What is the overview of U.S. securities laws?
The federal securities laws govern the offer and sale of securities and the trading of securities, activities of certain professionals in the industry, investment companies (such as mutual funds), tender offers, proxy statements, and generally the regulation of public companies.
Securities Law: An Overview
Securities laws and regulations aim at ensuring that investors receive accurate and necessary information regarding the type and value of the interest under consideration for purchase. (For more information on the history of securities, see securities law history).
The Securities Act effectuates disclosure through a mandatory registration process in any sale of any securities. In reality, due to a number of exemptions (for trading on the secondary market and small offerings), the Act is mainly applied to primary market offerings by issuers.
The Securities Act of 1933 (as amended, the “Securities Act”) was passed to ensure that investors have financial and other important information about securities that are being sold publicly. It also bans the use of fraud, deceit, and misrepresentation in the sales of securities.
A security is "[a]n instrument that evidences the holder's ownership rights in a firm (e.g., a stock), the holder's creditor relationship with a firm or government (e.g., a bond), or the holder's other rights (e.g., an option)." Black's Law Dictionary, 10th ed.
The United States Treasury offers five types of Treasury marketable securities: Treasury Bills, Treasury Notes, Treasury Bonds, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs).
The laws that govern the securities industry are: Securities Act of 1933 – regulating distribution of new securities. Securities Exchange Act of 1934 – regulating trading securities, brokers, and exchanges. Trust Indenture Act of 1939 – regulating debt securities.
The federal securities laws, enacted in the depths of the Great Depression, established one of the most important principles for capital markets: Businesses that seek to raise money from the public must first provide the public with sufficient information to make informed investment decisions.
Securities are fungible and tradable financial instruments used to raise capital in public and private markets. There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and hybrids—which combine aspects of debt and equity.
If a company does not comply with the requirements and is not able to rely on an exemption from them, then it is violating securities laws which may result in penalties such as severe fines or the shutdown of operations.
What are the two basic objectives of the 1933 Securities Act?
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 sale; and. prohibit deceit, misrepresentations, and other fraud in the sale of securities.
The primary goal of the 1933 Securities Act was simply to require securities issuers to disclose all material information necessary for investors to be able to make informed investment decisions on stocks.
The crash led to Congress to passing the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC "was designed to restore investor confidence in our capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing."
U.S. Securities means Securities issued by an issuer that is organized under the laws of the United States or any State thereof or that are otherwise traded in the United States, and shall include American Depositary Receipts.
The Federal Reserve, which purchases and sells Treasury securities as a means to influence federal interest rates and the nation's money supply, is the largest holder of such debt.
Security is a financial instrument that can be traded between parties in the open market. The four types of security are debt, equity, derivative, and hybrid securities. Holders of equity securities (e.g., shares) can benefit from capital gains by selling stocks.
There are four types of marketable Treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS).
The Securities and Exchange Commission administers Federal securities laws that seek to provide protection for investors; to ensure that securities markets are fair and honest; and, when necessary, to provide the means to enforce securities laws through sanctions.
The Securities and Exchange Commission (SEC) oversees securities exchanges, securities brokers and dealers, investment advisors, and mutual funds in an effort to promote fair dealing, the disclosure of important market information, and to prevent fraud.
In the United States, each individual state has its own securities laws and rules. These state statutes are commonly known as "Blue Sky" Laws. Although the specific provisions of these laws vary among states, they all require the registration of securities offerings, and registration of brokers and brokerage firms.
What is the main goal of securities regulation?
Regulation should detect, deter and penalize market manipulation and other unfair trading practices. Regulation should aim to ensure that investors are given fair access to market facilities and market or price information.
The U.S. Department of the Treasury issues Securities to raise the money needed to operate the federal government.
Financial institutions and banks may issue equity or debt securities for their capital needs beyond their normal sources of funding from deposits and government grants.
The securities inside the account may be used to generate cash (either in the form of dividends or interest) by selling the security in the market, or by holding it to maturity (in the case of a bond). The cash generated may then be used to buy more securities, or it may be withdrawn by the account holder.
Stockholders may have voting rights and can benefit from capital appreciation and dividends. Securities, on the other hand, is a broader term encompassing various tradable financial instruments. While stocks are a type of security, securities can also include bonds, mutual funds, options, and other financial assets.
