after some banks, securities firms, and wealthy individuals suffered big losses on financially distressed, highly leveraged funds that bought derivatives, and in some cases avoided regulatory scrutiny by registering outside the United States.

The Regulators The Securities and Exchange Commission (SEC), which was created in 1934, is the principal regulator of securities markets in the United States. Before 1929, individual states regulated securities activities. But the stock market crash of 1929, which triggered the Great Depression, showed that arrangement to be inadequate. The Securities Act of 1933 and the Securities Exchange Act of 1934 consequently gave the federal government a preeminent role in protecting small investors from fraud and making it easier for them to understand companies' financial reports. The commission enforces a web of rules to achieve that goal. Companies issuing stocks, bonds, and other securities must file detailed financial registration statements, which are made available to the public. The SEC determines whether these disclosures are full and fair so that investors can make well-informed and realistic evaluations of various securities. The SEC also oversees trading in stocks and administers rules designed to prevent price manipulation; to that end, brokers and dealers in the over-the-counter market and the stock exchanges must register with the SEC.