• Introduction
• Revitalizing the SEC
• Special Study of Securities Markets
  • "For the Protection of Investors"
  • "Operation S.E.C."
  • Impact of the Special Study
• A Greater Voice
• The "Go-Go" Years
• An Economic Theory of Regulation Emerges
• Growing Political Concerns
• Ethical Crisis at the SEC

The Bright Image: The SEC, 1961-1973

Special Study of Securities Markets

"For the Protection of Investors"

“The Commission is convinced that the Congress and the investing public expect our study to be as thoroughgoing as our budget of time, manpower and money will permit.”
- Undated letter from SEC Commissioner Jack M. Whitney II to Edwin Darby, The Chicago Sun-Times

In early September 1961, at the urging of Cary, Congress authorized the SEC "to make a study and investigation of the adequacy, for the protection of investors, of the rules of national securities exchanges and national securities associations."(8) Congress appropriated $750,000 to hire staff to make special studies of the over-the-counter market, small securities issues, and investment advisory services. Cary hired Milton Cohen, a former SEC staff member, along with attorneys, economists, statisticians, financial analysts, and professional and support staff to complete what would come to be known as the Special Study of Securities Markets.

Politics played a role in the creation of the Special Study group. Cohen demanded quasi-independence from control of the Commission, agreeing that the Special Study group would report its findings to the Commission, but would not require the five-member Commission itself to approve those findings. SEC supporters in Congress, among them House Speaker Sam Rayburn (D-TX), wanted the study to focus on the markets and not the SEC. Cary had to navigate opposing political viewpoints, including a fundamental disagreement over whether SEC regulation or market competition should be the animating feature of securities law.

<<Previous | Next >>