Importance of Securities Act of 1933

The Securities and Exchange Act of 1933 one of the laws that govern the securities industry. It was the first major legislation regarding the sale of securities, that shifted power from states to the federal government. It is known as the "truth in securities" law which President Franklin D. Roosevelt signed as a part of the New Deal.The Act was created to protect investors after the stock market crash of 1929, biggest bear market in Wall Street 's history.

The Securities Act of 1933 had two main objectives:

requirement that investors receive financial and other significant information regarding securities that are being offered for public sale.
prohibition of deceit, misrepresentation and other fraud in the sale of securities

Securities and Exchange Commission that was created year later, in 1934 governs the Securities Act of 1933. In order to accomplish set objectives SEC requires companies to register their securities and disclose essential information in the process which will enable investors to make informed decisions. Even though SEC requires accurate information it cannot guarantee it. In the United States securities must be registered unless they can be exempt.The registration form and prospectus provide investors with substantial information:

description of company's properties and business
description of the securities that are offered for public sale
information about company's management
financial statements certified by independent accountant

Shortly after the registration statement and prospectus are filed with the Sec they are publicly available. As we have already mentioned some offering of securities are exempt from registration including:

private offerings to a limited number of persons or institutions
offerings of limited size
intrastate offerings
securities of municipal, state and federal governments.

Since its creation several amendments to Securities Act of 1933 have been passed, with the latest enacted in 2018.

Comments

OTC stocks more difficult to trade and deposit

Mina Mar Group helps micro-cap companies structure their growth. Micro-capitalized companies are those with less than $50,000,000 in equity, sometimes under $1,000,000. Restructuring involves raising money (both debt and stock), and planning how they will eventually harvest that wealth. If you’re a founder or investor, the secret to harvesting your equity is to possess assets with a developed market for their sale; up until recently, that market was the public market. Now, Over-The-Counter Securities (“OTC Securities”) don’t serve that purpose since, unless you’re a tech unicorn doing an IPO, there are essentially no ways to sell the shares you’ve invested in. OTC securities – how they were deposited five years ago. Brokerages all around the country have tightened compliance over the past five years to the point where no one may deposit share certificates into their brokerage accounts, even if they can prove that they paid for them. Consider the following demand from a secondary ...

S1 Registration

A Form S1 represents the opening registration that a US firm must submit with the SEC prior to an Initial Public Offering. The Securities Act requires a registration statement, otherwise known as Securities and Exchange Commission Form S1, previous to security can be issued on a public exchange such as the NASDAQ, NYSE, or other exchanges. Foreign corporations can register with the SEC, but they must do so using the SEC Form F1. Corporations must fill out Form S1 to outline their intended use of capital proceeds, a description of their current business strategy and competition, and a brief prospectus for the new security, including offering pricing mechanism and any other dilution to other listed stocks. The SEC also mandates that any material business conducted between the corporations and its directors and external counsel be disclosed. Investors can access S1 filings online in order to do due diligence on new offers before they go public. As a result, businesses can use t...

All-cash, All-stock offer

An acquisition strategy known as an “all-cash, all-stock offer” requires the buyer to commit to purchasing all of the target company’s outstanding shares for a certain amount in cash. It is also characterized as buying all of a company’s outstanding shares from its shareholders in exchange for payment. All-cash, all-stock offers are typically taken into consideration as a strategy to complete an acquisition. This could be an excellent technique the acquiring corporation might use to make the transaction appear sweet and persuade shareholders who are on the fence to accept the sale by offering a premium above the cost at which the shares are now trading. So if it’s that case, if indeed the company was purchased at a premium, then shareholders of the target company could experience an increase in the value of their shares. Even when we talk about cash deals, a stock value for the target firm is discussed, and that value may be considerably higher than its current market price. Therefore,...

Mina Mar Group

Search This Blog