Securities Act Of 1933

What was the 'Securities Act Of 1933'

The Securities Act of 1933 was established as a result of the stock market crash of 1929. The legislation had two main goals: to ensure more transparency in financial statements so investors can make informed decisions about investments; and to establish laws against misrepresentation and fraudulent activities in the securities markets.

BREAKING DOWN 'Securities Act Of 1933'

The Securities Act of 1933 was the first major legislation regarding the sale of securities. Prior to this legislation, the sales of securities were primarily governed by state laws. The legislation addressed the need for better disclosure by requiring companies to register with the Securities and Exchange Commission. Registration ensures companies provide the SEC and potential investors with all relevant information by means of the prospectus and registration statement.

Main Objectives of Securities Act of 1933

The Securities Act of 1933 required that investors receive financial information from securities being offered for public sale. This means that prior to going public, companies had to submit information made readily available to investors. This prospectus is required and available on the Securities and Exchange Commission website. Information required includes a description of the company’s properties and business; a description of the security being offered; information about management running the company and financial statements that have been certified by independent accountants.

The other main point of the Securities Act of 1933 was to prohibit deceit and misrepresentations. The act aimed to eliminate fraud that happens during the sales of securities.

Legacy of Securities Act of 1933

The Securities Act of 1933 was the first federal legislation used to regulate the stock market. The act took power away from the states and into the hands of the federal government. The act more importantly created a uniform set of rules to protect investors against fraud.

The act is commonly referred to as the Truth in Securities law or act. This law is also known as the 1933 Act and The Securities Act. The Securities Act of 1933 was signed into law by President Franklin D. Roosevelt, and is considered part of the famous New Deal passed by Roosevelt.

The Securities Act of 1933 is governed by the Securities and Exchange Commission, which was created a year later by the Securities Act of 1934. Several amendments have passed to the Securities Act of 1933 since its creation. Amendments have been passed to update rules in 1934, 1954, 1959, 1960, 1970, 1980, 1982, 1987, 1996, 1998, 2000, 2010 and 2012.