5 Components of the The Uniform Securities Act

Originally released in 1930, the Uniform Securities Act is a piece of legislature that protects investors and gives states more control over issues relating to fraud and securities. Revised multiple times over the years, including in 1956 and 2005, it works with the policies and regulations put in place by the United States Securities and Exchange Commission (SEC). Though there are a number of things outlined in this act, there are several key functions that it performs.

Giving Control to Individual States

The key aspect of the Uniform Securities Act is that it gives more control to individual states. The federal government does not require that all investors register their investments at the federal level or that dealers register their investment companies. Many states do require registration though. The act allows states to create their own policies and regulations regarding how individuals and companies can register investments.

Meeting SEC Regulations

The SEC is responsible for monitoring the conduct of those in the exchange and securities industry. The regulations put in place by this organization usually take place on the federal level, but this act allows the SEC to regulate activities performed on the local level. These regulations apply to how much a person can invest or sell off in a set period of time, the information that companies must make public and how publicly traded companies can sell stocks.

Reducing Securities Fraud

Securities fraud occurs when any one individual or group of individuals perform activities that result in a financial loss. One example is stock manipulation. When a seller takes steps to hide the value of a stock, including to make the stock look like it is worth more or less than it actually is, this is an example of stock manipulation. Securities fraud also includes Internet fraud, corporate fraud and embezzlement. This act of legislature lays out how states can reduce securities fraud and how states can create policies regarding what to do with those found guilty of securities fraud.

Regulating Sales

As the Uniform Securities Act is quite long, many people skim over the subjects or skip reading the entire act. According to the North American Securities Administrators Association (NASAA), the very first section of the act covers fraudulent and prohibited practices in regards to sales. It states that no individual or companies can use fraudulent activities or actions as a way to make sales, and it prohibits all sellers from lying or making untruthful statements as a way to boost sales. The SEC can file charges against anyone caught violating this section.

Allowing for Enforcement

One other function of the Uniform Securities Act is that it allows for enforcement when one person or company breaks federal or state laws. This can include someone who uses insider trading to make money. Insider trading refers to a process where one person has firsthand knowledge or confidential information and provides another with that information. If someone sells stock before the price drops in the morning, that individual is guilty of insider trading. This act of legislature allows the SEC to enforce its own regulations and punish those guilty of breaking those regulation. Criminal activity is punishable by high fines and jail time.

The United States Securities and Exchange Commission is an organization affiliated with the federal government that protects investors and the general public. As the SEC can only make changes at the federal level, state governments need to know how to protect citizens and reduce the threat of fraud. The Uniform Securities Act, which the government updated and amended since its introduction, gives states the right to create their own policies.

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