In the UK, early forms of securities
regulation date back to at least the 13th Century when securities
brokers were required to be licensed in London. Nevertheless,
it was not until the 17th Century that stock exchange dealings
and speculation became more commonplace in the marketplace,
largely owing to the speculation in, and deriving from the
inflated interest in the South Sea Bubble Company. [1]
Thereafter, the city came to adopt an attitude of early self-regulation
in form of what was known as “self-regulation”.
The focus, therefore, was not on the ‘financial services
industry’ but rather on individual sectors such as banking,
insurance and investment management. There were clear distinctions
between retail banks, insurance companies, investment banks,
building societies and securities firms with each sector regulated
by a Self Regulating Organisation (“SRO”) that
promulgated its own rules and regulations. 
In the US on the other hand, it was not until the Securities
Act of 1933 that the first federal securities regulation was
enacted. Congress passed this Act following the great stock-market
crash of 1929 in a bid to regulate a market which had been
replete with unsupervised securities transactions and often
unscrupulous securities promoters and which later came to
be known as the “Truth in Securities” Act. The
1933 Act was heavily influenced by English legislation as
well as state securities laws such as the Kansas securities
law of 1911, (often referred to as “blue-sky laws”
). [2]
The Securities Act 1933 (“SA 1933”) together with
the Securities Exchange Act 1934 (“SEA 1934”)
make up the bulk of the US securities laws.
The Securities Act 1933 regulates the initial public offerings
of securities. It has two main objectives. Firstly, it requires
that all investors receive ‘accurate and timely’
financial and other significant information concerning securities
being offered to the public for sale. It also aims to prohibit
deceit, misrepresentations and other frauds in the sale of
securities. It is for this reason that the US imposes high
standards of financial disclosure of securities. As a general
rule, under Section 5 of the SA 1933, all offers and sales
of securities in the US must be either pursuant to a registration
statement filed with the SEC or in a transaction exempt from
the registration requirements. Sales found to have been made
in violation of this general prohibition are subject to a
right of recession by the purchaser [3]
and can also be fined up to $10,000 and five years imprisonment.
[4]
The 1934 Act requires registration with the SEC of National
securities exchanges; Brokers and dealers who conduct securities
business in interstate commerce; Transfer agents; Clearing
agencies; Government and municipal brokers and dealers; and
Securities information processors. The 1934 Act regulates
broker-dealers and secondary dealings in securities. Under
Section 15(a)(1) of the SEA 1934, any broker-dealer dealing
in securities to the public is thus obliged to register with
the SEC. All brokers who thus register with the SEC are then
also required to join the NASD. [5]
- Owing to the passing of the
Bubble Act 1720.[Return]
- Traditionally said to be a reference
to the blue sky of Kansas or alternatively to regulated
unscrupulous practices by securities promoters which claimed
that they could sell you a piece of the blue sky if you
would let them.[Return]
- Section 12(a). Registration normally
requires a description of the company’s properties
and business and of the security to be offered for sale,
information about the management of the company and financial
statements certified by independent accountants to be filed
electronically. There are, however, certain exemptions and
these include private offerings to a limited number of persons
or institutions, offerings of a limited size, intrastate
offerings and any state, and federal government securities.[Return]
- Section 24.[Return]
- Such statements and the accompanying
prospectuses are then available online using a securities
information service called EDGAR.[Return]
|
