International Economic Law in U.S. Law Schools: Evaluating its Pedagogy and Identifying Future Challenges

Abstract: U.S. law schools share with each other and with legal educational institutions worldwide the challenge of preparing students for the increasingly globalized practice of law. International economic law (IEL) encompasses a wide spectrum of subjects including trade in goods and services, financial law, economic integration, development law, business regulation and intellectual property. The expansive scope of the fields of practice and study within the discipline presents challenges for identifying the key issues with which scholars should try to stay current and the relevant material that should be imparted to students. Because of the breadth and depth of developments in the various fields of international economic law, it is imperative that professionals who are engaged in teaching, practicing and writing about international economic law in U.S. law schools, and elsewhere, collaborate on a uniform understanding of essential components that constitute effective teaching of this evolving subject area. In preparation for a seminal conference of the American Society of International Law's Interest Group on International Economic Law held November 9 - 11, 2006 at the historic Mount Washington Resort in Bretton Woods, New Hampshire, the conference chairs appointed Stephen T. Zamora (Houston Law Center), Craig L. Jackson (Thurgood Marshall School of Law) and Karen E. Bravo (Indiana University School of Law - Indianapolis) Co-Rapporteurs for the Workshop on the Future of Teaching International Economic Law. Charged with fleshing out some of the critical issues or ideas relevant to teaching international economic law that would provide catalysts for future action for developing the discipline of teaching IEL, the Co-Rapporteurs administered surveys to teachers of IEL in U.S. law schools as well as administrators who oversee curricular matters. The results of the survey are presented and discussed here, including the status of the discipline, the trends identified and some challenges and recommendations for the future.
Accepted Paper Series

Universities with law and economics programs

Almost every major American law school offers courses in law and economics and has faculty working in the field; until 2005, many of these programs received funding from the John M. Olin Foundation, which was an early supporter of the field.
Two of the leading Law Schools focusing on Law and Economics are the University of Chicago Law School, whose distinguished faculty includes Judge Richard A. Posner, Ronald Coase and Gary Becker, and the George Mason University School of Law, whose faculty includes Nobel laureate Vernon Smith, and perennial Nobel finalist, Gordon Tullock. In the spring of 2006, Vanderbilt University Law School announced the creation of a new program to award a Ph.D. in Law & Economics.
The University of Toronto Faculty of Law offers a combined J.D. / M.A. Economics, as well as a J.D. / Ph.D. Economics.
In Europe, a consortium of universities from ten different countries is running the European Master Program in Law and Economics which is the leading European program in the field since 1990. A newer European Doctorate program in Law and Economics is operated by three leading European centers in Law and Economics.
The Collegio Carlo Alberto in Turin, Italy hosts an International Ph.D. Program in Institutions, Economics and Law. Members of the teaching staff come from various academic institutes in Europe and the United States. A separate Doctoral Program in Law and Economics is currently run by the School of Economics at the University of Siena. Also in Italy, the International University College of Turin [2], with students and faculty from worldwide, runs a biennial Master of Sciences in Comparative Law, Economics and Finance which challenges mainstream views on the subject.
Switzerland's University of St.Gallen has a Law and Economics Program on both the undergraduate (Bachelor of Arts in Law and Economics) and graduate levels (Master of Arts in Law and Economics). The graduate program was initiated in October 2005 at the first international scientific conference on Law and Economics by the President of the University, Ernst Mohr and the St.Gallen Professor and leading business lawyer Peter Nobel. The Law and Economics Program is supported by an International Academic Council lead by leading experts in the field of law and economics, such as Richard A. Posner, Ronald J. Gilson, Victor Goldberg or Geoffrey P. Miller.
Operating outside this particular framework, the Utrecht University offers students the possibility to major in law and economics as part of their undergraduate studies, or to specialize in law and economics in a one-year post-graduate programme.
University of Economics, Prague, namely Department of Institutional Economics at the Faculty of Economics and Public Administration, offers Law and Economics as a possible specialization for graduate students, while complete graduate program is being prepared.
The University of Cambridge also has a specific course called 'Land Economy', who combines law, economy and the environment into one discipline.[3] Nottingham University Business School and City University Law School, London both have undergraduate courses in Law and Economics. In India, the National University of Juridical Sciences (NUJS) offers two courses in Law and Economics to its undergraduate students. [4] In the National University of Singapore, a highly selective Double Honours Programme in Law and Economics was launched in 2005, whereby students complete two Bachelors' degrees in five years.

Pareto efficiency

Relatedly, additional critique has been directed toward the assumed benefits of law and policy designed to increase allocative efficiency; when such assumptions are modeled on "first-best" (Pareto optimal) general-equilibrium conditions. Under the theory of the second best, for example, if the fulfillment of a subset of optimal conditions cannot be met under any circumstances, it is incorrect to conclude that the fulfillment of any subset of optimal conditions will necessarily result in an increase in allocative efficiency.[8]
Consequently, any expression of public policy whose purported purpose is an unambiguous increase in allocative efficiency (for example, consolidation of research and development costs through increased mergers and acquisitions resulting from a systematic relaxation of anti-trust laws) is, according to critics, fundamentally incorrect; as there is no general reason to conclude that an increase in allocative efficiency is more likely than a decrease.
Essentially, the "first-best" neoclassical analysis fails to properly account for various kinds of general-equilibrium feedback relationships that result from intrinsic Pareto imperfections.[8]
Another critique comes from the fact that there is no unique optimal result. Warren Samuels in his 2007 book, The Legal-Economic Nexus, argues, "efficiency in the Pareto sense cannot dispositively be applied to the definition and assignment of rights themselves, because efficiency requires an antecedent determination of the rights (23-4)."

Positive law and economics

Positive law and economics uses economic analysis to predict the effects of various legal rules. So, for example, a positive economic analysis of tort law would predict the effects of a strict liability rule as opposed to the effects of a negligence rule. Positive law and economics has also at times purported to explain the development of legal rules, for example the common law of torts, in terms of their economic efficiency.

Origin and history

As early as in the 18th century, Adam Smith discussed the economic effect on mercantilist legislation. However, to apply economics to analyze the law regulating nonmarket activities is relatively new. In 1961, Ronald Coase and Guido Calabresi independently from each other published two groundbreaking articles: "The Problem of Social Cost" [2] and "Some Thoughts on Risk Distribution and the Law of Torts". [3] This can been seen as the starting point for the modern school of law and economics.[4]
In the early 1970s, Henry Manne (a former student of Coase) set out to build a Center for Law and Economics at a major law school. He began at Rochester, worked at Miami, but was soon made unwelcome, moved to Emory, and ended at George Mason. The latter soon became a center for the education of judges -- many long out of law school and never exposed to numbers and economics. Manne also attracted the support of the John M. Olin Foundation, whose support accelerated the movement. Today, Olin centers (or programs) for Law and Economics exist at many universities.

[edit] Relationship to other disciplines and approaches

As used by lawyers and legal scholars, the phrase "law and economics" refers to the application of the methods of economics to legal problems.
Because of the overlap between legal systems and political systems, some of the issues in law and economics are also raised in political economy and political science. Most formal academic work done in law and economics is broadly within the Neoclassical tradition. Approaches to the same issues from Marxist and critical theory/Frankfurt School perspectives usually do not identify themselves as "law and economics". For example, research by members of the critical legal studies movement considers many of the same fundamental issues as does work labeled "law and economics". The one wing that represents a non-neoclassical approach to "law and economics" is the Continental (mainly German) tradition that sees the concept starting out of the Staatswissenschaften approach and the German Historical School of Economics; this view is represented in the Elgar Companion to Law and Economics (2nd ed. 2005) and - though not exclusively - in the European Journal of Law and Economics. Here, consciously non-neoclassical approaches to economics are used for the analysis of legal (and administrative/governance) problems.

144.2 RECORDS OF THE COMMITTEE

Textual Records: General records, 1938-41. Preliminary and final reports, 1938-41. Records relating to committee hearings, 1938- 40. Records relating to special studies and published monographs, 1938-41. Industrial problems information file ("Industry File"), 1938-41. Questionnaires, 1938-39. Personnel and accounting records, 1938-41. Records of investigations and special studies of insurance, investment banking, and corporate practices by the Securities and Exchange Commission (SEC), 1938-41. Records of hearings and special studies by the Departments of the Treasury, Justice, and Labor, 1938-41.
Specific Restrictions: As specified by the SEC, no one, except government officials for official purposes, may have access to records created and filed by the SEC on behalf of the TNEC, except for the following: certain records relating to the insurance study, consisting of replies to formal questionnaires (but not including replies to questionnaires sent to state supervisory officials and replies to the questionnaire of February 9, 1940, to life insurance agents); exhibits, including rate books and form insurance policies; and all conventional-form annual statements.

Comment letters

Comment letters are letters by the SEC to a public company raising issues and requested comments. For example, in October 2001, the SEC wrote to Computer Associates (CA), covering fifteen items, mostly about CA's accounting, including five about revenue recognition. The chief financial officer of CA, to whom the letter was addressed, pleaded guilty to fraud at CA in 2004.
In June 2004, the SEC announced that it would publicly post all comment letters, to give investors access to the information in them. In mid-2005, Allan Beller, former head of the SEC's Division of Corporation Finance, said that the SEC believed that "it is appropriate to expand the transparency of our comment process by making this information available to an unlimited audience."
An analysis in May 2006 of regulatory filings over the prior 12 months indicates, however, that the SEC has not accomplished what it said it would do. The analysis found 212 companies that had reported receiving comment letters from the SEC, but only 21 letters (for these companies) were posted on the SEC's website. John W. White, the current head of the Division of Corporation Finance, told the New York Times: "We have now resolved the hurdles of posting the information.... We expect a significant number of new postings in the coming months."

Actors in the fight against being sued in violation of securities laws

The SEC consists of five Commissioners appointed by the President of the United States with the advice and consent of the United States Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year. To ensure that the SEC remains non-partisan, no more than three Commissioners may belong to the same political party. The President also designates one of the Commissioners as Chairman, the SEC's top executive.
Within the SEC, there are four divisions, 18 offices and approximately 3,800 staff. Headquartered in Washington, DC, the SEC has 11 regional offices throughout the United States.
The SEC's four main divisions are: Corporation Finance, Trading and Markets, Investment Management, and Enforcement. [6]
Corporation Finance is the division that oversees the disclosure made by public companies as well as the registration of transactions, such as mergers, made by companies. The division is also responsible for operating EDGAR.
The Trading and Markets division oversees self-regulatory organizations (SROs) such as FINRA and MSRB, and all broker-dealer firms and investment houses. This division also interprets proposed changes to regulations and monitors operations of the industry. In practice, the SEC delegates most of its enforcement and rulemaking authority to FINRA. In fact, all trading firms not regulated by other SROs must register as a member of FINRA. Individuals trading securities must pass exams administered by FINRA to become registered representatives. [7] [8]
The Investment Management Division oversees investment companies including mutual funds and investment advisers. This division administers federal securities laws, in particular the Investment Company Act of 1940 and Investment Advisers Act of 1940. This Division's responsibilities include:[9]
assisting the Commission in interpreting laws and regulations for the public and SEC inspection and enforcement staff;
responding to no-action requests and requests for exemptive relief;
reviewing investment company and investment adviser filings;
assisting the Commission in enforcement matters involving investment companies and advisers; and
advising the Commission on adapting SEC rules to new circumstances.
The Enforcement Division works with the other three divisions, and other Commission offices, to investigate violations of the securities laws and regulations and to bring actions against alleged violators. The SEC generally conducts investigations in private. The SEC's staff may seek voluntary production of documents and testimony, or may seek a formal order of investigation from the SEC, which allows the staff to compel the production of documents and witness testimony. The SEC can bring a civil action in a U.S. District Court or an administrative proceeding which is heard by an independent administrative law judge (ALJ). The SEC does not have criminal authority, but may refer matters to state and federal prosecutors. The current Director of Enforcement is Linda Chatman Thomsen
Among the SEC's offices are:
The Office of General Counsel, which acts as the agency's "lawyer" before federal appellate courts and provides legal advice to the Commission and other SEC divisions and offices;
The Office of the Chief Accountant, which establishes and enforces accounting and auditing policies set by the SEC. This office has played an important role in such areas as working with the Financial Accounting Standards Board to develop Generally Accepted Accounting Principles, the Public Company Accounting Oversight Board in developing audit requirements, and the International Accounting Standards Board in advancing the development of International Financial Reporting Standards;
The Office of Compliance, Inspections and Examinations, which inspects broker-dealers, stock exchanges, credit rating agencies, mutual funds and other financial firms that are regulated by the SEC;
The Office of International Affairs, which represents the SEC abroad and which negotiates international enforcement information-sharing agreements, develops the SEC's international regulatory policies in areas such as mutual recognition, and helps develop international regulatory standards through organizations such as the International Organization of Securities Commissions and the Financial Stability Forum;
The Office of Investor Education and Advocacy, which helps educate the public about securities markets and warns investors of fraud and stock market scams; and
The Office of Economic Analysis, which helps the SEC estimate the economic costs and benefits of its various rules and regulations.

Relationship to other agencies
In addition to working with various SROs such as NYSE and NASD, the Securities and Exchange Commission also works with other federal agencies, state securities regulators and law enforcement agencies. [10]
In 1988 Executive Order 12631 established the President's Working Group on Financial Markets. The Working Group is chaired by the Secretary of the Treasury and includes the Chairman of the SEC, the Chairman of the Federal Reserve and the Chairman of the Commodity Futures Trading Commission. The goal of the Working Group is to enhance the integrity, efficiency, orderliness and competitiveness of the financial markets while maintaining investor confidence. [11]
The Securities Act of 1933 was originally administered by the Federal Trade Commission (FTC). The Securities Exchange Act of 1934 transferred this responsibility from FTC to the SEC. The main mission of the FTC is to promote consumer protection and to eradicate anticompetitive business practices. The FTC regulates general business practices, while the SEC focuses on the securities markets.
The Temporary National Economic Committee was established by joint resolution of Congress 52 Stat. 705 on June 16, 1938. It was tasked with reporting to the Congress on abuses of monopoly power. The committee was defunded in 1941, but its records are still under seal by order of the SEC.[12]
The Municipal Securities Rulemaking Board (MSRB) was established in 1975 by Congress to develop rules for companies involved in underwriting and trading municipal securities. The MSRB is monitored by the SEC, but the MSRB does not have the authority to enforce its rules.
While most violations of securities laws are enforced by the SEC and the various SROs it monitors, state securities regulators can also enforce state-wide securities laws known colloquially as Blue sky laws. [2] States may require securities to be registered in the state before they can be sold there. The National Securities Markets Improvement Act of 1996 (NSMIA) addresses this dual system of federal-state regulation by amending Section 18 of the 1933 Act to exempt nationally traded securities from state registration, thereby pre-empting state law in this area. However, NSMIA preserves the states' anti-fraud authority over all securities traded in the state. [13]
The SEC also works with federal and state law enforcement agencies to carry out actions against actors alleged to be in violation of the securities laws.

Blue sky laws of truth in the Federal Securities Act of the Securities Act of 1933

Prior to the enactment of the federal securities laws and the creation of the SEC, there existed so-called Blue Sky Laws, which were enacted and enforced at the state level.[2] However, these laws were generally found lacking; the Investment Bankers Association told its members as early as 1915 that they could "ignore" Blue Sky Laws by making securities offerings across state lines through the mail.[3] After holding hearings on abuses on interstate frauds (commonly known as the Pecora Commission), Congress passed the Securities Act of 1933 (15 U.S.C. § 77a) which regulates interstate sales of securities (original issues) at the federal level. The subsequent Securities Exchange Act of 1934 (15 U.S.C. § 78d) regulates sales of securities in the secondary market. Section 4 of the 1934 Act created the U.S. Securities and Exchange Commission to enforce the federal securities laws. Both laws are considered part of Franklin Roosevelt's "New Deal" raft of legislation.
The Securities Act of 1933 is also known as the "Truth in Securities Act" or the "Federal Securities Act” and is often shorted to the "1933 Act." Its goal is to increase public trust in the capital markets by requiring uniform disclosure of information about public securities offerings. The primary drafters of 1933 Act were Huston Thompson, a former Federal Trade Commission chairman, and Walter Miller and Ollie Butler, two attorneys in the Commerce Department's Foreign Service Division, with input from Supreme Court Justice Louis Brandeis. For the first year of the law's enactment, the enforcement of the statute rested with the Federal Trade Commission, but this power was transferred to the SEC following its creation in 1934. (Interestingly, the first, rejected draft of the Securities Act written by Samuel Untermyer vested these powers in the U.S. Post Office, because Untermyer believed that only by vesting enforcement powers with the postal service could the constitutionality of the act be assured.[3]) The law requires that issuing companies register distributions of securities with the SEC prior to interstate sales of these securities, so that investors may have access to basic financial information about issuing companies and risks involved in investing in the securities in question. Since 1996, most registration statements (and associated materials) filed with the SEC can be accessed via the SEC’s online system, EDGAR.[4]
The Securities Exchange Act of 1934 is also known as “the Exchange Act” or "the 34 Act". This act regulates secondary trading between individuals and companies which are often unrelated to the original issuers of securities. Entities under the SEC’s authority include securities exchanges with physical trading floors such as the New York Stock Exchange (NYSE), self-regulatory organizations such as the National Association of Securities Dealers (NASD), the Municipal Securities Rulemaking Board (MSRB), online trading platforms such as NASDAQ and ATS, and any other persons (e.g., securities brokers) engaged in transactions for the accounts of others.[5]
President Franklin Delano Roosevelt appointed Joseph P. Kennedy, Sr., father of President John F. Kennedy, to serve as the first Chairman of the SEC, along with James M. Landis (one of the architects of the 1934 Act and other New Deal legislation) and Ferdinand Pecora (Chief Counsel to the United States Senate Committee on Banking and Currency during its investigation of Wall Street banking and stock brokerage practices). Other prominent SEC commissioners and chairmen include William O. Douglas (who went on to be a U.S. Supreme Court justice), Jerome Frank (one of the leaders of the legal realism movement) and William J. Casey (who would later head the Central Intelligence Agency under President Ronald Reagan).
For a full list of SEC chairs and commissioners, see: Securities and Exchange Commission appointees.

The SEC was established

The SEC was established by the United States Congress in 1934 as an independent, non-partisan, quasi-judicial regulatory agency following years of depression caused by over production of goods, the introduction of consumer credit, and the Great Crash of 1929. The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting. The SEC was given the power to license and regulate stock exchanges. Currently, the SEC is responsible for administering seven major laws that govern the securities industry. They are: the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes-Oxley Act of 2002 and most recently, the Credit Rating Agency Reform Act of 2006.
The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies found to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses which include a criminal violation.
To achieve its mandate, the SEC enforces the statutory requirement that public companies submit quarterly and annual reports, as well as other periodic reports. In addition to annual financial reports, company executives must provide a narrative account, called the "management discussion and analysis" (MD&A), that outlines the previous year of operations and explains how the company fared in that time period. Management will usually also touch on the upcoming year, outlining future goals and approaches to new projects. In an attempt to level the playing field for all investors, the SEC maintains an online database called EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system) online from which investors can access this and other information filed with the agency.
Quarterly and annual reports from public companies are crucial for investors to make sound decisions when investing in the capital markets. Unlike banking, investment in the capital markets is not guaranteed by the federal government. The potential for big gains needs to be weighed against equally likely losses. Mandatory disclosure of financial and other information about the issuer and the security itself gives private individuals as well as large institutions the same basic facts about the public companies they invest in, thereby increasing public scrutiny while reducing insider trading and fraud.
The SEC makes reports available to the public via the EDGAR system. SEC also offers publications on investment-related topics for public education. The same online system also takes tips and complaints from investors to help the SEC track down violators of the securities laws.

Regulation S

Regulation S is a "safe harbour" that defines when an offering of securities will be deemed to come to rest abroad and therefore not subject to the registration obligations imposed under Section 5 of the 1933 Act. The regulation includes two safe harbour provisions: an issuer safe harbour and a resale safe harbour.
Section 5 of the 1933 Act is meant primarily as protection for United States investors. As such, the U.S. Securities and Exchange Commission had only previously, weakly enforced registration of foreign transactions, and only had limited constitutional authority to do so.

Rule 144

Rule 144, promulgated by the SEC under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration. In addition to restrictions on the minimum length of time for which such securities must be held and the maximum volume permitted to be sold, the issuer must agree to the sale. If certain requirements are met, Form 144 must be filed with the SEC. Often, the issuer requires that a legal opinion be given indicating that the resale complies with the rule. The amount of securities sold during any subsequent 3-month period generally does not exceed any of the following limitations:
1% of the stock outstanding,
The avg weekly reported volume of trading in the securities on all national securities exchanges for the preceding 4 weeks, and
The avg weekly volume of trading of the securities reported through the consolidated transactions reporting system (NASDAQ.
Notice of resale is provided to the SEC if the amt of securities sold in reliance on Rule 144 in any 3-month period exceeds 500 shares or if they have an aggregate sales price in excess of $10,000.After one year, Rule 144(k) allows for the permanent removal of the restriction except as to 'insiders'.[1]
In cases of mergers, buyouts or takeovers, owners of securities who had previously filed Form 144 and still wish to sell restricted and controlled securities must refile Form 144 once the merger, buyout or takeover has been completed.

Exemptions from Registration

Despite the stringent registration requirements imposed by the 1933 Act, most US securities are not sold through public, registered offerings. Instead, one or more exemptions are used. The exemptions are non-exclusive, meaning more than one may apply to any given offering. Under Section 4(2), private placements may be made to institutions or other "accredited investors" deemed to be able to "fend for themselves" without a full registration. Regulation D codifies this statutory principal and offers more clearly defined safe harbor rules for those seeking a private placement exemption. Section 3(a)(11) offers the little used exemption allowing issues made only within one state to avoid registration. Rule 147 creates a clearly defined safe harbor for intrastate offerings.
Of greater importance, Section 4(1) allows for secondary market transactions to take place without registration - an essential provision allowing for market liquidity. Rule 144 allows company affiliates (insiders and control persons) and other owners of restricted securities to sell in some circumstances, and is discussed in detail below.
Rule 144A exempts resales of restricted securities between "Qualified Institutional Buyers," or "QIBs." This creates a secondary market in restricted securities among the biggest players on Wall Street. Note that Rules 144 and 144A accomplish different objectives

The Registration Process

In general, securities offered or sold to the public in the U.S. must be registered by filing a registration statement with the SEC. The prospectus, which is the document through which an issuer’s securities are marketed to a potential investor, is generally filed in conjunction with the registration statement. The SEC prescribes the relevant forms on which an issuer's securities must be registered. Among other things, registration forms call for:
a description of the issuer's properties and business;
a description of the securities to be offered for sale;
information about the management of the issuer;
information about the securities (if other than common stock); and
financial statements certified by independent accountants.
Registration statements and prospectuses become public shortly after they are filed with the SEC. If filed by U.S. domestic issuers, the statements are available from the SEC's website using EDGAR. Registration statements are subject to SEC examination for compliance with disclosure requirements. It is illegal for an issuer to lie in or to omit material facts from a registration statement or prospectus.
Not all offerings of securities must be registered with the SEC. Some exemptions from the registration requirements include:
private offerings to a limited number of persons or institutions;
offerings of limited size;
intrastate offerings; and
securities of municipal, state, and federal governments.
One of the key exceptions to the registration requirement, Rule 144, is discussed in greater detail below.
Regardless of whether securities must be registered, the 1933 Act makes it illegal to commit fraud in conjunction with the offer or sale of securities. A defrauded investor can sue for recovery under the 1933 Act.

Integration of the world economy becoming increasingly clear trend in state-to-state, citizens and citizens, how to use the law to effectively protect

Integration of the world economy becoming increasingly clear trend in state-to-state, citizens and citizens, how to use the law to effectively protect their access to the fruits of economic success

The 1933 Act has two basic objectives:

to require that investors receive significant (or “material”) information concerning securities being offered for public sale; and
to prohibit deceit, misrepresentations, and other fraud in the sale of securities to the public.
Underlying the 1933 Act is the idea that a company (i.e., an “issuer”) offering securities should provide potential investors with sufficient information about both the issuer and the securities to make an informed investment decision. To assist in achieving its objectives of informing potential investors and fostering fair dealing in the securities markets, the 1933 Act requires issuers to publicly disclose significant information about themselves and the terms of the securities. Disclosure also has the added benefit of discouraging bad behavior. Supreme Court Justice Louis Brandeis coined the phrase “sunlight is the best disinfectant,” which also is part of the philosophy underlying the 1933 Act.
Disclosure of material information is accomplished through the registration of securities with the Securities and Exchange Commission (the “SEC” or the “Commission”). The SEC is the principal federal agency responsible for oversight of the securities markets and enforcement of the federal securities laws. The SEC was created pursuant to the Securities Exchange Act of 1934 (the "1934 Act"). Prior to the passage of the 1934 Act, securities were registered with the Federal Trade Commission.