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19 Bus. Law. 721 (1963-1964)
Public Regulation of the Securities Markets

handle is hein.journals/busl19 and id is 723 raw text is: April 1964 PUBLIC REGULATION OF THE SECURITIES MARKETS By GEORGE J. STIGLER* Chicago, Ill. It is doubtful whether any other type of public regulation of eco- nomic activity has been so widely admired as the regulation of the securities markets by the Securities and Exchange Commission. The purpose of this regulation is to increase the portion of truth in the world and to prevent or punish fraud,. and who can defend ignorance or fraud? The Commission has led a scandal-free life as federal regu- latory bodies go. It has been essentially a technical body, and has enjoyed the friendship, or at least avoided the enmity, of both politi- cal parties. The Report of the Special Study of the Securities Markets of the Securities and Exchange Commission1 which was recently -released is itself symptomatic of the privileged atmosphere within which the S. E. C. dwells. This study investigated the adequacy of the controls over the security markets now exercised by the S. E. C. The study was well endowed: it was directed by an experienced attorney, Milton H. Cohen; it had a professional staff of more than thirty people; and it operated on a schedule that was leisurely by Washington standards. The study was not an instrument of some self-serving group, nor was it even seriously limited by positions taken by the administration. Such a professional, disinterested appraisal would not even be con- ceivable for agricultural or merchant marine or petroleum policy, or the other major areas of public regulation. Disinterest, goodwill, and money had all joined to improve the capital markets of America. The regulation of the securities markets is therefore an appro- priately antiseptic area in which to see how public policy is formed. Here we should be able to observe past policy appraised, and new policy defended, on an intellectually respectable level, if ever it is. We begin with an examination of certain of the Special Study's policy proposals. Mr. Cohen presents a vast number of recom- mendations of changes in institutions and practices. Most are minor, and some are even frivolous (market, letters should not predict specific price levels of stocks). The content of the proposals, how- *Charles R. Walgreen Distinguished Service Professor, Dept. of Economics and Graduate School of Business, University of Chicago. I wish to disclose my obligation to Claire Friedland for performing the statistical work. Editors Note: Because of the importance of the subject and its timely in- terest to legal and financial circles, this article is being published simultaneously with, and with the permission of, the JOURNAL OF BUSINESS of the University of Chicago. 1. 88th Congress, 1st sess., House Document 95 (1963) [Government Printing Office; Washington, D. C.] Part I. All citations in text to part, chapter or page refer to this work.