chapter theme

Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934 to ensure that the country never suffers through another economic crisis as catastrophic as the Great Depression. It is in no small part owing to these laws that the United States has enjoyed so many years of economic stability.

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cyberlaw

Companies must deliver certain documents to investors and also file them with the SEC. Most companies now make their required SEC filings electronically, using the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. Once filed with the SEC, this information is available online (at http://www.sec.gov/). Each day, Web surfers "hit" EDGAR half a million times and download 2.5 million pages.

Companies can fulfill their SEC filing requirements online with EDGAR, but delivering documents to investors electronically is more difficult because computer literacy and availability among investors vary widely. The SEC does permit issuers to communicate electronically with investors, provided that the following standards are met:

• Consent. Although many investors have computers, an issuer cannot assume that all do, or that all want to receive data this way. Therefore, an electronic document is only valid if the investor agrees to receive information in this form.


• Notice. A company cannot simply post information on its Internet Web site, because investors will not necessarily know it is there. The issuer must notify investors, via e-mail or snail mail, that information is available.


• Access. The recipients must have access to the information for a reasonable period of time and be able to download or print it. The investor can always request the paper version of a document, even after consenting to electronic delivery.

Companies communicate with investors via the Internet, and so does the SEC. Omnigene Diagnostics, Inc. was touted on various online investment bulletin boards, so when the SEC halted trading in this dubious stock, it announced the action on America Online. SEC enforcement officials also regularly surf the Net, looking for illegal activity.

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