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Securities Act of 1933
Often referred to as the "truth in securities"
law, the Securities Act of 1933 has two basic objectives:
require that investors receive financial and other significant
information concerning securities being offered for public
prohibit deceit, misrepresentations, and other fraud in
the sale of securities.
The full text of this Act is available at: http://www.sec.gov/about/laws/sa33.pdf.
Purpose of Registration
A primary means of accomplishing these goals is the disclosure
of important financial information through the registration
of securities. This information enables investors, not the
government, to make informed judgments about whether to
purchase a company's securities. While the SEC requires
that the information provided be accurate, it does not guarantee
it. Investors who purchase securities and suffer losses
have important recovery rights if they can prove that there
was incomplete or inaccurate disclosure of important information.
The Registration Process
In general, securities sold in the U.S. must be registered.
The registration forms companies file provide essential
facts while minimizing the burden and expense of complying
with the law. In general, registration forms call for:
a description of the company's properties and business;
a description of the security to be offered for sale;
information about the management of the company; and
financial statements certified by independent accountants.
Registration statements and prospectuses become public shortly
after filing with the SEC. If filed by U.S. domestic companies,
the statements are available on the EDGAR database accessible
at www.sec.gov. Registration statements are subject to examination
for compliance with disclosure requirements.
Not all offerings of securities must be registered with
the Commission. Some exemptions from the registration requirement
private offerings to a limited number of persons or institutions;
offerings of limited size;
intrastate offerings; and
securities of municipal, state, and federal governments.
By exempting many small offerings from the registration
process, the SEC seeks to foster capital formation by lowering
the cost of offering securities to the public.
Securities Exchange Act of 1934
With this Act, Congress created the Securities and Exchange
Commission. The Act empowers the SEC with broad authority
over all aspects of the securities industry. This includes
the power to register, regulate, and oversee brokerage firms,
transfer agents, and clearing agencies as well as the nation's
securities self regulatory organizations (SROs). The various
stock exchanges, such as the New York Stock Exchange, and
American Stock Exchange are SROs. The National Association
of Securities Dealers, which operates the NASDAQ system,
is also an SRO.
The Act also identifies and prohibits certain types of
conduct in the markets and provides the Commission with
disciplinary powers over regulated entities and persons
associated with them.
The Act also empowers the SEC to require periodic reporting
of information by companies with publicly traded securities.
Companies with more than $10 million in assets whose securities
are held by more than 500 owners must file annual and other
periodic reports. These reports are available to the public
through the SEC's EDGAR database.
The Securities Exchange Act also governs the disclosure
in materials used to solicit shareholders' votes in annual
or special meetings held for the election of directors and
the approval of other corporate action. This information,
contained in proxy materials, must be filed with the Commission
in advance of any solicitation to ensure compliance with
the disclosure rules. Solicitations, whether by management
or shareholder groups, must disclose all important facts
concerning the issues on which holders are asked to vote.
The Securities Exchange Act requires disclosure of important
information by anyone seeking to acquire more than 5 percent
of a company's securities by direct purchase or tender offer.
Such an offer often is extended in an effort to gain control
of the company. As with the proxy rules, this allows shareholders
to make informed decisions on these critical corporate events.
The securities laws broadly prohibit fraudulent activities
of any kind in connection with the offer, purchase, or sale
of securities. These provisions are the basis for many types
of disciplinary actions, including actions against fraudulent
insider trading. Insider trading is illegal when a person
trades a security while in possession of material nonpublic
information in violation of a duty to withhold the information
or refrain from trading.
Registration of Exchanges, Associations, and Others
The Act requires a variety of market participants to register
with the Commission, including exchanges, brokers and dealers,
transfer agents, and clearing agencies. Registration for
these organizations involves filing disclosure documents
that are updated on a regular basis.
The exchanges and the National Association of Securities
Dealers (NASD) are identified as self-regulatory organizations
(SRO). SROs must create rules that allow for disciplining
members for improper conduct and for establishing measures
to ensure market integrity and investor protection. SRO
proposed rules are published for comment before final SEC
review and approval.
The full text of this Act can be read at: http://www.sec.gov/about/laws/sea34.pdf.
Public Utility Holding Company Act of 1935
On August 8, 2005, the Energy Policy Act of 2005 (H.R. 6,
199th Cong.) was signed by the President and became law,
Pub.L. 109-58. Title XII of the Energy Policy Act is the
Electricity Modernization Act of 2005 (the "Modernization
Act"). Subtitle F of the Modernization Act, repeals
the Public Utility Holding Company Act of 1935 ("Act")
effective February 8, 2006. It also enacted the Public Utility
Holding Company Act of 2005 ("2005 Act") and gave
the Federal Energy Regulatory Commission jurisdiction over
Although OPUR has been dissolved, the Securities and Exchange
Commission ("SEC") will continue to maintain this
web site until March 1, 2007, as a service to any interested
parties looking for materials that might not otherwise be
easily accessed. However, in light of the repeal of the
Act, no new material will be added to the site. Also, because
the Act is no longer in effect, no new filings, amendments
to filings, or forms that had been required under the Act,
can or will be accepted by the SEC either on EDGAR or on
Any questions about the 2005 Act should be directed to the
Federal Energy Regulatory Commission.
Trust Indenture Act of 1939
This Act applies to debt securities such as bonds, debentures,
and notes that are offered for public sale. Even though
such securities may be registered under the Securities Act,
they may not be offered for sale to the public unless a
formal agreement between the issuer of bonds and the bondholder,
known as the trust indenture, conforms to the standards
of this Act. The full text of this Act is available at:
Investment Company Act of 1940
This Act regulates the organization of companies, including
mutual funds, that engage primarily in investing, reinvesting,
and trading in securities, and whose own securities are
offered to the investing public. The regulation is designed
to minimize conflicts of interest that arise in these complex
operations. The Act requires these companies to disclose
their financial condition and investment policies to investors
when stock is initially sold and, subsequently, on a regular
basis. The focus of this Act is on disclosure to the investing
public of information about the fund and its investment
objectives, as well as on investment company structure and
operations. It is important to remember that the Act does
not permit the SEC to directly supervise the investment
decisions or activities of these companies or judge the
merits of their investments. The full text of this Act is
available at: http://www.sec.gov/about/laws/ica40.pdf.
Investment Advisers Act of 1940
This law regulates investment advisers. With certain exceptions,
this Act requires that firms or sole practitioners compensated
for advising others about securities investments must register
with the SEC and conform to regulations designed to protect
investors. Since the Act was amended in 1996, generally
only advisers who have at least $25 million of assets under
management or advise a registered investment company must
register with the Commission. The full text of this Act
is available at: http://www.sec.gov/about/laws/iaa40.pdf.
Sarbanes-Oxley Act of 2002
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley
Act of 2002, which he characterized as "the most far
reaching reforms of American business practices since the
time of Franklin Delano Roosevelt." The Act mandated
a number of reforms to enhance corporate responsibility,
enhance financial disclosures and combat corporate and accounting
fraud, and created the "Public Company Accounting Oversight
Board," also known as the PCAOB, to oversee the activities
of the auditing profession. The full text of the Act is
available at: http://www.sec.gov/about/laws/soa2002.pdf.
You can find links to all Commission rulemaking and reports
issued under the Sarbanes-Oxley Act at: http://www.sec.gov/spotlight/sarbanes-oxley.htm.
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