Investment Companies - Securities Act of 1933: Definitions

The Securities Act of 1933 was passed to ensure that all new securities offered to the public are 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. The following definitions will be helpful in preparing for the exam:

  • 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 any person who offers or sells for an issuer in connection with the distribution of a security. An underwriter typically assists the issuer with the registration of a new security.
  • An offer to sell includes every attempt or offer to dispose of or any solicitation of an offer to buy a security, or interest in a security, for value.
  • Registration statement means the statement provided for under the Securities Act of 1933; it includes any amendment, report, document or memo filed as part of this statement.
  • Dealer refers to any person who engages (directly or indirectly) as agent, broker or principal in the business of offering, buying, selling or otherwise dealing or trading in securities issued by another.
  • Insurance company is a company that is organized as an insurance company and whose primary business activity is the writing of insurance, or reinsuring risks underwritten by other insurance companies.
  • A separate account refers to an account established by an insurance company under which income, gains and losses are held separately from the general account of the insurance company.
  • Prospectus refers to any prospectus or other publication, letter or communication that offers any security for sale or confirms the sale of any security.

Any legitimate prospectus issued by a company must have the SEC's no approval clause on the front page. It is important to note that the SEC does not pass on the merits of the security or the adequacy of the information in the prospectus. The SEC only reviews the prospectus to make sure that it contains no misleading information and that the registration of the new issue is complete.

Registration
Related Articles
  1. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  2. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  3. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
  4. Forex Education

    China's Devaluation of the Yuan

    Just over one week ago the People’s Bank of China (PBOC) surprised markets with three consecutive devaluations of the yuan, knocking over 3% off its value.
  5. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  6. Investing Basics

    Explaining Rehypothecation

    Rehypothecation occurs when an asset used as collateral for one party is reused in another transaction.
  7. Investing Basics

    What's a Price-Taker?

    Price-taker is an economic term describing a market participant who has no effect on overall market activity.
  8. Economics

    Explaining the Participation Rate

    The participation rate is the percentage of civilians who are either employed or unemployed and looking for a job.
  9. Economics

    Understanding Organic Growth

    Organic growth is the increase in a company’s revenue and value due to internal operations.
  10. Investing Basics

    Explaining Options Contracts

    Options contracts grant the owner the right to buy or sell shares of a security in the future at a given price.
RELATED TERMS
  1. Yield To Maturity (YTM)

    The total return anticipated on a bond if the bond is held until ...
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the ...
  3. Interest Coverage Ratio

    A debt ratio and profitability ratio used to determine how easily ...
  4. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  5. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  6. Remittance

    The term most commonly refers to money being sent via mail or ...
RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  4. Why would someone change their Social Security number?

    In general, the Social Security Administration, or SSA, does not encourage citizens to change their Social Security numbers, ... Read Full Answer >>
  5. Are spousal Social Security benefits retroactive?

    Spousal Social Security benefits are retroactive. These benefits are quite complicated, and anyone in this type of situation ... Read Full Answer >>
  6. Is Argentina a developed country?

    Argentina is not a developed country. It has one of the strongest economies in South America or Central America and ranks ... Read Full Answer >>
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!