1. What are “securities laws”?
Securities laws are the federal and state statutes and regulations that control the sale or transfer of rights or ownership interests in a business entity (securities). Specifically, securities laws purport to protect the general public from deceptive practices in the sale or trade of securities. The major securities laws include the Securities Act of 1933 and the Securities Exchange Act of 1934. The primary method of protecting investors prescribed under these acts is thorough disclosure of relevant or material information. As we discuss in this chapter, the requirements for the disclosure of information vary based upon the nature of the sale or transfer of securities.
• Discussion: Why do you think the Federal Government seeks to protect the rights of private owners of a business entity? Do you believe that the disclosure of relevant or material information is the best way of achieving this goal? Why or why not?
• Practice Question: What are the laws applicable to the sale or trade of securities?