The primary mission of the U.S. Securities and
Exchange Commission (SEC) is to protect investors and maintain the integrity of
the securities markets. As more and more first-time investors turn to the
markets to help secure their futures, pay for homes, and send children to
college, these goals are more compelling than ever.
The world of investing is fascinating, complex,
and can be very fruitful. But unlike the banking world, where deposits are
guaranteed by the federal government, stocks, bonds and other securities can
lose value. There are no guarantees. That is why investing should not be a
spectator sport; indeed, the principal way for investors to protect the money
they put into the securities markets is to do research and ask questions.
The laws and rules that govern the securities
industry in the United States derive from a simple and straightforward concept:
all investors, whether large institutions or private individuals, should have
access to certain basic facts about an investment prior to buying it. To achieve
this, the SEC requires public companies to disclose meaningful financial and
other information to the public, which provides a common pool of knowledge for
all investors to use to judge for themselves if a company's securities are a
good investment. Only through the steady flow of timely, comprehensive and
accurate information can people make sound investment decisions.
The SEC also oversees other key participants in
the securities world, including stock exchanges, broker-dealers, investment
advisors, mutual funds, and public utility holding companies. Here again, the
SEC is concerned primarily with promoting disclosure of important information,
enforcing the securities laws, and protecting investors who interact with these
various organizations and individuals.
Crucial to the SEC's effectiveness is its
enforcement authority. Each year the SEC brings between 400-500 civil
enforcement actions against individuals and companies that break the securities
laws. Typical infractions include insider trading, accounting fraud, and
providing false or misleading information about securities and the companies
that issue them.
Fighting securities fraud, however, requires
teamwork. At the heart of effective investor protection is an educated and
careful investor. The SEC offers the public a wealth of educational information
on its Internet website at www.sec.gov.
The website also includes the EDGAR database, www.sec.gov/edgar.shtml,
of disclosure documents that public companies are required to file with the
Though it is the primary overseer and regulator
of the U.S. securities markets, the SEC works closely with many other
institutions, including Congress, other federal departments and agencies, the
self-regulatory organizations (e.g. the stock exchanges), state securities
regulators, and various private sector organizations.
You can visit
to see an overview of the SEC's history, responsibilities, activities,
organization, and operation.
The Laws That Govern the Securities
Industry - The first step is to understand the
laws which form the foundation for the SEC. They are:
- Securities Act of 1933
- Securities Exchange Act of 1934
- Public Utility Holding Company Act of 1935
- Trust Indenture Act of 1939
- Investment Company Act of 1940
- Investment Advisers Act of 1940
Complete information on these Acts can be found
The key issue of these Acts is "truth in
securities", requiring that investors receive financial and other
significant information concerning securities being offered for public sale and
prohibiting deceit, misrepresentations, and other fraud in the sale of
securities. It is important for investors to know the source of information and
the affiliation of that source with the securities the information pertains
Private Securities Litigation Reform Act of
1995 - Providing relief for the many
companies caught in disclosure-related lawsuits, was a primary objective of the
Private Securities Litigation Reform Act of 1995. The Reform Act created a safe
harbor for "forward-looking statements" other than those
contained in financial statements prepared in accordance with generally accepted
accounting principles, or made in connection with certain types of securities
offerings. The safe harbor exempts companies from liability for forward-looking
statements if they are accompanied by meaningful cautionary language, and, in
any event, a company cannot be liable unless an executive approving the
statement had actual knowledge that the statement was false.
The Reform Act defines forward-looking statements
to mean projections of financial items, such as revenues and earnings,
statements of plans and objectives and any statement of underlying assumptions.
In some cases, even statements phrased in the past tense are forward-looking
when primarily relevant to some expected future event.
Many, if not most, projections are based on what
is known, or assumed to be known, about the past or present. The safe harbor
protection extends to the "assumptions underlying or relating to"
forward-looking statements. The safe harbor should therefore protect a company
that errs in developing facts which are a basis for its projections. An error in
developing facts may be distinguished from deliberate suppression of known and
highly relevant facts. In some jurisdictions, pre-Reform Act cases held that a
prediction was "false" within the meaning of the securities law
if, at the time it was made, the speaker knew but failed to disclose a fact that
tended to seriously undermine the prediction.
Safe harbor statements can be found in company
reports and press releases with forward-looking statements. An example of a safe
Forward-looking statements in this release are
made pursuant to the ``safe harbor'' provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such forward-looking
statements involve risks and uncertainties, including without limitation,
continued acceptance of the Company's products, increased levels of competition
for the Company, new products and technological changes, the Company's
dependence on third-party suppliers, and other risks detailed from time to time
in the Company's periodic reports filed with the Securities and Exchange
Regulation FD -
As of October 23, 2000, the SEC adopted new rules and amendments governing fair
disclosure of information on publicly traded securities. The new rules address
the selective disclosure by issuers of material
nonpublic information; when insider trading liability arises in connection with
a trader's "use" or "knowing possession" of
material nonpublic information; and when the breach of a family or other
non-business relationship may give rise to liability under the misappropriation
theory of insider trading.
The rules are designed to promote the full and
fair disclosure of information by issuers, and to clarify and enhance existing
prohibitions against insider trading. Regulation FD covers information provided
on this web site. Company information provided adheres to Regulation FD and has
been made available to the general public prior to publication on this web site.
For more on Regulation FD, please visit www.sec.gov/rules/final/33-7881.htm.
Securities as Compensation
- The SEC regulates the use of securities as compensation, requiring
registration of shares. One method of accelerating the registration of shares to
be provided as compensation is the use of Form S-8 to register stock. The intent
of Regulation S-8 is to allow companies to register securities issued to
employees or consultants. This allows the shares to become free trading upon
filing of the registration statement.
There are specific restrictions upon the use of
Form S-8 to register securities. In particular, S-8 securities may only be
issued as compensation or as an incentive to individuals who provide services
that do not involve capital raising transactions or market making activities. To
lean more about Regulation S-8 you can visit www.sec.gov/rules/final/33-7646.txt.
Disclaimer - The information contained in
the documents in this website should not be construed as an offer to
sell, or a solicitation to buy, any securities referred to herein.
The information is considered reliable, but not guaranteed as to
accuracy or completeness. TheStockAdvisor specifically disclaims
any liability in connection with the documents and/or information
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