When the stock market crashed in October 1929, countless investors lost their fortunes. Banks also lost large amounts of money during this period, as they invested heavily in the markets. The mass withdrawal of money from the banking system by people, due to the fear of depositors that banks will not be able to pay their money, has caused the bankruptcy of many banks.

In the era of the crisis and the subsequent depression, public confidence in the markets fell sharply. There was a consensus that for the economy to recover, it is necessary that people's faith in the stock markets be restored. To identify problems and find solutions, the Congress held hearings.

Based on the results of these hearings, Congress passed the Securities Act of 1933 and the Securities Trading Act of 1934. These laws were aimed at restoring investor confidence in the capital markets by providing additional structure and state control. The main goals of these laws can be two reasonable principles: