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Middle Market M: Handbook for Investment Banking and Business Consulting by Michael R. Nall, Christian W. Blees, Robert T. Slee, Kenneth H. Marks

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CHAPTER 14

Regulation and Compliance

This chapter discusses securities laws that may be encountered in the deal process. The federal securities laws (and to a lesser extent state securities laws, also known as blue-sky laws) frequently influence the decisions and behaviors of parties to a corporate transaction. A basic familiarity with these laws will help advisors understand the framework within which their clients often must operate, and help them avoid legal exposure for their own actions.

PROTECTING INVESTORS: SECURITIES ACT OF 1933

The Securities Act of 1933 (33 Act), sometimes referred to as the “truth in securities” law, was the first substantial attempt at federal regulation of the offer and sale of securities. Congress enacted the 33 Act during the Great Depression for two principal purposes: (1) to prohibit deceit, misrepresentations, and fraud in the sale of new issuances of securities, and (2) to ensure that investors receive financial and other significant information concerning securities being offered for public sale. The aim was for an investor to have sufficient information to make a reasonable decision about the purchase of a security.

The 33 Act generally requires registration with the Securities and Exchange Commission (SEC) of any security being offered to the public for the first time and, in connection with the registration, disclosure of information about the offering and the issuer. Don't be deceived by the word first. The law applies to secondary offerings ...

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