Securities Act of 1933

What is the Securities Act of 1933?

• The Securities Act of 1933 was passed by Congress following the Stock Market Crash of 1929 and during the ensuing Great Depression. The Securities Act of 1933 was legislated pursuant to the interstate commerce clause of the United States Constitution. The act requires that any sale or offer of investment security using the means of interstate commerce be registered with the Securities and Exchange Commission, unless an exemption is present under the law.

• The Securities Act of 1933 was the first piece of federal legislation to regulate the offer and sale of securities in the United States of America. Prior to the passing of the Securities Act of 1933, regulation of investment securities was primarily governed by state laws (referred to as blue sky laws).

• When the United States Congress passed the Securities Act of 1933 it aimed to increase transparence in the marketplace; the primary goal of the legislation was to require issuers of investment securities to fully disclose all material information that a prospective investor or shareholder would want to know when analyzing the investment.

• The Securities Act of 1933 is distinct from the local blue sky laws, which typically impose very specific and qualitative requirements on security offerings. If a company fails to meet such requirements in the specific regulating state, then it would simply be barred from offering there.


What is the Purpose of the Securities Act of 1933?

• The purpose of the Securities Act of 1933 is to aid the federal government in regulating business offerings. In essence, the Securities Act of 1933 was passed to re-instill consumer confidence and tighten regulations during the Great Depression.

What is the Registration Process?

• To register an investment security to the United States public, a company must file a registration statement with the Securities and Exchange Commission. The formal prospectus, which is how an issuer’s securities are marketed to the public, is typically filed in conjunction with this application.

• In general, the Securities Act of 1933 required that the registration form include the following statements or information:

o A brief description of the securities to be offered for saleo Information concerning the securities (if other than stock)o Financial statements certified by a team of independent accountantso Information about the management of the issuer

• Once filed with the SEC< the registration statements and prospectus become public; the statements may be obtained by accessing the SEC’s website. Furthermore, all registration statements are subject to SEC examinaition for compliance in regards to disclosure requirements—it is illegal for an issuing corporation to lie in or omit materials from the registration form or prospectus

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