Secreg
Securities Outline
INTRODUCTION
THE REGULATORY FRAMEWORK
• Premise of securities regulation is that mandatory disclosure (as well as antifraud provisions) will equip securities investors and their advisors with the information to move capital to its optimal uses. • Purposes of securities regulation: o Assuring that when securities are created and offered to the public, investors have an accurate idea of what they are purchasing an interest in, and how much their interest represents. o To assure that there is a continuous flow of information about the corporation which is represented by securities being traded on secondary markets. o To prohibit a variety of fraudulent, manipulative, and deceptive practices, since the complexity of securities invites unscrupulous people to cheat or mislead investors. o Concerned with regulating people and firms that are part of the large industry that buys and sells securities, and assure that they don’t take advantage of their superior experience and access. • Securities transactions occur in two settings: o Sales of securities to investors by issuers to raise capital for their business (issuer transactions). o Buy-sale transactions among investors of already-issued securities (trading transactions). • Securities markets serve three basic functions: o Capital formation. o Liquidity. ▪ The ability readily to sell an investment instrument—an important attribute of securities. o Risk management. • The Securities Act of 1933 o Regulates public offerings of securities. ▪ §2(b) requires that when the SEC is engaged in rulemaking, they should consider whether the action is necessary in the public interest, whether it will protect investors, and whether the action will promote efficiency, competition, and capital formation. ▪ Basic provision is §5 which prohibits offers and sales of securities which are not registered with the SEC. ▪ §6 and §8 set forth the procedure for
INTRODUCTION
THE REGULATORY FRAMEWORK
• Premise of securities regulation is that mandatory disclosure (as well as antifraud provisions) will equip securities investors and their advisors with the information to move capital to its optimal uses. • Purposes of securities regulation: o Assuring that when securities are created and offered to the public, investors have an accurate idea of what they are purchasing an interest in, and how much their interest represents. o To assure that there is a continuous flow of information about the corporation which is represented by securities being traded on secondary markets. o To prohibit a variety of fraudulent, manipulative, and deceptive practices, since the complexity of securities invites unscrupulous people to cheat or mislead investors. o Concerned with regulating people and firms that are part of the large industry that buys and sells securities, and assure that they don’t take advantage of their superior experience and access. • Securities transactions occur in two settings: o Sales of securities to investors by issuers to raise capital for their business (issuer transactions). o Buy-sale transactions among investors of already-issued securities (trading transactions). • Securities markets serve three basic functions: o Capital formation. o Liquidity. ▪ The ability readily to sell an investment instrument—an important attribute of securities. o Risk management. • The Securities Act of 1933 o Regulates public offerings of securities. ▪ §2(b) requires that when the SEC is engaged in rulemaking, they should consider whether the action is necessary in the public interest, whether it will protect investors, and whether the action will promote efficiency, competition, and capital formation. ▪ Basic provision is §5 which prohibits offers and sales of securities which are not registered with the SEC. ▪ §6 and §8 set forth the procedure for