The Securities Act of 1933 has two basic objectives:
- To require that investors receive financial and other significant information concerning securities being offered for public sale; and
- To prohibit deceit, misrepresentations, and other fraud in the sale of securities.
The SEC accomplishes these goals primarily by requiring that companies disclose important financial information through the registration of securities. This information enables investors, not the government, to make informed judgments about whether to invest in a company’s securities. Here’s an overview of how the registration process works. In general, all securities offered in the United States must be registered with the SEC or must qualify for an exemption from the registration requirements. The registration forms a company files with the SEC provide significant information, 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; and
- Financial statements certified by independent accountants.
Registration statements and prospectuses become public shortly after the company files them with the SEC. All companies, domestic and foreign, are required to file registration statements and other forms electronically. Investors can then access registration and other company filings using EDGAR.
Not all offerings of securities must be registered with the SEC. The most common exemptions from the registration requirements include:
- Private offerings to a limited number of persons or institutions;
- Offerings of limited size;
- Intrastate offerings; and
- Securities of municipal, state, and federal governments.
By exempting many small offerings from the registration process, the SEC seeks to foster capital formation by lowering the cost of offering securities to investors.
The SEC’s Division of Corporation Finance may examine a company’s registration statement to determine whether it complies with our disclosure requirements. But the SEC does not evaluate the merits of offerings, nor do we determine if the securities offered are “good” investments.
While SEC rules require that companies provide accurate and truthful information, the SEC cannot guarantee the accuracy of the information in a company’s filings. In fact, every year the SEC brings enforcement actions against companies who have failed to provide important information to investors. Investors who purchase securities and suffer losses should know that they have important recovery rights if they can prove that there was incomplete or inaccurate disclosure of important information.