© The Vanguard Group, Inc., used with permission.
First Index Investment Trust stock certificate, dated December 31, 1975. The fund was later renamed the Vanguard 500 Index.
petition to charge separately for investment advice— a key moment in the evolution of the fee-based advisory model.
As commission revenues declined, Regan worked swiftly to retain talent and preserve Merrill’ s institutional leadership. The firm petitioned the SEC to separate research services from execution costs, thereby preserving access to research at competitive rates. In June 1975, SEC Commissioner Philip A. Loomis Jr. affirmed the value of research, declaring,“ Securities research is at the heart of the investment process.” The White House supported legislation at that time, ensuring that money managers could continue to fund research within a market-based framework.
Regan’ s legacy is one of principled pragmatism— embracing reform while defending the enduring value of trusted financial advice, research and a full-service brokerage model.
John C. Bogle: The Indexing Revolution
In 1976, John Bogle, founder and former chief executive of the Vanguard Group, launched the Vanguard 500 Index Fund, introducing a radically simple idea: do not try to beat the market— match it; track the S & P 500 Index, minimize costs and let compounding do the work. In 1971, an Institutional Investor Study Report by the SEC found that competitive brokerage commissions would have a positive impact on the distribution of mutual funds.
Bogle’ s vision was shaped by his Princeton thesis and Paul Samuelson’ s 1974 essay, Challenge to Judgment, which argued that most active managers historically failed to consistentely outperform their benchmarks.
Bogle saw an opening. He leveraged Mayday’ s deregulated environment to bring low-cost indexing to the average investor. Critics derided it as“ Bogle’ s Folly,” claiming it was un-American to“ surrender” investment decisions to a formula and efficient market hypothesis.
The initial offering of the Vanguard fund in 1976 raised $ 11 million— far short of its $ 150 million goal— but it marked the beginning of a groundbreaking shift in the industry. That same year, the S & P 500 Index was restructured to include 40 financial stocks for the first time, marking a pivotal shift in the financial sector’ s influence within the broader market.
Today, index investing is no longer a contrarian approach; it has become a mainstream strategy. In 2024 alone, three S & P 500 Exchange Traded Funds( ETFs)— BlackRock’ s IVV, State Street’ s SPY and Vanguard’ s VOO— captured nearly 20 % of a record $ 1.5 trillion in global fund flows. With $ 2.1 trillion in combined assets and expense ratios as low as 0.03 %, Bogle’ s vision has become the foundation of modern investing.
A Legislative Seal on Market Reform
The Ford administration’ s regulatory agenda served as the culmination of a decade-long, bipartisan effort in Congress to modernize the US securities markets. Although fixed-rate commissions had been upheld under the Securities Exchange Act of 1934, growing pressure laid the groundwork for sweeping legislative change. That momentum reached its peak in June 1975, when Congress passed the Securities Acts Amendments of 1975, co-sponsored by Senators Harrison A. Williams( D-NJ), Edward W. Brooke( R-MA) and John G. Tower( R-TX). Signed into law by President Gerald R. Ford on June 4, 1975, the legislation formally codified the end of fixed brokerage commissions— effectively ratifying the Mayday reforms.
In addition to dismantling the commission cartel, the law authorized the establishment of a national market system( NMS) and a unified clearing and settlement framework to promote transparency and competition. It also introduced new requirements for registering municipal securities dealers. It mandated public disclosure of holdings and transactions by institutional investment managers, further aligning market operations with investor protection and regulatory oversight.
The Boomer Effect and the Enduring Legacy of Mayday
By 1975, the Mayday reforms arrived just as a generation was coming of age. Baby Boomers— born between 1946 and 1964— were entering the workforce, many of whom had returned from the Vietnam War at its end. Their economic emergence coincided with a pivotal shift in financial policy. Hence, the deregulation of brokerage commissions opened the capital markets to a generation eager to participate, save and build wealth.
One year earlier, Congress had enacted the ERISA, introducing fiduciary standards, creating Individual Retirement Accounts( IRAs) and reinforcing private pension protections. These developments aligned with the growing participation of Boomers in public programs like Social Security and Medicare. Together, these public and private systems established a financial safety net that remains essential for Boomers as retirees and family caregivers.
32 FINANCIAL HISTORY | Summer 2025 | www. MoAF. org