Securities Act of 1933

Definition

The Securities Act of 1933 is a federal law enacted to ensure transparency in financial statements so investors can make informed decisions. It mandates that companies provide truthful information about their securities to the public.

5 Must Know Facts For Your Next Test

1. Requires companies issuing stock to register with the SEC.
2. Mandates detailed disclosures about the company's financial condition and business operations.
3. Aims to prevent fraud by ensuring accurate and complete information is provided.
4. Introduces civil liabilities for false or misleading statements during stock issuance.
5. Provides exemptions for certain smaller offerings from full registration requirements.

Review Questions

• What are the primary objectives of the Securities Act of 1933?
• Why is registration with the SEC required under this act when issuing new stock?
• What consequences can a company face if it provides false information under this act?

Related terms

SEC (Securities and Exchange Commission): A U.S. government agency responsible for enforcing federal securities laws and regulating the securities industry.

Prospectus:

A legal document issued by companies offering securities, detailing financial health and risks associated with investment.

Exempt Offering: Certain types of securities offerings that are exempt from SEC registration requirements, usually smaller or private placements.