Opinion ID: 2816868
Heading Depth: 2
Heading Rank: 1

Heading: securities legislation

Text: The Securities and Exchange Act of 1934 (Exchange Act) “was intended principally to protect investors against manipulation of stock prices through regulation of transactions upon securities exchanges.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 (1976). To accomplish this goal, the Exchange Act makes it unlawful for “any person,” in connection with the purchase or sale of securities, “[t]o use or employ . . . any 3 manipulative or deceptive device or contrivance in contravention of [SEC] rules.” 15 U.S.C. § 78j(b). The Commission’s regulations, in turn, make it unlawful for “any person,” in connection with the purchase or sale of securities, “[t]o employ any device, scheme, or artifice to defraud” or “[t]o engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.” 17 C.F.R. § 240.10b–5(a), (c). The Investment Advisers Act of 1940 (Advisers Act) proscribes nearly identical conduct. The Act makes it unlawful for “any investment adviser” to “employ any device, scheme, or artifice to defraud any client or prospective client” or to “engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative.” 15 U.S.C. § 80b– 6(1), (4). To implement these prohibitions, the SEC requires investment advisers to “[a]dopt and implement written policies and procedures reasonably designed to prevent violation[s]” of the Advisers Act. 17 C.F.R. § 275.206(4)–7(a). Like the crash in 1929, the wreckage wrought by the Great Recession of 2008 produced calls for reform, ultimately resulting in the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank Act), Pub. L. No. 111-203, 124 Stat. 1376 (2010). Before the Dodd–Frank Act, the SEC could bar individuals who violated either the Exchange Act or the Advisers Act from associating with various people in the securities world, including stock brokers, dealers and investment advisers. See 15 U.S.C. § 78o(b)(4)(F) (2006) (Exchange Act violator may be barred from “associat[ing] with a broker or dealer”); id. § 80b–3(f) (2006) (Advisers Act violator may be barred from “associat[ing] with an investment adviser”). The Dodd–Frank Act expanded this power. Now, the Commission may also bar violators from associating with municipal advisors or 4 “nationally recognized statistical rating organizations” (rating organizations). See Dodd–Frank Act § 925(a). The SEC’s enlarged authority created remedies that were “not previously available under the securities laws” before the Dodd–Frank Act. John W. Lawton, Advisers Act Release No. 3513, 2012 WL 6208750, at  (Dec. 13, 2012).