Do you know the difference between the USA Securities Act of 1933 and 1934
Main differences between the USA securities acts of 1933 and 1934
1 min read
The two main pieces of legislation that regulate securities in the USA are the Securities Acts of 1933 and 1934. These laws are not only different in the year they were enacted and their scope, but also in their liability provisions.
It would be impossible to list all the differences between these two acts in this post, but we can outline some key points relevant to D&O practitioners. In our view, those are:
The Securities Act of 1933
1) It is also known as the Securities Act, 33 Act, or “Truth in Securities”.
2) Regulates the registration and offering of securities, it regulates the registration of the prospectus of an initial public offering (IPOs), and most importantly, the information provided to investors in the offering.
3) Defines which securities require registration (certain securities are exempt from registration).
4) Provides liabilities for the issuers and anyone involved in the issuance in the case of misrepresentation of securities offerings.
5) The liability provisions apply to registered offerings; therefore, it applies to initial public offerings (IPOs).
6) The liability provisions are mainly found in Section 11 of the 33 Act.
7) Intent and reliance are not required. Therefore, the elements of fraud need not be proven.
8) Defendants and damages are specified in the statute.
The Securities Act of 1934
1) It is also known as the Exchange Act or the 34 Act.
2) With the 34 Act, the US Congress created the Securities and Exchange Commission (SEC).
3) It is much broader than the 33 Act, as it is not limited to IPOs.
4) Regulates securities transactions (i.e., selling and buying on the secondary markets), and also securities market exchanges, periodic disclosures, and any professionals involved in the securities industry (i.e., brokerages, dealers, agents, clearing agencies, securities organizations, etc).
5) Prohibits fraud in connection with any purchases or sales of securities in the secondary market.
6) Regulates periodic reporting of information such as yearly and quarterly reports, and any other material facts.
7) The liability provisions are mainly found in Section 10(b)(5) of the 34 Act.
8) The elements of fraud must be pleaded and proven.
If you want to learn more about securities legislation and how they impact the exposure of D&O listed companies in the USA, then you should follow our masterclasses on securities exposure with Kevin LaCroix.
