Securities regulation in the United States is the field of U.S. law that covers various aspects of transactions and other dealings with securities. The term is usually understood to include both federal- and state-level regulation by purely governmental regulatory agencies, but sometimes may also encompass listing requirements of exchanges like the New York Stock Exchange and rules of self-regulatory organizations like the Financial Industry Regulatory Authority (FINRA). On the Federal level, the primary securities regulator is the Securities and Exchange Commission (SEC). However, Futures and some aspects of derivatives are regulated by the Federal Commodity Futures Trading Commission (CFTC).
FINRA is a self-regulatory organization that promulgates rules that govern brokers and dealers and certain other kinds of professionals in the securities industry. It was formed by the merger of the enforcement divisions of the National Association of Securities Dealers (NASD) and the New York Stock Exchange. FINRA, like the exchanges, is overseen by the SEC, and FINRA's rules are generally subject to SEC approval.
The federal securities laws were largely created as part of the New Deal. There are 5 particularly prominent federal securities laws:
- Securities Act of 1933 - regulating distribution of new securities
- Securities Exchange Act of 1934 - regulating trading securities, brokers and exchanges
- Trust Indenture Act of 1939 - regulating debt securities
- Investment Company Act of 1940 - regulating mutual funds
- Investment Advisers Act of 1940 - regulating investment advisers
Since these laws were originally enacted, Congress has amended them many times. The Holding Company Act and the Trust Indenture Act in particular have changed significantly since then. The titles listed above, including the year of original enactment, are the so-called "popular names" of these laws, and practitioners in this area reference these statutes using these popular names (e.g., "Section 10(b) of the Exchange Act" or "Section 5 of the Securities Act"). When they do so, they do not generally mean the original provisions of the original acts, they mean as amended to date.
When Congress amends the securities laws, those amendments have their own popular names (a few prominent examples include Securities Investor Protection Act of 1970, the Insider Trading Sanctions Act of 1984, the Insider Trading and Securities Fraud Enforcement Act of 1988 and the Dodd-Frank Act). These acts often include provisions that state that they are amending one of the primary 5 laws. Other laws passed since then include Private Securities Litigation Reform Act (1995), Sarbanes–Oxley Act (2002), Jumpstart Our Business Startups Act (2012), and various other federal securities laws.
Although practitioners in this area use these popular names to reference the federal securities laws, like all U.S. statutes they are generally all codified in the U.S. Code, which is the official codification of U.S. statutory law. They are contained in Title 15. Thus, the official code citation for Section 5 of the Securities Act of 1933 is actually 15 U.S.C. section 77e. Not every law adopted by Congress is codified, because some of them just aren't appropriate for codification. E.g., appropriations are not codified.
There are also fairly extensive regulations under these laws, largely made by the SEC. One of the most famous and often used SEC rules is Rule 10b-5, which prohibits fraud in securities transactions as well as insider trading. Because interpretations under rule 10b-5 often deem silence to be fraudulent in certain circumstances, efforts to comply with Rule 10b-5 and avoid lawsuits under 10b-5 have been responsible for a very large amount of corporate disclosure.
The federal securities laws govern not only the offer and sale of securities, but also trading of securities, activities of certain professionals in the industry, investment companies like mutual funds, tender offers, proxy statements, and generally the regulation of public companies. Public company regulation is largely a disclosure-driven regime, but it has grown in recent years to the point that it begins to dictate certain issues of corporate governance.
State laws governing issuance and trading of securities are commonly referred to as blue sky laws.
Read more about Securities Regulation In The United States: History
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