A more thorough explanation:

Securities law is a set of laws that regulate the buying and selling of stocks, bonds, and other investments. The need for securities law arose after the stock market crash of 1929, which led to the Great Depression. Before the crash, companies would sell stocks to investors without disclosing important information about the company. Brokers would then sell these stocks to investors, promising large profits without any real basis. This led to a speculative frenzy that ended in the market crash.

In response to this, Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require companies to disclose information about themselves and the securities they issue. The Securities and Exchange Commission (SEC) was also created to regulate the securities industry and enforce federal law and its own rules.

State laws also exist, known as blue sky laws, which regulate securities at the state level. However, federal law often preempts state law, requiring investors to sue in federal court and under federal law.

For example, in New York, the Martin Act only allows the Attorney General to bring a suit for violations. Individual investors must bring private suits for common-law fraud law in order to recover. This illustrates the differences between state and federal securities laws and the need for federal regulation.