History of the Securities Commission

The earliest known government involvement into securities scams refer to the "Bubble Act" which was created by the British Parliament in 1720. The act was an effort by the Parliament to stifle the scam involving the South Sea Company [a government supported monopoly] which was attempting to pay off the national debt. As soon as it became clear that the scam was working, other brokers began to collect on investments that were also absolutely worthless. It seems that all one had to say to attract investors was, "I've got this great idea for a business, but I have no way to finance it." Disclosure was not mandated. Legitimate business could no longer use investing to gain finances because of widespread distrust of brokers. Something had to be done. No new laws were enacted until the creation of the of the Companies Act of 1844, which was the first to require the modern prospectus.

Blue Sky Laws

Blue Sky Laws were enacted to fight scams. America was facing a similar crisis as the agrarians in the west were being sold securities worth nothing more than "lots of blue sky". Kansas was the first to enact the "Blue Sky Laws" in 1911 and other states eventually followed. In 1929, the Uniform Sale of Securities Act was adopted and later amended numerous times to incorporate sections which carry antifraud provisions, regulate broker/dealers and investment advisors, and register securities. Thirty-six of the states, the District of Columbia and Puerto Rico have adopted forms of the "Uniform Securities Act", with the rest creating their own versions of "Blue Sky Laws". West Virginia adopted the act as Chapter 32 of the West Virginia State Code and created the office of Commissioner of Securities in 1931 with the West Virginia State Auditor as Commissioner Ex-officio.

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