Research Handbooks in Financial Law series
Edited by Jerry Markham and Rigers Gjyshi
Chapter 4: Exemptions from 1933 Act registration
Section 5 of the Securities Act of 1933, which contains the basic prohibition against offers and sales without registration, explicitly applies on its face to all offers and all sales of any security. This broadly drafted prohibition is thus presumptively applicable to all securities transactions. However, most transactions that take place on a daily basis are not subject to Section 5’s prohibitions and the registration requirements. This is because the 1933 Act provides a number of exemptions from the operation of Section 5 and, hence, from its registration requirements. There are three statutory bases for exemption from the 1933 Act’s registration provisions. Keep in mind that, to a large extent, the exemptions provide only an exemption from the Act’s registration requirements and thus do not affect the antifraud provisions. Section 3 of the 1933 Act sets forth various categories of securities that are exempt from registration. Section 4 of the 1933 Act describes a variety of transactions that qualify for an exemption from registration. Section 28 of the 1933 Act gives the SEC broad exemptive rulemaking power beyond that granted by the statutory exemptions in Sections 3 and 4 of the 1933 Act. Notwithstanding the broad exemptive authority granted by Section 28, virtually all of the exemptions are grounded in Section 3 or 4. One must read an exemptive rule under Section 3 or 4 in conjunction with the terms of the statute because, in order to be valid, the rule must fall within the bounds that the statute authorizes.
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