Securities Industry Regulations - The Securities Act of 1933

The Securities Act of 1933 was passed to ensure that all new securities offered to the public have been described in adequate detail in the registration statement and prospectus. The Securities and Exchange Commission (SEC) is the federal regulatory agency responsible for enforcing the Act. To prevent fraud in the sale of securities, the SEC designed the Act to provide full disclosure to the public in the interstate sale of securities so that any potential investor may make fully informed buying decisions.

Definitions
The 1933 act defines an issuer as any person who issues or proposes to issue a security. An issuer may include a corporation, federal government, state or local government, or a church or charitable organization.

An underwriter is defined as a person ( broker dealer / investment bank) who offers or sells securities for an issuer. An underwriter typically assists the issuer with the registration of a new security.

Penalties under the 1933 Securities Act
Any person who willfully violates the Act of 1933 or SEC rules and regulations is subject to five years in prison, a $10,000 fine, or both. The Act also holds the directors, attorneys, accountants, underwriting syndicate, and all persons who signed the registration statement civilly liable for false and misleading statements contained in the registration statement and prospectus. As a result, any one of the participating individuals may be sued by an investor who purchased the new issue and was not aware of any false statements or omissions.

Securities Exchange Act of 1934
Related Articles
  1. FA

    The Basics of The Series 79 Exam

    Passing the Series 79 exam is usually necessary for anyone who wants to work in investment banking.
  2. Your Clients

    Events in 2016 That'll Alter Your Retirement Plans

    Retirement savers who are trying to see what lies ahead can expect these changes affecting their retirement plans in 2016.
  3. Term

    What is the Series 66?

    The Series 66 exam is one of two tests required to register as both a securities agent and an investment advisor.
  4. Your Practice

    How Likely is a New Fiduciary Rule in 2016?

    New fiduciary standards for advisors working with retirement accounts are on the horizon. Will they become reality in 2016?
  5. Professionals

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  6. Brokers

    Duck These Illegal Sales Tactics Used By Brokers

    Many unscrupulous brokers employ illegal swindling tactics to sell bad securities. Here are sales strategies that should indicate red flags to investors.
  7. Professionals

    Private Banker: Career Path & Qualifications

    Discover what kind of work private bankers do, and learn more about how you can develop the experience and qualifications required to work in the field.
  8. Financial Advisors

    Top Compliance Headaches for Financial Advisors

    Advisors who do not devote sufficient attention to compliance issues can find themselves in hot water with both regulators and their clients.
  9. Investing Basics

    How To Handle A Serious Dispute With Your Broker

    Find out what to do if you have a dispute with your broker.
  10. Professionals

    Hedge Funds and the Law

    Learn how hedge funds have gotten in trouble for illegal insider trading. Read about questionable high-frequency trading (HFT) strategies.
RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Series 79

    A examination to ensure a candidate is qualified to become a ...
  6. Research Analyst

    A person who prepares investigative reports on equity securities. ...
RELATED FAQS
  1. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  2. How are variable annuities regulated?

    The sale of a variable annuity is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory ... Read Full Answer >>
  3. Do financial advisors need to pass the Series 7 exam?

    The exact nature of a financial advisor's job responsibilities determines whether he must have a Series 7 license. If a financial ... Read Full Answer >>
  4. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
  5. Do financial advisors need to be approved by FINRA?

    The term "financial advisor" can refer to a couple of different roles. It most often refers to a broker-dealer or an investment ... Read Full Answer >>
  6. How does a broker decide which customers are eligible to open a margin account?

    Brokers have the sole discretion to determine which customers may open margin accounts with them, although there are regulations ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center