What are the major Securities Regulations that I should be aware of for Securities Trading?

Question:  I am trying to understand basic Securities Regulation and I am getting confused by all of the different Acts and acronyms that seem to be part of a bottomless pit of rules and regulations.  Are there any major Securities Regulations that can provide me with a solid foundation?

Response: While the topic of Securities Regulation can be very confusing and convoluted, there are a couple of statutes that provide the main framework of Securities Regulation in the United States.  The main statutes are The Securities Act of 1933 (“’33 Act”) and The Securities Exchange Act of 1934 (“Exchange Act”).  Both the ’33 Act and the Exchange Act are governed by the Securities & Exchange Commission (“SEC”) and both statutes are responsible for overall Securities Regulation in the U.S. 

The overall goal of Securities Regulation is to protect investors from fraudulent activities and deception.  The provisions include rules against insider trading, implement requirements for public disclosure and ban practices like price fixing (which is creating an artificial movement in stock prices) and money laundering.  The securities markets in the United States have a major impact on the overall economy, so the government has a vested interest in making sure that the markets operate without illegal activity. 

Securities Regulation even plays a part in anti-terrorism efforts by conducting due diligence on all potential investors.  Prior to investing into things like mutual funds and hedge funds, investors must provide information on how they obtained their money and in some cases must provide financial statements proving that the money is not from an illegal source.  The goal of a Securities Regulation like the anti-money laundering provisions is to prevent terrorists from “cleaning” their money through the stock market by depositing illegal funds in and pulling legitimate funds out through a stock distribution.

While Securities Regulation is certainly a difficult topic to fully master, having an understanding of the ’33 Act and the Exchange Act will help you to acquire a solid foundation on the key laws, rules and regulations.  

Additional Resources:

Answered by D. Nicole Rosen

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