Securities Markets - Blue Sky Laws and the Securities Act of 1933
Blue Sky Laws
Aside from all the federal laws and SRO rules you need to know thoroughly, you should at least be aware of blue sky laws: state level anti-fraud statutes enforced by the individual states' attorneys-general. All states have the authority to take action against securities scams, and they often do if they feel the SEC has been slow or lax.
Specific provisions vary state-by-state. Generally speaking, however, they require the following:
- All securities sold in a particular state must either be registered there or be exempt from registration; and
- All broker-dealers and their representatives must be registered there or be exempt from registration.
The Securities Act of 1933
The seminal federal law governing the issuance of new offerings is the Securities Act of 1933, or the Truth in Securities law. It has two basic objectives:
- to ensure investors have all significant financial and non-financial information about securities being offered for sale, and
- to prohibit deceit, misrepresentations and fraud in the sale of securities.
Among other things, the 1933 act requires all securities issued for public sale across state lines to have a prospectus, which must include basics such as the following:
- Name under which the issuer is doing business
- State or sovereign nation under which the issuer is organized
- Headquarters location
- General character of the business
- Names and addresses of the following parties:
- All directors
- The chief executive, financial and accounting officers
- The underwriters
- All persons owning 10% or more of the company
- Pertinent financial information:
- A statement of the issuer's capitalization, including the authorized and outstanding amount of stock
- Estimated proceeds from offering the securities
- The proposed offering price of the security, or at least the method by which that price will be derived
- The balance sheet as of a date not more than 90 days prior to the date of the registration statement filing
- An income statement showing profits or loss
The prospectus is not designed to offer investment advice, nor does it indicate that the SEC approved the issue or verified the information. It just means the company has filed all the paperwork needed to go ahead with the issue. The prospectus is really no more than a summary of the information found in the registration statement, which does the following:
- describes the company's properties and business,
- describes the security offered for sale,
- provides information about management, and
- provides financial statements certified by independent auditors.
Registration statements and prospectuses become public shortly after being filed with the SEC.
ProfessionalsThe Securities Act of 1933 was the first major piece of securities industry regulation that was brought about largely as a result of the stock market crash of 1929. Other major laws were also ...
ProfessionalsFINRA/NASAA Series 26: Section 1 Securities Act of 1933: Definitions. In this section some important definitions from the securities act of 1933.
ProfessionalsSeries 6, Section 8: The Prospectus. This section, Prospectus, relates to the registration and the registration process pertaining to a new issue.
ProfessionalsThe Securities Act of 1933 was the first major piece of securities industry legislation and it regulates the primary market.
ProfessionalsFINRA Series 6 Exam Study Guide - The Securities Act of 1933. This section discusses the securities act of 1933 including definitions and penalties under the act.
ProfessionalsFINRA Series 6: Section 10 Investment Company Registration, Regulations and Rules. In this section: The Investment Company Act of 1940 and The Securities Act of 1933.
ProfessionalsWhile the SEC is reviewing the securities’ registration statement, a registered representative is very limited as to what they may do with regard to the new issue. During the cooling off ...
ProfessionalsFINRA/NASAA Series 63 - Other Definitions. This section review other definitions and note how they could appear on the exam.
ProfessionalsWhile the SEC is reviewing the securities’ registration statement, a registered representative is very limited as to what they may do with regard to the new issue. During the cooling ...
ProfessionalsFINRA/NASAA Series 65 - Securities Regulation. In this section securities registartion exemptions and registering a security.
1. The process by which a company files required documents with ...
A filing with the Securities and Exchange Commission (SEC), which ...
A preliminary prospectus filed by a company with the Securities ...
The initial registration form for new securities required by ...
A filing with the Securities and Exchange Commission (SEC) that ...
A filing with the Securities and Exchange Commission (SEC) required ...
The correct answer is a. Registration by coordination is permitted when the issuer has filed a registration application with ... Read Answer >>
Learn about the differences between the summary prospectus and statutory, or full, prospectus, and discover what mutual fund ... Read Answer >>
Understand how penny stocks are issued and regulated, and learn how these sometimes rewarding but always risky investments ... Read Answer >>
Understand what investments require a summary prospectus or a offering memorandum, and learn the differences between the ... Read Answer >>
All securities, including stocks, bonds and notes, must be registered with the Securities and Exchange Commission (SEC) before ... Read Answer >>
Read and understand the prospectus before investing in a mutual fund. You can obtain a copy from the fund company, your financial ... Read Answer >>