ShmoopTube

00:00

Finance a la Shmoop! What is the Securities Act of 1933? Hey, is it these

00:08

axes? No, it's a different act, or a whole bunch of Acts in the 30s and the

00:12

40s. All right, well for a long time the

00:14

little guy had, well not really much more than a prayer, when it came to investing [man praying in church]

00:19

his money. Like investing it well. The stock market appeared to be this wild,

00:23

wild, Westy thing, with few rules and a whole lot of insider trading information,

00:28

driving the bus, or carriage, or whatever they had back then. In fact before 1933,

00:34

securities laws were a, state thing. Each state had its own view as to how much

00:40

the poor uneducated farmer should be protected by the government. In fact

00:45

most really weren't protected at all. Making matters even worse, States [man and woman trading on map]

00:50

citizens, invested in each other all the time. Like across the state border. So

00:56

what would then happen when one set of state's laws, applied to one side of the

01:00

trade and one state set of laws, was conjoined to another set of laws, applied

01:05

to the other in a different state. Yeah that was a problem. Clearly we needed,

01:10

national laws and that's when the 1933 Securities Act was born, setting federal

01:16

law above state law. But keeping state laws generally intact when the [Uncle Sam]

01:21

intrastate activities were happening. What did all that mean? Well it

01:24

meant that the default laws generally revolved around whatever the state had

01:29

already in place. Except in the case where transactions, required a federal

01:34

purview, or look-see. Because the transactions happened among, two or more

01:39

states, or that they violated some major federal law. Like discrimination or

01:44

something like that down the line. Well the notion here, was that, farmers were

01:49

being sold acres of, quote, Blue Sky, unquote. Like you had to pay for the blue [two men in field]

01:54

sky and we're not talking about smog here. Instead of things of real value.

01:58

Right, like farmers would believe that they could buy an acre of blue sky.

02:02

Sorry, farmer Joe, we're just keeping it real there, you really did try to buy

02:06

acres of blue sky. Was solely because, farmer Joe, did not possess the education, [squirrels in head]

02:11

to determine the difference between a real investment opportunity and a fake

02:16

one. Finally the government, well they just had to step in and protect the

02:20

average Joe, from the average, you know Schmo.[man talking in front of parchment]

Full Transcript