The Future for the Global Securities Market: Legal and Regulatory Aspects

EDWARD F. GREENE, DANIEL A. BRAVERMAN AND JENNIFER M. SCHNECK¹

In most countries, the distribution of securities to the public is subject to significant regulation. The United States is no exception. The experience of the early part of this century, culminating in the market crash of 1929, illustrated the dangers in permitting virtually unsupervised sales of securities, often involving unsophisticated investors and unscrupulous or incompetent issuers and other market participants. The resulting lack of confidence in the integrity of the market meant that even legitimate transactions were tainted.

The market crash led to radical reform of the regulatory system. The distribution of securities, the activities of brokers and dealers, the operations of stock exchanges and numerous other activities related to the operation of the securities markets were made subject to detailed statutory provisions and regulations, and the ongoing oversight of a newly created administrative agency, the Securities and Exchange Commission (the ' SEC').

Since the enactment of the two principal statutes governing securities activities, the Securities Act of 1933 (the 'Securities Act') and the Securities Exchange Act of 1934 (the 'Exchange Act'), the US securities markets have undergone phenomenal growth. For example, the total amount of securities traded on the New York Stock Exchange (the NYSE) in 1937 was 409.5 million shares.² In 1994, that amount was 73,240 million shares.³ In addition, there has been explosive growth in the types of securities traded, as well as the development of myriad new types of derivative instruments. There has also been a significant shift in who participates in the markets, with institutional investors now accounting for the bulk of investment.⁴

-157-