# Understanding the Securities Act of 1933: Key Takeaways and Significance

![A crowd of people gather in front of a bank during the market crash of 1929.](https://www.investopedia.com/thmb/_81WDJq4NZPVxHj6iHIqqL6G0j4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/SecuritiesActof1933-0e806d263d2247e7a7fdf0d9302e42f0.jpg)

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## What Is the Securities Act of 1933?

The Securities Act of 1933 was enacted to protect investors after the [stock market crash of 1929](https://www.investopedia.com/terms/s/stock-market-crash-1929.asp). It requires issuers to register securities and make accurate disclosures so that investors can make informed decisions. It was signed into law by President Franklin D. Roosevelt as part of the New Deal.

### Key Takeaways

*   The Securities Act of 1933 was enacted following the 1929 stock market crash to protect investors from fraud and ensure transparency in the financial markets.  
    
*   This act marked the first federal regulation of securities sales, moving the regulation from state to federal jurisdiction and creating a uniform set of rules for financial disclosures.  
    
*   Companies offering securities to the public are required to file a prospectus and registration statement with the SEC to provide detailed financial and business information.  
    
*   Some securities offerings are exempt from registration, such as intrastate offerings, private offerings, and government-issued securities, providing flexibility in the regulatory framework.  
    
*   The Securities and Exchange Commission (SEC), established by the Securities Exchange Act of 1934, oversees the enforcement of the 1933 Act, ensuring compliance and protecting investors against deceit and misrepresentation.  
    

## Key Features and Requirements of the Securities Act of 1933

The Securities Act of 1933 was the first major law regulating the sale of securities. Prior to this legislation, the sales of securities were primarily governed by state laws. The law required companies to register new securities with the government.

Registration requires companies to give the Securities and Exchange Commission (SEC) and potential investors all necessary information via a [prospectus](https://www.investopedia.com/terms/p/prospectus.asp) and registration statement.

Known as the "Truth in Securities" law, the act mandates that investors receive financial information for publicly sold securities. This means that before going public, companies have to submit information that is readily available to investors.

Today, the required prospectus has to be made available on the SEC website. A prospectus must include:

*   A description of the company’s properties and business
*   A description of the security being offered
*   Information about executive management
*   Financial statements that have been certified by independent accountants

### $2.4 billion

The proposed SEC budget for fiscal year 2024.

## Exemptions from SEC Registration Under the Securities Act

Some securities offerings don't need to register under the act. These include:

*   [Intrastate offerings](https://www.investopedia.com/terms/r/secrule147.asp)
*   Offerings of limited size
*   Securities issued by municipal, state, and federal governments
*   Private offerings to a limited number of persons or institutions

Another key aim of the 1933 Act was to stop deceit and misrepresentation. The act sought to eliminate fraud in securities sales.

> **Important**
>
> Every registration statement and prospectus for a public securities offering in the United States can be found on EDGAR, an electronic database by the Securities and Exchange Commission.

## Historical Context and Evolution of the Securities Act of 1933

The 1933 Act was the first federal law to regulate the stock market. The act shifted power from the states to the federal government. The act established uniform rules to protect investors from fraud. It was signed into law by President Franklin D. Roosevelt and is considered part of the [New Deal](https://www.investopedia.com/terms/n/new-deal.asp) passed by Roosevelt.

The Securities Act of 1933 is governed by the Securities and Exchange Commission, which was created a year later by the Securities Exchange Act of 1934. Several amendments to the act have been passed over the years to update rules.

## What Was the Objective of the 1933 Securities Act?

The main goal of the Securities Act of 1933 was to introduce national disclosure requirements for companies selling stock or other securities. It requires companies selling securities to the public to reveal key information about their property, financial health, and executives. Prior to that law, securities were only subject to state regulations, and brokers could promise extravagant returns while disclosing little relevant information.

## How Is the Head of the Securities and Exchange Commission Chosen?

The Securities and Exchange Commission is headed by five commissioners, who serve five-year terms and are appointed by the president with the consent of the Senate. The president also designates one of those commissioners to be the chairman of the body.

## How Did the Public Benefit From the Federal Securities Act?

The main benefit of the securities act was to introduce disclosure requirements for new securities issues. Prior to its passage, companies selling stocks or bonds could promise large profits without revealing key information about their companies. The disclosure requirements helped investors better understand the true financial prospects of a company, allowing them to make better investment decisions and safeguard their money.

## The Impact and Legacy of the Securities Act of 1933

The Securities Act of 1933 was the first federal law to regulate the securities industry. It requires companies that sell stocks or bonds to the public to disclose certain information, such as their assets, financial health, executives, and a description of the security being sold. These rules are intended to protect investors from deceptive practices, such as those that preceded the 1929 stock market crash.

The Securities Act laid the groundwork for modern federal regulations, enforced by the SEC. Although it has been amended by more recent legislation, it remains one of the most important laws governing securities offerings in the United States.  

> **Article Sources**
>
> 1.  Investor.gov. “[Registration Under the Securities Act of 1933](https://www.investor.gov/introduction-investing/investing-basics/glossary/registration-under-securities-act-1933).”
>     
> 2.  U.S. Securities and Exchange Commission. “[Fiscal Year 2024 Congressional Budget Justification](https://www.sec.gov/files/fy-2024-congressional-budget-justification_final-3-10.pdf).” Pages 13, 16.
>     
> 3.  U.S. Securities and Exchange Commission. "[The Laws that Govern the Securities Industry](https://www.sec.gov/answers/about-laws#secact1933)."
>     
> 4.  Library of Congress. “[National Recovery Administration (NRA) and the New Deal: A Resource Guide](https://guides.loc.gov/national-recovery-administration/new-deal).”
>     
> 5.  GovInfo. “[Securities Exchange Act of 1934](https://www.govinfo.gov/app/details/COMPS-1885).” Download PDF.
>     
> 6.  Legal Information Institute. "[Securities Law History](https://www.law.cornell.edu/wex/securities_law_history)."
>     
> 7.  U.S. Securities and Exchange Commission. “[Current SEC Commissioners](https://www.sec.gov/about/commissioners).”