a range that did not indicate strong upward or downward movement. However, Facebook has gone on to
trade at values more than four times its initial IPO valuation, due to investor beliefs and expectations. Not all
stocks go up in value after their IPO; some vacillate between highs and lows and frustrate investors with their
unstable valuation swings.
Figure 14.4
Stocks on the secondary market fluctuate in value. (Credit: 3844328/ pixabay/ License: CC0)
Reporting Requirements
The Securities Exchange Act of 1934 created numerous reporting requirements for public companies. The
purpose of these requirements was transparency, that is, keeping the public up to date and informed of
changes that might impact securities prices. Public companies with securities registered under Section 12 or
that are subject to Section 15(d) must file reports with the SEC. Section 12 requires the registration of certain
securities and outlines the procedures necessary to do so. Information required by Section 12 includes the
nature of the business, its financial structure, the different classes of securities, the names of officers and
directors along with their salaries and bonus arrangements, and financial statements. Section 15 requires
brokers and dealers to register with the SEC. Individuals who buy and sell securities are considered traders,
and therefore, are not subject to filing under Section 15. Section 15(d) requires registered companies to file
periodic reports, such as the the annual Form 10-K and the quarterly Form 10-Q. These reports will be
explained in detail in the next section of this chapter. The SEC Commission makes these reports available to all
investors through the EDGAR website to help them make informed investment decisions.
Registration Requirements
The Securities Act of 1933 required companies initiating securities offers and exchanges to register with the
SEC, unless they met exemption criteria. Section 5 of the Securities Exchange Act of 1934 built upon this
foundation and made it unlawful to transact on unregistered exchanges and specifically extended this
regulation to the usage of the mail and interstate commerce. 15 U.S. Code § 78f states that exchanges must
not only register with the SEC, but they must also have rules that “prevent fraudulent and manipulative acts
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