Securities Act of 1933

Definition

The Securities Act of 1933 is a federal law enacted to ensure greater transparency in financial statements and to establish laws against misrepresentation and fraudulent activities in the securities markets. Its primary goal is to protect investors by requiring issuers of securities to provide full and fair disclosure.

5 Must Know Facts For Your Next Test

1. The Securities Act of 1933 requires that all securities offered for public sale must be registered with the Securities and Exchange Commission (SEC).
2. It mandates that issuers provide a prospectus containing detailed information about the security being offered.
3. The Act aims to prevent fraud and deceit in the sale of securities by ensuring accurate disclosure.
4. It empowers investors with the ability to sue for damages if they are misled or harmed by false information.
5. Exemptions from registration under this act include private placements, intrastate offerings, and certain small offerings.

Review Questions

• What is the primary purpose of the Securities Act of 1933?
• What document must issuers provide to potential investors under this act?
• Name two types of offerings that are exempt from registration under the Securities Act of 1933.

Related terms

Prospectus: A legal document required by and filed with the SEC that provides details about an investment offering for sale to the public

Initial Public Offering (IPO): The process through which a private company offers shares to the public for the first time

Securities and Exchange Commission (SEC):

A U.S. government agency responsible for enforcing federal securities laws and regulating the securities industry