Corporate Governance and Federal Securities Laws - Explained
How do Federal Securities Laws Affect Corporate Governance
Written by Jason Gordon
Updated at September 25th, 2021
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Table of Contents
What is the role of securities laws in corporate governance?Discussion QuestionAcademic ResearchWhat is the role of securities laws in corporate governance?
Federal securities laws are generally concerned with corporate compliance. The primary federal securities laws are the Securities Act of 1933 (33 Act) and the Securities Act of 1934 (34 Act). State law also governs the sale or exchange of securities, but state law largely mimics or piggybacks upon federal securities law.
The 33 Act primarily controls the initial issuance of securities. In private corporations, the 33 Act places numerous governance requirements on corporate stakeholders during the issuance process.
The 34 Act places significant requirements on the reporting and disclosure of information by publicly-held corporations.
These provisions include mandatory reporting to the Securities and Exchange Commission, as well as disclosure requirements to corporate shareholders.
The corporate directors and officers are primarily tasked with making and ensuring the accuracy of all securities-related disclosures.
Notably, the 33 and 34 Acts allow for a cause of action by shareholders against the corporation or its agents for failure to make disclosures, omissions, or material inaccuracy in a disclosure.
These causes of action are based upon negligent misrepresentation and fraud (intentional misrepresentation) in connection with the purchase or sale of corporate securities. The causes of action available to shareholders under the 33 Act and 34 Acts are discussed in greater detail in a separate chapter.
Next Article: Corporate Governance the Foreign Corrupt Practices Act Back to: CORPORATE GOVERNANCE
Related Topics
- What are the primary state and federal corporate governance laws?
- What is the role of the state in corporate governance?
- What is the role of Securities Laws in corporate governance?
- What is the role of the Foreign Corrupt Practices Act in corporate governance?
- What is the Sarbanes-Oxley Act (SOX) effect on corporate governance?
- Sarbanes-Oxley Act (SOX)
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- Corporate Monitors
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Discussion Question
Why do you think corporate compliance with securities law is an important consideration in corporate governance? How does compliance affect each stakeholder (shareholder, director, officer) in the corporate governance regime? Practice Questions: What are the corporate governance requirements relevant to federal securities laws?