Federal and California Securities Law Compliance

Federal Securities Law

The United States federal government began regulating securities in 1933 in response to the financial scams and scandals, that led to the stock market crash of 1929. The Securities Act of 1933 is a disclosure act, requiring the issuers and underwriters of securities to file registration statements, prospectus, offering circulars, advertisements, and intent to sell notices with the federal government. The Securities Act of 1933 creates liability for those who misrepresent or omit facts about the securities.
The Securities Act of 1933 was followed by the Securities Exchange Act of 1934. While the Securities Act of 1933 regulates securities’ issuance, the Securities Exchange Act of 1934 regulates the secondary trading of securities, meaning the buy and sale of securities not involving the issuer of the securities.
The Securities Exchange Act of 1934 makes it unlawful for any person, by the use of any means or instrumentality of interstate commerce or the mails, or of any facility of any national securities exchange to use or use, in connection with the buy or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
Other federal regulations followed the Securities Exchange Act of 1934, including the Investment Company Act of 1940.

State Securities Laws (“Blue Sky Laws”)

All fifty states, the District of Columbia, Guam, and Puerto Rico, have enacted state securities laws, referred to as “blue sky laws.” These acts regulate offers, subscriptions, sales, and issuances of securities by businesses and individuals to different degrees. Like federal securities laws, blue sky laws protect the public against fraudulent investment schemes through the full disclosure of all information an investor would find useful in making an informed investment decision. Blue sky laws also protect securities and investors’ issuers by regulating the commissions that may be earned by a securities broker.

California Securities Law

The California Corporate Securities Law of 1968 regulates all offers and sales of securities in California. All securities offered or sold must be qualified with the California Department of Business Oversight or exempted from registration by a specific rule or California securities law.
Exemptions from qualification do not limit issuer liability for fraud, criminal, or civil penalties, but instead, exempt the offer or sale from the cost and formalities of qualification. The Federal Securities Act of 1933 and Securities Exchange Act of 1934 are separate laws dealing with the issuance and secondary sale of securities. The California Corporate Securities Law of 1968 regulates offers and sales of securities from both issuers and secondary sellers.
Like federal securities laws and the blue sky securities laws of other states, the California Corporate Securities Law of 1968 protects the public from fraud and deception in transactions involving securities. The California Corporate Securities Law of 1968 achieves this regulation in part by providing statutory remedies as well as common law remedies for those damaged in securities transactions that violate the California Corporate Securities Law of 1968.

NOTICE: The information on this website does not constitute legal advice and you should not rely on any information without seeking the advice of a competent attorney licensed to practice in your jurisdiction. This web site is both a communication and/or solicitation as defined by California Rules of Professional Conduct, rule 1-400. For further information, please click here.


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