The Securities Act was Congress's opening shot in the war on securities fraud. Congress primarily targeted the issuers of securities. Companies which issue securities (called issuers) seek to raise money to fund new projects or investments or to expand their operations. These companies must attract potential investors. Therefore issuers have an incentive to present the company in a way that is attractive to investors. The Securities Act serves the dual purpose of ensuring that issuers selling securities to the public disclose material information, and that any securities transactions are not based on fraudulent information or practices. In this context, "material" means information that would affect a reasonable investor's evaluation of the company's stock. The goal is to provide investors with accurate information so that they can make informed investment decisions. Show
Mandatory DisclosuresThe Securities Act effectuates disclosure through a mandatory registration process in any sale of any securities. In reality, due to a number of exemptions (for trading on the secondary market and small offerings), the Act is mainly applied to primary market offerings by issuers. Under Section 5 of the Securities Act, all issuers must register non-exempt securities with the Securities and Exchange Commission (SEC). Section 5 regulates the timeline and distribution process for issuers who offer securities for sale. The actual registration process is laid out in Section 6, under which registration entails two parts:
The SEC rules dictate the appropriate registration form, which depends on the type of issuer and the securities offered. Section 7 gives the SEC full authority to determine what information issuers must submit, but generally required is information about the issuer and the terms of the offered securities that would help investors form a reasoned opinion about the investment. The requirements are extensive, and include descriptions of the issuer's business, past performance, information about the issuer's officers and managers, audited financial statements, information on executive compensation, risks of the business, tax and legal issues, and the terms of the securities issued. Often, the issuer will submit the prospectus with the registration statement. All of this information becomes public soon after filing with the SEC, through the SEC's online EDGAR system. The SEC reviews registration statements to ensure that all required disclosures have been made. Barring glaring deficiencies or omissions, the registration statement is effective within 20 days, per Section 8. The SEC substantively evaluates the registration statement and prospectus, and can issue "deficiency letters" suggesting changes. Thus, the SEC can aid issuers in shaping disclosures to meet investor needs. Companies tend to comply because the SEC has the power to accelerate the effective date, which allows the company to sell its stock and raise capital earlier. The registration process protects investors in two ways. Issuers cannot offer to sell securities without disclosing information about the company, and developing and delivering a prospectus that the SEC has reviewed. In addition, issuers are strictly liable for any material misstatements or omissions in the prospectus or registration statement. Enforcing the Securities ActSEC enforcement actions are the primary mechanism for enforcing federal securities laws. The SEC can prosecute issuers and sellers of unregistered securities. Under Section 20(b)can seek injunctions against the sale or issue of securities if the Securities Act has been violated, or if a violation is imminent. Section 8A also allows the SEC to issue orders to issuers to cease and desist from certain activities, and bar officers and directors who have violated the Securities Act's anti-fraud provisions. Additionally, the SEC can seek civil penalties under Section 20(d) if a party violated the Securities Act, an SEC rule, or a cease-and-desist order. The SEC may not bring actions on behalf of individual investors, but the Securities Act allows individual investors to bring civil actions under several provisions:
Which statement is true under nasaa rules within 120 days of fiscal year end the customer must be given a copy of the?The best answer is D. NASAA rules require that within 120 days of fiscal year end, the adviser must send each customer a revised Brochure (Form ADV Part 2A) and Brochure Supplement (Form ADV Part 2B) if there are material changes.
Which of the following actions should be taken if a registered representative RR receives a written complaint from a customer?Which of the following actions should be taken if a registered representative (RR) receives a written complaint from a customer? The RR should forward the complaint to her principal.
What is the purpose of the Uniform Securities Act?The Uniform Securities Act (USA) provides basic investor protection from securities fraud, complementing the federal Securities and Exchange Act. The act only applies to securities not regulated by the Securities and Exchange Commission.
Which action is a prohibited practice under the Uniform Securities Act?Under the Uniform Securities Act, which of the following are prohibited actions of an investment adviser? The USA prohibits an investment adviser from acting as principal or agent in a transaction with an advisory client without approval prior to completion (settlement) of the trade.
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