3.6 Securities Exchange Act of 1934

• Library: Corporations and Partnerships in Virginia (Virginia CLE) (2016 Ed.)

3.6 SECURITIES EXCHANGE ACT OF 1934

3.601 In General. While the Securities Act regulates the issue and sale of securities, the Exchange Act governs securities markets and issuers whose securities are publicly held. The basic purposes of the Exchange Act are to (i) regulate securities exchanges and the securities markets; (ii) make information about the issuers of securities available to persons who buy and sell securities; (iii) prevent fraud in securities trading and manipulation of securities markets; and (iv) protect the national credit by controlling the amount of credit that may be used in the securities market. ²³⁰

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The Exchange Act definition of "security" is substantially the same as the Securities Act definition. ²³¹ However, many of the provisions of the Exchange Act apply only to equity securities, which are defined as "any stock or similar security; or any security future on any such security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right." ²³² The Exchange Act also exempts from one or more of its provisions what it defines as "exempted securities." ²³³ These are fairly similar to those exempted from the registration requirements of the Securities Act. ²³⁴ In order to determine whether a security is in fact exempt from a particular provision of the Exchange Act, the pertinent provision and rules promulgated by the SEC must be examined.

3.602 Registration of Securities. Unless there are "unlisted trading privileges in a security," section 12(a) of the Exchange Act ²³⁵ makes it unlawful for any member of a national securities exchange or any broker or dealer to undertake any transaction in any security, other than an exempted security, on a national securities exchange, unless the security's registration on the exchange is effective. If an issuer's total assets exceed $10,000,000, ²³⁶ and if any class of nonexempt securities of the issuer are held of record either by 2,000 persons (excluding shareholders who received securities under an employment compensation plan in transactions exempt from Securities Act registration) or, for issuers other than banks and bank holding companies, by at least 500 persons who are not accredited investors, the Exchange Act requires the class of securities to be registered before any of the securities can be traded by the use of the mails or any means of instrumentalities of interstate commerce. ²³⁷ Securities listed on a national securities...