• Introduction
• Last Days of Financial Frontier
• Politicians and Professors
• Building an Institution
• Friendly Enforcement
• Encouraging Capital
• The Capital Strike
• Registration Revision
• Accounting Becomes Key
• Breaking the Log Jam
• The Kennedy Legacy

431 Days: Joseph P. Kennedy and the Creation of the SEC

Encouraging Capital

Registration Revision

Among the duties that the SEC inherited from the Securities Division of the FTC was to "require a fair and full disclosure of the material facts regarding securities offered for sale." But the question remained: what constitutes "fair and full"? Kennedy, hoping to spur new capital investment by simplifying registration requirements, took another look at the matter.

The FTC's "Schedule A" called for comprehensive historical data including all information on plant and property going back at least as far as 1922. Reformers like Pecora knew that such disclosure could only discredit business even further--almost every company had skeletons in its closet from the 1920s.

"This is our answer to our pledge to make less onerous, less expensive, and more practical the registration of securities."

Corporate accountants, meanwhile, called the requirements "expensive and tedious," and Joseph Kennedy was inclined to agree with them. In August 1934 the SEC issued temporary rules for the registration of existing securities that mandated disclosure by holders of more than 10 percent of a corporation's stock, directed that insider trading profits revert to the company, and required contemporary data only. These were well received. By the September 15 deadline, the SEC had received applications for 2,910 stock and 1,968 bond issues. Landis had cots brought in so that staffers reviewing the applications could work all night.

The temporary rules bought some time. During the next few months the Commission consulted widely with industry. Richard Whitney even helped Kennedy arrange consultations with leaders of the nation's largest corporations. The results were two of the SEC's most important tools, Form 10 for permanent registration of existing securities, and Schedule A-2 for registration of new issues. It was on the latter that Kennedy pinned his hopes of breaking the capital strike. When Schedule A-2 was released on January 13, 1935, he announced "This is our answer to our pledge to make less onerous, less expensive, and more practical the registration of securities." (New York Times, January 14, 1935)

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Papers

Photos

• Kennedy, Joseph P. (July 1934) (With permission of the John F. Kennedy Library Foundation)