Securities Act of 1933
Prior to the Securities Act of 1933, there were no true regulatory guidelines on the issuance of securities. Securities were under different state jurisdictions, which proved to be not successful. These regulatory actions led to fraud being conducted and investors being deceived into making poor investment choices. Prior to this Act, companies were not forced to disclose financial information to the public, so investors were investing their money without knowing the facts that surround their investments. Even if the company did disclose their financial positons, management would often fraudulently misstate their numbers in order to draw more investors. This activity by companies was not the main cause for the stock market crash in 1929, but it was a contributor as investors lost large sums of money due to the false faith they had in their investments. After the stock market crashed, investors grew weary of the market and lost confidence in investing their money. This lack of confidence led to the creation of the Securities Act of 1933, also known as the “truth in securities act”. …show more content…
The first goal was to require companies to disclose financial and other relevant information to investors, so investors can get a sense of the company they are investing in. This disclosure would also help investors gain confidence back in the market. The second goal was to “prohibit deceit, misrepresentation, and other fraud in the sale of securities” (SEC). This objective was to put the blame on the companies for committing fraudulent activity. Prior to this act, investors could not sue for losing money due to fraud by a company. These two goals are still prominent
Prior to the Securities Act of 1933, there were no true regulatory guidelines on the issuance of securities. Securities were under different state jurisdictions, which proved to be not successful. These regulatory actions led to fraud being conducted and investors being deceived into making poor investment choices. Prior to this Act, companies were not forced to disclose financial information to the public, so investors were investing their money without knowing the facts that surround their investments. Even if the company did disclose their financial positons, management would often fraudulently misstate their numbers in order to draw more investors. This activity by companies was not the main cause for the stock market crash in 1929, but it was a contributor as investors lost large sums of money due to the false faith they had in their investments. After the stock market crashed, investors grew weary of the market and lost confidence in investing their money. This lack of confidence led to the creation of the Securities Act of 1933, also known as the “truth in securities act”. …show more content…
The first goal was to require companies to disclose financial and other relevant information to investors, so investors can get a sense of the company they are investing in. This disclosure would also help investors gain confidence back in the market. The second goal was to “prohibit deceit, misrepresentation, and other fraud in the sale of securities” (SEC). This objective was to put the blame on the companies for committing fraudulent activity. Prior to this act, investors could not sue for losing money due to fraud by a company. These two goals are still prominent