What Is the Securities Act of 1933?
The Securities Act of 1933 was made law and was enacted to safeguard investors following the 1929 collapse of the stock market 1929. The law had two major objectives: to provide more transparent accounting statements to allow investors to make educated decisions about the investment they make; and also to establish rules to protect investors from fraudulent and misleading statements and fraud within the securities market.
Understanding the Securities Act of 1933
The Securities Act of 1933 was the first major law governing the selling of securities. Prior to this legislation, the sale of securities was mostly governed by state laws. The law focused on the need for more information disclosure by requiring firms to be registered with the Securities and Exchange Commission (SEC). The registration process ensures that firms are able to provide their SEC as well as potential investors the most current details through a prospectus and registration statements.
The law, also known under also known as the “Truth in Securities” law The 1933 Act along with the Federal Securities Act, requires that investors get financial data from securities put up for sale in public. This means that before making public offerings, firms must make information readily accessible to investors.
The prospectus that is required today is required to be available via the SEC website. Prospectus materials must include the following details:
- An overview of the property of the company as well as its business
- An explanation of the security provided
- Information about the executive management
- The financial statements have been verified by independent accountants
Securities exempt from SEC Registration
Certain securities are exempt from the registration requirements of the law. This includes:
- Intrastate services
- Limited-time offers
- Securities issued by the state, municipal and federal government
- Private offerings to a restricted amount of individuals or institutions
The main objective of the Securities Act of 1933 was to prevent deceit and fraudulent representations. The legislation was intended to prevent fraud that occurs during the sale of securities.
President Franklin D. Roosevelt signed the Securities Act of 1933 into law as part of his famed New Deal.
History of the Securities Act of 1933
The Securities Act of 1933 was the first law of federal origin to regulate the market for shares. The law removed power from states and placed it under the control of the Federal government. It also created a uniform set of rules that would protect investors from fraud. The law was signed by President Franklin D. Roosevelt and is considered to be part of the New Deal passed by Roosevelt.
The Securities Act of 1933 is administered by the Securities and Exchange Commission, which was established one year later through the Securities Exchange Act of 1934. A number of amendments to the statute were passed to improve regulations several times over the decades, with the most recent adopted in the year 2018.