The Evolution of Securities Class Action Law: Securities Act of 1933

Reform During the Great Depression.

As mentioned in my earlier article, I’ll be publishing a series of short articles highlighting key historical developments in the law of U.S. securities class actions to help bring some clarity to the legal landscape and help simplify the complex. Let’s start off at the beginning with the Securities Act of 1933, here is an excerpt:

1933 marked the depths of the Great Depression. It had been four years since the stock market crashed in 1929. A quarter of the nation’s workforce was unemployed, banks were continuing to fail, and homeless Americans were living in shanty towns across the country.

It was also the first year in office of President Franklin D. Roosevelt and new Democratic majorities in both houses of Congress. Roosevelt had been elected on a promise to take radical action to steer the country out of crisis by implementing a plan of “relief, recovery, and reform,” and he enjoyed widespread popular support. Much of his platform was enacted in an ambitious wave of New Deal legislation in 1933.

As part of the promise of “relief,” Roosevelt and the new Congress took immediate action to stabilize the economy, including declaring a bank holiday, granting short term payments to desperate people, and providing temporary jobs. As part of the promise of “recovery,” Congress enacted major federal programs to restore consumer demand, stabilize prices, and create long term jobs. Finally, Congress turned to the promise of “reform,” which meant taking action to rein in corporate abuses and prevent another stock market crash.

The Securities Act of 1933 was Congress’ first major step towards reforming the financial markets....  Read full article