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8000 - Miscellaneous Statutes and Regulations
REGISTERED SECURITIES ASSOCIATIONS
SEC. 15A. (a) An association of brokers and
dealers may be registered as a national securities association pursuant
to subsection (b), or as an affiliated securities association pursuant
to subsection (d), under the terms and conditions hereinafter provided
in this section and in accordance with the provisions of section 19(a)
of this title, by filing with the Commission an application for
registration in such form as the Commission, by rule, may prescribe
containing the rules of the association and such other information and
documents as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
(b) An associaction of brokers and dealers shall not be registered
as a national securities association unless the Commission determines
that--
(1) By reason of the number and geographical distribution of its
members and the scope of their transactions, such association will be
able to carry out the purposes of this section.
(2) Such association is so organized and has the capacity to be
able to carry out the purposes of this title and to comply, and
(subject to any rule or order of the Commission pursuant to
section 17(d) or
19(g)(2) of this title) to
enforce compliance by its members and persons associated with its
members, with the provisions of this title, the rules and regulations
thereunder, the rules of the Municipal Securities Rulemaking Board, and
the rules of the association.
(3) Subject to the provisions of subsection (g) of this section,
the rules of the association provide that any registered broker or
dealer may become a member of such association and any person may
become associated with a member thereof.
(4) The rules of the association assure a fair representation of
its members in the selection of its directors and administration of its
affairs and provide that one or more directors shall be representative
of issuers and investors and not be associated with a member of the
association, broker, or dealer.
(5) The rules of the association provide for the equitable
allocation of reasonable dues, fees, and other charges among members
and issuers and other persons using any facility or system which the
association operates or controls.
(6) The rules of the association are designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest; and are not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers, to fix minimum profits, to impose any schedule or fix rates of
commissions, allowances, discounts, or other fees to be charged by its
members, or to regulate by virtue of any authority conferred by this
title matters not related to the purposes of this title or the
administration of the association.
(7) The rules of the association provide that (subject to any
rule or order of the Commission pursuant to section 17(d) or 19(g)(2)
of this title) its members and persons
{{12-29-06 p.9226.03}}associated with
its members shall be appropriately disciplined for violation of any
provision of this title, the rules or regulations thereunder, the rules
of the Municipal Securities Rulemaking Board, or the rules of the
association, by expulsion, suspension, limitation of activities,
functions, and operations, fine, censure, being suspended or barred
from being associated with a member, or any other fitting sanction.
(8) The rules of the association are in accordance with the
provisions of subsection (h) of this section, and, in general, provide
a fair procedure for the disciplining of members and persons associated
with members, the denial of membership to any person seeking membership
therein, the barring of any person from becoming associated with a
member thereof, and the prohibition or limitation by the association of
any person with respect to access to services offered by the
association or a member thereof.
(9) The rules of the association do not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of this title.
(10) The requirements of subsection (c), insofar as these may be
applicable, are satisfied.
(11) The rules of the association include provisions governing
the form and content of quotations relating to securities sold
otherwise than on a national securities exchange which may be
distributed or published by any member or person associated with a
member, and the persons to whom such quotations may be supplied. Such
rules relating to quotations shall be designed to produce fair and
informative quotations, to prevent fictitious or misleading quotations,
and to promote orderly procedures for collecting, distributing, and
publishing quotation.
{{12-26-06 p.9227}}
(12) The rules of the association to promote just and equitable
principles of trade, as required by paragraph (6), include rules to
prevent members of the association from participating in any limited
partnership rollup transaction (as such term is defined in paragraphs
(4) and (5) of section 14(h)) unless such transaction was conducted in
accordance with procedures designed to protect the rights of limited
partners, including--
(A) the right of dissenting limited partners to one of the
following:
(i) an appraisal and compensation;
(ii) retention of a security under substantially the same terms
and conditions as the original issue;
(iii) approval of the limited partnership rollup transaction by
not less than 75 percent of the outstanding securities of each of the
participating limited partnerships;
(iv) the use of a committee that is independent, as determined in
accordance with rules prescribed by the association, of the general
partner or sponsor, that has been approved by a majority of the
outstanding securities of each of the participating partnerships, and
that has such authority as is necessary to protect the interest of
limited partners, including the authority to hire independent advisors,
to negotiate with the general partner or sponsor on behalf of the
limited partners, and to make a recommendation to the limited partners
with respect to the proposed transaction; or
(v) other comparable rights that are prescribed by rule by the
association and that are designed to protect dissenting limited
partners;
(B) the right not to have their voting power unfairly reduced or
abridged;
(C) the right not to bear an unfair portion of the costs of a
proposed limited partnership rollup transaction that is rejected; and
(D) restrictions on the conversion of contingent interests or
fees into non-contingent interests or fees and restrictions on the
receipt of a non-contingent equity interest in exchange for fees for
services which have not yet been provided.
As used in this paragraph, the term "dissenting limited
partner" means a person who, on the date on which soliciting
material is mailed to investors, is a holder of a beneficial interest
in a limited partnership that is the subject of a limited partnership
rollup transaction, and who casts a vote against the transaction and
complies with procedures established by the association, except that
for purposes of an exchange or tender offer, such person shall file an
objection in writing under the rules of the association during the
period in which the offer is outstanding.
(13) The rules of the association prohibit the authorization for
quotation on an automated interdealer quotation system sponsored by the
association of any security designated by the Commission as a national
market system security resulting from a limited partnership rollup
transaction (as such term is defined in paragraphs (4) and (5) of
section 14(h)), unless such
transaction was conducted in accordance with procedures designed to
protect the rights of limited partners, including--
(A) the right of dissenting limited partners to one of the
following:
(i) an appraisal and compensation;
(ii) retention of a security under substantially the same terms
and conditions as the original issue;
(iii) approval of the limited partnership rollup transaction by
not less than 75 percent of the outstanding securities of each of the
participating limited partnerships;
(iv) the use of a committee that is independent, as determined in
accordance with rules prescribed by the association, of the general
partner or sponsor, that has been approved by a majority of the
outstanding securities of each of the participating partnerships, and
that has such authority as is necessary to protect the interest of
limited partners, including the authority to hire independent advisors,
to negotiate with the general partner or sponsor on behalf of the
limited partners, and to make a recommendation to the limited partners
with respect to the proposed transaction; or
(v) other comparable rights that are prescribed by rule by the
association and that are designed to protect dissenting limited
partners;
(B) the right not to have their voting power unfairly reduced or
abridged;
{{12-29-06 p.9228}}
(C) the right not to bear an unfair portion of the costs of a
proposed limited partnership rollup transaction that is rejected; and
(D) restrictions on the conversion of contingent interests or
fees into non-contingent interests or fees and restrictions on the
receipt of a non-contingent equity interest in exchange for fees for
services which have not yet been provided.
As used in this paragraph, the term "dissenting limited
partner" means a person who, on the date on which soliciting
material is mailed to investors, is a holder of a beneficial interest
in a limited partnership that is the subject of a limited partnership
rollup transaction, and who casts a vote against the transaction and
complies with procedures established by the association, except that
for purposes of an exchange or tender offer, such person shall file an
objection in writing under the rules of the association during the
period during which the offer is outstanding.
(14) The rules of the association include provisions governing
the sales, or offers of sales, of securities on the premises of any
military installation to any member of the Armed Forces or a dependent
thereof, which rules require--
(A) the broker or dealer performing brokerage services to clearly
and conspicuously disclose to potential investors--
(i) that the securities offered are not being offered or provided
by the broker or dealer on behalf of the Federal Government, and that
its offer is not sanctioned, recommended, or encouraged by the Federal
Government; and
(ii) the identity of the registered broker-dealer offering the
securities;
(B) such broker or dealer to perform an appropriate suitability
determination, including consideration of costs and knowledge about
securities, prior to making a recommendation of a security to a member
of the Armed Forces or a dependent thereof; and
(C) that no person receive any referral fee or incentive
compensation in connection with a sale or offer of sale of securities,
unless such person is an associated person of a registered broker or
dealer and is qualified pursuant to the rules of a self-regulatory
organization.
(c) The Commission may permit or require the rules of an
association applying for registration pursuant to subsection (b), to
provide for the admission of an association registered as an affiliated
securities association pursuant to subsection (d), to participation in
said applicant association as an affiliate thereof, under terms
permitting such powers and responsibilities to such affiliate, and
under such other appropriate terms and conditions, as may be provided
by the rules of said applicant association, if such rules appear to the
Commission to be necessary or appropriate in the public interest or for
the protection of investors and to carry out the purposes of this
section. The duties and powers of the Commission with respect to any
national securities association or any affilliated securities
association shall in no way be limited by reason of any such
affiliation.
(d) An applicant association shall not be registered as an
affiliated securities association unless it appears to the Commission
that--
(1) such association, notwithstanding that it does not satisfy
the requirements set forth in paragraph (1) of subsection (b), will,
forthwith upon the registration thereof, be admitted to affiliation
with an association registered as a national securities association
pursuant to said subsection (b), in the manner and under the terms and
conditions provided by the rules of said national securities
association in accordance with subsection (c); and
(2) such association and its rules satisfy the requirements set
forth in paragraphs (2) to (10), inclusive, and paragraph (12), of
subsection (b); except that in the case of any such association any
restrictions upon membership therein of the type authorized by
paragraph (3) of subsection (b) shall not be less stringent than in the
case of the national securities association with which such association
is to be affiliated.
(e)(1) The rules of a registered securities association may provide
that no member thereof shall deal with any nonmember professional (as
defined in paragraph (2) of this subsection) except at the same prices,
for the same commissions or fees, and on the same terms and conditions
as are by such member accorded to the general public.
{{12-29-06 p.9228.01}}
(2) For the purposes of this subsection, the term "nonmember
professional" shall include (A) with respect to transactions in
securities other than municipal securities, any registered broker or
dealer who is not a member of any registered securities association,
except such a broker or dealer who deals exclusively in commercial
paper, bankers' acceptances, and commercial bills, and (B) with respect
to transactions in municipal securities, any municipal securities
dealer (other than a bank or division or department of a bank) who is
not a member of any registered securities association and any municipal
securities broker who is not a member of any such association.
(3) Nothing in this subsection shall be so construed or applied
as to prevent (A) any member of a registered securities association
from granting to any other member of any registered securities
association any dealer's discount, allowance, commission, or special
terms, in connection with the purchase or sale of securities, or (B)
any member of a registered securities association or any municipal
securities dealer which is a bank or a division or department of a bank
from granting to any member of any registered securities association or
any such municipal securities dealer any dealer's discount, allowance,
commission, or special terms in connection with the purchase or sale of
municipal securities: Provided, however, That the granting
of any such discount, allowance, commission, or special terms in
connection with the purchase or sale of municipal securities shall be
subject to rules of the Municipal Securities Rulemaking Board adopted
pursuant to section 15B(b)(2)(K) of this title.
(f) Nothing in subsection (b)(6) or (b)(11) of this section shall
be construed to permit a registered securities association to make
rules concerning any transaction by a registered broker or dealer in a
municipal security.
(g)(1) A registered securities association shall deny membership to
any person who is not a registered broker or dealer.
(2) A registered securities association may, and in cases in
which the Commission, by order, directs as necessary or appropriate in
the public interest or for the protection of investors shall, deny
membership to any registered broker or dealer, and bar from becoming
associated with a member any person, who is subject to a statutory
disqualification. A registered securities association shall file notice
with the Commission not less than thirty days prior to admitting any
registered broker or dealer to membership or permitting any person to
become associated with a member, if the association knew, or in the
exercise of reasonable care should have known, that such broker or
dealer or person was subject to a statutory disqualification. The
notice shall be in such form and contain such information as the
Commission, by rule, may prescribe as necessary or appropriate in the
public interest or for the protection of investors.
(3)(A) A registered securities association may deny membership
to, or condition the membership of, a registered broker or dealer if
(i) such broker or dealer does not meet such standards of financial
responsibility or operational capability or such broker or dealer or
any natural person associated with such broker or dealer does not meet
such standards of training, experience, and competence as are
prescribed by the rules of the association or (ii) such broker or
dealer or person associated with such broker or dealer has engaged and
there is a reasonable likelihood he will again engage in acts or
practice inconsistent with just and equitable principles of trade. A
registered securities association may examine and verify the
qualifications of an applicant to become a member and the natural
persons associated with such an applicant in accordance with procedures
established by the rules of the association.
(B) A registered securities association may bar a natural person
from becoming associated with a member or condition the association of
a natural person with a member if such natural person (i) does not meet
such standards of training, experience, and competence as are
prescribed by the rules of the association or (ii) has engaged and
there is a reasonable likelihood he will again engage in acts or
practices inconsistent with just and equitable principles of trade. A
registered securities association may examine and verify the
qualifications of an applicant to become a person associated with a
member in accordance with procedures established by the rules of the
association and require a natural person
{{12-29-06 p.9228.02}}associated with a
member, or any class of such natural persons, to be registered with the
association in accordance with procedures so established.
(C) A registered securities association may bar any person from
becoming associated with a member if such person does not agree (i) to
supply the association with such information with respect to its
relationship and dealings with the member as may be specified in the
rules of the association and (ii) to permit examination of its books
and records to verify the accuracy of any information so supplied.
(D) Nothing in subparagraph (A), (B), or (C) of this paragraph
shall be construed to permit a registered securities association to
deny membership to or condition the membership of, or bar any person
from becoming associated with or condition the association of any
person with, a broker or dealer that engages exclusively in
transactions in municipal securities.
(4) A registered securities association may deny membership to a
registered broker or dealer not engaged in a type of business in which
the rules of the association require members to be engaged:
Provided, however, That no registered securities association
may deny membership to a registered broker or dealer by reason of the
amount of such type of business done by such broker or dealer or the
other types of business in which he is engaged.
(h)(1) In any proceeding by a registered securities association to
determine whether a member or person associated with a member should be
disciplined (other than a summary proceeding pursuant to paragraph (3)
of this subsection) the associaton shall bring specific charges, notify
such member or person of, and give him an opportunity to defend
against, such charges, and keep a record. A determination by the
association to impose a disciplinary sanction shall be supported by a
statement setting forth--
(A) any act or practice in which such member or person associated
with a member has been found to have engaged, or which such member or
person has been found to have omitted;
(B) the specific provision of this title, the rules or
regulations thereunder, the rules of the Municipal Securities
Rulemaking Board, or the rules of the association which any such act or
practice, or omission to act, is deemed to violate; and
(C) the sanction imposed and the reason therefor.
(2) In any proceeding by a registered securities association to
determine whether a person shall be denied membership, barred from
becoming associated with a member, or prohibited or limited with
respect to access to services offered by the association or a member
thereof (other than a summary proceeding pursuant to paragraph (3) of
this subsection), the association shall notify such person of and give
him an opportunity to be heard upon, the specific grounds for denial,
bar, or prohibition or limitation under consideration and keep a
record. A determination by the association to deny membership, bar a
person from becoming associated with a member, or prohibit or limit a
person with respect to access to services offered by the association or
a member thereof shall be supported by a statement setting forth the
specific grounds on which the denial, bar, or prohibition or limitation
is based.
(3) A registered securities association may summarily (A) suspend
a member or person associated with a member who has been and is
expelled or suspended from any self-regulatory organization or barred
or suspended from being associated with a member of any self-regulatory
organization, (B) suspend a member who is in such financial or
operating difficulty that the association determines and so notifies
the Commission that the member cannot be permitted to continue to do
business as a member with safety to investors, creditors, other
members, or the association, or (C) limit or prohibit any person with
respect to access to services offered by the association if
subparagraph (A) or (B) of this paragraph is applicable to such person
or, in the case of a person who is not a member, if the association
determines that such person does not meet the qualification
requirements or other prerequisites for such access and such person
cannot be permitted to
{{10-31-07 p.9228.02-A}}continue to have
such access with safety to investors, creditors, members, or the
association. Any person aggrieved by any such summary action shall be
promptly afforded an opportunity for a hearing by the association in
accordance with the provisions of paragraph (1) or (2) of this
subsection. The Commission, by order, may stay any such summary action
on its own motion or upon application by any person aggrieved thereby,
if the Commission determines summarily or after notice and opportunity
for hearing (which hearing may consist solely of the submission of
affidavits or presentation of oral arguments) that such stay is
consistent with the public interest and the protection of investors.
(i) Obligation To Maintain Registration, Disciplinary, and
Other Data.--
(1) MAINTENANCE OF SYSTEM TO RESPOND TO INQUIRIES.--A
registered securities association shall--
(A) establish and maintain a system for collecting and retaining
registration information;
(B) establish and maintain a toll-free telephone listing, and a
readily accessible electronic or other process, to receive and promptly
respond to inquiries regarding--
(i) registration information on its members and their associated
persons; and
(ii) registration information on the members and their associated
persons of any registered national securities exchange that uses the
system described in subparagraph (A) for the registration of its
members and their associated persons; and
(C) adopt rules governing the process for making inquiries and
the type, scope, and presentation of information to be provided in
response to such inquiries in consultation with any registered national
securities exchange providing information pursuant to subparagraph
(B)(ii).
(2) RECOVERY OF COSTS.--A registered securities
association may charge persons making inquiries described in paragraph
(1)(B), other than individual investors, reasonable fees for responses
to such inquiries.
(3) PROCESS FOR DISPUTED INFORMATION.--Each registered
securities association shall adopt rules establishing an administrative
process for disputing the accuracy of information provided in response
to inquiries under this subsection in consultation with any registered
national securities exchange providing information pursuant to
paragraph (1)(B)(ii).
(4) LIMITATION ON LIABILITY.--A registered securities
association, or an exchange reporting information to such an
association, shall not have any liability to any person for any actions
taken or omitted in good faith under this subsection.
(5) DEFINITION.--For purposes of this subsection, the
term "registration information" means the information reported in
connection with the registration or licensing of brokers and dealers
and their associated persons, including disciplinary actions,
regulatory, judicial, and arbitration proceedings, and other
information required by law, or exchange or association rule, and the
source and status of such information.
(j) Registration for Sales of Private Securities
Offerings.--A registered securities association shall create a
limited qualification category for any associated person of a member
who effects sales as part of a primary offering of securities not
involving a public offering, pursuant to section 3(b), 4(2), or 4(6) of
the Securities Act of 1933 and the rules and regulations thereunder,
and shall deem qualified in such limited qualification category,
without testing, any bank employee who, in the six month period
preceding the date of the enactment of the Gramm-Leach-Bliley Act,
engaged in effecting such sales.
(k) LIMITED PURPOSE NATIONAL SECURITIES ASSOCIATION.--
(1) Regulation of members with respect to security futures
products.--A futures association registered under section 17 of the
Commodity Exchange Act shall be a registered national securities
association for the limited purpose of regulating the activities of
members who are registered as brokers or dealers in security futures
products pursuant to section 15(b)(11).
(2) REQUIREMENTS FOR REGISTRATION.--Such a securities
association shall--
(A) be so organized and have the capacity to carry out the
purposes of the securities laws applicable to security futures products
and to comply, and (subject to any rule or order of the Commission
pursuant to section 19(g)(2)) to enforce compliance by its members and
persons associated with its members, with the provisions of the
securities
{{10-31-07 p.9228.02-B}}laws applicable
to security futures products, the rules and regulations thereunder, and
its rules;
(B) have rules that--
(i) are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest, including rules
governing sales practices and the advertising of security futures
products reasonably comparable to those of other national securities
associations registered pursuant to subsection (a) that are applicable
to security futures products; and
(ii) are not designed to regulate by virtue of any authority
conferred by this title matters not related to the purposes of this
title or the administration of the association;
(C) have rules that provide that (subject to any rule or order of
the Commission pursuant to section 19(g)(2)) its members and persons
associated with its members shall be appropriately disciplined for
violation of any provision of the securities laws applicable to
security futures products, the rules or regulations thereunder, or the
rules of the association, by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure, being suspended
or barred from being associated with a member, or any other fitting
sanction; and
(D) have rules that ensure that members and natural persons
associated with members meet such standards of training, experience,
and competence necessary to effect transactions in security futures
products and are tested for their knowledge of securities and security
futures products.
(3) EXEMPTION FROM RULE CHANGE SUBMISSION.--Such a
securities association shall be exempt from submitting proposed rule
changes pursuant to section 19(b) of this title, except that--
(A) the association shall file proposed rule changes related to
higher margin levels, fraud or manipulation, recordkeeping, reporting,
listing standards, or decimal pricing for security futures products,
sales practices for, advertising of, or standards of training,
experience, competence, or other qualifications for security futures
products for persons who effect transactions in security futures
products, or rules effectuating the association's obligation to
enforce the securities laws pursuant to section 19(b)(7);
(B) the association shall file pursuant to sections 19(b)(1) and
19(b)(2) proposed rule changes related to margin, except for changes
resulting in higher margin levels; and
(C) the association shall file pursuant to section 19(b)(1)
proposed rule changes that have been abrogated by the Commission
pursuant to section 19(b)(7)(C).
(4) OTHER EXEMPTIONS.--Such a securities association
shall be exempt from and shall not be required to enforce compliance by
its members, and its members shall not, solely with respect to their
transactions effected in security futures products, be required to
comply, with the following provisions of this title and the rules
thereunder:
(A) Section 8.
(B) Subsections (b)(1), (b)(3), (b)(4), (b)(5), (b)(8), (b)(10),
(b)(11), (b)(12), (b)(13), (c), (d), (e), (f), (g), (h), and (i) of
this section.
(C) Subsections (d), (f), and (k) of section 17.
(D) Subsections (a), (f), and (h) of section 19.
(l) consistent with this title, each national securities
association registered pursuant to subsection (a) of this section shall
issue such rules as are necessary to avoid duplicative or conflicting
rules 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--
(1) rules of such national securities association of the type
specified in section 15(c)(3)(B) involving security futures products;
and
(2) similar rules of national securities associations registered
pursuant to subsection (k) of this section and national securities
exchanges registered pursuant to section 6(g) involving security
futures products.
{{12-29-06 p.9228.02-B1}}
(m) PROCEDURES AND RULES FOR SECURITY FUTURE PRODUCTS.--A
national securities association registered pursuant to subsection (a)
shall, not later than 8 months after the date of the enactment of the
Commodity Futures Modernization Act of 2000, implement the procedures
specified in section 6(h)(5)(A) of this title and adopt the rules
specified in subparagraphs (B) and (C) of section 6(h)(5) of this
title.
[Codified to 15 U.S.C. 78o--3]
[Source: Section 15A of the Act of June 6, 1934 (Pub. L.
No. 291), as added by section 1 of the Act of June 25, 1938 (Pub. L.
No. 719; 52 Stat. 1070), effective June 25, 1938, and amended by
section 7 of the Act of August 20, 1964 (Pub. L. No. 88-467; (78 Stat.
574-578), effective August 20, 1964; section 12 of the Act of June 4,
1975 (Pub. L. No. 94-29; 89 Stat. 127), effective December 1, 1975;
section 102(g) of title I of the Act of October 28, 1986 (Pub. L. No.
99-571; 100 Stat. 3218), effective July 25, 1987; and section 509 of
title V of the Act of October 15, 1990 (Pub. L. No. 101--429; 104 Stat.
957), effective October 15, 1990; sections 106(b) of title I and 303(a)
and (c) of title III of the Act of December 17, 1993 (Pub. L. No.
103--202; 107 Stat. 2350, 2364 and 2366 respectively), effective
December 17, 1993, except that the addition of paragraphs (b)(12) and
13 is effective December 17, 1994; section 203 of title II of the Act
of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1391), effective
May 12, 2001; sections 203(c) and 206(j) and (k)(1) of title II of the
Act of December 21, 2000 (Pub. L. No. 106--554; 114 Stat. 2763A--422
and 433), effective December 22, 2001; sections 5 and 6 of the Act of
September 29, 2006 (Pub. L. No. 109--291; 120 Stat. 1319 and 1320),
effective September 29, 2006]
MUNICIPAL SECURITIES
SEC. 15B (a)(1) It shall be unlawful for any municipal securities
dealer (other than one registered as a broker or dealer under
section 15 of this title) to
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 unless such
municipal securities dealer is registered in accordance with this
subsection.
(2) A municipal securities dealer may be registered by filing
with the Commission an application for registration in such form and
containing such information and documents concerning such municipal
securities dealer and any persons associated with such municipal
securities 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
Commission may extend the time for the 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 the registration of a municipal securities
dealer 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 subsection (c) of this section.
(3) Any provision of this title (other than section 5 or
paragraph (1) of this subsection) which prohibits any act, practice, or
course of business if the mails or any means or instrumentality or
interstate commerce is used in connection therewith shall also prohibit
any such act, practice, or course of business by any registered
municipal securities
{{12-29-06 p.9228.02-B2}}dealer or any
person acting on behalf of such municipal securities dealer,
irrespective of any use of the mails or any means or instrumentality of
interstate commerce in connection therewith.
(4) The Commission, by rule or order, upon its own motion or upon
application, may conditionally or unconditionally exempt any broker,
dealer, or municipal securities dealer or class of brokers, dealers, or
municipal securities dealers from any provision of this section or the
rules or regulations thereunder, if the Commission finds that such
exemption is consistent with the public interest, the protection of
investors, and the purposes of this section.
(b)(1) Not later than one hundred twenty days after the date of
enactment of the Securities Acts Amendments of 1975, the Commission
shall establish a Municipal Securities Rulemaking Board (hereinafter in
this section referred to as the "Board"), to be composed
initially of fifteen members appointed by the Commission, which shall
perform the duties set forth in this section. The initial members of
the Board shall serve as members for a term of two years, and shall
consist of (A) five individuals who are not associated with any broker,
dealer, or municipal securities dealer (other than by reason of being
under common control with, or indirectly controlling, any broker or
dealer which is not a municipal securities broker or municipal
securities dealer), at least one of whom shall be representative of
investors in municipal securities, and at least one of whom shall be
representative of issuers of municipal securities (which members are
hereinafter referred to as "public representatives"); (B) five
individuals who are associated with and representative of municipal
securities brokers and municipal securities dealers which are not banks
or subsidiaires or departments or divisions of banks (which members are
hereinafter referred to as "broker-dealer representatives"); and
(C) five individuals who are associated with and representative of
municipal securities dealers which are banks or subsidiaries or
departments or divisions of banks (which members are hereinafter
referred to as "bank representatives"). Prior to the expiration
of the terms of office of the initial members of the Board, an election
shall be held under rules adopted by the Board (pursuant to subsection
(b)(2)(B) of this section) of the members to succeed such initial
members.
(2) The Board shall propose and adopt rules to effect the
purposes of this title with respect to transactions in municipal
securities effected by brokers, dealers, and municipal securities
dealers. (Such rules are hereinafter collectively referred to in this
title as "rules of the Board".) The rules of the Board, as a
minimum, shall:
(A) provide that no municipal securities broker or municipal
securities dealer shall effect any transaction in, or induce or attempt
to induce the purchase or sale of, any municipal security unless such
municipal securities broker or municipal securities dealer meets such
standards of operational capability and such municipal securities
broker or municipal securities dealer and every natural person
associated with such municipal securities broker or municipal
securities dealer meet such standard of training, experience,
competence, and such other qualifications as the Board finds necessary
or appropriate in the public interest or for the protection of
investors. In connection with the definition and application of such
standards the Board may--
(i) appropriately classify municipal securities brokers and
municipal securities dealers (taking into account relevant matters,
including types of business done, nature of securities other than
municipal securities sold, and character of business organization), and
persons associated with municipal securities brokers and municipal
securities dealers;
(ii) specify that all or any portion of such standards shall be
applicable to any such class;
(iii) require persons in any such class to pass tests
administered in accordance with subsection (c)(7) of this section;
and
{{8-30-02 p.9228.03}}
(iv) provide that persons in any such class other than municipal
securities brokers and municipal securities dealers and partners,
officers, and supervisory employees of municipal securities brokers or
municipal securities dealers, may be qualified solely on the basis of
compliance with such standards of training and such other
qualifications as the Board finds appropriate.
(B) establish fair procedures for the nomination and election of
members of the Board and assure fair representation in such nominations
and elections of municipal securities brokers and municipal securities
dealers. Such rule shall provide that the membership of the Board shall
at all times be equally divided among public representatives,
broker-dealer representatives, and bank representatives, and that the
public representatives shall be subject to approval by the Commission
to assure that no one of them is associated with any broker, dealer, or
municipal securities dealer (other than by reason of being under common
control with, or indirectly controlling, any broker or dealer which is
not a municipal securities broker or municipal securities dealer) and
that at least one is representative of investors in municipal
securities and at least one is representative of issuers of municipal
securities. Such rules shall also specify the term members shall serve
and may increase the number of members which shall constitute the whole
Board provided that such number is an odd number.
(C) be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in municipal securities, to remove
impediments to and perfect the mechanism of a free and open market in
municipal securities, and, in general, to protect investors and the
public interest; and not be designed to permit unfair discrimination
between customers, issuers, municipal securities brokers, or municipal
securities dealers, to fix minimum profits, to impose any schedule or
fix rates of commissons, allowances, discounts, or other fees to be
charged by municipal securities brokers or municipal securities
dealers, to regulate by virtue of any authority conferred by this title
matters not related to the purposes of this title burden on competition
not necessary or appropriate in furtherance of the purposes of this
title.
(D) if the Board deems appropriate, provide for the arbitration
of claims, disputes, and controversies relating to transactions in
municipal securities: Provided, however, That no person
other than a municipal securities broker, municipal securities dealer,
or person associated with such a municipal securities broker or
municipal securities dealer may be compelled to such arbitration except
at his instance and in accordance with
section 29 of this title.
(E) provide for the periodic examination in accordance with
subsection (c)(7) of this section of municipal securities brokers and
municipal securities dealers to determine compliance with applicable
provisions of this title, the rules and regulations thereunder, and the
rules of the Board. Such rules shall specify the minimum scope and
frequency of such examinations and shall be designed to avoid
unnecessary regulatory duplication or undue regulatory burdens for any
such municipal securities broker or municipal securities dealer.
(F) include provisions governing the form and content of
quotations relating to municipal securities which may be distributed or
published by any municipal securities broker, municipal securities
dealer, or person associated with such a municipal securities broker or
municipal securities dealer, and the persons to whom such quotations
may be supplied. Such rules relating to quotations shall be designed to
produce fair and informative quotations, to prevent fictitious or
misleading quotations, and to promote orderly procedures for
collecting, distributing, and publishing quotations.
(G) prescribe records to be made and kept by municipal securities
brokers and municipal securities dealers and the periods for which such
records shall be preserved.
(H) define the term "separately identifiable department or
division", as that term is used in
section 3(a)(30) of this title,
in accordance with specified and appropriate standards to assure that a
bank is not deemed to be engaged in the business of buying and selling
municipal securities through a separately identifiable department or
division unless such
{{8-30-02 p.9228.04}}department or
division is organized and administered so as to permit independent
examination and enforcement of applicable provisions of this title, the
rules and regulations thereunder, and the rules of the Board. A
separately identifiable department or division of a bank may be engaged
in activities other than those relating to municipal securities.
(I) provide for the operation and administration of the Board,
including the selection of a Chairman from among the members of the
Board, the compensation of the members of the Board, and the
appointment and compensation of such employees, attorneys, and
consultants as may be necessary or appropriate to carry out the Board's
functions under this section.
(J) provide that each municipal securities broker and each
municipal securities dealer shall pay to the Board such reasonable fees
and charges as may be necessary or appropriate to defray the costs and
expenses of operating and administering the Board. Such rules shall
specify the amount of such fees and charges.
(K) establish the terms and conditions under which any municipal
securities dealer may sell, or prohibit any municipal securities dealer
from selling, any part of a new issue of municipal securities to a
municipal securities investment portfolio during the underwriting
period.
(3) Nothing in this section shall be construed to impair or limit
the power of the Commission under this title.
(c)(1) No broker, dealer, or 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 contravention of any
rule of the Board.
(2) The Commission, by order, shall censure, place limitations on
the activities, functions, or operations, suspend for a period not
exceeding twelve months or revoke the registration of any municipal
securities dealer, if it finds, on the record after notice and
opportunity for hearing, that such censure, placing of limitations,
denial, suspension, or revocation, is in the public interest and that
such municipal securities dealer has committed or omitted any act or
omission enumerated in subparagraph (A), (D), (E), (H) or (G) of
paragraph (4) of section 15(b)
of this title, has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within ten years of the
commencement of the proceedings under this paragraph, or is enjoined
from any action, conduct, or practice specified in subparagraph (C) of
such paragraph (4).
(3) Pending final determination whether any registration under
this section 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 appropriate in
the public interest or for the protection of investors. Any registered
municipal securities dealer may, upon such terms and conditions as the
Commission may deem necessary 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 municipal securities dealer is no longer in existence or
has ceased to do business as a municipal securities dealer, the
Commission, by order, shall cancel the registration of such municipal
securities dealer.
(4) The Commission, by order, shall censure or place limitations
on the activities or functions of any person associated, seeking to
become associated, or, at the time of the alleged misconduct,
associated or seeking to become associated with a municipal securities
dealer, or suspend for a period not exceeding twelve months or bar any
such person from being associated with a municipal securities dealer,
if the Commission finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations, suspension, or bar
is in the public interest and that such person has committed any act or
omission enumerated in subparagraph (A), (D), (E), (H) or (G) of
paragraph (4) of section 15(b) of this title, 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
is enjoined from any action, conduct, or practice specified in
subparagraph (C) unlawful for any person as to whom an order entered
pursuant to this paragraph or
{{8-30-02 p.9228.05}}paragraph (5) of
this subsection suspending or barring him from being associated with a
municipal securities dealer is in effect willfully to become, or to be,
associated with a municipal securities dealer without the consent of
the Commission, and it shall be unlawful for any municipal securities
dealer to permit such a person to become, or remain, a person
associated with him without the consent of the Commission, if such
municipal securities dealer knew, or, in the exercise of reasonable
care should have known, of such order.
(5) With respect to any municipal securities dealer for which the
Commission is not the appropriate regulatory agency, the appropriate
regulatory agency for such municipal securities dealer may sanction any
such municipal securities dealer in the manner and for the reasons
specified in paragraph (2) of this subsection and any person associated
with such municipal securities dealer in the manner and for the reasons
specified in paragraph (4) of this subsection. In addition, such
appropriate regulatory agency may, in accordance with section 8 of the
Federal Deposit Insurance Act (12
U.S.C. 1818), enforce compliance by such municipal securities
dealer or any person associated with such municipal securities dealer
with the provisions of this section,
section 17 of this title, the
rules of the Board, and the rules of the Commission pertaining to
municipal securities dealers, persons associated with municipal
securities dealers, and transactions in municipal securities. For
purposes of the preceding sentence, any violation of any such provision
shall constitute adequate basis for the issuance of any order under
section 8(b) or 8(c) of the Federal Deposit Insurance Act, and the
customers of any such municipal securities dealer shall be deemed to be
"depositors" as that term is used in section 8(c) of that Act.
Nothing in this paragraph shall be construed to affect in any way the
powers of such appropriate regulatory agency to proceed against such
municipal securities dealer under any other provision of law.
(6)(A) The Commission, prior to the entry of an order of
investigation, or commencement of any proceedings, against any
municipal securities dealer, or person associated with any municipal
securities dealer, for which the Commission is not the appropriate
regulatory agency, for violation of any provision of this section,
section 15(c)(1) or 15(c)(2) of
this title, any rule or regulation under any such section, or any rule
of the Board, shall (i) give notice to the appropriate regulatory
agency for such municipal securities dealer of the identity of such
municipal securities dealer or person associated with such municipal
securities dealer, the nature of and basis for such proposed action,
and whether the Commission is seeking a monetary penalty against such
municipal securities dealer or such associated person pursuant to
section 21B of this title; and
(ii) consult with such appropriate regulatory agency concerning the
effect of such proposed action on sound banking practices and the
feasibility and desirability of coordinating such action with any
proceeding or proposed proceeding by such appropriate regulatory agency
against such municipal securities dealer or associated person.
(B) The appropriate regulatory agency for a municipal securities
dealer (if other than the Commission), prior to the entry of an order
of investigation, or commencement of any proceedings, against such
municipal securities dealer or person associated with such municipal
securities dealer, for violation of any provision of this section, the
rules of the Board, or the rules or regulations of the Commission
pertaining to municipal securities dealers, persons associated with
municipal securities dealers, or transactions in municipal securities
shall (i) give notice to the Commission of the identity of such
municipal securities dealer or person associated with such municipal
securities dealer and the nature of and basis for such proposed action
and (ii) consult with the Commission concerning the effect of such
proposed action on the protection of investors and the feasibility and
desirability of coordinating such action with any proceeding or
proposed proceeding by the Commission against such municipal securities
dealer or associated person.
(C) Nothing in this paragraph shall be construed to impair or
limit (other than by the requirement of prior consultation) the power
of the Commission or the appropriate regulatory agency for a municipal
securities dealer to initiate any action of a class described in this
paragraph or to affect in any way the power of the Commission or such
appropriate regulatory agency to initiate any other action pursuant to
this title or any other provision of law.
{{8-30-02 p.9228.06}}
(7)(A) Tests required pursuant to subsection (b)(2)(A)(iii) of
this section shall be administered by or on behalf of and periodic
examinations pursuant to subsection (b)(2)(E) of this section shall be
conducted by--
(i) a registered securities association, in the case of municipal
securities brokers and municipal securities dealers who are members of
such association; and
(ii) the appropriate regulatory agency for any municipal
securities broker or municipal securities dealer, in the case of all
other municipal securities brokers and municipal securities dealers.
(B) A registered securities association shall make a report of
any examination conducted pursuant to subsection (b)(2)(E) of this
section and promptly furnish the Commission a copy thereof and any data
supplied to it in connection with such examination. Subject to such
limitations as the Commission, by rule, determines to be necessary or
appropriate in the public interest or for the protection of investors,
the Commission shall, on request, make available to the Board a copy of
any report of an examination of a municipal securities broker or
municipal securities dealer made by or furnished to the Commission
pursuant to this paragraph or section
17(c)(3) of this title.
(8) The Commission is authorized, by order, if in its opinion
such action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise, in furtherance of the purposes
of this title, to remove from office or censure any member or employee
of the Board, who, the Commission finds, on the record after notice and
opportunity for hearing, has willfully (A) violated any provision of
this title, the rules and regulations thereunder, or the rules of the
Board or (B) abused his authority.
(d)(1) Neither the Commission nor the Board is authorized under
this title, by rule or regulation, to require any issuer of municipal
securities, directly or indirectly through a purchaser or prospective
purchaser of securities from the issuer, to file with the Commission or
the Board prior to the sale of such securities by the issuer any
application, report, or document in connection with the issuance, sale,
or distribution of such securities.
(2) The Board is not authorized under this title to require any
issuer of municipal securities, directly or indirectly through a
municipal securities broker or municipal securities dealer or
otherwise, to furnish to the Board or to a purchaser or a prospective
purchaser of such securities any application, report, document, or
information with respect to such issuer: Provided, however,
That the Board may require municipal securities brokers and
municipal securities dealers to furnish to the Board or purchasers or
prospective purchasers of municipal securities applications, reports,
documents, and information with respect to the issuer thereof which is
generally available from a source other than such issuer. Nothing in
this paragraph shall be construed to impair or limit the power of the
Commission under any provision of this title.
[Codified to 15 U.S.C. 78o--4]
[Source: Section 15B of the Act of June 6, 1934 (Pub. L. No. 291),
as added by section 13 of the Act of June 4, 1975 (Pub. L. No. 94--29;
89 Stat. 131), effective June 4, 1975, except section 15B(a) effective
December 1, 1975, as amended by section 4(a) and (b) of the Act of June
6, 1983 (Pub. L. No. 98--38; 97 Stat. 207), effective June 6, 1983;
sections 318, 319 and 320 of title III of the Act of December 4, 1987
(Pub. L. No. 100--181; 101 Stat. 1256), effective December 4, 1987; and
section 205 of the title II of the Act of October 15, 1990 (Pub. L. No.
101--429; 104 Stat. 941), effective October 15, 1990; section 203(c)(1)
of title II of the Act of November 15, 1990 (Pub. L. No. 101--550; 104
Stat. 2718), effective November 15, 1990; section 301(b)(9) of title
III of the Act of November 3, 1998, (Pub. L. No. 105--353; 112 Stat.
3236), effective November 3, 1998; section 604(c)(1)(B) of title VI of
the Act of November 30, 2002 (Pub. L. No. 107--204; 116 Stat. 796),
effective July 30, 2002]
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