Securities Act of 1933
The Securities Act of 1933 is the federal law requiring registration and disclosure for new securities offerings, ensuring investors receive material information before buying, often called the "Paper Act" or "Truth in Securities Act."
Exam Tip
1933 Act = registration of NEW issues (Paper Act). 1934 Act = trading of EXISTING securities (People Act). Know the difference!
What is the Securities Act of 1933?
The Securities Act of 1933 was the first major federal securities law, enacted after the 1929 stock market crash. It requires companies to register securities with the SEC and provide investors with material information through a prospectus before the securities can be sold publicly.
Key Principles
| Principle | Requirement |
|---|---|
| Disclosure | Material information must be provided |
| Registration | Securities must be registered (or exempt) |
| Anti-Fraud | Prohibits fraud in securities sales |
The Act's Goals
| Goal | How Achieved |
|---|---|
| Full Disclosure | Registration statement and prospectus |
| Investor Protection | Accurate, complete information |
| Fraud Prevention | Criminal and civil penalties |
Registration Process
| Document | Purpose |
|---|---|
| Registration Statement | Full disclosure filed with SEC |
| Prospectus | Investor-facing disclosure document |
| Form S-1 | Most common registration form |
Registration Statement Contents
| Section | Information |
|---|---|
| Part I | Prospectus (for investors) |
| Part II | Additional information (for SEC) |
The Prospectus
| Element | Description |
|---|---|
| Business Description | What the company does |
| Financial Statements | Audited financials |
| Risk Factors | Material risks to investors |
| Use of Proceeds | How money will be used |
| Management | Officers and directors |
Exempt Securities
| Type | Reason |
|---|---|
| Government Securities | Treasury, agency, municipal |
| Bank Securities | Separately regulated |
| Short-Term Paper | Maturities under 9 months |
| Nonprofit Securities | Religious, charitable |
| Insurance Policies | State regulated |
Exempt Transactions
| Exemption | Description |
|---|---|
| Regulation D | Private placements |
| Regulation A | Mini-public offerings up to $75M |
| Intrastate (Rule 147) | Single state offerings |
| Rule 144 | Resale of restricted securities |
Liability Under the '33 Act
| Section | Violation |
|---|---|
| Section 11 | Material misstatement in registration |
| Section 12 | Sale of unregistered securities |
| Section 17 | Fraud in securities sales |
Study This Term In
Related Terms
Securities Exchange Act of 1934
SecuritiesThe Securities Exchange Act of 1934 is the federal law regulating secondary market trading, creating the SEC, and requiring ongoing disclosure by public companies, often called the "People Act" for regulating market participants.
Prospectus
GeneralA prospectus is a legal document filed with the SEC that provides details about an investment offering, including risks, fees, objectives, and management.
Regulation D (Reg D)
SecuritiesRegulation D provides exemptions from SEC registration for private placements, allowing companies to raise capital by selling securities to accredited investors without the cost and time of a full public offering.
SEC (Securities and Exchange Commission)
GeneralThe SEC is the U.S. federal agency responsible for enforcing securities laws, regulating securities markets, and protecting investors from fraud and market manipulation.