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The Bright Image: The SEC, 1961-1973

Special Study of Securities Markets
Impact of the Special Study

The Special Study would be released in several parts during 1963. A leading historian of the SEC has called the Special Study "undoubtedly the single most influential document published in the history of the SEC," providing "the foundation for most of the reforms that occurred in the securities industry in the ensuing fifteen years."(9)

Milton Cohen, (left) with Frederick Moss, Boston Stock Exchange (center) and John Weithers, Midwest Stock Exchange (right) Courtesy of Milton Cohen

Central to the findings of the Special Study were the limits of industry self-regulation. The Special Study concluded that industry self-regulation had often been self-interested, more protective of industry business concerns than the concerns of the public. The Special Study pointed to the lack of securities industry standards for ethical conduct regarding entry requirements, selling practices, back-office procedures, and for the behavior of floor members. It also noted the problems of fixed commission rates and mutual fund selling practices that often hurt small investors. The Special Study highlighted lenient exchange disciplinary procedures for rules violations, and numerous instances of unethical or fraudulent practices by sales personnel. (10)

The Special Study provided the impetus for additional regulatory efforts by the SEC. Cary established a new Office of Program Planning, with Walter Werner as Director, to work with the securities industry to implement the SEC's expanded program for policing rules violations.

Perhaps most importantly, the Special Study refocused the SEC's emphasis on fiduciary issues, those issues that had been most emphasized during the New Deal. Protecting investors from unfair and unequal stock exchange practices such as fixed-commission and brokerage house rates, commission rebates to exchange members trading in mutual funds, and undisclosed reciprocal trading and service arrangements which raised the cost of trading to investors, became a major focus of the SEC as a result of the Special Study.

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Footnotes:

(9) Seligman, Transformation, 299.

(10) Ibid, 330-334.

Related Museum Resources
Papers
1963
Reflections by Milton Cohen on the Special Study of Securities Markets, presented at the Practising Law Institute, New York City
[document] (pdf) (Courtesy of Milton Cohen)
1963
SEC Special Study of the Securities Markets

(Courtesy of Stuart Kaswell; made possible through a gift from the family of Milton H. Cohen)

June 30, 1963
29th Annual Report of the Securities and Exchange Commission
[image] (pdf) (Government Records)
September 5, 1963
Memo from Robert Block to Ralph Saul regarding proposal to adopt a new confirmation rule under 10(b)
[transcript] (pdf) (Courtesy of the National Archives and Records Administration)
September 20, 1963
Memo from Walter P. North, SEC to Roy R. Coffin, Bureau of the Budget on Part 5 of Special Study Report
[transcript] (pdf) (Courtesy of the John F. Kennedy Presidential Library)
November 20, 1963
Statement of G. Keith Funston, New York Stock Exchange, before the Subcommittee on Commerce and Finance of the House Interstate and Foreign Commerce Committee on HR. 6789, 6793 and S.1642
[image] (pdf) (Government Records)
September 14, 1964
Memo from David Silver to SEC Chairman Cohen re Mr. Funston's Charges of Commission Staff Misconduct
[image] (pdf) (Courtesy of David Silver)
August 12, 1971
Letter from Milton Cohen to The New York Times on Policy for Securities Market
[document] (pdf) (Courtesy of Milton Cohen)
Photos
September 3, 1965
Milton Cohen (left) with Frederick Moss, Boston Stock Exchange and John Weithers, Midwest Stock Exchange
(Courtesy of Milton Cohen )

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