What federal securities laws govern financing?
Section 5 of the Securities Act of 1933 is a blanket prohibition on sales of securities in the absence of registration with the Securities and Exchange Commission (it bears mentioning that securities includes debt as well as equity). To register securities, the seller must make a filing with the SEC (a so-called “registration statement”) that provides detailed information about the issuer of the securities, including a description of its business and audited financial statements. The process of preparing a registration statement is a time-consuming and expensive one. Therefore, many companies, including the vast majority of early-stage companies, rely on exemptions from the Securities Act’s registration requirements. The Securities Act, in addition to setting forth the broad requirements of registration under Section 5, also provides exemptions from the registration requirements under Section 3, which exempts certain types of securities (e.g., municipal bonds) and Section 4, which exem
