Abstract The substance of the power of the Securities and Exchange Commission, in so far as it concerns accounting, derives from that passage in the Securities Act which in effect enables the Commission to stop the issue of new securities if it appears to the Commission at any time that the registration statement includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading. For the Commission the various items of a balance sheet and of an income statement are material facts, and what in accounting parlance is often referred to as the disclosure or non-disclosure of information becomes in the law the statement or omission of material facts. The corresponding powers in the Exchange Act make it unlawful for any member to effect any transaction in any security unless a registration is effective as pit scribed by the Commission.
T. H. Sanders (1936) studied this question.