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Securities Act of 1933 and Exchange Act of 1934
1933–1934· Law or rule
Fact, law or dataA rule, statute, definition or measured number.
The two New Deal laws that still govern US securities: the 1933 Act for selling new securities, the 1934 Act for trading them afterward.
See it on the Money & Finance map →How it works
The Securities Act of May 1933 requires anyone offering securities to the public to register and disclose the facts in a prospectus, unless an exemption applies, such as the Regulation D private placements used for most real estate syndications. The Exchange Act of June 1934 created the SEC and regulates exchanges, brokers and public companies' ongoing reports. Its Section 10(b), through SEC Rule 10b-5 of 1942, bans fraud in any securities trade. The approach is disclosure, not approval of an investment's merits.
Why it matters
They set the rule that investors must get the facts, backed by legal liability; that underpins trust in US markets and defines what counts as securities fraud.
Think of it like
Like mandatory seller disclosures and a title report in a property sale: the law does not stop a bad deal, only a hidden one.
Facts, rules and data
The statutes and SEC rules. The Supreme Court's 1946 Howey case, about Florida orange-grove plots sold with management contracts, still defines an 'investment contract', and so which deals are securities.
Debates and risks
Which crypto tokens are securities under Howey remains contested, as does whether 1930s disclosure rules work when most investors never read the filings.
Connections (4)
▸Securities Act of 1933 and Exchange Act of 1934 require disclosure for Initial public offerings (IPOs)Fact, law or data
The connection
A company going public must file a registration statement (Form S-1) with audited financials, risks, executive pay and use of proceeds, and give buyers a prospectus. The SEC reviews it for completeness, not merit. Directors and underwriters are liable for misstatements, which is why underwriters run heavy due diligence.
When and why
Since 1933; the 2012 JOBS Act let smaller 'emerging growth companies' file confidentially and test investor interest before going public.
How we know
Every IPO's S-1 and prospectus are public on the SEC's EDGAR database; Section 11 of the 1933 Act sets liability for false statements in them.
Debates and risks
Whether disclosure costs help explain why US-listed companies fell from about 8,000 in the late 1990s to about 4,000, as firms stay private longer, is debated.
▸Securities and Exchange Commission (SEC) enforces Securities Act of 1933 and Exchange Act of 1934Fact, law or data
The connection
The SEC writes the detailed rules that put both Acts into practice, such as Regulation D for private placements and Rule 10b-5 against fraud, reviews filings, and sues violators in federal court or its own proceedings. Remedies include fines, returning ill-gotten profits to victims and barring people from serving as officers or working in the industry.
When and why
Since 1934, when the SEC took over the 1933 Act from the Federal Trade Commission; it now sues in federal court for most fraud penalties.
How we know
The Acts' grants of rulemaking power; SEC rules in Title 17 of the Code of Federal Regulations; SEC v. Jarkesy (2024), requiring jury trials for fraud penalties.
Debates and risks
How far the SEC can stretch 1930s laws to new products like crypto and private markets without new legislation from Congress is contested.
▸Insider trading is prohibited under Securities Act of 1933 and Exchange Act of 1934Fact, law or data
The connection
The 1934 Act's Section 10(b) and SEC Rule 10b-5 ban deception in securities trades, and courts treat trading on confidential information in breach of a duty as such deception. Section 16 makes officers, directors and 10% owners report their trades and return short-swing profits made within six months. Later laws set penalties up to three times profits.
When and why
The SEC first applied Rule 10b-5 to insider trading in the 1961 Cady, Roberts case; Congress raised penalties in 1984 and 1988, during the Boesky era.
How we know
Supreme Court decisions (Chiarella 1980, Dirks 1983, O'Hagan 1997, Salman 2016) and the Insider Trading Sanctions Act of 1984.
Debates and risks
Because no statute defines insider trading, its boundaries keep shifting; the SEC's 2024 'shadow trading' jury win, over trades in a rival company's stock, widened it.
▸Securities fraud: lying to investors and rigging markets is defined largely by Securities Act of 1933 and Exchange Act of 1934Fact, law or data
The connection
Section 17(a) of the 1933 Act bans fraud in selling securities, and Section 10(b) of the 1934 Act, with Rule 10b-5, bans it in any purchase or sale. Courts filled in the details: a misstatement must be 'material', and private plaintiffs must prove intent and losses. The 2002 Sarbanes–Oxley Act added a separate criminal securities-fraud statute.
When and why
Since 1933–34; key Supreme Court rulings include Hochfelder (1976) on intent, Basic v. Levinson (1988) on materiality and reliance, and Morrison (2010) limiting foreign cases.
How we know
The statutory text, SEC Rule 10b-5 (1942) and thousands of court decisions; shareholder class actions under Rule 10b-5 are filed every year.
Debates and risks
Whether private class actions mainly deter fraud or mostly shift money among shareholders while lawyers collect fees is debated.