Era 01 · 1720

The Bubble Act

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Cure by amputation

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The South Sea Company crashed in September 1720. Parliament's response, passed that same year, was to effectively ban joint-stock companies altogether. The fraud was stopped — by crippling the legal form that made fraud possible, along with every legitimate use of that form for the next century.

Events in this era

Aug 1720

South Sea Peak

South Sea Company stock peaked near £1,000 in August 1720, up from roughly £128 in January, a tenfold rise in eight months. Directors and insiders unloaded shares privately while publicly promoting the company's 'inexhaustible' South American prospects. Isaac Newton reportedly lost about £20,000, equivalent to several million pounds in modern money. By late September the price had collapsed below £200. The resulting panic spread across London, triggering bank runs and parliamentary inquiry.

Market cap of £100M+ in 1720 money

Jun 1720

Bubble Act Passed

Before the crash even completed, Parliament passed the Bubble Act — restricting the formation of joint-stock companies to those specifically chartered by the Crown. The regulation was so broad it inhibited legitimate incorporation for 100+ years.

Joint-stock form effectively banned until 1825

1825

Bubble Act repealed

After 105 years, Parliament repealed the Bubble Act. The restriction on joint-stock companies had so throttled legitimate incorporation that the industrializing British economy was being held back by a rule meant to prevent 17th-century fraud.

Joint-stock form legally available again

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The SEC

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