A Bit of Background
Securities regulation in the United States followed several centuries of regulation in England. Brokers were licensed in England as early as 1285. All such regulation was aimed at the curtailment of dubious money-raising schemes, such as the one in England during the early 18th Century when thousands of people were persuaded to purchase stock in a company based upon the representation that the company founders were preparing to carry “on an undertaking of great importance, but nobody to know what it is.” The investors in this scheme, as well as many others who invested in similar
schemes, had their bubbles burst, lost their money and, as a result, the “Bubble Act” was passed in 1720. The Bubble Act focused on “persons who contrive or attempt such dangerous and mischievous undertakings or projects, under false pretenses of public good, do presume . . . to open books for public subscriptions, and draw in many unwary
persons to subscribe therein towards raising great sums of money . . . ”.
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