Corporate securities laws aren’t the easiest things to understand, even for businesses that have been involved in finance and investing in the corporate world for a long time. But since the best way to ensure a better understanding of complex corporate securities laws is to start at the bottom, here are a few of the most basic — and essential — definitions related to corporate securities laws:
Corporate Securities: Securities are simply documents that represent an interest, or ownership, in an organization or corporation; they can be purchased and traded, but they don’t quite function like normal consumer goods. The most common types of securities are stocks, bonds, notes, transferable shares, investment contracts, and certificates that officially state participation or interest in something else.
Private Placement Securities: This is a special type of securities; “private placements” are typically large banks and insurance companies, and they are the opposite of public issues. Private placement offerings are given to a select group of investors, and these investors don’t have to be registered with the Securities and Exchange Commission (SEC).
Initial Public Offering (IPO): This term refers to the process that a private business goes through when offering stocks to the public for the first time. Not only does this process typically provide a business with more capital, but it also increases exposure and opportunities for growth. Nevertheless, the process is pretty complex and requires the help of IPO attorneys, who can usually be found at your average securities law firms.
Securities Exchange Act of 1934: This is the legislation that created the SEC, and it set the foundation for all corporate securities laws that have been created since 1934 to protect investors, businesses, and American consumers. The SEC uses this legislation to weed out insider trading rings (and it found 52 in 2014 alone), to bring enforcement actions against violations of the laws (which happened 755 times in 2014, a record high), and to ensure that the economy is protected against insider information schemes (which 80 individuals were found guilty of in 2014).
Now it’s your turn to contribute — are there any terms that you would like defined, or any processes related to corporate securities law that could be expanded? We’d love to hear any questions or comments from our readers.