Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

What is the primary purpose of the Securities Act of 1933?

1. To regulate corporate takeovers

2. To provide investors with full and fair disclosure regarding new issues

3. To supervise the trading of securities

4. To collect taxes on securities transactions

The correct answer is: To provide investors with full and fair disclosure regarding new issues

The primary purpose of the Securities Act of 1933 is to ensure that investors receive full and fair disclosure when it comes to new issues of securities. This legislation was enacted in response to the stock market crash of 1929 and the public's desire for protection against fraud and misleading information. By requiring issuers of new securities to provide detailed information about the investment's risks, potential returns, and the company's financial condition, the Act aims to promote transparency and build investor confidence in the securities markets. This requirement for disclosure is foundational in preventing deceitful practices in the issuance of securities, thus providing a level of protection for investors. It also allows them to make informed decisions based on comprehensive information rather than facing uncertainty and potential manipulation. The other options, while related to securities and the overall market structure, do not directly align with the primary intent of the Securities Act of 1933. Regulating corporate takeovers and supervising trading of securities are addressed by different laws and regulatory bodies. Similarly, the collection of taxes on securities transactions falls under the jurisdiction of tax authorities, rather than being a focus of the Securities Act.