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8000 - Miscellaneous Statutes and Regulations
PROXIES
SEC. 14 (a) It shall be unlawful for any person, by the use of the
mails or by any means or instrumentality of interstate commerce or of
any facility of a national securities exchange or otherwise, in
contravention of such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for the
protection of investors, to solicit or to permit the use of his name to
solicit any proxy or consent or authorization in respect of any
security (other than an exempted security) registered pursuant to
section 12 of this title.
(b)(1) It shall be unlawful for any member of a national securities
exchange, or any broker or dealer registered under this title, or any
bank, association, or other entity that exercises fiduciary powers, in
contravention of such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for the
protection of investors, to give, or to refrain from giving a proxy,
consent, authorization, or information statement in respect of any
security registered pursuant to section 12 of this title, or any
security by an investment company registered under the Investment
Company Act of 1940, and carried for the account of a customer.
(2) With respect to banks, the rules and regulations prescribed
by the Commission under paragraph (1) shall not require the disclosure
of the names of beneficial owners of securities in an account held by
the bank on the date of enactment of this paragraph unless the
beneficial owner consents to the disclosure. The provisions of this
paragraph shall not apply in the case of a bank which the Commission
finds has not made a good faith effort to obtain such consent from such
beneficial owners.
(c) Unless proxies, consents, or authorizations in respect of a
security registered pursuant to section 12 of this title, or a security
issued by an investment company
{{8-30-02 p.9214.01}}registered under the
Investment Company Act of 1940, are solicited by or on behalf of the
management of the issuer from the holders of record of such security in
accordance with the rules and regulations prescribed under subsection
(a) of this section, prior to any annual or other meeting of the
holders of such security, such issuer shall, in accordance with rules
and regulations prescribed by the Commission, file with the Commission
and transmit to all holders of record of such security information
substantially equivalent to the information which would be required to
be transmitted if a solicitation were made, but no information shall be
required to be filed or transmitted pursuant to this subsection before
July 1, 1964.
(d)(1) It shall be unlawful for any person, directly or indirectly,
by use of the mails or by any means or instrumentality of interstate
commerce or of any facility of a national securities exchange or
otherwise, to make a tender offer for, or a request or invitation for
tenders of, any class of any equity security which is registered
pursuant to section 12 of this title, or any equity security of an
insurance company which would have been required to be so registered
except for the exemption contained in section 12(g)(2)(G) of this
title, or any equity security issued by a closed-end investment company
registered under the Investment Company Act of 1940, if, after
consummation thereof, such person would, directly or indirectly, be the
beneficial owner of more than 5 per centum of such class, unless at the
time copies of the offer or request or invitation are first published
or sent or given to security holders such person has filed with the
Commission a statement containing such of the information specified in
section 13(d) of this title,
and such additional information as the Commission may by rules and
regulations prescribe as necessary or appropriate in the public
interest or for the protection of investors. All requests or
invitations for tenders or advertisements making a tender offer or
requesting or inviting tenders of such a security shall be filed as a
part of such statement and shall contain such of the information
contained in such statement as the Commission may by rules and
regulations prescribe. Copies of any additional material soliciting or
requesting such tender offers subsequent to the initial solicitation or
request shall contain such information as the Commission may by rules
and regulations prescribe as necessary or appropriate in the public
interest or for the protection of investors, and shall be filed with
the Commission not later than the time copies of such material are
first published or sent or given to security holders. Copies of all
statements, in the form in which such material is furnished to security
holders and the Commission, shall be sent to the issuer not later than
the date such material is first published or sent or given to any
security holders.
(2) When two or more persons act as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring,
holding, or disposing of securities of an issuer, such syndicate or
group shall be deemed a "person" for purposes of this subsection.
(3) In determining, for purposes of this subsection, any
percentage of a class of any security, such class shall be deemed to
consist of the amount of the outstanding securities of such class,
exclusive of any securities of such class held by or for the account of
the issuer or a subsidiary of the issuer.
(4) Any solicitation or recommendation to the holders of such a
security to accept or reject a tender offer or request or invitation
for tenders shall be made in accordance with such rules and regulations
as the Commission may prescribe as necessary or appropriate in the
public interest or for the protection of investors.
(5) Securities deposited pursuant to a tender offer or
request or invitation for tenders may be withdrawn by or on behalf of
the depositor at any time until the expiration of seven
{{10-31-05 p.9215}}
days after the time definitive copies of the offer or request or
invitation are first published or sent or given to security holders,
and at any time after sixty days from the date of the original tender
offer or request or invitation, except as the Commission may otherwise
prescribe by rules, regulations, or order as necessary or appropriate
in the public interest or for the protection of investors.
(6) Where any person makes a tender offer, or request or
invitation for tenders, for less than all the outstanding equity
securities of a class, and where a greater number of securities is
deposited pursuant thereto within ten days after copies of the offer or
request or invitation are first published or sent or given to security
holders than such person is bound or willing to take up and pay for,
the securities taken up shall be taken up as nearly as may be pro rata,
disregarding fractions, according to the number of securities deposited
by each depositor. The provisions of this subsection shall also apply
to securities deposited within ten days after notice of an increase in
the consideration offered to security holders, as described in
paragraph (7), is first published or sent or given to security holders.
(7) Where any person varies the terms of a tender offer or
request or invitation for tenders before the expiration thereof by
increasing the consideration offered to holders of such securities,
such person shall pay the increased consideration to each security
holder whose securities are taken up and paid for pursuant to the
tender offer or request or invitation for tenders whether or not such
securities have been taken up by such person before the variation of
the tender offer or request or invitation.
(8) The provisions of this subsection shall not apply to any
offer for, or request or invitation for tenders of, any security--
(A) if the acquisition of such security, together with all other
acquisitions by the same person of securities of the same class during
the preceding twelve months, would not exceed 2 per centum of that
class;
(B) by the issuer of such security; or
(C) which the Commission, by rules or regulations or by order,
shall exempt from the provisions of this subsection as not entered into
for the purpose of, and not having the effect of, changing or
influencing the control of the issuer or otherwise as not comprehended
within the purposes of this subsection.
(e) It shall be unlawful for any person to make any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading, or to engage
in any fraudulent, deceptive, or manipulative acts or practices, in
connection with any tender offer or request or invitation for tenders,
or any solicitation of security holders in opposition to or in favor of
any such offer, request, or invitation. The Commission shall, for the
purposes of this subsection, by rules and regulations define, and
prescribe means reasonably designed to prevent, such acts and practices
as are fraudulent, deceptive, or manipulative.
(f) If, pursuant to any arrangement or understanding with the
person or persons acquiring securities in a transaction subject to
subsection (d) of this section or subsection (d) of section 13 of this
title, any persons are to be elected or designated as directors of the
issuer, otherwise than at a meeting of security holders, and the
persons so elected or designated will constitute a majority of the
directors of the issuer, then, prior to the time any such person takes
office as a director, and in accordance with rules and regulations
prescribed by the Commission, the issuer shall file with the
Commission, and transmit to all holders of record of securities of the
issuer who would be entitled to vote at a meeting for election of
directors, information substantially equivalent to the information
which would be required by subsection (a) or (c) of this section to be
transmitted if such person or persons were nominees for election as
directors at a meeting of such security holders.
(g)(1)(A) At the time of filing such preliminary proxy solicitation
material as the Commission may require by rule pursuant to subsection
(a) of this section that concerns an acquisition, merger,
consolidation, or proposed sale or other disposition of substantially
all the assets of a company, the person making such filing, other than
a company registered under the Investment Company Act of 1940, shall
pay to the Commission the following fees:
{{10-31-05 p.9216}}
(i) for preliminary proxy solicitation material involving an
acquisition, merger, or consolidation, if there is a proposed payment
of cash or transfer of securities or property to shareholders, a fee at
a rate that, subject to paragraphs (5) and (6), is equal to $92 per
$1,000,000 of such proposed payment, or of the value of such securities
or other property proposed to be transferred; and
(ii) for preliminary proxy solicitation material involving a
proposed sale or other disposition of substantially all of the assets
of a company, a fee of 1;50 of 1 per centum of the cash or of the value
of any securities or other property proposed to be received upon such
sale or disposition.
(B) The fee imposed under subparagraph (A) shall be reduced with
respect to securities in an amount equal to any fee paid to the
Commission with respect to such securities in connection with the
proposed transaction under section 6(b) of the Securities Act of 1933
(15 U.S.C. 77f(b)), or the fee
paid under that section shall be reduced in an amount equal to the fee
paid to the Commission in connection with such transaction under this
subsection. Where two or more companies involved in an acquisition,
merger, consolidation, sale, or other disposition of substantially all
the assets of a company must file such proxy material with the
Commission, each shall pay a proportionate share of such fee.
(2) At the time of filing such preliminary information statement
as the Commission may require by rule pursuant to subsection (c) of
this section, the issuer shall pay to the Commission the same fee as
required for preliminary proxy solicitation material under paragraph
(1) of this subsection.
(3) At the time of filing such statement as the Commission may
require by rule pursuant to subsection (d)(1) of this section, the
person making the filing shall pay to the Commission a fee at a rate
that, subject to paragraphs (5) and (6), is equal to $92 per $1,000,000
of the aggregate amount of cash or of the value of securities or other
property proposed to be offered. The fee shall be reduced with respect
to securities in an amount equal to any fee paid with respect to such
securities in connection with the proposed transaction under section
6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)), or the fee paid
under that section shall be reduced in an amount equal to the fee paid
to the Commission in connection with such transaction under this
subsection.
(4) OFFSETTING COLLECTIONS.--Fees collected pursuant to
this subsection for any fiscal year shall be deposited and credited as
offsetting collections to the account providing appropriations to the
Commission, and, except as provided in paragraph (9), shall not be
collected for any fiscal year except to the extent provided in advance
in appropriation Acts. No fees collected pursuant to this subsection
for fiscal year 2002 or any succeeding fiscal year shall be deposited
and credited as general revenue of the Treasury.
(5) ANNUAL ADJUSTMENT.--For each of the fiscal years
2003 through 2011, the Commission shall by order adjust each of the
rates required by paragraphs (1) and (3) for such fiscal year to a rate
that is equal to the rate (expressed in dollars per million) that is
applicable under section 6(b) of the Securities Act of 1933 for such
fiscal year.
(6) FINAL RATE ADJUSTMENT.--For fiscal year 2012 and all
of the succeeding fiscal years, the Commission shall by order adjust
each of the rates required by paragraphs (1) and (3) for all of such
fiscal years to a rate that is equal to the rate (expressed in dollars
per million) that is applicable under section 6(b) of the Securities
Act of 1933 for all of such fiscal years.
(7) PRO RATA APPLICATION.--The rates per $1,000,000
required by this subsection shall be applied pro rata to amounts and
balances of less than $1,000,000.
(8) REVIEW AND EFFECTIVE DATE.--In exercising its
authority under this subsection, the Commission shall not be required
to comply with the provisions of section 553 of title 5, United States
Code. An adjusted rate prescribed under paragraph (5) or (6) and
published under paragraph (10) shall not be subject to judicial review.
Subject to paragraphs (4) and (9)--
(A) an adjusted rate prescribed under paragraph (5) shall take
effect on the later of--
{{10-31-05 p.9216.01}}
(i) the first day of the fiscal year to which such rate applies;
or
(ii) five days after the date on which a regular appropriation to
the Commission for such fiscal year is enacted; and
(B) an adjusted rate prescribed under paragraph (6) shall take
effect on the later of--
(i) the first day of fiscal year 2012; or
(ii) five days after the date on which a regular appropriation to
the Commission for fiscal year 2012 is enacted.
(9) LAPSE OF APPROPRIATION.--If on the first day of a
fiscal year a regular appropriation to the Commission has not been
enacted, the Commission shall continue to collect fees (as offsetting
collections) under this subsection at the rate in effect during the
preceding fiscal year, until 5 days after the date such a regular
appropriation is enacted.
(10) PUBLICATION.--The rate applicable under this
subsection for each fiscal year is published pursuant to section
6(b)(10) of the Securities Act of 1933.
(11) Notwithstanding any other provision of law, the Commission
may impose fees, charges, or prices for matters not involving any
acquisition, merger, consolidation, sale, or other disposition of
assets described in this subsection, as authorized by section 9701 of
title 31, United States Code, or otherwise.
(h) Proxy Solicitations and Tender Offers in Connection With
Limited Partnership Rollup Transactions.--
(1) PROXY RULES TO CONTAIN SPECIAL PROVISIONS.--It shall
be unlawful for any person to solicit any proxy, consent, or
authorization concerning a limited partnership rollup transaction, or
to make any tender offer in furtherance of a limited partnership rollup
transaction, unless such transaction is conducted in accordance with
rules prescribed by the Commission under subsections (a) and (d) as
required by this subsection. Such rules shall--
(A) permit any holder of a security that is the subject of the
proposed limited partnership rollup transaction to engage in
preliminary communications for the purpose of determining whether to
solicit proxies, consents, or authorizations in opposition to the
proposed limited partnership rollup transaction, without regard to
whether any such communication would otherwise be considered a
solicitation of proxies, and without being required to file soliciting
material with the Commission prior to making that determination, except
that--
(i) nothing in this subparagraph shall be construed to limit the
application of any provision of this title prohibiting, or reasonably
designed to prevent, fraudulent, deceptive, or manipulative acts or
practices under this title; and
(ii) any holder of not less than 5 percent of the
outstanding securities that are the subject of the proposed limited
partnership rollup transaction who engages in the business of buying
and selling limited partnership interests in the secondary market shall
be required to disclose such ownership interests and any potential
conflict of interest in such preliminary communications.
(B) require the issuer to provide to holders of the securities
that are the subject of the limited partnership rollup transaction such
list of the holders of the issuer's securities as the Commission may
determine in such form and subject to such terms and conditions as the
Commission may specify;
(C) prohibit compensating any person soliciting proxies,
consents, or authorizations directly from security holders concerning
such a limited partnership rollup transaction--
(i) on the basis of whether the solicited proxy, consent, or
authorization either approves or disapproves the proposed limited
partnership rollup transaction; or
(ii) contingent on the approval, disapproval, or completion of
the limited partnership rollup transaction;
(D) set forth disclosure requirements for soliciting material
distributed in connection with a limited partnership rollup
transaction, including requirements for clear, concise, and
comprehensible disclosure with respect to--
{{10-31-05 p.9216.02}}
(i) any changes in the business plan, voting rights, form of
ownership interest, or the compensation of the general partner in the
proposed limited partnership rollup transaction from each of the
original limited partnerships;
(ii) the conflicts of interest, if any, of the general partner;
(iii) whether it is expected that there will be a significant
difference between the exchange values of the limited partnerships and
the trading price of the securities to be issued in the limited
partnership rollup transaction;
(iv) the valuation of the limited partnerships and the method
used to determine the value of the interests of the limited partners to
be exchanged for the securities in the limited partnership rollup
transaction;
(v) the differing risks and effects of the limited partnership
rollup transaction for investors in different limited partnerships
proposed to be included, and the risks and effects of completing the
limited partnership rollup transaction with less than all limited
partnerships;
(vi) the statement by the general partner required under
subparagraph (E);
(vii) such other matters deemed necessary or appropriate by the
Commission;
(E) require a statement by the general partner as to whether the
proposed limited partnership rollup transaction is fair or unfair to
investors in each limited partnership, a discussion of the basis for
that conclusion, and an evaluation and a description by the general
partner of alternatives to the limited partnership rollup transaction,
such as liquidation;
(F) provide that, if the general partner or sponsor has obtained
any opinion (other than an opinion of counsel), appraisal, or report
that is prepared by an outside party and that is materially related to
the limited partnership rollup transaction, such soliciting materials
shall contain or be accompanied by clear, concise, and comprehensible
disclosure with respect to--
(i) the analysis of the transaction, scope of review, preparation
of the opinion, and basis for and methods of arriving at conclusions,
and any representations and undertakings with respect thereto;
(ii) the identity and qualifications of the person who prepared
the opinion, the method of selection of such persons, and any material
past, existing, or contemplated relationships between the person or any
of its affiliates and the general partner, sponsor, successor, or any
other affiliate;
(iii) any compensation of the preparer of such opinion,
appraisal, or report that is contingent on the transaction's approval
or completion; and
(iv) any limitations imposed by the issuer on the access afforded
to such preparer to the issuer's personnel, premises, and relevant
books and records;
(G) provide that, if the general partner or sponsor has obtained
any opinion, appraisal, or report as described in subparagraph (F) from
any person whose compensation is contingent on the transaction's
approval or completion or who has not been given access by the issuer
to its personnel and premises and relevant books and records, the
general partner or sponsor shall state the reasons therefor;
(H) provide that, if the general partner or sponsor has not
obtained any opinion on the fairness of the proposed limited
partnership rollup transaction to investors in each of the affected
partnerships, such soliciting materials shall contain or be accompanied
by a statement of such partner's or sponsor's reasons for concluding
that such an opinion is not necessary in order to permit the limited
partners to make an informed decision on the proposed transaction;
(I) require that the soliciting material include a clear,
concise, and comprehensible summary of the limited partnership rollup
transaction (including a summary of the matters referred to in clauses
(i) through (vii) of subparagraph (D) and a summary of the matter
referred to in subparagraphs (F), (G), and (H)), with the risks of the
limited partnership rollup transaction set forth prominently in the
fore part thereof;
(J) provide that any solicitation or offering period with respect
to any proxy solicitation, tender offer, or information statement in a
limited partnership rollup transaction
{{10-31-07 p.9216.03}}shall be for not
less than the lesser of 60 calendar days or the maximum number of days
permitted under applicable State law; and
(K) contain such other provisions as the Commission determines to
be necessary or appropriate for the protection of investors in limited
partnership rollup transactions.
(2) EXEMPTIONS.--The Commission may, consistent with the
public interest, the protection of investors, and the purposes of this
title, exempt by rule or order any security or class of securities, any
transaction or class of transactions, or any person or class of
persons, in whole or in part, conditionally or unconditionally, from
the requirements imposed pursuant to paragraph (1) or from the
definition contained in paragraph (4).
(3) EFFECT ON COMMISSION AUTHORITY.--Nothing in this
subsection limits the authority of the Commission under subsection (a)
or (d) or any other provision of this title or precludes the Commission
from imposing, under subsection (a) or (d) or any other provision of
this title, a remedy or procedure required to be imposed under this
subsection.
(4) Definition of limited partnership rollup
transaction.--Except as provided in paragraph (5), as used in this
subsection, the term "limited partnership rollup transaction"
means a transaction involving the combination or reorganization of one
or more limited partnerships, directly or indirectly, in which--
(A) some or all of the investors in any of such limited
partnerships will receive new securities, or securities in another
entity, that will be reported under a transaction reporting plan
declared effective before the date of enactment of this subsection by
the Commission under section
11A;
(B) any of the investors' limited partnership securities are not,
as of the date of filing, reported under a transaction reporting plan
declared effective before the date of enactment of this subsection by
the Commission under section 11A;
(C) investors in any of the limited partnerships involved in the
transaction are subject to a significant adverse change with respect to
voting rights, the term of existence of the entity, management
compensation, or investment objectives; and
(D) any of such investors are not provided an option to receive
or retain a security under substantially the same terms and conditions
as the original issue.
(5) EXCLUSIONS FROM DEFINITION.--Notwithstanding
paragraph (4), the term "limited partnership rollup transaction"
does not include--
(A) a transaction that involves only a limited partnership or
partnerships having an operating policy or practice of retaining cash
available for distribution and reinvesting proceeds from the sale,
financing, or refinancing of assets in accordance with such criteria as
the Commission determines appropriate;
(B) a transaction involving only limited partnerships wherein the
interests of the limited partners are repurchased, recalled, or
exchanged in accordance with the terms of the preexisting limited
partnership agreements for securities in an operating company
specifically identified at the time of the formation of the original
limited partnership;
(C) a transaction in which the securities to be issued or
exchanged are not required to be and are not registered under the
Securities Act of 1933;
(D) a transaction that involves only issuers that are not
required to register or report under section 12, both before and after
the transaction;
(E) a transaction, except as the Commission may otherwise provide
by rule for the protection of investors, involving the combination or
reorganization of one or more limited partnerships in which a
non-affiliated party succeeds to the interests of a general partner or
sponsor, if--
(i) such action is approved by not less than 662/3 percent
of the outstanding units of each of the participating limited
partnerships; and
(ii) as a result of the transaction, the existing general
partners will receive only compensation to which they are entitled as
expressly provided for in the preexisting limited partnership
agreements; or
(F) a transaction, except as the Commission may otherwise provide
by rule for the protection of investors, in which the securities
offered to investors are securities of another
{{10-31-07 p.9216.04}}entity that are
reported under a transaction reporting plan declared effective before
the date of enactment of this subsection by the Commission under
section 11A, if--
(i) such other entity was formed, and such class of securities
was reported and regularly traded, not less than 12 months before the
date on which soliciting material is mailed to investors; and
(ii) the securities of that entity issued to investors in the
transaction do not exceed 20 percent of the total outstanding
securities of the entity, exclusive of any securities of such class
held by or for the account of the entity or a subsidiary of the entity.
[Codified to 15 U.S.C. 78n]
[Source: Section 14 of the Act of June 6, 1934 (Pub. L. No. 291;
48 Stat. 895), effective October 1, 1934, as amended by section 5 of
the Act of August 20, 1964 (Pub. L. No. 88--467; 78 Stat. 569, 570),
effective August 20, 1964; section 3 of the Act of July 29, 1968 (Pub.
L. No. 90--439; 82 Stat. 455), effective July 29, 1968; sections 3--5
of the Act of December 22, 1970 (Pub. L. No. 91--567; 84 Stat. 1497),
effective December 22, 1970; section 2(b) of the Act of June 6, 1983
(Pub. L. No. 98--38; 97 Stat. 205), effective June 6, 1983; section 2
of the Act of December 28, 1985 (Pub. L. No. 99--222; 99 Stat. 1737),
effective December 28, 1986; section 302 of title III of the Act of
November 15, 1990 (Pub. L. No. 101--550; 104 Stat. 2721), effective May
15, 1991; and section 302(a) of title III of the Act of December 17,
1993 (Pub. L. No. 103--202; 107 Stat. 2359), effective December 17,
1993; section 301(b)(7) of title III of the Act of November 3, 1998
(Pub. L. No. 105--353; 112 Stat. 3236), effective November 3, 1998;
section 5 of the Act of January 16, 2002 (Pub. L. No. 107--123; 115
Stat. 2395, effective January 16, 2002]
REGISTRATION AND REGULATION OF BROKERS AND
DEALERS
SEC. 15 (a)(1) It shall be unlawful for any broker or
dealer which is either a person other than a natural person or a
natural person not associated with a broker or dealer which is a person
other than a natural person (other than such a broker or dealer whose
business is exclusively intrastate and who does not make use of any
facility of a national securities exchange) to make use of the mails or
any means or instrumentality of interstate commerce to effect any
transactions in, or to induce or attempt to induce the purchase or sale
of, any security (other than an exempted security or commercial paper,
bankers' acceptances, or
{{12-29-06 p.9217}}commercial bills)
unless such broker or dealer is registered in accordance with
subsection (b) of this section.
(2) The Commission, by rule or order, as it deems consistent with
the public interest and the protection of investors, may conditionally
or unconditionally exempt from paragraph (1) of this subsection any
broker or dealer or class of brokers or dealers specified in such rule
or order.
(b)(1) A broker or dealer may be registered by filing with the
Commision an application for registration in such form and containing
such information and documents concerning such broker or dealer and any
persons associated with such broker or dealer as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the protection of investors. Within forty-five days of the date
of the filing of such application (or within such longer period as to
which the applicant consents), the Commission shall--
(A) by order grant registration, or
(B) institute proceedings to determine whether registration
should be denied. Such proceedings shall include notice of the grounds
for denial under consideration and opportunity for hearing and shall be
concluded within one hundred twenty days of the date of the filing
of the application for registration. At the conclusion of such
proceedings, the Commission, by order, shall grant or deny such
registration. The order granting registration shall not be effective
until such broker or dealer has become a member of a registered
securities association, or until such broker or dealer has become a
member of a national securities exchange if such broker or dealer
effects transactions solely on that exchange, unless the Commission has
exempted such broker or dealer, by rule or order, from such membership.
The Commission may extend the time for conclusion of such proceedings
for up to ninety days if it finds good cause for such extension and
publishes its reasons for so finding or for such longer period as to
which the applicant consents.
The Commission shall grant such registration if the Commission finds
that the requirements of this section are satisfied. The Commission
shall deny such registration if it does not make such a finding or if
it finds that if the applicant were so registered, its registration
would be subject to suspension or revocation under paragraph (4) of
this subsection.
(2)(A) An application for registration of a broker or dealer to
be formed or organized may be made by a broker or dealer to which the
broker or dealer to be formed or organized is to be the successor. Such
application, in such form as the Commission, by rule, may prescribe,
shall contain such information and documents concerning the applicant,
the successor, and any persons associated with the applicant or the
successor, as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
The grant or denial of registration to such an applicant shall be in
accordance with the procedures set forth in paragraph (1) of this
subsection. If the Commision grants such registration, the registration
shall terminate on the forty-fifth day after the effective date
thereof, unless prior thereto the successor shall, in accordance with
such rules and regulations as the Commision may prescribe, adopt the
application for registration as its own.
(B) Any person who is a broker or dealer solely by reason of
acting as a municipal securities dealer or municipal securities broker,
who so acts through a separately identificable department or division,
and who so acted in such a manner on the date of enactment of the
Securities Acts Amendments of 1975, may, in accordance with such terms
and conditions as the Commission, by rule, prescribes as necessary and
appropriate in the public interest and for the protection of investors,
register such separately identifiable department or division in
accordance with this subsection. If any such department or division is
so registered, the department or division and not such person himself
shall be the broker or dealer for purposes of this title.
(C) Within six months of the date of the granting of registration
to a broker or dealer, the Commision, or upon the authorization and
direction of the Commission, a
{{12-29-06 p.9218}}registered
securities association or national securities exchange of which such
broker or dealer is a member, shall conduct an inspection of the broker
or dealer to determine whether it is operating in conformity with the
provisions of this title and the rules and regulations thereunder:
Provided, however, That the Commission may delay such
inspection of any class of brokers or dealers for a period not to
exceed six months.
(3) Any provision of this title (other than
section 5 and subsection (a) of
this section) which prohibits any act, practice, or course of business
if the mails or any means or instrumentality of interstate commerce is
used in connection therewith shall also prohibit any such act,
practice, or course of business by any registered broker or dealer or
any person acting on behalf of such a broker or dealer, irrespective of
any use of the mails or any means or instrumentality of interstate
commerce in connection therewith.
(4) The Commission, by order, shall censure, place limitations on
the activities, functions, or operations of, suspend for a period not
exceeding twelve months, or revoke the registration of any broker or
dealer if it finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations, suspension, or
revocation is in the public interest and that such broker or dealer,
whether prior or subsequent to becoming such, or any person associated
with such broker or dealer, whether prior or subsequent to becoming so
associated--
(A) has willfully made or caused to be made in any application
for registration or report required to be filed with the Commission or
with any other appropriate regulatory agency under this title, or in
any proceeding before the Commission with respect to registration, any
statement which was at the time and in the light of the circumstances
under which it was made false or misleading with respect to any
material fact, or has omitted to state in any such application or
report any material fact which is required to be stated therein.
(B) has been convicted within ten years preceding the filing of
any application for registration or at any time thereafter of any
felony or misdemeanor or of a substantially equivalent crime by a
foreign court of competent jurisdiction which the Commission finds--
(i) involves the purchase or sale of any security, the taking of
a false oath, the making of a false report, bribery, perjury, burglary,
any substantially equivalent activity however denominated by the laws
of the relevant foreign government, or conspiracy to commit any such
offense;
(ii) arises out of the conduct of the business of a broker,
dealer, municipal securities dealer, government securities broker,
government securities dealer, investment adviser, bank, insurance
company, fiduciary, transfer agent, nationally recognized statistical
rating organization, foreign person peforming a function substantially
equivalent to any of the above, or any entity or person required to be
registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.) or any
substantially equivalent foreign statute or regulation;
(iii) involves the larceny, theft, robbery, extortion, forgery,
counterfeiting, fraudulent concealment, embezzlement, fraudulent
conversion, or misappropriation of funds, or securities, or
substantially equivalent activity however denominated by the laws of
the relevant foreign government; or
(iv) involves the violation of section 152, 1341, 1342, or 1343
or chapter 25 or 47 of title 18, United States Code, or a violation of
a substantially equivalent foreign statute.
(C) is permanently or temporarily enjoined by order, judgment, or
decree of any court of competent jurisdiction from acting as an
investment adviser, underwriter, broker, dealer, municipal securities
dealer, government securities broker, government securities dealer,
transfer agent, nationally recognized statistical rating organization,
foreign person performing a function substantially equivalent to any of
the above, or entity or person required to be registered under the
Commodity Exchange Act, or any substantially equivalent foreign statute
or regulation, or as an affiliated person or employee of any investment
company, bank, insurance company, foreign entity substantially
equivalent to any of the above, or entity or person required to be
registered under the Commodity Exchange Act, or any substantially
equivalent foreign statute or
{{2-29-08 p.9219}}regulation, or from
engaging in or continuing any conduct or practice in connection with
any such activity, or in connection with the purchase or sale of any
security.
(D) has willfully violated any provision of the Securities Act of
1933, the Investment Advisers Act of 1940, the Investment Company Act
of 1940, the Commodity Exchange Act, this title, the rules or
regulations under any of such statutes, or the rules of the Municipal
Securities Rulemaking Board, or is unable to comply with any such
provision.
(E) has willfully aided, abetted, counseled, commanded, induced,
or procured the violation by any other person of any provision of the
Securities Act of 1933, the Investment Advisers Act of 1940, the
Investment Company Act of 1940, the Commodity Exchange Act, this title,
the rules or regulations under any of such statutes, or the rules of
the Municipal Securities Rulemaking Board, or has failed reasonably to
supervise, with a view to preventing violations of the provisions of
such statutes, rules, and regulations, another person who commits such
a violation, if such other person is subject to his supervision. For
the purposes of this subparagraph (E) no person shall be deemed to have
failed reasonably to supervise any other person, if--
(i) there have been established procedures, and a system for
applying such procedures, which would reasonably be expected to prevent
and detect, insofar as practicable, any such violation by such other
person, and
(ii) such person has reasonably discharged the duties and
obligations incumbent upon him by reason of such procedures and system
without resonable cause to believe that such procedures and system were
not being complied with.
(F) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a broker or
dealer;
(G) has been found by a foreign financial regulatory authority to
have--
(i) made or caused to be made in any application for registration
or report required to be filed with a foreign financial regulatory
authority, or in any proceeding before a foreign financial regulatory
authority with respect to registration, any statement that was at the
time and in the light of the circumstances under which it was made
false or misleading with respect to any material fact, or has omitted
to state in any application or report to the foreign financial
regulatory authority any material fact that is required to be stated
therein;
(ii) violated any foreign statute or regulation regarding
transactions in securities, or contracts of sale of a commodity for
future delivery, traded on or subject to the rules of a contract market
or any board of trade;
(iii) aided, abetted, counseled, commanded, induced, or procured
the violation by any person of any provision of any statutory
provisions enacted by a foreign government, or rules or regulations
thereunder, empowering a foreign financial regulatory authority
regarding transactions in securities, or contracts of sale of a
commodity for future delivery, traded on or subject to the rules of a
contract market or any board of trade, or has been found, by a foreign
financial regulatory authority, to have failed reasonably to supervise,
with a view to preventing violations of such statutory provisions,
rules, and regulations, another person who commits such a violation, if
such other person is subject to his supervision; or
(H) is subject to any final order of a State securities
commission (or any agency or officer performing like functions), State
authority that supervises or examines banks, savings associations, or
credit unions, State insurance commission (or any agency or office
performing like functions), an appropriate Federal banking agency (as
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813(q))), or the National Credit Union Administration, that--
(i) bars such person from association with an entity regulated by
such commission, authority, agency, or officer, or from engaging in the
business of securities, insurance, banking, savings association
activities, or credit union activities; or
(ii) constitutes a final order based on violations of any laws or
regulations that prohibit fraudulent, manipulative, or deceptive
conduct.
(5) Pending final determination whether any registration under
this subsection shall be revoked, the Commission, by order, may suspend
such registration, if such suspension appears to the Commission, after
notice and opportunity for hearing, to be necessary or
{{2-29-08 p.9220}}appropriate in the
public interest or for the protection of investors. Any registered
broker or dealer may, upon such terms and conditions as the Commission
deems necessary or appropriate in the public interest or for the
protection of investors, withdraw from registration by filing a written
notice of withdrawal with the Commission. If the Commission finds that
any registered broker or dealer is no longer in existence or has ceased
to do business as a broker or dealer, the Commission, by order, shall
cancel the registration of such broker or dealer.
(6)(A) With respect to any person who is associated, who is
seeking to become associated, or, at the time of the alleged
misconduct, who was associated or was seeking to become associated with
a broker or dealer, or any person participating, or, at the time of the
alleged misconduct, who was participating, in an offering of any penny
stock, the Commission, by order, shall censure, place limitations on
the activities or functions of such person, or suspend for a period not
exceeding 12 months, or bar such person from being associated with a
broker or dealer, or from participating in an offering of penny stock,
if the Commission finds, on the record after notice and opportunity for
a hearing, that such censure, placing of limitations, suspension, or
bar is in the public interest and that such person--
(i) has committed or omitted any act or is subject to an order or
finding enumerated in subparagraph (A), (D), or (E) of paragraph (4) of
this subsection;
(ii) has been convicted of any offense specified in subparagraph
(B) of such paragraph (4) within 10 years of the commencement of the
proceedings under this paragraph; or
(iii) is enjoined from any action, conduct, or practice specified
in subparagraph (C) of such paragraph (4).
(B) It shall be unlawful--
(i) for any person as to whom an order under subparagraph (A) is
in effect, without the consent of the Commission, willfully to become,
or to be, associated with a broker or dealer in contravention of such
order, or to participate in an offering of penny stock in contravention
of such order;
(ii) for any broker or dealer to permit such a person, without
the consent of the Commission, to become or remain, a person associated
with the broker or dealer in contravention of such order, if such
broker or dealer knew, or in the exercise of reasonable care should
have known, of such order; or
(iii) for any broker or dealer to permit such a person, without
the consent of the Commission, to participate in an offering of penny
stock in contravention of such order, if such broker or dealer knew, or
in the exercise of reasonable care should have known, of such order and
of such participation.
(C) For purposes of this paragraph, the term "person
participating in an offering of penny stock" includes any person
acting as any promoter, finder, consultant, agent, or other person who
engages in activities with a broker, dealer, or issuer for purposes of
the issuance or trading in any penny stock, or inducing or attempting
to induce the purchase or sale of any penny stock. The Commission may,
by rule or regulation, define such term to include other activities,
and may, by rule, regulation, or order, exempt any person or class of
persons, in whole or in part, conditionally or unconditionally, from
such term.
(7) No registered broker or dealer or government securities
broker or government securities dealer registered (or required to
register) under section
15C(a)(1)(A) shall effect any transaction in, or induce the
purchase or sale of, any security unless such broker or dealer meets
such standards of operational capability and such broker or dealer and
all natural persons associated with such broker or dealer meet such
standards of training, experience, competence, and such other
qualifications as the Commission finds necessary or appropriate in the
public interest or for the protection of investors. The Commission
shall establish such standards by rules and regulations, which may--
(A) specify that all or any portion of such standards shall
be applicable to any class of brokers and dealers and persons
associated with brokers and dealers;
(B) require persons in any such class to pass tests
prescribed in accordance with such rules and regulations, which tests
shall, with respect to any class of partners, officers, or supervisory
employees (which latter term may be defined by the Commission's rules
and regulations and as so defined shall include branch managers of
brokers or dealers) engaged in the management of the broker or dealer,
include questions relating
{{8-30-02 p.9221}}to bookkeeping,
accounting, internal control over cash and securities, supervision of
employees, maintenance of records, and other appropriate matters; and
(C) provide that persons in any such class other than
brokers and dealers and partners, officers, and supervisory employees
of brokers or dealers, may be qualified solely on the basis of
compliance with such standards of training and such other
qualifications as the Commission finds appropriate.
The Commission, by rule, may prescribe reasonable fees and charges
to defray its costs in carrying out this paragraph, including, but not
limited to, fees for any test administered by it or under its
direction. The Commission may cooperate with registered securities
associations and national securities exchanges in devising and
administering tests and may require registered brokers and dealers and
persons associated with such brokers and dealers to pass tests
administered by or on behalf of any such association or exchange and to
pay such association or exchange reasonable fees or charges to defray
the costs incurred by such association or exchange in administering
such tests.
(8) It shall be unlawful for any registered broker or dealer to
effect any transaction in, or induce or attempt to induce the purchase
or sale of, any security (other than commercial paper, bankers'
acceptances, or commercial bills), unless such broker or dealer is a
member of a securities association registered pursuant to section 15A
of this title or effects transactions in securities solely on a
national securities exchange of which it is a member.
(9) The Commission by rule or order, as it deems consistent with
the public interest and the protection of investors, may conditionally
or unconditionally exempt from paragraph (8) of this subsection any
broker or dealer or class of brokers or dealers specified in such rule
or order.
(10) For the purposes of determining whether a person is subject
to a statutory disqualification under
section 6(c)(2),
15A(g)(2), or
17A(b)(4)(A) of this title,
the term "Commission" in paragraph (4)(B) of this subsection
shall mean "exchange", "association", or "clearing
agency", respectively.
(11) Broker/dealer registration with respect to transactions
in security futures products.--
(A) NOTICE REGISTRATION.--
(i) CONTENTS OF NOTICE.--Notwithstanding paragraphs (1)
and (2), a broker or dealer required to register only because it
effects transactions in security futures products on an exchange
registered pursuant to section 6(g) may register for purposes of this
section by filing with the Commission a written notice in such form and
containing such information concerning such broker or dealer and any
persons associated with such broker or dealer as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the protection of investors. A broker or dealer may not register
under this paragraph unless that broker or dealer is a member of a
national securities association registered under section 15A(k).
(ii) IMMEDIATE EFFECTIVENESS.--Such registration shall
be effective contemporaneously with the submission of notice, in
written or electronic form, to the Commission, except that such
registration shall not be effective if the registration would be
subject to suspension or revocation under paragraph (4).
(iii) SUSPENSION.--Such registration shall be suspended
immediately if a national securities association registered pursuant to
section 15A(k) of this title suspends the membership of that broker or
dealer.
(iv) TERMINATION.--Such registration shall be terminated
immediately if any of the above stated conditions for registration set
forth in this paragraph are no longer satisfied.
(B) EXEMPTIONS FOR REGISTERED BROKERS AND DEALERS.--A
broker or dealer registered pursuant to the requirements of
subparagraph (A) shall be exempt from the following provisions of this
title and the rules thereunder with respect to transactions in security
futures products:
(i) Section 8.
(ii) Section 11.
{{8-30-02 p.9222}}
(iii) Subsections (c)(3) and (c)(5) of this section.
(iv) Section 15B.
(v) Section 15C.
(vi) Subsections (d), (e), (f), (g), (h), and (i) of section 17.
(12) Exemption for security futures product exchange
members.--
(A) REGISTRATION EXEMPTION.--A natural person shall be
exempt from the registration requirements of the section if such
person--
(i) is a member of a designated contract market registered with
the Commission as an exchange pursuant to section 6(g);
(ii) effects transactions only in securities on the exchange of
which such person is a member; and
(iii) does not directly accept or solicit orders from public
customers or provide advice to public customers in connection with the
trading of security futures products.
(B) OTHER EXEMPTIONS.--A natural person exempt from
registration pursuant to subparagraph (A) shall also be exempt from the
following provisions of this title and the rules thereunder:
(i) Section 8.
(ii) Section 11.
(iii) Subsections (c)(3), (c)(5), and (e) of this section.
(iv) Section 15B.
(v) Section 15C.
(vi) Subsections (d), (e), (f), (g), (h), and (i) of section 17.
(c)(1)(A) No broker or dealer shall make use of the mails or any
means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase or sale
of, any security (other than commercial paper, bankers' acceptances,
or commercial bills) otherwise than on a national securities exchange
of which it is a member, or any security-based swap agreement (as
defined in section 206B of the Gramm-Leach-Bliley Act), by means of any
manipulative, deceptive, or other fraudulent device or contrivance.
(B) No municipal securities dealer shall make use of the mails or
any means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase or sale
of, any municipal security or any security-based swap agreement (as
defined in section 206B of the Gramm-Leach-Bliley Act) involving a
municipal security by means of any manipulative, deceptive, or other
fraudulent device or contrivance.
(C) No government securities broker or government securities
dealer shall make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce or to
attempt to induce the purchase or sale of, any government security or
any security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act) involving a government security by means of any
manipulative, deceptive, or other fraudulent device or contrivance.
(2)(A) No broker or dealer shall make use of the mails or any
means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase or sale
of, any security (other than an exempted security or commercial paper,
bankers' acceptances, or commercial bills) otherwise than on a national
securities exchange of which it is a member, in connection with which
such broker or dealer engages in any fraudulent, deceptive, or
manipulative act or practice, or makes any fictitious quotation.
(B) No municipal securities dealer shall make use of the mails or
any means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase or sale
of, any municipal security in connection with which such municipal
securities dealer engages in any fraudulent, deceptive, or manipulative
act or practice, or makes any fictitious quotation.
(C) No government securities broker or government securities
dealer shall make use of the mails or any means or instrumentality of
interstate commerce to effect any
{{8-30-02 p.9222.01}}transaction in, or
induce or attempt to induce the purchase or sale of, any government
security in connection with which such government securities broker or
government securities dealer engages in any fraudulent, deceptive, or
manipulative act or practice, or makes any fictitious quotation.
(D) The Commission shall for the purposes of this paragraph, by
rules and regulations define, and prescribe means reasonably designed
to prevent, such acts and practices as are fraudulent, deceptive, or
manipulative and such quotations as are fictitious.
(E) The Commission shall, prior to adopting any rule or
regulation under subparagraph (C), consult with and consider the views
of the Secretary of the Treasury and each appropriate regulatory
agency. If the Secretary of the Treasury or any appropriate regulatory
agency comments in writing on a proposed rule or regulation of the
Commission under such subparagraph (C) that has been published for
comment, the Commission shall respond in writing to such written
comment before adopting the proposed rule. If the Secretary of the
Treasury determines, and notifies the Commission, that such rule or
regulation, if implemented, would, or as applied does (i) adversely
affect the liquidity or efficiency of the market for government
securities; or (ii) impose any burden on competition not necessary or
appropriate in furtherance of the purposes of this section, the
Commission shall, prior to adopting the proposed rule or regulation,
find that such rule or regulation is necessary and appropriate in
furtherance of the purposes of this section notwithstanding the
Secretary's determination.
(3)(A) No broker or dealer (other than a government securities
broker or government securities dealer, except a registered broker or
dealer) shall make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce or
attempt to induce the purchase or sale of, any security (other than an
exempted security (except a government security) or commercial paper,
bankers' acceptances, or commercial bills) in contravention of such
rules and regulations as the Commission shall prescribe as necessary or
appropriate in the public interest or for the protection of investors
to provide safeguards with respect to the financial responsibility and
related practices of brokers and dealers including, but not limited to,
the acceptance of custody and use of customers' securities and the
carrying and use of customers' deposits or credit balances. Such rules
and regulations shall (A) require the maintenance of reserves with
respect to customers' deposits or credit balances, and (B) no later
than September 1, 1975, establish minimum financial responsibility
requirements for all brokers and dealers.
(B) Consistent with this title, the Commission, in consultation
with the Commodity Futures Trading Commission, shall issue such rules,
regulations, or orders as are necessary to avoid duplicative or
conflicting regulations applicable to any broker or dealer registered
with the Commission pursuant to section 15(b) (except paragraph (11)
thereof), that is also registered with the Commodity Futures Trading
Commission pursuant to section 4f(a) of the Commodity Exchange Act
(except paragraph (2) thereof), with respect to the application of: (i)
the provisions of section 8, section 15(c)(3), and section 17 of this
title and the rules and regulations thereunder related to the treatment
of customer funds, securities, or property, maintenance of books and
records, financial reporting, or other financial responsibility rules,
involving security futures products; and (ii) similar provisions of the
Commodity Exchange Act and rules and regulations thereunder involving
security futures products.
(4) If the Commission finds, after notice and opportunity
for a hearing, that any person subject to the provisions of
section 12,
13,
14, or subsection (d) of
section 15 of this title or any rule or regulation thereunder has
failed to comply with any such provision, rule, or regulation in any
material respect, the Commission may publish its findings and
issue an order requiring such person, and any person who was
a cause of the failure to comply due to an act or omission the person
knew or should have known would contribute to the
{{2-28-94 p.9223}}failure to comply,
to comply, or to take steps to effect compliance, with such provision
or such rule or regulation thereunder upon such terms and conditions
and within such time as the Commission may specify in such order.
(5) No dealer (other than a specialist registered on a national
securities exchange) acting in the capacity of market maker or
otherwise shall make use of the mails or any means or instrumentality
of interstate commerce to effect any transaction in, or to induce or
attempt to induce the purchase or sale of, any security (other than an
exempted security or a municipal security) in contravention of such
specified and appropriate standards with respect to dealing as the
Commission, by rule, shall prescribe as necessary or appropriate in the
public interest and for the protection of investors, to maintain fair
and orderly markets, or to remove impediments to and perfect the
mechanism of a national market system. Under the rules of the
Commission a dealer in a security may be prohibited from acting as a
broker in that security.
(6) No broker or dealer shall make use of the mails or any means
or instrumentality of interstate commerce to effect any transaction in,
or to induce or attempt to induce the purchase or sale of, any security
(other than an exempted security, municipal security, commercial paper,
bankers' acceptances, or commercial bills) in contravention of such
rules and regulations as the Commission shall prescribe as necessary or
appropriate in the public interest and for the protection of investors
or to perfect or remove impediments to a national system for the prompt
and accurate clearance and settlement of securities transactions, with
respect to the time and method of, and the form and format of documents
used in connection with, making settlements of and payments for
transactions in securities, making transfers and deliveries of
securities, and closing accounts. Nothing in this paragraph shall be
construed (A) to affect the authority of the Board of Governors of the
Federal Reserve System, pursuant to
section 7 of this title, to
prescribe rules and regulations for the purpose of preventing the
excessive use of credit for the purchase or carrying of securities, or
(B) to authorize the Commission to prescribe rules or regulations for
such purpose.
(7) In connection with any bid for or purchase of a government
security related to an offering of government securities by or on
behalf of an issuer, no government securities broker, government
securities dealer, or bidder for or purchaser of securities in such
offering shall knowingly or willfully make any false or misleading
written statement or omit any fact necessary to make any written
statement made not misleading.
(8) PROHIBITION OF REFERRAL FEES.--No broker or dealer,
or person associated with a broker or dealer, may solicit or accept,
directly or indirectly, remuneration for assisting an attorney in
obtaining the representation of any person in any private action
arising under this title or under the Securities Act of 1933.
(d) Each issuer which has filed a registration statement containing
an undertaking which is or becomes operative under this subsection as
in effect prior to the date of enactment of the Securities Acts
Amendments of 1964, and each issuer which shall after such date file a
registration statement which has become effective pursuant to the
Securities Act of 1933, as amended, shall file with the Commission, in
accordance with such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for the
protection of investors, such supplementary and periodic information,
documents, and reports as may be required pursuant to
section 13 of this title in
respect of a security registered pursuant to
section 12 of this title. The
duty to file under this subsection shall be automatically suspended if
and so long as any issue of securities of such issuer is registered
pursuant to section 12 of this title. The duty to file under this
subsection shall also be automatically suspended as to any fiscal
year, other than the fiscal year within which such registration
statement became effective, if, at the beginning of such fiscal
year, the securities of each class to which the registration
statement relates are held of record by less than three hundred
persons. For the purposes of this subsection, the term "class"
shall be construed to include all securities of an issuer which are of
substantially similar character and the holders of which enjoy
substantially similar rights and privileges. The Commission may, for
the purpose of this subsection, define by rules and regulations
the
{{2-28-94 p.9224}}term "held of
record" as it deems necessary or appropriate in the public interest
or for the protection of investors in order to prevent circumvention of
the provisions of this subsection. Nothing in this subsection shall
apply to securities issued by a foreign government or political
subdivision thereof.
(e) The Commission, by rule, as it deems necessary or appropriate
in the public interest and for the protection of investors or to assure
equal regulation, may require any member of a national securities
exchange not required to register under section 15 of this title and
any person associated with any such member to comply with any provision
of this title (other than section 15(a)) or the rules or regulations
thereunder which by its terms regulates or prohibits any act, practice,
or course of business by a "broker or dealer" or "registered
broker or dealer" or a "person associated with a broker or
dealer," respectively.
(f) Every registered broker or dealer, shall establish, maintain,
and enforce written policies and procedures reasonably designed, taking
into consideration the nature of such broker's or dealer's business, to
prevent the misuse in violation of this title, or the rules or
regulations thereunder, of material, nonpublic information by such
broker or dealer or any person associated with such broker or dealer.
The Commission, as it deems necessary or appropriate in the public
interest or for the protection of investors, shall adopt rules or
regulations to require specific policies or procedures reasonably
designed to prevent misuse in violation of this title (or the rules or
regulations thereunder) of material, nonpublic information.
(g) REQUIREMENTS FOR TRANSACTIONS IN PENNY STOCKS.--
(1) IN GENERAL.--No broker or dealer shall make use of
the mails or any means or instrumentality of interstate commerce to
effect any transaction in, or to induce or attempt to induce the
purchase or sale of, any penny stock by any customer except in
accordance with the requirements of this subsection and the rules and
regulations prescribed under this subsection.
(2) RISK DISCLOSURE WITH RESPECT TO PENNY STOCKS.--Prior
to effecting any transaction in any penny stock, a broker or dealer
shall give the customer a risk disclosure document that--
(A) contains a description of the nature and level of risk in the
market for penny stocks in both public offerings and secondary trading;
(B) contains a description of the broker's or dealer's duties to
the customer and of the rights and remedies available to the customer
with respect to violations of such duties or other requirements of
Federal securities laws;
(C) contains a brief, clear, narrative description of a dealer
market, including "bid" and "ask" prices for penny stocks
and the significance of the spread between the bid and ask prices;
(D) contains the toll free telephone number for inquiries on
disciplinary actions established pursuant to section 15A(i) of this
title;
(E) defines significant terms used in the disclosure document or
in the conduct of trading in penny stocks; and
(F) contains such other information, and is in such form
(including language, type size, and format), as the Commission shall
require by rule or regulation.
(3) COMMISSION RULES RELATING TO DISCLOSURE.--The
Commission shall adopt rules setting forth additional standards for the
disclosure by brokers and dealers to customers of information
concerning transactions in penny stocks. Such rules--
(A) shall require brokers and dealers to disclose to each
customer, prior to effecting any transaction in, and at the time of
confirming any transaction with respect to any penny stock, in
accordance with such procedures and methods as the Commission may
require consistent with the public interest and the protection of
investors--
(i) the bid and ask prices for penny stock, or such other
information as the Commission may, by rule, require to provide
customers with more useful and reliable information relating to the
price of such stock;
{{12-30-99 p.9225}}
(ii) the number of shares to which such bid and ask prices apply,
or other comparable information relating to the depth and liquidity of
the market for such stock; and
(iii) the amount and a description of any compensation that the
broker or dealer and the associated person thereof will receive or has
received in connection with such transaction;
(B) shall require brokers and dealers to provide, to each
customer whose account with the broker or dealer contains penny stocks,
a monthly statement indicating the market value of the penny stocks in
that account or indicating that the market value of such stock cannot
be determined because of the unavailability of firm quotes; and
(C) may, as the Commission finds necessary or appropriate in the
public interest or for the protection of investors, require brokers and
dealers to disclose to customers additional information concerning
transactions in penny stocks.
(4) EXEMPTIONS.--The Commission, as it determines
consistent with the public interest and the protection of investors,
may by rule, regulation, or order exempt in whole or in part,
conditionally or unconditionally, any person or class of persons, or
any transaction or class of transactions, from the requirements of this
subsection. Such exemptions shall include an exemption for brokers and
dealers based on the minimal percentage of the broker's or dealer's
commissions, commission-equivalents, and markups received from
transactions in penny stocks.
(5) REGULATIONS.--It shall be unlawful for any person to
violate such rules and regulations as the Commission shall prescribe in
the public interest or for the protection of investors or to maintain
fair and orderly markets--
(A) as necessary or appropriate to carry out this subsection; or
(B) as reasonably designed to prevent fraudulent, deceptive, or
manipulative acts and practices with respect to penny stocks.
(h) LIMITATIONS ON STATE LAW.--
(1) Capital, margin, books and records, bonding, and
reports.--No law, rule, regulation, or order, or other
administrative action of any State or political subdivision thereof
shall establish capital, custody, margin, financial responsibility,
making and keeping records, bonding, or financial or operational
reporting requirements for brokers, dealers, municipal securities
dealers, government securities brokers, or government securities
dealers that differ from, or are in addition to, the requirements in
those areas established under this title. The Commission shall consult
periodically the securities commissions (or any agency or office
performing like functions) of the States concerning the adequacy of
such requirements as established under this title.
(2) DE MINIMIS TRANSACTIONS BY ASSOCIATED PERSONS.--No
law, rule, regulation, or order, or other administrative action of any
State or political subdivision thereof may prohibit an associated
person of a broker or dealer from effecting a transaction described in
paragraph (3) for a customer in such State if--
(A) such associated person is not ineligible to register with
such State for any reason other than such a transaction;
(B) such associated person is registered with a registered
securities association and at least one State; and
(C) the broker or dealer with which such person is associated is
registered with such State.
(3) DESCRIBED TRANSACTIONS.--
(A) IN GENERAL.--A transaction is described in this
paragraph if--
(i) such transaction is effected--
(I) on behalf of a customer that, for 30 days prior to the day of
the transaction, maintained an account with the broker or dealer; and
(II) by an associated person of the broker or dealer--
(aa) to which the customer was assigned for 14 days prior to
the day of the transaction; and
{{12-30-99 p.9226}}
(bb) who is registered with a State in which the customer was a
resident or was present for at least 30 consecutive days during the
1-year period prior to the day of the transaction; or
(ii) the transaction is effected--
(I) on behalf of a customer that, for 30 days prior to the day of
the transaction, maintained an account with the broker or dealer; and
(II) during the period beginning on the date on which such
associated person files an application for registration with the State
in which the transaction is effected and ending on the earlier of--
(aa) 60 days after the date on which the application is filed; or
(bb) the date on which such State notifies the associated person
that it has denied the application for registration or has stayed the
pendency of the application for cause.
(B) RULES OF CONSTRUCTION.--For purposes of subparagraph
(A)(i)(II)--
(i) each of up to 3 associated persons of a broker or dealer who
are designated to effect transactions during the absence or
unavailability of the principal associated person for a customer may be
treated as an associated person to which such customer is assigned; and
(ii) if the customer is present in another State for 30 or more
consecutive days or has permanently changed his or her residence to
another State, a transaction is not described in this paragraph, unless
the associated person of the broker or dealer files an application for
registration with such State not later than 10 business days after the
later of the date of the transaction, or the date of the discovery of
the presence of the customer in the other State for 30 or more
consecutive days or the change in the customer's residence.
(i) Rulemaking To Extend Requirements to New Hybrid
Products.--
(1) CONSULTATION.--Prior to commencing a rulemaking
under this subsection, the Commission shall consult with and seek the
concurrence of the Board concerning the imposition of broker or dealer
registration requirements with respect to any new hybrid product. In
developing and promulgating rules under this subsection, the Commission
shall consider the views of the Board, including views with respect to
the nature of the new hybrid product; the history, purpose, extent, and
appropriateness of the regulation of the new product under the Federal
banking laws; and the impact of the proposed rule on the banking
industry.
(2) LIMITATION.--The Commission shall not--
(A) require a bank to register as a broker or dealer under this
section because the bank engages in any transaction in, or buys or
sells, a new hybrid product; or
(B) bring an action against a bank for a failure to comply with a
requirement described in subparagraph (A), unless the Commission has
imposed such requirement by rule or regulation issued in accordance
with this section.
(3) CRITERIA FOR RULEMAKING.--The Commission shall not
impose a requirement under paragraph (2) of this subsection with
respect to any new hybrid product unless the Commission determines
that--
(A) the new hybrid product is a security; and
(B) imposing such requirement is necessary and appropriate in the
public interest and for the protection of investors.
(4) CONSIDERATIONS.--In making a determination under
paragraph (3), the Commission shall consider--
(A) the nature of the new hybrid product; and
(B) the history, purpose, extent, and appropriateness of the
regulation of the new hybrid product under the Federal securities laws
and under the Federal banking laws.
(5) OBJECTION TO COMMISSION REGULATION.--
(A) FILING OF PETITION FOR REVIEW.--The Board may obtain
review of any final regulation described in paragraph (2) in the United
States Court of Appeals for the District of Columbia Circuit by filing
in such court, not later than 60 days after the date of publication of
the final regulation, a written petition requesting that the regulation
be set
{{12-29-06 p.9226.01}}aside. Any
proceeding to challenge any such rule shall be expedited by the Court
of Appeals.
(B) TRANSMITTAL OF PETITION AND RECORD.--A copy of a
petition described in subparagraph (A) shall be transmitted as soon as
possible by the Clerk of the Court to an officer or employee of the
Commission designated for that purpose. Upon receipt of the petition,
the Commission shall file with the court the regulation under review
and any documents referred to therein, and any other relevant materials
prescribed by the court.
(C) EXCLUSIVE JURISDICTION.--On the date of the filing
of the petition under subparagraph (A), the court has jurisdiction,
which becomes exclusive on the filing of the materials set forth in
subparagraph (B), to affirm and enforce or to set aside the regulation
at issue.
(D) STANDARD OF REVIEW.--The court shall determine to
affirm and enforce or set aside a regulation of the Commission under
this subsection, based on the determination of the court as to
whether--
(i) the subject product is a new hybrid product, as defined in
this subsection;
(ii) the subject product is a security; and
(iii) imposing a requirement to register as a broker or dealer
for banks engaging in transactions in such product is appropriate in
light of the history, purpose, and extent of regulation under the
Federal securities laws and under the Federal banking laws, giving
deference neither to the views of the Commission nor the Board.
(E) JUDICIAL STAY.--The filing of a petition by the
Board pursuant to subparagraph (A) shall operate as a judicial stay,
until the date on which the determination of the court is final
(including any appeal of such determination).
(F) OTHER AUTHORITY TO CHALLENGE.--Any aggrieved party
may seek judicial review of the Commission's rulemaking under this
subsection pursuant to section 25 of this title.
(6) DEFINITIONS.--For purposes of this subsection:
(A) NEW HYBRID PRODUCT.--The term "new hybrid
product" means a product that--
(i) was not subjected to regulation by the Commission as a
security prior to the date of the enactment of the Gramm-Leach-Bliley
Act;
(ii) is not an identified banking product as such term is defined
in section 206 of such Act; and
(iii) is not an equity swap within the meaning of section
206(a)(6) of such Act.
(B) BOARD.--The term "Board" means the Board of
Governors of the Federal Reserve System.
(i) *
The authority of the Commission under this section with respect to
security-based swap agreements (as defined in section 206B of the
Gramm-Leach-Bliley Act) shall be subject to the restrictions and
limitations of section 3A(b) of this title.
[Codified to 15 U.S.C. 78o]
[Source: Section 15 of the Act of June 6, 1934 (Pub. L.
No. 291; 48 Stat. 895), effective October 1, 1934, as amended by
section 3 of the Act of May 27, 1936 (Pub. L. No. 621; 49 Stat. 1377),
effective May 27, 1936 and July 25, 1936 (as to subsections (a) and
(d)); section 2 of the Act of June 25, 1938 (Pub. L. No. 719; 52 Stat.
1075), effective June 25, 1938; section 6 of the Act of August 20, 1964
(Pub. L. No. 88--467; 78 Stat. 570--574), effective August 20, 1964 and
July 1, 1964 (as to subsection (a)); section 7(d) of the Act of
December 30, 1970 (Pub. L. No. 91-598; 84 Stat. 1653), effective
December 30, 1970; section 11 of the Act of June 4, 1975 (Pub. L. No.
94--29; 89 Stat. 121), effective June 4, 1975, except amendment to
section 15(a) effective December 1, 1975; section 204 of title II of
the Act of December 19, 1977 (Pub. L. No. 95--213; 91 Stat. 1500),
effective December 19, 1977; section 3(a) of the Act of June 6, 1983
(Pub. L. No. 98-38; 97 Stat. 206), effective December 7, 1983; sections
4 and 6(b) of the Act of August 10, 1984 (Pub. L. No. 98--376; 98 Stat.
1265), effective August 10, 1984; section 102(e) and (f) of title I of
the Act of October 28, 1986 (Pub. L. No. 99--571; 100 Stat. 3218),
effective July 25, 1987; section 3(b) of the Act of November 19, 1988
(Pub. L. No. 100--704; 102 Stat. 4679),
{{12-29-06 p.9226.02}}effective November
19, 1988; sections 504(a) and 505 of title V of the Act of October 15,
1990 (Pub. L. No. 101--429; 104 Stat. 952 and 953), effective October
15, 1990; sections 203(a) and 203(c)(1) of title II of the Act of
November 15, 1990 (Pub. L. No. 101--550; 104 Stat. 2715 and 2718),
effective November 15, 1990; sections 105(a), 106(b)(2)(B), 109(b)(2),
and 110 of title I of the Act of December 17, 1993 (Pub. L. No.
103--202; 107 Stat. 2348, 2349, 2350, 2352, and 2353), effective
December 17, 1993; section 103(a) of the Act of December 22, 1995 (Pub.
L. No. 104--67; 109 Stat. 756), effective December 22, 1995; section
103(a) of title I of the Act of October 11, 1996 (Pub. L. No. 104--290;
110 Stat. 3420), effective October 11, 1996; section 301(b)(8) of title
III of the Act of November 3, 1998 (Pub. L. No. 105--353; 112 Stat.
3236), effective November 3, 1998; section 205 of title II of the Act
of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1391), effective
May 12, 2001; sections 203(a)(1) and (b) and 206(h) of title II and
303(e) of title III of the Act of December 21, 2000 (Pub. L. No.
106--554; 114 Stat. 2763A--421, 422, 432, 454, and 455 respectively;
sections 604(a) and 604(c)(1)(B) of title VI of the Act of July 30,
2002 (Pub. L. No. 107--204; 116 Stat. 795 and 796), effective July 30,
2002; section 4(b)(1)(A) of the Act of September 29, 2006 (Pub. L. No.
109--291; 120 Stat. 1337), effective September 29,
2006]
*Editor's Note: So in statute as enacted. Should
probably be "(j)". Go Back to Text
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