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The “Truth in securities act” is also termed as Securities Act of 1933 or Federal Securities Act. This act was the result of the crash of stock market in 1929. When the worldwide dramatic economic downturn took place, in October 1929 the security acts had to be modified. This very incidence is known as “Great Depression”.

Features of Truth in Securities Act

The legislation of the “Truth in securities act” had two objects. The first object is to ensure transparency of financial statements. This will ensure the investors that they can make decisions about the investment. The second object was to set up laws against the mis- presentation and deceitful activities in the markets of securities. This will stop the fake investments and other forged activities.

Some part of the act was sketched by James Landis, Thomas Corcoran and Benjamin V. Cohen. The laws were signed by President Franklin Roosevelt. The act states that, the company or issuer which offers securities should provide sufficient information about securities and issuer to the potential investor. This will make their investor to take informed investment decision. For this the issuer must disclose sufficient information to the investor. This way the first objective of transparency and fair dealing is attained.

The issuer must include significant details about themselves and security terms in the information broacher. This legal disclosure discourages fake behavior. The law and act is termed as the “sunlight is the best disinfectant” by Louise Brandies, the Supreme Court justice. The same phrase was included into the philosophy section of the 1933 act.

In order to disclose the information the issuer must register the securities with Securities and Exchange Commission or SEC. The SEC is the chief federal agency which is responsible for the error in the security markets. It is also responsible for the enforcement of the securities laws generated by federal.

The registration process in truth in securities act

To disclose the information to the investor the issuer must register with SEC. These are the steps with which the issuer can register. The SEC provides the relevant forms for the registration. The forms ask for the description of the business and property of the issuer. The description about the security for the sale is also asked in the form. Details about the management staff of the issuer has to be mentioned in the form. If the issuer is not registering for the common stock then he must provide the details about the securities. The financial statement which is certified by various accountants should also be provided along with the form.

When the issuer fills the form and provides the necessary documents, the details are made public. The issuer cannot lie or omit any material or fact in these details. However before making the details public the Truth in Securities act checks for exemptions. If the issuer is offering privately then the details may not be made public. This is however restricted to specific number of institutes or person. If the offering is of limited size then the details may not be disclosed.

The truth in securities act is considered as the landmark in securities laws.