The Securities Act of 1933 is referred to as the “truth in securities” law and has two basic fdr-Cropobjectives:

  1. Requires that investors receive financial and other significant information concerning securities being offered for public sale;
  2. Prohibit deceit, misrepresentations, and other fraud in the sale of securities.

To achieve these goals, securities must be registered before they can be sold to the public.  The registration process requires that issuers provide potential investors with essential facts about the investment, including:

  • A description of the company’s properties and business;
  • A description of the security to be offered for sale;
  • Information about the management of the company;
  • Financial statements certified by independent accountants

With such information investors, not the government, can make informed judgments about whether to purchase the securities. While the SEC requires that the information provided be accurate, it does not guarantee it.

Not all securities, however, must be registered before they can be sold to the public.  These include:

  • Certain exempt securities (such as US government securities, municipal securities, short-term corporate debt, and commercial bank securities)
  • Securities that are sold in an exempt transaction (such as those sold in a private placement (Reg D), offerings of limited size (Reg A), and intrastate offerings (Rule 147)

Knopman Notes:
Remember the basic provision of the Act of 1933 – all securities must be registered to be lawfully sold to the public unless:

  1. The security is exempt;
  2. The transaction is exempt.

This framework will help guide candidates through the analysis of whether a security must be registered. From here, candidates can recall and analyze the lists of exempt securities and transactions to make such a determination.  And remember, if either the security or transaction is exempt it means the SECURITY can lawfully sold without be registered.

Exams:
Series 7, Series 24, Series 63, Series 65, Series 66, Series 79

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Written by Dave Meshkov
Dave's mission (and job: Managing Director of Course Design) is to make FINRA exam training engaging, approachable, and dare he even say, enjoyable. Having trained and coached over ten thousand students to exam success he knows how to present complex subjects in memorable and understandable ways. Prior to joining Knopman Marks in 2011, Dave practiced bankruptcy law at Weil, Gotshal & Manages and served as a law clerk in a the Southern District of New York Bankruptcy Court working on the General Motors and Lehman Brothers bankruptcies. Building on his legal expertise and training allows him to keep all our courses updated with the latest legislative and rule-making changes. Dave currently trains for the Securities Industry Essentials (SIE) exam and the Top-Off Series 6, 7, 24, 57, 63, 65, 66, 79, 86, 87, and 99 exams. He also delivers executive one-on-one training and shares his passion for learning outside of work as a ski instructor and yoga teacher. Dave graduated magna cum laude from Fordham Law School, and cum laude with a BA from the University of Pennsylvania.