Securities Acts of 1933, 1934, 1940, etc. – Series 7 Exam

Securities Acts of 1933, 1934, 1940, etc. – Series 7 Exam
Published on finra-exam-mastery.com

📜 Overview of Key Securities Acts Tested on the Series 7 Exam
The Series 7 exam places strong emphasis on major federal securities laws that shape how the financial industry operates. These laws establish rules for registration, disclosure, antifraud provisions, and regulatory oversight. Understanding the purpose and key provisions of each Act is critical for success.

📘 Securities Act of 1933 – “Paper Act”
Purpose: Regulates the primary market

• Requires registration of new securities with the SEC
• Ensures full disclosure of material information to investors through a prospectus
• Prohibits fraudulent activity in the issuance of securities
• Exempt securities: U.S. government, municipal, commercial paper, insurance, banks
• Exempt transactions: Private placements (Reg D), intrastate offerings (Rule 147)

📊 Securities Exchange Act of 1934 – “People Act”
Purpose: Regulates the secondary market

• Established the SEC as the federal securities regulator
• Governs broker-dealers, exchanges, and public companies
• Requires periodic reporting (10-K, 10-Q, 8-K)
• Covers insider trading laws (Section 10b-5)
• Requires registration of broker-dealers, market makers, and exchanges
• Introduced Regulation T – margin rules

🛡️ Investment Company Act of 1940
Purpose: Regulates investment companies like mutual funds, UITs, and closed-end funds

• Requires registration with the SEC
• Sets standards for capital structure, diversification, and reporting
• Limits on management fees and prohibits affiliated transactions
• Defines types of investment companies and their operational rules

💼 Investment Advisers Act of 1940
Purpose: Regulates investment advisers

• Requires registration with the SEC (if managing $100M+ AUM) or state
• Defines fiduciary responsibilities
• Addresses disclosure of conflicts of interest
• Covers advisory contracts, advertising, custody of client funds
• Exempts publishers and incidental advisers under certain conditions

🏦 Trust Indenture Act of 1939
Purpose: Applies to corporate debt offerings over $50 million

• Requires a formal trust indenture between issuer and trustee
• Protects bondholders by enforcing transparency and accountability
• Applies to public corporate bonds only (not government or municipals)

💲 Securities Investor Protection Act of 1970 (SIPA)
Purpose: Created the SIPC, which protects customer assets in broker-dealer failures

• Covers up to $500,000 per customer, including up to $250,000 cash
• Does not cover commodities, futures, or investment performance
• Applies only to firms that are SIPC members

🚨 Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA)
Purpose: Strengthens penalties for insider trading

• Enables SEC to seek civil penalties up to 3x the profit gained or loss avoided
• Imposes supervisory liability for firms that fail to prevent insider trading
• Introduced “Contemporaneous Traders” clause for civil suits

📚 Series 7 Tip
Focus on each act’s purpose, who it regulates, required filings, and penalties. Questions often test subtle differences, especially between the 1933 and 1934 Acts, or between company vs. individual-level regulation.

🎯 Master the Rules That Govern the Market
Get full breakdowns, cheat sheets, and exam-style questions for every major securities law in our Series 7 prep course.

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