What is Securities Law?

Securities law is the body of both federal and state laws that regulate securities. A security is a stock, bond or debenture that is issued by a private corporation or the federal government in exchange for a financial investment.
The Security and Exchange Commission (SEC) serves as the governing body for federal security law. There are four main laws that the SEC enforces:

1. The Securities Exchange Act of 1934. This Act applies to all organizations that wish to trade securities on a national level. The Act gives the SEC the power to create rules and regulations to protect investors. Under this Act, the issuing organizations are required to register with the SEC. Registered issuers must then file extensive reports with the SEC; these reports allow the public to gain sufficient information to decide if they want to purchase stocks in the entity. This Act also requires registered organizations to provide their shareholders with specific information prior to seeking votes on shareholder issues.

2. Investment Company Act of 1940. The Investment Company Act of 1940 deals with conflicts of interest that may arise with publicly traded companies. In cases where there may be conflicts of interest, the Act requires additional disclosure of information so the public investors get an accurate and fair vision of a company’s potential value. The Act also requires all publicly traded companies to share information about their own financial situation.

3. Investment Advisers Act of 1940. This Act regulates people, rather than companies. The Act gives instructions regarding the ways in which investment advisers may do give advice, write reports, conduct analyses, and generally go about their business.

4. Dodd-Frank Wall Street Reform and Consumer Protection Act. This Act became law in 2010 as a direct response to the recession. Among other things, the Act reformed the way banks could seek capitol investment and requires publicly traded companies to share additional information including employee and owner compensation data.

Each state may make its own laws regarding the governance of securities. These laws are known as Blue Sky Laws. Blue Sky laws vary by state, but generally require all publicly traded companies to register and report sales. Most Blue Sky laws also spell out specific punishments for violations of state securities law.

Securities lawyers work to implement both federal and state laws, as well as to make sure publicly traded companies are in compliance.