Question

"Under the Securities Act of 1933, which of the following statements is(are) correct regarding the purpose of registration?

I. The purpose of registration is to allow for the detection of management fraud and prevent a public offering of securities when management fraud is suspected
II. The purpose of registration is to adequately and accurately disclose financial and other information upon which investors may determine the merits of securities."

Answer 1

The purpose of registration under the Securities Act of 1933 is to ensure comprehensive disclosure of relevant information, which indirectly helps prevent management fraud by making corporate actions more transparent.

Step-by-step explanation:

Under the Securities Act of 1933, the correct statement regarding the purpose of registration is that it aims to adequately and accurately disclose financial and other information upon which investors may base their judgment of the securities' merits. The act does not have a direct purpose of detecting management fraud; however, by requiring comprehensive disclosure, it indirectly helps to deter fraudulent activities by management. Moreover, the establishment of the Securities and Exchange Commission (SEC) further regulated the investment industry, providing oversight and enforcement to protect investors.

In response to major accounting scandals, the Sarbanes-Oxley Act of 2002 was implemented to raise the reliability of corporate financial information and protect investors from accounting fraud by enhancing corporate governance and financial disclosures. These regulatory frameworks work collectively to promote transparency and investor trust in the financial markets.