The US stock market is known as the largest and most vibrant globally. Therefore, the U.S. Securities Act is always a topic that many people are interested in learning about. In particular, other equity and emerging markets often refer to U.S. securities law to develop their own set of laws. The following article provides the essential information you need to know about this topic.
Table of Contents:
What is U.S. Securities Law?
U.S. Securities Law includes laws that regulate and manage the stock market in the United States, including stocks, foreign currency (forex), bonds, investment funds, and stock futures contracts… Securities Regulations U.S. securities are issued and regulated by U.S. laws and government, including at the federal and state levels, or stock exchanges and financial sector regulatory agencies.
U.S. Securities Law helps regulate securities transactions, helps parties avoid litigation and lawsuits, ensures transparency and fairness, and prevents fraud and abuse that negatively impacts the U.S. stock market. Market participants who do not comply with securities laws may be subject to criminal liability.
Under the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, the U.S. Securities and Exchange Commission (SEC) has the following powers:
Summon witnesses, testify or testify under oath;
Gather evidence and request any documents or records that the SEC deems relevant to the case;
Require agencies and organisations to cooperate in verifying, clarifying and collecting information.
History of U.S. Securities Law
When the stock market was just formed in the United States, securities laws were not enacted. At that time, the laws governing the stock market were enacted and regulated by states.
The “Black Thursday” incident occurred on October 29, 1929, and the entire stock market collapsed, leading to a major crisis in the stock market and the global economy. After the above event, the market fell for many years, and the US Congress found the causes of the collapse and prompted Congress to hold hearings and finally enact the US Securities Act of 1933.
Then, in 1934, the U.S. Securities Exchange Act continued to regulate securities trading activities on the public market (secondary market). The Securities Exchange Act was further revised to apply to companies operating in the OTC market in 1964.
Throughout the history of the U.S. stock market, the government has continued to regulate and implement reforms for the security of transactions in the U.S. stock market. And in October 2000, the SEC issued The Reg FD (Fair Disclosure) regulation to ensure that all investors receive essential information fairly at the same time. In 2010, the U.S. government passed consumer protection and Wall Street reform legislation after the 2007-08 financial crisis.
Most global equity markets, especially emerging markets, refer to U.S. securities laws.
Learn about important U.S. securities laws
Since its inception, there have been several essential laws mentioned in many documents, including:
- Securities Act of 1933 – which regulates the distribution of new securities
- Securities Exchange Act of 1934 – holds the purchase and sale of securities, brokers and exchanges
- Trust Indenture Act 1939 – Debt Securities Regulation
- Investment company Act 1940 – regulation of mutual funds
- Investment Advisors Act 1940 – regulation of investment advisors
- Sarbanes-Oxley ActDodd-Frank Wall Street Reform and Consumer Protection Act of 2002 – which regulates corporate responsibilities
- Dodd-Frank’s Consumer Protection and Wall Street Reform Act of 2010 – trade regulation, credit rating, corporate governance and corporate transparency
- Jumpstart Our Business Startups Act of 2012 – regulates capital market requirements.
Securities Act of 1933
The Securities Act of 1933 is known as the Law on “Truth in Titles”. This law has two main objectives:
- Investors have the right to receive financial information and other important information relating to securities offered to the public;
- And it is strictly forbidden to commit fraud, misrepresentation and other fraudulent acts in the sale of securities.
In particular, the content of the act governs the registration of a public offer of securities with the Securities and Exchange Commission of the United States, the information disclosed in the registration file and the authority of the Commission in case of disapproval of the registration file. The Head of the Commission in case of detection of infringements in the registration file and sanctions.
Securities Exchange Act of 1934
With this law, Congress established the Securities and Exchange Commission (SEC). The law gives the SEC authority over the securities industry, including the power to register, regulate and supervise the country’s brokerage firms, transfer agents, clearing houses and securities self-regulatory organizations (SROs). Various exchanges, such as the New York Stock Exchange, the NASDAQ Stock Exchange and the Chicago Board of Options, are SRO. The Financial Industry Regulatory Authority (FINRA) is also an SRO.
The law also identifies and prohibits certain types of behaviour on the market and gives the Commission disciplinary powers over regulated entities and those associated with them.
The law also authorizes the SEC to require periodic reporting of information about companies whose securities are listed on the stock exchange.
Conclusion
Above is some basic information about U.S. securities laws. It is a broad and well-studied topic in the global stock market. The SEC strictly regulates current U.S. securities laws and helps the market operate openly, transparently, and limit risks to participants.
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