One of the cornerstones upon which the current financial regulatory system is based, often referred to as the truth in securities law. It requires that investors receive any significant or financial information about corporations’ securities offerings. It prohibits misrepresentations and fraud in the sale of securities. The law also requires issuers to file a registration statement with the Securities and Exchange Commission (SEC) that outlines the securities offering. Each registration statement has a prospectus, which contains information about the securities being offered. The registration statement also contains information about the cost of doing the offering, a description of current business initiatives, and an indemnification of directors and officers.
A federal law governing mainly the issuance, registration, and distribution of securities by the issuer. The objective of the act is to give full disclosure of all facts related to the security being offered, so that potential investors are able to make informed decisions about whether or not to invest.