The Securities Act states: "Legislated pursuant to the interstate commerce clause of the Constitution, it requires that any offer or sale of securities using the means and instrumentalities of interstate commerce be registered pursuant to the 1933 Act, unless an exemption from registration exists under the law."
The Securities Act is the first chief federal legislation for regulating the buying and selling of securities. Earlier, the regulation of securities was primarily coordinated by state laws (usually termed as blue sky laws).
The main goals of the Securities Act, 1933 are:
- The Securities Act necessitates that the investors get substantial information regarding securities being offered for selling in the public
- To foreclose deception, misrepresentations, and other types of fraudulence involved in the selling of securities
The fundamental idea of the Securities Act is that a company or an issuer selling securities must furnish the prospective investors with adequate information regarding both the issuer and the securities for making a communicated investment decision.
By the registering of securities with the U.S. Securities and Exchange Commission (SEC), the disclosure of crucial information is successfully attained.
Under the Securities Act, 1933, all offering of securities or securities going to be sold to the general public in the U.S. has to be registered by entering a registration statement with the Securities and Exchange Commission (SEC). The prospectus of the company is usually filed jointly with the registration statement. The appropriate forms on which the issuer's security has to be registered are prescribed by the SEC.
Usually, the registration forms ask for:
- If not registering common stock, information about the securities
- A description of the properties and business of the issuer
- A description of the security going to be sold
- Information about the management of the issuer
- Financial statements certified by independent accountants
The prospectuses and registration statements are made public soon after registering with the SEC. If an issuer lies or makes an omission of material facts from a prospectus or registration statement, it would result in a legal violation.
It is not mandatory for all security offerings to be registered with the SEC.
There are some exceptions:
- Offerings of limited size
- Intrastate offerings
- Private offerings to a limited number of institutions or persons
- Securities of state, federal, or municipal governments