LEGISLATION OF ETHICS IN THE EARLY YEARS OF THE SECURITIES AND EXCHANGE COMMISSION

Enforcement action by the Securities and Exchange Commission in the years following its formation and prior to the beginning of World War II created reporting sanctions viewed as symbolic by much of corporate America. That is, powerful chief executive officers of many of America’s giant publicly held corporations believed these sanctions were instituted only to placate a worried investing public and would not be enforced with rigor. These managers, therefore, believed they could either ignore the Securities and Exchange Commission pronouncements or implement them only superficially. I submit the result has been many continual challenges of authority and corporate disregard of ethical behavior throughout the remainder of the 20th century. This paper will explore the history of the early part of the 20th century to determine reasons why these symbolic pronouncements may have been perceived by the Securities and Exchange Commission as a necessity for its continued existence.