Two Landmark Anniversaries

Two landmark anniversaries in securities take place in June. The first is the 85th Anniversary of the founding of the U.S. Securities and Exchange Commission. The Second is the creation of the SEC Historical Society twenty years ago.

First, the origins and the history of the Securities and Exchange Commission are well known to many in the securities business but perhaps less known to others. The Commission was born to chaos and strife emanating from the fraud and deceptive practices that had become synonymous with Wall Street and the capital markets at the time of the great crash. Congress tasked the infant agency with rebuilding the nation’s confidence in the financial system and instilling a new spirit and ethics.

The tools were not the penalties used today. The sole weapon given to the new regulator had been prescribed by Justice Lewis Brandice years before the SEC was created – sunlight. Fraud and deceit do not live in the glare of light. Congress told the new agency to shine the light in every corner of the markets with the hope of instilling a new ethics.

The new regulator did as directed. Beginning with its first Chairman, Joseph Kennedy, the agency sought to rekindle faith in the nation’s capital markets. While some questioned the choice of Mr. Kennedy, those doubts were promptly dispelled when the Commission charged one of the Chairman’s friends with market manipulation and eventually barred him from the securities markets. The success of those who have followed in Mr. Kennedy’s footsteps for the last eight and one-half decades down to current Chairman Jay Clayton today with his focus on the main street investors who are critical to the markets, is reflected in the results.

Today the U.S. capital markets are the life blood of the nation’s financial system. Those markets are the deepest and most liquid in the world; they are without a doubt the envy of the world. This result is a testament to the never-ending work of the women and men who have faithfully served the Commission over the years in properly carrying out its mandate.

The Second anniversary this month flows from the first. It is the founding of the Securities and Exchange Commission Historical Society. Twenty years ago three distinguished gentlemen — David Ruder, Harvey Pitt, and Paul Gonson — created the Society with the idea of not just preserving the history of financial regulation but of making it accessible to future generations.

While the task was daunting, the Society began and has continued to grow until today its Museum is home to numerous galleries and collections of information which unfold the never ending story financial regulation. Its success is reflected in the thousands of people who visit the museum each year.

The success of these two institutions – the Commission and the Society – while separate, is intertwined. The Commission’s never-to-be-completed task is to bring a new ethics to the securities market place. The Society not only chronicles those efforts in the history of financial regulation, but makes it accessible for all to learn, understand and hopefully impart the message to others that it is sunlight and ethics, not sharp tactics, that continually creates and re-creates the vitality of the U.S. financial system.

Happy anniversary to the U.S. Securities and Exchange Commission. Happy anniversary to the SEC Historical Society.

Disclosure note: Mr. Gorman is the Chairman of the Board of the Society

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