The '33 Act: What's the Big Deal?
This landmark law was passed in response to the 1929 stock market crash to restore investor confidence.
What is the Securities Act of 1933?
Before selling securities, issuers must comply with this section of the ’33 Act, which prohibits sales through mail or interstate commerce unless registered or exempt.
What is Section 5?
While SEC regulations aim to protect investors, these provisions allow companies to bypass registration when selling securities to small groups or institutions.
What are exemptions?
Under this section of the ’33 Act, investors can sue issuers for material misstatements or omissions in a registration statement.
What is Section 11?
Not all misstatements lead to liability. This legal defense argues that a misstatement must be significant enough to influence an investor’s decision.
What is materiality?
This key requirement ensures that companies issuing securities must disclose financials, governance, and management practices.
What is the registration filing?
This is the first phase of securities registration, where companies gather essential documents such as letters of intent and underwriting agreements.
What is the preregistration phase?
This SEC regulation governs private placements and allows companies to raise funds from accredited investors without the burden of full registration.
What is Regulation D?
If an investor purchases a security based on misleading statements in a public offering, this section allows them to undo the transaction and seek a refund.
What is Section 12(a)(2)?
Underwriters, executives, and auditors can escape liability if they can prove they performed this kind of reasonable investigation before a security was offered.
What is due diligence?
The '33 Act was designed to regulate this stage of the securities lifecycle, while the Securities Exchange Act of 1934 regulates trading and stock exchanges.
What is the original issuance of securities?
Once submitted to the SEC, a registration statement undergoes this process, where the SEC may issue deficiency letters requiring revisions.
What is an SEC review?
Under this rule, companies can raise up to $5 million within 12 months without requiring accredited investors—but public solicitation is still off-limits.
What is Rule 504?
This broad anti-fraud provision applies to all securities offerings and holds issuers liable for misleading investors—even if the misrepresentation was unintentional.
What is Section 17(a)?
If a company includes specific cautionary language about risks in forward-looking statements, investors cannot later claim they were misled, thanks to this doctrine.
What is the bespeaks caution doctrine?
While most securities must be registered before being sold, the ’33 Act makes an exception for small groups of qualified investors under these provisions.
What are exemptions?
If a company fails to satisfy SEC registration requirements, it may receive one of these orders, halting the sale of its securities.
What is a refusal or stop order?
If you’re a high-net-worth individual or financial professional meeting specific income or asset thresholds, you qualify as this type of investor.
What is an accredited investor?
The SEC has the power to impose both civil and criminal penalties on companies and individuals who violate the ’33 Act through this type of enforcement action.
What is regulatory enforcement?
Passed in 1995, this law created a safe harbor for forward-looking statements, shielding companies from liability as long as they provide meaningful risk disclosures.
What is the Private Securities Litigation Reform Act (PSLRA)?
Before securities can be sold to the public, the SEC requires issuers to submit this document, which includes key financial and risk disclosures.
What is a prospectus?
Popular in 2020 and 2021, these investment vehicles allow companies to go public by merging with a pre-funded shell company, though they have faced increasing regulatory scrutiny.
What are SPACs (Special Purpose Acquisition Companies)?
Thanks to the JOBS Act of 2012, small businesses can raise up to $1,070,000 annually through this SEC-regulated fundraising method.
What is crowdfunding?
Unlike misleading factual statements, statements of this type require additional proof that they were intended to deceive investors.
What are opinions?
While strict liability applies under Sections 11 and 12(a)(2), companies may still argue that they did not have this type of intent, which can help reduce penalties.
What is scienter (intent to mislead)?