The securities laws govern how companies raise money, how investments are sold, and how financial markets operate. Whether you're a startup considering raising equity, a company going public, or an individual investing, understanding the basics of securities regulation is essential. The penalties for getting it wrong range from civil fines to criminal prosecution.
The Securities Act and Securities Exchange Act
The Securities Act of 1933 requires registration of securities offerings unless an exemption applies. The Securities Exchange Act of 1934 governs securities trading and the companies whose securities are listed on exchanges. Together with SEC rules, these laws form the foundation of US securities regulation.
Under the Securities Act, a security — which includes stocks, bonds, and many investment contracts — cannot be sold to the public without registration unless an exemption applies. Common exemptions include private placements under Regulation D, offerings under Regulation A+, and intrastate offerings. Each exemption has specific requirements about investor qualification, advertising, and filing obligations.
Registration Requirements
Going public through an IPO requires registering the offering with the SEC, which involves preparing a detailed disclosure document — the registration statement — and waiting for SEC review and comment. This process typically takes months and costs millions in legal and accounting fees. Once public, companies face ongoing disclosure obligations including annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K for material events.
Broker-Dealer and Investment Adviser Regulation
Anyone in the business of effecting securities transactions generally must register as a broker-dealer with the SEC and FINRA. Registered representatives who interact with customers must pass qualifying exams. Investment advisers must register with the SEC if they manage more than $100 million in assets, or with state securities regulators otherwise.