What are Securities Laws?

Cite this article as:"What are Securities Laws?," in The Business Professor, updated December 4, 2014, last accessed August 3, 2020, https://thebusinessprofessor.com/lesson/securities-laws/.

Back To: BUSINESS TRANSACTIONS, ANTITRUST, & SECURITIES LAW

What are securities laws?

Securities laws concern the statutes and regulations that control the sale or trade of interests in a business entity (securities). Securities laws purport to protect the general public from deceptive practices in the sale of trade of securities. The past, dishonest activity by disreputable individuals gave rise to the current securities regulation regime that prospective sellers of securities must navigate. The primary method of protecting investors is through the public disclosure of information.

Securities are subject to federal and state regulation. State security laws are known a Blue Sky laws.  The two primary Acts governing the trade or sale of securities are the Securities Act of 1933 (33 Act) and the Securities Exchange Act of 1934 (34 Act), which are administered by the U. S. Securities & Exchange Commission (SEC).. The 33 Act provides the rules for the initial sale of securities to the public. This includes detailed disclosure rules. The 34 Act concerns the on-going disclosure once a company has securities trading on national exchanges. This includes the public reporting requirements and proxy disclosure before votes/

The regulatory goals of the securities laws include:

  • preventing manipulation of the securities market;
  • fully disclosure of “Material Information” to stakeholders;
  • Preventing fraud;
  • leveling playing field between insiders of a company and investors.

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