The Securities Act of 1933 was introduced by the US Congress as part of President Roosevelt’s New Deal after the 1929 market crash. It regulates the issuance of securities under federal law, requiring issuers to disclose information to investors and preventing fraudulent sales. Certain securities may be exempt from registration under section 144 and Regulation S. The act is enforced by the SEC and was later supported by the Securities Exchange Act of 1934.
Enacted by the United States Congress, the Securities Act of 1933 introduced the issuance of securities under federal regulation for the first time. Securities can be defined as stocks, bonds, mutual funds, and other similar investments. Part of President Franklin Delano Roosevelt’s New Deal, the act was a direct result of the 1929 market crash that triggered the Great Depression. Prior to this act, securities regulation was handled by state governments. The law is also known as the Truth in Securities Act, the Federal Securities Act or the 1933 Act. It is enforced by the United States Securities and Exchange Commission (SEC).
After the Crash of 1929, many had come to believe that state laws, or so-called blue sky laws, governing securities were not sufficient to protect against future economic disasters; the federal government should intervene. Toward this effort, President Roosevelt created a brain trust, not only to craft securities regulation, but to cobble together a set of progressive laws he called the New Deal. As part of that advisory group, Benjamin V. Cohen and Thomas Corcoran crafted the Securities Act of 1933, with the help of James Landis. Landis would become chairman of the newly formed SEC in 1934.
Indeed, the Securities Act of 1933 serves to make the process of issuing securities to investors more transparent. Issuers must undergo a registration process and meet other criteria before the sale of securities is legal. The registration process requires the issuer to disclose information about the issuing company and the security issued. The purpose of these regulations is twofold: to provide investors with enough information about a security to make a wise investment and to thwart fraudulent sales of securities.
Under section 144 of the 1933 Act, certain restricted securities may be sold without registration. This typically includes transactions that occur outside the United States. Some securities may also receive safe-haven under Regulation S, which means they may be exempt from registration as listed in Section 5. These typically include securities guaranteed by foreign governments.
Shortly after the Securities Act of 1933 was passed, Congress passed the Securities Exchange Act of 1934. Under this law, the SEC was created to enforce the 1933 Act. The Securities Act of 1933 was originally enforced by the Federal Trade Commission. The Securities Exchange Act of 1934 was also passed to establish regulation of secondary, or general public, trading in securities.
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