Key Securities Laws

Section 4.1: Key Securities Laws and FINRA Rules Estimated study time: 40 minutes Content: The U.S. securities industry is governed by a series of landmark federal statutes, each enacted in response to market abuses or financial crises. Understanding when each law was passed and what it covers is tested on the SIE exam. The Securities Act of 1933 — often called the "Paper Act" or "Truth in Securities Act" — governs the primary market (new issuances of securities to the public). It requires that issuers register new securities with the SEC (by filing a registration statement and prospectus) before offering them for sale. The purpose is to ensure investors receive full and fair disclosure about securities being sold to them. The registration process includes a quiet period (cooling-off period) during which only limited communications are allowed. Exempt securities (U.S. government securities, municipal bonds, bank securities) and exempt transactions (Regulation D private placements, Regulation A+ small offerings, Regulation Crowdfunding) are not required to register under the 1933 Act. The Securities Exchange Act of 1934 — often called the "People Act" or "Exchange Act" — governs the secondary market (trading of already-issued securities). It created the SEC, established rules for exchanges and broker-dealers, required ongoing reporting by public companies (10-K annual, 10-Q quarterly, 8-K current event reports), and prohibited market manipulation and insider trading. All broker-dealers must register with the SEC under the 1934 Act. The Investment Company Act of 1940 governs investment companies — primarily mutual funds (open-end investment companies), closed-end funds, and ETFs. It requires registration with the SEC and mandates disclosure through a prospectus. Under this Act, funds must redeem shares within seven days of a shareholder request…