Future Business Leaders of America (FBLA) Securities and Investments Practice Test

Which act regulates the new-issue or primary market for securities?

1. Securities Exchange Act of 1934

2. Securities Act of 1933

3. Investment Company Act of 1940

4. Financial Services Modernization Act

The correct answer is: Securities Act of 1933

The Securities Act of 1933 is designed specifically to regulate the new-issue or primary market for securities. This legislation requires that all new securities be registered with the Securities and Exchange Commission (SEC) before they can be sold to the public. The registration process includes providing detailed information about the company's business, financial condition, and the specifics of the securities being offered. This act aims to ensure transparency and to protect investors from fraud by requiring full disclosure, thus maintaining the integrity of the primary market. The Securities Exchange Act of 1934 primarily focuses on the secondary market, regulating trading of already issued securities and the activities of stock exchanges, brokers, and dealers. The Investment Company Act of 1940 governs investment companies and their activities, ensuring investor protection in those specific entities. The Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act, primarily addresses the regulations surrounding financial institutions and enabling them to offer multiple financial services, rather than focusing on securities issuance.