The Securities Act of 1933 (SA33)

Regulates new issues of securities

Primary concern is disclosure, you can sell a bad investment, as long as you disclose all facts. An investment that has a 1% chance of succeeding is perfectly legal, as long as everyone who may want to buy it knows it only has a 1% chance of succeeding.

Any company that registered under SA33 must create registration statement, with lots of information. All signers of the registration statement are strictly liable for any inaccurate statements. This is a very high level of liability, so they are very careful (generally)

Regulation S, “safe harbor” (not retirement), deals with offering of securities executed in another country and thus not required to register under SA33.

The Securities Exchange Act of 1934 (SEA34)

Regulates the Secondary trading markets, the Exchanges.

This act created the SEC, the regulatory arm of the Securities Exchange Act. SEC if primarily responsible for enforcement of all United States federal securities laws

SEC enforces corporate reporting by all companies >$10M assets and shares held by >500 owners

The Investment Company Act of 1940 (ICA40)

The primary source of regulation for mutual funds and closed-end funds and also impacts operations of hedge funds, private equity funds, and even holding companies.

Requires disclosure of material details about each investment company.

ICA40 prevents short selling of mutual fund shares.

Also is what limits regarding filings, service charges, financial disclosure, and the fiduciary duties associated with fund companies.

SEA requires funds;

  • Register with SEC
  • Have BOD, 75% must be independent
  • Limit investment strategies, including leverage
  • Maintain certain percentage of assets in cash for investors who want to sell
  • Disclosure structure, financial condition, investment policies, and fund objectives to investors


The Investment Advisers Act of 1940

Not nearly as important to know about as the SA33, SEA34, and ICA40, and primarily only needed for Series 65.

Created to monitor and regulate activities of Investment Advisers (IAs) and their representatives, Investment Advisory Representatives (IARs)

It covers people who charge a fee to advise people or institutions.

The IAA basically uses 3 criteria to judge if someone is an investment adviser under this act, and that is what type of advice are they offering? What is the method of compensation? Whether or not a significant portion of their income comes from the fee for advice.