Securities Act of 1933

Article

Name

Securities Act of 1933

Types

Authors

Cornell University

Publisher

Cornell University

Quotes from

The SEC can prosecute issuers and sellers of unregistered securities. Under Section 20(b), the SEC 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 cease and desist orders to issuers 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.

Section 5 and Section 12(a)(1) allow purchasers to sue sellers for offering or selling a non-exempt security without registering it. As long as the purchaser can prove a direct link between the purchaser and the seller, and the suit is within the statute of limitations, the purchaser may obtain rescission with interest, or damages if the investor sold his securities for less than he purchased them.

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

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.

Section 12(a)(2) creates liability for any person who offers or sells a security through a prospectus or an oral communication containing a material misstatement or omission. The person is liable to the purchaser for rescission of the purchase or damages, provided that the purchaser did not know about the misstatement or omission at the time of the purchase. Court holdings imply that the cause of action only applies to purchasers in the initial offering, not secondary purchases, but this is not settled law yet. Investors suing under 12(a)(2) can only recover from sellers.

Section 11 makes issuers strictly liable for registration statements that contain "an untrue statement of a material fact or omit to state a material fact required

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 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).

A purchaser of the security can bring suit under Section 11, even if he bought the security after the initial offering, on the secondary markets. As long as the purchaser can trace the purchase back to the initial offering and is within the statute of limitations, he can sue;

Related topics

Securities Act of 1933

Web URL

https://www.law.cornell.edu/wex/securities_act_of_1933

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