Series 6

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.




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