The Securities exist in form of notes, stocks, treasury
stocks, bonds, certificates of interest or participation in profit
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment contracts,
voting trust certificates, certificates of deposit for a security,
and a fractional undivided interest in gas, oil, or other mineral rights.
Certain types of notes, such as a note secured by a home mortgage or
a note secured by accounts receivable or other business assets are
not securities.
There are two principle settings for buying and selling
securities: issuer transactions and trading transactions. Issuer
transactions are the means by which businessmen raise capital and
involve the sale of securities by the issuer to investor. Trading
transactions are the purchasing and selling of outstanding securities
among investors. Outstanding securities are traded through securities
markets that can be either stock exchanges or "over-the-counter".
A stock exchange provides a place, rules, and procedures for buying
and selling securities. Generally, to have their securities sold
and bought on a stock exchange, a company must list its securities
on a given exchange. Stock exchange rules are subject to approval
by the Securities and Exchange
Commission (SEC) . All transactions that do not take place on a
stock exchange are said to be executed in the over-the-counter market,
which is the residual securities market. Only dealers and brokers who
are registered with the SEC may engage in securities business both
on stock exchanges and over-the-couner market. Most of the broker-dealers
serving the public are members of the National Association of Securities
Dealers (NASD), a national securities association registered with SEC.
Securities
regulations focus mainly on the market for common stocks. Both federal
and state laws regulate securities. Federal securities laws are generally
administrated by the Security and Exchange Commission which was established
by the Securities Exchange act of 1934. The first of the federal securities
laws enacted was the Federal Securities Act of 1933, which regulates
the public offering and sale of securities in interstate commerce.
The 1933 Act prohibits the offer or sale of a security not registered
with the Securities Exchange Commission and requires the disclosure
of certain information to the prospective security's purchaser. The
objective of the 1933 Act's registration requirements is to enable
a purchaser to make a reasoned decision based on reliable information.
