Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

Which federal law created the SEC?

1. The Securities Exchange Act of 1934

2. The Securities Act of 1933

3. The Investment Company Act of 1940

4. The Dodd-Frank Act

The correct answer is: The Securities Exchange Act of 1934

The correct answer is rooted in the historical context of U.S. financial regulation. The Securities Exchange Act of 1934 was enacted in response to the stock market crash of 1929 and the ensuing Great Depression. This legislation established the Securities and Exchange Commission (SEC) to oversee and regulate the securities industry, ensuring better protection for investors and promoting fair and efficient markets. While the Securities Act of 1933 also played a crucial role in regulating new securities offerings and required companies to provide full and fair disclosure, it did not establish the SEC itself. The Investment Company Act of 1940 focused on the regulation of investment companies and their activities, while the Dodd-Frank Act of 2010 was aimed at reforming financial regulation in response to the 2008 financial crisis but did not create the SEC. Understanding this context clarifies why the Securities Exchange Act of 1934 is the correct answer, as it specifically created the SEC to enforce the securities laws and protect investors.