What economic crisis led to the establishment of the Securities and Exchange Commission (SEC)?

The establishment of the Securities and Exchange Commission (SEC) was a direct response to the widespread economic turmoil and instability caused by the Great Depression, which had multiple factors contributing to its severity. The Great Depression, beginning in 1929, was marked by massive unemployment, bank failures, and an overall collapse of the financial system, largely rooted in issues related to stock market speculation and lack of regulatory oversight.

In the wake of the stock market crash of 1929, which acted as the catalyst for the economic downturn, it became apparent that there was a dire need for comprehensive regulatory measures to restore investor confidence and stabilize the financial markets. The SEC was created in 1934 as part of President Franklin D. Roosevelt's New Deal policies, aiming to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. By establishing rules governing securities transactions and enforcing disclosure requirements, the SEC sought to prevent the fraudulent practices that had contributed to the financial collapse and to promote transparency in the stock market.

While the Panic of 1907 and the recession of 1937 were significant events in American economic history, they did not lead directly to the formation of the SEC nor did they highlight the pressing need for the same level of regulatory structure as the