I. What Are the Federal
chaotic securities markets of the 1920s, companies often sold stocks and bonds on the basis of glittering promises
of fantastic profits - without disclosing any meaningful information to investors. These conditions contributed to
the disastrous Stock Market Crash of 1929. In response, the U.S. Congress enacted the federal securities laws and
created the Securities and Exchange Commission (SEC) to administer them.
are two primary sets of federal laws that come into play when a company wants to offer and sell its securities to
the public. They are:
the Securities Act
of 1933 (Securities Act), and
Exchange Act of 1934 (Exchange Act).
Securities Act generally requires companies to give investors "full disclosure" of all "material facts," the facts
investors would find important in making an investment decision. This Act also requires companies to file a
registration statement with the SEC that includes information for investors. The SEC does not evaluate the merits
of offerings, or determine if the securities offered are "good" investments. The SEC staff reviews registration
statements and declares them "effective" if companies satisfy our disclosure rules.
Exchange Act requires publicly held companies to disclose information continually about their business operations,
financial conditions, and managements. These companies, and in many cases their officers, directors and significant
shareholders, must file periodic reports or other disclosure documents with the SEC. In some cases, the company
must deliver the information directly to investors.
III. Benefits of a Company “Going