The Securities Acts

There are generally six laws that govern the securities industry that the SEC is responsible for overseeing. [2] The first of these laws is the Securities Act of 1933. This act requires firms to register securities intended for public sale. In the registration, important information regarding the securities for sale and the firm (e.g., its financial statements, its business operations, and its management) must be disclosed. No information can be fraudulent or deceitful. All statements are made publicly available.

The Securities Exchange Act of 1934 created the SEC and gave it authority to oversee the securities industry, including large shareholders (defined as a 5 percent shareholder), brokerage firms, securities dealers, and the stock exchanges. Corporations are required to submit accurate annual reports (the 10-K) and quarterly reports (the 10-Q). The act also allows the SEC to govern the proxy process (the process used to solicit shareholder votes ) and insider trading. This act, along with the Securities Act of 1933, was specifically designed to restore investor confidence.

The Trust Indenture Act of 1939 applies to the sale, and formal agreement between buyer and seller, of debt securities. The Investment Company Act of 1940 regulates investment companies, such as mutual funds, by requiring the disclosure of their financial condition and their investment policies. The Investment Advisors Act of 1940 currently regulates investment advisors who manage more than $25 million or who advise a registered investment company. Finally, the Public Utility Holding Company Act of 1935 regulates the holding companies of gas and electric companies.

All of the acts taken together, especially the first two, boil down to the following. They force corporations to tell the public about themselves without lying. This allows investors to make informed decisions. In addition, the spirit of the acts is to put the investors' interests first.

Infectious Greed. Restoring Confidence in Americas Companies
Infectious Greed: Restoring Confidence in Americas Companies
ISBN: 0131406442
EAN: 2147483647
Year: 2003
Pages: 118 © 2008-2017.
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