New Deal Era Financial Regulation in the Twenty First Century: An Ethical Examination of the Securities Acts of 1933 and 1934
Fay, Robert Roy
One of the still relevant laws created during Franklin Delano Roosevelt's first one hundred days was the Securities and Exchange Act of 1933 (15 USC §77a). The Securities Act of 1933 instituted a new era for financial regulation at the federal level. The purpose of the Act was to foment transparency and ethics into financial regulation with the hope of preventing another stock market crash or severe depression.The Securities Act of 1933 is a currently valid law as is its sibling law, the Securities and Exchange Act of 1934 (15 USC §78a). Yet, recent corporate history has suggested dishonest or fraudulent practices creeping back into American financial culture when seemingly healthy companies suddenly declare bankruptcy. In their wake are the ruins of main street investors who may have lost their life investments.Because the Securities and Exchange Act of 1934 puts a heavy responsibility for integrity upon independent accountants and auditors, this paper analyzes the auditor's ethical and legal role for honesty and integrity. This paper specifically analyzes the events and practices perpetrated by the Enron Corporation and by Bernard Madoff as two examples of large scale financial frauds in recent history. The scale of these frauds calls into question the current state of financial regulation.Despite the reforms made by the Sarbanes Oxley Act of 2002 (15 USC §7241), this paper opines that the largest continued obstacle between auditors and honesty is for their lack of independence related to the audit fee. Accordingly, this paper recommends that the Public Company Accounting Oversight Board institute regulations to 1) require periodic auditor rotations on publicly traded clients and 2) to publicly escrow the audit fees between auditors and their clients so that auditors answer to the government for their fee.This paper comments upon financial regulation as observed through selected artistic and literary dimensions. It analyzes works of F. Scott Fitzgerald, John Steinbeck, Ayn Rand and Oliver Stone by applying key concepts from the Securities and Exchange Acts of 1933 (and 1934) into the analysis of fictional characters.
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