In the 1930s, the Securities and Exchange Commission introduced a doctrine of sorts that contained the shingle theory. It’s a little outdated today, especially since brokerages can operate without a brick-and-mortar store (ergo the “shingle”), but also for other reasons. The shingle theory is the theory that a broker who opens up a shop (“hanging a shingle”) will be an honest and fair businessman with his customers, taking responsibility where it’s due.
It’s a nice idea, but the real world tells us to be on our guard with brokerages. While there are legit brokerages out there, there are also scam brokerages, and everything in-between (think: “grey” brokerages that aren’t all scams, but aren’t totally honest, either).
The U.S. government has tried to keep brokers honest. There’s the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other agencies that have slapped rules, regulations, and oversight onto brokerages. A few bad apples ruin the party for everyone.
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Finance: What is The Securities Amendmen...9 Views
finance a la shmoop what is the Securities Amendments Act of 1975
alright people before 1975 we're thinking Nixon era here trading stocks [People greeting Nixon]
was very much a regional thing New York was the Sun and the rest of the world
well more or less just orbited the 1975 Act created a national market clearing [Countries orbiting galaxy]
system so that a share of IBM traded for generally the same price in California
Georgia New Hampshire and New York this way smaller less liquid regional systems [US states appear beside IBM]
or regional pieces or regional trading bins weren't penalized with higher
transaction costs than you know those suit-and-tie wearing wolves on Wall [Transaction costs crossed out]
Street and that's pretty much it that's what the 1975 securities Amendment Act
was all about basically it just was passed to ensure that the SEC would
consider any new regulation that might come down the pike from that point
forward in terms of fairness across a level playing field [Moving through a tunnel]
nationally yeah fairness or the wind [Football player placing football on the field]
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