The legal background to the Securities Act of 1933 and the Securities Exchange Act of 1934 is somewhat unusual because there was very little federal regulation in this area prior to the enactment of these laws. As noted in the first chapter of this paper, Congress did not act to regulate corporations and banks during the Nineteenth Century. Even during the Constitutional Convention of 1787, proposals for empowering the federal government "to grant charters of incorporation in cases where the public good may require them, and the authority of a single state may be incompetent" were ignored. In 1902, the Industrial Commission (created by Congress in 1898) recommended that Congress enact a federal incorporation law in order to control the large corporations and trusts which were then being created. The Commission recommended that corporations be required to publish all material facts that might be of value to investors and the public. Such disclosure should include all of the details concerning the organization of the corporation. Any prospectus which did not include a full and accurate disclosure of these material facts would be considered fraudulent, exposing the responsible stock promoters to legal liability. In addition, the Commission recommended that corporations be required to send annual financial reports, certified by independent accountants, to shareholders, as well as grant shareholders access to records of directors' meetings. It should be recognized that while the Commission's recommendations were never adopted by Congress, they predicted the eventual provisions of the Acts of 1933 and 1943.
Throughout the first half of the Twentieth Century, federal incorporation laws were debated. As noted above, many within and without the federal government suggested the enactment of such laws as a means of implementing some uniform corporation regulations, rather than relying upon a confusing array of individual state laws...