Opinion ID: 781210
Heading Depth: 2
Heading Rank: 1

Heading: The Securities Exchange Act of 1934

Text: 2 Congress enacted the Securities Exchange Act of 1934 (the Exchange Act) to achieve a high standard of business ethics in the securities industry. Affiliated Ute Citizens v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). The Act allows for the creation of national securities associations for brokers and dealers and authorizes self-regulating organizations (SROs) within the securities industry to self-regulate their members, subject to federal oversight by the Commission. 15 U.S.C. § 78o-3(a). 3 All such associations must be approved and registered by the Commission. The Exchange Act mandates that such associations promulgate rules designed, inter alia, to 4 prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect ... [the] national market system, and, in general, to protect investors and the public interest. 5 Id. § 78o-3(b)(6). 6 To date, only one such organization has ever received Commission approval—the NASD, a private nonprofit Delaware corporation. The Exchange Act requires the NASD, as a national securities association, to enforce its rules and impose sanctions on members that violate NASD rules and/or the Exchange Act. 15 U.S.C. § 78o-3(b)(7). NASD disciplinary orders are subject to review by the Commission. This system of joint public-private regulation of the securities industry reflects Congress's intent to establish a `cooperative regulation' where [securities] associations would regulate themselves under the supervision of the SEC. Jones v. SEC, 115 F.3d 1173, 1179 (4th Cir.1997) (quoting S. Rep. No. 75-1455, at 3-4 (1938); H.R. Rep. No. 75-2307, at 4-5 (1938)). Commission decisions are appealable to the United States Courts of Appeals. 15 U.S.C. § 78y(a)(1).