8.1.  Overview of U.S. Securities Regulation

Federal regulation of the securities industry had its beginnings in the stock market crash of 1929 and the deep depression that followed. The two most important pieces of legislation that came out of these events were the Securities Act of 1933 and the Securities Exchange Act of 1934. Nearly all of the laws and regulations that followed have been built upon these two fundamental legislative acts. For the first 40 years, this new framework of securities regulation mostly ignored municipal securities. During the 1970s and 1980s, munis were increasingly brought under federal oversight.

The most important piece of legislation regulating how securities are issued is the Securities Act of 1933, also called the 1933 Act or the Paper Act (because it requires the disclosure in writing of material information about a security).

Securities must be registered with the federal government prior to their sale. The registration statement, which also serves as a disclosure document to investors, must include information about the securities, the company, and its management, as well as independently certified financial disclosures.

Municipal securities were made exempt from the 1933 Act, but the disclosures required in a municipal offering’s official statement (discussed on page 57) are in some ways similar. Also, as discussed soon, municipals are no longer exempt from the antifraud provisions of the Act.

Whereas the Securities Act of 1933 regulates how securities are registered, issued, and distributed to the public for the first time—the primary market—the Securities Exchange Act of 1934 regulates the reselling of securities—the secondary market. It is sometimes called the 1934 Act or the People Act, because it first required securities professionals to register not just their product, but also themselves.

The 1934 Act cre