SIE Exam: Securities Regulations
Section 4 — Overview of the Regulatory Framework (9% of exam)
This SIE exam topic covers the major federal securities laws that form the regulatory foundation of the U.S. securities industry. The Securities Act of 1933 (the Paper Act) focuses on the primary market, requiring registration and full disclosure for new securities offerings. The Securities Exchange Act of 1934 governs secondary market activity, created the SEC, and regulates exchanges, broker-dealers, and transfer agents. Section 10(b) and Rule 10b-5 prohibit securities fraud and insider trading. Section 16 requires corporate insiders to report their holdings. The Investment Company Act of 1940 regulates mutual funds and other investment companies, including the requirement for at least 40% independent directors. The Investment Advisers Act of 1940 establishes registration and fiduciary requirements for investment advisers. Additional legislation includes the Trust Indenture Act of 1939 (corporate bonds over $50 million), the Insider Trading Sanctions Act of 1984 (treble damages), the Securities Investor Protection Act of 1970 (creating SIPC), Sarbanes-Oxley (corporate governance after Enron), and Dodd-Frank (Volcker Rule restricting proprietary trading).
Key Concepts
Securities Act of 1933
The Paper Act requires registration and full disclosure for new securities offerings through the filing of a registration statement and delivery of a prospectus.
Securities Exchange Act of 1934
Created the SEC and governs secondary market trading, broker-dealer registration, insider reporting (Section 16), and anti-fraud provisions (Section 10b, Rule 10b-5).
Investment Company Act of 1940
Regulates mutual funds and other investment companies. Requires at least 40% independent directors and establishes the 75-5-10 diversification test.
Sarbanes-Oxley Act of 2002
Enacted after Enron and WorldCom scandals. Created the PCAOB, strengthened corporate governance, and increased penalties for corporate fraud.
Dodd-Frank Act (Volcker Rule)
Restricts banking entities from proprietary trading and limits investments in hedge funds and private equity funds.
Insider Trading Sanctions Act of 1984
Authorizes civil penalties of up to three times the profits gained or losses avoided through insider trading (treble damages).
Practice Questions
Question 1 of 4
Which of the following was created by the Securities Exchange Act of 1934?
Question 2 of 4
Under the Insider Trading Sanctions Act of 1984, a person found liable for insider trading may face civil penalties of up to:
Question 3 of 4
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the Volcker Rule, which restricts:
Question 4 of 4
Which periodic report must publicly traded companies file with the SEC within 60 days of their fiscal year-end?
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Start Practicing FreeFrequently Asked Questions
What securities laws are tested on the SIE exam?
Key laws include the Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 1940, Investment Advisers Act of 1940, Trust Indenture Act of 1939, Sarbanes-Oxley, Dodd-Frank, and the Securities Investor Protection Act of 1970.
What is the difference between the 1933 Act and the 1934 Act?
The Securities Act of 1933 regulates the primary market (new securities offerings, registration, prospectus delivery). The Securities Exchange Act of 1934 regulates the secondary market (trading, exchanges, broker-dealers) and created the SEC.