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1 1 (February 5, 2020)

handle is hein.crs/govcaeq0001 and id is 1 raw text is: FF.ri E~$~ & February 5, 2020 Federal Securities Laws: An Overview $, s Act: & ,. The Securities Act of 1933 (Securities Act) governs the process by which companies issue securities. The Act prohibits any person from offering or selling a security to the public unless the offering has been registered with the Securities and Exchange Commission (SEC) or falls under an exemption. The Act's exemptions include private placements, certain small issues, and offerings involving certain classes of securities (e.g., government securities and bank securities). If an exemption does not apply, an issuer must file a registration statement with the SEC that includes detailed information about the issuer's business operations, financial condition, and the nature of the offering. If a company issues securities in violation of the Act's registration requirements, individuals who purchased the securities may sue the company to rescind their purchases or for damages. The Act also allows purchasers to sue issuers and other specified individuals-such as directors, underwriters, and persons who signed the registration statement-for damages for certain material misrepresentations or omissions in connection with the offering. The Trust Indenture Act of 1939 supplemented the Securities Act by adding more requirements for public offerings of debt securities. While the Securities Act governs primary offerings, the Securities Exchange Act of 1934 (Exchange Act) fosters transparency and fairness in secondary securities markets. The Act requires companies with securities traded on national securities exchanges and companies with large numbers of shareholders to register their securities with the SEC and abide by a variety of reporting requirements. The Act also regulates national securities exchanges, broker- dealers, and self-regulatory organizations (SROs); imposes certain requirements on tender offers (i.e., broad solicitations by a third party to purchase a substantial percentage of a company's shares at a specified price, often in an attempt to acquire the company); and governs proxy solicitation (i.e., the process by which a corporation's shareholders can authorize another party to vote their shares). The Exchange Act also contains an important catch-all fraud provision. Section 10(b), as implemented by SEC Rule 1 0b-5, makes it unlawful to, in connection with the purchase or sale of any security, make any untrue statement of material fact or to engage in fraudulent schemes. Courts have held that Section 10(b) and Rule 1 0b- 5 apply to a wide range of fraudulent conduct, such as false statements, insider trading, and market manipulation. The Supreme Court has held that Section 10(b) contains an implied private right of action, allowing injured plaintiffs to sue persons who violate its requirements for damages. , ,, , , pamy sk'-'., 96' The Investment Company Act of 1940 regulates issuers that engage primarily in investing, reinvesting, and trading in securities. Common examples of investment companies are mutual funds and exchange-traded funds (ETFs). According to one estimate, investment companies registered in the United States managed $21.4 trillion in net assets as of 2018. While these vehicles offer investors the benefits of portfolio diversification and expert management, they were also the locus of a range of abusive practices during the 1920s and 1930s, including misleading disclosures, management self-dealing, and embezzlement. To address these problems, the Investment Company Act (1) requires investment companies to register with the SEC, subject to certain exceptions, (2) imposes disclosure requirements for the investment company and its investment policies, (3) prohibits many types of direct transactions between investment companies and affiliated persons, (4) limits an investment company's ownership of shares of other investment companies, and (5) requires investment companies to create shareholder-elected boards of directors to police management conflicts of interest. Private funds, such as hedge funds and private equity funds, typically fall within exceptions to the Act. Advss'r s Act czf 194% The Investment Advisers Act of 1940 imposes a range of requirements on persons or firms in the business of advising others about the value of securities or the advisability of investing in securities. Under the Act and associated SEC regulations, investment advisers are fiduciaries, meaning they must act in their clients' best interests, fully disclose any material conflicts of interest, seek best execution for client transactions, and have a reasonable basis for client recommendations. The Act also requires investment advisers to register with the SEC, subject to certain exceptions, and imposes certain disclosure obligations on registered advisers. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act's amendments to the Act and associated SEC regulations, investment advisers to many hedge funds and private equity funds must register with the SEC. Frgn Co~-RrupkA Pnrcx~kcos- Act 977 Congress enacted the Foreign Corrupt Practices Act (FCPA) in response to the SEC's discovery that a large number of U.S. corporations had bribed foreign officials to secure business. The FCPA contains both anti-bribery and accounting provisions. The anti-bribery provisions prohibit making corrupt payments or giving anything of value to a N.: z:O&X:2$' ~ - , gmmw' ggmm , q rq\\ 'M M X 11LULANJILiM,

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