Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkEasy
A broker-dealer firm is developing its internal policies and procedures to ensure compliance with federal securities laws. Which of the following acts primarily governs the initial public offering (IPO) of securities and requires the registration of new issues?
- ATrust Indenture Act of 1939
- BInvestment Advisers Act of 1940
- CSecurities Exchange Act of 1934
- DSecurities Act of 1933
Show answer & explanationAnswer & explanation
Correct answer: D. Securities Act of 1933
The Securities Act of 1933 is often referred to as the 'Truth in Securities' Act and primarily regulates the initial issuance and sale of securities to the public, requiring registration and full disclosure.
Why the other options are wrong
- A. The Trust Indenture Act of 1939 applies to public issues of debt securities.
- B. The Investment Advisers Act of 1940 regulates investment advisers.
- C. The Securities Exchange Act of 1934 primarily regulates the secondary market and established the SEC.
Securities Act of 1933
The Securities Act of 1933 is a federal law that regulates the primary market, requiring registration of new securities issues and full disclosure of material information to investors.
- Regulates primary market (new issues).
- Requires registration of securities.
- Mandates full disclosure via prospectus.
Memory trick: The '33 Act kicks off the securities game with disclosure.