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Legal corpus: the complete U.S. Code (59,740 sections, all 53 titles)

Browse Source 
Ingested titles 12–51 and 54 from OLRC USLM XML @119-100 (the whole Code
now, uniform edition; Title 53 is reserved/empty). LegalText 11,221 ->
59,740; repo total 105,704 records. Deterministic (byte-identical rerun,
verified on Title 42's 8,356 sections); make check green. make
legal-us-code default now covers every title.

Co-Authored-By: Claude Opus 4.8 <noreply@anthropic.com>
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legal/us/code/title-15/chapter-2b/section-78a.md
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---
type: "LegalText"
title: "15 U.S.C. § 78a"
description: "Short title"
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corpus: "united_states_code"
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title_number: 15
title_name: "COMMERCE AND TRADE"
chapter_number: "2B"
chapter_name: "SECURITIES EXCHANGES"
section: "78a"
citation: "15 U.S.C. § 78a"
status: "current"
release_point: "119-100"
release_date: "2026-06-26"
source: "official"
source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc15@119-100.zip"
source_identifier: "/us/usc/t15/s78a"
source_file: "data/legal/raw/us/code/title-15/usc15.xml"
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retrieved_at: "2026-07-04"
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tags: ["legal", "us-code"]
---
# 15 U.S.C. § 78a - Short title
## Text
This chapter may be cited as the “Securities Exchange Act of 1934.”
(June 6, 1934, ch. 404, title I, § 1, 48 Stat. 881.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “This Act” meaning the Securities Exchange Act of 1934, act June 6, 1934, ch. 404. The act was divided into two titles as follows: “Title I—Regulation of Securities Exchanges” and “Title II—Amendments to Securities Act of 1933.” This section was section 1 of title I of the Act, which title, as amended, is set out as sections 78a to 78d–5, 78e to 78l, 78m, 78m–1, 78n to 78o, 78o–3, 78o–4, 78o–5 to 78o–7, 78o–10 to 78u–6, 78v to 78dd–1, 78ee to 78hh, 78mm, and 78pp to 78rr of this title. Sections 78kk, 78ll, 78nn, 78oo, and 78rr of this title, which were directed to be added at the end of the Securities Exchange Act of 1934, have been treated in the Code as added to title I of the Act to reflect the probable intent of Congress. See Codification notes set out under those sections. Title II of the act amended or repealed sections 77b, 77c, 77d, 77e, 77j, 77k, 77m, 77o, and 77s of this title, and added former sections 78ii and 78jj of this title. For complete classification of this Act to the Code, see Tables.
Statutory Notes and Related Subsidiaries
Short Title of 2025 AmendmentPub. L. 119–60, div. H, title LXXXI, § 8103(a), Dec. 18, 2025, 139 Stat. 1838, provided that: “This section [amending section 78p of this title and enacting provisions set out as notes under section 78p of this title] may be cited as the ‘Holding Foreign Insiders Accountable Act’.”
Short Title 2022 AmendmentPub. L. 117–263, div. E, title LVIII, § 5801, Dec. 23, 2022, 136 Stat. 3421, provided that: “This title [enacting sections 77z–4 and 78rr of this title and sections 14a, 253, 1772e, 1772f, 1831cc, 1831dd, 4527, 4528, 5334, 5335, 5498, and 5499 of Title 12, Banks and Banking, amending sections 77g, 78d, 78m, 78n, 78o–3, 78o–4, 78o–7, 80a–8, 80a–29, and 80b–4 of this title and sections 1467a, 1844, 5361, and 5468 of Title 12, enacting provisions set out as notes under sections 77g, 78o–3, 78o–4, and 78rr of this title and sections 14a, 253, 1772e, 1831cc, 4527, 5334, 5335, and 5498 of Title 12, and amending provisions set out as a note under section 5491 of Title 12] may be cited as the ‘Financial Data Transparency Act of 2022’.”
Short Title of 2018 AmendmentPub. L. 115–141, div. S, title IX, § 901, Mar. 23, 2018, 132 Stat. 1143, provided that: “This title [amending section 78d of this title] may be cited as the ‘Small Business Access to Capital After a Natural Disaster Act’.”
Short Title of 2016 AmendmentPub. L. 114–284, § 1, Dec. 16, 2016, 130 Stat. 1447, provided that: “This Act [enacting section 78qq of this title and amending sections 78d and 80c–1 of this title] may be cited as the ‘SEC Small Business Advocate Act of 2016’.”
Short Title of 2012 AmendmentPub. L. 112–106, § 1, Apr. 5, 2012, 126 Stat. 306, provided that: “This Act [enacting section 77d–1 of this title, amending sections 77b, 77c, 77d, 77e to 77g, 77r, 78c, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o–6, 7213, and 7262 of this title, enacting provisions set out as notes under sections 77a, 77b, 77d, 77g, 77r, 78c, 78d, 78l, and 78o–6 of this title, and amending provisions set out as a note under section 78l of this title] may be cited as the ‘Jumpstart Our Business Startups Act’.”
Short Title of 2010 AmendmentPub. L. 111–203, title IX, § 901, July 21, 2010, 124 Stat. 1822, provided that: “This title [see Tables for classification] may be cited as the ‘Investor Protection and Securities Reform Act of 2010’.”
Short Title of 2006 AmendmentPub. L. 109–291, § 1, Sept. 29, 2006, 120 Stat. 1327, provided that: “This Act [enacting section 78o–7 of this title, amending sections 78c, 78o, 78q, 78u–2, 80a–2, 80a–9, 80b–2, and 80b–3 of this title, section 4519 of Title 12, Banks and Banking, section 1087–2 of Title 20, Education, and section 181 of Title 23, Highways, and enacting provisions set out as notes under section 78o–7 of this title] may be cited as the ‘Credit Rating Agency Reform Act of 2006’.”
Short Title of 2004 AmendmentPub. L. 108–458, title VII, § 7803(a), Dec. 17, 2004, 118 Stat. 3861, provided that: “This section [amending sections 78l and 78o–5 of this title] may be cited as the ‘Emergency Securities Response Act of 2004’.”
Short Title of 2002 AmendmentsPub. L. 107–204, title XI, § 1101, July 30, 2002, 116 Stat. 807, provided that: “This title [amending sections 77h–1, 78u–3, and 78ff of this title and sections 1512 and 1513 of Title 18, Crimes and Criminal Procedure, and enacting provisions set out as a note under section 994 of Title 28, Judiciary and Judicial Procedure] may be cited as the ‘Corporate Fraud Accountability Act of 2002’.” Pub. L. 107–123, § 1, Jan. 16, 2002, 115 Stat. 2390, provided that: “This Act [enacting chapter 48 of Title 5, Government Organization and Employees, amending sections 77f, 77ggg, 78d, 78m, 78n, and 78ee of this title, sections 3132 and 5373 of Title 5, and section 1833b of Title 12, Banks and Banking, and enacting provisions set out as notes under section 78ee of this title and section 4802 of Title 5] may be cited as the ‘Investor and Capital Markets Fee Relief Act’.”
Short Title of 1998 AmendmentsPub. L. 105–366, § 1, Nov. 10, 1998, 112 Stat. 3302, provided that: “This Act [enacting section 78dd–3 of this title, amending sections 78dd–1, 78dd–2, and 78ff of this title, and enacting provisions set out as notes under section 78dd–1 of this title] may be cited as the ‘International Anti-Bribery and Fair Competition Act of 1998’.” Pub. L. 105–353, § 1, Nov. 3, 1998, 112 Stat. 3227, provided that: “This Act [amending sections 77b, 77k, 77m, 77p, 77r, 77v, 77z–1 to 77z–3, 77aa, 77ccc, 77ddd, 77mmm, 77sss, 78c, 78d, 78g, 78n, 78o, 78o–4, 78o–5, 78q, 78s, 78t, 78u–4, 78z, 78bb, 78ee, 78kk, 78ll, 80a–2, 80a–3, 80a–12, 80a–18, 80a–29, 80a–30, 80b–3, and 80b–18a of this title and enacting provisions set out as notes under this section and sections 77p and 78u of this title] may be cited as the ‘Securities Litigation Uniform Standards Act of 1998’.”
Short Title of 1996 AmendmentPub. L. 104–290, § 1(a), Oct. 11, 1996, 110 Stat. 3416, provided that: “This Act [enacting sections 77z–3, 78mm, and 80b–3a of this title, amending sections 77b, 77c, 77f, 77r, 77ddd, 78c, 78d, 78g, 78h, 78o, 78q, 78bb, 78ee, 78kk, 80a–2, 80a–3, 80a–6, 80a–12, 80a–24, 80a–26, 80a–27, 80a–29, 80a–30, 80a–34, 80a–54, 80a–60, 80a–63, 80b–2, 80b–3, 80b–5, and 80b–18a of this title and section 1002 of Title 29, Labor, and enacting provisions set out as notes under this section, sections 77e, 77r, 78b, 78n, 78o, 78ee, 80a–2, 80a–3, 80a–24, 80a–51, 80b–2, 80b–3a, 80b–10, and 80b–20 of this title, and section 1002 of Title 29] may be cited as the ‘National Securities Markets Improvement Act of 1996’.” Pub. L. 104–290, title I, § 101, Oct. 11, 1996, 110 Stat. 3417, provided that: “This title [enacting sections 77z–3 and 78mm of this title, amending sections 77b, 77r, 78c, 78g, 78h, 78o, 78q, 78bb, and 80a–2 of this title, and enacting provisions set out as notes under sections 77e and 77r of this title] may be cited as the ‘Capital Markets Efficiency Act of 1996’.” Pub. L. 104–290, title IV, § 401, Oct. 11, 1996, 110 Stat. 3441, provided that: “This title [amending sections 77f, 78d, 78ee, and 78kk of this title and enacting provisions set out as notes under this section and section 78ee of this title] may be cited as the ‘Securities and Exchange Commission Authorization Act of 1996’.”
Short Title of 1995 AmendmentPub. L. 104–67, § 1(a), Dec. 22, 1995, 109 Stat. 737, provided that: “This Act [enacting sections 77z–1, 77z–2, 78j–1, 78u–4, and 78u–5 of this title, amending sections 77k, 77l, 77t, 78o, 78t, 78u, and 78u–4 of this title and section 1964 of Title 18, Crimes and Criminal Procedure, and enacting provisions set out as notes under sections 77k, 77l, and 78j–1 of this title] may be cited as the ‘Private Securities Litigation Reform Act of 1995’.”
Short Title of 1994 AmendmentsPub. L. 103–389, § 1, Oct. 22, 1994, 108 Stat. 4081, provided that: “This Act [amending section 78l of this title] may be cited as the ‘Unlisted Trading Privileges Act of 1994’.” Pub. L. 103–325, title II, § 201, Sept. 23, 1994, 108 Stat. 2198, provided that: “This subtitle [subtitle A (§§ 201–210) of title II of Pub. L. 103–325 enacting section 1835 of Title 12, Banks and Banking, amending sections 77r–1, 78c, 78g, 78h, and 78k of this title and sections 24, 1464, and 1757 of Title 12, and enacting provisions set out as notes under section 78b of this title and section 3305 of Title 12] may be cited as the ‘Small Business Loan Securitization and Secondary Market Enhancement Act of 1994’.”
Short Title of 1993 AmendmentPub. L. 103–202, § 1(a), Dec. 17, 1993, 107 Stat. 2344, provided that: “This Act [enacting section 3130 of Title 31, Money and Finance, amending sections 78c, 78f, 78n, 78o, 78o–3, 78o–5, 78s, and 78w of this title, and enacting provisions set out as notes under this section, sections 78f, 78n, and 78o–5 of this title, and section 3121 of Title 31] may be cited as the ‘Government Securities Act Amendments of 1993’.” Pub. L. 103–202, title III, § 301, Dec. 17, 1993, 107 Stat. 2359, provided that: “This title [amending sections 78f, 78n, and 78o–3 of this title and enacting provisions set out as notes under sections 78f and 78n of this title] may be cited as the ‘Limited Partnership Rollup Reform Act of 1993’.”
Short Title of 1990 AmendmentsPub. L. 101–550, § 1, Nov. 15, 1990, 104 Stat. 2713, provided that: “This Act [amending sections 77ccc to 77eee, 77iii to 77rrr, 77uuu, 77vvv, 78c, 78d, 78n, 78o, 78o–4, 78o–5, 78q–1, 78x, 78kk, 79z–5, 80a–2, 80a–9, 80a–44, 80a–45, 80b–2, 80b–3, 80b–10, and 80b–18 of this title and enacting provisions set out as notes under this section and sections 77aaa and 78n of this title] may be cited as the ‘Securities Acts Amendments of 1990’.” Pub. L. 101–550, title I, § 101, Nov. 15, 1990, 104 Stat. 2713, provided that: “This title [amending sections 77uuu, 78d, 78kk, 79z–5, 80a–45, and 80b–18 of this title] may be cited as the ‘Securities and Exchange Commission Authorization Act of 1990’.” Pub. L. 101–550, title II, § 201, Nov. 15, 1990, 104 Stat. 2714, provided that: “This title [amending sections 78c, 78d, 78o, 78o–4, 78o–5, 78q–1, 78x, 80a–2, 80a–9, 80a–44, 80b–2, 80b–3, and 80b–10 of this title] may be cited as the ‘International Securities Enforcement Cooperation Act of 1990’.” Pub. L. 101–550, title III, § 301, Nov. 15, 1990, 104 Stat. 2721, provided that: “This title [amending section 78n of this title and enacting provisions set out as a note under section 78n of this title] may be cited as the ‘Shareholder Communications Improvement Act of 1990’.” Pub. L. 101–432, § 1, Oct. 16, 1990, 104 Stat. 963, provided that: “This Act [enacting section 1831l of Title 12, Banks and Banking, amending sections 78i, 78l, 78m, 78o–5, 78q, 78q–1, and 78y of this title, and enacting provisions set out as notes under sections 78b and 78q–1 of this title] may be cited as the ‘Market Reform Act of 1990’.” Pub. L. 101–429, § 1(a), Oct. 15, 1990, 104 Stat. 931, provided that: “This Act [enacting sections 77h–1, 78q–2, 78u–2, and 78u–3 of this title, amending sections 77g, 77t, 78c, 78o, 78o–3, 78o–4, 78q–1, 78u, 78u–1, 78w, 78cc, 80a–9, 80a–41, 80b–3, 80b–9, and 80b–14 of this title, and enacting provisions set out as notes under this section and sections 77g, 78o, and 78s of this title] may be cited as the ‘Securities Enforcement Remedies and Penny Stock Reform Act of 1990’.” Pub. L. 101–429, title V, § 501, Oct. 15, 1990, 104 Stat. 951, provided that: “This title [enacting section 78q–2 of this title, amending sections 77g, 78c, 78o, 78o–3, and 78cc of this title, and enacting provisions set out as notes under sections 78o and 78s of this title] may be cited as the ‘Penny Stock Reform Act of 1990’.”
Short Title of 1988 AmendmentsPub. L. 100–704, § 1, Nov. 19, 1988, 102 Stat. 4677, provided that: “This Act [enacting sections 78t–1, 78u–1, and 80b–4a of this title, amending sections 78c, 78o, 78u, 78ff, and 78kk of this title, and enacting provisions set out as notes under sections 78b, 78o, and 78u–1 of this title] may be cited as the ‘Insider Trading and Securities Fraud Enforcement Act of 1988’.” Pub. L. 100–418, title V, § 5001, Aug. 23, 1988, 102 Stat. 1415, provided that: “This part [part I (§§ 5001–5003) of subtitle A of title I of Pub. L. 100–418, amending sections 78m, 78dd–1, 78dd–2, and 78ff of this title and enacting provisions set out as a note under section 78dd–1 of this title] may be cited as the ‘Foreign Corrupt Practices Act Amendments of 1988’.”
Short Title of 1987 AmendmentPub. L. 100–181, § 1, Dec. 4, 1987, 101 Stat. 1249, provided that: “This Act [enacting sections 78d–1, 78d–2, and 78ll of this title, amending sections 77b, 77c, 77f, 77i, 77s, 77t, 77v, 77ccc, 78c, 78d, 78f, 78k–1, 78l, 78m, 78o, 78o–4, 78o–5, 78q, 78q–1, 78u, 78w, 78aa, 78bb, 78kk, 78lll, 79h, 79r, 79x, 79y, 79z–4, 80a–2, 80a–3, 80a–5, 80a–6, 80a–9, 80a–12, 80a–15, 80a–17, 80a–18, 80a–20, 80a–21, 80a–22, 80a–24, 80a–26, 80a–28, 80a–35, 80a–41, 80a–52, 80a–53, 80a–54, 80a–56, 80b–2, 80b–3, 80b–5, 80b–9, 80b–11, 80b–13, and 80b–14 of this title, and repealing sections 78d–1, 78d–2, and 78jj of this title] may be cited as the ‘Securities and Exchange Commission Authorization Act of 1987’.”
Short Title of 1986 AmendmentPub. L. 99–571, § 1(a), Oct. 28, 1986, 100 Stat. 3208, provided that: “This Act [enacting section 78o–5 of this title and section 9110 of Title 31, Money and Finance, amending sections 78c, 78o, 78o–3, 78q, 78w, 78y, 80a–9, and 80b–3 of this title and section 3121 of Title 31, and enacting provisions set out as notes under section 78o–5 of this title] may be cited as the ‘Government Securities Act of 1986’.”
Short Title of 1985 AmendmentPub. L. 99–222, § 1, Dec. 28, 1985, 99 Stat. 1737, provided that: “This Act [amending section 78n of this title and enacting a provision set out as a note under section 78n of this title] may be cited as the ‘Shareholder Communications Act of 1985’.”
Short Title of 1984 AmendmentPub. L. 98–376, § 1, Aug. 10, 1984, 98 Stat. 1264, provided that: “This Act [amending sections 78c, 78o, 78t, 78u, and 78ff of this title and enacting provisions set out as a note under section 78c of this title] may be cited as the ‘Insider Trading Sanctions Act of 1984’.”
Short Title of 1977 AmendmentPub. L. 95–213, title I, § 101, Dec. 19, 1977, 91 Stat. 1494, provided that: “This title [enacting sections 78dd–1 and 78dd–2 of this title and amending sections 78m and 78ff of this title] may be cited as the ‘Foreign Corrupt Practices Act of 1977’.” Pub. L. 95–213, title II, § 201, Dec. 19, 1977, 91 Stat. 1498, provided that: “This title [amending sections 78m and 78o of this title] may be cited as the ‘Domestic and Foreign Investment Improved Disclosure Act of 1977’.”
Short Title of 1975 AmendmentPub. L. 94–29, § 1, June 4, 1975, 89 Stat. 97, provided: “That this Act [enacting sections 78k–1, 78o–4, 78q–1, and 78kk of this title, amending sections 77d, 77x, 77yyy, 78b, 78c, 78d–1, 78f, 78h, 78k, 78l, 78m, 78o, 78o–3, 78q, 78s, 78u, 78w, 78x, 78y, 78bb, 78ee, 78ff, 78iii, 79z–3, 80a–9, 80a–10, 80a–13, 80a–15, 80a–16, 80a–18, 80a–31, 80a–35, 80a–48, 80b–3, 80b–4, and 80b–17 of this title, and enacting provisions set out as notes under sections 78b and 78f of this title] may be cited as the ‘Securities Acts Amendments of 1975’.”
Short Title of 1964 AmendmentPub. L. 88–467, § 1, Aug. 20, 1964, 78 Stat. 565, provided: “That this Act [amending sections 77d, 78c, 78l to 78o, 78o–3, 78p, 78t, 78w, and 78ff of this title and enacting provisions set out as a note under section 78c of this title] may be cited as the ‘Securities Acts Amendments of 1964’.”
Short Title of 1936 AmendmentAct May 27, 1936, ch. 462, 49 Stat. 1375, enacting sections 78l–1, 78o–1, 78o–2, and 78hh–1 of this title, and amending sections 78l, 78o, 78q, 78r, 78t, 78u, 78w, and 78ff of this title, is popularly known as the Unlisted Securities Trading Act.
SeverabilityPub. L. 104–290, § 3, Oct. 11, 1996, 110 Stat. 3417, provided: “If any provision of this Act [see Short Title of 1996 Amendment note above], an amendment made by this Act, or the application of such provision or amendment to any person or circumstance is held to be unconstitutional, the remainder of this Act, the amendments made by this Act, and the application of the provisions of such to any person or circumstance shall not be affected thereby.”
Congressional Findings of 1998 AmendmentPub. L. 105–353, § 2, Nov. 3, 1998, 112 Stat. 3227, provided that: “The Congress finds that— “(1) the Private Securities Litigation Reform Act of 1995 [see Short Title of 1995 Amendment note above] sought to prevent abuses in private securities fraud lawsuits; “(2) since enactment of that legislation, considerable evidence has been presented to Congress that a number of securities class action lawsuits have shifted from Federal to State courts; “(3) this shift has prevented that Act from fully achieving its objectives; “(4) State securities regulation is of continuing importance, together with Federal regulation of securities, to protect investors and promote strong financial markets; and “(5) in order to prevent certain State private securities class action lawsuits alleging fraud from being used to frustrate the objectives of the Private Securities Litigation Reform Act of 1995, it is appropriate to enact national standards for securities class action lawsuits involving nationally traded securities, while preserving the appropriate enforcement powers of State securities regulators and not changing the current treatment of individual lawsuits.”
Purposes of 1996 AmendmentPub. L. 104–290, title IV, § 402, Oct. 11, 1996, 110 Stat. 3441, provided: “The purposes of this title [see Short Title of 1996 Amendment note above] are— “(1) to authorize appropriations for the Commission for fiscal year 1997; and “(2) to reduce over time the rates of fees charged under the Federal securities laws.”
Definitions Pub. L. 104–290, § 2, Oct. 11, 1996, 110 Stat. 3417, provided: “For purposes of this Act [see Short Title of 1996 Amendment note above]— “(1) the term ‘Commission’ means the Securities and Exchange Commission; and “(2) the term ‘State’ has the same meaning as in section 3 of the Securities Exchange Act of 1934 [15 U.S.C. 78c].”
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---
type: "LegalText"
title: "15 U.S.C. § 78aa–1"
description: "Special provision relating to statute of limitations on private causes of action"
jurisdiction: "us"
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kind: "code_section"
title_number: 15
title_name: "COMMERCE AND TRADE"
chapter_number: "2B"
chapter_name: "SECURITIES EXCHANGES"
section: "78aa–1"
citation: "15 U.S.C. § 78aa–1"
status: "current"
release_point: "119-100"
release_date: "2026-06-26"
source: "official"
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---
# 15 U.S.C. § 78aa–1 - Special provision relating to statute of limitations on private causes of action
## Text
(a) Effect on pending causes of action The limitation period for any private civil action implied under section 78j(b) of this title that was commenced on or before June 19, 1991, shall be the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991.
(b) Effect on dismissed causes of action Any private civil action implied under section 78j(b) of this title that was commenced on or before June 19, 1991—
(1) which was dismissed as time barred subsequent to June 19, 1991, and
(2) which would have been timely filed under the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991,
shall be reinstated on motion by the plaintiff not later than 60 days after December 19, 1991.
(June 6, 1934, ch. 404, title I, § 27A, as added Pub. L. 102–242, title IV, § 476, Dec. 19, 1991, 105 Stat. 2387.)
## Notes
Editorial Notes
ConstitutionalityFor information regarding the constitutionality of certain provisions of this section, see the Table of Laws Held Unconstitutional in Whole or in Part by the Supreme Court on the Constitution Annotated website, constitution.congress.gov.
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---
# 15 U.S.C. § 78aa - Jurisdiction of offenses and suits
## Text
(a) In general The district courts of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations, may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. In any action or proceeding instituted by the Commission under this chapter in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence. Judgments and decrees so rendered shall be subject to review as provided in sections 1254, 1291, 1292, and 1294 of title 28. No costs shall be assessed for or against the Commission in any proceeding under this chapter brought by or against it in the Supreme Court or such other courts.
(b) Extraterritorial jurisdiction The district courts of the United States and the United States courts of any Territory shall have jurisdiction of an action or proceeding brought or instituted by the Commission or the United States alleging a violation of the antifraud provisions of this chapter involving—
(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; or
(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.
(June 6, 1934, ch. 404, title I, § 27, 48 Stat. 902; June 25, 1936, ch. 804, 49 Stat. 1921; June 25, 1948, ch. 646, § 32(b), 62 Stat. 991; May 24, 1949, ch. 139, § 127, 63 Stat. 107; Pub. L. 100–181, title III, § 326, Dec. 4, 1987, 101 Stat. 1259; Pub. L. 111–203, title IX, §§ 929E(b), 929P(b)(2), July 21, 2010, 124 Stat. 1853, 1865.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title. The Federal Rules of Civil Procedure, referred to in subsec. (a), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure.
Codification As originally enacted section contained references to the Supreme Court of the District of Columbia. Act June 25, 1936, substituted “the district court of the United States for the District of Columbia” for “the Supreme Court of the District of Columbia”, and act June 25, 1948, as amended by act May 24, 1949, substituted “United States District Court for the District of Columbia” for “district court of the United States for the District of Columbia”. Pub. L. 100–181 struck out reference to the United States District Court for the District of Columbia. Previously, such words had been editorially eliminated as superfluous in view of section 132(a) of Title 28, Judiciary and Judicial Procedure, which provides that “There shall be in each judicial district a district court which shall be a court of record known as the United States District Court for the district”, and section 88 of Title 28 which provides that “the District of Columbia constitutes one judicial district”.
Amendments2010—Pub. L. 111–203, § 929P(b)(2), designated existing provisions as subsec. (a), inserted heading, and added subsec. (b). Pub. L. 111–203, § 929E(b), inserted “In any action or proceeding instituted by the Commission under this chapter in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence.” after “defendant may be found.” 1987—Pub. L. 100–181 struck out “, the United States District Court for the District of Columbia,” after “district courts of the United States” and substituted “sections 1254, 1291, 1292, and 1294 of title 28” for “sections 128 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 225 and 347)”. See Codification note above.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78b - Necessity for regulation
## Text
For the reasons hereinafter enumerated, transactions in securities as commonly conducted upon securities exchanges and over-the-counter markets are effected with a national public interest which makes it necessary to provide for regulation and control of such transactions and of practices and matters related thereto, including transactions by officers, directors, and principal security holders, to require appropriate reports, to remove impediments to and perfect the mechanisms of a national market system for securities and a national system for the clearance and settlement of securities transactions and the safeguarding of securities and funds related thereto, and to impose requirements necessary to make such regulation and control reasonably complete and effective, in order to protect interstate commerce, the national credit, the Federal taxing power, to protect and make more effective the national banking system and Federal Reserve System, and to insure the maintenance of fair and honest markets in such transactions:
(1) Such transactions (a) are carried on in large volume by the public generally and in large part originate outside the States in which the exchanges and over-the-counter markets are located and/or are effected by means of the mails and instrumentalities of interstate commerce; (b) constitute an important part of the current of interstate commerce; (c) involve in large part the securities of issuers engaged in interstate commerce; (d) involve the use of credit, directly affect the financing of trade, industry, and transportation in interstate commerce, and directly affect and influence the volume of interstate commerce; and affect the national credit.
(2) The prices established and offered in such transactions are generally disseminated and quoted throughout the United States and foreign countries and constitute a basis for determining and establishing the prices at which securities are bought and sold, the amount of certain taxes owing to the United States and to the several States by owners, buyers, and sellers of securities, and the value of collateral for bank loans.
(3) Frequently the prices of securities on such exchanges and markets are susceptible to manipulation and control, and the dissemination of such prices gives rise to excessive speculation, resulting in sudden and unreasonable fluctuations in the prices of securities which (a) cause alternately unreasonable expansion and unreasonable contraction of the volume of credit available for trade, transportation, and industry in interstate commerce, (b) hinder the proper appraisal of the value of securities and thus prevent a fair calculation of taxes owing to the United States and to the several States by owners, buyers, and sellers of securities, and (c) prevent the fair valuation of collateral for bank loans and/or obstruct the effective operation of the national banking system and Federal Reserve System.
(4) National emergencies, which produce widespread unemployment and the dislocation of trade, transportation, and industry, and which burden interstate commerce and adversely affect the general welfare, are precipitated, intensified, and prolonged by manipulation and sudden and unreasonable fluctuations of security prices and by excessive speculation on such exchanges and markets, and to meet such emergencies the Federal Government is put to such great expense as to burden the national credit.
(June 6, 1934, ch. 404, title I, § 2, 48 Stat. 881; Pub. L. 94–29, § 2, June 4, 1975, 89 Stat. 97; Pub. L. 111–203, title IX, § 985(b)(1), July 21, 2010, 124 Stat. 1933.)
## Notes
Editorial Notes
Amendments2010—Pub. L. 111–203 substituted “effected” for “affected” in introductory provisions. 1975—Pub. L. 94–29 inserted “to remove impediments to and perfect the mechanisms of a national market system for securities and a national system for the clearance and settlement of securities transactions and the safeguarding of securities and funds related thereto,” after “require appropriate reports,” in introductory provisions.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective Date of 1975 AmendmentPub. L. 94–29, § 31(a), June 4, 1975, 89 Stat. 170, provided that: “This Act [enacting sections 78k–1, 78o–4, 78q–1, and 78kk of this title, amending this section and sections 77d, 77x, 77yyy, 78c, 78d–1, 78f, 78h, 78k, 78l, 78m, 78o, 78o–3, 78q, 78s, 78u, 78w, 78x, 78y, 78bb, 78ee, 78ff, 78iii, 79z–3, 80a–9, 80a–10, 80a–13, 80a–15, 80a–16, 80a–18, 80a–31, 80a–35, 80a–48, 80b–3, 80b–4, and 80b–17 of this title, and enacting provisions set out as notes under sections 78a and 78f of this title] shall become effective on the date of its enactment [June 4, 1975] except as hereinafter provided. The amendments made by this Act to sections 3(a)(12), 6(a) through (d), 11A(b), 15(a), 15A, 15B(a), 17A(b), and (c), and 19(g) of the Securities Exchange Act of 1934 [sections 78c(a)(12), 78f(a) through (d), 78k–1(b), 78o(a), 78o–3, 78o–4(a), 78q–1(b) and (c), and 78s(g) of this title] shall become effective one hundred eighty days after the date of enactment of this Act [June 4, 1975], and the amendments made by this Act to section 31 of the Securities Exchange Act of 1934 [section 78ee of this title] shall become effective on January 1, 1976. Neither the provisions of section 3(a)(3), 6(b)(2), or 6(c)(1) of the Securities Exchange Act of 1934 (as amended by this Act) [section 78c(a)(3), 78f(b)(2), or 78f(c)(1) of this title] nor any rule or regulation thereunder shall apply so as to deprive any person of membership in any national securities exchange (or its successor) of which such person was, on the date of enactment of this Act [June 4, 1975], a member or a member firm as defined in the constitution of such exchange or so as to deny membership in any such exchange (or its successor) to any natural person who is or becomes associated with such member or member firm.”
Study and Report on Impact of Technological Advances on Securities MarketsPub. L. 104–290, title V, § 510(a), Oct. 11, 1996, 110 Stat. 3450, provided that: “(1) Study.—“(A) In general.—The Commission shall conduct a study of—“(i) the impact of technological advances and the use of on-line information systems on the securities markets, including steps that the Commission has taken to facilitate the electronic delivery of prospectuses to institutional and other investors; “(ii) how such technologies have changed the way in which the securities markets operate; and “(iii) any steps taken by the Commission to address such changes. “(B) Considerations.—In conducting the study under subparagraph (A), the Commission shall consider how the Commission has adapted its enforcement policies and practices in response to technological developments with regard to—“(i) disclosure, prospectus delivery, and other customer protection regulations; “(ii) intermediaries and exchanges in the domestic and international financial services industry; “(iii) reporting by issuers, including communications with holders of securities; “(iv) the relationship of the Commission with other national regulatory authorities and organizations to improve coordination and cooperation; and “(v) the relationship of the Commission with State regulatory authorities and organizations to improve coordination and cooperation. “(2) Report.—Not later than 1 year after the date of enactment of this Act [Oct. 11, 1996], the Commission shall submit a report to the Congress on the results of the study conducted under paragraph (1).”
Joint Study on Impact of Additional Securities Based on Pooled ObligationsPub. L. 103–325, title II, § 209, Sept. 23, 1994, 108 Stat. 2202, provided that: “(a) Joint Study Required.—The Board and the Commission shall conduct a joint study of the impact of the provisions of this subtitle [subtitle A [§§ 201–210 of title II of Pub. L. 103–325], see Short Title of 1994 Amendment note set out under section 78a of this title] (including the amendments made by this subtitle) on the credit and securities markets. Such study shall evaluate—“(1) the impact of the provisions of this subtitle on the availability of credit for business and commercial enterprises in general, and the availability of credit in particular for—“(A) businesses in low- and moderate-income areas; “(B) businesses owned by women and minorities; “(C) community development efforts; “(D) community development financial institutions; “(E) businesses in different geographical regions; and “(F) a diversity of types of businesses; “(2) the structure and operation of the markets that develop for small business related securities and commercial mortgage related securities, including the types of entities (such as pension funds and insurance companies) that are significant purchasers of such securities, the extent to which such entities are sophisticated investors, the use of credit enhancements in obtaining investment-grade ratings, any conflicts of interest that arise in such markets, and any adverse effects of such markets on commercial real estate ventures, pension funds, or pension fund beneficiaries; “(3) the extent to which the provisions of this subtitle with regard to margin requirements, the number of eligible investment rating categories, preemption of State law, and the treatment of such securities as government securities for the purpose of State investment limitations, affect the structure and operation of such markets; and “(4) in view of the findings made pursuant to paragraphs (2) and (3), any additional suitability or disclosure requirements or other investor protections that should be required. “(b) Reports.—“(1) In general.—The Board and the Commission shall submit to the Congress a report on the results of the study required by subsection (a) before the end of—“(A) the 2-year period beginning on the date of enactment of this Act [Sept. 23, 1994]; “(B) the 4-year period beginning on such date of enactment; and “(C) the 6-year period beginning on such date of enactment. “(2) Contents of report.—Each report required under paragraph (1) shall contain or be accompanied by such recommendations for administrative or legislative action as the Board and the Commission consider appropriate and may include recommendations regarding the need to develop a system for reporting additional information concerning investments by the entities described in subsection (a)(2). “(c) Definitions.—As used in this section—“(1) the term ‘Board’ means the Board of Governors of the Federal Reserve System; and “(2) the term ‘Commission’ means the Securities and Exchange Commission.”
Intermarket Coordination; Reports to CongressPub. L. 101–432, § 8(a), Oct. 16, 1990, 104 Stat. 976, provided that the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Chairman of the Securities and Exchange Commission, and the Chairman of the Commodity Futures Trading Commission should report to the Congress not later than May 31, 1991, and annually thereafter until May 31, 1995, on the efforts their respective agencies have made relating to the coordination of regulatory activities to ensure the integrity and competitiveness of United States financial markets and to formulate coordinated mechanisms across marketplaces to protect the payments and market systems during market emergencies, on the views of their respective agencies with respect to the adequacy of margin levels and use of leverage by market participants, and other issues relating to market soundness.
Securities Laws StudyPub. L. 100–704, § 7, Nov. 19, 1988, 102 Stat. 4682, directed Securities and Exchange Commission to study and investigate adequacy of Federal securities laws and regulations for protection of the public interest and interests of investors, specified subjects for the study and investigation and authority of Commission in conducting the study and investigation, directed Commission to supply interim information to Congress on the progress of, and any impediments to completing, the study and investigation, directed Commission to report to Congress on results of the study and investigation within 18 months after the date funds are appropriated for the study and investigation, including in such report the Commission’s recommendations.
Foreign Investment StudyPub. L. 93–479, Oct. 26, 1974, 88 Stat. 1450, directed Secretary of the Treasury and Secretary of Commerce to conduct a comprehensive, overall study of foreign direct and portfolio investments in the United States and submit to Congress an interim report twelve months after Oct. 26, 1974, and not later than one and one-half years after Oct. 26, 1974, a full and complete report of the findings made under the study authorized, together with such recommendations as they considered appropriate.
Executive Documents
Ex. Ord. No. 12631. Working Group on Financial Markets Ex. Ord. No. 12631, Mar. 18, 1988, 53 F.R. 9421, provided: By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish a Working Group on Financial Markets, it is hereby ordered as follows: Section 1. Establishment. (a) There is hereby established a Working Group on Financial Markets (Working Group). The Working Group shall be composed of: (1) the Secretary of the Treasury, or his designee; (2) the Chairman of the Board of Governors of the Federal Reserve System, or his designee; (3) the Chairman of the Securities and Exchange Commission, or his designee; and (4) the Chairman of the Commodity Futures Trading Commission, or her designee. (b) The Secretary of the Treasury, or his designee, shall be the Chairman of the Working Group. Sec. 2. Purposes and Functions. (a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence, the Working Group shall identify and consider: (1) the major issues raised by the numerous studies on the events in the financial markets surrounding October 19, 1987, and any of those recommendations that have the potential to achieve the goals noted above; and (2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations. (b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible. (c) The Working Group shall report to the President initially within 60 days (and periodically thereafter) on its progress and, if appropriate, its views on any recommended legislative changes. Sec. 3. Administration. (a) The heads of Executive departments, agencies, and independent instrumentalities shall, to the extent permitted by law, provide the Working Group such information as it may require for the purpose of carrying out this Order. (b) Members of the Working Group shall serve without additional compensation for their work on the Working Group. (c) To the extent permitted by law and subject to the availability of funds therefor, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions. Ronald Reagan.
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# 15 U.S.C. § 78bb - Effect on existing law
## Text
(a) Limitation on judgments (1) In general No person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in 1 or more actions, a total amount in excess of the actual damages to that person on account of the act complained of. Except as otherwise specifically provided in this chapter, nothing in this chapter shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this chapter or the rules and regulations under this chapter.
(2) Rule of construction Except as provided in subsection (f), the rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity.
(3) State bucket shop laws No State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of “bucket shops” or other similar or related activities, shall invalidate—
(A) any put, call, straddle, option, privilege, or other security subject to this chapter (except any security that has a pari-mutuel payout or otherwise is determined by the Commission, acting by rule, regulation, or order, to be appropriately subject to such laws), or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such security;
(B) any security-based swap between eligible contract participants; or
(C) any security-based swap effected on a national securities exchange registered pursuant to section 78f(b) of this title.
(4) Other State provisions No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security-based swap or a security futures product, except that this paragraph may not be construed as limiting any State antifraud law of general applicability. A security-based swap may not be regulated as an insurance contract under any provision of State law.
(b) Modification of disciplinary procedures Nothing in this chapter shall be construed to modify existing law with regard to the binding effect (1) on any member of or participant in any self-regulatory organization of any action taken by the authorities of such organization to settle disputes between its members or participants, (2) on any municipal securities dealer or municipal securities broker of any action taken pursuant to a procedure established by the Municipal Securities Rulemaking Board to settle disputes between municipal securities dealers and municipal securities brokers, or (3) of any action described in paragraph (1) or (2) on any person who has agreed to be bound thereby.
(c) Continuing validity of disciplinary sanctions The stay, setting aside, or modification pursuant to section 78s(e) of this title of any disciplinary sanction imposed by a self-regulatory organization on a member thereof, person associated with a member, or participant therein, shall not affect the validity or force of any action taken as a result of such sanction by the self-regulatory organization prior to such stay, setting aside, or modification: Provided, That such action is not inconsistent with the provisions of this chapter or the rules or regulations thereunder. The rights of any person acting in good faith which arise out of any such action shall not be affected in any way by such stay, setting aside, or modification.
(d) Physical location of facilities of registered clearing agencies or registered transfer agents not to subject changes in beneficial or record ownership of securities to State or local taxes No State or political subdivision thereof shall impose any tax on any change in beneficial or record ownership of securities effected through the facilities of a registered clearing agency or registered transfer agent or any nominee thereof or custodian therefor or upon the delivery or transfer of securities to or through or receipt from such agency or agent or any nominee thereof or custodian therefor, unless such change in beneficial or record ownership or such transfer or delivery or receipt would otherwise be taxable by such State or political subdivision if the facilities of such registered clearing agency, registered transfer agent, or any nominee thereof or custodian therefor were not physically located in the taxing State or political subdivision. No State or political subdivision thereof shall impose any tax on securities which are deposited in or retained by a registered clearing agency, registered transfer agent, or any nominee thereof or custodian therefor, unless such securities would otherwise be taxable by such State or political subdivision if the facilities of such registered clearing agency, registered transfer agent, or any nominee thereof or custodian therefor were not physically located in the taxing State or political subdivision.
(e) Exchange, broker, and dealer commissions; brokerage and research services (1) No person using the mails, or any means or instrumentality of interstate commerce, in the exercise of investment discretion with respect to an account shall be deemed to have acted unlawfully or to have breached a fiduciary duty under State or Federal law unless expressly provided to the contrary by a law enacted by the Congress or any State subsequent to June 4, 1975, solely by reason of his having caused the account to pay a member of an exchange, broker, or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of an exchange, broker, or dealer would have charged for effecting that transaction, if such person determined in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such member, broker, or dealer, viewed in terms of either that particular transaction or his overall responsibilities with respect to the accounts as to which he exercises investment discretion. This subsection is exclusive and plenary insofar as conduct is covered by the foregoing, unless otherwise expressly provided by contract: Provided, however, That nothing in this subsection shall be construed to impair or limit the power of the Commission under any other provision of this chapter or otherwise.
(2) A person exercising investment discretion with respect to an account shall make such disclosure of his policies and practices with respect to commissions that will be paid for effecting securities transactions, at such times and in such manner, as the appropriate regulatory agency, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(3) For purposes of this subsection a person provides brokerage and research services insofar as he—
(A) furnishes advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities;
(B) furnishes analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; or
(C) effects securities transactions and performs functions incidental thereto (such as clearance, settlement, and custody) or required in connection therewith by rules of the Commission or a self-regulatory organization of which such person is a member or person associated with a member or in which such person is a participant.
(4) The provisions of this subsection shall not apply with regard to securities that are security futures products.
(f) Limitations on remedies (1) Class action limitations No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
(A) a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or
(B) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
(2) Removal of covered class actions Any covered class action brought in any State court involving a covered security, as set forth in paragraph (1), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to paragraph (1).
(3) Preservation of certain actions (A) Actions under State law of State of incorporation (i) Actions preserved Notwithstanding paragraph (1) or (2), a covered class action described in clause (ii) of this subparagraph that is based upon the statutory or common law of the State in which the issuer is incorporated (in the case of a corporation) or organized (in the case of any other entity) may be maintained in a State or Federal court by a private party.
(ii) Permissible actions A covered class action is described in this clause if it involves—
(I) the purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer; or
(II) any recommendation, position, or other communication with respect to the sale of securities of an issuer that—
(aa) is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and
(bb) concerns decisions of such equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters’ or appraisal rights.
(B) State actions (i) In general Notwithstanding any other provision of this subsection, nothing in this subsection may be construed to preclude a State or political subdivision thereof or a State pension plan from bringing an action involving a covered security on its own behalf, or as a member of a class comprised solely of other States, political subdivisions, or State pension plans that are named plaintiffs, and that have authorized participation, in such action.
(ii) State pension plan defined For purposes of this subparagraph, the term “State pension plan” means a pension plan established and maintained for its employees by the government of a State or political subdivision thereof, or by any agency or instrumentality thereof.
(C) Actions under contractual agreements between issuers and indenture trustees Notwithstanding paragraph (1) or (2), a covered class action that seeks to enforce a contractual agreement between an issuer and an indenture trustee may be maintained in a State or Federal court by a party to the agreement or a successor to such party.
(D) Remand of removed actions In an action that has been removed from a State court pursuant to paragraph (2), if the Federal court determines that the action may be maintained in State court pursuant to this subsection, the Federal court shall remand such action to such State court.
(4) Preservation of State jurisdiction The securities commission (or any agency or office performing like functions) of any State shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions.
(5) Definitions For purposes of this subsection, the following definitions shall apply:
(A) Affiliate of the issuer The term “affiliate of the issuer” means a person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, the issuer.
(B) Covered class action The term “covered class action” means—
(i) any single lawsuit in which—
(I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
(II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members; or
(ii) any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which—
(I) damages are sought on behalf of more than 50 persons; and
(II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.
(C) Exception for derivative actions Notwithstanding subparagraph (B), the term “covered class action” does not include an exclusively derivative action brought by one or more shareholders on behalf of a corporation.
(D) Counting of certain class members For purposes of this paragraph, a corporation, investment company, pension plan, partnership, or other entity, shall be treated as one person or prospective class member, but only if the entity is not established for the purpose of participating in the action.
(E) Covered security The term “covered security” means a security that satisfies the standards for a covered security specified in paragraph (1) or (2) of section 18(b) of the Securities Act of 1933 [15 U.S.C. 77r(b)], at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred, except that such term shall not include any debt security that is exempt from registration under the Securities Act of 1933 [15 U.S.C. 77a et seq.] pursuant to rules issued by the Commission under section 4(2) 11 See References in Text note below. of that Act [15 U.S.C. 77d(a)(2)].
(F) Rule of construction Nothing in this paragraph shall be construed to affect the discretion of a State court in determining whether actions filed in such court should be joined, consolidated, or otherwise allowed to proceed as a single action.
(June 6, 1934, ch. 404, title I, § 28, 48 Stat. 903; Pub. L. 94–29, § 21, June 4, 1975, 89 Stat. 160; Pub. L. 97–303, § 4, Oct. 13, 1982, 96 Stat. 1409; Pub. L. 100–181, title III, §§ 327–329, Dec. 4, 1987, 101 Stat. 1259; Pub. L. 104–290, title I, § 103(b), Oct. 11, 1996, 110 Stat. 3422; Pub. L. 105–353, title I, § 101(b)(1), Nov. 3, 1998, 112 Stat. 3230; Pub. L. 106–554, § 1(a)(5) [title II, §§ 203(a)(2), 210], Dec. 21, 2000, 114 Stat. 2763, 2763A–422, 2763A–436; Pub. L. 111–203, title VII, § 767, July 21, 2010, 124 Stat. 1799.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a) to (c) and (e), was in the original “this title”. See References in Text note set out under section 78a of this title. The Securities Act of 1933, referred to in subsec. (f)(5)(E), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. Section 4(2) of the Act was redesignated section 4(a)(2) by Pub. L. 112–106, title II, § 201(b)(1), (c)(1), Apr. 5, 2012, 126 Stat. 314, and is classified to section 77d(a)(2) of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.
Amendments2010—Subsec. (a). Pub. L. 111–203 amended subsec. (a) generally. Prior to amendment, subsec. (a) related to rights and remedies provided by this chapter and applicability of certain State securities laws. 2000—Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 210], inserted “subject to this chapter” after “privilege, or other security”, substituted “any such security” for “any such instrument, if such instrument is traded pursuant to rules and regulations of a self-regulatory organization that are filed with the Commission pursuant to section 78s(b) of this title”, and inserted at end “No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security futures product, except that this sentence shall not be construed as limiting any State antifraud law of general applicability.” Subsec. (e)(4). Pub. L. 106–554, § 1(a)(5) [title II, § 203(a)(2)], added par. (4). 1998—Subsec. (a). Pub. L. 105–353, § 101(b)(1)(A), substituted “Except as provided in subsection (f) of this section, the rights and remedies” for “The rights and remedies”. Subsec. (f). Pub. L. 105–353, § 101(b)(1)(B), added subsec. (f). 1996—Subsec. (a). Pub. L. 104–290 substituted “Except as otherwise specifically provided in this chapter, nothing” for “Nothing”. 1987—Subsec. (c). Pub. L. 100–181, § 327, substituted “on” for “or” after “self-regulatory organization”. Subsec. (d). Pub. L. 100–181, § 328, substituted “change in beneficial” for “change is beneficial”. Subsec. (e)(1). Pub. L. 100–181, § 329, substituted “subsequent to the date of enactment of the Securities Acts Amendments of 1975” for “subsequent to the date of enactment of the Securities Acts Amendments in 1975”, which for purposes of codification was translated as “subsequent to June 4, 1975,” thus requiring no change in text. 1982—Subsec. (a). Pub. L. 97–303 inserted provision that no State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of “bucket shops” or other similar or related activities, shall invalidate any put, call, straddle, option, privilege, or other security, or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such instrument, if such instrument is traded pursuant to rules and regulations of a self-regulatory organization that are filed with the Commission pursuant to section 78s(b) of this title. 1975—Subsec. (b). Pub. L. 94–29, § 21(1), struck out provisions that nothing in this chapter be construed to modify existing law with regard to the binding effect on any member of an exchange of any disciplinary action taken by the authorities of an exchange and made the remaining provisions applicable to all members of and participants in all self-regulatory organizations as well as municipal securities professionals. Subsecs. (c) to (e). Pub. L. 94–29, § 21(2), added subsecs. (c) to (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date of 1998 AmendmentAmendment by Pub. L. 105–353 not to affect or apply to any action commenced before and pending on Nov. 3, 1998, see section 101(c) of Pub. L. 105–353, set out as a note under section 77p of this title.
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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description: "Swap agreements"
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---
# 15 U.S.C. § 78c–1 - Swap agreements
## Text
(a) [Reserved]
(b) Security-based swap agreements (1) The definition of “security” in section 78c(a)(10) of this title does not include any security-based swap agreement.
(2) The Commission is prohibited from registering, or requiring, recommending, or suggesting, the registration under this chapter of any security-based swap agreement. If the Commission becomes aware that a registrant has filed a registration application with respect to such a swap agreement, the Commission shall promptly so notify the registrant. Any such registration with respect to such a swap agreement shall be void and of no force or effect.
(3) Except as provided in section 78p(a) of this title with respect to reporting requirements, the Commission is prohibited from—
(A) promulgating, interpreting, or enforcing rules; or
(B) issuing orders of general applicability;
under this chapter in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement.
(4) References in this chapter to the “purchase” or “sale” of a security-based swap agreement shall be deemed to mean the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap agreement, as the context may require.
(June 6, 1934, ch. 404, title I, § 3A, as added Pub. L. 106–554, § 1(a)(5) [title III, § 303(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–452; amended Pub. L. 111–203, title VII, § 762(d)(1), July 21, 2010, 124 Stat. 1760.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (b)(2) to (4), was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2010—Subsec. (a). Pub. L. 111–203, § 762(d)(1)(A), struck out subsec. (a) and reserved that subsec. Prior to amendment, text read as follows: “The definition of ‘security’ in section 78c(a)(10) of this title does not include any non-security-based swap agreement (as defined in section 206C of the Gramm-Leach-Bliley Act).” Subsec. (b). Pub. L. 111–203, § 762(d)(1)(B), struck out “(as defined in section 206B of the Gramm-Leach-Bliley Act)” after “security-based swap agreement” wherever appearing.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
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title: "15 U.S.C. § 78c–2"
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title_name: "COMMERCE AND TRADE"
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---
# 15 U.S.C. § 78c–2 - Securities-related derivatives
## Text
(a) Any agreement, contract, or transaction (or class thereof) that is exempted by the Commodity Futures Trading Commission pursuant to section 6(c)(1) of title 7 with the condition that the Commission exercise concurrent jurisdiction over such agreement, contract, or transaction (or class thereof) shall be deemed a security for purposes of the securities laws.
(b) With respect to any agreement, contract, or transaction (or class thereof) that is exempted by the Commodity Futures Trading Commission pursuant to section 6(c)(1) of title 7 with the condition that the Commission exercise concurrent jurisdiction over such agreement, contract, or transaction (or class thereof), references in the securities laws to the “purchase” or “sale” of a security shall be deemed to include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under such agreement, contract, or transaction, as the context may require.
(June 6, 1934, ch. 404, title I, § 3B, as added Pub. L. 111–203, title VII, § 717(b), July 21, 2010, 124 Stat. 1651.)
## Notes
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 1a of Title 7, Agriculture.
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---
type: "LegalText"
title: "15 U.S.C. § 78c–3"
description: "Clearing for security-based swaps"
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title_number: 15
title_name: "COMMERCE AND TRADE"
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---
# 15 U.S.C. § 78c–3 - Clearing for security-based swaps
## Text
(a) In general (1) Standard for clearing It shall be unlawful for any person to engage in a security-based swap unless that person submits such security-based swap for clearing to a clearing agency that is registered under this chapter or a clearing agency that is exempt from registration under this chapter if the security-based swap is required to be cleared.
(2) Open access The rules of a clearing agency described in paragraph (1) shall—
(A) prescribe that all security-based swaps submitted to the clearing agency with the same terms and conditions are economically equivalent within the clearing agency and may be offset with each other within the clearing agency; and
(B) provide for non-discriminatory clearing of a security-based swap executed bilaterally or on or through the rules of an unaffiliated national securities exchange or security-based swap execution facility.
(b) Commission review (1) Commission-initiated review (A) The Commission on an ongoing basis shall review each security-based swap, or any group, category, type, or class of security-based swaps to make a determination that such security-based swap, or group, category, type, or class of security-based swaps should be required to be cleared.
(B) The Commission shall provide at least a 30-day public comment period regarding any determination under subparagraph (A).
(2) Swap submissions (A) A clearing agency shall submit to the Commission each security-based swap, or any group, category, type, or class of security-based swaps that it plans to accept for clearing and provide notice to its members (in a manner to be determined by the Commission) of such submission.
(B) Any security-based swap or group, category, type, or class of security-based swaps listed for clearing by a clearing agency as of July 21, 2010, shall be considered submitted to the Commission.
(C) The Commission shall—
(i) make available to the public any submission received under subparagraphs (A) and (B);
(ii) review each submission made under subparagraphs (A) and (B), and determine whether the security-based swap, or group, category, type, or class of security-based swaps, described in the submission is required to be cleared; and
(iii) provide at least a 30-day public comment period regarding its determination whether the clearing requirement under subsection (a)(1) shall apply to the submission.
(3) Deadline The Commission shall make its determination under paragraph (2)(C) not later than 90 days after receiving a submission made under paragraphs (2)(A) and (2)(B), unless the submitting clearing agency agrees to an extension for the time limitation established under this paragraph.
(4) Determination (A) In reviewing a submission made under paragraph (2), the Commission shall review whether the submission is consistent with section 78q–1 of this title.
(B) In reviewing a security-based swap, group of security-based swaps or class of security-based swaps pursuant to paragraph (1) or a submission made under paragraph (2), the Commission shall take into account the following factors:
(i) The existence of significant outstanding notional exposures, trading liquidity and adequate pricing data.
(ii) The availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the contract on terms that are consistent with the material terms and trading conventions on which the contract is then traded.
(iii) The effect on the mitigation of systemic risk, taking into account the size of the market for such contract and the resources of the clearing agency available to clear the contract.
(iv) The effect on competition, including appropriate fees and charges applied to clearing.
(v) The existence of reasonable legal certainty in the event of the insolvency of the relevant clearing agency or 1 or more of its clearing members with regard to the treatment of customer and security-based swap counterparty positions, funds, and property.
(C) In making a determination under subsection (b)(1) or paragraph (2)(C) that the clearing requirement shall apply, the Commission may require such terms and conditions to the requirement as the Commission determines to be appropriate.
(5) Rules Not later than 1 year after July 21, 2010, the Commission shall adopt rules for a clearing agency’s submission for review, pursuant to this subsection, of a security-based swap, or a group, category, type, or class of security-based swaps, that it seeks to accept for clearing. Nothing in this paragraph limits the Commission from making a determination under paragraph (2)(C) for security-based swaps described in paragraph (2)(B).
(c) Stay of clearing requirement (1) In general After making a determination pursuant to subsection (b)(2), the Commission, on application of a counterparty to a security-based swap or on its own initiative, may stay the clearing requirement of subsection (a)(1) until the Commission completes a review of the terms of the security-based swap (or the group, category, type, or class of security-based swaps) and the clearing arrangement.
(2) Deadline The Commission shall complete a review undertaken pursuant to paragraph (1) not later than 90 days after issuance of the stay, unless the clearing agency that clears the security-based swap, or group, category, type, or class of security-based swaps, agrees to an extension of the time limitation established under this paragraph.
(3) Determination Upon completion of the review undertaken pursuant to paragraph (1), the Commission may—
(A) determine, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, that the security-based swap, or group, category, type, or class of security-based swaps, must be cleared pursuant to this subsection if it finds that such clearing is consistent with subsection (b)(4); or
(B) determine that the clearing requirement of subsection (a)(1) shall not apply to the security-based swap, or group, category, type, or class of security-based swaps.
(4) Rules Not later than 1 year after July 21, 2010, the Commission shall adopt rules for reviewing, pursuant to this subsection, a clearing agency’s clearing of a security-based swap, or a group, category, type, or class of security-based swaps, that it has accepted for clearing.
(d) Prevention of evasion (1) In general The Commission shall prescribe rules under this section (and issue interpretations of rules prescribed under this section), as determined by the Commission to be necessary to prevent evasions of the mandatory clearing requirements under this chapter.
(2) Duty of Commission to investigate and take certain actions To the extent the Commission finds that a particular security-based swap or any group, category, type, or class of security-based swaps that would otherwise be subject to mandatory clearing but no clearing agency has listed the security-based swap or the group, category, type, or class of security-based swaps for clearing, the Commission shall—
(A) investigate the relevant facts and circumstances;
(B) within 30 days issue a public report containing the results of the investigation; and
(C) take such actions as the Commission determines to be necessary and in the public interest, which may include requiring the retaining of adequate margin or capital by parties to the security-based swap or the group, category, type, or class of security-based swaps.
(3) Effect on authority Nothing in this subsection—
(A) authorizes the Commission to adopt rules requiring a clearing agency to list for clearing a security-based swap or any group, category, type, or class of security-based swaps if the clearing of the security-based swap or the group, category, type, or class of security-based swaps would threaten the financial integrity of the clearing agency; and
(B) affects the authority of the Commission to enforce the open access provisions of subsection (a)(2) with respect to a security-based swap or the group, category, type, or class of security-based swaps that is listed for clearing by a clearing agency.
(e) Reporting transition rules Rules adopted by the Commission under this section shall provide for the reporting of data, as follows:
(1) Security-based swaps entered into before July 21, 2010, shall be reported to a registered security-based swap data repository or the Commission no later than 180 days after the effective date of this section.
(2) Security-based swaps entered into on or after July 21, 2010, shall be reported to a registered security-based swap data repository or the Commission no later than the later of—
(A) 90 days after such effective date; or
(B) such other time after entering into the security-based swap as the Commission may prescribe by rule or regulation.
(f) Clearing transition rules (1) Security-based swaps entered into before July 21, 2010, are exempt from the clearing requirements of this subsection if reported pursuant to subsection (e)(1).
(2) Security-based swaps entered into before application of the clearing requirement pursuant to this section are exempt from the clearing requirements of this section if reported pursuant to subsection (e)(2).
(g) Exceptions (1) In general The requirements of subsection (a)(1) shall not apply to a security-based swap if 1 of the counterparties to the security-based swap—
(A) is not a financial entity;
(B) is using security-based swaps to hedge or mitigate commercial risk; and
(C) notifies the Commission, in a manner set forth by the Commission, how it generally meets its financial obligations associated with entering into non-cleared security-based swaps.
(2) Option to clear The application of the clearing exception in paragraph (1) is solely at the discretion of the counterparty to the security-based swap that meets the conditions of subparagraphs (A) through (C) of paragraph (1).
(3) Financial entity definition (A) In general For the purposes of this subsection, the term “financial entity” means—
(i) a swap dealer;
(ii) a security-based swap dealer;
(iii) a major swap participant;
(iv) a major security-based swap participant;
(v) a commodity pool as defined in section 1a(10) of title 7;
(vi) a private fund as defined in section 80b–2(a) of this title;
(vii) an employee benefit plan as defined in paragraphs (3) and (32) of section 1002 of title 29;
(viii) a person predominantly engaged in activities that are in the business of banking or financial in nature, as defined in section 1843(k) of title 12.
(B) Exclusion The Commission shall consider whether to exempt small banks, savings associations, farm credit system institutions, and credit unions, including—
(i) depository institutions with total assets of $10,000,000,000 or less;
(ii) farm credit system institutions with total assets of $10,000,000,000 or less; or
(iii) credit unions with total assets of $10,000,000,000 or less.
(4) Treatment of affiliates (A) In general An affiliate of a person that qualifies for an exception under this subsection (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate—
(i) enters into the security-based swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity, and the commercial risk that the affiliate is hedging or mitigating has been transferred to the affiliate;
(ii) is directly and wholly-owned by another affiliate qualified for the exception under this paragraph or an entity that is not a financial entity;
(iii) is not indirectly majority-owned by a financial entity;
(iv) is not ultimately owned by a parent company that is a financial entity; and
(v) does not provide any services, financial or otherwise, to any affiliate that is a nonbank financial company supervised by the Board of Governors (as defined under section 5311 of title 12).
(B) Limitation on qualifying affiliates The exception in subparagraph (A) shall not apply if the affiliate is—
(i) a swap dealer;
(ii) a security-based swap dealer;
(iii) a major swap participant;
(iv) a major security-based swap participant;
(v) a commodity pool;
(vi) a bank holding company;
(vii) a private fund, as defined in section 80b–2(a) of this title;
(viii) an employee benefit plan or government 11 So in original. Probably should be “governmental”. plan, as defined in paragraphs (3) and (32) of section 1002 of title 29;
(ix) an insured depository institution;
(x) a farm credit system institution;
(xi) a credit union;
(xii) a nonbank financial company supervised by the Board of Governors (as defined under section 5311 of title 12); or
(xiii) an entity engaged in the business of insurance and subject to capital requirements established by an insurance governmental authority of a State, a territory of the United States, the District of Columbia, a country other than the United States, or a political subdivision of a country other than the United States that is engaged in the supervision of insurance companies under insurance law.
(C) Limitation on affiliates’ affiliates Unless the Commission determines, by order, rule, or regulation, that it is in the public interest, the exception in subparagraph (A) shall not apply with respect to an affiliate if such affiliate is itself affiliated with—
(i) a major security-based swap participant;
(ii) a security-based swap dealer;
(iii) a major swap participant; or
(iv) a swap dealer.
(D) Conditions on transactions With respect to an affiliate that qualifies for the exception in subparagraph (A)—
(i) such affiliate may not enter into any security-based swap other than for the purpose of hedging or mitigating commercial risk; and
(ii) neither such affiliate nor any person affiliated with such affiliate that is not a financial entity may enter into a security-based swap with or on behalf of any affiliate that is a financial entity or otherwise assume, net, combine, or consolidate the risk of security-based swaps entered into by any such financial entity, except one that is an affiliate that qualifies for the exception under subparagraph (A).
(E) Transition rule for affiliates An affiliate, subsidiary, or a wholly owned entity of a person that qualifies for an exception under subparagraph (A) and is predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of the person shall be exempt from the margin requirement described in section 78o–10(e) of this title and the clearing requirement described in subsection (a) with regard to security-based swaps entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on July 21, 2010.
(F) Risk management program Any security-based swap entered into by an affiliate that qualifies for the exception in subparagraph (A) shall be subject to a centralized risk management program of the affiliate, which is reasonably designed both to monitor and manage the risks associated with the security-based swap and to identify each of the affiliates on whose behalf a security-based swap was entered into.
(5) Election of counterparty (A) Security-based swaps required to be cleared With respect to any security-based swap that is subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer or a major security-based swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty shall have the sole right to select the clearing agency at which the security-based swap will be cleared.
(B) Security-based swaps not required to be cleared With respect to any security-based swap that is not subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer or a major security-based swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty—
(i) may elect to require clearing of the security-based swap; and
(ii) shall have the sole right to select the clearing agency at which the security-based swap will be cleared.
(6) Abuse of exception The Commission may prescribe such rules or issue interpretations of the rules as the Commission determines to be necessary to prevent abuse of the exceptions described in this subsection. The Commission may also request information from those persons claiming the clearing exception as necessary to prevent abuse of the exceptions described in this subsection.
(h) Trade execution (1) In general With respect to transactions involving security-based swaps subject to the clearing requirement of subsection (a)(1), counterparties shall—
(A) execute the transaction on an exchange; or
(B) execute the transaction on a security-based swap execution facility registered under section 78c–4 of this title or a security-based swap execution facility that is exempt from registration under section 78c–4(e) of this title.
(2) Exception The requirements of subparagraphs (A) and (B) of paragraph (1) shall not apply if no exchange or security-based swap execution facility makes the security-based swap available to trade or for security-based swap transactions subject to the clearing exception under subsection (g).
(i) Board approval Exemptions from the requirements of this section to clear a security-based swap or execute a security-based swap through a national securities exchange or security-based swap execution facility shall be available to a counterparty that is an issuer of securities that are registered under section 78l of this title or that is required to file reports pursuant to section 78o(d) of this title, only if an appropriate committee of the issuer’s board or governing body has reviewed and approved the issuer’s decision to enter into security-based swaps that are subject to such exemptions.
(j) Designation of chief compliance officer (1) In general Each registered clearing agency shall designate an individual to serve as a chief compliance officer.
(2) Duties The chief compliance officer shall—
(A) report directly to the board or to the senior officer of the clearing agency;
(B) in consultation with its board, a body performing a function similar thereto, or the senior officer of the registered clearing agency, resolve any conflicts of interest that may arise;
(C) be responsible for administering each policy and procedure that is required to be established pursuant to this section;
(D) ensure compliance with this chapter (including regulations issued under this chapter) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section;
(E) establish procedures for the remediation of noncompliance issues identified by the compliance officer through any—
(i) compliance office review;
(ii) look-back;
(iii) internal or external audit finding;
(iv) self-reported error; or
(v) validated complaint; and
(F) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
(3) Annual reports (A) In general In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of—
(i) the compliance of the registered clearing agency or security-based swap execution facility of the compliance officer with respect to this chapter (including regulations under this chapter); and
(ii) each policy and procedure of the registered clearing agency of the compliance officer (including the code of ethics and conflict of interest policies of the registered clearing agency).
(B) Requirements A compliance report under subparagraph (A) shall—
(i) accompany each appropriate financial report of the registered clearing agency that is required to be furnished to the Commission pursuant to this section; and
(ii) include a certification that, under penalty of law, the compliance report is accurate and complete.
(June 6, 1934, ch. 404, title I, § 3C, as added Pub. L. 111–203, title VII, § 763(a), July 21, 2010, 124 Stat. 1762; amended Pub. L. 114–113, div. O, title VII, § 705(b), Dec. 18, 2015, 129 Stat. 3027.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a)(1) and (d)(1), was in the original “this Act”, and this chapter, referred to in subsec. (j)(2)(D), (3)(A)(i), was in the original “this title”. See References in Text note set out under section 78a of this title. For the effective date of this section, referred to in subsec. (e), see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title. Subsection (c) of that section, referred to in subsec. (g)(4)(B)(v), was in the original “subsection (c) of that Act”, and was translated as meaning subsec. (c) of section 3 of act Aug. 22, 1940, ch. 686, to reflect the probable intent of Congress.
Amendments2015—Subsec. (g)(4). Pub. L. 114–113 added subpars. (A) to (D) and (F), redesignated former subpar. (C) as (E), and struck out former subpars. (A) and (B) which related to application of exception to affiliates and prohibition relating to certain affiliates, respectively.
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.
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# 15 U.S.C. § 78c–4 - Security-based swap execution facilities
## Text
(a) Registration (1) In general No person may operate a facility for the trading or processing of security-based swaps, unless the facility is registered as a security-based swap execution facility or as a national securities exchange under this section.
(2) Dual registration Any person that is registered as a security-based swap execution facility under this section shall register with the Commission regardless of whether the person also is registered with the Commodity Futures Trading Commission as a swap execution facility.
(b) Trading and trade processing A security-based swap execution facility that is registered under subsection (a) may—
(1) make available for trading any security-based swap; and
(2) facilitate trade processing of any security-based swap.
(c) Identification of facility used to trade security-based swaps by national securities exchanges A national securities exchange shall, to the extent that the exchange also operates a security-based swap execution facility and uses the same electronic trade execution system for listing and executing trades of security-based swaps on or through the exchange and the facility, identify whether electronic trading of such security-based swaps is taking place on or through the national securities exchange or the security-based swap execution facility.
(d) Core principles for security-based swap execution facilities (1) Compliance with core principles (A) In general To be registered, and maintain registration, as a security-based swap execution facility, the security-based swap execution facility shall comply with—
(i) the core principles described in this subsection; and
(ii) any requirement that the Commission may impose by rule or regulation.
(B) Reasonable discretion of security-based swap execution facility Unless otherwise determined by the Commission, by rule or regulation, a security-based swap execution facility described in subparagraph (A) shall have reasonable discretion in establishing the manner in which it complies with the core principles described in this subsection.
(2) Compliance with rules A security-based swap execution facility shall—
(A) establish and enforce compliance with any rule established by such security-based swap execution facility, including—
(i) the terms and conditions of the security-based swaps traded or processed on or through the facility; and
(ii) any limitation on access to the facility;
(B) establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means—
(i) to provide market participants with impartial access to the market; and
(ii) to capture information that may be used in establishing whether rule violations have occurred; and
(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used in entering and executing orders traded or posted on the facility, including block trades.
(3) Security-based swaps not readily susceptible to manipulation The security-based swap execution facility shall permit trading only in security-based swaps that are not readily susceptible to manipulation.
(4) Monitoring of trading and trade processing The security-based swap execution facility shall—
(A) establish and enforce rules or terms and conditions defining, or specifications detailing—
(i) trading procedures to be used in entering and executing orders traded on or through the facilities of the security-based swap execution facility; and
(ii) procedures for trade processing of security-based swaps on or through the facilities of the security-based swap execution facility; and
(B) monitor trading in security-based swaps to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.
(5) Ability to obtain information The security-based swap execution facility shall—
(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this subsection;
(B) provide the information to the Commission on request; and
(C) have the capacity to carry out such international information-sharing agreements as the Commission may require.
(6) Financial integrity of transactions The security-based swap execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of security-based swaps entered on or through the facilities of the security-based swap execution facility, including the clearance and settlement of security-based swaps pursuant to section 78c–3(a)(1) of this title.
(7) Emergency authority The security-based swap execution facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, as is necessary and appropriate, including the authority to liquidate or transfer open positions in any security-based swap or to suspend or curtail trading in a security-based swap.
(8) Timely publication of trading information (A) In general The security-based swap execution facility shall make public timely information on price, trading volume, and other trading data on security-based swaps to the extent prescribed by the Commission.
(B) Capacity of security-based swap execution facility The security-based swap execution facility shall be required to have the capacity to electronically capture and transmit and disseminate trade information with respect to transactions executed on or through the facility.
(9) Recordkeeping and reporting (A) In general A security-based swap execution facility shall—
(i) maintain records of all activities relating to the business of the facility, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; and
(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this chapter.
(B) Requirements The Commission shall adopt data collection and reporting requirements for security-based swap execution facilities that are comparable to corresponding requirements for clearing agencies and security-based swap data repositories.
(10) Antitrust considerations Unless necessary or appropriate to achieve the purposes of this chapter, the security-based swap execution facility shall not—
(A) adopt any rules or taking 11 So in original. Probably should be “take”. any actions that result in any unreasonable restraint of trade; or
(B) impose any material anticompetitive burden on trading or clearing.
(11) Conflicts of interest The security-based swap execution facility shall—
(A) establish and enforce rules to minimize conflicts of interest in its decision-making process; and
(B) establish a process for resolving the conflicts of interest.
(12) Financial resources (A) In general The security-based swap execution facility shall have adequate financial, operational, and managerial resources to discharge each responsibility of the security-based swap execution facility, as determined by the Commission.
(B) Determination of resource adequacy The financial resources of a security-based swap execution facility shall be considered to be adequate if the value of the financial resources—
(i) enables the organization to meet its financial obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and
(ii) exceeds the total amount that would enable the security-based swap execution facility to cover the operating costs of the security-based swap execution facility for a 1-year period, as calculated on a rolling basis.
(13) System safeguards The security-based swap execution facility shall—
(A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that—
(i) are reliable and secure; and
(ii) have adequate scalable capacity;
(B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for—
(i) the timely recovery and resumption of operations; and
(ii) the fulfillment of the responsibilities and obligations of the security-based swap execution facility; and
(C) periodically conduct tests to verify that the backup resources of the security-based swap execution facility are sufficient to ensure continued—
(i) order processing and trade matching;
(ii) price reporting;
(iii) market surveillance; and
(iv) maintenance of a comprehensive and accurate audit trail.
(14) Designation of chief compliance officer (A) In general Each security-based swap execution facility shall designate an individual to serve as a chief compliance officer.
(B) Duties The chief compliance officer shall—
(i) report directly to the board or to the senior officer of the facility;
(ii) review compliance with the core principles in this subsection;
(iii) in consultation with the board of the facility, a body performing a function similar to that of a board, or the senior officer of the facility, resolve any conflicts of interest that may arise;
(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;
(v) ensure compliance with this chapter and the rules and regulations issued under this chapter, including rules prescribed by the Commission pursuant to this section;
(vi) establish procedures for the remediation of noncompliance issues found during—
(I) compliance office reviews;
(II) look backs;
(III) internal or external audit findings;
(IV) self-reported errors; or
(V) through validated complaints; and
(vii) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
(C) Annual reports (i) In general In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of—
(I) the compliance of the security-based swap execution facility with this chapter; and
(II) the policies and procedures, including the code of ethics and conflict of interest policies, of the security-based security-based 22 So in original. swap execution facility.
(ii) Requirements The chief compliance officer shall—
(I) submit each report described in clause (i) with the appropriate financial report of the security-based swap execution facility that is required to be submitted to the Commission pursuant to this section; and
(II) include in the report a certification that, under penalty of law, the report is accurate and complete.
(e) Exemptions The Commission may exempt, conditionally or unconditionally, a security-based swap execution facility from registration under this section if the Commission finds that the facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Commodity Futures Trading Commission.
(f) Rules The Commission shall prescribe rules governing the regulation of security-based swap execution facilities under this section.
(June 6, 1934, ch. 404, title I, § 3D, as added Pub. L. 111–203, title VII, § 763(c), July 21, 2010, 124 Stat. 1769.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (d)(9)(A)(ii), (10), (14)(B)(v), (C)(i)(I), was in the original “this title”. See References in Text note set out under section 78a of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.
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# 15 U.S.C. § 78c–5 - Segregation of assets held as collateral in security-based swap transactions
## Text
(a) Registration requirement It shall be unlawful for any person to accept any money, securities, or property (or to extend any credit in lieu of money, securities, or property) from, for, or on behalf of a security-based swaps customer to margin, guarantee, or secure a security-based swap cleared by or through a clearing agency (including money, securities, or property accruing to the customer as the result of such a security-based swap), unless the person shall have registered under this chapter with the Commission as a broker, dealer, or security-based swap dealer, and the registration shall not have expired nor been suspended nor revoked.
(b) Cleared security-based swaps (1) Segregation required A broker, dealer, or security-based swap dealer shall treat and deal with all money, securities, and property of any security-based swaps customer received to margin, guarantee, or secure a security-based swap cleared by or though 11 So in original. Probably should be “through”. a clearing agency (including money, securities, or property accruing to the security-based swaps customer as the result of such a security-based swap) as belonging to the security-based swaps customer.
(2) Commingling prohibited Money, securities, and property of a security-based swaps customer described in paragraph (1) shall be separately accounted for and shall not be commingled with the funds of the broker, dealer, or security-based swap dealer or be used to margin, secure, or guarantee any trades or contracts of any security-based swaps customer or person other than the person for whom the same are held.
(c) Exceptions (1) Use of funds (A) In general Notwithstanding subsection (b), money, securities, and property of a security-based swaps customer of a broker, dealer, or security-based swap dealer described in subsection (b) may, for convenience, be commingled and deposited in the same 1 or more accounts with any bank or trust company or with a clearing agency.
(B) Withdrawal Notwithstanding subsection (b), such share of the money, securities, and property described in subparagraph (A) as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle a cleared security-based swap with a clearing agency, or with any member of the clearing agency, may be withdrawn and applied to such purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the cleared security-based swap.
(2) Commission action Notwithstanding subsection (b), in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, any money, securities, or property of the security-based swaps customer of a broker, dealer, or security-based swap dealer described in subsection (b) may be commingled and deposited as provided in this section with any other money, securities, or property received by the broker, dealer, or security-based swap dealer and required by the Commission to be separately accounted for and treated and dealt with as belonging to the security-based swaps customer of the broker, dealer, or security-based swap dealer.
(d) Permitted investments Money described in subsection (b) may be invested in obligations of the United States, in general obligations of any State or of any political subdivision of a State, and in obligations fully guaranteed as to principal and interest by the United States, or in any other investment that the Commission may by rule or regulation prescribe, and such investments shall be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe.
(e) Prohibition It shall be unlawful for any person, including any clearing agency and any depository institution, that has received any money, securities, or property for deposit in a separate account or accounts as provided in subsection (b) to hold, dispose of, or use any such money, securities, or property as belonging to the depositing broker, dealer, or security-based swap dealer or any person other than the swaps customer of the broker, dealer, or security-based swap dealer.
(f) Segregation requirements for uncleared security-based swaps (1) Segregation of assets held as collateral in uncleared security-based swap transactions (A) Notification A security-based swap dealer or major security-based swap participant shall be required to notify the counterparty of the security-based swap dealer or major security-based swap participant at the beginning of a security-based swap transaction that the counterparty has the right to require segregation of the funds of other property supplied to margin, guarantee, or secure the obligations of the counterparty.
(B) Segregation and maintenance of funds At the request of a counterparty to a security-based swap that provides funds or other property to a security-based swap dealer or major security-based swap participant to margin, guarantee, or secure the obligations of the counterparty, the security-based swap dealer or major security-based swap participant shall—
(i) segregate the funds or other property for the benefit of the counterparty; and
(ii) in accordance with such rules and regulations as the Commission may promulgate, maintain the funds or other property in a segregated account separate from the assets and other interests of the security-based swap dealer or major security-based swap participant.
(2) Applicability The requirements described in paragraph (1) shall—
(A) apply only to a security-based swap between a counterparty and a security-based swap dealer or major security-based swap participant that is not submitted for clearing to a clearing agency; and
(B) (i) not apply to variation margin payments; or
(ii) not preclude any commercial arrangement regarding—
(I) the investment of segregated funds or other property that may only be invested in such investments as the Commission may permit by rule or regulation; and
(II) the related allocation of gains and losses resulting from any investment of the segregated funds or other property.
(3) Use of independent third-party custodians The segregated account described in paragraph (1) shall be—
(A) carried by an independent third-party custodian; and
(B) designated as a segregated account for and on behalf of the counterparty.
(4) Reporting requirement If the counterparty does not choose to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty, the security-based swap dealer or major security-based swap participant shall report to the counterparty of the security-based swap dealer or major security-based swap participant on a quarterly basis that the back office procedures of the security-based swap dealer or major security-based swap participant relating to margin and collateral requirements are in compliance with the agreement of the counterparties.
(g) Bankruptcy A security-based swap, as defined in section 78c(a)(68) of this title shall be considered to be a security as such term is used in section 101(53A)(B) and subchapter III of title 11.22 So in original. An account that holds a security-based swap, other than a portfolio margining account referred to in section 78o(c)(3)(C) of this title shall be considered to be a securities account, as that term is defined in section 741 of title 11. The definitions of the terms “purchase” and “sale” in section 78c(a)(13) and (14) of this title shall be applied to the terms “purchase” and “sale”, as used in section 741 of title 11. The term “customer”, as defined in section 741 of title 11, excludes any person, to the extent that such person has a claim based on any open repurchase agreement, open reverse repurchase agreement, stock borrowed agreement, non-cleared option, or non-cleared security-based swap except to the extent of any margin delivered to or by the customer with respect to which there is a customer protection requirement under section 78o(c)(3) of this title or a segregation requirement.
(June 6, 1934, ch. 404, title I, § 3E, as added Pub. L. 111–203, title VII, § 763(d), July 21, 2010, 124 Stat. 1774.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (a), was in the original “this title”. See References in Text note set out under section 78a of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.
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# 15 U.S.C. § 78cc - Validity of contracts
## Text
(a) Waiver provisions Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of a self-regulatory organization, shall be void.
(b) Contract provisions in violation of chapter Every contract made in violation of any provision of this chapter or of any rule or regulation thereunder, and every contract (including any contract for listing a security on an exchange) heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this chapter or any rule or regulation thereunder, shall be void (1) as regards the rights of any person who, in violation of any such provision, rule, or regulation, shall have made or engaged in the performance of any such contract, and (2) as regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule, or regulation: Provided, (A) That no contract shall be void by reason of this subsection because of any violation of any rule or regulation prescribed pursuant to paragraph (3) of subsection (c) of section 78o of this title, and (B) that no contract shall be deemed to be void by reason of this subsection in any action maintained in reliance upon this subsection, by any person to or for whom any broker or dealer sells, or from or for whom any broker or dealer purchases, a security in violation of any rule or regulation prescribed pursuant to paragraph (1) or (2) of subsection (c) of section 78o of this title, unless such action is brought within one year after the discovery that such sale or purchase involves such violation and within three years after such violation. The Commission may, in a rule or regulation prescribed pursuant to such paragraph (2) of such section 78o(c) of this title, designate such rule or regulation, or portion thereof, as a rule or regulation, or portion thereof, a contract in violation of which shall not be void by reason of this subsection.
(c) Validity of loans, extensions of credit, and creation of liens; actual knowledge of violation Nothing in this chapter shall be construed (1) to affect the validity of any loan or extension of credit (or any extension or renewal thereof) made or of any lien created prior or subsequent to the enactment of this chapter, unless at the time of the making of such loan or extension of credit (or extension or renewal thereof) or the creating of such lien, the person making such loan or extension of credit (or extension or renewal thereof) or acquiring such lien shall have actual knowledge of facts by reason of which the making of such loan or extension of credit (or extension or renewal thereof) or the acquisition of such lien is a violation of the provisions of this chapter or any rule or regulation thereunder, or (2) to afford a defense to the collection of any debt or obligation or the enforcement of any lien by any person who shall have acquired such debt, obligation, or lien in good faith for value and without actual knowledge of the violation of any provision of this chapter or any rule or regulation thereunder affecting the legality of such debt, obligation, or lien.
(June 6, 1934, ch. 404, title I, § 29, 48 Stat. 903; June 25, 1938, ch. 677, § 3, 52 Stat. 1076; Pub. L. 101–429, title V, § 507, Oct. 15, 1990, 104 Stat. 956; Pub. L. 111–203, title IX, §§ 927, 929T, July 21, 2010, 124 Stat. 1852, 1867.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2010—Subsec. (a). Pub. L. 111–203, §§ 927, 929T, amended subsec. (a) identically, substituting “a self-regulatory organization,” for “an exchange required thereby”. 1990—Subsec. (b). Pub. L. 101–429 substituted in cl. (A) “paragraph (3)” for “paragraph (2) or (3)” and in cl. (B) “paragraph (1) or (2)” for “paragraph (1)”, and inserted at end “The Commission may, in a rule or regulation prescribed pursuant to such paragraph (2) of such section 78o(c) of this title, designate such rule or regulation, or portion thereof, as a rule or regulation, or portion thereof, a contract in violation of which shall not be void by reason of this subsection.” 1938—Subsec. (b). Act June 25, 1938, inserted proviso.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective Date of 1990 AmendmentAmendment by Pub. L. 101–429 effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in a note under section 77g of this title.
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# 15 U.S.C. § 78d–1 - Delegation of functions by Commission
## Text
(a) Authorization; functions delegable; eligible persons; application of other laws In addition to its existing authority, the Securities and Exchange Commission shall have the authority to delegate, by published order or rule, any of its functions to a division of the Commission, an individual Commissioner, an administrative law judge, or an employee or employee board, including functions with respect to hearing, determining, ordering, certifying, reporting, or otherwise acting as to any work, business, or matter. Nothing in this section shall be deemed to supersede the provisions of section 556(b) of title 5, or to authorize the delegation of the function of rulemaking as defined in subchapter II of chapter 5 of title 5, with reference to general rules as distinguished from rules of particular applicability, or of the making of any rule pursuant to section 78s(c) of this title.
(b) Right of review; procedure With respect to the delegation of any of its functions, as provided in subsection (a) of this section, the Commission shall retain a discretionary right to review the action of any such division of the Commission, individual Commissioner, administrative law judge, employee, or employee board, upon its own initiative or upon petition of a party to or intervenor in such action, within such time and in such manner as the Commission by rule shall prescribe. The vote of one member of the Commission shall be sufficient to bring any such action before the Commission for review. A person or party shall be entitled to review by the Commission if he or it is adversely affected by action at a delegated level which (1) denies any request for action pursuant to section 77h(a) or section 77h(c) of this title or the first sentence of section 78l(d) of this title; (2) suspends trading in a security pursuant to section 78l(k) of this title; or (3) is pursuant to any provision of this chapter in a case of adjudication, as defined in section 551 of title 5, not required by this chapter to be determined on the record after notice and opportunity for hearing (except to the extent there is involved a matter described in section 554(a)(1) through (6) of such title 5).
(c) Finality of delegated action If the right to exercise such review is declined, or if no such review is sought within the time stated in the rules promulgated by the Commission, then the action of any such division of the Commission, individual Commissioner, administrative law judge, employee, or employee board, shall, for all purposes, including appeal or review thereof, be deemed the action of the Commission.
(June 6, 1934, ch. 404, title I, § 4A, as added Pub. L. 100–181, title III, § 308(a), Dec. 4, 1987, 101 Stat. 1254.)
## Notes
Editorial Notes
Prior ProvisionsA prior section 78d–1, Pub. L. 87–592, § 1, Aug. 20, 1962, 76 Stat. 394; Pub. L. 94–29, § 25, June 4, 1975, 89 Stat. 163; Pub. L. 95–251, § 2(a)(4), Mar. 27, 1978, 92 Stat. 183, provided for subject matter similar to the provisions comprising this section, prior to repeal by section 308(b) of Pub. L. 100–181.
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# 15 U.S.C. § 78d–2 - Transfer of functions with respect to assignment of personnel to chairman
## Text
In addition to the functions transferred by the provisions of Reorganization Plan Numbered 10 of 1950 (64 Stat. 1265), there are hereby transferred from the Commission to the Chairman of the Commission the functions of the Commission with respect to the assignment of Commission personnel, including Commissioners, to perform such functions as may have been delegated by the Commission to the Commission personnel, including Commissioners, pursuant to section 78d–1 of this title.
(June 6, 1934, ch. 404, title I, § 4B, as added Pub. L. 100–181, title III, § 308(a), Dec. 4, 1987, 101 Stat. 1255.)
## Notes
Editorial Notes
References in TextReorganization Plan Numbered 10 of 1950 (64 Stat. 1265), referred to in text, is set out as a note under section 78d of this title.
Prior ProvisionsA prior section 78d–2, Pub. L. 87–592, § 2, Aug. 20, 1962, 76 Stat. 395, provided for subject matter similar to the provisions comprising this section, prior to repeal by section 308(b) of Pub. L. 100–181.
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# 15 U.S.C. § 78d–3 - Appearance and practice before the Commission
## Text
(a) Authority to censure The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege of appearing or practicing before the Commission in any way, if that person is found by the Commission, after notice and opportunity for hearing in the matter—
(1) not to possess the requisite qualifications to represent others;
(2) to be lacking in character or integrity, or to have engaged in unethical or improper professional conduct; or
(3) to have willfully violated, or willfully aided and abetted the violation of, any provision of the securities laws or the rules and regulations issued thereunder.
(b) Definition With respect to any registered public accounting firm or associated person, for purposes of this section, the term “improper professional conduct” means—
(1) intentional or knowing conduct, including reckless conduct, that results in a violation of applicable professional standards; and
(2) negligent conduct in the form of—
(A) a single instance of highly unreasonable conduct that results in a violation of applicable professional standards in circumstances in which the registered public accounting firm or associated person knows, or should know, that heightened scrutiny is warranted; or
(B) repeated instances of unreasonable conduct, each resulting in a violation of applicable professional standards, that indicate a lack of competence to practice before the Commission.
(June 6, 1934, ch. 404, title I, § 4C, as added Pub. L. 107–204, title VI, § 602, July 30, 2002, 116 Stat. 794.)
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# 15 U.S.C. § 78d–4 - Additional duties of Inspector General
## Text
(a) Suggestion submissions by Commission employees (1) Hotline established The Inspector General of the Commission shall establish and maintain a telephone hotline or other electronic means for the receipt of—
(A) suggestions by employees of the Commission for improvements in the work efficiency, effectiveness, and productivity, and the use of the resources, of the Commission; and
(B) allegations by employees of the Commission of waste, abuse, misconduct, or mismanagement within the Commission.
(2) Confidentiality The Inspector General shall maintain as confidential—
(A) the identity of any individual who provides information by the means established under paragraph (1), unless the individual requests otherwise, in writing; and
(B) at the request of any such individual, any specific information provided by the individual.
(b) Consideration of reports The Inspector General shall consider any suggestions or allegations received by the means established under subsection (a)(1), and shall recommend appropriate action in relation to such suggestions or allegations.
(c) Recognition The Inspector General may recognize any employee who makes a suggestion under subsection (a)(1) (or by other means) that would or does—
(1) increase the work efficiency, effectiveness, or productivity of the Commission; or
(2) reduce waste, abuse, misconduct, or mismanagement within the Commission.
(d) Report The Inspector General of the Commission shall submit to Congress an annual report containing a description of—
(1) the nature, number, and potential benefits of any suggestions received under subsection (a);
(2) the nature, number, and seriousness of any allegations received under subsection (a);
(3) any recommendations made or actions taken by the Inspector General in response to substantiated allegations received under subsection (a); and
(4) any action the Commission has taken in response to suggestions or allegations received under subsection (a).
(e) Funding The activities of the Inspector General under this subsection shall be funded by the Securities and Exchange Commission Investor Protection Fund established under section 78u–6 of this title.
(June 6, 1934, ch. 404, title I, § 4D, as added Pub. L. 111–203, title IX, § 966, July 21, 2010, 124 Stat. 1912.)
## Notes
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78d–5 - Deadline for completing enforcement investigations and compliance examinations and inspections
## Text
(a) Enforcement investigations (1) In general Not later than 180 days after the date on which Commission staff provide 11 So in original. Probably should be “provides”. a written Wells notification to any person, the Commission staff shall either file an action against such person or provide notice to the Director of the Division of Enforcement of its intent to not file an action.
(2) Exceptions for certain complex actions Notwithstanding paragraph (1), if the Director of the Division of Enforcement of the Commission or the Director’s designee determines that a particular enforcement investigation is sufficiently complex such that a determination regarding the filing of an action against a person cannot be completed within the deadline specified in paragraph (1), the Director of the Division of Enforcement of the Commission or the Director’s designee may, after providing notice to the Chairman of the Commission, extend such deadline as needed for one additional 180-day period. If after the additional 180-day period the Director of the Division of Enforcement of the Commission or the Director’s designee determines that a particular enforcement investigation is sufficiently complex such that a determination regarding the filing of an action against a person cannot be completed within the additional 180-day period, the Director of the Division of Enforcement of the Commission or the Director’s designee may, after providing notice to and receiving approval of the Commission, extend such deadline as needed for one or more additional successive 180-day periods.
(b) Compliance examinations and inspections (1) In general Not later than 180 days after the date on which Commission staff completes the on-site portion of its compliance examination or inspection or receives all records requested from the entity being examined or inspected, whichever is later, Commission staff shall provide the entity being examined or inspected with written notification indicating either that the examination or inspection has concluded, has concluded without findings, or that the staff requests the entity undertake corrective action.
(2) Exception for certain complex actions Notwithstanding paragraph (1), if the head of any division or office within the Commission responsible for compliance examinations and inspections or his designee determines that a particular compliance examination or inspection is sufficiently complex such that a determination regarding concluding the examination or inspection, or regarding the staff requests the entity undertake corrective action, cannot be completed within the deadline specified in paragraph (1), the head of any division or office within the Commission responsible for compliance examinations and inspections or his designee may, after providing notice to the Chairman of the Commission, extend such deadline as needed for one additional 180-day period.
(June 6, 1934, ch. 404, title I, § 4E, as added Pub. L. 111–203, title IX, § 929U, July 21, 2010, 124 Stat. 1867.)
## Notes
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78d–6 - Report and certification of internal supervisory controls
## Text
(a) Annual reports and certification Not later than 90 days after the end of each fiscal year, the Commission shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the conduct by the Commission of examinations of registered entities, enforcement investigations, and review of corporate financial securities filings.
(b) Contents of reports Each report under subsection (a) shall contain—
(1) an assessment, as of the end of the most recent fiscal year, of the effectiveness of—
(A) the internal supervisory controls of the Commission; and
(B) the procedures of the Commission applicable to the staff of the Commission who perform examinations of registered entities, enforcement investigations, and reviews of corporate financial securities filings;
(2) a certification that the Commission has adequate internal supervisory controls to carry out the duties of the Commission described in paragraph (1)(B); and
(3) a summary by the Comptroller General of the United States of the review carried out under subsection (d).11 So in original. Probably should be “(e).”
(c) Certification (1) Signature The certification under subsection (b)(2) shall be signed by the Director of the Division of Enforcement, the Director of the Division of Corporation Finance, and the Director of the Office of Compliance Inspections and Examinations (or the head of any successor division or office).
(2) Content of certification Each individual described in paragraph (1) shall certify that the individual—
(A) is directly responsible for establishing and maintaining the internal supervisory controls of the Division or Office of which the individual is the head;
(B) is knowledgeable about the internal supervisory controls of the Division or Office of which the individual is the head;
(C) has evaluated the effectiveness of the internal supervisory controls during the 90-day period ending on the final day of the fiscal year to which the report relates; and
(D) has disclosed to the Commission any significant deficiencies in the design or operation of internal supervisory controls that could adversely affect the ability of the Division or Office to consistently conduct inspections, or investigations, or reviews of filings with professional competence and integrity.
(d) New Director or Acting Director Notwithstanding subsection (a), if the Director of the Division of Enforcement, the Director of the Division of Corporate Finance, or the Director of the Office of Compliance Inspections and Examinations has served as Director of the Division or Office for less than 90 days on the date on which a report is required to be submitted under subsection (a), the Commission may submit the report on the date on which the Director has served as Director for 90 days. If there is no Director of the Division of Enforcement, the Division of Corporate Finance, or the Office of Compliance Inspections and Examinations, on the date on which a report is required to be submitted under subsection (a), the Acting Director of the Division or Office may make the certification required under subsection (c).
(e) Review by the Comptroller General (1) Report The Comptroller General of the United States shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that contains a review of the adequacy and effectiveness of the internal supervisory control structure and procedures described in subsection (b)(1), not less frequently than once every 3 years, at a time to coincide with the publication of the reports of the Commission under this section.
(2) Authority to hire experts The Comptroller General of the United States may hire independent consultants with specialized expertise in any area relevant to the duties of the Comptroller General described in this section, in order to assist the Comptroller General in carrying out such duties.
(Pub. L. 111–203, title IX, § 961, July 21, 2010, 124 Stat. 1907.)
## Notes
Editorial Notes
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definitions For definitions of terms used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78d–7 - Triennial report on personnel management
## Text
(a) Triennial report required Once every 3 years, the Comptroller General of the United States shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the quality of personnel management by the Commission.
(b) Contents of report Each report under subsection (a) shall include—
(1) an evaluation of—
(A) the effectiveness of supervisors in using the skills, talents, and motivation of the employees of the Commission to achieve the goals of the Commission;
(B) the criteria for promoting employees of the Commission to supervisory positions;
(C) the fairness of the application of the promotion criteria to the decisions of the Commission;
(D) the competence of the professional staff of the Commission;
(E) the efficiency of communication between the units of the Commission regarding the work of the Commission (including communication between divisions and between subunits of a division) and the efforts by the Commission to promote such communication;
(F) the turnover within subunits of the Commission, including the consideration of supervisors whose subordinates have an unusually high rate of turnover;
(G) whether there are excessive numbers of low-level, mid-level, or senior-level managers;
(H) any initiatives of the Commission that increase the competence of the staff of the Commission;
(I) the actions taken by the Commission regarding employees of the Commission who have failed to perform their duties and circumstances under which the Commission has issued to employees a notice of termination; and
(J) such other factors relating to the management of the Commission as the Comptroller General determines are appropriate;
(2) an evaluation of any improvements made with respect to the areas described in paragraph (1) since the date of submission of the previous report; and
(3) recommendations for how the Commission can use the human resources of the Commission more effectively and efficiently to carry out the mission of the Commission.
(c) Consultation In preparing the report under subsection (a), the Comptroller General shall consult with current employees of the Commission, retired employees and other former employees of the Commission, the Inspector General of the Commission, persons that have business before the Commission, any union representing the employees of the Commission, private management consultants, academics, and any other source that the Comptroller General deems appropriate.
(d) Report by Commission Not later than 90 days after the date on which the Comptroller General submits each report under subsection (a), the Commission shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report describing the actions taken by the Commission in response to the recommendations contained in the report under subsection (a).
(e) Reimbursements for cost of reports (1) Reimbursements required The Commission shall reimburse the Government Accountability Office for the full cost of making the reports under this section, as billed therefor by the Comptroller General.
(2) Crediting and use of reimbursements Such reimbursements shall—
(A) be credited to the appropriation account “Salaries and Expenses, Government Accountability Office” current when the payment is received; and
(B) remain available until expended.
(f) Authority to hire experts The Comptroller General of the United States may hire independent consultants with specialized expertise in any area relevant to the duties of the Comptroller General described in this section, in order to assist the Comptroller General in carrying out such duties.
(Pub. L. 111–203, title IX, § 962, July 21, 2010, 124 Stat. 1908.)
## Notes
Editorial Notes
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definition For definition of “Commission” as used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78d–8 - Annual financial controls audit
## Text
(a) Reports of Commission (1) Annual reports required Not later than 6 months after the end of each fiscal year, the Commission shall publish and submit to Congress a report that—
(A) describes the responsibility of the management of the Commission for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(B) contains an assessment of the effectiveness of the internal control structure and procedures for financial reporting of the Commission during that fiscal year.
(2) Attestation The reports required under paragraph (1) shall be attested to by the Chairman and chief financial officer of the Commission.
(b) Report by Comptroller General (1) Report required Not later than 6 months after the end of the first fiscal year after July 21, 2010, the Comptroller General of the United States shall submit a report to Congress that assesses—
(A) the effectiveness of the internal control structure and procedures of the Commission for financial reporting; and
(B) the assessment of the Commission under subsection (a)(1)(B).
(2) Attestation The Comptroller General shall attest to, and report on, the assessment made by the Commission under subsection (a).
(c) Reimbursements for cost of reports (1) Reimbursements required The Commission shall reimburse the Government Accountability Office for the full cost of making the reports under subsection (b), as billed therefor by the Comptroller General.
(2) Crediting and use of reimbursements Such reimbursements shall—
(A) be credited to the appropriation account “Salaries and Expenses, Government Accountability Office” current when the payment is received; and
(B) remain available until expended.
(Pub. L. 111–203, title IX, § 963, July 21, 2010, 124 Stat. 1910.)
## Notes
Editorial Notes
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definition For definition of “Commission” as used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78d–9 - Report on oversight of national securities associations
## Text
(a) Report required Not later than 2 years after July 21, 2010, and every 3 years thereafter, the Comptroller General of the United States shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that includes an evaluation of the oversight by the Commission of national securities associations registered under section 78o–3 of this title with respect to—
(1) the governance of such national securities associations, including the identification and management of conflicts of interest by such national securities associations, together with an analysis of the impact of any conflicts of interest on the regulatory enforcement or rulemaking by such national securities associations;
(2) the examinations carried out by the national securities associations, including the expertise of the examiners;
(3) the executive compensation practices of such national securities associations;
(4) the arbitration services provided by the national securities associations;
(5) the review performed by national securities associations of advertising by the members of the national securities associations;
(6) the cooperation with and assistance to State securities administrators by the national securities associations to promote investor protection;
(7) how the funding of national securities associations is used to support the mission of the national securities associations, including—
(A) the methods of funding;
(B) the sufficiency of funds;
(C) how funds are invested by the national securities association pending use; and
(D) the impact of the methods, sufficiency, and investment of funds on regulatory enforcement by the national securities associations;
(8) the policies regarding the employment of former employees of national securities associations by regulated entities;
(9) the ongoing effectiveness of the rules of the national securities associations in achieving the goals of the rules;
(10) the transparency of governance and activities of the national securities associations; and
(11) any other issue that has an impact, as determined by the Comptroller General, on the effectiveness of such national securities associations in performing their mission and in dealing fairly with investors and members; 11 So in original. The semicolon probably should be a period.
(b) Reimbursements for cost of reports (1) Reimbursements required The Commission shall reimburse the Government Accountability Office for the full cost of making the reports under subsection (a), as billed therefor by the Comptroller General.
(2) Crediting and use of reimbursements Such reimbursements shall—
(A) be credited to the appropriation account “Salaries and Expenses, Government Accountability Office” current when the payment is received; and
(B) remain available until expended.
(Pub. L. 111–203, title IX, § 964, July 21, 2010, 124 Stat. 1910.)
## Notes
Editorial Notes
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definitions For definitions of terms used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78d - Securities and Exchange Commission
## Text
(a) Establishment; composition; limitations on commissioners; terms of office There is hereby established a Securities and Exchange Commission (hereinafter referred to as the “Commission”) to be composed of five commissioners to be appointed by the President by and with the advice and consent of the Senate. Not more than three of such commissioners shall be members of the same political party, and in making appointments members of different political parties shall be appointed alternately as nearly as may be practicable. No commissioner shall engage in any other business, vocation, or employment than that of serving as commissioner, nor shall any commissioner participate, directly or indirectly, in any stock-market operations or transactions of a character subject to regulation by the Commission pursuant to this chapter. Each commissioner shall hold office for a term of five years and until his successor is appointed and has qualified, except that he shall not so continue to serve beyond the expiration of the next session of Congress subsequent to the expiration of said fixed term of office, and except (1) any commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and (2) the terms of office of the commissioners first taking office after June 6, 1934, shall expire as designated by the President at the time of nomination, one at the end of one year, one at the end of two years, one at the end of three years, one at the end of four years, and one at the end of five years, after June 6, 1934.
(b) Appointment and compensation of staff and leasing authority (1) Appointment and compensation The Commission shall appoint and compensate officers, attorneys, economists, examiners, and other employees in accordance with section 4802 of title 5.
(2) Reporting of information In establishing and adjusting schedules of compensation and benefits for officers, attorneys, economists, examiners, and other employees of the Commission under applicable provisions of law, the Commission shall inform the heads of the agencies referred to under section 1833b of title 12 and Congress of such compensation and benefits and shall seek to maintain comparability with such agencies regarding compensation and benefits.
(3) Leasing authority Nothwithstanding 11 So in original. Probably should be “Notwithstanding”. any other provision of law, the Commission is authorized to enter directly into leases for real property for office, meeting, storage, and such other space as is necessary to carry out its functions, and shall be exempt from any General Services Administration space management regulations or directives.
(c) Acceptance of travel support for Commission activities from non-Federal sources; regulations Notwithstanding any other provision of law, in accordance with regulations which the Commission shall prescribe to prevent conflicts of interest, the Commission may accept payment and reimbursement, in cash or in kind, from non-Federal agencies, organizations, and individuals for travel, subsistence, and other necessary expenses incurred by Commission members and employees in attending meetings and conferences concerning the functions or activities of the Commission. Any payment or reimbursement accepted shall be credited to the appropriated funds of the Commission. The amount of travel, subsistence, and other necessary expenses for members and employees paid or reimbursed under this subsection may exceed per diem amounts established in official travel regulations, but the Commission may include in its regulations under this subsection a limitation on such amounts.
(d) Acceptance of relocation expenses from former employers by professional fellows program participants Notwithstanding any other provision of law, former employers of participants in the Commission’s professional fellows programs may pay such participants their actual expenses for relocation to Washington, District of Columbia, to facilitate their participation in such programs, and program participants may accept such payments.
(e) Fee payments Notwithstanding any other provision of law, whenever any fee is required to be paid to the Commission pursuant to any provision of the securities laws or any other law, the Commission may provide by rule that such fee shall be paid in a manner other than in cash and the Commission may also specify the time that such fee shall be determined and paid relative to the filing of any statement or document with the Commission.
(f) Reimbursement of expenses for assisting foreign securities authorities Notwithstanding any other provision of law, the Commission may accept payment and reimbursement, in cash or in kind, from a foreign securities authority, or made on behalf of such authority, for necessary expenses incurred by the Commission, its members, and employees in carrying out any investigation pursuant to section 78u(a)(2) of this title or in providing any other assistance to a foreign securities authority. Any payment or reimbursement accepted shall be considered a reimbursement to the appropriated funds of the Commission.
(g) Office of the Investor Advocate (1) Office established There is established within the Commission the Office of the Investor Advocate (in this subsection referred to as the “Office”).
(2) Investor Advocate (A) In general The head of the Office shall be the Investor Advocate, who shall—
(i) report directly to the Chairman; and
(ii) be appointed by the Chairman, in consultation with the Commission, from among individuals having experience in advocating for the interests of investors in securities and investor protection issues, from the perspective of investors.
(B) Compensation The annual rate of pay for the Investor Advocate shall be equal to the highest rate of annual pay for other senior executives who report to the Chairman of the Commission.
(C) Limitation on service An individual who serves as the Investor Advocate may not be employed by the Commission—
(i) during the 2-year period ending on the date of appointment as Investor Advocate; or
(ii) during the 5-year period beginning on the date on which the person ceases to serve as the Investor Advocate.
(3) Staff of Office The Investor Advocate, after consultation with the Chairman of the Commission, may retain or employ independent counsel, research staff, and service staff, as the Investor Advocate deems necessary to carry out the functions, powers, and duties of the Office.
(4) Functions of the Investor Advocate The Investor Advocate shall—
(A) assist retail investors in resolving significant problems such investors may have with the Commission or with self-regulatory organizations;
(B) identify areas in which investors would benefit from changes in the regulations of the Commission or the rules of self-regulatory organizations;
(C) identify problems that investors have with financial service providers and investment products;
(D) analyze the potential impact on investors of—
(i) proposed regulations of the Commission; and
(ii) proposed rules of self-regulatory organizations registered under this chapter; and
(E) to the extent practicable, propose to the Commission changes in the regulations or orders of the Commission and to Congress any legislative, administrative, or personnel changes that may be appropriate to mitigate problems identified under this paragraph and to promote the interests of investors.
(5) Access to documents The Commission shall ensure that the Investor Advocate has full access to the documents of the Commission and any self-regulatory organization, as necessary to carry out the functions of the Office.
(6) Annual reports (A) Report on objectives (i) In general Not later than June 30 of each year after 2010, the Investor Advocate shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on the objectives of the Investor Advocate for the following fiscal year.
(ii) Contents Each report required under clause (i) shall contain full and substantive analysis and explanation.
(B) Report on activities (i) In general Not later than December 31 of each year after 2010, the Investor Advocate shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on the activities of the Investor Advocate during the immediately preceding fiscal year.
(ii) Contents Each report required under clause (i) shall include—
(I) appropriate statistical information and full and substantive analysis;
(II) information on steps that the Investor Advocate has taken during the reporting period to improve investor services and the responsiveness of the Commission and self-regulatory organizations to investor concerns;
(III) a summary of the most serious problems encountered by investors during the reporting period;
(IV) an inventory of the items described in subclause (III) that includes—
(aa) identification of any action taken by the Commission or the self-regulatory organization and the result of such action;
(bb) the length of time that each item has remained on such inventory; and
(cc) for items on which no action has been taken, the reasons for inaction, and an identification of any official who is responsible for such action;
(V) recommendations for such administrative and legislative actions as may be appropriate to resolve problems encountered by investors; and
(VI) any other information, as determined appropriate by the Investor Advocate.
(iii) Independence Each report required under this paragraph shall be provided directly to the Committees listed in clause (i) without any prior review or comment from the Commission, any commissioner, any other officer or employee of the Commission, or the Office of Management and Budget.
(iv) Confidentiality No report required under clause (i) may contain confidential information.
(7) Regulations The Commission shall, by regulation, establish procedures requiring a formal response to all recommendations submitted to the Commission by the Investor Advocate, not later than 3 months after the date of such submission.
(8) Ombudsman (A) Appointment Not later than 180 days after the date on which the first Investor Advocate is appointed under paragraph (2)(A)(i),22 So in original. Probably should be “(2)(A)(ii),”. the Investor Advocate shall appoint an Ombudsman, who shall report directly to the Investor Advocate.
(B) Duties The Ombudsman appointed under subparagraph (A) shall—
(i) act as a liaison between the Commission and any retail investor in resolving problems that retail investors may have with the Commission or with self-regulatory organizations;
(ii) review and make recommendations regarding policies and procedures to encourage persons to present questions to the Investor Advocate regarding compliance with the securities laws; and
(iii) establish safeguards to maintain the confidentiality of communications between the persons described in clause (ii) and the Ombudsman.
(C) Limitation In carrying out the duties of the Ombudsman under subparagraph (B), the Ombudsman shall utilize personnel of the Commission to the extent practicable. Nothing in this paragraph shall be construed as replacing, altering, or diminishing the activities of any ombudsman or similar office of any other agency.
(D) Report The Ombudsman shall submit a semiannual report to the Investor Advocate that describes the activities and evaluates the effectiveness of the Ombudsman during the preceding year. The Investor Advocate shall include the reports required under this section in the reports required to be submitted by the Inspector Advocate under paragraph (6).
(h) Examiners (1) Division of Trading and Markets The Division of Trading and Markets of the Commission, or any successor organizational unit, shall have a staff of examiners who shall—
(A) perform compliance inspections and examinations of entities under the jurisdiction of that Division; and
(B) report to the Director of that Division.
(2) Division of Investment Management The Division of Investment Management of the Commission, or any successor organizational unit, shall have a staff of examiners who shall—
(A) perform compliance inspections and examinations of entities under the jurisdiction of that Division; and
(B) report to the Director of that Division.
(i) Office of the Advocate for Small Business Capital Formation (1) Office established There is established within the Commission the Office of the Advocate for Small Business Capital Formation (hereafter in this subsection referred to as the “Office”).
(2) Advocate for Small Business Capital Formation (A) In general The head of the Office shall be the Advocate for Small Business Capital Formation, who shall—
(i) report directly to the Commission; and
(ii) be appointed by the Commission, from among individuals having experience in advocating for the interests of small businesses and encouraging small business capital formation.
(B) Compensation The annual rate of pay for the Advocate for Small Business Capital Formation shall be equal to the highest rate of annual pay for other senior executives who report directly to the Commission.
(C) No current employee of the Commission An individual may not be appointed as the Advocate for Small Business Capital Formation if the individual is currently employed by the Commission.
(3) Staff of Office The Advocate for Small Business Capital Formation, after consultation with the Commission, may retain or employ independent counsel, research staff, and service staff, as the Advocate for Small Business Capital Formation determines to be necessary to carry out the functions of the Office.
(4) Functions of the Advocate for Small Business Capital Formation The Advocate for Small Business Capital Formation shall—
(A) assist small businesses and small business investors in resolving significant problems such businesses and investors may have with the Commission or with self-regulatory organizations;
(B) identify areas in which small businesses and small business investors would benefit from changes in the regulations of the Commission or the rules of self-regulatory organizations;
(C) identify problems that small businesses have with securing access to capital, including any unique challenges to minority-owned small businesses, women-owned small businesses, and small businesses affected by hurricanes or other natural disasters;
(D) analyze the potential impact on small businesses and small business investors of—
(i) proposed regulations of the Commission that are likely to have a significant economic impact on small businesses and small business capital formation; and
(ii) proposed rules that are likely to have a significant economic impact on small businesses and small business capital formation of self-regulatory organizations registered under this chapter;
(E) conduct outreach to small businesses and small business investors, including through regional roundtables, in order to solicit views on relevant capital formation issues;
(F) to the extent practicable, propose to the Commission changes in the regulations or orders of the Commission and to Congress any legislative, administrative, or personnel changes that may be appropriate to mitigate problems identified under this paragraph and to promote the interests of small businesses and small business investors;
(G) consult with the Investor Advocate on proposed recommendations made under subparagraph (F); and
(H) advise the Investor Advocate on issues related to small businesses and small business investors.
(5) Access to documents The Commission shall ensure that the Advocate for Small Business Capital Formation has full access to the documents and information of the Commission and any self-regulatory organization, as necessary to carry out the functions of the Office.
(6) Annual report on activities (A) In general Not later than December 31 of each year after 2015, the Advocate for Small Business Capital Formation shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on the activities of the Advocate for Small Business Capital Formation during the immediately preceding fiscal year.
(B) Contents Each report required under subparagraph (A) shall include—
(i) appropriate statistical information and full and substantive analysis;
(ii) information on steps that the Advocate for Small Business Capital Formation has taken during the reporting period to improve small business services and the responsiveness of the Commission and self-regulatory organizations to small business and small business investor concerns;
(iii) a summary of the most serious issues encountered by small businesses and small business investors, including any unique issues encountered by minority-owned small businesses, women-owned small businesses, and small businesses affected by hurricanes or other natural disasters and their investors, during the reporting period;
(iv) an inventory of the items summarized under clause (iii) (including items summarized under such clause for any prior reporting period on which no action has been taken or that have not been resolved to the satisfaction of the Advocate for Small Business Capital Formation as of the beginning of the reporting period covered by the report) that includes—
(I) identification of any action taken by the Commission or the self-regulatory organization and the result of such action;
(II) the length of time that each item has remained on such inventory; and
(III) for items on which no action has been taken, the reasons for inaction, and an identification of any official who is responsible for such action;
(v) recommendations for such changes to the regulations, guidance and orders of the Commission and such legislative actions as may be appropriate to resolve problems with the Commission and self-regulatory organizations encountered by small businesses and small business investors and to encourage small business capital formation; and
(vi) any other information, as determined appropriate by the Advocate for Small Business Capital Formation.
(C) Confidentiality No report required by subparagraph (A) may contain confidential information.
(D) Independence Each report required under subparagraph (A) shall be provided directly to the committees of Congress listed in such subparagraph without any prior review or comment from the Commission, any commissioner, any other officer or employee of the Commission, or the Office of Management and Budget.
(7) Regulations The Commission shall establish procedures requiring a formal response to all recommendations submitted to the Commission by the Advocate for Small Business Capital Formation, not later than 3 months after the date of such submission.
(8) Government-Business Forum on Small Business Capital Formation The Advocate for Small Business Capital Formation shall be responsible for planning, organizing, and executing the annual Government-Business Forum on Small Business Capital Formation described in section 80c–1 of this title.
(9) Rule of construction Nothing in this subsection may be construed as replacing or reducing the responsibilities of the Investor Advocate with respect to small business investors.
(j) Open data publication All public data assets published by the Commission under the securities laws and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111–203; 124 Stat. 1376) shall be—
(1) made available as an open Government data asset (as defined in section 3502 of title 44);
(2) freely available for download;
(3) rendered in a human-readable format; and
(4) accessible via application programming interface where appropriate.
(June 6, 1934, ch. 404, title I, § 4, 48 Stat. 885; Oct. 28, 1949, ch. 782, title XI, § 1106(a), 63 Stat. 972; Pub. L. 86–619, § 3, July 12, 1960, 74 Stat. 408; Pub. L. 86–771, Sept. 13, 1960, 74 Stat. 913; Pub. L. 88–426, title III, § 305(20), Aug. 14, 1964, 78 Stat. 425; Pub. L. 98–38, § 1, June 6, 1983, 97 Stat. 205; Pub. L. 100–181, title III, § 307, Dec. 4, 1987, 101 Stat. 1254; Pub. L. 101–550, title I, § 103, title II, § 207, Nov. 15, 1990, 104 Stat. 2713, 2721; Pub. L. 104–290, title IV, § 406, Oct. 11, 1996, 110 Stat. 3444; Pub. L. 105–353, title II, § 203, Nov. 3, 1998, 112 Stat. 3234; Pub. L. 107–123, § 8(d)(2), Jan. 16, 2002, 115 Stat. 2399; Pub. L. 111–203, title IX, §§ 915, 919D, 965, 991(e)(1), July 21, 2010, 124 Stat. 1830, 1840, 1911, 1954; Pub. L. 114–284, § 2(a), Dec. 16, 2016, 130 Stat. 1447; Pub. L. 115–141, div. S, title IX, § 902, Mar. 23, 2018, 132 Stat. 1143; Pub. L. 117–263, div. E, title LVIII, § 5822, Dec. 23, 2022, 136 Stat. 3427; Pub. L. 119–21, title III, § 30003(a), July 4, 2025, 139 Stat. 126.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a), (g)(4)(D)(ii), and (i)(4)(D)(ii), was in the original “this title”. See References in Text note set out under section 78a of this title. The Dodd-Frank Wall Street Reform and Consumer Protection Act, referred to in subsec. (j), is Pub. L. 111–203, July 21, 2010, 124 Stat. 1376, which enacted chapter 53 (§ 5301 et seq.) of Title 12, Banks and Banking, and chapters 108 (§ 8201 et seq.) and 109 (§ 8301 et seq.) of this title, and enacted, amended, and repealed numerous other sections and notes in the Code. For complete classification of this Act to the Code, see Short Title note set out under section 5301 of Title 12 and Tables.
Amendments2025—Subsecs. (i) to (k). Pub. L. 119–21 redesignated subsecs. (j) and (k) as (i) and (j), respectively, and struck out former subsec. (i) which related to the establishment of the Securities and Exchange Commission Reserve Fund and amounts therein. 2022—Subsec. (k). Pub. L. 117–263 added subsec. (k). 2018—Subsec. (j)(4)(C), (6)(B)(iii). Pub. L. 115–141 substituted “minority-owned small businesses, women-owned small businesses, and small businesses affected by hurricanes or other natural disasters” for “minority-owned and women-owned small businesses”. 2016—Subsec. (j). Pub. L. 114–284 added subsec. (j). 2010—Subsec. (g). Pub. L. 111–203, § 915, added subsec. (g). Subsec. (g)(8). Pub. L. 111–203, § 919D, added par. (8). Subsec. (h). Pub. L. 111–203, § 965, added subsec. (h). Subsec. (i). Pub. L. 111–203, § 991(e)(1), added subsec. (i). 2002—Subsec. (b)(1), (2). Pub. L. 107–123 added pars. (1) and (2) and struck out former pars. (1) and (2), which authorized the Commission to appoint and compensate officers, attorneys, examiners, and other experts as needed, and to select, appoint, and compensate professional economists. 1998—Subsec. (b)(2), (3). Pub. L. 105–353 added par. (2) and redesignated former par. (2) as (3). 1996—Subsec. (e). Pub. L. 104–290 inserted before period at end “and the Commission may also specify the time that such fee shall be determined and paid relative to the filing of any statement or document with the Commission”. 1990—Subsec. (b). Pub. L. 101–550, § 103, inserted heading, designated existing provision as par. (1) and inserted heading, and added par. (2). Subsec. (f). Pub. L. 101–550, § 207, added subsec. (f). 1987—Subsec. (e). Pub. L. 100–181 added subsec. (e). 1983—Subsecs. (c), (d). Pub. L. 98–38 added subsecs. (c) and (d). 1964—Subsec. (a). Pub. L. 88–426 repealed provisions which prescribed the compensation of the Chairman and the Commissioners. 1960—Subsec. (a). Pub. L. 86–771 authorized the chairman to receive an additional $500 a year. Pub. L. 86–619 increased the salary of each commissioner from $15,000 to $20,000 a year, and provided for continuation in office of a commissioner upon termination of his term until a successor is appointed and has qualified, not beyond expiration of next session of Congress subsequent to the expiration of said fixed term of office. 1949—Subsec. (b). Act Oct. 28, 1949, substituted “Classification Act of 1949” for “Classification Act of 1923”.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by sections 915, 919D, and 965 of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Pub. L. 111–203, title IX, § 991(e)(2), July 21, 2010, 124 Stat. 1955, provided that: “The amendment made by this subsection [amending this section] shall take effect on October 1, 2011.”
Effective Date of 2002 AmendmentAmendment by Pub. L. 107–123 effective Oct. 1, 2001, see section 11 of Pub. L. 107–123, set out as a note under section 78ee of this title.
Effective Date of 1964 AmendmentFor effective date of amendment by Pub. L. 88–426, see section 501 of Pub. L. 88–426.
RepealsAct Oct. 28, 1949, ch. 782, set out in the credit of this section, was repealed (subject to a savings clause) by Pub. L. 89–554, Sept. 6, 1966, § 8, 80 Stat. 632, 655.
Rule of Construction—No New Disclosure RequirementsAmendment by Pub. L. 117–263 not to be construed to require certain additional information to be collected or disclosed, see section 5826 of Pub. L. 117–263, set out as a note under section 77g of this title.
Expenditure of Funds in and Closure of the Securities and Exchange Commission Reserve FundPub. L. 119–21, title III, § 30003(c)–(e), July 4, 2025, 139 Stat. 126, provided that: “(c) Transition Provision.—During the period beginning on the date of enactment of this Act [July 4, 2025] and ending on October 1, 2025, the Securities and Exchange Commission may expend amounts in the Securities and Exchange Commission Reserve Fund that were obligated before the date of enactment of this Act for any program, project, or activity that is ongoing (as of the day before the date of enactment of this Act) in accordance with [former] subsection (i) of section 4 of the Securities Exchange Act of 1934 (15 U.S.C. 78d), as in effect on the day before the date of enactment of this Act. “(d) Transfer of Remaining Amounts.—Effective on October 1, 2025, the obligated and unobligated balances of amounts in the Securities and Exchange Commission Reserve Fund shall be transferred to the general fund of the Treasury. “(e) Closing of Account.—For the purposes of section 1555 of title 31, United States Code, the Securities and Exchange Commission Reserve Fund shall be considered closed, and thereafter shall not be available for obligation or expenditure for any purpose, upon execution of the transfer required under subsection (d).”
Outreach by the CommissionPub. L. 112–106, title VII, § 701, Apr. 5, 2012, 126 Stat. 327, provided that: “The Securities and Exchange Commission shall provide online information and conduct outreach to inform small and medium sized businesses, women owned businesses, veteran owned businesses, and minority owned businesses of the changes made by this Act [see Short Title of 2012 Amendment note set out under section 78a of this title].”
Pay Authority for Employment of Experts and ConsultantsPub. L. 111–203, title IX, § 929G(c), July 21, 2010, 124 Stat. 1856, provided that: “The [Securities and Exchange] Commission may set the rate of pay for experts and consultants appointed under the authority of section 3109 of title 5, United States Code, in the same manner in which it sets the rate of pay for employees of the Commission.”
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out below.
1950 REORGANIZATION PLAN NO. 1015 F.R. 3175, 64 Stat. 1265Prepared by the President and transmitted to the Senate and the House of Representatives in Congress assembled, March 13, 1950, pursuant to the provisions of the Reorganization Act of 1949, approved June 20, 1949 [see 5 U.S.C. 901 et seq.].
SECURITIES AND EXCHANGE COMMISSION
Section 1. Transfer of Functions to the Chairman(a) Subject to the provisions of subsection (b) of this section there are hereby transferred from the Securities and Exchange Commission, hereinafter referred to as the Commission, to the Chairman of the Commission, hereinafter referred to as the Chairman, the executive and administrative functions of the Commission, including functions of the Commission with respect to (1) the appointment and supervision of personnel employed under the Commission, (2) the distribution of business among such personnel and among administrative units of the Commission, and (3) the use and expenditure of funds. (b)(1) In carrying out any of his functions under the provisions of this section the Chairman shall be governed by general policies of the Commission and by such regulatory decisions, findings, and determinations as the Commission may by law be authorized to make. (2) The appointment by the Chairman of the heads of major administrative units under the Commission shall be subject to the approval of the Commission. (3) Personnel employed regularly and full time in the immediate offices of Commissioners other than the Chairman shall not be affected by the provisions of this reorganization plan. (4) There are hereby reserved to the Commission its functions with respect to revising budget estimates and with respect to determining upon the distribution of appropriated funds according to major programs and purposes.
Sec. 2. Performance of Transferred FunctionsThe Chairman may from time to time make such provisions as he shall deem appropriate authorizing the performance by any officer, employee, or administrative unit under his jurisdiction of any function transferred to the Chairman by the provisions of section 1 of this reorganization plan.
Sec. 3. Designation of ChairmanThe functions of the Commission with respect to choosing a Chairman from among the Commissioners composing the Commission are hereby transferred to the President.
Message of the PresidentTo the Congress of the United States: I transmit herewith Reorganization Plan No. 10 of 1950, prepared in accordance with the Reorganization Act of 1949 and providing for reorganizations in the Securities and Exchange Commission. My reasons for transmitting this plan are stated in an accompanying general message. After investigation I have found and hereby declare that each reorganization included in Reorganization Plan No. 10 of 1950 is necessary to accomplish one or more of the purposes set forth in section 2(a) of the Reorganization Act of 1949. The taking effect of the reorganizations included in this plan may not in itself result in substantial immediate savings. However, many benefits in improved operations are probable during the next years which will result in a reduction in expenditures as compared with those that would be otherwise necessary. An itemization of these reductions in advance of actual experience under this plan is not practicable. Harry S. Truman.
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title: "15 U.S.C. § 78dd–2"
description: "Prohibited foreign trade practices by domestic concerns"
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title_name: "COMMERCE AND TRADE"
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citation: "15 U.S.C. § 78dd–2"
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---
# 15 U.S.C. § 78dd–2 - Prohibited foreign trade practices by domestic concerns
## Text
(a) Prohibition It shall be unlawful for any domestic concern, other than an issuer which is subject to section 78dd–1 of this title, or for any officer, director, employee, or agent of such domestic concern or any stockholder thereof acting on behalf of such domestic concern, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to—
(1) any foreign official for purposes of—
(A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or
(B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,
in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person;
(2) any foreign political party or official thereof or any candidate for foreign political office for purposes of—
(A) (i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or
(B) inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,
in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person; or
(3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of—
(A) (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or
(B) inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,
in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.
(b) Exception for routine governmental action Subsections (a) and (i) shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.
(c) Affirmative defenses It shall be an affirmative defense to actions under subsection (a) or (i) that—
(1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country; or
(2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to—
(A) the promotion, demonstration, or explanation of products or services; or
(B) the execution or performance of a contract with a foreign government or agency thereof.
(d) Injunctive relief (1) When it appears to the Attorney General that any domestic concern to which this section applies, or officer, director, employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) or (i) of this section, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond.
(2) For the purpose of any civil investigation which, in the opinion of the Attorney General, is necessary and proper to enforce this section, the Attorney General or his designee are empowered to administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of any books, papers, or other documents which the Attorney General deems relevant or material to such investigation. The attendance of witnesses and the production of documentary evidence may be required from any place in the United States, or any territory, possession, or commonwealth of the United States, at any designated place of hearing.
(3) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Attorney General may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Attorney General or his designee, there to produce records, if so ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof. All process in any such case may be served in the judicial district in which such person resides or may be found. The Attorney General may make such rules relating to civil investigations as may be necessary or appropriate to implement the provisions of this subsection.
(e) Guidelines by Attorney General Not later than 6 months after August 23, 1988, the Attorney General, after consultation with the Securities and Exchange Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall determine to what extent compliance with this section would be enhanced and the business community would be assisted by further clarification of the preceding provisions of this section and may, based on such determination and to the extent necessary and appropriate, issue—
(1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice’s present enforcement policy, the Attorney General determines would be in conformance with the preceding provisions of this section; and
(2) general precautionary procedures which domestic concerns may use on a voluntary basis to conform their conduct to the Department of Justice’s present enforcement policy regarding the preceding provisions of this section.
The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provisions of subchapter II of chapter 5 of title 5 and those guidelines and procedures shall be subject to the provisions of chapter 7 of that title.
(f) Opinions of Attorney General (1) The Attorney General, after consultation with appropriate departments and agencies of the United States and after obtaining the views of all interested persons through public notice and comment procedures, shall establish a procedure to provide responses to specific inquiries by domestic concerns concerning conformance of their conduct with the Department of Justice’s present enforcement policy regarding the preceding provisions of this section. The Attorney General shall, within 30 days after receiving such a request, issue an opinion in response to that request. The opinion shall state whether or not certain specified prospective conduct would, for purposes of the Department of Justice’s present enforcement policy, violate the preceding provisions of this section. Additional requests for opinions may be filed with the Attorney General regarding other specified prospective conduct that is beyond the scope of conduct specified in previous requests. In any action brought under the applicable provisions of this section, there shall be a rebuttable presumption that conduct, which is specified in a request by a domestic concern and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department of Justice’s present enforcement policy, is in compliance with the preceding provisions of this section. Such a presumption may be rebutted by a preponderance of the evidence. In considering the presumption for purposes of this paragraph, a court shall weigh all relevant factors, including but not limited to whether the information submitted to the Attorney General was accurate and complete and whether it was within the scope of the conduct specified in any request received by the Attorney General. The Attorney General shall establish the procedure required by this paragraph in accordance with the provisions of subchapter II of chapter 5 of title 5 and that procedure shall be subject to the provisions of chapter 7 of that title.
(2) Any document or other material which is provided to, received by, or prepared in the Department of Justice or any other department or agency of the United States in connection with a request by a domestic concern under the procedure established under paragraph (1), shall be exempt from disclosure under section 552 of title 5 and shall not, except with the consent of the domestic concern, be made publicly available, regardless of whether the Attorney General responds to such a request or the domestic concern withdraws such request before receiving a response.
(3) Any domestic concern who has made a request to the Attorney General under paragraph (1) may withdraw such request prior to the time the Attorney General issues an opinion in response to such request. Any request so withdrawn shall have no force or effect.
(4) The Attorney General shall, to the maximum extent practicable, provide timely guidance concerning the Department of Justice’s present enforcement policy with respect to the preceding provisions of this section to potential exporters and small businesses that are unable to obtain specialized counsel on issues pertaining to such provisions. Such guidance shall be limited to responses to requests under paragraph (1) concerning conformity of specified prospective conduct with the Department of Justice’s present enforcement policy regarding the preceding provisions of this section and general explanations of compliance responsibilities and of potential liabilities under the preceding provisions of this section.
(g) Penalties (1) (A) Any domestic concern that is not a natural person and that violates subsection (a) or (i) of this section shall be fined not more than $2,000,000.
(B) Any domestic concern that is not a natural person and that violates subsection (a) or (i) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General.
(2) (A) Any natural person that is an officer, director, employee, or agent of a domestic concern, or stockholder acting on behalf of such domestic concern, who willfully violates subsection (a) or (i) of this section shall be fined not more than $100,000 or imprisoned not more than 5 years, or both.
(B) Any natural person that is an officer, director, employee, or agent of a domestic concern, or stockholder acting on behalf of such domestic concern, who violates subsection (a) or (i) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General.
(3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of a domestic concern, such fine may not be paid, directly or indirectly, by such domestic concern.
(h) Definitions For purposes of this section:
(1) The term “domestic concern” means—
(A) any individual who is a citizen, national, or resident of the United States; and
(B) any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States or a territory, possession, or commonwealth of the United States.
(2) (A) The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.
(B) For purposes of subparagraph (A), the term “public international organization” means—
(i) an organization that is designated by Executive order pursuant to section 288 of title 22; or
(ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register.
(3) (A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if—
(i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or
(ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur.
(B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.
(4) (A) The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in—
(i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
(ii) processing governmental papers, such as visas and work orders;
(iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
(iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
(v) actions of a similar nature.
(B) The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.
(5) The term “interstate commerce” means trade, commerce, transportation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof, and such term includes the intrastate use of—
(A) a telephone or other interstate means of communication, or
(B) any other interstate instrumentality.
(i) Alternative jurisdiction (1) It shall also be unlawful for any United States person to corruptly do any act outside the United States in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to any of the persons or entities set forth in paragraphs (1), (2), and (3) of subsection (a), for the purposes set forth therein, irrespective of whether such United States person makes use of the mails or any means or instrumentality of interstate commerce in furtherance of such offer, gift, payment, promise, or authorization.
(2) As used in this subsection, the term “United States person” means a national of the United States (as defined in section 1101 of title 8) or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the laws of the United States or any State, territory, possession, or commonwealth of the United States, or any political subdivision thereof.
(Pub. L. 95–213, title I, § 104, Dec. 19, 1977, 91 Stat. 1496; Pub. L. 100–418, title V, § 5003(c), Aug. 23, 1988, 102 Stat. 1419; Pub. L. 103–322, title XXXIII, § 330005, Sept. 13, 1994, 108 Stat. 2142; Pub. L. 105–366, § 3, Nov. 10, 1998, 112 Stat. 3304.)
## Notes
Editorial Notes
Codification Section was enacted as part of Pub. L. 95–213, the Foreign Corrupt Practices Act of 1977, and not as part of act June 6, 1934, ch. 404, 48 Stat. 881, the Securities Exchange Act of 1934, which comprises this chapter.
Amendments1998—Subsec. (a)(1)(A). Pub. L. 105–366, § 3(a)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “(A)(i) influencing any act or decision of such foreign official in his official capacity, or (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or”. Subsec. (a)(2)(A). Pub. L. 105–366, § 3(a)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “(A)(i) influencing any act or decision of such party, official, or candidate in its or his official capacity, or (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate,”. Subsec. (a)(3)(A). Pub. L. 105–366, § 3(a)(3), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “(A)(i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, or (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or”. Subsec. (b). Pub. L. 105–366, § 3(d)(2), substituted “Subsections (a) and (i)” for “Subsection (a)”. Subsec. (c). Pub. L. 105–366, § 3(d)(3), substituted “subsection (a) or (i)” for “subsection (a)” in introductory provisions. Subsec. (d)(1). Pub. L. 105–366, § 3(d)(4), substituted “subsection (a) or (i)” for “subsection (a)”. Subsec. (g)(1). Pub. L. 105–366, § 3(b)(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “(1)(A) Any domestic concern that violates subsection (a) of this section shall be fined not more than $2,000,000. “(B) Any domestic concern that violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General.” Subsec. (g)(2). Pub. L. 105–366, § 3(b)(2), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “(2)(A) Any officer or director of a domestic concern, or stockholder acting on behalf of such domestic concern, who willfully violates subsection (a) of this section shall be fined not more than $100,000, or imprisoned not more than 5 years, or both. “(B) Any employee or agent of a domestic concern who is a United States citizen, national, or resident or is otherwise subject to the jurisdiction of the United States (other than an officer, director, or stockholder acting on behalf of such domestic concern), and who willfully violates subsection (a) of this section, shall be fined not more than $100,000, or imprisoned not more than 5 years, or both. “(C) Any officer, director, employee, or agent of a domestic concern, or stockholder acting on behalf of such domestic concern, who violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General.” Subsec. (h)(2). Pub. L. 105–366, § 3(c), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “The term ‘foreign official’ means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality.” Subsec. (h)(4)(A). Pub. L. 105–366, § 3(e), substituted “The” for “For purposes of paragraph (1), the” in introductory provisions. Subsec. (i). Pub. L. 105–366, § 3(d)(1), added subsec. (i). 1994—Subsec. (a)(3). Pub. L. 103–322 substituted “domestic concern” for “issuer” in closing provisions. 1988—Pub. L. 100–418 substituted “Prohibited foreign trade” for “Foreign corrupt” in section catchline and amended text generally, revising and restating as subsecs. (a) to (h) provisions of former subsecs. (a) to (d).
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# 15 U.S.C. § 78dd–3 - Prohibited foreign trade practices by persons other than issuers or domestic concerns
## Text
(a) Prohibition It shall be unlawful for any person other than an issuer that is subject to section 78dd–1 of this title or a domestic concern (as defined in section 78dd–2 of this title), or for any officer, director, employee, or agent of such person or any stockholder thereof acting on behalf of such person, while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to—
(1) any foreign official for purposes of—
(A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or
(B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,
in order to assist such person in obtaining or retaining business for or with, or directing business to, any person;
(2) any foreign political party or official thereof or any candidate for foreign political office for purposes of—
(A) (i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or
(B) inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,
in order to assist such person in obtaining or retaining business for or with, or directing business to, any person; or
(3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of—
(A) (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or
(B) inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,
in order to assist such person in obtaining or retaining business for or with, or directing business to, any person.
(b) Exception for routine governmental action Subsection (a) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.
(c) Affirmative defenses It shall be an affirmative defense to actions under subsection (a) of this section that—
(1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country; or
(2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to—
(A) the promotion, demonstration, or explanation of products or services; or
(B) the execution or performance of a contract with a foreign government or agency thereof.
(d) Injunctive relief (1) When it appears to the Attorney General that any person to which this section applies, or officer, director, employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) of this section, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond.
(2) For the purpose of any civil investigation which, in the opinion of the Attorney General, is necessary and proper to enforce this section, the Attorney General or his designee are empowered to administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of any books, papers, or other documents which the Attorney General deems relevant or material to such investigation. The attendance of witnesses and the production of documentary evidence may be required from any place in the United States, or any territory, possession, or commonwealth of the United States, at any designated place of hearing.
(3) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Attorney General may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Attorney General or his designee, there to produce records, if so ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof.
(4) All process in any such case may be served in the judicial district in which such person resides or may be found. The Attorney General may make such rules relating to civil investigations as may be necessary or appropriate to implement the provisions of this subsection.
(e) Penalties (1) (A) Any juridical person that violates subsection (a) of this section shall be fined not more than $2,000,000.
(B) Any juridical person that violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General.
(2) (A) Any natural person who willfully violates subsection (a) of this section shall be fined not more than $100,000 or imprisoned not more than 5 years, or both.
(B) Any natural person who violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General.
(3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of a person, such fine may not be paid, directly or indirectly, by such person.
(f) Definitions For purposes of this section:
(1) The term “person”, when referring to an offender, means any natural person other than a national of the United States (as defined in section 1101 of title 8 11 So in original. A closing parenthesis probably should appear. or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the law of a foreign nation or a political subdivision thereof.
(2) (A) The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.
(B) For purposes of subparagraph (A), the term “public international organization” means—
(i) an organization that is designated by Executive order pursuant to section 288 of title 22; or
(ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register.
(3) (A) A person’s state of mind is knowing, with respect to conduct, a circumstance or a result if—
(i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or
(ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur.
(B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.
(4) (A) The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in—
(i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
(ii) processing governmental papers, such as visas and work orders;
(iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
(iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
(v) actions of a similar nature.
(B) The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.
(5) The term “interstate commerce” means trade, commerce, transportation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof, and such term includes the intrastate use of—
(A) a telephone or other interstate means of communication, or
(B) any other interstate instrumentality.
(Pub. L. 95–213, title I, § 104A, as added Pub. L. 105–366, § 4, Nov. 10, 1998, 112 Stat. 3306.)
## Notes
Editorial Notes
Codification Section was enacted as part of Pub. L. 95–213, the Foreign Corrupt Practices Act of 1977, and not as part of act June 6, 1934, ch. 404, 48 Stat. 881, the Securities Exchange Act of 1934, which comprises this chapter.
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# 15 U.S.C. § 78dd - Foreign securities exchanges
## Text
(a) Unlawful transactions on foreign securities exchanges It shall be unlawful for any broker or dealer, directly or indirectly, to make use of the mails or of any means or instrumentality of interstate commerce for the purpose of effecting on an exchange not within or subject to the jurisdiction of the United States, any transaction in any security the issuer of which is a resident of, or is organized under the laws of, or has its principal place of business in, a place within or subject to the jurisdiction of the United States, 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 or to prevent the evasion of this chapter.
(b) Business without the jurisdiction of the United States The provisions of this chapter or of any rule or regulation thereunder shall not apply to any person insofar as he transacts a business in securities without the jurisdiction of the United States, unless he transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of this chapter.
(c) Rule of construction No provision of this chapter that was added by the Wall Street Transparency and Accountability Act of 2010, or any rule or regulation thereunder, shall apply to any person insofar as such person transacts a business in security-based swaps without the jurisdiction of the United States, unless such person transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of any provision of this chapter that was added by the Wall Street Transparency and Accountability Act of 2010. This subsection shall not be construed to limit the jurisdiction of the Commission under any provision of this chapter, as in effect prior to July 21, 2010.
(June 6, 1934, ch. 404, title I, § 30, 48 Stat. 904; Pub. L. 111–203, title VII, § 772(b), July 21, 2010, 124 Stat. 1802.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title. The Wall Street Transparency and Accountability Act of 2010, referred to in subsec. (c), is title VII of Pub. L. 111–203, July 21, 2010, 124 Stat. 1641, which enacted chapter 109 (§ 8301 et seq.) of this title and enacted and amended numerous other sections and notes in the Code. For complete classification of this Act to the Code, see Short Title note set out under section 8301 of this title and Tables.
Amendments2010—Subsec. (c). Pub. L. 111–203 added subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78e - Transactions on unregistered exchanges
## Text
It shall be unlawful for any broker, dealer, or exchange, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce for the purpose of using any facility of an exchange within or subject to the jurisdiction of the United States to effect any transaction in a security, or to report any such transaction, unless such exchange (1) is registered as national securities exchange under section 78f of this title, or (2) is exempted from such registration upon application by the exchange because, in the opinion of the Commission, by reason of the limited volume of transactions effected on such exchange, it is not practicable and not necessary or appropriate in the public interest or for the protection of investors to require such registration.
(June 6, 1934, ch. 404, title I, § 5, 48 Stat. 885.)
## Notes
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78f - National securities exchanges
## Text
(a) Registration; application An exchange may be registered as a national securities exchange under the terms and conditions hereinafter provided in this section and in accordance with the provisions of section 78s(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 exchange 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) Determination by Commission requisite to registration of applicant as a national securities exchange An exchange shall not be registered as a national securities exchange unless the Commission determines that—
(1) Such exchange is so organized and has the capacity to be able to carry out the purposes of this chapter and to comply, and (subject to any rule or order of the Commission pursuant to section 78q(d) or 78s(g)(2) of this title) to enforce compliance by its members and persons associated with its members, with the provisions of this chapter, the rules and regulations thereunder, and the rules of the exchange.
(2) Subject to the provisions of subsection (c) of this section, the rules of the exchange provide that any registered broker or dealer or natural person associated with a registered broker or dealer may become a member of such exchange and any person may become associated with a member thereof.
(3) The rules of the exchange 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 exchange, broker, or dealer.
(4) The rules of the exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities.
(5) The rules of the exchange 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, or to regulate by virtue of any authority conferred by this chapter matters not related to the purposes of this chapter or the administration of the exchange.
(6) The rules of the exchange provide that (subject to any rule or order of the Commission pursuant to section 78q(d) or 78s(g)(2) of this title) its members and persons associated with its members shall be appropriately disciplined for violation of the provisions of this chapter, the rules or regulations thereunder, or the rules of the exchange, 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.
(7) The rules of the exchange are in accordance with the provisions of subsection (d) 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 exchange of any person with respect to access to services offered by the exchange or a member thereof.
(8) The rules of the exchange do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter.
(9) (A) The rules of the exchange prohibit the listing of any security issued in a limited partnership rollup transaction (as such term is defined in paragraphs (4) and (5) of section 78n(h) of this title), unless such transaction was conducted in accordance with procedures designed to protect the rights of limited partners, including—
(i) 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 of limited partners that is independent, as determined in accordance with rules prescribed by the exchange, of the general partner or sponsor, that has been approved by a majority of the outstanding units of each of the participating limited 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 exchange and that are designed to protect dissenting limited partners;
(ii) the right not to have their voting power unfairly reduced or abridged;
(iii) the right not to bear an unfair portion of the costs of a proposed limited partnership rollup transaction that is rejected; and
(iv) 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.
(B) 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 exchange, except that for purposes of an exchange or tender offer, such person shall file an objection in writing under the rules of the exchange during the period during which the offer is outstanding.
(10) (A) The rules of the exchange prohibit any member that is not the beneficial owner of a security registered under section 78l of this title from granting a proxy to vote the security in connection with a shareholder vote described in subparagraph (B), unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instructions of the beneficial owner.
(B) A shareholder vote described in this subparagraph is a shareholder vote with respect to the election of a member of the board of directors of an issuer, executive compensation, or any other significant matter, as determined by the Commission, by rule, and does not include a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.].
(C) Nothing in this paragraph shall be construed to prohibit a national securities exchange from prohibiting a member that is not the beneficial owner of a security registered under section 78l of this title from granting a proxy to vote the security in connection with a shareholder vote not described in subparagraph (A).
(c) Denial of membership in national exchanges; denial of association with member; conditions; limitation of membership (1) A national securities exchange shall deny membership to (A) any person, other than a natural person, which is not a registered broker or dealer or (B) any natural person who is not, or is not associated with, a registered broker or dealer.
(2) A national securities exchange 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 or natural person associated with a registered broker or dealer, and bar from becoming associated with a member any person, who is subject to a statutory disqualification. A national securities exchange shall file notice with the Commission not less than thirty days prior to admitting any person to membership or permitting any person to become associated with a member, if the exchange knew, or in the exercise of reasonable care should have known, that such 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 national securities exchange 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 exchange or (ii) such broker or dealer or person associated with such broker or dealer has engaged and there is a reasonable likelihood he may again engage in acts or practices inconsistent with just and equitable principles of trade. A national securities exchange 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 exchange.
(B) A national securities exchange may bar a natural person from becoming a member or associated with a member, or condition the membership of a natural person or 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 exchange or (ii) has engaged and there is a reasonable likelihood he may again engage in acts or practices inconsistent with just and equitable principles of trade. A national securities exchange 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 exchange and require any person associated with a member, or any class of such persons, to be registered with the exchange in accordance with procedures so established.
(C) A national securities exchange may bar any person from becoming associated with a member if such person does not agree (i) to supply the exchange with such information with respect to its relationship and dealings with the member as may be specified in the rules of the exchange and (ii) to permit the examination of its books and records to verify the accuracy of any information so supplied.
(4) A national securities exchange may limit (A) the number of members of the exchange and (B) the number of members and designated representatives of members permitted to effect transactions on the floor of the exchange without the services of another person acting as broker: Provided, however, That no national securities exchange shall have the authority to decrease the number of memberships in such exchange, or the number of members and designated representatives of members permitted to effect transactions on the floor of such exchange without the services of another person acting as broker, below such number in effect on May 1, 1975, or the date such exchange was registered with the Commission, whichever is later: And provided further, That the Commission, in accordance with the provisions of section 78s(c) of this title, may amend the rules of any national securities exchange to increase (but not to decrease) or to remove any limitation on the number of memberships in such exchange or the number of members or designated representatives of members permitted to effect transactions on the floor of the exchange without the services of another person acting as broker, if the Commission finds that such limitation imposes a burden on competition not necessary or appropriate in furtherance of the purposes of this chapter.
(d) Discipline of national securities exchange members and persons associated with members; summary proceedings (1) In any proceeding by a national securities exchange 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 exchange 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 exchange 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 chapter, the rules or regulations thereunder, or the rules of the exchange which any such act or practice, or omission to act, is deemed to violate; and
(C) the sanction imposed and the reasons therefor.
(2) In any proceeding by a national securities exchange 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 exchange or a member thereof (other than a summary proceeding pursuant to paragraph (3) of this subsection), the exchange 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 exchange 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 exchange 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 national securities exchange 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 exchange 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 exchange, or (C) limit or prohibit any person with respect to access to services offered by the exchange 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 exchange determines that such person does not meet the qualification requirements or other prerequisites for such access and such person cannot be permitted to continue to have such access with safety to investors, creditors, members, or the exchange. Any person aggrieved by any such summary action shall be promptly afforded an opportunity for a hearing by the exchange 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.
(e) Commissions, allowances, discounts, and other fees (1) On and after June 4, 1975, no national securities exchange may impose any schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by its members: Provided, however, That until May 1, 1976, the preceding provisions of this paragraph shall not prohibit any such exchange from imposing or fixing any schedule of commissions, allowances, discounts, or other fees to be charged by its members for acting as broker on the floor of the exchange or as odd-lot dealer: And provided further, That the Commission, in accordance with the provisions of section 78s(b) of this title as modified by the provisions of paragraph (3) of this subsection, may—
(A) permit a national securities exchange, by rule, to impose a reasonable schedule or fix reasonable rates of commissions, allowances, discounts, or other fees to be charged by its members for effecting transactions on such exchange prior to November 1, 1976, if the Commission finds that such schedule or fixed rates of commissions, allowances, discounts, or other fees are in the public interest; and
(B) permit a national securities exchange, by rule, to impose a schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by its members for effecting transactions on such exchange after November 1, 1976, if the Commission finds that such schedule or fixed rates of commissions, allowances, discounts, or other fees (i) are reasonable in relation to the costs of providing the service for which such fees are charged (and the Commission publishes the standards employed in adjudging reasonableness) and (ii) do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter, taking into consideration the competitive effects of permitting such schedule or fixed rates weighed against the competitive effects of other lawful actions which the Commission is authorized to take under this chapter.
(2) Notwithstanding the provisions of section 78s(c) of this title, the Commission, by rule, may abrogate any exchange rule which imposes a schedule or fixes rates of commissions, allowances, discounts, or other fees, if the Commission determines that such schedule or fixed rates are no longer reasonable, in the public interest, or necessary to accomplish the purposes of this chapter.
(3) (A) Before approving or disapproving any proposed rule change submitted by a national securities exchange which would impose a schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by its members for effecting transactions on such exchange, the Commission shall afford interested persons (i) an opportunity for oral presentation of data, views, and arguments and (ii) with respect to any such rule concerning transactions effected after November 1, 1976, if the Commission determines there are disputed issues of material fact, to present such rebuttal submissions and to conduct (or have conducted under subparagraph (B) of this paragraph) such cross-examination as the Commission determines to be appropriate and required for full disclosure and proper resolution of such disputed issues of material fact.
(B) The Commission shall prescribe rules and make rulings concerning any proceeding in accordance with subparagraph (A) of this paragraph designed to avoid unnecessary costs or delay. Such rules or rulings may (i) impose reasonable time limits on each interested person’s oral presentations, and (ii) require any cross-examination to which a person may be entitled under subparagraph (A) of this paragraph to be conducted by the Commission on behalf of that person in such manner as the Commission determines to be appropriate and required for full disclosure and proper resolution of disputed issues of material fact.
(C) (i) If any class of persons, the members of which are entitled to conduct (or have conducted) cross-examination under subparagraphs (A) and (B) of this paragraph and which have, in the view of the Commission, the same or similar interests in the proceeding, cannot agree upon a single representative of such interests for purposes of cross-examination, the Commission may make rules and rulings specifying the manner in which such interests shall be represented and such cross-examination conducted.
(ii) No member of any class of persons with respect to which the Commission has specified the manner in which its interests shall be represented pursuant to clause (i) of this subparagraph shall be denied, pursuant to such clause (i), the opportunity to conduct (or have conducted) cross-examination as to issues affecting his particular interests if he satisfies the Commission that he has made a reasonable and good faith effort to reach agreement upon group representation and there are substantial and relevant issues which would not be presented adequately by group representation.
(D) A transcript shall be kept of any oral presentation and cross-examination.
(E) In addition to the bases specified in section 78y(a) of this title, a reviewing Court may set aside an order of the Commission under section 78s(b) of this title approving an exchange rule imposing a schedule or fixing rates of commissions, allowances, discounts, or other fees, if the Court finds—
(1) a Commission determination under subparagraph (A) of this paragraph that an interested person is not entitled to conduct cross-examination or make rebuttal submissions, or
(2) a Commission rule or ruling under subparagraph (B) of this paragraph limiting the petitioner’s cross-examination or rebuttal submissions,
has precluded full disclosure and proper resolution of disputed issues of material fact which were necessary for fair determination by the Commission.
(f) Compliance of non-members with exchange rules The Commission, by rule or order, as it deems necessary or appropriate in the public interest and for the protection of investors, to maintain fair and orderly markets, or to assure equal regulation, may require—
(1) any person not a member or a designated representative of a member of a national securities exchange effecting transactions on such exchange without the services of another person acting as a broker, or
(2) any broker or dealer not a member of a national securities exchange effecting transactions on such exchange on a regular basis,
to comply with such rules of such exchange as the Commission may specify.
(g) Notice registration of security futures product exchanges (1) Registration required An exchange that lists or trades security futures products may register as a national securities exchange solely for the purposes of trading security futures products if—
(A) the exchange is a board of trade, as that term is defined by the Commodity Exchange Act (7 U.S.C. 1a(2)) [7 U.S.C. 1 et seq.], that has been designated a contract market by the Commodity Futures Trading Commission and such designation is not suspended by order of the Commodity Futures Trading Commission; and
(B) such exchange does not serve as a market place for transactions in securities other than—
(i) security futures products; or
(ii) futures on exempted securities or groups or indexes of securities or options thereon that have been authorized under section 2(a)(1)(C) of the Commodity Exchange Act [7 U.S.C. 2(a)(1)(C)].
(2) Registration by notice filing (A) Form and content An exchange required to register only because such exchange lists or trades security futures products may register for purposes of this section by filing with the Commission a written notice in such form as the Commission, by rule, may prescribe containing the rules of the exchange and such other information and documents concerning such exchange, comparable to the information and documents required for national securities exchanges under subsection (a), as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors. If such exchange has filed documents with the Commodity Futures Trading Commission, to the extent that such documents contain information satisfying the Commission’s informational requirements, copies of such documents may be filed with the Commission in lieu of the required written notice.
(B) 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 such registration would be subject to suspension or revocation.
(C) Termination Such registration shall be terminated immediately if any of the conditions for registration set forth in this subsection are no longer satisfied.
(3) Public availability The Commission shall promptly publish in the Federal Register an acknowledgment of receipt of all notices the Commission receives under this subsection and shall make all such notices available to the public.
(4) Exemption of exchanges from specified provisions (A) Transaction exemptions An exchange that is registered under paragraph (1) of this subsection shall be exempt from, and shall not be required to enforce compliance by its members with, and its members shall not, solely with respect to those transactions effected on such exchange in security futures products, be required to comply with, the following provisions of this chapter and the rules thereunder:
(i) Subsections (b)(2), (b)(3), (b)(4), (b)(7), (b)(9), (c), (d), and (e) of this section.
(ii) Section 78h of this title.
(iii) Section 78k of this title.
(iv) Subsections (d), (f), and (k) 11 See References in Text note below. of section 78q of this title.
(v) Subsections (a), (f), and (h) of section 78s of this title.
(B) Rule change exemptions An exchange that registered under paragraph (1) of this subsection shall also be exempt from submitting proposed rule changes pursuant to section 78s(b) of this title, except that—
(i) such exchange 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 security futures products for persons who effect transactions in security futures products, or rules effectuating such exchange’s obligation to enforce the securities laws pursuant to section 78s(b)(7) of this title;
(ii) such exchange shall file pursuant to sections 78s(b)(1) and 78s(b)(2) of this title proposed rule changes related to margin, except for changes resulting in higher margin levels; and
(iii) such exchange shall file pursuant to section 78s(b)(1) of this title proposed rule changes that have been abrogated by the Commission pursuant to section 78s(b)(7)(C) of this title.
(5) Trading in security futures products (A) In general Subject to subparagraph (B), it shall be unlawful for any person to execute or trade a security futures product until the later of—
(i) 1 year after December 21, 2000; or
(ii) such date that a futures association registered under section 17 of the Commodity Exchange Act [7 U.S.C. 21] has met the requirements set forth in section 78o–3(k)(2) of this title.
(B) Principal-to-principal transactions Notwithstanding subparagraph (A), a person may execute or trade a security futures product transaction if—
(i) the transaction is entered into—
(I) on a principal-to-principal basis between parties trading for their own accounts or as described in section 1a(18)(B)(ii) of the Commodity Exchange Act [7 U.S.C. 1a(18)(B)(ii)]; and
(II) only between eligible contract participants (as defined in subparagraphs (A), (B)(ii), and (C) of such section 1a(18) [7 U.S.C. 1a(18)(A), (B)(ii), (C)]) at the time at which the persons enter into the agreement, contract, or transaction; and
(ii) the transaction is entered into on or after the later of—
(I) 8 months after December 21, 2000; or
(II) such date that a futures association registered under section 17 of the Commodity Exchange Act [7 U.S.C. 21] has met the requirements set forth in section 78o–3(k)(2) of this title.
(h) Trading in security futures products (1) Trading on exchange or association required It shall be unlawful for any person to effect transactions in security futures products that are not listed on a national securities exchange or a national securities association registered pursuant to section 78o–3(a) of this title.
(2) Listing standards required Except as otherwise provided in paragraph (7), a national securities exchange or a national securities association registered pursuant to section 78o–3(a) of this title may trade only security futures products that (A) conform with listing standards that such exchange or association files with the Commission under section 78s(b) of this title and (B) meet the criteria specified in section 2(a)(1)(D)(i) of the Commodity Exchange Act [7 U.S.C. 2(a)(1)(D)(i)].
(3) Requirements for listing standards and conditions for trading Such listing standards shall—
(A) except as otherwise provided in a rule, regulation, or order issued pursuant to paragraph (4), require that any security underlying the security future, including each component security of a narrow-based security index, be registered pursuant to section 78l of this title;
(B) require that if the security futures product is not cash settled, the market on which the security futures product is traded have arrangements in place with a registered clearing agency for the payment and delivery of the securities underlying the security futures product;
(C) be no less restrictive than comparable listing standards for options traded on a national securities exchange or national securities association registered pursuant to section 78o–3(a) of this title;
(D) except as otherwise provided in a rule, regulation, or order issued pursuant to paragraph (4), require that the security future be based upon common stock and such other equity securities as the Commission and the Commodity Futures Trading Commission jointly determine appropriate;
(E) require that the security futures product is cleared by a clearing agency that has in place provisions for linked and coordinated clearing with other clearing agencies that clear security futures products, which permits the security futures product to be purchased on one market and offset on another market that trades such product;
(F) require that only a broker or dealer subject to suitability rules comparable to those of a national securities association registered pursuant to section 78o–3(a) of this title effect transactions in the security futures product;
(G) require that the security futures product be subject to the prohibition against dual trading in section 4j of the Commodity Exchange Act (7 U.S.C. 6j) and the rules and regulations thereunder or the provisions of section 78k(a) of this title and the rules and regulations thereunder, except to the extent otherwise permitted under this chapter and the rules and regulations thereunder;
(H) require that trading in the security futures product not be readily susceptible to manipulation of the price of such security futures product, nor to causing or being used in the manipulation of the price of any underlying security, option on such security, or option on a group or index including such securities;
(I) require that procedures be in place for coordinated surveillance among the market on which the security futures product is traded, any market on which any security underlying the security futures product is traded, and other markets on which any related security is traded to detect manipulation and insider trading;
(J) require that the market on which the security futures product is traded has in place audit trails necessary or appropriate to facilitate the coordinated surveillance required in subparagraph (I);
(K) require that the market on which the security futures product is traded has in place procedures to coordinate trading halts between such market and any market on which any security underlying the security futures product is traded and other markets on which any related security is traded; and
(L) require that the margin requirements for a security futures product comply with the regulations prescribed pursuant to section 78g(c)(2)(B) of this title, except that nothing in this subparagraph shall be construed to prevent a national securities exchange or national securities association from requiring higher margin levels for a security futures product when it deems such action to be necessary or appropriate.
(4) Authority to modify certain listing standard requirements (A) Authority to modify The Commission and the Commodity Futures Trading Commission, by rule, regulation, or order, may jointly modify the listing standard requirements specified in subparagraph (A) or (D) of paragraph (3) to the extent such modification fosters the development of fair and orderly markets in security futures products, is necessary or appropriate in the public interest, and is consistent with the protection of investors.
(B) Authority to grant exemptions The Commission and the Commodity Futures Trading Commission, by order, may jointly exempt any person from compliance with the listing standard requirement specified in subparagraph (E) of paragraph (3) to the extent such exemption fosters the development of fair and orderly markets in security futures products, is necessary or appropriate in the public interest, and is consistent with the protection of investors.
(5) Requirements for other persons trading security future products It shall be unlawful for any person (other than a national securities exchange or a national securities association registered pursuant to section 78o–3(a) of this title) to constitute, maintain, or provide a marketplace or facilities for bringing together purchasers and sellers of security future products or to otherwise perform with respect to security future products the functions commonly performed by a stock exchange as that term is generally understood, unless a national securities association registered pursuant to section 78o–3(a) of this title or a national securities exchange of which such person is a member—
(A) has in place procedures for coordinated surveillance among such person, the market trading the securities underlying the security future products, and other markets trading related securities to detect manipulation and insider trading;
(B) has rules to require audit trails necessary or appropriate to facilitate the coordinated surveillance required in subparagraph (A); and
(C) has rules to require such person to coordinate trading halts with markets trading the securities underlying the security future products and other markets trading related securities.
(6) Deferral of options on security futures trading No person shall offer to enter into, enter into, or confirm the execution of any put, call, straddle, option, or privilege on a security future, except that, after 3 years after December 21, 2000, the Commission and the Commodity Futures Trading Commission may by order jointly determine to permit trading of puts, calls, straddles, options, or privileges on any security future authorized to be traded under the provisions of this chapter and the Commodity Exchange Act [7 U.S.C. 1 et seq.].
(7) Deferral of linked and coordinated clearing (A) Notwithstanding paragraph (2), until the compliance date, a national securities exchange or national securities association registered pursuant to section 78o–3(a) of this title may trade a security futures product that does not—
(i) conform with any listing standard promulgated to meet the requirement specified in subparagraph (E) of paragraph (3); or
(ii) meet the criterion specified in section 2(a)(1)(D)(i)(IV) of the Commodity Exchange Act [7 U.S.C. 2(a)(1)(D)(i)(IV)].
(B) The Commission and the Commodity Futures Trading Commission shall jointly publish in the Federal Register a notice of the compliance date no later than 165 days before the compliance date.
(C) For purposes of this paragraph, the term “compliance date” means the later of—
(i) 180 days after the end of the first full calendar month period in which the average aggregate comparable share volume for all security futures products based on single equity securities traded on all national securities exchanges, any national securities associations registered pursuant to section 78o–3(a) of this title, and all other persons equals or exceeds 10 percent of the average aggregate comparable share volume of options on single equity securities traded on all national securities exchanges and any national securities associations registered pursuant to section 78o–3(a) of this title; or
(ii) 2 years after the date on which trading in any security futures product commences under this chapter.
(i) Rules to avoid duplicative regulation of dual registrants Consistent with this chapter, each national securities exchange 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 78o(b) of this title (except paragraph (11) thereof), that is also registered with the Commodity Futures Trading Commission pursuant to section 4f(a) of the Commodity Exchange Act [7 U.S.C. 6f(a)] (except paragraph (2) thereof), with respect to the application of—
(1) rules of such national securities exchange of the type specified in section 78o(c)(3)(B) of this title involving security futures products; and
(2) similar rules of national securities exchanges registered pursuant to subsection (g) and national securities associations registered pursuant to section 78o–3(k) of this title involving security futures products.
(j) Procedures and rules for security future products A national securities exchange registered pursuant to subsection (a) shall implement the procedures specified in subsection (h)(5)(A) and adopt the rules specified in subparagraphs (B) and (C) of subsection (h)(5) not later than 8 months after the date of receipt of a request from an alternative trading system for such implementation and rules.
(k) Rules relating to security futures products traded on foreign boards of trade (1) To the extent necessary or appropriate in the public interest, to promote fair competition, and consistent with the promotion of market efficiency, innovation, and expansion of investment opportunities, the protection of investors, and the maintenance of fair and orderly markets, the Commission and the Commodity Futures Trading Commission shall jointly issue such rules, regulations, or orders as are necessary and appropriate to permit the offer and sale of a security futures product traded on or subject to the rules of a foreign board of trade to United States persons.
(2) The rules, regulations, or orders adopted under paragraph (1) shall take into account, as appropriate, the nature and size of the markets that the securities underlying the security futures product reflect.
(l) Security-based swaps It shall be unlawful for any person to effect a transaction in a security-based swap with or for a person that is not an eligible contract participant, unless such transaction is effected on a national securities exchange registered pursuant to subsection (b).
(June 6, 1934, ch. 404, title I, § 6, 48 Stat. 885; Pub. L. 94–29, § 4, June 4, 1975, 89 Stat. 104; Pub. L. 100–181, title III, §§ 309–312, Dec. 4, 1987, 101 Stat. 1255; Pub. L. 103–202, title III, § 303(b), Dec. 17, 1993, 107 Stat. 2365; Pub. L. 106–554, § 1(a)(5) [title II, §§ 202(a), 206(a), (i), (k)(2), (l)], Dec. 21, 2000, 114 Stat. 2763, 2763A–416, 2763A–426, 2763A–433, 2763A–434; Pub. L. 111–203, title VII, §§ 721(e)(8), 734(b)(2), 763(e), title IX, § 957, July 21, 2010, 124 Stat. 1671, 1718, 1777, 1906.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (b) to (e), (g)(4)(A), (h)(3)(G), (7)(C)(ii), and (i), was in the original “this title”. This chapter, referred to in subsec. (h)(6), was in the original “this Act”. See References in Text note set out under section 78a of this title. The Investment Company Act of 1940, referred to in subsec. (b)(10)(B), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80a–51 of this title and Tables. The Commodity Exchange Act, referred to in subsecs. (g)(1)(A) and (h)(6), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. Section 1a(2) of Title 7 was redesignated section 1a(6) by Pub. L. 111–203, title VII, § 721(a)(1), July 21, 2010, 124 Stat. 1658. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables. Subsection (k) of section 78q of this title, referred to in subsec. (g)(4)(A)(iv), was redesignated subsec. (j) by Pub. L. 111–203, title VI, § 617(a)(2), July 21, 2010, 124 Stat. 1616.
Amendments2010—Subsec. (b)(9). Pub. L. 111–203, § 957(1), designated introductory provisions and subpars. (A) to (D) as subpar. (A), redesignated former subpars. (A) to (D) as cls. (i) to (iv), respectively, of subpar. (A) and realigned margins, redesignated former cls. (i) to (v) of subpar. (A) as subcls. (I) to (V), respectively, of cl. (i) and realigned margins, and designated concluding provisions as subpar. (B). Subsec. (b)(10). Pub. L. 111–203, § 957(2), added par. (10). Subsec. (g)(1)(A). Pub. L. 111–203, § 734(b)(2), substituted “that has been designated” for “that—(i) has been designated” and “and” for “or” at end and struck out cl. (ii) which read as follows: “is registered as a derivative transaction execution facility under section 5a of the Commodity Exchange Act and such registration is not suspended by the Commodity Futures Trading Commission; and”. Subsec. (g)(5)(B)(i)(I). Pub. L. 111–203, § 721(e)(8)(A), substituted “section 1a(18)(B)(ii)” for “section 1a(12)(B)(ii)”. Subsec. (g)(5)(B)(i)(II). Pub. L. 111–203, § 721(e)(8)(B), substituted “section 1a(18)” for “section 1a(12)”. Subsec. (l). Pub. L. 111–203, § 763(e), added subsec. (l). 2000—Subsec. (g). Pub. L. 106–554, § 1(a)(5) [title II, § 202(a)], added subsec. (g). Subsec. (h). Pub. L. 106–554, § 1(a)(5) [title II, § 206(a)], added subsec. (h). Subsec. (i). Pub. L. 106–554, § 1(a)(5) [title II, § 206(i)], added subsec. (i). Subsec. (j). Pub. L. 106–554, § 1(a)(5) [title II, § 206(k)(2)], added subsec. (j). Subsec. (k). Pub. L. 106–554, § 1(a)(5) [title II, § 206(l)], added subsec. (k). 1993—Subsec. (b)(9). Pub. L. 103–202 added par. (9). 1987—Subsec. (c)(2). Pub. L. 100–181, § 309, substituted “protection of investors shall” for “protection shall”. Subsec. (c)(3)(A). Pub. L. 100–181, § 310, substituted “associated” for “association”. Subsec. (c)(4). Pub. L. 100–181, § 311, substituted “may limit (A)” for “may (A) limit”. Subsec. (e)(1). Pub. L. 100–181, § 312(1), substituted “paragraph (3) of this subsection” for “paragraph (4) of this section”. Subsec. (e)(3), (4). Pub. L. 100–181, § 312(2), (3), redesignated par. (4) as (3) and, in subpar. (E), substituted “fixing” for “fixes” in introductory provisions, “subparagraph (A) of this paragraph” for “paragraph (4)(A) of this subsection” in cl. (1), and “subparagraph (B) of this paragraph” for “paragraph (4)(B) of this subsection” in cl. (2), and struck out former par. (3) which read as follows: “Until December 31, 1976, the Commission, on a regular basis, shall file with the Speaker of the House and the President of the Senate information concerning the effect on the public interest, protection of investors, and maintenance of fair and orderly markets of the absence of any schedule or fixed rates of commissions, allowances, discounts, or other fees to be charged by members of any national securities exchange for effecting transactions on such exchange.” 1975—Pub. L. 94–29 restructured the entire section and, in addition, authorized the Commission to require an exchange to file such documents and information as it deems necessary or appropriate in the public interest or for the protection of investors and to prescribe the form and substance of an exchange’s application for registration, expanded to eight the number of explicit statutory requirements that must be satisfied before an exchange may be registered as a national securities exchange, set forth the authority of a national securities exchange to admit or deny persons membership or association with members, prescribed exchange procedures for instituting disciplinary actions, denying membership, and summarily suspending members or persons associated with members, specified the authority of national securities exchanges to impose schedules or fix rates of commissions, allowances, discounts, or other fees to be charged by its members for transacting business on the exchange, and empowered the Commission to regulate any broker or dealer who effects transactions on an exchange on a regular basis but who is not a member of that exchange and any person who effects transactions on an exchange without the services of another person acting as broker.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by section 957 of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by sections 721(e)(8) and 734(b)(2) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of Title 7, Agriculture. Amendment by section 763(e) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date of 1993 AmendmentPub. L. 103–202, title III, § 304, Dec. 17, 1993, 107 Stat. 2367, provided that: “(a) Effective Date.—“(1) In general.—The amendments made by section 303 [amending this section and section 78o–3 of this title] shall become effective 12 months after the date of enactment of this Act [Dec. 17, 1993]. “(2) Rulemaking authority.—Notwithstanding paragraph (1), the authority of the Securities and Exchange Commission, a registered securities association, and a national securities exchange to commence rulemaking proceedings for the purpose of issuing rules pursuant to the amendments made by section 303 is effective on the date of enactment of this Act. “(3) Review of filings prior to effective date.—Prior to the effective date of regulations promulgated pursuant to this title [amending this section and sections 78n and 78o–3 of this title and enacting provisions set out as notes under sections 78a and 78n of this title], the Securities and Exchange Commission shall continue to review and declare effective registration statements and amendments thereto relating to limited partnership rollup transactions in accordance with applicable regulations then in effect. “(b) Effect on Existing Authority.—The amendments made by this title [amending this section and sections 78n and 78o–3 of this title] shall not limit the authority of the Securities and Exchange Commission, a registered securities association, or a national securities exchange under any provision of the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or preclude the Commission or such association or exchange from imposing, under any other such provision, a remedy or procedure required to be imposed under such amendments.”
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, except for amendment of subsecs. (a) through (d) by Pub. L. 94–29 to be effective 180 days after June 4, 1975, with provisions of subsecs. (b)(2) and (c)(6), as amended by Pub. L. 94–29, or rules or regulations thereunder, not to apply in a way so as to deprive any person of membership in any national securities exchange (or its successor) of which such person was, on June 4, 1975, a member or a member firm as defined in the constitution of such exchange, or so as to deny membership in any such exchange (or its successor) to a natural person who is or becomes associated with such member or member firm, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Changes in Organization and Rules of National Securities Exchanges and Registered Securities AssociationsPub. L. 94–29, § 31(b), June 4, 1975, 89 Stat. 170, provided that: “If it appears to the Commission at any time within one year of the effective date of any amendment made by this Act [see Short Title of 1975 Amendment note under section 78a of this title] to the Securities Exchange Act of 1934 that the organization or rules of any national securities exchange or registered securities association registered with the Commission on the date of enactment of this Act [June 4, 1975] do not comply with such Act as amended, the Commission shall so notify such exchange or association in writing, specifying the respects in which the exchange or association is not in compliance with such Act. On and after the one hundred eightieth day following the date of receipt of such notice by a national securities exchange or registered securities association, the Commission, without regard to the provisions of section 19(h) of the Securities Exchange Act of 1934 [section 78s(h) of this title], as amended by this Act, is authorized by order, to suspend the registration of any such exchange or association or impose limitations on the activities, functions, and operations of any such exchange or association, if the Commission finds, after notice and opportunity for hearing, that the organization or rules of such exchange or association do not comply with such Act. Any such suspension or limitation shall continue in effect until the Commission, by order, declares that such exchange or association is in compliance with such requirements.”
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78ff - Penalties
## Text
(a) Willful violations; false and misleading statements Any person who willfully violates any provision of this chapter (other than section 78dd–1 of this title), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $25,000,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.
(b) Failure to file information, documents, or reports Any issuer which fails to file information, documents, or reports required to be filed under subsection (d) of section 78o of this title or any rule or regulation thereunder shall forfeit to the United States the sum of $100 for each and every day such failure to file shall continue. Such forfeiture, which shall be in lieu of any criminal penalty for such failure to file which might be deemed to arise under subsection (a) of this section, shall be payable into the Treasury of the United States and shall be recoverable in a civil suit in the name of the United States.
(c) Violations by issuers, officers, directors, stockholders, employees, or agents of issuers (1) (A) Any issuer that violates subsection (a) or (g) of section 78dd–1 of this title shall be fined not more than $2,000,000.
(B) Any issuer that violates subsection (a) or (g) of section 78dd–1 of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission.
(2) (A) Any officer, director, employee, or agent of an issuer, or stockholder acting on behalf of such issuer, who willfully violates subsection (a) or (g) of section 78dd–1 of this title shall be fined not more than $100,000, or imprisoned not more than 5 years, or both.
(B) Any officer, director, employee, or agent of an issuer, or stockholder acting on behalf of such issuer, who violates subsection (a) or (g) of section 78dd–1 of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission.
(3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of an issuer, such fine may not be paid, directly or indirectly, by such issuer.
(June 6, 1934, ch. 404, title I, § 32, 48 Stat. 904; May 27, 1936, ch. 462, § 9, 49 Stat. 1380; June 25, 1938, ch. 677, § 4, 52 Stat. 1076; Pub. L. 88–467, § 11, Aug. 20, 1964, 78 Stat. 580; Pub. L. 94–29, §§ 23, 27(b), June 4, 1975, 89 Stat. 162, 163; Pub. L. 95–213, title I, § 103(b), Dec. 19, 1977, 91 Stat. 1496; Pub. L. 98–376, § 3, Aug. 10, 1984, 98 Stat. 1265; Pub. L. 100–418, title V, § 5003(b), Aug. 23, 1988, 102 Stat. 1419; Pub. L. 100–704, § 4, Nov. 19, 1988, 102 Stat. 4680; Pub. L. 105–366, § 2(d), Nov. 10, 1998, 112 Stat. 3303; Pub. L. 107–204, title XI, § 1106, July 30, 2002, 116 Stat. 810.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (a), was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2002—Subsec. (a). Pub. L. 107–204 substituted “$5,000,000, or imprisoned not more than 20 years” for “$1,000,000, or imprisoned not more than 10 years” and “$25,000,000” for “$2,500,000”. 1998—Subsec. (c)(1). Pub. L. 105–366, § 2(d)(1), (2), substituted “subsection (a) or (g) of section 78dd–1” for “section 78dd–1(a)” in subpars. (A) and (B). Subsec. (c)(2). Pub. L. 105–366, § 2(d)(3), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “(2)(A) Any officer or director of an issuer, or stockholder acting on behalf of such issuer, who willfully violates section 78dd–1(a) of this title shall be fined not more than $100,000, or imprisoned not more than 5 years, or both. “(B) Any employee or agent of an issuer who is a United States citizen, national, or resident or is otherwise subject to the jurisdiction of the United States (other than an officer, director, or stockholder acting on behalf of such issuer), and who willfully violates section 78dd–1(a) of this title, shall be fined not more than $100,000, or imprisoned not more than 5 years, or both. “(C) Any officer, director, employee, or agent of an issuer, or stockholder acting on behalf of such issuer, who violates section 78dd–1(a) of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission.” 1988—Subsec. (a). Pub. L. 100–704 substituted “$1,000,000” for “$100,000”, “10 years” for “five years”, “is a person other than a natural person” for “is an exchange”, and “$2,500,000” for “$500,000”. Subsec. (c). Pub. L. 100–418 amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “(1) Any issuer which violates section 78dd–1(a) of this title shall, upon conviction, be fined not more than $1,000,000. “(2) Any officer or director of an issuer, or any stockholder acting on behalf of such issuer, who willfully violates section 78dd–1(a) of this title shall, upon conviction, be fined not more than $10,000, or imprisoned not more than five years, or both. “(3) Whenever an issuer is found to have violated section 78dd–1(a) of this title, any employee or agent of such issuer who is a United States citizen, national, or resident or is otherwise subject to the jurisdiction of the United States (other than an officer, director, or stockholder of such issuer), and who willfully carried out the act or practice constituting such violation shall, upon conviction, be fined not more than $10,000, or imprisoned not more than five years, or both. “(4) Whenever a fine is imposed under paragraph (2) or (3) of this subsection upon any officer, director, stockholder, employee, or agent of an issuer, such fine shall not be paid, directly or indirectly, by such issuer.” 1984—Subsec. (a). Pub. L. 98–376 substituted “$100,000” for “$10,000”. 1977—Subsec. (a). Pub. L. 95–213, § 103(b)(1), inserted “(other than section 78dd–1 of this title)” after “Any person who willfully violates any provision of this chapter”. Subsec. (c). Pub. L. 95–213, § 103(b)(2), added subsec. (c). 1975—Subsec. (a). Pub. L. 94–29, §§ 23(1), 27(b), inserted “or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof,” and substituted “or imprisoned not more than five years” for “or imprisoned not more than two years”. Subsec. (c). Pub. L. 94–29, § 23(2), struck out subsec. (c) which rendered this section inapplicable to violations of any rule or regulation prescribed pursuant to paragraph (3) of subsection (c) of section 78o of this title. 1964—Subsec. (b). Pub. L. 88–467 substituted “required to be filed under” for “pursuant to an undertaking contained in a registration statement as provided in” and inserted “or any rule or regulation thereunder” after “section 78o of this title.” 1938—Subsec. (c). Act June 25, 1938, added subsec. (c). 1936—Subsec. (a). Act May 27, 1936, inserted “or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title”. Subsec. (b). Act May 27, 1936, added subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 1988 AmendmentAmendment by Pub. L. 100–704 not applicable to actions occurring before Nov. 19, 1988, see section 9 of Pub. L. 100–704, set out as a note under section 78o of this title.
Effective Date of 1984 AmendmentAmendment by Pub. L. 98–376 effective Aug. 10, 1984, see section 7 of Pub. L. 98–376, set out as a note under section 78c of this title.
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Effective Date of 1964 AmendmentAmendment by Pub. L. 88–467 effective Aug. 20, 1964, see section 13 of Pub. L. 88–467, set out as a note under section 78c of this title.
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# 15 U.S.C. § 78g - Margin requirements
## Text
(a) Rules and regulations for extension of credit; standard for initial extension; undermargined accounts For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Board of Governors of the Federal Reserve System shall, prior to October 1, 1934, and from time to time thereafter, prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security or a security futures product). For the initial extension of credit, such rules and regulations shall be based upon the following standard: An amount not greater than whichever is the higher of—
(1) 55 per centum of the current market price of the security, or
(2) 100 per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than 75 per centum of the current market price.
Such rules and regulations may make appropriate provision with respect to the carrying of undermargined accounts for limited periods and under specified conditions; the withdrawal of funds or securities; the substitution or additional purchases of securities; the transfer of accounts from one lender to another; special or different margin requirements for delayed deliveries, short sales, arbitrage transactions, and securities to which paragraph (2) of this subsection does not apply; the bases and the methods to be used in calculating loans, and margins and market prices; and similar administrative adjustments and details. For the purposes of paragraph (2) of this subsection, until July 1, 1936, the lowest price at which a security has sold on or after July 1, 1933, shall be considered as the lowest price at which such security has sold during the preceding thirty-six calendar months.
(b) Lower and higher margin requirements Notwithstanding the provisions of subsection (a) of this section, the Board of Governors of the Federal Reserve System, may, from time to time, with respect to all or specified securities or transactions, or classes of securities, or classes of transactions, by such rules and regulations (1) prescribe such lower margin requirements for the initial extension or maintenance of credit as it deems necessary or appropriate for the accommodation of commerce and industry, having due regard to the general credit situation of the country, and (2) prescribe such higher margin requirements for the initial extension or maintenance of credit as it may deem necessary or appropriate to prevent the excessive use of credit to finance transactions in securities.
(c) Unlawful credit extension to customers (1) Prohibition It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer—
(A) on any security (other than an exempted security), except as provided in paragraph (2), in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System (hereafter in this section referred to as the “Board”) shall prescribe under subsections (a) and (b); or
(B) without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board may prescribe—
(i) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the rules and regulations of the Board; and
(ii) to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of subparagraph (A).
(2) Margin regulations (A) Compliance with margin rules required It shall be unlawful for any broker, dealer, or member of a national securities exchange to, directly or indirectly, extend or maintain credit to or for, or collect margin from any customer on, any security futures product unless such activities comply with the regulations—
(i) which the Board shall prescribe pursuant to subparagraph (B); or
(ii) if the Board determines to delegate the authority to prescribe such regulations, which the Commission and the Commodity Futures Trading Commission shall jointly prescribe pursuant to subparagraph (B).
If the Board delegates the authority to prescribe such regulations under clause (ii) and the Commission and the Commodity Futures Trading Commission have not jointly prescribed such regulations within a reasonable period of time after the date of such delegation, the Board shall prescribe such regulations pursuant to subparagraph (B).
(B) Criteria for issuance of rules The Board shall prescribe, or, if the authority is delegated pursuant to subparagraph (A)(ii), the Commission and the Commodity Futures Trading Commission shall jointly prescribe, such regulations to establish margin requirements, including the establishment of levels of margin (initial and maintenance) for security futures products under such terms, and at such levels, as the Board deems appropriate, or as the Commission and the Commodity Futures Trading Commission jointly deem appropriate—
(i) to preserve the financial integrity of markets trading security futures products;
(ii) to prevent systemic risk;
(iii) to require that—
(I) the margin requirements for a security future product be consistent with the margin requirements for comparable option contracts traded on any exchange registered pursuant to section 78f(a) of this title; and
(II) initial and maintenance margin levels for a security future product not be lower than the lowest level of margin, exclusive of premium, required for any comparable option contract traded on any exchange registered pursuant to section 78f(a) of this title, other than an option on a security future;
except that nothing in this subparagraph shall be construed to prevent a national securities exchange or national securities association from requiring higher margin levels for a security future product when it deems such action to be necessary or appropriate; and
(iv) to ensure that the margin requirements (other than levels of margin), including the type, form, and use of collateral for security futures products, are and remain consistent with the requirements established by the Board, pursuant to subparagraphs (A) and (B) of paragraph (1).
(3) Exception This subsection and the rules and regulations issued under this subsection shall not apply to any credit extended, maintained, or arranged by a member of a national securities exchange or a broker or dealer to or for a member of a national securities exchange or a registered broker or dealer—
(A) a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or
(B) to finance its activities as a market maker or an underwriter;
except that the Board may impose such rules and regulations, in whole or in part, on any credit otherwise exempted by this paragraph if the Board determines that such action is necessary or appropriate in the public interest or for the protection of investors.
(d) Unlawful credit extension in violation of rules and regulations; exceptions to application of rules, etc. (1) Prohibition It shall be unlawful for any person not subject to subsection (c) to extend or maintain credit or to arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Board shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this section. Such rules and regulations may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) and the rules and regulations thereunder.
(2) Exceptions This subsection and the rules and regulations issued under this subsection shall not apply to any credit extended, maintained, or arranged—
(A) by a person not in the ordinary course of business;
(B) on an exempted security;
(C) to or for a member of a national securities exchange or a registered broker or dealer—
(i) a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or
(ii) to finance its activities as a market maker or an underwriter;
(D) by a bank on a security other than an equity security; or
(E) as the Board shall, by such rules, regulations, or orders as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations thereunder.
(3) Board authority The Board may impose such rules and regulations, in whole or in part, on any credit otherwise exempted by subparagraph (C) if it determines that such action is necessary or appropriate in the public interest or for the protection of investors.
(e) Effective date of this section and rules and regulations The provisions of this section or the rules and regulations thereunder shall not apply on or before July 1, 1937, to any loan or extension of credit made prior to June 6, 1934, or to the maintenance, renewal, or extension of any such loan or credit, except to the extent that the Board of Governors of the Federal Reserve System may by rules and regulations prescribe as necessary to prevent the circumvention of the provisions of this section or the rules and regulations thereunder by means of withdrawals of funds or securities, substitutions of securities, or additional purchases or by any other device.
(f) Unlawful receipt of credit; exemptions (1) It is unlawful for any United States person, or any foreign person controlled by a United States person or acting on behalf of or in conjunction with such person, to obtain, receive, or enjoy the beneficial use of a loan or other extension of credit from any lender (without regard to whether the lender’s office or place of business is in a State or the transaction occurred in whole or in part within a State) for the purpose of (A) purchasing or carrying United States securities, or (B) purchasing or carrying within the United States of any other securities, if, under this section or rules and regulations prescribed thereunder, the loan or other credit transaction is prohibited or would be prohibited if it had been made or the transaction had otherwise occurred in a lender’s office or other place of business in a State.
(2) For the purposes of this subsection—
(A) The term “United States person” includes a person which is organized or exists under the laws of any State or, in the case of a natural person, a citizen or resident of the United States; a domestic estate; or a trust in which one or more of the foregoing persons has a cumulative direct or indirect beneficial interest in excess of 50 per centum of the value of the trust.
(B) The term “United States security” means a security (other than an exempted security) issued by a person incorporated under the laws of any State, or whose principal place of business is within a State.
(C) The term “foreign person controlled by a United States person” includes any noncorporate entity in which United States persons directly or indirectly have more than a 50 per centum beneficial interest, and any corporation in which one or more United States persons, directly or indirectly, own stock possessing more than 50 per centum of the total combined voting power of all classes of stock entitled to vote, or more than 50 per centum of the total value of shares of all classes of stock.
(3) The Board of Governors of the Federal Reserve System may, in its discretion and with due regard for the purposes of this section, by rule or regulation exempt any class of United States persons or foreign persons controlled by a United States person from the application of this subsection.
(g) Effect of bona fide agreement for delayed delivery of mortgage related security Subject to such rules and regulations as the Board of Governors of the Federal Reserve System may adopt in the public interest and for the protection of investors, no member of a national securities exchange or broker or dealer shall be deemed to have extended or maintained credit or arranged for the extension or maintenance of credit for the purpose of purchasing a security, within the meaning of this section, by reason of a bona fide agreement for delayed delivery of a mortgage related security or a small business related security against full payment of the purchase price thereof upon such delivery within one hundred and eighty days after the purchase, or within such shorter period as the Board of Governors of the Federal Reserve System may prescribe by rule or regulation.
(June 6, 1934, ch. 404, title I, § 7, 48 Stat. 886; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; Pub. L. 90–437, July 29, 1968, 82 Stat. 452; Pub. L. 91–508, title III, § 301(a), Oct. 26, 1970, 84 Stat. 1124; Pub. L. 98–440, title I, § 102, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103–325, title II, § 203, Sept. 23, 1994, 108 Stat. 2199; Pub. L. 104–290, title I, § 104(a), Oct. 11, 1996, 110 Stat. 3422; Pub. L. 105–353, title III, § 301(b)(5), (6), Nov. 3, 1998, 112 Stat. 3236; Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–429; Pub. L. 111–203, title IX, § 929, July 21, 2010, 124 Stat. 1852.)
## Notes
Editorial Notes
Amendments2010—Subsec. (c)(1)(A). Pub. L. 111–203 substituted “; or” for “; and” at end. 2000—Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(1)], inserted “or a security futures product” after “exempted security” in introductory provisions. Subsec. (c)(1)(A). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(2)], inserted “except as provided in paragraph (2),” after “security),”. Subsec. (c)(2), (3). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(3), (4)], added par. (2) and redesignated former par. (2) as (3). 1998—Subsecs. (a), (b). Pub. L. 105–353, § 301(b)(5), substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”. Subsec. (d). Pub. L. 105–353, § 301(b)(6), substituted “exceptions” for “exception” in heading. 1996—Subsec. (c). Pub. L. 104–290, § 104(a)(1), amended heading and text of subsec. (c) generally. Prior to amendment, text read as follows: “It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer— “(1) on any security (other than an exempted security), in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System shall prescribe under subsections (a) and (b) of this section; “(2) without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board of Governors of the Federal Reserve System may prescribe (A) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the rules and regulations of the Board of Governors of the Federal Reserve System, and (B) to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of paragraph (1) of this subsection.” Subsec. (d). Pub. L. 104–290, § 104(a)(2), amended heading and text of subsec. (d) generally. Prior to amendment, text read as follows: “It shall be unlawful for any person not subject to subsection (c) of this section to extend or maintain credit or to arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Board of Governors of the Federal Reserve System shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this section. Such rules and regulations may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) of this section and the rules and regulations thereunder. This subsection and the rules and regulations thereunder shall not apply (A) to a loan made by a person not in the ordinary course of his business, (B) to a loan on an exempted security, (C) to a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of a national securities exchange, (D) to a loan by a bank on a security other than an equity security, or (E) to such other loans as the Board of Governors of the Federal Reserve System shall, by such rules and regulations as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations thereunder.” 1994—Subsec. (g). Pub. L. 103–325 inserted “or a small business related security” after “mortgage related security”. 1984—Subsec. (g). Pub. L. 98–440 added subsec. (g). 1970—Subsec. (f). Pub. L. 91–508 added subsec. (f). 1968—Subsec. (a). Pub. L. 90–437, § 1(1), struck out “registered on a national securities exchange” after “(other than an exempted security)”. Subsec. (c). Pub. L. 90–437, § 1(2), struck out “who transacts a business in securities through the medium of any such member” after “any broker or dealer”, in par. (1) struck out “registered on a national securities exchange” after “(other than an exempted security)”, and in par. (2) substituted “other than securities” for “other than exempted securities and/or securities registered upon a national securities exchange”. Subsec. (d). Pub. L. 90–437, § 1(3), struck out “registered on a national securities exchange” after “the purpose of purchasing or carrying any security”, and “registered on national securities exchanges” after “the purpose of purchasing or carrying securities”.
Statutory Notes and Related Subsidiaries
Change of Name Act Aug. 23, 1935, in subsec. (e), substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective Date of 1970 AmendmentAmendment by Pub. L. 91–508 effective on first day of seventh calendar month which begins after Oct. 26, 1970, except as otherwise provided in section 401(c) of Pub. L. 91–508, see section 401(a) of Pub. L. 91–508, set out as a note under section 1951 of Title 12, Banks and Banking. Pub. L. 91–508, title IV, § 401(c), Oct. 26, 1970, 84 Stat. 1125, provided that: “The Board of Governors of the Federal Reserve System may by regulation provide that the amendment made by title III [amending this section] shall be effective on any date not earlier than the publication of the regulation in the Federal Register and not later than the first day of the thirteenth calendar month which begins after the date of enactment [Oct. 26, 1970].”
Validity of Rules and RegulationsPub. L. 91–508, title III, § 301(b), Oct. 26, 1970, 84 Stat. 1125, provided that: “The amendment made by subsection (a) of this section [amending this section] does not affect the continuing validity of any rule or regulation under section 7 of the Securities Exchange Act of 1934 [this section] in effect prior to the effective date of the amendment.”
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# 15 U.S.C. § 78gg - Separability
## Text
If any provision of this chapter, or the application of such provision to any person or circumstances, shall be held invalid, the remainder of the chapter and the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.
(June 6, 1934, ch. 404, title I, § 33, 48 Stat. 905.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this Act”. See References in Text note set out under section 78a of this title.
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# 15 U.S.C. § 78h - Restrictions on borrowing and lending by members, brokers, and dealers
## Text
It shall be unlawful for any registered broker or dealer, member of a national securities exchange, or broker or dealer who transacts a business in securities through the medium of any member of a national securities exchange, directly or indirectly—
(a) In contravention of such rules and regulations as the Commission shall prescribe for the protection of investors to hypothecate or arrange for the hypothecation of any securities carried for the account of any customer under circumstances (1) that will permit the commingling of his securities without his written consent with the securities of any other customer, (2) that will permit such securities to be commingled with the securities of any person other than a bona fide customer, or (3) that will permit such securities to be hypothecated, or subjected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities.
(b) To lend or arrange for the lending of any securities carried for the account of any customer without the written consent of such customer or in contravention of such rules and regulations as the Commission shall prescribe for the protection of investors.
(June 6, 1934, ch. 404, title I, § 8, 48 Stat. 888; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; Pub. L. 94–29, § 5, June 4, 1975, 89 Stat. 109; Pub. L. 98–440, title I, § 103, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103–325, title II, § 204, Sept. 23, 1994, 108 Stat. 2199; Pub. L. 104–290, title I, § 104(b), Oct. 11, 1996, 110 Stat. 3423.)
## Notes
Editorial Notes
Amendments1996—Pub. L. 104–290 redesignated subsecs. (b) and (c) as (a) and (b), respectively, and struck out former subsec. (a) which related to borrowing in ordinary course of business as broker or dealer on any security, except exempted security, registered on national securities exchange. 1994—Subsec. (a). Pub. L. 103–325 inserted “or a small business related security” after “mortgage related security” in last sentence. 1984—Subsec. (a). Pub. L. 98–440 inserted provision that no person shall be deemed to have borrowed within the ordinary course of business, within the meaning of this subsection, by reason of a bona fide agreement for delayed delivery of a mortgage related security under certain conditions. 1975—Pub. L. 94–29, § 5(1), substituted “any registered broker or dealer, member of a national securities exchange, or broker or dealer who transacts a business in securities through the medium of any member of a national securities exchange” for “any member of a national securities exchange, or any broker or dealer who transacts a business in securities through the medium of any such member” in provisions preceding subsec. (a). Subsecs. (b) to (d). Pub. L. 94–29, § 5(2), redesignated subsecs. (c) and (d) as (b) and (c), respectively, and in subsec. (c) as so redesignated inserted “or in contravention of such rules and regulations as the Commissioner shall prescribe for the protection of investors” after “written consent of such customer”. Former subsec. (b), which covered the maximum allowable aggregate indebtedness of brokers, was struck out.
Statutory Notes and Related Subsidiaries
Change of Name Act Aug. 23, 1935, substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78hh–1 - Effective date of certain sections
## Text
This Act shall become effective on May 27, 1936; except that clause (2) of subsection (f) of section 78l of this title, and subsections (a) and (d) of section 78o of this title, shall become effective ninety days after May 27, 1936, and that clause (3) of subsection (f) of section 78l of this title shall become effective six months after May 27, 1936.
(May 27, 1936, ch. 462, § 12, 49 Stat. 1380.)
## Notes
Editorial Notes
References in TextThis Act, referred to in text, is act May 27, 1936, ch. 462, 49 Stat. 1375, popularly known as the Unlisted Securities Trading Act, which enacted sections 78l–1, 78o–1, 78o–2, and 78hh–1 of this title, and amended sections 78l, 78o, 78q, 78r, 78t, 78u, 78w, and 78ff of this title.
Codification Section was not enacted as a part of the Securities Exchange Act of 1934 which comprises this chapter.
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# 15 U.S.C. § 78hh - Effective date
## Text
This chapter shall become effective on July 1, 1934, except that sections 78f and 78l(b to e) of this title shall become effective on September 1, 1934; and sections 78e, 78g, 78h, 78i(a)(6), 78j, 78k, 78l(a), 78m, 78n, 78o, 78p, 78q, 78r, 78s, and 78dd of this title shall become effective on October 1, 1934.
(June 6, 1934, ch. 404, title I, § 34, 48 Stat. 905.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “This Act”. See References in Text note set out under section 78a of this title.
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# 15 U.S.C. § 78ii - Omitted
## Notes
Editorial Notes
Codification Section, act June 6, 1934, ch. 404, title II, § 210, 48 Stat. 908, transferred the powers, duties and functions of the Federal Trade Commission under subchapter I of chapter 2A of this title to the Securities and Exchange Commission. Pending proceedings before the Federal Trade Commission were continued before the Securities and Exchange Commission.
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# 15 U.S.C. § 78j–1 - Audit requirements
## Text
(a) In general Each audit required pursuant to this chapter of the financial statements of an issuer by a registered public accounting firm shall include, in accordance with generally accepted auditing standards, as may be modified or supplemented from time to time by the Commission—
(1) procedures designed to provide reasonable assurance of detecting illegal acts that would have a direct and material effect on the determination of financial statement amounts;
(2) procedures designed to identify related party transactions that are material to the financial statements or otherwise require disclosure therein; and
(3) an evaluation of whether there is substantial doubt about the ability of the issuer to continue as a going concern during the ensuing fiscal year.
(b) Required response to audit discoveries (1) Investigation and report to management If, in the course of conducting an audit pursuant to this chapter to which subsection (a) applies, the registered public accounting firm detects or otherwise becomes aware of information indicating that an illegal act (whether or not perceived to have a material effect on the financial statements of the issuer) has or may have occurred, the firm shall, in accordance with generally accepted auditing standards, as may be modified or supplemented from time to time by the Commission—
(A) (i) determine whether it is likely that an illegal act has occurred; and
(ii) if so, determine and consider the possible effect of the illegal act on the financial statements of the issuer, including any contingent monetary effects, such as fines, penalties, and damages; and
(B) as soon as practicable, inform the appropriate level of the management of the issuer and assure that the audit committee of the issuer, or the board of directors of the issuer in the absence of such a committee, is adequately informed with respect to illegal acts that have been detected or have otherwise come to the attention of such firm in the course of the audit, unless the illegal act is clearly inconsequential.
(2) Response to failure to take remedial action If, after determining that the audit committee of the board of directors of the issuer, or the board of directors of the issuer in the absence of an audit committee, is adequately informed with respect to illegal acts that have been detected or have otherwise come to the attention of the firm in the course of the audit of such firm, the registered public accounting firm concludes that—
(A) the illegal act has a material effect on the financial statements of the issuer;
(B) the senior management has not taken, and the board of directors has not caused senior management to take, timely and appropriate remedial actions with respect to the illegal act; and
(C) the failure to take remedial action is reasonably expected to warrant departure from a standard report of the auditor, when made, or warrant resignation from the audit engagement;
the registered public accounting firm shall, as soon as practicable, directly report its conclusions to the board of directors.
(3) Notice to Commission; response to failure to notify An issuer whose board of directors receives a report under paragraph (2) shall inform the Commission by notice not later than 1 business day after the receipt of such report and shall furnish the registered public accounting firm making such report with a copy of the notice furnished to the Commission. If the registered public accounting firm fails to receive a copy of the notice before the expiration of the required 1-business-day period, the registered public accounting firm shall—
(A) resign from the engagement; or
(B) furnish to the Commission a copy of its report (or the documentation of any oral report given) not later than 1 business day following such failure to receive notice.
(4) Report after resignation If a registered public accounting firm resigns from an engagement under paragraph (3)(A), the firm shall, not later than 1 business day following the failure by the issuer to notify the Commission under paragraph (3), furnish to the Commission a copy of the report of the firm (or the documentation of any oral report given).
(c) Auditor liability limitation No registered public accounting firm shall be liable in a private action for any finding, conclusion, or statement expressed in a report made pursuant to paragraph (3) or (4) of subsection (b), including any rule promulgated pursuant thereto.
(d) Civil penalties in cease-and-desist proceedings If the Commission finds, after notice and opportunity for hearing in a proceeding instituted pursuant to section 78u–3 of this title, that a registered public accounting firm has willfully violated paragraph (3) or (4) of subsection (b), the Commission may, in addition to entering an order under section 78u–3 of this title, impose a civil penalty against the registered public accounting firm and any other person that the Commission finds was a cause of such violation. The determination to impose a civil penalty and the amount of the penalty shall be governed by the standards set forth in section 78u–2 of this title.
(e) Preservation of existing authority Except as provided in subsection (d), nothing in this section shall be held to limit or otherwise affect the authority of the Commission under this chapter.
(f) Definitions As used in this section, the term “illegal act” means an act or omission that violates any law, or any rule or regulation having the force of law. As used in this section, the term “issuer” means an issuer (as defined in section 78c of this title), the securities of which are registered under section 78l of this title, or that is required to file reports pursuant to section 78o(d) of this title, or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.
(g) Prohibited activities Except as provided in subsection (h), it shall be unlawful for a registered public accounting firm (and any associated person of that firm, to the extent determined appropriate by the Commission) that performs for any issuer any audit required by this chapter or the rules of the Commission under this chapter or, beginning 180 days after the date of commencement of the operations of the Public Company Accounting Oversight Board established under section 7211 of this title (in this section referred to as the “Board”), the rules of the Board, to provide to that issuer, contemporaneously with the audit, any non-audit service, including—
(1) bookkeeping or other services related to the accounting records or financial statements of the audit client;
(2) financial information systems design and implementation;
(3) appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
(4) actuarial services;
(5) internal audit outsourcing services;
(6) management functions or human resources;
(7) broker or dealer, investment adviser, or investment banking services;
(8) legal services and expert services unrelated to the audit; and
(9) any other service that the Board determines, by regulation, is impermissible.
(h) Preapproval required for non-audit services A registered public accounting firm may engage in any non-audit service, including tax services, that is not described in any of paragraphs (1) through (9) of subsection (g) for an audit client, only if the activity is approved in advance by the audit committee of the issuer, in accordance with subsection (i).
(i) Preapproval requirements (1) In general (A) Audit committee action All auditing services (which may entail providing comfort letters in connection with securities underwritings or statutory audits required for insurance companies for purposes of State law) and non-audit services, other than as provided in subparagraph (B), provided to an issuer by the auditor of the issuer shall be preapproved by the audit committee of the issuer.
(B) De minimis exception The preapproval requirement under subparagraph (A) is waived with respect to the provision of non-audit services for an issuer, if—
(i) the aggregate amount of all such non-audit services provided to the issuer constitutes not more than 5 percent of the total amount of revenues paid by the issuer to its auditor during the fiscal year in which the non-audit services are provided;
(ii) such services were not recognized by the issuer at the time of the engagement to be non-audit services; and
(iii) such services are promptly brought to the attention of the audit committee of the issuer and approved prior to the completion of the audit by the audit committee or by 1 or more members of the audit committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the audit committee.
(2) Disclosure to investors Approval by an audit committee of an issuer under this subsection of a non-audit service to be performed by the auditor of the issuer shall be disclosed to investors in periodic reports required by section 78m(a) of this title.
(3) Delegation authority The audit committee of an issuer may delegate to 1 or more designated members of the audit committee who are independent directors of the board of directors, the authority to grant preapprovals required by this subsection. The decisions of any member to whom authority is delegated under this paragraph to preapprove an activity under this subsection shall be presented to the full audit committee at each of its scheduled meetings.
(4) Approval of audit services for other purposes In carrying out its duties under subsection (m)(2), if the audit committee of an issuer approves an audit service within the scope of the engagement of the auditor, such audit service shall be deemed to have been preapproved for purposes of this subsection.
(j) Audit partner rotation It shall be unlawful for a registered public accounting firm to provide audit services to an issuer if the lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit, has performed audit services for that issuer in each of the 5 previous fiscal years of that issuer.
(k) Reports to audit committees Each registered public accounting firm that performs for any issuer any audit required by this chapter shall timely report to the audit committee of the issuer—
(1) all critical accounting policies and practices to be used;
(2) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management officials of the issuer, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the registered public accounting firm; and
(3) other material written communications between the registered public accounting firm and the management of the issuer, such as any management letter or schedule of unadjusted differences.
(l) Conflicts of interest It shall be unlawful for a registered public accounting firm to perform for an issuer any audit service required by this chapter, if a chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for the issuer, was employed by that registered independent public accounting firm and participated in any capacity in the audit of that issuer during the 1-year period preceding the date of the initiation of the audit.
(m) Standards relating to audit committees (1) Commission rules (A) In general Effective not later than 270 days after July 30, 2002, the Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the requirements of any portion of paragraphs (2) through (6).
(B) Opportunity to cure defects The rules of the Commission under subparagraph (A) shall provide for appropriate procedures for an issuer to have an opportunity to cure any defects that would be the basis for a prohibition under subparagraph (A), before the imposition of such prohibition.
(2) Responsibilities relating to registered public accounting firms The audit committee of each issuer, in its capacity as a committee of the board of directors, shall be directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by that issuer (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and each such registered public accounting firm shall report directly to the audit committee.
(3) Independence (A) In general Each member of the audit committee of the issuer shall be a member of the board of directors of the issuer, and shall otherwise be independent.
(B) Criteria In order to be considered to be independent for purposes of this paragraph, a member of an audit committee of an issuer may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee—
(i) accept any consulting, advisory, or other compensatory fee from the issuer; or
(ii) be an affiliated person of the issuer or any subsidiary thereof.
(C) Exemption authority The Commission may exempt from the requirements of subparagraph (B) a particular relationship with respect to audit committee members, as the Commission determines appropriate in light of the circumstances.
(4) Complaints Each audit committee shall establish procedures for—
(A) the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and
(B) the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters.
(5) Authority to engage advisers Each audit committee shall have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties.
(6) Funding Each issuer shall provide for appropriate funding, as determined by the audit committee, in its capacity as a committee of the board of directors, for payment of compensation—
(A) to the registered public accounting firm employed by the issuer for the purpose of rendering or issuing an audit report; and
(B) to any advisers employed by the audit committee under paragraph (5).
(June 6, 1934, ch. 404, title I, § 10A, as added Pub. L. 104–67, title III, § 301(a), Dec. 22, 1995, 109 Stat. 762; amended Pub. L. 107–204, title II, §§ 201(a), 202–204, 205(b), (d), 206, title III, § 301, July 30, 2002, 116 Stat. 771–775; Pub. L. 111–203, title IX, § 985(b)(3), July 21, 2010, 124 Stat. 1933.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a), (b)(1), (e), (g), (k), and (l), was in the original “this title”. See References in Text note set out under section 78a of this title. The Securities Act of 1933, referred to in subsec. (f), is title I of act May 27, 1933, ch. 38, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.
Amendments2010—Subsec. (i)(1)(B). Pub. L. 111–203 substituted “minimis” for “minimus” in heading and “the non-audit” for “the nonaudit” in cl. (i). 2002—Subsec. (a). Pub. L. 107–204, § 205(b)(1), substituted “a registered public accounting firm” for “an independent public accountant” in introductory provisions. Subsec. (b)(1). Pub. L. 107–204, § 205(b)(2), (4)(A), in introductory provisions, substituted “the registered public accounting firm” for “the independent public accountant” and “the firm” for “the accountant”. Subsec. (b)(1)(B). Pub. L. 107–204, § 205(b)(4)(B), substituted “such firm” for “such accountant”. Subsec. (b)(2). Pub. L. 107–204, § 205(b)(2), (4)(A), (B), in introductory provisions, substituted “the firm” for “the accountant”, “such firm” for “such accountant”, and “the registered public accounting firm” for “the independent public accountant” and, in concluding provisions, substituted “the registered public accounting firm” for “the independent public accountant”. Subsec. (b)(3). Pub. L. 107–204, § 205(b)(2), substituted “the registered public accounting firm” for “the independent public accountant” wherever appearing in introductory provisions. Subsec. (b)(4). Pub. L. 107–204, § 205(b)(1), (4)(A), (C), substituted “a registered public accounting firm” for “an independent public accountant”, “the firm” for “the accountant”, and “the report of the firm” for “the accountant’s report”. Subsec. (c). Pub. L. 107–204, § 205(b)(3), substituted “No registered public accounting firm” for “No independent public accountant”. Subsec. (d). Pub. L. 107–204, § 205(b)(1), (2), substituted “a registered public accounting firm” for “an independent public accountant” and “the registered public accounting firm” for “the independent public accountant”. Subsec. (f). Pub. L. 107–204, § 205(d), substituted “Definitions” for “Definition” in heading and inserted at end “As used in this section, the term ‘issuer’ means an issuer (as defined in section 78c of this title), the securities of which are registered under section 78l of this title, or that is required to file reports pursuant to section 78o(d) of this title, or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn.” Subsecs. (g), (h). Pub. L. 107–204, § 201(a), added subsecs. (g) and (h). Subsec. (i). Pub. L. 107–204, § 202, added subsec. (i). Subsec. (j). Pub. L. 107–204, § 203, added subsec. (j). Subsec. (k). Pub. L. 107–204, § 204, added subsec. (k). Subsec. (l). Pub. L. 107–204, § 206, added subsec. (l). Subsec. (m). Pub. L. 107–204, § 301, added subsec. (m).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective DatePub. L. 104–67, title III, § 301(b), Dec. 22, 1995, 109 Stat. 764, provided that: “The amendment made by subsection (a) [enacting this section] shall apply to each annual report— “(1) for any period beginning on or after January 1, 1996, with respect to any registrant that is required to file selected quarterly financial data pursuant to the rules or regulations of the Securities and Exchange Commission; and “(2) for any period beginning on or after January 1, 1997, with respect to any other registrant.”
ConstructionPub. L. 104–67, title II, § 203, Dec. 22, 1995, 109 Stat. 762, provided that: “Nothing in this Act [see Short Title of 1995 Amendment note set out under section 78a of this title] or the amendments made by this Act shall be deemed to create or ratify any implied private right of action, or to prevent the Commission, by rule or regulation, from restricting or otherwise regulating private actions under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.].”
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# 15 U.S.C. § 78j–2 - Position limits and position accountability for security-based swaps and large trader reporting
## Text
(a) Position limits As a means reasonably designed to prevent fraud and manipulation, the Commission shall, by rule or regulation, as necessary or appropriate in the public interest or for the protection of investors, establish limits (including related hedge exemption provisions) on the size of positions in any security-based swap that may be held by any person. In establishing such limits, the Commission may require any person to aggregate positions in—
(1) any security-based swap and any security or loan or group of securities or loans on which such security-based swap is based, which such security-based swap references, or to which such security-based swap is related as described in paragraph (68) of section 78c(a) of this title, and any other instrument relating to such security or loan or group or index of securities or loans; or
(2) any security-based swap and—
(A) any security or group or index of securities, the price, yield, value, or volatility of which, or of which any interest therein, is the basis for a material term of such security-based swap as described in paragraph (68) of section 78c(a) of this title; and
(B) any other instrument relating to the same security or group or index of securities described under subparagraph (A).
(b) Exemptions The Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any person or class of persons, any security-based swap or class of security-based swaps, or any transaction or class of transactions from any requirement the Commission may establish under this section with respect to position limits.
(c) SRO rules (1) In general As a means reasonably designed to prevent fraud or manipulation, the Commission, by rule, regulation, or order, as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter, may direct a self-regulatory organization—
(A) to adopt rules regarding the size of positions in any security-based swap that may be held by—
(i) any member of such self-regulatory organization; or
(ii) any person for whom a member of such self-regulatory organization effects transactions in such security-based swap; and
(B) to adopt rules reasonably designed to ensure compliance with requirements prescribed by the Commission under this subsection.
(2) Requirement to aggregate positions In establishing the limits under paragraph (1), the self-regulatory organization may require such member or person to aggregate positions in—
(A) any security-based swap and any security or loan or group or narrow-based security index of securities or loans on which such security-based swap is based, which such security-based swap references, or to which such security-based swap is related as described in section 78c(a)(68) of this title, and any other instrument relating to such security or loan or group or narrow-based security index of securities or loans; or
(B) (i) any security-based swap; and
(ii) any security-based swap and any other instrument relating to the same security or group or narrow-based security index of securities.
(d) Large trader reporting The Commission, by rule or regulation, may require any person that effects transactions for such person’s own account or the account of others in any securities-based swap or uncleared security-based swap and any security or loan or group or narrow-based security index of securities or loans as set forth in paragraphs (1) and (2) of subsection (a) under this section to report such information as the Commission may prescribe regarding any position or positions in any security-based swap or uncleared security-based swap and any security or loan or group or narrow-based security index of securities or loans and any other instrument relating to such security or loan or group or narrow-based security index of securities or loans as set forth in paragraphs (1) and (2) of subsection (a) under this section.
(June 6, 1934, ch. 404, title I, § 10B, as added Pub. L. 111–203, title VII, § 763(h), July 21, 2010, 124 Stat. 1778.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (c)(1), was in the original “this title”. See References in Text note set out under section 78a of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.
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# 15 U.S.C. § 78j–3 - Compensation committees
## Text
(a) Independence of compensation committees (1) Listing standards The Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any equity security of an issuer, other than an issuer that is a controlled company, limited partnership, company in bankruptcy proceedings, open-ended management investment company that is registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], or a foreign private issuer that provides annual disclosures to shareholders of the reasons that the foreign private issuer does not have an independent compensation committee, that does not comply with the requirements of this subsection.
(2) Independence of compensation committees The rules of the Commission under paragraph (1) shall require that each member of the compensation committee of the board of directors of an issuer be—
(A) a member of the board of directors of the issuer; and
(B) independent.
(3) Independence The rules of the Commission under paragraph (1) shall require that, in determining the definition of the term “independence” for purposes of paragraph (2), the national securities exchanges and the national securities associations shall consider relevant factors, including—
(A) the source of compensation of a member of the board of directors of an issuer, including any consulting, advisory, or other compensatory fee paid by the issuer to such member of the board of directors; and
(B) whether a member of the board of directors of an issuer is affiliated with the issuer, a subsidiary of the issuer, or an affiliate of a subsidiary of the issuer.
(4) Exemption authority The rules of the Commission under paragraph (1) shall permit a national securities exchange or a national securities association to exempt a particular relationship from the requirements of paragraph (2), with respect to the members of a compensation committee, as the national securities exchange or national securities association determines is appropriate, taking into consideration the size of an issuer and any other relevant factors.
(b) Independence of compensation consultants and other compensation committee advisers (1) In general The compensation committee of an issuer may only select a compensation consultant, legal counsel, or other adviser to the compensation committee after taking into consideration the factors identified by the Commission under paragraph (2).
(2) Rules The Commission shall identify factors that affect the independence of a compensation consultant, legal counsel, or other adviser to a compensation committee of an issuer. Such factors shall be competitively neutral among categories of consultants, legal counsel, or other advisers and preserve the ability of compensation committees to retain the services of members of any such category, and shall include—
(A) the provision of other services to the issuer by the person that employs the compensation consultant, legal counsel, or other adviser;
(B) the amount of fees received from the issuer by the person that employs the compensation consultant, legal counsel, or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel, or other adviser;
(C) the policies and procedures of the person that employs the compensation consultant, legal counsel, or other adviser that are designed to prevent conflicts of interest;
(D) any business or personal relationship of the compensation consultant, legal counsel, or other adviser with a member of the compensation committee; and
(E) any stock of the issuer owned by the compensation consultant, legal counsel, or other adviser.
(c) Compensation committee authority relating to compensation consultants (1) Authority to retain compensation consultant (A) In general The compensation committee of an issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain or obtain the advice of a compensation consultant.
(B) Direct responsibility of compensation committee The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of a compensation consultant.
(C) Rule of construction This paragraph may not be construed—
(i) to require the compensation committee to implement or act consistently with the advice or recommendations of the compensation consultant; or
(ii) to affect the ability or obligation of a compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee.
(2) Disclosure In any proxy or consent solicitation material for an annual meeting of the shareholders (or a special meeting in lieu of the annual meeting) occurring on or after the date that is 1 year after July 21, 2010, each issuer shall disclose in the proxy or consent material, in accordance with regulations of the Commission, whether—
(A) the compensation committee of the issuer retained or obtained the advice of a compensation consultant; and
(B) the work of the compensation consultant has raised any conflict of interest and, if so, the nature of the conflict and how the conflict is being addressed.
(d) Authority to engage independent legal counsel and other advisers (1) In general The compensation committee of an issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain and obtain the advice of independent legal counsel and other advisers.
(2) Direct responsibility of compensation committee The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of independent legal counsel and other advisers.
(3) Rule of construction This subsection may not be construed—
(A) to require a compensation committee to implement or act consistently with the advice or recommendations of independent legal counsel or other advisers under this subsection; or
(B) to affect the ability or obligation of a compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee.
(e) Compensation of compensation consultants, independent legal counsel, and other advisers Each issuer shall provide for appropriate funding, as determined by the compensation committee in its capacity as a committee of the board of directors, for payment of reasonable compensation—
(1) to a compensation consultant; and
(2) to independent legal counsel or any other adviser to the compensation committee.
(f) Commission rules (1) In general Not later than 360 days after July 21, 2010, the Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the requirements of this section.
(2) Opportunity to cure defects The rules of the Commission under paragraph (1) shall provide for appropriate procedures for an issuer to have a reasonable opportunity to cure any defects that would be the basis for the prohibition under paragraph (1), before the imposition of such prohibition.
(3) Exemption authority (A) In general The rules of the Commission under paragraph (1) shall permit a national securities exchange or a national securities association to exempt a category of issuers from the requirements under this section, as the national securities exchange or the national securities association determines is appropriate.
(B) Considerations In determining appropriate exemptions under subparagraph (A), the national securities exchange or the national securities association shall take into account the potential impact of the requirements of this section on smaller reporting issuers.
(g) Controlled company exemption (1) In general This section shall not apply to any controlled company.
(2) Definition For purposes of this section, the term “controlled company” means an issuer—
(A) that is listed on a national securities exchange or by a national securities association; and
(B) that holds an election for the board of directors of the issuer in which more than 50 percent of the voting power is held by an individual, a group, or another issuer.
(June 6, 1934, ch. 404, title I, § 10C, as added Pub. L. 111–203, title IX, § 952(a), July 21, 2010, 124 Stat. 1900.)
## Notes
Editorial Notes
References in TextThe Investment Company Act of 1940, referred to in subsec. (a)(1), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80a–51 of this title and Tables.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78j–4 - Recovery of erroneously awarded compensation policy
## Text
(a) Listing standards The Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that does not comply with the requirements of this section.
(b) Recovery of funds The rules of the Commission under subsection (a) shall require each issuer to develop and implement a policy providing—
(1) for disclosure of the policy of the issuer on incentive-based compensation that is based on financial information required to be reported under the securities laws; and
(2) that, in the event that the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws, the issuer will recover from any current or former executive officer of the issuer who received incentive-based compensation (including stock options awarded as compensation) during the 3-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in 11 So in original. Probably should be “compensation in”. excess of what would have been paid to the executive officer under the accounting restatement.
(June 6, 1934, ch. 404, title I, § 10D, as added Pub. L. 111–203, title IX, § 954, July 21, 2010, 124 Stat. 1904.)
## Notes
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78j - Manipulative and deceptive devices
## Text
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
(a) (1) To effect a short sale, or to use or employ any stop-loss order in connection with the purchase or sale, of any security other than a government security, 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.
(2) Paragraph (1) of this subsection shall not apply to security futures products.
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement 11 So in original. Probably should be followed by a comma. any manipulative or deceptive device or contrivance 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.
(c) (1) To effect, accept, or facilitate a transaction involving the loan or borrowing of securities 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.
(2) Nothing in paragraph (1) may be construed to limit the authority of the appropriate Federal banking agency (as defined in section 1813(q) of title 12), the National Credit Union Administration, or any other Federal department or agency having a responsibility under Federal law to prescribe rules or regulations restricting transactions involving the loan or borrowing of securities in order to protect the safety and soundness of a financial institution or to protect the financial system from systemic risk.
Rules promulgated under subsection (b) that prohibit fraud, manipulation, or insider trading (but not rules imposing or specifying reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading), and judicial precedents decided under subsection (b) and rules promulgated thereunder that prohibit fraud, manipulation, or insider trading, shall apply to security-based swap agreements to the same extent as they apply to securities. Judicial precedents decided under section 77q(a) of this title and sections 78i, 78o, 78p, 78t, and 78u–1 of this title, and judicial precedents decided under applicable rules promulgated under such sections, shall apply to security-based swap agreements to the same extent as they apply to securities.
(June 6, 1934, ch. 404, title I, § 10, 48 Stat. 891; Pub. L. 106–554, § 1(a)(5) [title II, § 206(g), title III, § 303(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–432, 2763A–454; Pub. L. 111–203, title VII, § 762(d)(3), title IX, §§ 929L(2), 984(a), July 21, 2010, 124 Stat. 1761, 1861, 1932.)
## Notes
Editorial Notes
Amendments2010—Pub. L. 111–203, § 762(d)(3)(B), which directed amendment of the matter following subsection (b) “by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act), in each place that such terms appear’ ”, was executed by striking out “(as defined in section 206B of the Gramm-Leach-Bliley Act)” after “security-based swap agreements” in two places in concluding provisions following subsec. (c) to reflect the probable intent of Congress. Subsec. (a)(1). Pub. L. 111–203, § 929L(2), substituted “other than a government security” for “registered on a national securities exchange”. Subsec. (b). Pub. L. 111–203, § 762(d)(3)(A), struck out “(as defined in section 206B of the Gramm-Leach-Bliley Act),” after “securities-based swap agreement”. Subsec. (c). Pub. L. 111–203, § 984(a), which directed amendment of this section by adding subsec. (c) at the end, was executed by adding subsec. (c) after subsec. (b) to reflect the probable intent of Congress. 2000—Pub. L. 106–554, § 1(a)(5) [title III, § 303(d)(2)], inserted concluding provisions at end. Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 206(g)], designated existing provisions as par. (1) and added par. (2). Subsec. (b). Pub. L. 106–554, § 1(a)(5) [title III, § 303(d)(1)], inserted “or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act),” before “any manipulative or deceptive device”.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by sections 929L(2) and 984(a) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 Title 12, Banks and Banking. Amendment by section 762(d)(3) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
RegulationsPub. L. 111–203, title IX, § 984(b), July 21, 2010, 124 Stat. 1933, provided that: “Not later than 2 years after the date of enactment of this Act [July 21, 2010], the Commission shall promulgate rules that are designed to increase the transparency of information available to brokers, dealers, and investors, with respect to the loan or borrowing of securities.” [For definitions of terms used in section 984(b) of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.]
Prohibition of Insider TradingPub. L. 112–105, § 4(a), Apr. 4, 2012, 126 Stat. 292, provided that: “Members of Congress and employees of Congress are not exempt from the insider trading prohibitions arising under the securities laws, including section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. 78j(b)] and Rule 10b–5 thereunder.” [For definitions of “Member of Congress” and “employee of Congress”, see section 2 of Pub. L. 112–105, set out as a Definitions note under section 13101 of Title 5, Government Organization and Employees.]
Application of Insider Trading LawsPub. L. 112–105, § 9(b)(1), Apr. 4, 2012, 126 Stat. 297, provided that: “Executive branch employees, judicial officers, and judicial employees are not exempt from the insider trading prohibitions arising under the securities laws, including section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. 78j(b)] and Rule 10b–5 thereunder.” [For definitions of “executive branch employees”, “judicial officers”, and “judicial employees”, see section 2 of Pub. L. 112–105, set out as a Definitions note under section 13101 of Title 5, Government Organization and Employees.]
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78jj - Repealed. Pub. L. 100–181, title III, § 330, Dec. 4, 1987, 101 Stat. 1259
## Notes
Section, act June 6, 1934, ch. 404, title II, § 211, 48 Stat. 909, provided for a study and report by Securities and Exchange Commission of reorganization proceedings. Study as basis for Trust Indenture Act of 1939, see section 77bbb of this title.
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# 15 U.S.C. § 78k–1 - National market system for securities; securities information processors
## Text
(a) Congressional findings; facilitating establishment of national market system for securities; designation of qualified securities (1) The Congress finds that—
(A) The securities markets are an important national asset which must be preserved and strengthened.
(B) New data processing and communications techniques create the opportunity for more efficient and effective market operations.
(C) It is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure—
(i) economically efficient execution of securities transactions;
(ii) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets;
(iii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities;
(iv) the practicability of brokers executing investors’ orders in the best market; and
(v) an opportunity, consistent with the provisions of clauses (i) and (iv) of this subparagraph, for investors’ orders to be executed without the participation of a dealer.
(D) The linking of all markets for qualified securities through communication and data processing facilities will foster efficiency, enhance competition, increase the information available to brokers, dealers, and investors, facilitate the offsetting of investors’ orders, and contribute to best execution of such orders.
(2) The Commission is directed, therefore, having due regard for the public interest, the protection of investors, and the maintenance of fair and orderly markets, to use its authority under this chapter to facilitate the establishment of a national market system for securities (which may include subsystems for particular types of securities with unique trading characteristics) in accordance with the findings and to carry out the objectives set forth in paragraph (1) of this subsection. The Commission, by rule, shall designate the securities or classes of securities qualified for trading in the national market system from among securities other than exempted securities. (Securities or classes of securities so designated hereinafter 11 So in original. Probably should be “are hereinafter”. in this section referred to as “qualified securities”.)
(3) The Commission is authorized in furtherance of the directive in paragraph (2) of this subsection—
(A) to create one or more advisory committees pursuant to chapter 10 of title 5 (which shall be in addition to the National Market Advisory Board established pursuant to subsection (d) of this section),22 So in original. The comma probably should not appear. and to employ one or more outside experts;
(B) by rule or order, to authorize or require self-regulatory organizations to act jointly with respect to matters as to which they share authority under this chapter in planning, developing, operating, or regulating a national market system (or a subsystem thereof) or one or more facilities thereof; and
(C) to conduct studies and make recommendations to the Congress from time to time as to the possible need for modifications of the scheme of self-regulation provided for in this chapter so as to adapt it to a national market system.
(b) Securities information processors; registration; withdrawal of registration; access to services; censure; suspension or revocation of registration (1) Except as otherwise provided in this section, it shall be unlawful for any securities information processor unless registered in accordance with this subsection, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a securities information processor. The Commission, by rule or order, upon its own motion or upon application, may conditionally or unconditionally exempt any securities information processor or class of securities information processors or security or class of securities 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, including the maintenance of fair and orderly markets in securities and the removal of impediments to and perfection of the mechanism of a national market system: Provided, however, That a securities information processor not acting as the exclusive processor of any information with respect to quotations for or transactions in securities is exempt from the requirement to register in accordance with this subsection unless the Commission, by rule or order, finds that the registration of such securities information processor is necessary or appropriate in the public interest, for the protection of investors, or for the achievement of the purposes of this section.
(2) A securities information processor may be registered by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the address of its principal office, or offices, the names of the securities and markets for which it is then acting and for which it proposes to act as a securities information processor, and such other information and documents as the Commission, by rule, may prescribe with regard to performance capability, standards and procedures for the collection, processing, distribution, and publication of information with respect to quotations for and transactions in securities, personnel qualifications, financial condition, and such other matters as the Commission determines to be germane to the provisions of this chapter and the rules and regulations thereunder, or necessary or appropriate in furtherance of the purposes of this section.
(3) The Commission shall, upon the filing of an application for registration pursuant to paragraph (2) of this subsection, publish notice of the filing and afford interested persons an opportunity to submit written data, views, and arguments concerning such application. Within ninety days of the date of the publication of such notice (or within such longer period as to which the applicant consents) the Commission shall—
(A) by order grant such 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 eighty days of the date of publication of notice 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 sixty days if it finds good cause for such extension and publishes its reasons for so finding or for such longer periods as to which the applicant consents.
The Commission shall grant the registration of a securities information processor if the Commission finds that such securities information processor is so organized, and has the capacity, to be able to assure the prompt, accurate, and reliable performance of its functions as a securities information processor, comply with the provisions of this chapter and the rules and regulations thereunder, carry out its functions in a manner consistent with the purposes of this section, and, insofar as it is acting as an exclusive processor, operate fairly and efficiently. The Commission shall deny the registration of a securities information processor if the Commission does not make any such finding.
(4) A registered securities information processor 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 securities information processor is no longer in existence or has ceased to do business in the capacity specified in its application for registration, the Commission, by order, shall cancel the registration.
(5) (A) If any registered securities information processor prohibits or limits any person in respect of access to services offered, directly or indirectly, by such securities information processor, the registered securities information processor shall promptly file notice thereof with the Commission. 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. Any prohibition or limitation on access to services with respect to which a registered securities information processor is required by this paragraph to file notice shall be subject to review by the Commission on its own motion, or upon application by any person aggrieved thereby filed within thirty days after such notice has been filed with the Commission and received by such aggrieved person, or within such longer period as the Commission may determine. Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of such prohibition or limitation, unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments). The Commission shall establish for appropriate cases an expedited procedure for consideration and determination of the question of a stay.
(B) In any proceeding to review the prohibition or limitation of any person in respect of access to services offered by a registered securities information processor, if the Commission finds, after notice and opportunity for hearing, that such prohibition or limitation is consistent with the provisions of this chapter and the rules and regulations thereunder and that such person has not been discriminated against unfairly, the Commission, by order, shall dismiss the proceeding. If the Commission does not make any such finding or if it finds that such prohibition or limitation imposes any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter, the Commission, by order, shall set aside the prohibition or limitation and require the registered securities information processor to permit such person access to services offered by the registered securities information processor.
(6) The Commission, by order, may censure or place limitations upon the activities, functions, or operations of any registered securities information processor or suspend for a period not exceeding twelve months or revoke the registration of any such processor, if the Commission finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, suspension, or revocation is in the public interest, necessary or appropriate for the protection of investors or to assure the prompt, accurate, or reliable performance of the functions of such securities information processor, and that such securities information processor has violated or is unable to comply with any provision of this chapter or the rules or regulations thereunder.
(c) Rules and regulations covering use of mails or other means or instrumentalities of interstate commerce; reports of purchase or sale of qualified securities; limiting registered securities transactions to national securities exchanges (1) No self-regulatory organization, member thereof, securities information processor, broker, or dealer shall make use of the mails or any means or instrumentality of interstate commerce to collect, process, distribute, publish, or prepare for distribution or publication any information with respect to quotations for or transactions in any security other than an exempted security, to assist, participate in, or coordinate the distribution or publication of such information, or to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any such security in contravention of such rules and regulations as the Commission shall prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter to—
(A) prevent the use, distribution, or publication of fraudulent, deceptive, or manipulative information with respect to quotations for and transactions in such securities;
(B) assure the prompt, accurate, reliable, and fair collection, processing, distribution, and publication of information with respect to quotations for and transactions in such securities and the fairness and usefulness of the form and content of such information;
(C) assure that all securities information processors may, for purposes of distribution and publication, obtain on fair and reasonable terms such information with respect to quotations for and transactions in such securities as is collected, processed, or prepared for distribution or publication by any exclusive processor of such information acting in such capacity;
(D) assure that all exchange members, brokers, dealers, securities information processors, and, subject to such limitations as the Commission, by rule, may impose as necessary or appropriate for the protection of investors or maintenance of fair and orderly markets, all other persons may obtain on terms which are not unreasonably discriminatory such information with respect to quotations for and transactions in such securities as is published or distributed by any self-regulatory organization or securities information processor;
(E) assure that all exchange members, brokers, and dealers transmit and direct orders for the purchase or sale of qualified securities in a manner consistent with the establishment and operation of a national market system; and
(F) assure equal regulation of all markets for qualified securities and all exchange members, brokers, and dealers effecting transactions in such securities.
(2) The Commission, by rule, as it deems necessary or appropriate in the public interest or for the protection of investors, may require any person who has effected the purchase or sale of any qualified security by use of the mails or any means or instrumentality of interstate commerce to report such purchase or sale to a registered securities information processor, national securities exchange, or registered securities association and require such processor, exchange, or association to make appropriate distribution and publication of information with respect to such purchase or sale.
(3) (A) The Commission, by rule, is authorized to prohibit brokers and dealers from effecting transactions in securities registered pursuant to section 78l(b) of this title otherwise than on a national securities exchange, if the Commission finds, on the record after notice and opportunity for hearing, that—
(i) as a result of transactions in such securities effected otherwise than on a national securities exchange the fairness or orderliness of the markets for such securities has been affected in a manner contrary to the public interest or the protection of investors;
(ii) no rule of any national securities exchange unreasonably impairs the ability of any dealer to solicit or effect transactions in such securities for his own account or unreasonably restricts competition among dealers in such securities or between dealers acting in the capacity of market makers who are specialists in such securities and such dealers who are not specialists in such securities, and
(iii) the maintenance or restoration of fair and orderly markets in such securities may not be assured through other lawful means under this chapter.
The Commission may conditionally or unconditionally exempt any security or transaction or any class of securities or transactions from any such prohibition if the Commission deems such exemption consistent with the public interest, the protection of investors, and the maintenance of fair and orderly markets.
(B) For the purposes of subparagraph (A) of this paragraph, the ability of a dealer to solicit or effect transactions in securities for his own account shall not be deemed to be unreasonably impaired by any rule of an exchange fairly and reasonably prescribing the sequence in which orders brought to the exchange must be executed or which has been adopted to effect compliance with a rule of the Commission promulgated under this chapter.
(4) The Commission is directed to review any and all rules of national securities exchanges which limit or condition the ability of members to effect transactions in securities otherwise than on such exchanges.
(5) No national securities exchange or registered securities association may limit or condition the participation of any member in any registered clearing agency.
(6) Tick size.— (A) Study and report.— The Commission shall conduct a study examining the transition to trading and quoting securities in one penny increments, also known as decimalization. The study shall examine the impact that decimalization has had on the number of initial public offerings since its implementation relative to the period before its implementation. The study shall also examine the impact that this change has had on liquidity for small and middle capitalization company securities and whether there is sufficient economic incentive to support trading operations in these securities in penny increments. Not later than 90 days after April 5, 2012, the Commission shall submit to Congress a report on the findings of the study.
(B) Designation.— If the Commission determines that the securities of emerging growth companies should be quoted and traded using a minimum increment of greater than $0.01, the Commission may, by rule not later than 180 days after April 5, 2012, designate a minimum increment for the securities of emerging growth companies that is greater than $0.01 but less than $0.10 for use in all quoting and trading of securities in any exchange or other execution venue.
(d) National Market Advisory Board (1) Not later than one hundred eighty days after June 4, 1975, the Commission shall establish a National Market Advisory Board (hereinafter in this section referred to as the “Advisory Board”) to be composed of fifteen members, not all of whom shall be from the same geographical area of the United States, appointed by the Commission for a term specified by the Commission of not less than two years or more than five years. The Advisory Board shall consist of persons associated with brokers and dealers (who shall be a majority) and persons not so associated who are representative of the public and, to the extent feasible, have knowledge of the securities markets of the United States.
(2) It shall be the responsibility of the Advisory Board to formulate and furnish to the Commission its views on significant regulatory proposals made by the Commission or any self-regulatory organization concerning the establishment, operation, and regulation of the markets for securities in the United States.
(3) (A) The Advisory Board shall study and make recommendations to the Commission as to the steps it finds appropriate to facilitate the establishment of a national market system. In so doing, the Advisory Board shall assume the responsibilities of any advisory committee appointed to advise the Commission with respect to the national market system which is in existence at the time of the establishment of the Advisory Board.
(B) The Advisory Board shall study the possible need for modifications of the scheme of self-regulation provided for in this chapter so as to adapt it to a national market system, including the need for the establishment of a new self-regulatory organization (hereinafter in this section referred to as a “National Market Regulatory Board” or “Regulatory Board”) to administer the national market system. In the event the Advisory Board determines a National Market Regulatory Board should be established, it shall make recommendations as to:
(i) the point in time at which a Regulatory Board should be established;
(ii) the composition of a Regulatory Board;
(iii) the scope of the authority of a Regulatory Board;
(iv) the relationship of a Regulatory Board to the Commission and to existing self-regulatory organizations; and
(v) the manner in which a Regulatory Board should be funded.
The Advisory Board shall report to the Congress, on or before December 31, 1976, the results of such study and its recommendations, including such recommendations for legislation as it deems appropriate.
(C) In carrying out its responsibilities under this paragraph, the Advisory Board shall consult with self-regulatory organizations, brokers, dealers, securities information processors, issuers, investors, representatives of Government agencies, and other persons interested or likely to participate in the establishment, operation, or regulation of the national market system.
(e) National markets system for security futures products (1) Consultation and cooperation required With respect to security futures products, the Commission and the Commodity Futures Trading Commission shall consult and cooperate so that, to the maximum extent practicable, their respective regulatory responsibilities may be fulfilled and the rules and regulations applicable to security futures products may foster a national market system for security futures products if the Commission and the Commodity Futures Trading Commission jointly determine that such a system would be consistent with the congressional findings in subsection (a)(1). In accordance with this objective, the Commission shall, at least 15 days prior to the issuance for public comment of any proposed rule or regulation under this section concerning security futures products, consult and request the views of the Commodity Futures Trading Commission.
(2) Application of rules by order of CFTC No rule adopted pursuant to this section shall be applied to any person with respect to the trading of security futures products on an exchange that is registered under section 78f(g) of this title unless the Commodity Futures Trading Commission has issued an order directing that such rule is applicable to such persons.
(June 6, 1934, ch. 404, title I, § 11A, as added Pub. L. 94–29, § 7, June 4, 1975, 89 Stat. 111; amended Pub. L. 98–620, title IV, § 402(14), Nov. 8, 1984, 98 Stat. 3358; Pub. L. 100–181, title III, §§ 313, 314, Dec. 4, 1987, 101 Stat. 1256; Pub. L. 106–554, § 1(a)(5) [title II, § 206(c)], Dec. 21, 2000, 114 Stat. 2763, 2763A–430; Pub. L. 112–106, title I, § 106(b), Apr. 5, 2012, 126 Stat. 312; Pub. L. 117–286, § 4(a)(62), Dec. 27, 2022, 136 Stat. 4312.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2022—Subsec. (a)(3)(A). Pub. L. 117–286 substituted “chapter 10 of title 5 (which shall be in addition to the National Market Advisory Board established pursuant to subsection (d) of this section),” for “the Federal Advisory Committee Act (which shall be in addition to the National Market Advisory Board established pursuant to subsection (d) of this section)”. 2012—Subsec. (c)(6). Pub. L. 112–106 added par. (6). 2000—Subsec. (e). Pub. L. 106–554 added subsec. (e). 1987—Subsec. (b)(2). Pub. L. 100–181, § 313(1), substituted “transactions” for “transaction”. Subsec. (c)(4). Pub. L. 100–181, § 313(2), struck out “On or before the ninetieth day following June 4, 1975, the Commission shall (i) report to the Congress the results of its review, including the effects on competition of such rules, and (ii) commence a proceeding in accordance with the provisions of section 78s(c) of this title to amend any such rule imposing a burden on competition which does not appear to the Commission to be necessary or appropriate in furtherance of the purposes of this chapter. The Commission shall conclude any such proceeding within ninety days of the date of publication of notice of its commencement.” Subsec. (e). Pub. L. 100–181, § 314, struck out subsec. (e) which read as follows: “The Commission is authorized and directed to make a study of the extent to which persons excluded from the definitions of ‘broker’ and ‘dealer’ maintain accounts on behalf of public customers for buying and selling securities registered under section 78l of this title and whether such exclusions are consistent with the protection of investors and the other purposes of this chapter. The Commission shall report to the Congress, on or before December 31, 1976, the results of its study together with such recommendations for legislation as it deems advisable.” 1984—Subsec. (c)(4). Pub. L. 98–620 struck out designation “(A)” after “(4)”, and struck out subpar. (B) which provided that review pursuant to section 78y(b) of this title of any rule promulgated by the Commission in accordance with any proceeding commenced pursuant to this paragraph would, except as to causes the court considers of greater importance, take precedence on the docket over all other causes and had to be assigned for consideration at the earliest practicable date and expedited in every way.
Statutory Notes and Related Subsidiaries
Effective Date of 1984 AmendmentAmendment by Pub. L. 98–620 not applicable to cases pending on Nov. 8, 1984, see section 403 of Pub. L. 98–620, set out as an Effective Date note under section 1657 of Title 28, Judiciary and Judicial Procedure.
Effective DateSection effective June 4, 1975, except for subsec. (b) which is effective 180 days after June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Termination of Advisory CommitteesAdvisory committees established after Jan. 5, 1973, to terminate not later than the expiration of the 2-year period beginning on the date of their establishment, unless, in the case of a committee established by the President or an officer of the Federal Government, such committee is renewed by appropriate action prior to the expiration of such 2-year period, or in the case of a committee established by the Congress, its duration is otherwise provided for by law. See section 1013 of Title 5, Government Organization and Employees.
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# 15 U.S.C. § 78k - Trading by members of exchanges, brokers, and dealers
## Text
(a) Trading for own account or account of associated person; exceptions (1) It shall be unlawful for any member of a national securities exchange to effect any transaction on such exchange for its own account, the account of an associated person, or an account with respect to which it or an associated person thereof exercises investment discretion: Provided, however, That this paragraph shall not make unlawful—
(A) any transaction by a dealer acting in the capacity of market maker;
(B) any transaction for the account of an odd-lot dealer in a security in which he is so registered;
(C) any stabilizing transaction effected in compliance with rules under section 78j(b) of this title to facilitate a distribution of a security in which the member effecting such transaction is participating;
(D) any bona fide arbitrage transaction, any bona fide hedge transaction involving a long or short position in an equity security and a long or short position in a security entitling the holder to acquire or sell such equity security, or any risk arbitrage transaction in connection with a merger, acquisition, tender offer, or similar transaction involving a recapitalization;
(E) any transaction for the account of a natural person, the estate of a natural person, or a trust created by a natural person for himself or another natural person;
(F) any transaction to offset a transaction made in error;
(G) any other transaction for a member’s own account provided that (i) such member is primarily engaged in the business of underwriting and distributing securities issued by other persons, selling securities to customers, and acting as broker, or any one or more of such activities, and whose gross income normally is derived principally from such business and related activities and (ii) such transaction is effected in compliance with rules of the Commission which, as a minimum, assure that the transaction is not inconsistent with the maintenance of fair and orderly markets and yields priority, parity, and precedence in execution to orders for the account of persons who are not members or associated with members of the exchange;
(H) any transaction for an account with respect to which such member or an associated person thereof exercises investment discretion if such member—
(i) has obtained, from the person or persons authorized to transact business for the account, express authorization for such member or associated person to effect such transactions prior to engaging in the practice of effecting such transactions;
(ii) furnishes the person or persons authorized to transact business for the account with a statement at least annually disclosing the aggregate compensation received by the exchange member in effecting such transactions; and
(iii) complies with any rules the Commission has prescribed with respect to the requirements of clauses (i) and (ii); and
(I) any other transaction of a kind which the Commission, by rule, determines is consistent with the purposes of this paragraph, the protection of investors, and the maintenance of fair and orderly markets.
(2) The Commission, by rule, as it deems necessary or appropriate in the public interest and for the protection of investors, to maintain fair and orderly markets, or to assure equal regulation of exchange markets and markets occurring otherwise than on an exchange, may regulate or prohibit:
(A) transactions on a national securities exchange not unlawful under paragraph (1) of this subsection effected by any member thereof for its own account (unless such member is acting in the capacity of market maker or odd-lot dealer), the account of an associated person, or an account with respect to which such member or an associated person thereof exercises investment discretion;
(B) transactions otherwise than on a national securities exchange effected by use of the mails or any means or instrumentality of interstate commerce by any member of a national securities exchange, broker, or dealer for the account of such member, broker, or dealer (unless such member, broker, or dealer is acting in the capacity of a market maker) 11 So in original. Probably should be followed by a comma. the account of an associated person, or an account with respect to which such member, broker, or dealer or associated person thereof exercises investment discretion; and
(C) transactions on a national securities exchange effected by any broker or dealer not a member thereof for the account of such broker or dealer (unless such broker or dealer is acting in the capacity of market maker), the account of an associated person, or an account with respect to which such broker or dealer or associated person thereof exercises investment discretion.
(3) The provisions of paragraph (1) of this subsection insofar as they apply to transactions on a national securities exchange effected by a member thereof who was a member on February 1, 1978 shall not become effective until February 1, 1979. Nothing in this paragraph shall be construed to impair or limit the authority of the Commission to regulate or prohibit such transactions prior to February 1, 1979, pursuant to paragraph (2) of this subsection.
(b) Registration of members as odd-lot dealers and specialists When not in contravention of such rules and regulations as the Commission may 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, the rules of a national securities exchange may permit (1) a member to be registered as an odd-lot dealer and as such to buy and sell for his own account so far as may be reasonably necessary to carry on such odd-lot transactions, and (2) a member to be registered as a specialist. Under the rules and regulations of the Commission a specialist may be permitted to act as a broker and dealer or limited to acting as a broker or dealer. It shall be unlawful for a specialist or an official of the exchange to disclose information in regard to orders placed with such specialist which is not available to all members of the exchange, to any person other than an official of the exchange, a representative of the Commission, or a specialist who may be acting for such specialist: Provided, however, That the Commission, by rule, may require disclosure to all members of the exchange of all orders placed with specialists, under such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. It shall also be unlawful for a specialist permitted to act as a broker and dealer to effect on the exchange as broker any transaction except upon a market or limited price order.
(c) Exemptions from provisions of section and rules and regulations If because of the limited volume of transactions effected on an exchange, it is in the opinion of the Commission impracticable and not necessary or appropriate in the public interest or for the protection of investors to apply any of the foregoing provisions of this section or the rules and regulations thereunder, the Commission shall have power, upon application of the exchange and on a showing that the rules of such exchange are otherwise adequate for the protection of investors, to exempt such exchange and its members from any such provision or rules and regulations.
(d) Prohibition on extension of credit by broker-dealer It shall be unlawful for a member of a national securities exchange who is both a dealer and a broker, or for any person who both as a broker and a dealer transacts a business in securities through the medium of a member or otherwise, to effect through the use of any facility of a national securities exchange or of the mails or of any means or instrumentality of interstate commerce, or otherwise in the case of a member, (1) any transaction in connection with which, directly or indirectly, he extends or maintains or arranges for the extension or maintenance of credit to or for a customer on any security (other than an exempted security) which was a part of a new issue in the distribution of which he participated as a member of a selling syndicate or group within thirty days prior to such transaction: Provided, That credit shall not be deemed extended by reason of a bona fide delayed delivery of (i) any such security against full payment of the entire purchase price thereof upon such delivery within thirty-five days after such purchase or (ii) any mortgage related security or any small business related security against full payment of the entire purchase price thereof upon such delivery within one hundred and eighty days after such purchase, or within such shorter period as the Commission may prescribe by rule or regulation, or (2) any transaction with respect to any security (other than an exempted security) unless, if the transaction is with a customer, he discloses to such customer in writing at or before the completion of the transaction whether he is acting as a dealer for his own account, as a broker for such customer, or as a broker for some other person.
(June 6, 1934, ch. 404, title I, § 11, 48 Stat. 891; Aug. 10, 1954, ch. 667, title II, § 201, 68 Stat. 686; Pub. L. 94–29, § 6, June 4, 1975, 89 Stat. 110; Pub. L. 95–283, § 18(a), May 21, 1978, 92 Stat. 275; Pub. L. 98–440, title I, § 104, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103–68, § 1, Aug. 11, 1993, 107 Stat. 691; Pub. L. 103–325, title II, § 205, Sept. 23, 1994, 108 Stat. 2199.)
## Notes
Editorial Notes
Amendments1994—Subsec. (d)(1)(ii). Pub. L. 103–325 inserted “or any small business related security” after “mortgage related security”. 1993—Subsec. (a)(1)(E). Pub. L. 103–68, § 1(1), struck out “(other than an investment company)” after “trust”. Subsec. (a)(1)(H), (I). Pub. L. 103–68, § 1(2)–(4), added subpar. (H) and redesignated former subpar. (H) as (I). 1984—Subsec. (d)(1). Pub. L. 98–440 designated existing provisions of par. (1) as cl. (i) and added cl. (ii). 1978—Subsec. (a)(3). Pub. L. 95–283 substituted “February 1, 1978” for “May 1, 1975”, and “February 1, 1979” for “May 1, 1978” in two places. 1975—Subsec. (a). Pub. L. 94–29, § 6(2), prohibited stock exchange members from effecting any transaction on the exchange for its own account, the account of an associated person, or an account with respect to which the member or an associated person exercises investment discretion, exempted from that prohibition 8 types of transactions, and authorized the Commission, as it deems necessary or appropriate in the public interest or for the protection of investors, to regulate or prohibit the specifically exempted transactions, certain transactions otherwise that on a national securities exchange, and transactions on a national securities exchange effected by a broker or dealer not a member thereof for the account of such broker or dealer, the account of an associated person, or an account with respect to which such broker, dealer, or associated person exercises investment discretion. Subsec. (b). Pub. L. 94–29, § 6(2), struck out requirement that specialist’s dealings be limited to those transactions reasonably necessary to permit him to maintain a fair and orderly market, expanded the Commission’s rulemaking authority in the area of specialist’s dealings so that the Commission may define responsibilities and restrict activities of specialists in response to changing conditions in the market, expanded the standards to be followed by the Commission in exercising its rulemaking power to include the maintenance of fair and orderly markets and the removal of impediments to and the perfection of the mechanism of a national market system, and inserted specific reference to the Commission’s power to limit the activity of a specialist to that of a broker or dealer. Subsec. (e). Pub. L. 94–29, § 6(3), struck out subsec. (e) which directed the Commission to make a study, to be submitted on or before Jan. 3, 1936, of the feasibility of segregating the functions of dealer and broker. 1954—Subsec. (d). Act Aug. 10, 1954, reduced from 6 months to 30 days the prohibition period against extending credit to purchasers of a new issue by dealers.
Statutory Notes and Related Subsidiaries
Effective Date of 1978 AmendmentPub. L. 95–283, § 18(b), May 21, 1978, 92 Stat. 275, provided that: “The amendment made by subsection (a) of this section [amending this section] shall be effective as of May 1, 1978.”
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Effective Date of 1954 AmendmentAmendment by act Aug. 10, 1954, effective 60 days after Aug. 10, 1954, see note under section 77b of this title.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78kk - Authorization of appropriations
## Text
In addition to any other funds authorized to be appropriated to the Commission, there are authorized to be appropriated to carry out the functions, powers, and duties of the Commission—
(1) for fiscal year 2011, $1,300,000,000;
(2) for fiscal year 2012, $1,500,000,000;
(3) for fiscal year 2013, $1,750,000,000;
(4) for fiscal year 2014, $2,000,000,000; and
(5) for fiscal year 2015, $2,250,000,000.
(June 6, 1934, ch. 404, title I, § 35, as added Pub. L. 94–29, § 24, June 4, 1975, 89 Stat. 162; amended Pub. L. 95–20, Apr. 13, 1977, 91 Stat. 47; Pub. L. 95–211, Dec. 19, 1977, 91 Stat. 1492; Pub. L. 95–425, § 1, Oct. 6, 1978, 92 Stat. 962; Pub. L. 96–477, title IV, § 401, Oct. 21, 1980, 94 Stat. 2291; Pub. L. 100–181, title I, § 101, Dec. 4, 1987, 101 Stat. 1249; Pub. L. 100–704, § 8, Nov. 19, 1988, 102 Stat. 4683; Pub. L. 101–550, title I, § 102, Nov. 15, 1990, 104 Stat. 2713; Pub. L. 104–290, title IV, § 403, Oct. 11, 1996, 110 Stat. 3441; Pub. L. 105–353, title II, § 201, Nov. 3, 1998, 112 Stat. 3233; Pub. L. 107–204, title VI, § 601, July 30, 2002, 116 Stat. 793; Pub. L. 111–203, title IX, § 991(c), July 21, 2010, 124 Stat. 1953.)
## Notes
Editorial Notes
Codification Pub. L. 94–29, which directed amendment of the Securities Exchange Act of 1934 by adding this section at the end, is reflected in the source credit above as adding this section to title I of the Securities Exchange Act of 1934, to reflect the probable intent of Congress.
Amendments2010—Pub. L. 111–203 amended section generally. Prior to amendment, section related to appropriation for fiscal year 2003 and specified amounts to fund certain additional compensation, for mitigation activities after the Sept. 11, 2001, attacks, and to add additional oversight personnel and improve investigative and disciplinary efforts. 2002—Pub. L. 107–204 amended section generally, updating fiscal year from 1999 to 2003, striking out subsec. designations, and substituting provisions relating to funding of additional compensation, terrorist-related information technology, security enhancements, and recovery and mitigation activities, and an additional 200 qualified professionals to provide enhanced oversight for provisions relating to miscellaneous expenses such as meetings and official functions. 1998—Pub. L. 105–353 amended section generally. Prior to amendment, text read as follows: “There are authorized to be appropriated to carry out the functions, powers, and duties of the Commission $300,000,000 for fiscal year 1997, in addition to any other funds authorized to be appropriated to the Commission.” 1996—Pub. L. 104–290 amended section generally. Prior to amendment, text read as follows: “There are authorized to be appropriated to carry out the functions, powers, and duties of the Commission— “(1) $178,023,000 for the fiscal year ending September 30, 1990; and “(2) $212,609,000 for the fiscal year ending September 30, 1991.” 1990—Pub. L. 101–550 amended section generally, substituting present provisions for former provisions which provided for fiscal years 1988 and 1989: in subsec. (a), for authorization of appropriations for the Commission; in subsec. (b), for amounts for the EDGAR system; and in subsec. (c), for amounts for reception and representation expenses and for membership in the International Organization of Securities Commissions. 1988—Subsec. (c). Pub. L. 100–704 added subsec. (c). 1987—Pub. L. 100–181 amended section generally. Prior to amendment, text read as follows: “There are authorized to be appropriated to carry out the functions, powers, and duties of the Commission not to exceed $51,000,000 for the fiscal year ending June 30, 1976, $56,500,000 for the fiscal year ending September 30, 1977, $63,750,000 for the fiscal year ending September 30, 1978, $69,000,000 for the fiscal year ending September 30, 1979, $79,000,000 for the fiscal year ending September 30, 1980, $85,500,000 for the fiscal year ending September 30, 1981, $96,640,000 for the fiscal year ending September 30, 1982, and $106,610,000 for the fiscal year ending September 30, 1983. For fiscal years succeeding fiscal year 1983, there may be appropriated such sums as the Congress may hereafter authorize by law.” 1980—Pub. L. 96–477 authorized appropriations of $85,500,000 for fiscal year ending Sept. 30, 1981, $96,640,000 for fiscal year ending Sept. 30, 1982, and $106,610,000 for fiscal year ending Sept. 30, 1983, and provided that for fiscal years succeeding 1983, there may be appropriated such sums as Congress may authorize by law. 1978—Pub. L. 95–425 inserted provision authorizing appropriations of not to exceed $69,000,000, and $79,000,000 for fiscal years ending Sept. 30, 1979 and 1980, respectively, and substituted “fiscal year 1980” for “fiscal year 1978”. 1977—Pub. L. 95–211 authorized appropriations of not to exceed $63,750,000 for fiscal year ending Sept. 30, 1978, and substituted “For the fiscal years succeeding fiscal year 1978” for “For fiscal years succeeding the 1977 fiscal year” in provisions relating to appropriations for succeeding fiscal years. Pub. L. 95–20 substituted “$56,500,000” for “$55,000,000”.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective Date of 1988 AmendmentAmendment by Pub. L. 100–704 not applicable to actions occurring before Nov. 19, 1988, see section 9 of Pub. L. 100–704 set out as a note under section 78o of this title.
Effective DateSection effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
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# 15 U.S.C. § 78l–1 - Applications for unlisted trading privileges deemed filed under section 78l of this title
## Text
Any application to continue unlisted trading privileges for any security heretofore filed by any exchange and approved by the Commission pursuant to clause (1) of subsection (f) of section 78l of this title and rules and regulations thereunder shall be deemed to have been filed and approved pursuant to clause (1) of said subsection (f).
(May 27, 1936, ch. 462, § 2, 49 Stat. 1377.)
## Notes
Editorial Notes
Codification Section was not enacted as a part of the Securities Exchange Act of 1934 which comprises this chapter.
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# 15 U.S.C. § 78ll - Requirements for the EDGAR system
## Text
The Commission, by rule or regulation—
(1) shall provide that any information in the EDGAR system that is required to be disseminated by the contractor—
(A) may be sold or disseminated by the contractor only pursuant to a uniform schedule of fees prescribed by the Commission;
(B) may be obtained by a purchaser by direct interconnection with the EDGAR system;
(C) shall be equally available on equal terms to all persons; and
(D) may be used, resold, or redisseminated by any person who has lawfully obtained such information without restriction and without payment of additional fees or royalties; and
(2) shall require that persons, or classes of persons, required to make filings with the Commission submit such filings in a form and manner suitable for entry into the EDGAR system and shall specify the date that such requirement is effective with respect to that person or class; except that the Commission may exempt persons or classes of persons, or filings or classes of filings, from such rules or regulations in order to prevent hardships or to avoid imposing unreasonable burdens or as otherwise may be necessary or appropriate.
(June 6, 1934, ch. 404, title I, § 35A, as added Pub. L. 100–181, title I, § 102, Dec. 4, 1987, 101 Stat. 1249; amended Pub. L. 105–353, title II, § 202, Nov. 3, 1998, 112 Stat. 3234.)
## Notes
Editorial Notes
Codification Pub. L. 100–181, which directed amendment of the Securities Exchange Act of 1934 by adding this section after section 35 of the Act, is reflected in the source credit above as adding this section to title I of the Securities Exchange Act of 1934, to reflect the probable intent of Congress. See Codification note set out under section 78kk of this title.
Amendments1998—Subsecs. (a) to (c). Pub. L. 105–353, § 202(1), struck out subsecs. (a) to (c) which: in subsec. (a) required certifications and reports as prerequisite to obligation or expenditure of funds for establishment or operation of EDGAR system, and provided that former section 78kk(b) amounts were to be exclusive source of funds for systems procurement and operation; in subsec. (b) required report on status of EDGAR development, implementation, and progress to certain Congressional committees at six-month intervals; and in subsec. (c) required certification to Congressional committees of total costs, cost/benefit analysis, assurances of compliance, capabilities of system, competence of personnel, and review of test group filings prior to entering into contract for EDGAR system. Subsec. (d). Pub. L. 105–353, § 202(2), struck out “(d)” before “The Commission” in introductory provisions, in par. (2) substituted period for “; and” at end, and struck out par. (3) which read as follows: “shall require all persons who make any filing with the Commission, in addition to complying with such other rules concerning the form and manner of filing as the Commission may prescribe, to submit such filings in written or printed form— “(A) for a period of at least one year after the effective date specified for such person or class under paragraph (2); or “(B) for a shorter period if the Commission determines that the EDGAR system (i) is reliable, (ii) provides a suitable alternative to such written and printed filings, and (iii) assures that the provision of information through the EDGAR system is as effective and efficient for filers, users, and disseminators as provision of such information in written or printed form.” Subsec. (e). Pub. L. 105–353, § 202(1), struck out subsec. (e) which read as follows: “For the purposes of carrying out its responsibilities under subsection (d)(3) of this section, the Commission shall consult with representatives of persons filing, disseminating, and using information contained in filings with the Commission.”
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# 15 U.S.C. § 78m–1 - Reporting and recordkeeping for certain security-based swaps
## Text
(a) Required reporting of security-based swaps not accepted by any clearing agency or derivatives clearing organization (1) In general Each security-based swap that is not accepted for clearing by any clearing agency or derivatives clearing organization shall be reported to—
(A) a security-based swap data repository described in section 78m(n) of this title; or
(B) in the case in which there is no security-based swap data repository that would accept the security-based swap, to the Commission pursuant to this section within such time period as the Commission may by rule or regulation prescribe.
(2) Transition rule for preenactment security-based swaps (A) Security-based swaps entered into before July 21, 2010 Each security-based swap entered into before July 21, 2010, the terms of which have not expired as of July 21, 2010, shall be reported to a registered security-based swap data repository or the Commission by a date that is not later than—
(i) 30 days after issuance of the interim final rule; or
(ii) such other period as the Commission determines to be appropriate.
(B) Commission rulemaking The Commission shall promulgate an interim final rule within 90 days of July 21, 2010, providing for the reporting of each security-based swap entered into before July 21, 2010, as referenced in subparagraph (A).
(C) Effective date The reporting provisions described in this section shall be effective upon July 21, 2010.
(3) Reporting obligations (A) Security-based swaps in which only 1 counterparty is a security-based swap dealer or major security-based swap participant With respect to a security-based swap in which only 1 counterparty is a security-based swap dealer or major security-based swap participant, the security-based swap dealer or major security-based swap participant shall report the security-based swap as required under paragraphs (1) and (2).
(B) Security-based swaps in which 1 counterparty is a security-based swap dealer and the other a major security-based swap participant With respect to a security-based swap in which 1 counterparty is a security-based swap dealer and the other a major security-based swap participant, the security-based swap dealer shall report the security-based swap as required under paragraphs (1) and (2).
(C) Other security-based swaps With respect to any other security-based swap not described in subparagraph (A) or (B), the counterparties to the security-based swap shall select a counterparty to report the security-based swap as required under paragraphs (1) and (2).
(b) Duties of certain individuals Any individual or entity that enters into a security-based swap shall meet each requirement described in subsection (c) if the individual or entity did not—
(1) clear the security-based swap in accordance with section 78c–3(a)(1) of this title; or
(2) have the data regarding the security-based swap accepted by a security-based swap data repository in accordance with rules (including timeframes) adopted by the Commission under this chapter.
(c) Requirements An individual or entity described in subsection (b) shall—
(1) upon written request from the Commission, provide reports regarding the security-based swaps held by the individual or entity to the Commission in such form and in such manner as the Commission may request; and
(2) maintain books and records pertaining to the security-based swaps held by the individual or entity in such form, in such manner, and for such period as the Commission may require, which shall be open to inspection by—
(A) any representative of the Commission;
(B) an appropriate prudential regulator;
(C) the Commodity Futures Trading Commission;
(D) the Financial Stability Oversight Council; and
(E) the Department of Justice.
(d) Identical data In prescribing rules under this section, the Commission shall require individuals and entities described in subsection (b) to submit to the Commission a report that contains data that is not less comprehensive than the data required to be collected by security-based swap data repositories under this chapter.
(June 6, 1934, ch. 404, title I, § 13A, as added Pub. L. 111–203, title VII, § 766(a), July 21, 2010, 124 Stat. 1797.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (b)(2) and (d), was in the original “this title”. See References in Text note set out under section 78a of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.
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# 15 U.S.C. § 78m–2 - Reporting requirements regarding coal or other mine safety
## Text
(a) Reporting mine safety information Each issuer that is required to file reports pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78m(a), 78o(d)] and that is an operator, or that has a subsidiary that is an operator, of a coal or other mine shall include, in each periodic report filed with the Commission under the securities laws on or after July 21, 2010, the following information for the time period covered by such report:
(1) For each coal or other mine of which the issuer or a subsidiary of the issuer is an operator—
(A) the total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under section 104 of the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 814) for which the operator received a citation from the Mine Safety and Health Administration;
(B) the total number of orders issued under section 104(b) of such Act (30 U.S.C. 814(b));
(C) the total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of such Act (30 U.S.C. 814(d));
(D) the total number of flagrant violations under section 110(b)(2) of such Act (30 U.S.C. 820(b)(2));
(E) the total number of imminent danger orders issued under section 107(a) of such Act (30 U.S.C. 817(a));
(F) the total dollar value of proposed assessments from the Mine Safety and Health Administration under such Act (30 U.S.C. 801 et seq.); and
(G) the total number of mining-related fatalities.
(2) A list of such coal or other mines, of which the issuer or a subsidiary of the issuer is an operator, that receive written notice from the Mine Safety and Health Administration of—
(A) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under section 104(e) of such Act (30 U.S.C. 814(e)); or
(B) the potential to have such a pattern.
(3) Any pending legal action before the Federal Mine Safety and Health Review Commission involving such coal or other mine.
(b) Reporting shutdowns and patterns of violations Beginning on and after July 21, 2010, each issuer that is an operator, or that has a subsidiary that is an operator, of a coal or other mine shall file a current report with the Commission on Form 8–K (or any successor form) disclosing the following regarding each coal or other mine of which the issuer or subsidiary is an operator:
(1) The receipt of an imminent danger order issued under section 107(a) of the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 817(a)).
(2) The receipt of written notice from the Mine Safety and Health Administration that the coal or other mine has—
(A) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under section 104(e) of such Act (30 U.S.C. 814(e)); or
(B) the potential to have such a pattern.
(c) Rule of construction Nothing in this section shall be construed to affect any obligation of a person to make a disclosure under any other applicable law in effect before, on, or after July 21, 2010.
(d) Commission authority (1) Enforcement A violation by any person of this section, or any rule or regulation of the Commission issued under this section, shall be treated for all purposes in the same manner as a violation of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the rules and regulations issued thereunder, consistent with the provisions of this section, and any such person shall be subject to the same penalties, and to the same extent, as for a violation of such Act or the rules or regulations issued thereunder.
(2) Rules and regulations The Commission is authorized to issue such rules or regulations as are necessary or appropriate for the protection of investors and to carry out the purposes of this section.
(e) Definitions In this section—
(1) the terms “issuer” and “securities laws” have the meaning given the terms in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);
(2) the term “coal or other mine” means a coal or other mine, as defined in section 3 of the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 802), that is subject to the provisions of such Act (30 U.S.C. 801 et seq.); and
(3) the term “operator” has the meaning given the term in section 3 of the Federal Mine Safety and Health Act of 1977 (30 U.S.C. 802).
(f) Effective date This section shall take effect on the day that is 30 days after July 21, 2010.
(Pub. L. 111–203, title XV, § 1503, July 21, 2010, 124 Stat. 2218.)
## Notes
Editorial Notes
References in TextSuch Act, referred to in subsecs. (a)(1)(F) and (e)(2), is the Federal Mine Safety and Health Act of 1977, Pub. L. 91–173, Dec. 30, 1969, 83 Stat. 742, which is classified principally to chapter 22 (§ 801 et seq.) of Title 30, Mineral Lands and Mining. For complete classification of this Act to the Code, see Short Title note set out under section 801 of Title 30 and Tables. The Securities Exchange Act of 1934, referred to in subsec. (d)(1), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to this chapter. For complete classification of this Act to the Code, see section 78a of this title and Tables.
Codification Section was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Definitions For definitions of terms used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78mm - General exemptive authority
## Text
(a) Authority (1) In general Except as provided in subsection (b), but notwithstanding any other provision of this chapter, the Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this chapter or of any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.
(2) Procedures The Commission shall, by rule or regulation, determine the procedures under which an exemptive order under this section shall be granted and may, in its sole discretion, decline to entertain any application for an order of exemption under this section.
(b) Limitation The Commission may not, under this section, exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions from section 78o–5 of this title or the rules or regulations issued thereunder or (for purposes of section 78o–5 of this title and the rules and regulations issued thereunder) from any definition in paragraph (42), (43), (44), or (45) of section 78c(a) of this title.
(c) Derivatives Unless the Commission is expressly authorized by any provision described in this subsection to grant exemptions, the Commission shall not grant exemptions, with respect to amendments made by subtitle B of the Wall Street Transparency and Accountability Act of 2010, with respect to paragraphs (65), (66), (68), (69), (70), (71), (72), (73), (74), (75), (76), and (79) of section 78c(a) of this title, and sections 78j–2(a), 78j–2(b), 78j–2(c), 78m–1, 78o–10, 78q–1(g), 78q–1(h), 78q–1(i), 78q–1(j), 78q–1(k), and 78q–1(l) of this title; provided that the Commission shall have exemptive authority under this chapter with respect to security-based swaps as to the same matters that the Commodity Futures Trading Commission has under the Wall Street Transparency and Accountability Act of 2010 with respect to swaps, including under section 6(c) of title 7.
(June 6, 1934, ch. 404, title I, § 36, as added Pub. L. 104–290, title I, § 105(b), Oct. 11, 1996, 110 Stat. 3424; amended Pub. L. 111–203, title VII, § 772(a), July 21, 2010, 124 Stat. 1801.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a)(1) and (c), was in the original “this title”. See References in Text note set out under section 78a of this title. The Wall Street Transparency and Accountability Act of 2010, referred to in subsec. (c), is title VII of Pub. L. 111–203, July 21, 2010, 124 Stat. 1641, which enacted chapter 109 (§ 8301 et seq.) of this title and enacted and amended numerous other sections and notes in the Code. Subtitle B of the Act enacted subchapter II (§ 8341 et seq.) of chapter 109 and sections 78c–3 to 78c–5, 78j–2, 78m–1, and 78o–10 of this title, amended sections 77b, 77b–1, 77e, 77q, 78c, 78c–1, 78f, 78i, 78j, 78m, 78o, 78p, 78q–1, 78t, 78u–1, 78u–2, 78bb, 78dd, 78mm, 80a–2, and 80b–2 of this title, enacted provisions set out as a note under section 77b of this title, and amended provisions set out as a note under section 78c of this title. For complete classification of this Act to the Code, see Short Title note set out under section 8301 of this title and Tables.
Amendments2010—Subsec. (c). Pub. L. 111–203 added subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
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# 15 U.S.C. § 78n–1 - Shareholder approval of executive compensation
## Text
(a) Separate resolution required (1) In general Not less frequently than once every 3 years, a proxy or consent or authorization for an annual or other meeting of the shareholders for which the proxy solicitation rules of the Commission require compensation disclosure shall include a separate resolution subject to shareholder vote to approve the compensation of executives, as disclosed pursuant to section 229.402 of title 17, Code of Federal Regulations, or any successor thereto.
(2) Frequency of vote Not less frequently than once every 6 years, a proxy or consent or authorization for an annual or other meeting of the shareholders for which the proxy solicitation rules of the Commission require compensation disclosure shall include a separate resolution subject to shareholder vote to determine whether votes on the resolutions required under paragraph (1) will occur every 1, 2, or 3 years.
(3) Effective date The proxy or consent or authorization for the first annual or other meeting of the shareholders occurring after the end of the 6-month period beginning on July 21, 2010, shall include—
(A) the resolution described in paragraph (1); and
(B) a separate resolution subject to shareholder vote to determine whether votes on the resolutions required under paragraph (1) will occur every 1, 2, or 3 years.
(b) Shareholder approval of golden parachute compensation (1) Disclosure In any proxy or consent solicitation material (the solicitation of which is subject to the rules of the Commission pursuant to subsection (a)) for a meeting of the shareholders occurring after the end of the 6-month period beginning on July 21, 2010, at which shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially all the assets of an issuer, the person making such solicitation shall disclose in the proxy or consent solicitation material, in a clear and simple form in accordance with regulations to be promulgated by the Commission, any agreements or understandings that such person has with any named executive officers of such issuer (or of the acquiring issuer, if such issuer is not the acquiring issuer) concerning any type of compensation (whether present, deferred, or contingent) that is based on or otherwise relates to the acquisition, merger, consolidation, sale, or other disposition of all or substantially all of the assets of the issuer and the aggregate total of all such compensation that may (and the conditions upon which it may) be paid or become payable to or on behalf of such executive officer.
(2) Shareholder approval Any proxy or consent or authorization relating to the proxy or consent solicitation material containing the disclosure required by paragraph (1) shall include a separate resolution subject to shareholder vote to approve such agreements or understandings and compensation as disclosed, unless such agreements or understandings have been subject to a shareholder vote under subsection (a).
(c) Rule of construction The shareholder vote referred to in subsections (a) and (b) shall not be binding on the issuer or the board of directors of an issuer, and may not be construed—
(1) as overruling a decision by such issuer or board of directors;
(2) to create or imply any change to the fiduciary duties of such issuer or board of directors;
(3) to create or imply any additional fiduciary duties for such issuer or board of directors; or
(4) to restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation.
(d) Disclosure of votes Every institutional investment manager subject to section 78m(f) of this title shall report at least annually how it voted on any shareholder vote pursuant to subsections (a) and (b), unless such vote is otherwise required to be reported publicly by rule or regulation of the Commission.
(e) Exemption (1) In general The Commission may, by rule or order, exempt any other issuer or class of issuers from the requirement under subsection (a) or (b). In determining whether to make an exemption under this subsection, the Commission shall take into account, among other considerations, whether the requirements under subsections (a) and (b) disproportionately burdens 11 So in original. Probably should be “burden”. small issuers.
(2) Treatment of emerging growth companies (A) In general An emerging growth company shall be exempt from the requirements of subsections (a) and (b).
(B) Compliance after termination of emerging growth company treatment An issuer that was an emerging growth company but is no longer an emerging growth company shall include the first separate resolution described under subsection (a)(1) not later than the end of—
(i) in the case of an issuer that was an emerging growth company for less than 2 years after the date of first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act of 1933 [15 U.S.C. 77a et seq.], the 3-year period beginning on such date; and
(ii) in the case of any other issuer, the 1-year period beginning on the date the issuer is no longer an emerging growth company.
(June 6, 1934, ch. 404, title I, § 14A, as added Pub. L. 111–203, title IX, § 951, July 21, 2010, 124 Stat. 1899; amended Pub. L. 112–106, title I, § 102(a)(1), Apr. 5, 2012, 126 Stat. 308.)
## Notes
Editorial Notes
References in TextThe Securities Act of 1933, referred to in subsec. (e)(2)(B)(i), is title I of act May 27, 1933, ch. 38, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.
Amendments2012—Subsec. (e). Pub. L. 112–106 designated existing provisions as par. (1), inserted heading, substituted “any other issuer” for “an issuer”, and added par. (2).
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78n–2 - Corporate governance
## Text
Not later than 180 days after July 21, 2010, the Commission shall issue rules that require an issuer to disclose in the annual proxy sent to investors the reasons why the issuer has chosen—
(1) the same person to serve as chairman of the board of directors and chief executive officer (or in equivalent positions); or
(2) different individuals to serve as chairman of the board of directors and chief executive officer (or in equivalent positions of the issuer).
(June 6, 1934, ch. 404, title I, § 14B, as added Pub. L. 111–203, title IX, § 972, July 21, 2010, 124 Stat. 1915.)
## Notes
Editorial Notes
Codification July 21, 2010, referred to in text, was in the original “the date of enactment of this subsection”, and was translated as meaning the date of enactment of Pub. L. 111–203, which enacted this section, to reflect the probable intent of Congress.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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type: "LegalText"
title: "15 U.S.C. § 78n"
description: "Proxies"
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title_number: 15
title_name: "COMMERCE AND TRADE"
chapter_number: "2B"
chapter_name: "SECURITIES EXCHANGES"
section: "78n"
citation: "15 U.S.C. § 78n"
status: "current"
release_point: "119-100"
release_date: "2026-06-26"
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confidence: "official"
tags: ["legal", "us-code"]
---
# 15 U.S.C. § 78n - Proxies
## Text
(a) Solicitation of proxies in violation of rules and regulations (1) 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 78l of this title.
(2) The rules and regulations prescribed by the Commission under paragraph (1) may include—
(A) a requirement that a solicitation of proxy, consent, or authorization by (or on behalf of) an issuer include a nominee submitted by a shareholder to serve on the board of directors of the issuer; and
(B) a requirement that an issuer follow a certain procedure in relation to a solicitation described in subparagraph (A).
(b) Giving or refraining from giving proxy in respect of any security carried for account of customer (1) It shall be unlawful for any member of a national securities exchange, or any broker or dealer registered under this chapter, 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 78l of this title, or any security issued by an investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], 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 December 28, 1985, 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) Information to holders of record prior to annual or other meeting Unless proxies, consents, or authorizations in respect of a security registered pursuant to section 78l of this title, or a security issued by an investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], 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) Tender offer by owner of more than five per centum of class of securities; exceptions (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 78l 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 78l(g)(2)(G) of this title, or any equity security issued by a a closed-end investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], 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 78m(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 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) Untrue statement of material fact or omission of fact with respect to tender offer 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) Election or designation of majority of directors of issuer by owner of more than five per centum of class of securities at other than meeting of security holders 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 78m 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) Filing fees (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 [15 U.S.C. 80a–1 et seq.], shall pay to the Commission the following fees:
(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 paragraph (4), is equal to $92 11 See Adjustment of Registration Fee Rate notes below. 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 at a rate that, subject to paragraph (4), is equal to $92 1 per $1,000,000 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 77f(b) of this title, 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 paragraph (4), is equal to $92 1 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) Annual adjustment.— For each fiscal year, the Commission shall by order adjust the rate 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 (15 U.S.C. 77f(b)) for such fiscal year.
(5) Fee collection.— Fees collected pursuant to this subsection for fiscal year 2012 and each fiscal year thereafter shall be deposited and credited as general revenue of the Treasury and shall not be available for obligation.
(6) Review; effective date; publication.— In exercising its authority under this subsection, the Commission shall not be required to comply with the provisions of section 553 of title 5. An adjusted rate prescribed under paragraph (4) shall be published and take effect in accordance with section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)).
(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) 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, 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 chapter prohibiting, or reasonably designed to prevent, fraudulent, deceptive, or manipulative acts or practices under this chapter; 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 conflicts of interests 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—
(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 person, 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 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 chapter, 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 chapter or precludes the Commission from imposing, under subsection (a) or (d) or any other provision of this chapter, a remedy or procedure required to be imposed under this subsection.
(4) “Limited partnership rollup transaction” defined 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 December 17, 1993, by the Commission under section 78k–1 of this title;
(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 December 17, 1993, by the Commission under section 78k–1 of this title;
(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 [15 U.S.C. 77a et seq.];
(D) a transaction that involves only issuers that are not required to register or report under section 78l of this title, 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 66⅔ 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 entity that are reported under a transaction reporting plan declared effective before December 17, 1993, by the Commission under section 78k–1 of this title, 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.
(i) Disclosure of pay versus performance The Commission shall, by rule, require each issuer to disclose in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer a clear description of any compensation required to be disclosed by the issuer under section 229.402 of title 17, Code of Federal Regulations (or any successor thereto), including, for any issuer other than an emerging growth company, information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions. The disclosure under this subsection may include a graphic representation of the information required to be disclosed.
(j) Disclosure of hedging by employees and directors The Commission shall, by rule, require each issuer to disclose in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer whether any employee or member of the board of directors of the issuer, or any designee of such employee or member, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities—
(1) granted to the employee or member of the board of directors by the issuer as part of the compensation of the employee or member of the board of directors; or
(2) held, directly or indirectly, by the employee or member of the board of directors.
(k) Data standards for proxy and consent solicitation materials (1) Requirement The Commission shall, by rule, adopt data standards for all information contained in any proxy or consent solicitation material prepared by an issuer for an annual meeting of the shareholders of the issuer, except that the Commission may exempt exhibits, signatures, and certifications from those data standards.
(2) Consistency The data standards required under paragraph (1) shall incorporate, and ensure compatibility with (to the extent feasible), all applicable data standards established in the rules promulgated under section 5334 of title 12, including, to the extent practicable, by having the characteristics described in clauses (i) through (vi) of subsection (c)(1)(B) of such section 5334.
(June 6, 1934, ch. 404, title I, § 14, 48 Stat. 895; Pub. L. 88–467, § 5, Aug. 20, 1964, 78 Stat. 569; Pub. L. 90–439, § 3, July 29, 1968, 82 Stat. 455; Pub. L. 91–567, §§ 3–5, Dec. 22, 1970, 84 Stat. 1497; Pub. L. 98–38, § 2(b), June 6, 1983, 97 Stat. 205; Pub. L. 99–222, § 2, Dec. 28, 1985, 99 Stat. 1737; Pub. L. 101–550, title III, § 302, Nov. 15, 1990, 104 Stat. 2721; Pub. L. 103–202, title III, § 302(a), Dec. 17, 1993, 107 Stat. 2359; Pub. L. 105–353, title III, § 301(b)(7), Nov. 3, 1998, 112 Stat. 3236; Pub. L. 107–123, § 6, Jan. 16, 2002, 115 Stat. 2396; Pub. L. 111–203, title IX, §§ 953(a), 955, 971(a), 991(b)(3), July 21, 2010, 124 Stat. 1903, 1904, 1915, 1953; Pub. L. 112–106, title I, § 102(a)(2), Apr. 5, 2012, 126 Stat. 309; Pub. L. 117–263, div. E, title LVIII, § 5821(g), Dec. 23, 2022, 136 Stat. 3426.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (b) and (h)(1)(A), (2), (3), was in the original “this title”. See References in Text note set out under section 78a of this title. The Investment Company Act of 1940, referred to in subsecs. (b)(1), (c), (d)(1), and (g)(1)(A), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80a–51 of this title and Tables. The Securities Act of 1933, referred to in subsec. (h)(5)(C), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.
Amendments2022—Subsec. (k). Pub. L. 117–263 added subsec. (k). 2012—Subsec. (i). Pub. L. 112–106 inserted “, for any issuer other than an emerging growth company,” after “including”. 2010—Subsec. (a). Pub. L. 111–203, § 971(a), designated existing provisions as par. (1) and added par. (2). Subsec. (g)(1)(A). Pub. L. 111–203, § 991(b)(3)(A), substituted “paragraph (4)” for “paragraphs (5) and (6)” in cls. (i) and (ii). Subsec. (g)(3). Pub. L. 111–203, § 991(b)(3)(B), substituted “paragraph (4)” for “paragraphs (5) and (6)”. Subsec. (g)(4) to (6). Pub. L. 111–203, § 991(b)(3)(C), (D), added pars. (4) to (6) and struck out former pars. (4) to (6) which related to deposit and crediting of fees as offsetting collections, annual adjustment of rates, and final rate adjustment, respectively. Subsec. (g)(8) to (11). Pub. L. 111–203, § 991(b)(3)(E), (F), redesignated par. (11) as (8) and struck out former pars. (8) to (10) which related to review and effective date of adjusted rate, collection of fees upon lapse of appropriation, and publication of rate, respectively. Subsec. (i). Pub. L. 111–203, § 953(a), added subsec. (i). Subsec. (j). Pub. L. 111–203, § 955, added subsec. (j). 2002—Subsec. (g)(1)(A)(i), (ii), (3). Pub. L. 107–123, § 6(1), substituted “a fee at a rate that, subject to paragraphs (5) and (6), is equal to $92 per $1,000,000 of” for “a fee of 1⁄50 of 1 per centum of”. Subsec. (g)(4) to (11). Pub. L. 107–123, § 6(2), (3), added pars. (4) to (10) and redesignated former par. (4) as (11). 1998—Subsec. (g)(4). Pub. L. 105–353 substituted “consolidation, sale,” for “consolidation sale,”. 1993—Subsec. (h). Pub. L. 103–202 added subsec. (h). 1990—Subsec. (b)(1). Pub. L. 101–550, § 302(a), substituted “section 78l of this title, or any security issued by an investment company registered under the Investment Company Act of 1940,” for “section 78l of this title” and “authorization, or information statement” for “or authorization”. Subsec. (c). Pub. L. 101–550, § 302(b), substituted “title, or a security issued by an investment company registered under the Investment Company Act of 1940,” for “title”. 1985—Subsec. (b). Pub. L. 99–222 designated existing provision as par. (1), inserted “or any bank, association, or other entity that exercises fiduciary powers,” after “under this chapter,”, and added par. (2). 1983—Subsec. (g). Pub. L. 98–38 added subsec. (g). 1970—Subsec. (d)(1). Pub. L. 91–567, § 3, included equity securities of an insurance company which would have been required to be registered except for the exemption contained in section 78l(g)(2)(G) of this title, and substituted “5 per centum” for “10 per centum”. Subsec. (d)(8). Pub. L. 91–567, § 4, struck out cl. (A) which excluded offers for, or invitations for tenders of, securities proposed to be made by means of a registration statement under the Securities Act of 1933, and redesignated cls. (B) to (D) as (A) to (C), respectively. Subsec. (e). Pub. L. 91–567, § 5, inserted provisions requiring the Commission, for the purposes of the subsection, by rules and regulations to define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative. 1968—Subsecs. (d) to (f). Pub. L. 90–439 added subsecs. (d) to (f). 1964—Subsec. (a). Pub. L. 88–467, § 5(a), substituted provisions which make it unlawful for any person, in contravention of the Commission’s rules and regulations, to solicit, or to permit the use of his name to solicit, proxies in respect of any security registered pursuant to section 78l of this title for former provisions which limited the Commission’s rulemaking authority to proxies relating to securities listed and registered on a national securities exchange. Subsec. (b). Pub. L. 88–467, § 5(b), substituted provisions which make it unlawful for members of a national securities exchange and brokers and dealers registered under this chapter, in contravention of such rules as may be prescribed by the Commission, to give, or to refrain from giving proxies, consents, and other authorizations in respect of any security registered under section 78l of this title carried for the account of customers for former provisions which limited the Commission’s rulemaking authority only to the giving of proxies in respect to listed securities carried for the account of customers by members of the national securities exchanges and by brokers or dealers who conduct business through the medium of an exchange member, and deleted the reference to brokers and dealers who transacted business through the medium of an exchange member as being now covered by brokers and dealers registered under this chapter. Subsec. (c). Pub. L. 88–467, § 5(c), added subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by sections 953(a), 955, and 971(a) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by section 991(b)(3) of Pub. L. 111–203 effective Oct. 1, 2011, see section 991(b)(4) of Pub. L. 111–203, set out as a note under section 77f of this title.
Effective Date of 2002 AmendmentAmendment by Pub. L. 107–123 effective Oct. 1, 2001, except that authorities provided by subsec. (g)(9) of this section to not apply until Oct. 1, 2002, see section 11 of Pub. L. 107–123, set out as a note under section 78ee of this title.
Effective Date of 1990 AmendmentPub. L. 101–550, title III, § 303, Nov. 15, 1990, 104 Stat. 2721, provided that: “The amendments made by section 302 of this title [amending this section] shall take effect upon the expiration of 180 days after the date of enactment of this Act [Nov. 15, 1990].”
Effective Date of 1985 AmendmentPub. L. 99–222, § 3, Dec. 28, 1985, 99 Stat. 1737, provided that: “The amendments made by this Act [amending this section] shall become effective one year after the date of enactment of this Act [Dec. 28, 1985].”
Effective Date of 1964 AmendmentAmendment by Pub. L. 88–467 effective Aug. 20, 1964, see section 13 of Pub. L. 88–467, set out as a note under section 78c of this title.
RegulationsPub. L. 111–203, title IX, § 971(b), (c), July 21, 2010, 124 Stat. 1915, provided that: “(b) Regulations.—The Commission may issue rules permitting the use by a shareholder of proxy solicitation materials supplied by an issuer of securities for the purpose of nominating individuals to membership on the board of directors of the issuer, under such terms and conditions as the Commission determines are in the interests of shareholders and for the protection of investors. “(c) Exemptions.—The Commission may, by rule or order, exempt an issuer or class of issuers from the requirement made by this section [amending this section] or an amendment made by this section. In determining whether to make an exemption under this subsection, the Commission shall take into account, among other considerations, whether the requirement in the amendment made by subsection (a) disproportionately burdens small issuers.” [For definitions of terms used in section 971(b), (c) of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.] Pub. L. 103–202, title III, § 302(b), Dec. 17, 1993, 107 Stat. 2363, provided that: “The Securities and Exchange Commission shall conduct rulemaking proceedings and prescribe final regulations under the Securities Act of 1933 [15 U.S.C. 77a et seq.] and the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.] to implement the requirements of section 14(h) of the Securities Exchange Act of 1934 [15 U.S.C. 78n(h)], as amended by subsection (a), and such regulations shall become effective not later than 12 months after the date of enactment of this Act [Dec. 17, 1993].”
Rule of Construction—No New Disclosure RequirementsAmendment by Pub. L. 117–263 not to be construed to require certain additional information to be collected or disclosed, see section 5826 of Pub. L. 117–263, set out as a note under section 77g of this title.
Construction of 1993 AmendmentAmendment by Pub. L. 103–202 not to limit authority of Securities and Exchange Commission, a registered securities association, or a national securities exchange under any provision of this chapter or preclude the Commission or such association or exchange from imposing a remedy or procedure required to be imposed under such amendment, see section 304(b) of Pub. L. 103–202, set out in an Effective Date of 1993 Amendment note under section 78f of this title.
Study and Report on Shareholder Access to Proxy StatementsPub. L. 104–290, title V, § 510(b), Oct. 11, 1996, 110 Stat. 3450, provided that the Securities and Exchange Commission should conduct a study to determine if shareholder access to proxy statements pursuant to this section had been impaired by recent statutory, judicial, or regulatory changes and the ability of shareholders to have proposals relating to corporate practices and social issues included as part of proxy statements, and provided that the Commission report the study and any recommendations to Congress by 1 year after Oct. 11, 1996.
Evaluation of Fairness Opinion Preparation, Disclosure, and UsePub. L. 103–202, title III, § 302(c), Dec. 17, 1993, 107 Stat. 2363, provided that the Comptroller General of the United States should, within 18 months after Dec. 17, 1993, conduct a study of the use of fairness opinions in limited partnership rollup transactions, the standards which preparers use in making determinations of fairness, the scope of review, quality of analysis, qualifications and methods of selection of preparers, costs of preparation, and any limitations imposed by issuers on such preparers, the nature and quality of disclosures provided with respect to such opinions, any conflicts of interest concerning such opinions, and the usefulness of the opinions to limited partners, with a report required to be sent to Congress by the end of the 18-month period.
Adjustment of Registration Fee RateBy order dated Aug. 25, 2023, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $147.60 per $1,000,000, effective Oct. 1, 2023, see 88 F.R. 59953. By order dated Aug. 25, 2022, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $110.20 per $1,000,000, effective Oct. 1, 2022, see 87 F.R. 53030. By order dated Aug. 23, 2021, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $92.70 per $1,000,000, effective Oct. 1, 2021, see 86 F.R. 47696. By order dated Aug. 26, 2020, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $109.10 per $1,000,000, effective Oct. 1, 2020, see 85 F.R. 53890. By order dated Aug. 23, 2019, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $129.80 per $1,000,000, effective Oct. 1, 2019, see 84 F.R. 45601. By order dated Aug. 24, 2018, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $121.20 per $1,000,000, effective Oct. 1, 2018, see 83 F.R. 44101. By order dated Aug. 24, 2017, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $124.50 per $1,000,000, effective Oct. 1, 2017, see 82 F.R. 41080. By order dated Aug. 30, 2016, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $115.90 per $1,000,000, effective Oct. 1, 2016, see 81 F.R. 61283. By order dated Aug. 26, 2015, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $100.70 per $1,000,000, effective Oct. 1, 2015, see 80 F.R. 52824. By order dated Aug. 29, 2014, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $116.20 per $1,000,000, effective Oct. 1, 2014, see 79 F.R. 52771. By order dated Aug. 30, 2013, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $128.80 per $1,000,000, effective Oct. 1, 2013, see 78 F.R. 54934. By order dated Aug. 31, 2012, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $136.40 per $1,000,000, effective Oct. 1, 2012, see 77 F.R. 55240. By order dated Aug. 31, 2011, the Securities and Exchange Commission adjusted the fee rates applicable under subsec. (g) of this section to $114.60 per $1,000,000, effective Oct. 1, 2011, see 76 F.R. 55139.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78nn - Tennessee Valley Authority
## Text
(a) In general Commencing with the issuance by the Tennessee Valley Authority of an annual report on Commission Form 10–K (or any successor thereto) for fiscal year 2006 and thereafter, the Tennessee Valley Authority shall file with the Commission, in accordance with such rules and regulations as the Commission has prescribed or may prescribe, such periodic, current, and supplementary information, documents, and reports as would be required pursuant to section 78m of this title if the Tennessee Valley Authority were an issuer of a security registered pursuant to section 78l of this title. Notwithstanding the preceding sentence, the Tennessee Valley Authority shall not be required to register any securities under this chapter, and shall not be deemed to have registered any securities under this chapter.
(b) Limited treatment as issuer Commencing with the issuance by the Tennessee Valley Authority of an annual report on Commission Form 10–K (or any successor thereto) for fiscal year 2006 and thereafter, the Tennessee Valley Authority shall be deemed to be an issuer for purposes of section 78j–1 of this title, other than for subsection (m)(1) or (m)(3) of section 78j–1 of this title. The Tennessee Valley Authority shall not be required by this subsection to comply with the rules issued by any national securities exchange or national securities association in response to rules issued by the Commission pursuant to section 78j–1(m)(1) of this title.
(c) No effect on TVA authority Nothing in this section shall be construed to diminish, impair, or otherwise affect the authority of the Board of Directors of the Tennessee Valley Authority to carry out its statutory functions under the Tennessee Valley Authority Act of 1933 [16 U.S.C. 831 et seq.].
(June 6, 1934, ch. 404, title I, § 37, as added Pub. L. 108–447, div. H, title V, § 520(2), Dec. 8, 2004, 118 Stat. 3267.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (a), was in the original “this title”. See References in Text note set out under section 78a of this title and Codification note below. The Tennessee Valley Authority Act of 1933, referred to in subsec. (c), is act May 18, 1933, ch. 32, 48 Stat. 58, which is classified generally to chapter 12A (§ 831 et seq.) of Title 16, Conservation. For complete classification of this Act to the Code, see section 831 of Title 16 and Tables.
Codification Pub. L. 108–447, which directed amendment of the Securities Exchange Act of 1934 by adding this section at the end, is reflected in the source credit above as adding this section to title I of the Securities Exchange Act of 1934, to reflect the probable intent of Congress.
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# 15 U.S.C. § 78o–1 - Brokers deemed to be registered
## Text
All brokers and dealers for whom registration was in effect on May 27, 1936, in accordance with rules and regulations of the Commission prescribed pursuant to section 78o of this title shall be deemed to be registered pursuant to said section.
(May 27, 1936, ch. 462, § 10, 49 Stat. 1380.)
## Notes
Editorial Notes
Codification Section was not enacted as a part of the Securities Exchange Act of 1934 which comprises this chapter.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78o–10 - Registration and regulation of security-based swap dealers and major security-based swap participants
## Text
(a) Registration (1) Security-based swap dealers It shall be unlawful for any person to act as a security-based swap dealer unless the person is registered as a security-based swap dealer with the Commission.
(2) Major security-based swap participants It shall be unlawful for any person to act as a major security-based swap participant unless the person is registered as a major security-based swap participant with the Commission.
(b) Requirements (1) In general A person shall register as a security-based swap dealer or major security-based swap participant by filing a registration application with the Commission.
(2) Contents (A) In general The application shall be made in such form and manner as prescribed by the Commission, and shall contain such information, as the Commission considers necessary concerning the business in which the applicant is or will be engaged.
(B) Continual reporting A person that is registered as a security-based swap dealer or major security-based swap participant shall continue to submit to the Commission reports that contain such information pertaining to the business of the person as the Commission may require.
(3) Expiration Each registration under this section shall expire at such time as the Commission may prescribe by rule or regulation.
(4) Rules Except as provided in subsections (d) and (e), the Commission may prescribe rules applicable to security-based swap dealers and major security-based swap participants, including rules that limit the activities of non-bank security-based swap dealers and major security-based swap participants.
(5) Transition Not later than 1 year after July 21, 2010, the Commission shall issue rules under this section to provide for the registration of security-based swap dealers and major security-based swap participants.
(6) Statutory disqualification Except to the extent otherwise specifically provided by rule, regulation, or order of the Commission, it shall be unlawful for a security-based swap dealer or a major security-based swap participant to permit any person associated with a security-based swap dealer or a major security-based swap participant who is subject to a statutory disqualification to effect or be involved in effecting security-based swaps on behalf of the security-based swap dealer or major security-based swap participant, if the security-based swap dealer or major security-based swap participant knew, or in the exercise of reasonable care should have known, of the statutory disqualification.
(c) Dual registration (1) Security-based swap dealer Any person that is required to be registered as a security-based swap dealer under this section shall register with the Commission, regardless of whether the person also is registered with the Commodity Futures Trading Commission as a swap dealer.
(2) Major security-based swap participant Any person that is required to be registered as a major security-based swap participant under this section shall register with the Commission, regardless of whether the person also is registered with the Commodity Futures Trading Commission as a major swap participant.
(d) Rulemaking (1) In general The Commission shall adopt rules for persons that are registered as security-based swap dealers or major security-based swap participants under this section.
(2) Exception for prudential requirements (A) In general The Commission may not prescribe rules imposing prudential requirements on security-based swap dealers or major security-based swap participants for which there is a prudential regulator.
(B) Applicability Subparagraph (A) does not limit the authority of the Commission to prescribe rules as directed under this section.
(e) Capital and margin requirements (1) In general (A) Security-based swap dealers and major security-based swap participants that are banks Each registered security-based swap dealer and major security-based swap participant for which there is not a prudential regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the prudential regulator shall by rule or regulation prescribe under paragraph (2)(A).
(B) Security-based swap dealers and major security-based swap participants that are not banks Each registered security-based swap dealer and major security-based swap participant for which there is not a prudential regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission shall by rule or regulation prescribe under paragraph (2)(B).
(2) Rules (A) Security-based swap dealers and major security-based swap participants that are banks The prudential regulators, in consultation with the Commission and the Commodity Futures Trading Commission, shall adopt rules for security-based swap dealers and major security-based swap participants, with respect to their activities as a swap dealer or major swap participant, for which there is a prudential regulator imposing—
(i) capital requirements; and
(ii) both initial and variation margin requirements on all security-based swaps that are not cleared by a registered clearing agency.
(B) Security-based swap dealers and major security-based swap participants that are not banks The Commission shall adopt rules for security-based swap dealers and major security-based swap participants, with respect to their activities as a swap dealer or major swap participant, for which there is not a prudential regulator imposing—
(i) capital requirements; and
(ii) both initial and variation margin requirements on all swaps that are not cleared by a registered clearing agency.
(C) Capital In setting capital requirements for a person that is designated as a security-based swap dealer or a major security-based swap participant for a single type or single class or category of security-based swap or activities, the prudential regulator and the Commission shall take into account the risks associated with other types of security-based swaps or classes of security-based swaps or categories of security-based swaps engaged in and the other activities conducted by that person that are not otherwise subject to regulation applicable to that person by virtue of the status of the person.
(3) Standards for capital and margin (A) In general To offset the greater risk to the security-based swap dealer or major security-based swap participant and the financial system arising from the use of security-based swaps that are not cleared, the requirements imposed under paragraph (2) shall—
(i) help ensure the safety and soundness of the security-based swap dealer or major security-based swap participant; and
(ii) be appropriate for the risk associated with the non-cleared security-based swaps held as a security-based swap dealer or major security-based swap participant.
(B) Rule of construction (i) In general Nothing in this section shall limit, or be construed to limit, the authority—
(I) of the Commission to set financial responsibility rules for a broker or dealer registered pursuant to section 78o(b) of this title (except for section 78o(b)(11) thereof) in accordance with section 78o(c)(3) of this title; or
(II) of the Commodity Futures Trading Commission to set financial responsibility rules for a futures commission merchant or introducing broker registered pursuant to section 4f(a) of the Commodity Exchange Act [7 U.S.C. 6f(a)] (except for section 4f(a)(3) [7 U.S.C. 6f(a)(3)] thereof) in accordance with section 4f(b) of the Commodity Exchange Act [7 U.S.C. 6f(b)].
(ii) Futures commission merchants and other dealers A futures commission merchant, introducing broker, broker, or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which such futures commission merchant, introducing broker, broker, or dealer is subject to under this chapter or the Commodity Exchange Act [7 U.S.C. 1 et seq.].
(C) Margin requirements In prescribing margin requirements under this subsection, the prudential regulator with respect to security-based swap dealers and major security-based swap participants that are depository institutions, and the Commission with respect to security-based swap dealers and major security-based swap participants that are not depository institutions shall permit the use of noncash collateral, as the regulator or the Commission determines to be consistent with—
(i) preserving the financial integrity of markets trading security-based swaps; and
(ii) preserving the stability of the United States financial system.
(D) Comparability of capital and margin requirements (i) In general The prudential regulators, the Commission, and the Securities and Exchange Commission shall periodically (but not less frequently than annually) consult on minimum capital requirements and minimum initial and variation margin requirements.
(ii) Comparability The entities described in clause (i) shall, to the maximum extent practicable, establish and maintain comparable minimum capital requirements and minimum initial and variation margin requirements, including the use of noncash collateral, for—
(I) security-based swap dealers; and
(II) major security-based swap participants.
(4) Applicability with respect to counterparties The requirements of paragraphs (2)(A)(ii) and (2)(B)(ii) shall not apply to a security-based swap in which a counterparty qualifies for an exception under section 78c–3(g)(1) of this title or satisfies the criteria in section 78c–3(g)(4) of this title.
(f) Reporting and recordkeeping (1) In general Each registered security-based swap dealer and major security-based swap participant—
(A) shall make such reports as are required by the Commission, by rule or regulation, regarding the transactions and positions and financial condition of the registered security-based swap dealer or major security-based swap participant;
(B) (i) for which there is a prudential regulator, shall keep books and records of all activities related to the business as a security-based swap dealer or major security-based swap participant in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and
(ii) for which there is no prudential regulator, shall keep books and records in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and
(C) shall keep books and records described in subparagraph (B) open to inspection and examination by any representative of the Commission.
(2) Rules The Commission shall adopt rules governing reporting and recordkeeping for security-based swap dealers and major security-based swap participants.
(g) Daily trading records (1) In general Each registered security-based swap dealer and major security-based swap participant shall maintain daily trading records of the security-based swaps of the registered security-based swap dealer and major security-based swap participant and all related records (including related cash or forward transactions) and recorded communications, including electronic mail, instant messages, and recordings of telephone calls, for such period as may be required by the Commission by rule or regulation.
(2) Information requirements The daily trading records shall include such information as the Commission shall require by rule or regulation.
(3) Counterparty records Each registered security-based swap dealer and major security-based swap participant shall maintain daily trading records for each counterparty in a manner and form that is identifiable with each security-based swap transaction.
(4) Audit trail Each registered security-based swap dealer and major security-based swap participant shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions.
(5) Rules The Commission shall adopt rules governing daily trading records for security-based swap dealers and major security-based swap participants.
(h) Business conduct standards (1) In general Each registered security-based swap dealer and major security-based swap participant shall conform with such business conduct standards as prescribed in paragraph (3) and as may be prescribed by the Commission by rule or regulation that relate to—
(A) fraud, manipulation, and other abusive practices involving security-based swaps (including security-based swaps that are offered but not entered into);
(B) diligent supervision of the business of the registered security-based swap dealer and major security-based swap participant;
(C) adherence to all applicable position limits; and
(D) such other matters as the Commission determines to be appropriate.
(2) Responsibilities with respect to special entities (A) Advising special entities A security-based swap dealer or major security-based swap participant that acts as an advisor to 11 So in original. Probably should be followed by “a”. special entity regarding a security-based swap shall comply with the requirements of paragraph (4) with respect to such special entity.
(B) Entering of security-based swaps with respect to special entities A security-based swap dealer that enters into or offers to enter into 1 security-based swap with a special entity shall comply with the requirements of paragraph (5) with respect to such special entity.
(C) Special entity defined For purposes of this subsection, the term “special entity” means—
(i) a Federal agency;
(ii) a State, State agency, city, county, municipality, or other political subdivision of a State or;
(iii) any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002);
(iv) any governmental plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002); or
(v) any endowment, including an endowment that is an organization described in section 501(c)(3) of title 26.
(3) Business conduct requirements Business conduct requirements adopted by the Commission shall—
(A) establish a duty for a security-based swap dealer or major security-based swap participant to verify that any counterparty meets the eligibility standards for an eligible contract participant;
(B) require disclosure by the security-based swap dealer or major security-based swap participant to any counterparty to the transaction (other than a security-based swap dealer, major security-based swap participant, security-based swap dealer, or major security-based swap participant) of—
(i) information about the material risks and characteristics of the security-based swap;
(ii) any material incentives or conflicts of interest that the security-based swap dealer or major security-based swap participant may have in connection with the security-based swap; and
(iii) (I) for cleared security-based swaps, upon the request of the counterparty, receipt of the daily mark of the transaction from the appropriate derivatives clearing organization; and
(II) for uncleared security-based swaps, receipt of the daily mark of the transaction from the security-based swap dealer or the major security-based swap participant;
(C) establish a duty for a security-based swap dealer or major security-based swap participant to communicate in a fair and balanced manner based on principles of fair dealing and good faith; and
(D) establish such other standards and requirements as the Commission may determine are appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter.
(4) Special requirements for security-based swap dealers acting as advisors (A) In general It shall be unlawful for a security-based swap dealer or major security-based swap participant—
(i) to employ any device, scheme, or artifice to defraud any special entity or prospective customer who is a special entity;
(ii) to engage in any transaction, practice, or course of business that operates as a fraud or deceit on any special entity or prospective customer who is a special entity; or
(iii) to engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative.
(B) Duty Any security-based swap dealer that acts as an advisor to a special entity shall have a duty to act in the best interests of the special entity.
(C) Reasonable efforts Any security-based swap dealer that acts as an advisor to a special entity shall make reasonable efforts to obtain such information as is necessary to make a reasonable determination that any security-based swap recommended by the security-based swap dealer is in the best interests of the special entity, including information relating to—
(i) the financial status of the special entity;
(ii) the tax status of the special entity;
(iii) the investment or financing objectives of the special entity; and
(iv) any other information that the Commission may prescribe by rule or regulation.
(5) Special requirements for security-based swap dealers as counterparties to special entities (A) In general Any security-based swap dealer or major security-based swap participant that offers to or enters into a security-based swap with a special entity shall—
(i) comply with any duty established by the Commission for a security-based swap dealer or major security-based swap participant, with respect to a counterparty that is an eligible contract participant within the meaning of subclause (I) or (II) of clause (vii) of section 1a(18) of the Commodity Exchange Act [7 U.S.C. 1a(18)], that requires the security-based swap dealer or major security-based swap participant to have a reasonable basis to believe that the counterparty that is a special entity has an independent representative that—
(I) has sufficient knowledge to evaluate the transaction and risks;
(II) is not subject to a statutory disqualification;
(III) is independent of the security-based swap dealer or major security-based swap participant;
(IV) undertakes a duty to act in the best interests of the counterparty it represents;
(V) makes appropriate disclosures;
(VI) will provide written representations to the special entity regarding fair pricing and the appropriateness of the transaction; and
(VII) in the case of employee benefit plans subject to the Employee Retirement Income Security act 22 So in original. Probably should be capitalized. of 1974 [29 U.S.C. 1001 et seq.], is a fiduciary as defined in section 3 of that Act (29 U.S.C. 1002); and
(ii) before the initiation of the transaction, disclose to the special entity in writing the capacity in which the security-based swap dealer is acting.
(B) Commission authority The Commission may establish such other standards and requirements under this paragraph as the Commission may determine are appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter.
(6) Rules The Commission shall prescribe rules under this subsection governing business conduct standards for security-based swap dealers and major security-based swap participants.
(7) Applicability This subsection shall not apply with respect to a transaction that is—
(A) initiated by a special entity on an exchange or security-based swaps execution facility; and
(B) the security-based swap dealer or major security-based swap participant does not know the identity of the counterparty to the transaction.
(i) Documentation standards (1) In general Each registered security-based swap dealer and major security-based swap participant shall conform with such standards as may be prescribed by the Commission, by rule or regulation, that relate to timely and accurate confirmation, processing, netting, documentation, and valuation of all security-based swaps.
(2) Rules The Commission shall adopt rules governing documentation standards for security-based swap dealers and major security-based swap participants.
(j) Duties Each registered security-based swap dealer and major security-based swap participant shall, at all times, comply with the following requirements:
(1) Monitoring of trading The security-based swap dealer or major security-based swap participant shall monitor its trading in security-based swaps to prevent violations of applicable position limits.
(2) Risk management procedures The security-based swap dealer or major security-based swap participant shall establish robust and professional risk management systems adequate for managing the day-to-day business of the security-based swap dealer or major security-based swap participant.
(3) Disclosure of general information The security-based swap dealer or major security-based swap participant shall disclose to the Commission and to the prudential regulator for the security-based swap dealer or major security-based swap participant, as applicable, information concerning—
(A) terms and conditions of its security-based swaps;
(B) security-based swap trading operations, mechanisms, and practices;
(C) financial integrity protections relating to security-based swaps; and
(D) other information relevant to its trading in security-based swaps.
(4) Ability to obtain information The security-based swap dealer or major security-based swap participant shall—
(A) establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; and
(B) provide the information to the Commission and to the prudential regulator for the security-based swap dealer or major security-based swap participant, as applicable, on request.
(5) Conflicts of interest The security-based swap dealer and major security-based swap participant shall implement conflict-of-interest systems and procedures that—
(A) establish structural and institutional safeguards to ensure that the activities of any person within the firm relating to research or analysis of the price or market for any security-based swap or acting in a role of providing clearing activities or making determinations as to accepting clearing customers are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of persons whose involvement in pricing, trading, or clearing activities might potentially bias their judgment or supervision and contravene the core principles of open access and the business conduct standards described in this chapter; and
(B) address such other issues as the Commission determines to be appropriate.
(6) Antitrust considerations Unless necessary or appropriate to achieve the purposes of this chapter, the security-based swap dealer or major security-based swap participant shall not—
(A) adopt any process or take any action that results in any unreasonable restraint of trade; or
(B) impose any material anticompetitive burden on trading or clearing.
(7) Rules The Commission shall prescribe rules under this subsection governing duties of security-based swap dealers and major security-based swap participants.
(k) Designation of chief compliance officer (1) In general Each security-based swap dealer and major security-based swap participant shall designate an individual to serve as a chief compliance officer.
(2) Duties The chief compliance officer shall—
(A) report directly to the board or to the senior officer of the security-based swap dealer or major security-based swap participant;
(B) review the compliance of the security-based swap dealer or major security-based swap participant with respect to the security-based swap dealer and major security-based swap participant requirements described in this section;
(C) in consultation with the board of directors, a body performing a function similar to the board, or the senior officer of the organization, resolve any conflicts of interest that may arise;
(D) be responsible for administering each policy and procedure that is required to be established pursuant to this section;
(E) ensure compliance with this chapter (including regulations) relating to security-based swaps, including each rule prescribed by the Commission under this section;
(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer through any—
(i) compliance office review;
(ii) look-back;
(iii) internal or external audit finding;
(iv) self-reported error; or
(v) validated complaint; and
(G) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
(3) Annual reports (A) In general In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of—
(i) the compliance of the security-based swap dealer or major swap participant with respect to this chapter (including regulations); and
(ii) each policy and procedure of the security-based swap dealer or major security-based swap participant of the chief compliance officer (including the code of ethics and conflict of interest policies).
(B) Requirements A compliance report under subparagraph (A) shall—
(i) accompany each appropriate financial report of the security-based swap dealer or major security-based swap participant that is required to be furnished to the Commission pursuant to this section; and
(ii) include a certification that, under penalty of law, the compliance report is accurate and complete.
(l) Enforcement and administrative proceeding authority (1) Primary enforcement authority (A) Securities and Exchange Commission Except as provided in subparagraph (B), (C), or (D), the Commission shall have primary authority to enforce subtitle B, and the amendments made by subtitle B of the Wall Street Transparency and Accountability Act of 2010, with respect to any person.
(B) Prudential regulators The prudential regulators shall have exclusive authority to enforce the provisions of subsection (e) and other prudential requirements of this chapter (including risk management standards), with respect to security-based swap dealers or major security-based swap participants for which they are the prudential regulator.
(C) Referral (i) Violations of nonprudential requirements If the appropriate Federal banking agency for security-based swap dealers or major security-based swap participants that are depository institutions has cause to believe that such security-based swap dealer or major security-based swap participant may have engaged in conduct that constitutes a violation of the nonprudential requirements of this section or rules adopted by the Commission thereunder, the agency may recommend in writing to the Commission that the Commission initiate an enforcement proceeding as authorized under this chapter. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation.
(ii) Violations of prudential requirements If the Commission has cause to believe that a securities-based swap dealer or major securities-based swap participant that has a prudential regulator may have engaged in conduct that constitute 33 So in original. Probably should be “constitutes”. a violation of the prudential requirements of subsection (e) or rules adopted thereunder, the Commission may recommend in writing to the prudential regulator that the prudential regulator initiate an enforcement proceeding as authorized under this chapter. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation.
(D) Backstop enforcement authority (i) Initiation of enforcement proceeding by prudential regulator If the Commission does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the Commission receives a written report under subsection 44 So in original. Probably should be “subparagraph”. (C)(i), the prudential regulator may initiate an enforcement proceeding.
(ii) Initiation of enforcement proceeding by Commission If the prudential regulator does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the prudential regulator receives a written report under subsection 4 (C)(ii), the Commission may initiate an enforcement proceeding.
(2) Censure, denial, suspension; notice and hearing The Commission, by order, shall censure, place limitations on the activities, functions, or operations of, or revoke the registration of any security-based swap dealer or major security-based swap participant that has registered with the Commission pursuant to subsection (b) if the Commission finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, or revocation is in the public interest and that such security-based swap dealer or major security-based swap participant, or any person associated with such security-based swap dealer or major security-based swap participant effecting or involved in effecting transactions in security-based swaps on behalf of such security-based swap dealer or major security-based swap participant, whether prior or subsequent to becoming so associated—
(A) 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 section 78o(b) of this title;
(B) 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 subsection;
(C) is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4);
(D) is subject to an order or a final order specified in subparagraph (F) or (H), respectively, of such paragraph (4); or
(E) has been found by a foreign financial regulatory authority to have committed or omitted any act, or violated any foreign statute or regulation, enumerated in subparagraph (G) of such paragraph (4).
(3) Associated persons 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 security-based swap dealer or major security-based swap participant for the purpose of effecting or being involved in effecting security-based swaps on behalf of such security-based swap dealer or major security-based swap participant, 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 security-based swap dealer or major security-based swap participant, 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—
(A) 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 section 78o(b) of this title;
(B) 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 subsection;
(C) is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4);
(D) is subject to an order or a final order specified in subparagraph (F) or (H), respectively, of such paragraph (4); or
(E) has been found by a foreign financial regulatory authority to have committed or omitted any act, or violated any foreign statute or regulation, enumerated in subparagraph (G) of such paragraph (4).
(4) Unlawful conduct It shall be unlawful—
(A) for any person as to whom an order under paragraph (3) is in effect, without the consent of the Commission, willfully to become, or to be, associated with a security-based swap dealer or major security-based swap participant in contravention of such order; or
(B) for any security-based swap dealer or major security-based swap participant to permit such a person, without the consent of the Commission, to become or remain a person associated with the security-based swap dealer or major security-based swap participant in contravention of such order, if such security-based swap dealer or major security-based swap participant knew, or in the exercise of reasonable care should have known, of such order.
(June 6, 1934, ch. 404, title I, § 15F, as added Pub. L. 111–203, title VII, § 764(a), July 21, 2010, 124 Stat. 1784; amended Pub. L. 114–1, title III, § 302(b), Jan. 12, 2015, 129 Stat. 28.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (e)(3)(B)(ii), (j)(5)(A), (6), (k)(2)(E), (3)(A)(i), and (l)(1)(B), (C), was in the original “this title”, and this chapter, referred to in subsec. (h)(3)(D), (5)(B), was in the original “this Act”. See References in Text note set out under section 78a of this title. The Commodity Exchange Act, referred to in subsec. (e)(3)(B)(ii), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables. The Employee Retirement Income Security Act of 1974, referred to in subsec. (h)(5)(A)(i)(VII), is Pub. L. 93–406, Sept. 2, 1974, 88 Stat. 829, which is classified principally to chapter 18 (§ 1001 et seq.) of Title 29, Labor. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 29 and Tables. Subtitle B of the Wall Street Transparency and Accountability Act of 2010, referred to in subsec. (l)(1)(A), is subtitle B (§§ 761–774) of title VII of Pub. L. 111–203, July 21, 2010, 124 Stat. 1754, which enacted this section and subchapter II (§ 8341 et seq.) of chapter 109 and sections 78c–3 to 78c–5, 78j–2, and 78m–1 of this title, amended sections 77b, 77b–1, 77e, 77q, 78c, 78c–1, 78f, 78i, 78j, 78m, 78o, 78p, 78q–1, 78t, 78u–1, 78u–2, 78bb, 78dd, 78mm, 80a–2, and 80b–2 of this title, enacted provisions set out as a note under section 77b of this title, and amended provisions set out as a note under section 78c of this title. For complete classification of subtitle B to the Code, see Tables.
Amendments2015—Subsec. (e)(4). Pub. L. 114–1 added par. (4).
Statutory Notes and Related Subsidiaries
Effective DateSection effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 77b of this title.
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title: "15 U.S.C. § 78o–11"
description: "Credit risk retention"
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title_number: 15
title_name: "COMMERCE AND TRADE"
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chapter_name: "SECURITIES EXCHANGES"
section: "78o–11"
citation: "15 U.S.C. § 78o–11"
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release_date: "2026-06-26"
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---
# 15 U.S.C. § 78o–11 - Credit risk retention
## Text
(a) Definitions In this section—
(1) the term “Federal banking agencies” means the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation;
(2) the term “insured depository institution” has the same meaning as in section 1813(c) of title 12;
(3) the term “securitizer” means—
(A) an issuer of an asset-backed security; or
(B) a person who organizes and initiates an asset-backed securities transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuer; and
(4) the term “originator” means a person who—
(A) through the extension of credit or otherwise, creates a financial asset that collateralizes an asset-backed security; and
(B) sells an asset directly or indirectly to a securitizer.
(b) Regulations required (1) In general Not later than 270 days after July 21, 2010, the Federal banking agencies and the Commission shall jointly prescribe regulations to require any securitizer to retain an economic interest in a portion of the credit risk for any asset that the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party.
(2) Residential mortgages Not later than 270 days after July 21, 2010, the Federal banking agencies, the Commission, the Secretary of Housing and Urban Development, and the Federal Housing Finance Agency, shall jointly prescribe regulations to require any securitizer to retain an economic interest in a portion of the credit risk for any residential mortgage asset that the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party.
(c) Standards for regulations (1) Standards The regulations prescribed under subsection (b) shall—
(A) prohibit a securitizer from directly or indirectly hedging or otherwise transferring the credit risk that the securitizer is required to retain with respect to an asset;
(B) require a securitizer to retain—
(i) not less than 5 percent of the credit risk for any asset—
(I) that is not a qualified residential mortgage that is transferred, sold, or conveyed through the issuance of an asset-backed security by the securitizer; or
(II) that is a qualified residential mortgage that is transferred, sold, or conveyed through the issuance of an asset-backed security by the securitizer, if 1 or more of the assets that collateralize the asset-backed security are not qualified residential mortgages; or
(ii) less than 5 percent of the credit risk for an asset that is not a qualified residential mortgage that is transferred, sold, or conveyed through the issuance of an asset-backed security by the securitizer, if the originator of the asset meets the underwriting standards prescribed under paragraph (2)(B);
(C) specify—
(i) the permissible forms of risk retention for purposes of this section;
(ii) the minimum duration of the risk retention required under this section; and
(iii) that a securitizer is not required to retain any part of the credit risk for an asset that is transferred, sold or conveyed through the issuance of an asset-backed security by the securitizer, if all of the assets that collateralize the asset-backed security are qualified residential mortgages;
(D) apply, regardless of whether the securitizer is an insured depository institution;
(E) with respect to a commercial mortgage, specify the permissible types, forms, and amounts of risk retention that would meet the requirements of subparagraph (B), which in the determination of the Federal banking agencies and the Commission may include—
(i) retention of a specified amount or percentage of the total credit risk of the asset;
(ii) retention of the first-loss position by a third-party purchaser that specifically negotiates for the purchase of such first loss position, holds adequate financial resources to back losses, provides due diligence on all individual assets in the pool before the issuance of the asset-backed securities, and meets the same standards for risk retention as the Federal banking agencies and the Commission require of the securitizer;
(iii) a determination by the Federal banking agencies and the Commission that the underwriting standards and controls for the asset are adequate; and
(iv) provision of adequate representations and warranties and related enforcement mechanisms; and 11 So in original. The word “and” probably should not appear.
(F) establish appropriate standards for retention of an economic interest with respect to collateralized debt obligations, securities collateralized by collateralized debt obligations, and similar instruments collateralized by other asset-backed securities; and
(G) provide for—
(i) a total or partial exemption of any securitization, as may be appropriate in the public interest and for the protection of investors;
(ii) a total or partial exemption for the securitization of an asset issued or guaranteed by the United States, or an agency of the United States, as the Federal banking agencies and the Commission jointly determine appropriate in the public interest and for the protection of investors, except that, for purposes of this clause, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation are not agencies of the United States;
(iii) a total or partial exemption for any asset-backed security that is a security issued or guaranteed by any State of the United States, or by any political subdivision of a State or territory, or by any public instrumentality of a State or territory that is exempt from the registration requirements of the Securities Act of 1933 [15 U.S.C. 77a et seq.] by reason of section 3(a)(2) of that Act (15 U.S.C. 77c(a)(2)), or a security defined as a qualified scholarship funding bond in section 150(d)(2) of title 26, as may be appropriate in the public interest and for the protection of investors; and
(iv) the allocation of risk retention obligations between a securitizer and an originator in the case of a securitizer that purchases assets from an originator, as the Federal banking agencies and the Commission jointly determine appropriate.
(2) Asset classes (A) Asset classes The regulations prescribed under subsection (b) shall establish asset classes with separate rules for securitizers of different classes of assets, including residential mortgages, commercial mortgages, commercial loans, auto loans, and any other class of assets that the Federal banking agencies and the Commission deem appropriate.
(B) Contents For each asset class established under subparagraph (A), the regulations prescribed under subsection (b) shall include underwriting standards established by the Federal banking agencies that specify the terms, conditions, and characteristics of a loan within the asset class that indicate a low credit risk with respect to the loan.
(d) Originators In determining how to allocate risk retention obligations between a securitizer and an originator under subsection (c)(1)(E)(iv), the Federal banking agencies and the Commission shall—
(1) reduce the percentage of risk retention obligations required of the securitizer by the percentage of risk retention obligations required of the originator; and
(2) consider—
(A) whether the assets sold to the securitizer have terms, conditions, and characteristics that reflect low credit risk;
(B) whether the form or volume of transactions in securitization markets creates incentives for imprudent origination of the type of loan or asset to be sold to the securitizer; and
(C) the potential impact of the risk retention obligations on the access of consumers and businesses to credit on reasonable terms, which may not include the transfer of credit risk to a third party.
(e) Exemptions, exceptions, and adjustments (1) In general The Federal banking agencies and the Commission may jointly adopt or issue exemptions, exceptions, or adjustments to the rules issued under this section, including exemptions, exceptions, or adjustments for classes of institutions or assets relating to the risk retention requirement and the prohibition on hedging under subsection (c)(1).
(2) Applicable standards Any exemption, exception, or adjustment adopted or issued by the Federal banking agencies and the Commission under this paragraph shall—
(A) help ensure high quality underwriting standards for the securitizers and originators of assets that are securitized or available for securitization; and
(B) encourage appropriate risk management practices by the securitizers and originators of assets, improve the access of consumers and businesses to credit on reasonable terms, or otherwise be in the public interest and for the protection of investors.
(3) Certain institutions and programs exempt (A) Farm credit system institutions Notwithstanding any other provision of this section, the requirements of this section shall not apply to any loan or other financial asset made, insured, guaranteed, or purchased by any institution that is subject to the supervision of the Farm Credit Administration, including the Federal Agricultural Mortgage Corporation.
(B) Other Federal programs This section shall not apply to any residential, multifamily, or health care facility mortgage loan asset, or securitization based directly or indirectly on such an asset, which is insured or guaranteed by the United States or an agency of the United States. For purposes of this subsection, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Federal home loan banks shall not be considered an agency of the United States.
(4) Exemption for qualified residential mortgages (A) In general The Federal banking agencies, the Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency shall jointly issue regulations to exempt qualified residential mortgages from the risk retention requirements of this subsection.
(B) Qualified residential mortgage The Federal banking agencies, the Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency shall jointly define the term “qualified residential mortgage” for purposes of this subsection, taking into consideration underwriting and product features that historical loan performance data indicate result in a lower risk of default, such as—
(i) documentation and verification of the financial resources relied upon to qualify the mortgagor;
(ii) standards with respect to—
(I) the residual income of the mortgagor after all monthly obligations;
(II) the ratio of the housing payments of the mortgagor to the monthly income of the mortgagor;
(III) the ratio of total monthly installment payments of the mortgagor to the income of the mortgagor;
(iii) mitigating the potential for payment shock on adjustable rate mortgages through product features and underwriting standards;
(iv) mortgage guarantee insurance or other types of insurance or credit enhancement obtained at the time of origination, to the extent such insurance or credit enhancement reduces the risk of default; and
(v) prohibiting or restricting the use of balloon payments, negative amortization, prepayment penalties, interest-only payments, and other features that have been demonstrated to exhibit a higher risk of borrower default.
(C) Limitation on definition The Federal banking agencies, the Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency in defining the term “qualified residential mortgage”, as required by subparagraph (B), shall define that term to be no broader than the definition “qualified mortgage” as the term is defined under section 129C(c)(2) of the Truth in Lending Act, as amended by the Consumer Financial Protection Act of 2010,22 See References in Text note below. and regulations adopted thereunder.
(5) Condition for qualified residential mortgage exemption The regulations issued under paragraph (4) shall provide that an asset-backed security that is collateralized by tranches of other asset-backed securities shall not be exempt from the risk retention requirements of this subsection.
(6) Certification The Commission shall require an issuer to certify, for each issuance of an asset-backed security collateralized exclusively by qualified residential mortgages, that the issuer has evaluated the effectiveness of the internal supervisory controls of the issuer with respect to the process for ensuring that all assets that collateralize the asset-backed security are qualified residential mortgages.
(f) Enforcement The regulations issued under this section shall be enforced by—
(1) the appropriate Federal banking agency, with respect to any securitizer that is an insured depository institution; and
(2) the Commission, with respect to any securitizer that is not an insured depository institution.
(g) Authority of Commission The authority of the Commission under this section shall be in addition to the authority of the Commission to otherwise enforce the securities laws.
(h) Authority to coordinate on rulemaking The Chairperson of the Financial Stability Oversight Council shall coordinate all joint rulemaking required under this section.
(i) Effective date of regulations The regulations issued under this section shall become effective—
(1) with respect to securitizers and originators of asset-backed securities backed by residential mortgages, 1 year after the date on which final rules under this section are published in the Federal Register; and
(2) with respect to securitizers and originators of all other classes of asset-backed securities, 2 years after the date on which final rules under this section are published in the Federal Register.
(June 6, 1934, ch. 404, title I, § 15G, as added Pub. L. 111–203, title IX, § 941(b), July 21, 2010, 124 Stat. 1891.)
## Notes
Editorial Notes
References in TextThe Securities Act of 1933, referred to in subsec. (c)(1)(G)(iii), is title I of act May 27, 1933, ch. 38, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables. Section 129C(c)(2) of the Truth in Lending Act, as amended by the Consumer Financial Protection Act of 2010, referred to in subsec. (e)(4)(C), probably means section 129C(b)(2) of Pub. L. 90–321, as amended by title X of Pub. L. 111–203, which defines “qualified mortgage” and is classified to section 1639c(b)(2) of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78o–2 - Liabilities arising prior to amendment unaffected
## Text
Nothing in this Act shall be deemed to extinguish any liability which may have arisen prior to the effective date of this Act by reason of any violation of section 78o of this title or of any rule or regulation thereunder.
(May 27, 1936, ch. 462, § 11, 49 Stat. 1380.)
## Notes
Editorial Notes
References in TextThis Act, referred to in text, is act May 27, 1936, ch. 462, 49 Stat. 1375, popularly known as the Unlisted Securities Trading Act, which enacted sections 78l–1, 78o–1, 78o–2, and 78hh–1 of this title, and amended sections 78l, 78o, 78q, 78r, 78t, 78u, 78w, and 78ff of this title. Effective date of this Act, referred to in text, is July 1, 1934. See section 78hh–1 of this title.
Codification Section was not enacted as a part of the Securities Exchange Act of 1934 which comprises this chapter.
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# 15 U.S.C. § 78o–4a - Commission Office of Municipal Securities
## Text
(a) In general There shall be in the Commission an Office of Municipal Securities, which shall—
(1) administer the rules of the Commission with respect to the practices of municipal securities brokers and dealers, municipal securities advisors, municipal securities investors, and municipal securities issuers; and
(2) coordinate with the Municipal Securities Rulemaking Board for rulemaking and enforcement actions as required by law.
(b) Director of the Office The head of the Office of Municipal Securities shall be the Director, who shall report to the Chairman.
(c) Staffing (1) In general The Office of Municipal Securities shall be staffed sufficiently to carry out the requirements of this section.
(2) Requirement The staff of the Office of Municipal Securities shall include individuals with knowledge of and expertise in municipal finance.
(Pub. L. 111–203, title IX, § 979, July 21, 2010, 124 Stat. 1926.)
## Notes
Editorial Notes
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definitions For definitions of terms used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78o–6 - Securities analysts and research reports
## Text
(a) Analyst protections The Commission, or upon the authorization and direction of the Commission, a registered securities association or national securities exchange, shall have adopted, not later than 1 year after July 30, 2002, rules reasonably designed to address conflicts of interest that can arise when securities analysts recommend equity securities in research reports and public appearances, in order to improve the objectivity of research and provide investors with more useful and reliable information, including rules designed—
(1) to foster greater public confidence in securities research, and to protect the objectivity and independence of securities analysts, by—
(A) restricting the prepublication clearance or approval of research reports by persons employed by the broker or dealer who are engaged in investment banking activities, or persons not directly responsible for investment research, other than legal or compliance staff;
(B) limiting the supervision and compensatory evaluation of securities analysts to officials employed by the broker or dealer who are not engaged in investment banking activities; and
(C) requiring that a broker or dealer and persons employed by a broker or dealer who are involved with investment banking activities may not, directly or indirectly, retaliate against or threaten to retaliate against any securities analyst employed by that broker or dealer or its affiliates as a result of an adverse, negative, or otherwise unfavorable research report that may adversely affect the present or prospective investment banking relationship of the broker or dealer with the issuer that is the subject of the research report, except that such rules may not limit the authority of a broker or dealer to discipline a securities analyst for causes other than such research report in accordance with the policies and procedures of the firm;
(2) to define periods during which brokers or dealers who have participated, or are to participate, in a public offering of securities as underwriters or dealers should not publish or otherwise distribute research reports relating to such securities or to the issuer of such securities;
(3) to establish structural and institutional safeguards within registered brokers or dealers to assure that securities analysts are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of those whose involvement in investment banking activities might potentially bias their judgment or supervision; and
(4) to address such other issues as the Commission, or such association or exchange, determines appropriate.
(b) Disclosure The Commission, or upon the authorization and direction of the Commission, a registered securities association or national securities exchange, shall have adopted, not later than 1 year after July 30, 2002, rules reasonably designed to require each securities analyst to disclose in public appearances, and each registered broker or dealer to disclose in each research report, as applicable, conflicts of interest that are known or should have been known by the securities analyst or the broker or dealer, to exist at the time of the appearance or the date of distribution of the report, including—
(1) the extent to which the securities analyst has debt or equity investments in the issuer that is the subject of the appearance or research report;
(2) whether any compensation has been received by the registered broker or dealer, or any affiliate thereof, including the securities analyst, from the issuer that is the subject of the appearance or research report, subject to such exemptions as the Commission may determine appropriate and necessary to prevent disclosure by virtue of this paragraph of material non-public information regarding specific potential future investment banking transactions of such issuer, as is appropriate in the public interest and consistent with the protection of investors;
(3) whether an issuer, the securities of which are recommended in the appearance or research report, currently is, or during the 1-year period preceding the date of the appearance or date of distribution of the report has been, a client of the registered broker or dealer, and if so, stating the types of services provided to the issuer;
(4) whether the securities analyst received compensation with respect to a research report, based upon (among any other factors) the investment banking revenues (either generally or specifically earned from the issuer being analyzed) of the registered broker or dealer; and
(5) such other disclosures of conflicts of interest that are material to investors, research analysts, or the broker or dealer as the Commission, or such association or exchange, determines appropriate.
(c) Limitation Notwithstanding subsection (a) or any other provision of law, neither the Commission nor any national securities association registered under section 78o–3 of this title may adopt or maintain any rule or regulation in connection with an initial public offering of the common equity of an emerging growth company—
(1) restricting, based on functional role, which associated persons of a broker, dealer, or member of a national securities association, may arrange for communications between a securities analyst and a potential investor; or
(2) restricting a securities analyst from participating in any communications with the management of an emerging growth company that is also attended by any other associated person of a broker, dealer, or member of a national securities association whose functional role is other than as a securities analyst.
(d) Definitions In this section—
(1) the term “securities analyst” means any associated person of a registered broker or dealer that is principally responsible for, and any associated person who reports directly or indirectly to a securities analyst in connection with, the preparation of the substance of a research report, whether or not any such person has the job title of “securities analyst”; and
(2) the term “research report” means a written or electronic communication that includes an analysis of equity securities of individual companies or industries, and that provides information reasonably sufficient upon which to base an investment decision.
(June 6, 1934, ch. 404, title I, § 15D, as added Pub. L. 107–204, title V, § 501(a), July 30, 2002, 116 Stat. 791; amended Pub. L. 112–106, title I, § 105(b), Apr. 5, 2012, 126 Stat. 311.)
## Notes
Editorial Notes
Amendments2012—Subsecs. (c), (d). Pub. L. 112–106 added subsec. (c) and redesignated former subsec. (c) as (d).
Statutory Notes and Related Subsidiaries
Post Offering CommunicationsPub. L. 112–106, title I, § 105(d), Apr. 5, 2012, 126 Stat. 311, provided that: “Neither the [Securities and Exchange] Commission nor any national securities association registered under section 15A of the Securities Exchange Act of 1934 [15 U.S.C. 78o–3] may adopt or maintain any rule or regulation prohibiting any broker, dealer, or member of a national securities association from publishing or distributing any research report or making a public appearance, with respect to the securities of an emerging growth company, either— “(1) within any prescribed period of time following the initial public offering date of the emerging growth company; or “(2) within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or member of a national securities association and the emerging growth company or its shareholders that restricts or prohibits the sale of securities held by the emerging growth company or its shareholders after the initial public offering date.”
Commission AuthorityPub. L. 107–204, title V, § 501(c), July 30, 2002, 116 Stat. 793, provided that: “The Commission may promulgate and amend its regulations, or direct a registered securities association or national securities exchange to promulgate and amend its rules, to carry out section 15D of the Securities Exchange Act of 1934 [15 U.S.C. 78o–6], as added by this section, as is necessary for the protection of investors and in the public interest.”
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# 15 U.S.C. § 78o–7 - Registration of nationally recognized statistical rating organizations
## Text
(a) Registration procedures (1) Application for registration (A) In general A credit rating agency that elects to be treated as a nationally recognized statistical rating organization for purposes of this chapter (in this section referred to as the “applicant”), shall furnish to the Commission an application for registration, in such form as the Commission shall require, by rule or regulation issued in accordance with subsection (n), and containing the information described in subparagraph (B).
(B) Required information An application for registration under this section shall contain information regarding—
(i) credit ratings performance measurement statistics over short-term, mid-term, and long-term periods (as applicable) of the applicant;
(ii) the procedures and methodologies that the applicant uses in determining credit ratings;
(iii) policies or procedures adopted and implemented by the applicant to prevent the misuse, in violation of this chapter (or the rules and regulations hereunder), of material, nonpublic information;
(iv) the organizational structure of the applicant;
(v) whether or not the applicant has in effect a code of ethics, and if not, the reasons therefor;
(vi) any conflict of interest relating to the issuance of credit ratings by the applicant;
(vii) the categories described in any of clauses (i) through (v) of section 78c(a)(62)(B) of this title with respect to which the applicant intends to apply for registration under this section;
(viii) on a confidential basis, a list of the 20 largest issuers and subscribers that use the credit rating services of the applicant, by amount of net revenues received therefrom in the fiscal year immediately preceding the date of submission of the application;
(ix) on a confidential basis, as to each applicable category of obligor described in any of clauses (i) through (v) of section 78c(a)(62)(B) of this title, written certifications described in subparagraph (C), except as provided in subparagraph (D); and
(x) any other information and documents concerning the applicant and any person associated with such applicant as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(C) Written certifications Written certifications required by subparagraph (B)(ix)—
(i) shall be provided from not fewer than 10 qualified institutional buyers, none of which is affiliated with the applicant;
(ii) may address more than one category of obligors described in any of clauses (i) through (v) of section 78c(a)(62)(B) of this title;
(iii) shall include not fewer than 2 certifications for each such category of obligor; and
(iv) shall state that the qualified institutional buyer—
(I) meets the definition of a qualified institutional buyer under section 78c(a)(64) of this title; and
(II) has used the credit ratings of the applicant for at least the 3 years immediately preceding the date of the certification in the subject category or categories of obligors.
(D) Exemption from certification requirement A written certification under subparagraph (B)(ix) is not required with respect to any credit rating agency which has received, or been the subject of, a no-action letter from the staff of the Commission prior to August 2, 2006, stating that such staff would not recommend enforcement action against any broker or dealer that considers credit ratings issued by such credit rating agency to be ratings from a nationally recognized statistical rating organization.
(E) Limitation on liability of qualified institutional buyers No qualified institutional buyer shall be liable in any private right of action for any opinion or statement expressed in a certification made pursuant to subparagraph (B)(ix).
(2) Review of application (A) Initial determination Not later than 90 days after the date on which the application for registration is furnished to the Commission under paragraph (1) (or within such longer period as to which the applicant consents) the Commission shall—
(i) by order, grant such registration for ratings in the subject category or categories of obligors, as described in clauses (i) through (v) of section 78c(a)(62)(B) of this title; or
(ii) institute proceedings to determine whether registration should be denied.
(B) Conduct of proceedings (i) Content Proceedings referred to in subparagraph (A)(ii) shall—
(I) include notice of the grounds for denial under consideration and an opportunity for hearing; and
(II) be concluded not later than 120 days after the date on which the application for registration is furnished to the Commission under paragraph (1).
(ii) Determination At the conclusion of such proceedings, the Commission, by order, shall grant or deny such application for registration.
(iii) Extension authorized The Commission may extend the time for conclusion of such proceedings for not longer than 90 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.
(C) Grounds for decision The Commission shall grant registration under this subsection—
(i) if the Commission finds that the requirements of this section are satisfied; and
(ii) unless the Commission finds (in which case the Commission shall deny such registration) that—
(I) the applicant does not have adequate financial and managerial resources to consistently produce credit ratings with integrity and to materially comply with the procedures and methodologies disclosed under paragraph (1)(B) and with subsections (g), (h), (i), and (j); or
(II) if the applicant were so registered, its registration would be subject to suspension or revocation under subsection (d).
(3) Public availability of information Subject to section 78x of this title, the Commission shall, by rule, require a nationally recognized statistical rating organization, upon the granting of registration under this section, to make the information and documents submitted to the Commission in its completed application for registration, or in any amendment submitted under paragraph (1) or (2) of subsection (b), publicly available on its website, or through another comparable, readily accessible means, except as provided in clauses (viii) and (ix) of paragraph (1)(B).
(b) Update of registration (1) Update Each nationally recognized statistical rating organization shall promptly amend its application for registration under this section if any information or document provided therein becomes materially inaccurate, except that a nationally recognized statistical rating organization is not required to amend—
(A) the information required to be filed under subsection (a)(1)(B)(i) by filing information under this paragraph, but shall amend such information in the annual submission of the organization under paragraph (2) of this subsection; or
(B) the certifications required to be provided under subsection (a)(1)(B)(ix) by filing information under this paragraph.
(2) Certification Not later than 90 days after the end of each calendar year, each nationally recognized statistical rating organization shall file with the Commission an amendment to its registration, in such form as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors—
(A) certifying that the information and documents in the application for registration of such nationally recognized statistical rating organization (other than the certifications required under subsection (a)(1)(B)(ix)) continue to be accurate; and
(B) listing any material change that occurred to such information or documents during the previous calendar year.
(c) Accountability for ratings procedures (1) Authority The Commission shall have exclusive authority to enforce the provisions of this section in accordance with this chapter with respect to any nationally recognized statistical rating organization, if such nationally recognized statistical rating organization issues credit ratings in material contravention of those procedures relating to such nationally recognized statistical rating organization, including procedures relating to the prevention of misuse of nonpublic information and conflicts of interest, that such nationally recognized statistical rating organization—
(A) includes in its application for registration under subsection (a)(1)(B)(ii); or
(B) makes and disseminates in reports pursuant to section 78q(a) of this title or the rules and regulations thereunder.
(2) Limitation The rules and regulations that the Commission may prescribe pursuant to this chapter, as they apply to nationally recognized statistical rating organizations, shall be narrowly tailored to meet the requirements of this chapter applicable to nationally recognized statistical rating organizations. Notwithstanding any other provision of this section, or any other provision of law, neither the Commission nor any State (or political subdivision thereof) may regulate the substance of credit ratings or the procedures and methodologies by which any nationally recognized statistical rating organization determines credit ratings. Nothing in this paragraph may be construed to afford a defense against any action or proceeding brought by the Commission to enforce the antifraud provisions of the securities laws.
(3) Internal controls over processes for determining credit ratings (A) In general Each nationally recognized statistical rating organization shall establish, maintain, enforce, and document an effective internal control structure governing the implementation of and adherence to policies, procedures, and methodologies for determining credit ratings, taking into consideration such factors as the Commission may prescribe, by rule.
(B) Attestation requirement The Commission shall prescribe rules requiring each nationally recognized statistical rating organization to submit to the Commission an annual internal controls report, which shall contain—
(i) a description of the responsibility of the management of the nationally recognized statistical rating organization in establishing and maintaining an effective internal control structure under subparagraph (A);
(ii) an assessment of the effectiveness of the internal control structure of the nationally recognized statistical rating organization; and
(iii) the attestation of the chief executive officer, or equivalent individual, of the nationally recognized statistical rating organization.
(d) Censure, denial, or suspension of registration; notice and hearing (1) In general The Commission, by order, shall censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding 12 months, or revoke the registration of any nationally recognized statistical rating organization, or with respect to any person who is associated with, who is seeking to become associated with, or, at the time of the alleged misconduct, who was associated or was seeking to become associated with a nationally recognized statistical rating organization, the Commission, by order, shall censure, place limitations on the activities or functions of such person, suspend for a period not exceeding 1 year, or bar such person from being associated with a nationally recognized statistical rating organization, if the Commission finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, suspension, bar or revocation is necessary for the protection of investors and in the public interest and that such nationally recognized statistical rating organization, or any person associated with such an organization, whether prior to or subsequent to becoming so associated—
(A) has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) of section 78o(b)(4) of this title, has been convicted of any offense specified in section 78o(b)(4)(B) of this title, or is enjoined from any action, conduct, or practice specified in subparagraph (C) of section 78o(b)(4) of this title, during the 10-year period preceding the date of commencement of the proceedings under this subsection, or at any time thereafter;
(B) has been convicted during the 10-year period preceding the date on which an application for registration is filed with the Commission under this section, or at any time thereafter, of—
(i) any crime that is punishable by imprisonment for 1 or more years, and that is not described in section 78o(b)(4)(B) of this title; or
(ii) a substantially equivalent crime by a foreign court of competent jurisdiction;
(C) is subject to any order of the Commission barring or suspending the right of the person to be associated with a nationally recognized statistical rating organization;
(D) fails to file the certifications required under subsection (b)(2);
(E) fails to maintain adequate financial and managerial resources to consistently produce credit ratings with integrity; 11 So in original. The word “or” probably should appear.
(F) has failed reasonably to supervise, with a view to preventing a violation of the securities laws, an individual who commits such a violation, if the individual is subject to the supervision of that person.
(2) Suspension or revocation for particular class of securities (A) In general The Commission may temporarily suspend or permanently revoke the registration of a nationally recognized statistical rating organization with respect to a particular class or subclass of securities, if the Commission finds, on the record after notice and opportunity for hearing, that the nationally recognized statistical rating organization does not have adequate financial and managerial resources to consistently produce credit ratings with integrity.
(B) Considerations In making any determination under subparagraph (A), the Commission shall consider—
(i) whether the nationally recognized statistical rating organization has failed over a sustained period of time, as determined by the Commission, to produce ratings that are accurate for that class or subclass of securities; and
(ii) such other factors as the Commission may determine.
(e) Termination of registration (1) Voluntary withdrawal A nationally recognized statistical rating organization may, upon such terms and conditions as the Commission may establish as necessary in the public interest or for the protection of investors, withdraw from registration by furnishing a written notice of withdrawal to the Commission.
(2) Commission authority In addition to any other authority of the Commission under this chapter, if the Commission finds that a nationally recognized statistical rating organization is no longer in existence or has ceased to do business as a credit rating agency, the Commission, by order, shall cancel the registration under this section of such nationally recognized statistical rating organization.
(f) Representations (1) Ban on representations of sponsorship by United States or agency thereof It shall be unlawful for any nationally recognized statistical rating organization to represent or imply in any manner whatsoever that such nationally recognized statistical rating organization has been designated, sponsored, recommended, or approved, or that the abilities or qualifications thereof have in any respect been passed upon, by the United States or any agency, officer, or employee thereof.
(2) Ban on representation as NRSRO of unregistered credit rating agencies It shall be unlawful for any credit rating agency that is not registered under this section as a nationally recognized statistical rating organization to state that such credit rating agency is a nationally recognized statistical rating organization registered under this chapter.
(3) Statement of registration under Securities Exchange Act of 1934 provisions No provision of paragraph (1) shall be construed to prohibit a statement that a nationally recognized statistical rating organization is a nationally recognized statistical rating organization under this chapter, if such statement is true in fact and if the effect of such registration is not misrepresented.
(g) Prevention of misuse of nonpublic information (1) Organization policies and procedures Each nationally recognized statistical rating organization shall establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of the business of such nationally recognized statistical rating organization, to prevent the misuse in violation of this chapter, or the rules or regulations hereunder, of material, nonpublic information by such nationally recognized statistical rating organization or any person associated with such nationally recognized statistical rating organization.
(2) Commission authority The Commission shall issue final rules in accordance with subsection (n) to require specific policies or procedures that are reasonably designed to prevent misuse in violation of this chapter (or the rules or regulations hereunder) of material, nonpublic information.
(h) Management of conflicts of interest (1) Organization policies and procedures Each nationally recognized statistical rating organization shall establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of the business of such nationally recognized statistical rating organization and affiliated persons and affiliated companies thereof, to address and manage any conflicts of interest that can arise from such business.
(2) Commission authority The Commission shall issue final rules in accordance with subsection (n) to prohibit, or require the management and disclosure of, any conflicts of interest relating to the issuance of credit ratings by a nationally recognized statistical rating organization, including, without limitation, conflicts of interest relating to—
(A) the manner in which a nationally recognized statistical rating organization is compensated by the obligor, or any affiliate of the obligor, for issuing credit ratings or providing related services;
(B) the provision of consulting, advisory, or other services by a nationally recognized statistical rating organization, or any person associated with such nationally recognized statistical rating organization, to the obligor, or any affiliate of the obligor;
(C) business relationships, ownership interests, or any other financial or personal interests between a nationally recognized statistical rating organization, or any person associated with such nationally recognized statistical rating organization, and the obligor, or any affiliate of the obligor;
(D) any affiliation of a nationally recognized statistical rating organization, or any person associated with such nationally recognized statistical rating organization, with any person that underwrites the securities or money market instruments that are the subject of a credit rating; and
(E) any other potential conflict of interest, as the Commission deems necessary or appropriate in the public interest or for the protection of investors.
(3) Separation of ratings from sales and marketing (A) Rules required The Commission shall issue rules to prevent the sales and marketing considerations of a nationally recognized statistical rating organization from influencing the production of ratings by the nationally recognized statistical rating organization.
(B) Contents of rules The rules issued under subparagraph (A) shall provide for—
(i) exceptions for small nationally recognized statistical rating organizations with respect to which the Commission determines that the separation of the production of ratings and sales and marketing activities is not appropriate; and
(ii) suspension or revocation of the registration of a nationally recognized statistical rating organization, if the Commission finds, on the record, after notice and opportunity for a hearing, that—
(I) the nationally recognized statistical rating organization has committed a violation of a rule issued under this subsection; and
(II) the violation of a rule issued under this subsection affected a rating.
(4) Look-back requirement (A) Review by the nationally recognized statistical rating organization Each nationally recognized statistical rating organization shall establish, maintain, and enforce policies and procedures reasonably designed to ensure that, in any case in which an employee of a person subject to a credit rating of the nationally recognized statistical rating organization or the issuer, underwriter, or sponsor of a security or money market instrument subject to a credit rating of the nationally recognized statistical rating organization was employed by the nationally recognized statistical rating organization and participated in any capacity in determining credit ratings for the person or the securities or money market instruments during the 1-year period preceding the date an action was taken with respect to the credit rating, the nationally recognized statistical rating organization shall—
(i) conduct a review to determine whether any conflicts of interest of the employee influenced the credit rating; and
(ii) take action to revise the rating if appropriate, in accordance with such rules as the Commission shall prescribe.
(B) Review by Commission (i) In general The Commission shall conduct periodic reviews of the policies described in subparagraph (A) and the implementation of the policies at each nationally recognized statistical rating organization to ensure they are reasonably designed and implemented to most effectively eliminate conflicts of interest.
(ii) Timing of reviews The Commission shall review the code of ethics and conflict of interest policy of each nationally recognized statistical rating organization—
(I) not less frequently than annually; and
(II) whenever such policies are materially modified or amended.
(5) Report to Commission on certain employment transitions (A) Report required Each nationally recognized statistical rating organization shall report to the Commission any case such organization knows or can reasonably be expected to know where a person associated with such organization within the previous 5 years obtains employment with any obligor, issuer, underwriter, or sponsor of a security or money market instrument for which the organization issued a credit rating during the 12-month period prior to such employment, if such employee—
(i) was a senior officer of such organization;
(ii) participated in any capacity in determining credit ratings for such obligor, issuer, underwriter, or sponsor; or
(iii) supervised an employee described in clause (ii).
(B) Public disclosure Upon receiving such a report, the Commission shall make such information publicly available.
(i) Prohibited conduct (1) Prohibited acts and practices The Commission shall issue final rules in accordance with subsection (n) to prohibit any act or practice relating to the issuance of credit ratings by a nationally recognized statistical rating organization that the Commission determines to be unfair, coercive, or abusive, including any act or practice relating to—
(A) conditioning or threatening to condition the issuance of a credit rating on the purchase by the obligor or an affiliate thereof of other services or products, including pre-credit rating assessment products, of the nationally recognized statistical rating organization or any person associated with such nationally recognized statistical rating organization;
(B) lowering or threatening to lower a credit rating on, or refusing to rate, securities or money market instruments issued by an asset pool or as part of any asset-backed or mortgage-backed securities transaction, unless a portion of the assets within such pool or part of such transaction, as applicable, also is rated by the nationally recognized statistical rating organization; or
(C) modifying or threatening to modify a credit rating or otherwise departing from its adopted systematic procedures and methodologies in determining credit ratings, based on whether the obligor, or an affiliate of the obligor, purchases or will purchase the credit rating or any other service or product of the nationally recognized statistical rating organization or any person associated with such organization.
(2) Rule of construction Nothing in paragraph (1), or in any rules or regulations adopted thereunder, may be construed to modify, impair, or supersede the operation of any of the antitrust laws (as defined in section 12 of this title, except that such term includes section 45 of this title, to the extent that such section 45 applies to unfair methods of competition).
(j) Designation of compliance officer (1) In general Each nationally recognized statistical rating organization shall designate an individual responsible for administering the policies and procedures that are required to be established pursuant to subsections (g) and (h), and for ensuring compliance with the securities laws and the rules and regulations thereunder, including those promulgated by the Commission pursuant to this section.
(2) Limitations (A) In general Except as provided in subparagraph (B), an individual designated under paragraph (1) may not, while serving in the designated capacity—
(i) perform credit ratings;
(ii) participate in the development of ratings methodologies or models;
(iii) perform marketing or sales functions; or
(iv) participate in establishing compensation levels, other than for employees working for that individual.
(B) Exception The Commission may exempt a small nationally recognized statistical rating organization from the limitations under this paragraph, if the Commission finds that compliance with such limitations would impose an unreasonable burden on the nationally recognized statistical rating organization.
(3) Other duties Each individual designated under paragraph (1) shall establish procedures for the receipt, retention, and treatment of—
(A) complaints regarding credit ratings, models, methodologies, and compliance with the securities laws and the policies and procedures developed under this section; and
(B) confidential, anonymous complaints by employees or users of credit ratings.
(4) Compensation The compensation of each compliance officer appointed under paragraph (1) shall not be linked to the financial performance of the nationally recognized statistical rating organization and shall be arranged so as to ensure the independence of the officer’s judgment.
(5) Annual reports required (A) Annual reports required Each individual designated under paragraph (1) shall submit to the nationally recognized statistical rating organization an annual report on the compliance of the nationally recognized statistical rating organization with the securities laws and the policies and procedures of the nationally recognized statistical rating organization that includes—
(i) a description of any material changes to the code of ethics and conflict of interest policies of the nationally recognized statistical rating organization; and
(ii) a certification that the report is accurate and complete.
(B) Submission of reports to the Commission Each nationally recognized statistical rating organization shall file the reports required under subparagraph (A) together with the financial report that is required to be submitted to the Commission under this section.
(k) Statements of financial condition Each nationally recognized statistical rating organization shall, on a confidential basis, file with the Commission, at intervals determined by the Commission, such financial statements, certified (if required by the rules or regulations of the Commission) by an independent public accountant, and information concerning its financial condition, as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(l) Sole method of registration (1) In general On and after the effective date of this section, a credit rating agency may only be registered as a nationally recognized statistical rating organization for any purpose in accordance with this section.
(2) Prohibition on reliance on no-action relief On and after the effective date of this section—
(A) an entity that, before that date, received advice, approval, or a no-action letter from the Commission or staff thereof to be treated as a nationally recognized statistical rating organization pursuant to the Commission rule at section 240.15c3–1 of title 17, Code of Federal Regulations, may represent itself or act as a nationally recognized statistical rating organization only—
(i) during Commission consideration of the application, if such entity has filed an application for registration under this section; and
(ii) on and after the date of approval of its application for registration under this section; and
(B) the advice, approval, or no-action letter described in subparagraph (A) shall be void.
(3) Notice to other agencies Not later than 30 days after September 29, 2006, the Commission shall give notice of the actions undertaken pursuant to this section to each Federal agency which employs in its rules and regulations the term “nationally recognized statistical rating organization” (as that term is used under Commission rule 15c3–1 (17 C.F.R. 240.15c3–1), as in effect on September 29, 2006).
(m) Accountability (1) In general The enforcement and penalty provisions of this chapter shall apply to statements made by a credit rating agency in the same manner and to the same extent as such provisions apply to statements made by a registered public accounting firm or a securities analyst under the securities laws, and such statements shall not be deemed forward-looking statements for the purposes of section 78u–5 of this title.
(2) Rulemaking The Commission shall issue such rules as may be necessary to carry out this subsection.
(n) Regulations (1) New provisions Such rules and regulations as are required by this section or are otherwise necessary to carry out this section, including the application form required under subsection (a)—
(A) shall be issued by the Commission in final form, not later than 270 days after September 29, 2006; and
(B) shall become effective not later than 270 days after September 29, 2006.
(2) Review of existing regulations Not later than 270 days after September 29, 2006, the Commission shall—
(A) review its existing rules and regulations which employ the term “nationally recognized statistical rating organization” or “NRSRO”; and
(B) amend or revise such rules and regulations in accordance with the purposes of this section, as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(o) NRSROs subject to Commission authority (1) In general No provision of the laws of any State or political subdivision thereof requiring the registration, licensing, or qualification as a credit rating agency or a nationally recognized statistical rating organization shall apply to any nationally recognized statistical rating organization or person employed by or working under the control of a nationally recognized statistical rating organization.
(2) Limitation Nothing in this subsection prohibits the securities commission (or any agency or office performing like functions) of any State from investigating and bringing an enforcement action with respect to fraud or deceit against any nationally recognized statistical rating organization or person associated with a nationally recognized statistical rating organization.
(p) Regulation of nationally recognized statistical rating organizations (1) Establishment of Office of Credit Ratings (A) Office established The Commission shall establish within the Commission an Office of Credit Ratings (referred to in this subsection as the “Office”) to administer the rules of the Commission—
(i) with respect to the practices of nationally recognized statistical rating organizations in determining ratings, for the protection of users of credit ratings and in the public interest;
(ii) to promote accuracy in credit ratings issued by nationally recognized statistical rating organizations; and
(iii) to ensure that such ratings are not unduly influenced by conflicts of interest.
(B) Director of the Office The head of the Office shall be the Director, who shall report to the Chairman.
(2) Staffing The Office established under this subsection shall be staffed sufficiently to carry out fully the requirements of this section. The staff shall include persons with knowledge of and expertise in corporate, municipal, and structured debt finance.
(3) Commission examinations (A) Annual examinations required The Office shall conduct an examination of each nationally recognized statistical rating organization at least annually.
(B) Conduct of examinations Each examination under subparagraph (A) shall include a review of—
(i) whether the nationally recognized statistical rating organization conducts business in accordance with the policies, procedures, and rating methodologies of the nationally recognized statistical rating organization;
(ii) the management of conflicts of interest by the nationally recognized statistical rating organization;
(iii) implementation of ethics policies by the nationally recognized statistical rating organization;
(iv) the internal supervisory controls of the nationally recognized statistical rating organization;
(v) the governance of the nationally recognized statistical rating organization;
(vi) the activities of the individual designated by the nationally recognized statistical rating organization under subsection (j)(1);
(vii) the processing of complaints by the nationally recognized statistical rating organization; and
(viii) the policies of the nationally recognized statistical rating organization governing the post-employment activities of former staff of the nationally recognized statistical rating organization.
(C) Inspection reports The Commission shall make available to the public, in an easily understandable format, an annual report summarizing—
(i) the essential findings of all examinations conducted under subparagraph (A), as deemed appropriate by the Commission;
(ii) the responses by the nationally recognized statistical rating organizations to any material regulatory deficiencies identified by the Commission under clause (i); and
(iii) whether the nationally recognized statistical rating organizations have appropriately addressed the recommendations of the Commission contained in previous reports under this subparagraph.
(4) Rulemaking authority The Commission shall—
(A) establish, by rule, fines, and other penalties applicable to any nationally recognized statistical rating organization that violates the requirements of this section and the rules thereunder; and
(B) issue such rules as may be necessary to carry out this section.
(q) Transparency of ratings performance (1) Rulemaking required The Commission shall, by rule, require that each nationally recognized statistical rating organization publicly disclose information on the initial credit ratings determined by the nationally recognized statistical rating organization for each type of obligor, security, and money market instrument, and any subsequent changes to such credit ratings, for the purpose of allowing users of credit ratings to evaluate the accuracy of ratings and compare the performance of ratings by different nationally recognized statistical rating organizations.
(2) Content The rules of the Commission under this subsection shall require, at a minimum, disclosures that—
(A) are comparable among nationally recognized statistical rating organizations, to allow users of credit ratings to compare the performance of credit ratings across nationally recognized statistical rating organizations;
(B) are clear and informative for investors having a wide range of sophistication who use or might use credit ratings;
(C) include performance information over a range of years and for a variety of types of credit ratings, including for credit ratings withdrawn by the nationally recognized statistical rating organization;
(D) are published and made freely available by the nationally recognized statistical rating organization, on an easily accessible portion of its website, and in writing, when requested;
(E) are appropriate to the business model of a nationally recognized statistical rating organization; and
(F) each nationally recognized statistical rating organization include an attestation with any credit rating it issues affirming that no part of the rating was influenced by any other business activities, that the rating was based solely on the merits of the instruments being rated, and that such rating was an independent evaluation of the risks and merits of the instrument.
(r) Credit ratings methodologies The Commission shall prescribe rules, for the protection of investors and in the public interest, with respect to the procedures and methodologies, including qualitative and quantitative data and models, used by nationally recognized statistical rating organizations that require each nationally recognized statistical rating organization—
(1) to ensure that credit ratings are determined using procedures and methodologies, including qualitative and quantitative data and models, that are—
(A) approved by the board of the nationally recognized statistical rating organization, a body performing a function similar to that of a board; and
(B) in accordance with the policies and procedures of the nationally recognized statistical rating organization for the development and modification of credit rating procedures and methodologies;
(2) to ensure that when material changes to credit rating procedures and methodologies (including changes to qualitative and quantitative data and models) are made, that—
(A) the changes are applied consistently to all credit ratings to which the changed procedures and methodologies apply;
(B) to the extent that changes are made to credit rating surveillance procedures and methodologies, the changes are applied to then-current credit ratings by the nationally recognized statistical rating organization within a reasonable time period determined by the Commission, by rule; and
(C) the nationally recognized statistical rating organization publicly discloses the reason for the change; and
(3) to notify users of credit ratings—
(A) of the version of a procedure or methodology, including the qualitative methodology or quantitative inputs, used with respect to a particular credit rating;
(B) when a material change is made to a procedure or methodology, including to a qualitative model or quantitative inputs;
(C) when a significant error is identified in a procedure or methodology, including a qualitative or quantitative model, that may result in credit rating actions; and
(D) of the likelihood of a material change described in subparagraph (B) resulting in a change in current credit ratings.
(s) Transparency of credit rating methodologies and information reviewed (1) Form for disclosures The Commission shall require, by rule, each nationally recognized statistical rating organization to prescribe a form to accompany the publication of each credit rating that discloses—
(A) information relating to—
(i) the assumptions underlying the credit rating procedures and methodologies;
(ii) the data that was relied on to determine the credit rating; and
(iii) if applicable, how the nationally recognized statistical rating organization used servicer or remittance reports, and with what frequency, to conduct surveillance of the credit rating; and
(B) information that can be used by investors and other users of credit ratings to better understand credit ratings in each class of credit rating issued by the nationally recognized statistical rating organization.
(2) Format The form developed under paragraph (1) shall—
(A) be easy to use and helpful for users of credit ratings to understand the information contained in the report;
(B) require the nationally recognized statistical rating organization to provide the content described in paragraph (3)(B) in a manner that is directly comparable across types of securities; and
(C) be made readily available to users of credit ratings, in electronic or paper form, as the Commission may, by rule, determine.
(3) Content of form (A) Qualitative content Each nationally recognized statistical rating organization shall disclose on the form developed under paragraph (1)—
(i) the credit ratings produced by the nationally recognized statistical rating organization;
(ii) the main assumptions and principles used in constructing procedures and methodologies, including qualitative methodologies and quantitative inputs and assumptions about the correlation of defaults across underlying assets used in rating structured products;
(iii) the potential limitations of the credit ratings, and the types of risks excluded from the credit ratings that the nationally recognized statistical rating organization does not comment on, including liquidity, market, and other risks;
(iv) information on the uncertainty of the credit rating, including—
(I) information on the reliability, accuracy, and quality of the data relied on in determining the credit rating; and
(II) a statement relating to the extent to which data essential to the determination of the credit rating were reliable or limited, including—
(aa) any limits on the scope of historical data; and
(bb) any limits in accessibility to certain documents or other types of information that would have better informed the credit rating;
(v) whether and to what extent third party due diligence services have been used by the nationally recognized statistical rating organization, a description of the information that such third party reviewed in conducting due diligence services, and a description of the findings or conclusions of such third party;
(vi) a description of the data about any obligor, issuer, security, or money market instrument that were relied upon for the purpose of determining the credit rating;
(vii) a statement containing an overall assessment of the quality of information available and considered in producing a rating for an obligor, security, or money market instrument, in relation to the quality of information available to the nationally recognized statistical rating organization in rating similar issuances;
(viii) information relating to conflicts of interest of the nationally recognized statistical rating organization; and
(ix) such additional information as the Commission may require.
(B) Quantitative content Each nationally recognized statistical rating organization shall disclose on the form developed under this subsection—
(i) an explanation or measure of the potential volatility of the credit rating, including—
(I) any factors that might lead to a change in the credit ratings; and
(II) the magnitude of the change that a user can expect under different market conditions;
(ii) information on the content of the rating, including—
(I) the historical performance of the rating; and
(II) the expected probability of default and the expected loss in the event of default;
(iii) information on the sensitivity of the rating to assumptions made by the nationally recognized statistical rating organization, including—
(I) 5 assumptions made in the ratings process that, without accounting for any other factor, would have the greatest impact on a rating if the assumptions were proven false or inaccurate; and
(II) an analysis, using specific examples, of how each of the 5 assumptions identified under subclause (I) impacts a rating; 22 So in original. The word “and” probably should appear.
(iv) such additional information as may be required by the Commission.
(4) Due diligence services for asset-backed securities (A) Findings The issuer or underwriter of any asset-backed security shall make publicly available the findings and conclusions of any third-party due diligence report obtained by the issuer or underwriter.
(B) Certification required In any case in which third-party due diligence services are employed by a nationally recognized statistical rating organization, an issuer, or an underwriter, the person providing the due diligence services shall provide to any nationally recognized statistical rating organization that produces a rating to which such services relate, written certification, as provided in subparagraph (C).
(C) Format and content The Commission shall establish the appropriate format and content for the written certifications required under subparagraph (B), to ensure that providers of due diligence services have conducted a thorough review of data, documentation, and other relevant information necessary for a nationally recognized statistical rating organization to provide an accurate rating.
(D) Disclosure of certification The Commission shall adopt rules requiring a nationally recognized statistical rating organization, at the time at which the nationally recognized statistical rating organization produces a rating, to disclose the certification described in subparagraph (B) to the public in a manner that allows the public to determine the adequacy and level of due diligence services provided by a third party.
(t) Corporate governance, organization, and management of conflicts of interest (1) Board of directors Each nationally recognized statistical rating organization shall have a board of directors.
(2) Independent directors (A) In general At least ½ of the board of directors, but not fewer than 2 of the members thereof, shall be independent of the nationally recognized statistical rating agency. A portion of the independent directors shall include users of ratings from a nationally recognized statistical rating organization.
(B) Independence determination In order to be considered independent for purposes of this subsection, a member of the board of directors of a nationally recognized statistical rating organization—
(i) may not, other than in his or her capacity as a member of the board of directors or any committee thereof—
(I) accept any consulting, advisory, or other compensatory fee from the nationally recognized statistical rating organization; or
(II) be a person associated with the nationally recognized statistical rating organization or with any affiliated company thereof; and
(ii) shall be disqualified from any deliberation involving a specific rating in which the independent board member has a financial interest in the outcome of the rating.
(C) Compensation and term The compensation of the independent members of the board of directors of a nationally recognized statistical rating organization shall not be linked to the business performance of the nationally recognized statistical rating organization, and shall be arranged so as to ensure the independence of their judgment. The term of office of the independent directors shall be for a pre-agreed fixed period, not to exceed 5 years, and shall not be renewable.
(3) Duties of board of directors In addition to the overall responsibilities of the board of directors, the board shall oversee—
(A) the establishment, maintenance, and enforcement of policies and procedures for determining credit ratings;
(B) the establishment, maintenance, and enforcement of policies and procedures to address, manage, and disclose any conflicts of interest;
(C) the effectiveness of the internal control system with respect to policies and procedures for determining credit ratings; and
(D) the compensation and promotion policies and practices of the nationally recognized statistical rating organization.
(4) Treatment of NRSRO subsidiaries If a nationally recognized statistical rating organization is a subsidiary of a parent entity, the board of the directors of the parent entity may satisfy the requirements of this subsection by assigning to a committee of such board of directors the duties under paragraph (3), if—
(A) at least ½ of the members of the committee (including the chairperson of the committee) are independent, as defined in this section; and
(B) at least 1 member of the committee is a user of ratings from a nationally recognized statistical rating organization.
(5) Exception authority If the Commission finds that compliance with the provisions of this subsection present an unreasonable burden on a small nationally recognized statistical rating organization, the Commission may permit the nationally recognized statistical rating organization to delegate such responsibilities to a committee that includes at least one individual who is a user of ratings of a nationally recognized statistical rating organization.
(u) Duty to report tips alleging material violations of law (1) Duty to report Each nationally recognized statistical rating organization shall refer to the appropriate law enforcement or regulatory authorities any information that the nationally recognized statistical rating organization receives from a third party and finds credible that alleges that an issuer of securities rated by the nationally recognized statistical rating organization has committed or is committing a material violation of law that has not been adjudicated by a Federal or State court.
(2) Rule of construction Nothing in paragraph (1) may be construed to require a nationally recognized statistical rating organization to verify the accuracy of the information described in paragraph (1).
(v) Information from sources other than the issuer In producing a credit rating, a nationally recognized statistical rating organization shall consider information about an issuer that the nationally recognized statistical rating organization has, or receives from a source other than the issuer or underwriter, that the nationally recognized statistical rating organization finds credible and potentially significant to a rating decision.
(w) Data standards for information required to be submitted or published under this section (1) Requirement The Commission shall, by rule, adopt data standards for all collections of information required to be submitted or published by a nationally recognized statistical rating organization under this section.
(2) Consistency The data standards required under paragraph (1) shall incorporate, and ensure compatibility with (to the extent feasible), all applicable data standards established in the rules promulgated under section 5334 of title 12, including, to the extent practicable, by having the characteristics described in clauses (i) through (vi) of subsection (c)(1)(B) of such section 5334.
(June 6, 1934, ch. 404, title I, § 15E, as added Pub. L. 109–291, § 4(a), Sept. 29, 2006, 120 Stat. 1329; amended Pub. L. 111–203, title IX, §§ 932(a), 933(a), 934, 935, July 21, 2010, 124 Stat. 1872, 1883, 1884; Pub. L. 117–263, div. E, title LVIII, § 5821(c), Dec. 23, 2022, 136 Stat. 3425.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a)(1)(A), (B)(iii), (c), (e)(2), (f)(2), (3), (g), and (m)(1), was in the original “this title”. See References in Text note set out under section 78a of this title. The Securities Exchange Act of 1934, referred to in subsec. (f)(3), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to this chapter (§ 78a et seq.). For complete classification of this Act to the Code, see section 78a of this title and Tables.
Amendments2022—Subsec. (w). Pub. L. 117–263 added subsec. (w). 2010—Subsec. (b)(1)(A). Pub. L. 111–203, § 932(a)(1)(A), substituted “filed” for “furnished” and “filing” for “furnishing”. Subsec. (b)(1)(B). Pub. L. 111–203, § 932(a)(1)(B), substituted “filing” for “furnishing”. Subsec. (b)(2). Pub. L. 111–203, § 932(a)(1)(C), substituted “file with” for “furnish to” in introductory provisions. Subsec. (c)(2). Pub. L. 111–203, § 932(a)(2)(A), inserted “any other provision of this section, or” after “Notwithstanding” and inserted at end “Nothing in this paragraph may be construed to afford a defense against any action or proceeding brought by the Commission to enforce the antifraud provisions of the securities laws.” Subsec. (c)(3). Pub. L. 111–203, § 932(a)(2)(B), added par. (3). Subsec. (d). Pub. L. 111–203, § 932(a)(3), designated existing provisions as par. (1), inserted heading, inserted “, or with respect to any person who is associated with, who is seeking to become associated with, or, at the time of the alleged misconduct, who was associated or was seeking to become associated with a nationally recognized statistical rating organization, the Commission, by order, shall censure, place limitations on the activities or functions of such person, suspend for a period not exceeding 1 year, or bar such person from being associated with a nationally recognized statistical rating organization,” before “if the Commission finds” and “bar” before “or revocation is necessary”, redesignated former pars. (1) to (5) as subpars. (A) to (E), respectively, of par. (1) and former subpars. (A) and (B) of par. (2) as cls. (i) and (ii), respectively, of subpar. (B), in subpar. (B), substituted “filed with” for “furnished to” in introductory provisions, in subpar. (D), substituted “file” for “furnish”, and added subpar. (F) and par. (2). Subsec. (h)(3) to (5). Pub. L. 111–203, § 932(a)(4), added pars. (3) to (5). Subsec. (j). Pub. L. 111–203, § 932(a)(5), designated existing provisions as par. (1), inserted heading, and added pars. (2) to (5). Subsec. (k). Pub. L. 111–203, § 932(a)(6), substituted “file with” for “furnish to”. Subsec. (l)(2)(A)(i). Pub. L. 111–203, § 932(a)(7), substituted “filed” for “furnished”. Subsec. (m). Pub. L. 111–203, § 933(a), amended subsec. (m) generally. Prior to amendment, subsec. (m) provided that registration did not constitute a waiver of rights, privileges, or defenses and that this section could not be construed as creating any private right of action. Subsecs. (p) to (t). Pub. L. 111–203, § 932(a)(8), added subsecs. (p) to (t) and struck out former subsec. (p) which related to applicability date of this section. Subsec. (u). Pub. L. 111–203, § 934, added subsec. (u). Subsec. (v). Pub. L. 111–203, § 935, added subsec. (v).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
RegulationsPub. L. 111–203, title IX, § 937, July 21, 2010, 124 Stat. 1885, provided that: “Unless otherwise specifically provided in this subtitle [subtitle C (§§ 931–939H) of title IX of Pub. L. 111–203, enacting sections 78o–8 and 78o–9 of this title, amending this section and sections 78c, 78u–4, and 80a–6 of this title, sections 24a, 1817, 1831e, and 4519 of Title 12, Banks and Banking, and section 286hh of Title 22, Foreign Relations and Intercourse, and enacting provisions set out as notes under this section, sections 78m and 78o–9 of this title, and section 24a of Title 12], the [Securities and Exchange] Commission shall issue final regulations, as required by this subtitle and the amendments made by this subtitle, not later than 1 year after the date of enactment of this Act [July 21, 2010].”
Rule of Construction—No New Disclosure RequirementsAmendment by Pub. L. 117–263 not to be construed to require certain additional information to be collected or disclosed, see section 5826 of Pub. L. 117–263, set out as a note under section 77g of this title.
Qualification Standards for Credit Rating AnalystsPub. L. 111–203, title IX, § 936, July 21, 2010, 124 Stat. 1884, provided that: “Not later than 1 year after the date of enactment of this Act [July 21, 2010], the Commission shall issue rules that are reasonably designed to ensure that any person employed by a nationally recognized statistical rating organization to perform credit ratings— “(1) meets standards of training, experience, and competence necessary to produce accurate ratings for the categories of issuers whose securities the person rates; and “(2) is tested for knowledge of the credit rating process.” [For definitions of terms used in section 936 of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.]
Review of Reliance on RatingsPub. L. 111–203, title IX, § 939A, July 21, 2010, 124 Stat. 1887, provided that: “(a) Agency Review.—Not later than 1 year after the date of the enactment of this subtitle [July 21, 2010], each Federal agency shall, to the extent applicable, review—“(1) any regulation issued by such agency that requires the use of an assessment of the credit-worthiness of a security or money market instrument; and “(2) any references to or requirements in such regulations regarding credit ratings. “(b) Modifications Required.—Each such agency shall modify any such regulations identified by the review conducted under subsection (a) to remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness as each respective agency shall determine as appropriate for such regulations. In making such determination, such agencies shall seek to establish, to the extent feasible, uniform standards of credit-worthiness for use by each such agency, taking into account the entities regulated by each such agency and the purposes for which such entities would rely on such standards of credit-worthiness. “(c) Report.—Upon conclusion of the review required under subsection (a), each Federal agency shall transmit a report to Congress containing a description of any modification of any regulation such agency made pursuant to subsection (b).” [For definition of “security” as used in section 939A of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.]
Representations and Warranties in Asset-backed OfferingsPub. L. 111–203, title IX, § 943, July 21, 2010, 124 Stat. 1897, provided that: “Not later than 180 days after the date of enactment of this Act [July 21, 2010], the Securities and Exchange Commission shall prescribe regulations on the use of representations and warranties in the market for asset-backed securities (as that term is defined in section 3(a)(77) [now 3(a)(79)] of the Securities Exchange Act of 1934 [15 U.S.C. 78c(a)(79)], as added by this subtitle) that— “(1) require each national [sic] recognized statistical rating organization to include in any report accompanying a credit rating a description of—“(A) the representations, warranties, and enforcement mechanisms available to investors; and “(B) how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar securities; and “(2) require any securitizer (as that term is defined in section 15G(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78o–11(a)], as added by this subtitle) to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by the securitizer, so that investors may identify asset originators with clear underwriting deficiencies.” [For definitions of terms used in section 943 of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.]
FindingsPub. L. 111–203, title IX, § 931, July 21, 2010, 124 Stat. 1872, provided that: “Congress finds the following: “(1) Because of the systemic importance of credit ratings and the reliance placed on credit ratings by individual and institutional investors and financial regulators, the activities and performances of credit rating agencies, including nationally recognized statistical rating organizations, are matters of national public interest, as credit rating agencies are central to capital formation, investor confidence, and the efficient performance of the United States economy. “(2) Credit rating agencies, including nationally recognized statistical rating organizations, play a critical ‘gatekeeper’ role in the debt market that is functionally similar to that of securities analysts, who evaluate the quality of securities in the equity market, and auditors, who review the financial statements of firms. Such role justifies a similar level of public oversight and accountability. “(3) Because credit rating agencies perform evaluative and analytical services on behalf of clients, much as other financial ‘gatekeepers’ do, the activities of credit rating agencies are fundamentally commercial in character and should be subject to the same standards of liability and oversight as apply to auditors, securities analysts, and investment bankers. “(4) In certain activities, particularly in advising arrangers of structured financial products on potential ratings of such products, credit rating agencies face conflicts of interest that need to be carefully monitored and that therefore should be addressed explicitly in legislation in order to give clearer authority to the Securities and Exchange Commission. “(5) In the recent financial crisis, the ratings on structured financial products have proven to be inaccurate. This inaccuracy contributed significantly to the mismanagement of risks by financial institutions and investors, which in turn adversely impacted the health of the economy in the United States and around the world. Such inaccuracy necessitates increased accountability on the part of credit rating agencies.” [For definitions of terms used in section 931 of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.] Pub. L. 109–291, § 2, Sept. 29, 2006, 120 Stat. 1327, provided that: “Upon the basis of facts disclosed by the record and report of the Securities and Exchange Commission made pursuant to section 702 of the Sarbanes-Oxley Act of 2002 [Pub. L. 107–204] (116 Stat. 797), hearings before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives during the 108th and 109th Congresses, comment letters to the concept releases and proposed rules of the Commission, and facts otherwise disclosed and ascertained, Congress finds that credit rating agencies are of national importance, in that, among other things— “(1) their ratings, publications, writings, analyses, and reports are furnished and distributed, and their contracts, subscription agreements, and other arrangements with clients are negotiated and performed, by the use of the mails and other means and instrumentalities of interstate commerce; “(2) their ratings, publications, writings, analyses, and reports customarily relate to the purchase and sale of securities traded on securities exchanges and in interstate over-the-counter markets, securities issued by companies engaged in business in interstate commerce, and securities issued by national banks and member banks of the Federal Reserve System; “(3) the foregoing transactions occur in such volume as substantially to affect interstate commerce, the securities markets, the national banking system, and the national economy; “(4) the oversight of such credit rating agencies serves the compelling interest of investor protection; “(5) the 2 largest credit rating agencies serve the vast majority of the market, and additional competition is in the public interest; and “(6) the Commission has indicated that it needs statutory authority to oversee the credit rating industry.”
Securities and Exchange Commission Annual ReportPub. L. 109–291, § 6, Sept. 29, 2006, 120 Stat. 1338, provided that: “The Commission shall submit an annual report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that, with respect to the year to which the report relates— “(1) identifies applicants for registration under section 15E of the Securities Exchange Act of 1934 [15 U.S.C. 78o–7], as added by this Act; “(2) specifies the number of and actions taken on such applications; and “(3) specifies the views of the Commission on the state of competition, transparency, and conflicts of interest among nationally recognized statistical rating organizations.”
Definitions Pub. L. 109–291, § 3(b), Sept. 29, 2006, 120 Stat. 1328, provided that: “As used in this Act [see Short Title of 2006 Amendment note set out under section 78a of this title]— “(1) the term ‘Commission’ means the Securities and Exchange Commission; and “(2) the term ‘nationally recognized statistical rating organization’ has the same meaning as in section 3(a)(62) of the Securities Exchange Act of 1934 [15 U.S.C. 78c(a)(62)], as added by this Act.”
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title: "15 U.S.C. § 78o–8"
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# 15 U.S.C. § 78o–8 - Universal ratings symbols
## Text
(a) Rulemaking The Commission shall require, by rule, each nationally recognized statistical rating organization to establish, maintain, and enforce written policies and procedures that—
(1) assess the probability that an issuer of a security or money market instrument will default, fail to make timely payments, or otherwise not make payments to investors in accordance with the terms of the security or money market instrument;
(2) clearly define and disclose the meaning of any symbol used by the nationally recognized statistical rating organization to denote a credit rating; and
(3) apply any symbol described in paragraph (2) in a manner that is consistent for all types of securities and money market instruments for which the symbol is used.
(b) Rule of construction Nothing in this section shall prohibit a nationally recognized statistical rating organization from using distinct sets of symbols to denote credit ratings for different types of securities or money market instruments.
(Pub. L. 111–203, title IX, § 938, July 21, 2010, 124 Stat. 1885.)
## Notes
Editorial Notes
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definitions For definitions of terms used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78o–9 - Study and rulemaking on assigned credit ratings
## Text
(a) Definition In this section, the term “structured finance product” means an asset-backed security, as defined in section 3(a)(77) 11 See References in Text note below. of the Securities Exchange Act of 1934 [15 U.S.C. 78c(a)(79)], as added by section 941,1 and any structured product based on an asset-backed security, as determined by the Commission, by rule.
(b) Study The Commission shall carry out a study of—
(1) the credit rating process for structured finance products and the conflicts of interest associated with the issuer-pay and the subscriber-pay models;
(2) the feasibility of establishing a system in which a public or private utility or a self-regulatory organization assigns nationally recognized statistical rating organizations to determine the credit ratings of structured finance products, including—
(A) an assessment of potential mechanisms for determining fees for the nationally recognized statistical rating organizations;
(B) appropriate methods for paying fees to the nationally recognized statistical rating organizations;
(C) the extent to which the creation of such a system would be viewed as the creation of moral hazard by the Federal Government; and
(D) any constitutional or other issues concerning the establishment of such a system;
(3) the range of metrics that could be used to determine the accuracy of credit ratings; and
(4) alternative means for compensating nationally recognized statistical rating organizations that would create incentives for accurate credit ratings.
(c) Report and recommendation Not later than 24 months after July 21, 2010, the Commission shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that contains—
(1) the findings of the study required under subsection (b); and
(2) any recommendations for regulatory or statutory changes that the Commission determines should be made to implement the findings of the study required under subsection (b).
(d) Rulemaking (1) Rulemaking After submission of the report under subsection (c), the Commission shall, by rule, as the Commission determines is necessary or appropriate in the public interest or for the protection of investors, establish a system for the assignment of nationally recognized statistical rating organizations to determine the initial credit ratings of structured finance products, in a manner that prevents the issuer, sponsor, or underwriter of the structured finance product from selecting the nationally recognized statistical rating organization that will determine the initial credit ratings and monitor such credit ratings. In issuing any rule under this paragraph, the Commission shall give thorough consideration to the provisions of section 15E(w) of the Securities Exchange Act of 1934, as that provision would have been added by section 939D of H.R. 4173 (111th Congress), as passed by the Senate on May 20, 2010, and shall implement the system described in such section 939D unless the Commission determines that an alternative system would better serve the public interest and the protection of investors.
(2) Rule of construction Nothing in this subsection may be construed to limit or suspend any other rulemaking authority of the Commission.
(Pub. L. 111–203, title IX, § 939F, July 21, 2010, 124 Stat. 1889.)
## Notes
Editorial Notes
References in TextSection 3(a)(77) of the Securities Exchange Act of 1934, referred to in subsec. (a), was redesignated section 3(a)(79) of that Act by Pub. L. 112–106, title I, § 101(b)(1), Apr. 5, 2012, 126 Stat. 307, and is classified to section 78c(a)(79) of this title. Section 941, referred to in subsec. (a), means section 941 of Pub. L. 111–203. Section 15E of the Securities Exchange Act of 1934, referred to in subsec. (d)(1), is classified to section 78o–7 of this title. H.R. 4173, referred to in subsec. (d)(1), became Pub. L. 111–203. As enacted, section 939D of Pub. L. 111–203 did not add a subsec. (w) to section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 78o–7) but enacted provisions set out as a note below. For the provisions of section 15E(w) of the Securities Exchange Act of 1934, as that provision would have been added by section 939D of H.R. 4173 (111th Congress), as passed by the Senate on May 20, 2010, see 156 Cong. Rec. 80 at pp. S4338, S4339 (daily ed. May 25, 2010).
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010 and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Government Accountability Office Study on Alternative Business ModelsPub. L. 111–203, title IX, § 939D, July 21, 2010, 124 Stat. 1888, provided that: “(a) Study.—The Comptroller General of the United States shall conduct a study on alternative means for compensating nationally recognized statistical rating organizations in order to create incentives for nationally recognized statistical rating organizations to provide more accurate credit ratings, including any statutory changes that would be required to facilitate the use of an alternative means of compensation. “(b) Report.—Not later than 18 months after the date of enactment of this Act [July 21, 2010], the Comptroller General shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on the results of the study conducted under subsection (a), including recommendations, if any, for providing incentives to credit rating agencies to improve the credit rating process.” [For definition of “nationally recognized statistical rating organization” as used in section 939D of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.]
Definitions For definitions of terms used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78oo - Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Home Loan Banks
## Text
(a) Federal National Mortgage Association and Federal Home Loan Mortgage Corporation No class of equity securities of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation shall be treated as an exempted security for purposes of section 78l, 78m, 78n, or 78p of this title.
(b) Federal Home Loan Banks (1) Registration Each Federal Home Loan Bank shall register a class of its common stock under section 78l(g) of this title, not later than 120 days after July 30, 2008, and shall thereafter maintain such registration and be treated for purposes of this chapter as an “issuer”, the securities of which are required to be registered under section 78l of this title, regardless of the number of members holding such stock at any given time.
(2) Standards relating to audit committees Each Federal Home Loan Bank shall comply with the rules issued by the Commission under section 78j–1(m) of this title.
(c) Definitions For purposes of this section, the following definitions shall apply:
(1) Federal Home Loan Bank; member The terms “Federal Home Loan Bank” and “member”, have the same meanings as in section 1422 of title 12.
(2) Federal National Mortgage Association The term “Federal National Mortgage Association” means the corporation created by the Federal National Mortgage Association Charter Act [12 U.S.C. 1716 et seq.].
(3) Federal Home Loan Mortgage Corporation The term “Federal Home Loan Mortgage Corporation” means the corporation created by the Federal Home Loan Mortgage Corporation Act [12 U.S.C. 1451 et seq.].
(June 6, 1934, ch. 404, title I, § 38, as added Pub. L. 110–289, div. A, title I, § 1112, July 30, 2008, 122 Stat. 2677.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (b)(1), was in the original “this title”. See References in Text note set out under section 78a of this title and Codification note below. The Federal National Mortgage Association Charter Act, referred to in subsec. (c)(2), is title III of act June 27, 1934, ch. 847, 48 Stat. 1252, which is classified generally to subchapter III (§ 1716 et seq.) of chapter 13 of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 1716 of Title 12 and Tables. The Federal Home Loan Mortgage Corporation Act, referred to in subsec. (c)(3), is title III of Pub. L. 91–351, July 24, 1970, 84 Stat. 451, which is classified generally to chapter 11A (§ 1451 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title and Statement of Purpose note set out under section 1451 of Title 12 and Tables.
Codification Pub. L. 110–289, which directed amendment of the Securities Exchange Act of 1934 by adding this section at the end, is reflected in the source credit above as adding this section to title I of the Securities Exchange Act of 1934, to reflect the probable intent of Congress.
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# 15 U.S.C. § 78pp - Investor Advisory Committee
## Text
(a) Establishment and purpose (1) Establishment There is established within the Commission the Investor Advisory Committee (referred to in this section as the “Committee”).
(2) Purpose The Committee shall—
(A) advise and consult with the Commission on—
(i) regulatory priorities of the Commission;
(ii) issues relating to the regulation of securities products, trading strategies, and fee structures, and the effectiveness of disclosure;
(iii) initiatives to protect investor interest; and
(iv) initiatives to promote investor confidence and the integrity of the securities marketplace; and
(B) submit to the Commission such findings and recommendations as the Committee determines are appropriate, including recommendations for proposed legislative changes.
(b) Membership (1) In general The members of the Committee shall be—
(A) the Investor Advocate;
(B) a representative of State securities commissions;
(C) a representative of the interests of senior citizens; and
(D) not fewer than 10, and not more than 20, members appointed by the Commission, from among individuals who—
(i) represent the interests of individual equity and debt investors, including investors in mutual funds;
(ii) represent the interests of institutional investors, including the interests of pension funds and registered investment companies;
(iii) are knowledgeable about investment issues and decisions; and
(iv) have reputations of integrity.
(2) Term Each member of the Committee appointed under paragraph (1)(B) shall serve for a term of 4 years.
(3) Members not Commission employees Members appointed under paragraph (1)(B) shall not be deemed to be employees or agents of the Commission solely because of membership on the Committee.
(c) Chairman; vice chairman; secretary; assistant secretary (1) In general The members of the Committee shall elect, from among the members of the Committee—
(A) a chairman, who may not be employed by an issuer;
(B) a vice chairman, who may not be employed by an issuer;
(C) a secretary; and
(D) an assistant secretary.
(2) Term Each member elected under paragraph (1) shall serve for a term of 3 years in the capacity for which the member was elected under paragraph (1).
(d) Meetings (1) Frequency of meetings The Committee shall meet—
(A) not less frequently than twice annually, at the call of the chairman of the Committee; and
(B) from time to time, at the call of the Commission.
(2) Notice The chairman of the Committee shall give the members of the Committee written notice of each meeting, not later than 2 weeks before the date of the meeting.
(e) Compensation and travel expenses Each member of the Committee who is not a full-time employee of the United States shall—
(1) be entitled to receive compensation at a rate not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level V of the Executive Schedule under section 5316 of title 5 for each day during which the member is engaged in the actual performance of the duties of the Committee; and
(2) while away from the home or regular place of business of the member in the performance of services for the Committee, be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703(b) 11 So in original. Section 5703 of Title 5 does not contain a subsec. (b). of title 5.
(f) Staff The Commission shall make available to the Committee such staff as the chairman of the Committee determines are necessary to carry out this section.
(g) Review by Commission The Commission shall—
(1) review the findings and recommendations of the Committee; and
(2) each time the Committee submits a finding or recommendation to the Commission, promptly issue a public statement—
(A) assessing the finding or recommendation of the Committee; and
(B) disclosing the action, if any, the Commission intends to take with respect to the finding or recommendation.
(h) Committee findings Nothing in this section shall require the Commission to agree to or act upon any finding or recommendation of the Committee.
(i) Chapter 10 of title 5 Chapter 10 of title 5 shall not apply with respect to the Committee and its activities.
(j) Authorization of appropriations There is authorized to be appropriated to the Commission such sums as are necessary to carry out this section.
(June 6, 1934, ch. 404, title I, § 39, as added Pub. L. 111–203, title IX, § 911, July 21, 2010, 124 Stat. 1822; amended Pub. L. 117–286, § 4(a)(64), Dec. 27, 2022, 136 Stat. 4312.)
## Notes
Editorial Notes
Amendments2022—Subsec. (i). Pub. L. 117–286 substituted “Chapter 10 of title 5” for “Federal Advisory Committee Act” in heading and “Chapter 10 of title 5” for “The Federal Advisory Committee Act (5 U.S.C. App.)” in text.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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description: "National system for clearance and settlement of securities transactions"
jurisdiction: "us"
corpus: "united_states_code"
kind: "code_section"
title_number: 15
title_name: "COMMERCE AND TRADE"
chapter_number: "2B"
chapter_name: "SECURITIES EXCHANGES"
section: "78q–1"
citation: "15 U.S.C. § 78q–1"
status: "current"
release_point: "119-100"
release_date: "2026-06-26"
source: "official"
source_url: "https://uscode.house.gov/download/releasepoints/us/pl/119/100/xml_usc15@119-100.zip"
source_identifier: "/us/usc/t15/s78q–1"
source_file: "data/legal/raw/us/code/title-15/usc15.xml"
source_hash: "b1d842870c3dcf8c348f94ab752a6df23fe84a781d97eee074e10b40f04ed6ab"
raw_snapshot_hash: "6982338d990ef19d6b52bff6825089bdd6d0ee1233d9382673faf533decd5059"
text_hash: "7d06a5166a608d5708dc27beedc8e814dd019ddbcf59f34e6523496d6028a7b1"
retrieved_at: "2026-07-04"
confidence: "official"
tags: ["legal", "us-code"]
---
# 15 U.S.C. § 78q–1 - National system for clearance and settlement of securities transactions
## Text
(a) Congressional findings; facilitating establishment of system (1) The Congress finds that—
(A) The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.
(B) Inefficient procedures for clearance and settlement impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors.
(C) New data processing and communications techniques create the opportunity for more efficient, effective, and safe procedures for clearance and settlement.
(D) The linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.
(2) (A) The Commission is directed, therefore, having due regard for the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers and dealers, clearing agencies, and transfer agents, to use its authority under this chapter—
(i) to facilitate the establishment of a national system for the prompt and accurate clearance and settlement of transactions in securities (other than exempt securities); and
(ii) to facilitate the establishment of linked or coordinated facilities for clearance and settlement of transactions in securities, securities options, contracts of sale for future delivery and options thereon, and commodity options;
in accordance with the findings and to carry out the objectives set forth in paragraph (1) of this subsection.
(B) The Commission shall use its authority under this chapter to assure equal regulation under this chapter of registered clearing agencies and registered transfer agents. In carrying out its responsibilities set forth in subparagraph (A)(ii) of this paragraph, the Commission shall coordinate with the Commodity Futures Trading Commission and consult with the Board of Governors of the Federal Reserve System.
(b) Registration of clearing agencies; application; determinations by Commission requisite to registration of applicant as clearing agency; denial of participation; discipline; summary proceedings; exemption; facilities for handling derivatives (1) Except as otherwise provided in this section, it shall be unlawful for any clearing agency, unless registered in accordance with this subsection, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a clearing agency with respect to any security (other than an exempted security). The Commission, by rule or order, upon its own motion or upon application, may conditionally or unconditionally exempt any clearing agency or security or any class of clearing agencies or securities from any provisions 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, including the prompt and accurate clearance and settlement of securities transactions and the safeguarding of securities and funds. A clearing agency or transfer agent shall not perform the functions of both a clearing agency and a transfer agent unless such clearing agency or transfer agent is registered in accordance with this subsection and subsection (c) of this section.
(2) A clearing agency may be registered under the terms and conditions hereinafter provided in this subsection and in accordance with the provisions of section 78s(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 clearing agency and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the prompt and accurate clearance and settlement of securities transactions.
(3) A clearing agency shall not be registered unless the Commission determines that—
(A) Such clearing agency is so organized and has the capacity to be able to facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible, to safeguard securities and funds in its custody or control or for which it is responsible, to comply with the provisions of this chapter and the rules and regulations thereunder, to enforce (subject to any rule or order of the Commission pursuant to section 78q(d) or 78s(g)(2) of this title) compliance by its participants with the rules of the clearing agency, and to carry out the purposes of this section.
(B) Subject to the provisions of paragraph (4) of this subsection, the rules of the clearing agency provide that any (i) registered broker or dealer, (ii) other registered clearing agency, (iii) registered investment company, (iv) bank, (v) insurance company, or (vi) other person or class of persons as the Commission, by rule, may from time to time designate as appropriate to the development of a national system for the prompt and accurate clearance and settlement of securities transactions may become a participant in such clearing agency.
(C) The rules of the clearing agency assure a fair representation of its shareholders (or members) and participants in the selection of its directors and administration of its affairs. (The Commission may determine that the representation of participants is fair if they are afforded a reasonable opportunity to acquire voting stock of the clearing agency, directly or indirectly, in reasonable proportion to their use of such clearing agency.)
(D) The rules of the clearing agency provide for the equitable allocation of reasonable dues, fees, and other charges among its participants.
(E) The rules of the clearing agency do not impose any schedule of prices, or fix rates or other fees, for services rendered by its participants.
(F) The rules of the clearing agency are designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible, to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination in the admission of participants or among participants in the use of the clearing agency, or to regulate by virtue of any authority conferred by this chapter matters not related to the purposes of this section or the administration of the clearing agency.
(G) The rules of the clearing agency provide that (subject to any rule or order of the Commission pursuant to section 78q(d) or 78s(g)(2) of this title) its participants shall be appropriately disciplined for violation of any provision of the rules of the clearing agency by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, or any other fitting sanction.
(H) The rules of the clearing agency are in accordance with the provisions of paragraph (5) of this subsection, and, in general, provide a fair procedure with respect to the disciplining of participants, the denial of participation to any person seeking participation therein, and the prohibition or limitation by the clearing agency of any person with respect to access to services offered by the clearing agency.
(I) The rules of the clearing agency do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter.
(4) (A) A registered clearing agency may, and in cases in which the Commission, by order, directs as appropriate in the public interest shall, deny participation to any person subject to a statutory disqualification. A registered clearing agency shall file notice with the Commission not less than thirty days prior to admitting any person to participation, if the clearing agency knew, or in the exercise of reasonable care should have known, that such 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.
(B) A registered clearing agency may deny participation to, or condition the participation of, any person if such person does not meet such standards of financial responsibility, operational capability, experience, and competence as are prescribed by the rules of the clearing agency. A registered clearing agency may examine and verify the qualifications of an applicant to be a participant in accordance with procedures established by the rules of the clearing agency.
(5) (A) In any proceeding by a registered clearing agency to determine whether a participant should be disciplined (other than a summary proceeding pursuant to subparagraph (C) of this paragraph), the clearing agency shall bring specific charges, notify such participant of, and give him an opportunity to defend against such charges, and keep a record. A determination by the clearing agency to impose a disciplinary sanction shall be supported by a statement setting forth—
(i) any act or practice in which such participant has been found to have engaged, or which such participant has been found to have omitted;
(ii) the specific provisions of the rules of the clearing agency which any such act or practice, or omission to act, is deemed to violate; and
(iii) the sanction imposed and the reasons therefor.
(B) In any proceeding by a registered clearing agency to determine whether a person shall be denied participation or prohibited or limited with respect to access to services offered by the clearing agency, the clearing agency shall notify such person of, and give him an opportunity to be heard upon, the specific grounds for denial or prohibition or limitation under consideration and keep a record. A determination by the clearing agency to deny participation or prohibit or limit a person with respect to access to services offered by the clearing agency shall be supported by a statement setting forth the specific grounds on which the denial or prohibition or limitation is based.
(C) A registered clearing agency may summarily suspend and close the accounts of a participant who (i) has been and is expelled or suspended from any self-regulatory organization, (ii) is in default of any delivery of funds or securities to the clearing agency, or (iii) is in such financial or operating difficulty that the clearing agency determines and so notifies the appropriate regulatory agency for such participant that such suspension and closing of accounts are necessary for the protection of the clearing agency, its participants, creditors, or investors. A participant so summarily suspended shall be promptly afforded an opportunity for a hearing by the clearing agency in accordance with the provisions of subparagraph (A) of this paragraph. The appropriate regulatory agency for such participant, by order, may stay any such summary suspension on its own motion or upon application by any person aggrieved thereby, if such appropriate regulatory agency 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 protection of investors.
(6) No registered clearing agency shall prohibit or limit access by any person to services offered by any participant therein.
(7) (A) A clearing agency that is regulated directly or indirectly by the Commodity Futures Trading Commission through its association with a designated contract market for security futures products that is a national securities exchange registered pursuant to section 78f(g) of this title, and that would be required to register pursuant to paragraph (1) of this subsection only because it performs the functions of a clearing agency with respect to security futures products effected pursuant to the rules of the designated contract market with which such agency is associated, is exempted from the provisions of this section and the rules and regulations thereunder, except that if such a clearing agency performs the functions of a clearing agency with respect to a security futures product that is not cash settled, it must have arrangements in place with a registered clearing agency to effect the payment and delivery of the securities underlying the security futures product.
(B) Any clearing agency that performs the functions of a clearing agency with respect to security futures products must coordinate with and develop fair and reasonable links with any and all other clearing agencies that perform the functions of a clearing agency with respect to security futures products, in order to permit, as of the compliance date (as defined in section 78f(h)(6)(C) 11 So in original. Probably should be “section 78f(h)(7)(C)”. of this title), security futures products to be purchased on one market and offset on another market that trades such products.
(8) A registered clearing agency shall be permitted to provide facilities for the clearance and settlement of any derivative agreements, contracts, or transactions that are excluded from the Commodity Exchange Act [7 U.S.C. 1 et seq.], subject to the requirements of this section and to such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter.
(c) Registration of transfer agents (1) Except as otherwise provided in this section, it shall be unlawful for any transfer agent, unless registered in accordance with this section, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the function of a transfer agent with respect to any security registered under section 78l of this title or which would be required to be registered except for the exemption from registration provided by subsection (g)(2)(B) or (g)(2)(G) of that section. The appropriate regulatory agency, by rule or order, upon its own motion or upon application, may conditionally or unconditionally exempt any person or security or class of persons or securities from any provision of this section or any rule or regulation prescribed under this section, if the appropriate regulatory agency finds (A) that such exemption is in the public interest and consistent with the protection of investors and the purposes of this section, including the prompt and accurate clearance and settlement of securities transactions and the safeguarding of securities and funds, and (B) the Commission does not object to such exemption.
(2) A transfer agent may be registered by filing with the appropriate regulatory agency for such transfer agent an application for registration in such form and containing such information and documents concerning such transfer agent and any persons associated with the transfer agent as such appropriate regulatory agency may prescribe as necessary or appropriate in furtherance of the purposes of this section. Except as hereinafter provided, such registration shall become effective 45 days after receipt of such application by such appropriate regulatory agency or within such shorter period of time as such appropriate regulatory agency may determine.
(3) The appropriate regulatory agency for a transfer agent, by order, shall deny registration to, censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding 12 months, or revoke the registration of such transfer agent, if such appropriate regulatory agency finds, on the record after notice and opportunity for hearing, that such denial, censure, placing of limitations, suspension, or revocation is in the public interest and that such transfer agent, whether prior or subsequent to becoming such, or any person associated with such transfer agent, whether prior or subsequent to becoming so associated—
(A) has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) of paragraph (4) of section 78o(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); or
(B) is subject to an order entered pursuant to subparagraph (C) of paragraph (4) of this subsection barring or suspending the right of such person to be associated with a transfer agent.
(4) (A) Pending final determination whether any registration by a transfer agent under this subsection shall be denied, the appropriate regulatory agency for such transfer agent, by order, may postpone the effective date of such registration for a period not to exceed fifteen days, but if, after notice and opportunity for hearing (which may consist solely of affidavits and oral arguments), it shall appear to such appropriate regulatory agency to be necessary or appropriate in the public interest or for the protection of investors to postpone the effective date of such registration until final determination, such appropriate regulatory agency shall so order. Pending final determination whether any registration under this subsection shall be revoked, such appropriate regulatory agency, by order, may suspend such registration, if such suspension appears to such appropriate regulatory agency, after notice and opportunity for hearing, to be necessary or appropriate in the public interest or for the protection of investors.
(B) A registered transfer agent may, upon such terms and conditions as the appropriate regulatory agency for such transfer agent deems necessary or appropriate in the public interest, for the protection of investors, or in furtherance of the purposes of this section, withdraw from registration by filing a written notice of withdrawal with such appropriate regulatory agency. If such appropriate regulatory agency finds that any transfer agent for which it is the appropriate regulatory agency, is no longer in existence or has ceased to do business as a transfer agent, such appropriate regulatory agency, by order, shall cancel or deny the registration.
(C) The appropriate regulatory agency for a transfer agent, 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 the transfer agent, or suspend for a period not exceeding 12 months or bar any such person from being associated with any transfer agent, broker, dealer, investment adviser, municipal securities dealer, municipal advisor, or nationally recognized statistical rating organization, if the appropriate regulatory agency 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 or omitted any act, or is subject to an order or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) or 22 So in original. Probably should be “of”. paragraph (4) of section 78o(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). It shall be unlawful for any person as to whom such an order suspending or barring him from being associated with a transfer agent is in effect willfully to become, or to be, associated with a transfer agent without the consent of the appropriate regulatory agency that entered the order and the appropriate regulatory agency for that transfer agent. It shall be unlawful for any transfer agent to permit such a person to become, or remain, a person associated with it without the consent of such appropriate regulatory agencies, if the transfer agent knew, or in the exercise of reasonable care should have known, of such order. The Commission may establish, by rule, procedures by which a transfer agent reasonably can determine whether a person associated or seeking to become associated with it is subject to any such order, and may require, by rule, that any transfer agent comply with such procedures.
(d) Activities of clearing agencies and transfer agents; enforcement by appropriate regulatory agencies (1) No registered clearing agency or registered transfer agent shall, directly or indirectly, engage in any activity as clearing agency or transfer agent in contravention of such rules and regulations (A) as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter, or (B) as the appropriate regulatory agency for such clearing agency or transfer agent may prescribe as necessary or appropriate for the safeguarding of securities and funds.
(2) With respect to any clearing agency or transfer agent for which the Commission is not the appropriate regulatory agency, the appropriate regulatory agency for such clearing agency or transfer agent may, in accordance with section 1818 of title 12, enforce compliance by such clearing agency or transfer agent with the provisions of this section, sections 78q and 78s of this title, and the rules and regulations thereunder. For purposes of the preceding sentence, any violation of any such provision shall constitute adequate basis for the issuance of an order under section 1818(b) or 1818(c) of title 12, and the participants in any such clearing agency and the persons doing business with any such transfer agent shall be deemed to be “depositors” as that term is used in section 1818(c) of title 12.
(3) (A) With respect to any clearing agency or transfer agent for which the Commission is not the appropriate regulatory agency, the Commission and the appropriate regulatory agency for such clearing agency or transfer agent shall consult and cooperate with each other, and, as may be appropriate, with State banking authorities having supervision over such clearing agency or transfer agent toward the end that, to the maximum extent practicable, their respective regulatory responsibilities may be fulfilled and the rules and regulations applicable to such clearing agency or transfer agent may be in accord with both sound banking practices and a national system for the prompt and accurate clearance and settlement of securities transactions. In accordance with this objective—
(i) the Commission and such appropriate regulatory agency shall, at least fifteen days prior to the issuance for public comment of any proposed rule or regulation or adoption of any rule or regulation concerning such clearing agency or transfer agent, consult and request the views of the other; and
(ii) such appropriate regulatory agency shall assume primary responsibility to examine and enforce compliance by such clearing agency or transfer agent with the provisions of this section and sections 78q and 78s of this title.
(B) Nothing in the preceding subparagraph or elsewhere in this chapter shall be construed to impair or limit (other than by the requirement of notification) the Commission’s authority to make rules under any provision of this chapter or to enforce compliance pursuant to any provision of this chapter by any clearing agency, transfer agent, or person associated with a transfer agent with the provisions of this chapter and the rules and regulations thereunder.
(4) Nothing in this section shall be construed to impair the authority of any State banking authority or other State or Federal regulatory authority having jurisdiction over a person registered as a clearing agency, transfer agent, or person associated with a transfer agent, to make and enforce rules governing such person which are not inconsistent with this chapter and the rules and regulations thereunder.
(5) A registered transfer agent may not, directly or indirectly, engage in any activity in connection with the guarantee of a signature of an endorser of a security, including the acceptance or rejection of such guarantee, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest, for the protection of investors, to facilitate the equitable treatment of financial institutions which issue such guarantees, or otherwise in furtherance of the purposes of this chapter.
(e) Physical movement of securities certificates The Commission shall use its authority under this chapter to end the physical movement of securities certificates in connection with the settlement among brokers and dealers of transactions in securities consummated by means of the mails or any means or instrumentalities of interstate commerce.
(f) Rules concerning transfer of securities and rights and obligations of involved or affected parties (1) Notwithstanding any provision of State law, except as provided in paragraph (3), if the Commission makes each of the findings described in paragraph (2)(A), the Commission may adopt rules concerning—
(A) the transfer of certificated or uncertificated securities (other than government securities issued pursuant to chapter 31 of title 31 or securities otherwise processed within a book-entry system operated by the Federal Reserve banks pursuant to a Federal book-entry regulation) or limited interests (including security interests) therein; and
(B) rights and obligations of purchasers, sellers, owners, lenders, borrowers, and financial intermediaries (including brokers, dealers, banks, and clearing agencies) involved in or affected by such transfers, and the rights of third parties whose interests in such securities devolve from such transfers.
(2) (A) The findings described in this paragraph are findings by the Commission that—
(i) such rule is necessary or appropriate for the protection of investors or in the public interest and is reasonably designed to promote the prompt, accurate, and safe clearance and settlement of securities transactions;
(ii) in the absence of a uniform rule, the safe and efficient operation of the national system for clearance and settlement of securities transactions will be, or is, substantially impeded; and
(iii) to the extent such rule will impair or diminish, directly or indirectly, rights of persons specified in paragraph (1)(B) under State law concerning transfers of securities (or limited interests therein), the benefits of such rule outweigh such impairment or diminution of rights.
(B) In making the findings described in subparagraph (A), the Commission shall give consideration to the recommendations of the Advisory Committee established under paragraph (4), and it shall consult with and consider the views of the Secretary of the Treasury and the Board of Governors of the Federal Reserve System. If the Secretary of the Treasury objects, in writing, to any proposed rule of the Commission on the basis of the Secretary’s view on the issues described in clauses (i), (ii), and (iii) of subparagraph (A), the Commission shall consider all feasible alternatives to the proposed rule, and it shall not adopt any such rule unless the Commission makes an explicit finding that the rule is the most practicable method for achieving safe and efficient operation of the national clearance and settlement system.
(3) Any State may, prior to the expiration of 2 years after the Commission adopts a rule under this subsection, enact a statute that specifically refers to this subsection and the specific rule thereunder and establishes, prospectively from the date of enactment of the State statute, a provision that differs from that applicable under the Commission’s rule.
(4) (A) Within 90 days after October 16, 1990, the Commission shall (and at such times thereafter as the Commission may determine, the Commission may), after consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System, establish an advisory committee under chapter 10 of title 5. The Advisory Committee shall be directed to consider and report to the Commission on such matters as the Commission, after consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System, determines, including the areas, if any, in which State commercial laws and related Federal laws concerning the transfer of certificated or uncertificated securities, limited interests (including security interests) in such securities, or the creation or perfection of security interests in such securities do not provide the necessary certainty, uniformity, and clarity for purchasers, sellers, owners, lenders, borrowers, and financial intermediaries concerning their respective rights and obligations.
(B) The Advisory Committee shall consist of 15 members, of which—
(i) 11 shall be designated by the Commission in accordance with chapter 10 of title 5; and
(ii) 2 each shall be designated by the Board of Governors of the Federal Reserve System and the Secretary of the Treasury.
(C) The Advisory Committee shall conduct its activities in accordance with chapter 10 of title 5. Within 6 months of its designation, or such longer time as the Commission may designate, the Advisory Committee shall issue a report to the Commission, and shall cause copies of that report to be delivered to the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System.
(g) 33 So in original. Two subsecs. (g) have been enacted. Due diligence for the delivery of dividends, interest, and other valuable property rights (1) Revision of rules required The Commission shall revise its regulations in section 240.17Ad–17 of title 17, Code of Federal Regulations, as in effect on December 8, 1997, to extend the application of such section to brokers and dealers and to provide for the following:
(A) A requirement that the paying agent provide a single written notification to each missing security holder that the missing security holder has been sent a check that has not yet been negotiated. The written notification may be sent along with a check or other mailing subsequently sent to the missing security holder but must be provided no later than 7 months after the sending of the not yet negotiated check.
(B) An exclusion for paying agents from the notification requirements when the value of the not yet negotiated check is less than $25.
(C) A provision clarifying that the requirements described in subparagraph (A) shall have no effect on State escheatment laws.
(D) For purposes of such revised regulations—
(i) a security holder shall be considered a “missing security holder” if a check is sent to the security holder and the check is not negotiated before the earlier of the paying agent sending the next regularly scheduled check or the elapsing of 6 months after the sending of the not yet negotiated check; and
(ii) the term “paying agent” includes any issuer, transfer agent, broker, dealer, investment adviser, indenture trustee, custodian, or any other person that accepts payments from the issuer of a security and distributes the payments to the holders of the security.
(2) Rulemaking The Commission shall adopt such rules, regulations, and orders necessary to implement this subsection no later than 1 year after July 21, 2010. In proposing such rules, the Commission shall seek to minimize disruptions to current systems used by or on behalf of paying agents to process payment to account holders and avoid requiring multiple paying agents to send written notification to a missing security holder regarding the same not yet negotiated check.
(g) 3 Registration requirement It shall be unlawful for a clearing agency, unless registered with the Commission, directly or indirectly to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a clearing agency with respect to a security-based swap.
(h) Voluntary registration A person that clears agreements, contracts, or transactions that are not required to be cleared under this chapter may register with the Commission as a clearing agency.
(i) Standards for clearing agencies clearing security-based swap transactions To be registered and to maintain registration as a clearing agency that clears security-based swap transactions, a clearing agency shall comply with such standards as the Commission may establish by rule. In establishing any such standards, and in the exercise of its oversight of such a clearing agency pursuant to this chapter, the Commission may conform such standards or oversight to reflect evolving United States and international standards. Except where the Commission determines otherwise by rule or regulation, a clearing agency shall have reasonable discretion in establishing the manner in which it complies with any such standards.
(j) Rules The Commission shall adopt rules governing persons that are registered as clearing agencies for security-based swaps under this chapter.
(k) Exemptions The Commission may exempt, conditionally or unconditionally, a clearing agency from registration under this section for the clearing of security-based swaps if the Commission determines that the clearing agency is subject to comparable, comprehensive supervision and regulation by the Commodity Futures Trading Commission or the appropriate government authorities in the home country of the agency. Such conditions may include, but are not limited to, requiring that the clearing agency be available for inspection by the Commission and make available all information requested by the Commission.
(l) Existing depository institutions and derivative clearing organizations (1) In general A depository institution or derivative clearing organization registered with the Commodity Futures Trading Commission under the Commodity Exchange Act [7 U.S.C. 1 et seq.] that is required to be registered as a clearing agency under this section is deemed to be registered under this section solely for the purpose of clearing security-based swaps to the extent that, before July 21, 2010—
(A) the depository institution cleared swaps as a multilateral clearing organization; or
(B) the derivative clearing organization cleared swaps pursuant to an exemption from registration as a clearing agency.
(2) Conversion of depository institutions A depository institution to which this subsection applies may, by the vote of the shareholders owning not less than 51 percent of the voting interests of the depository institution, be converted into a State corporation, partnership, limited liability company, or similar legal form pursuant to a plan of conversion, if the conversion is not in contravention of applicable State law.
(3) Sharing of information The Commodity Futures Trading Commission shall make available to the Commission, upon request, all information determined to be relevant by the Commodity Futures Trading Commission regarding a derivatives clearing organization deemed to be registered with the Commission under paragraph (1).
(m) Modification of core principles The Commission may conform the core principles established in this section to reflect evolving United States and international standards.
(June 6, 1934, ch. 404, title I, § 17A, as added Pub. L. 94–29, § 15, June 4, 1975, 89 Stat. 141; amended Pub. L. 100–181, title III, § 322, Dec. 4, 1987, 101 Stat. 1257; Pub. L. 101–429, title II, § 206, Oct. 15, 1990, 104 Stat. 941; Pub. L. 101–432, § 5, Oct. 16, 1990, 104 Stat. 973; Pub. L. 101–550, title II, § 203(c)(1), Nov. 15, 1990, 104 Stat. 2718; Pub. L. 106–554, § 1(a)(5) [title II, §§ 206(d), 207], Dec. 21, 2000, 114 Stat. 2763, 2763A–431, 2763A–434; Pub. L. 107–204, title VI, § 604(c)(1)(C), July 30, 2002, 116 Stat. 796; Pub. L. 111–203, title VII, § 763(b), title IX, §§ 925(a)(3), 929W, July 21, 2010, 124 Stat. 1768, 1851, 1869; Pub. L. 117–286, § 4(a)(63), Dec. 27, 2022, 136 Stat. 4312.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a)(2), (b)(3)(A), (F), (I), (8), (d)(1), (3)(B), (4), (5), (e), and (h) to (j), was in the original “this title”. See References in Text note set out under section 78a of this title. The Commodity Exchange Act, referred to in subsecs. (b)(8) and (l)(1), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables.
Amendments2022—Subsec. (f)(4)(A). Pub. L. 117–286, § 4(a)(63)(A), substituted “chapter 10 of title 5.” for “the Federal Advisory Committee Act (5 U.S.C. App.).” Subsec. (f)(4)(B)(i). Pub. L. 117–286, § 4(a)(63)(B), substituted “chapter 10 of title 5;” for “the Federal Advisory Committee Act;”. Subsec. (f)(4)(C). Pub. L. 117–286, § 4(a)(63)(C), substituted “chapter 10 of title 5.” for “the Federal Advisory Committee Act.” 2010—Subsec. (c)(4)(C). Pub. L. 111–203, § 925(a)(3), substituted “12 months or bar any such person from being associated with any transfer agent, broker, dealer, investment adviser, municipal securities dealer, municipal advisor, or nationally recognized statistical rating organization,” for “twelve months or bar any such person from being associated with the transfer agent,”. Subsec. (g). Pub. L. 111–203, § 929W, added subsec. (g) relating to due diligence for the delivery of dividends, interest, and other valuable property rights. Pub. L. 111–203, § 763(b), added subsec. (g) relating to registration requirement. Subsecs. (h) to (m). Pub. L. 111–203, § 763(b), added subsecs. (h) to (m). 2002—Subsec. (c)(3)(A), (4)(C). Pub. L. 107–204 inserted “, or is subject to an order or finding,” before “enumerated” and substituted “(H), or (G)” for “or (G)”. 2000—Subsec. (b)(3)(A). Pub. L. 106–554, § 1(a)(5) [title II, § 207(1)], inserted “and derivative agreements, contracts, and transactions” after “prompt and accurate clearance and settlement of securities transactions”. Subsec. (b)(3)(F). Pub. L. 106–554, § 1(a)(5) [title II, § 207(2)], inserted “and, to the extent applicable, derivative agreements, contracts, and transactions” after “designed to promote the prompt and accurate clearance and settlement of securities transactions”. Subsec. (b)(7). Pub. L. 106–554, § 1(a)(5) [title II, § 206(d)], added par. (7). Subsec. (b)(8). Pub. L. 106–554, § 1(a)(5) [title II, § 207(3)], added par. (8). 1990—Subsec. (a)(2). Pub. L. 101–432, § 5(a), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “The Commission is directed, therefore, having due regard for the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers and dealers, clearing agencies, and transfer agents, to use its authority under this chapter to facilitate the establishment of a national system for the prompt and accurate clearance and settlement of transactions in securities (other than exempted securities) in accordance with the findings and to carry out the objectives set forth in paragraph (1) of this subsection. The Commission shall use its authority under this chapter to assure equal regulation under this chapter of registered clearing agencies and registered transfer agents.” Subsec. (c)(3)(A), (4)(C). Pub. L. 101–550 substituted “(A), (D), (E), or (G)” for “(A), (D), or (E)”. Subsec. (d)(5). Pub. L. 101–429 added par. (5). Subsec. (f). Pub. L. 101–432, § 5(b), added subsec. (f). 1987—Subsec. (c)(2). Pub. L. 100–181, § 322(1), (2), inserted “and any persons associated with the transfer agent” in first sentence and substituted “45” for “thirty” in second sentence. Subsec. (c)(3), (4). Pub. L. 100–181, § 322(3)–(5), added par. (3), struck out former par. (3)(A) which read as follows: “The appropriate regulatory agency for a transfer agent, by order, shall deny registration to, censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding twelve months, or revoke the registration of such transfer agent, if such appropriate regulatory agency finds, on the record after notice and opportunity for hearing, that such denial, censure, placing of limitations, suspension, or revocation is in the public interest and that such transfer agent has willfully violated or is unable to comply with any provision of this section or section 78q of this title or the rules or regulations thereunder.”, redesignated subpars. (B) and (C) of former par. (3) as subpars. (A) and (B), respectively, of new par. (4), and added subpar. (C) to such par. (4). Subsec. (d)(3)(B). Pub. L. 100–181, § 322(6), substituted “clearing agency, transfer agent, or person associated with a transfer agent” for “clearing agency or transfer agent”. Subsec. (d)(4). Pub. L. 100–181, § 322(7), substituted “, transfer agent, or person associated with a transfer agent,” for “or transfer agent”.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by sections 925(a)(3) and 929W of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by section 763(b) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date of 1990 AmendmentAmendment by Pub. L. 101–429 effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in a note under section 77g of this title.
Effective DateSection effective June 4, 1975, except for subsecs. (b) and (c) which are effective 180 days after June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Clearance and Settlement of Transactions; Report to CongressSection 8(b) of Pub. L. 101–432 directed Securities and Exchange Commission, in consultation with Commodity Futures Trading Commission, Board of Governors of the Federal Reserve System, and other relevant regulatory authorities, to examine progress toward establishing linked or coordinated facilities for clearance and settlement of transactions in securities, securities options, contracts of sale for future delivery and options thereon, and commodity options, and to submit to Congress, not later than 2 years from Oct. 16, 1990, a report detailing and evaluating such progress.
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---
# 15 U.S.C. § 78q–2 - Automated quotation systems for penny stocks
## Text
(a) Findings The Congress finds that—
(1) the market for penny stocks suffers from a lack of reliable and accurate quotation and last sale information available to investors and regulators;
(2) it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to improve significantly the information available to brokers, dealers, investors, and regulators with respect to quotations for and transactions in penny stocks; and
(3) a fully implemented automated quotation system for penny stocks would meet the information needs of investors and market participants and would add visibility and regulatory and surveillance data to that market.
(b) Mandate to facilitate establishment of automated quotation systems (1) In general The Commission shall facilitate the widespread dissemination of reliable and accurate last sale and quotation information with respect to penny stocks in accordance with the findings set forth in subsection (a), with a view toward establishing, at the earliest feasible time, one or more automated quotation systems that will collect and disseminate information regarding all penny stocks.
(2) Characteristics of systems Each such automated quotation system shall—
(A) be operated by a registered securities association or a national securities exchange in accordance with such rules as the Commission and these entities shall prescribe;
(B) collect and disseminate quotation and transaction information;
(C) except as provided in subsection (c), provide bid and ask quotations of participating brokers or dealers, or comparably accurate and reliable pricing information, which shall constitute firm bids or offers for at least such minimum numbers of shares or minimum dollar amounts as the Commission and the registered securities association or national securities exchange shall require; and
(D) provide for the reporting of the volume of penny stock transactions, including last sale reporting, when the volume reaches appropriate levels that the Commission shall specify by rule or order.
(c) Exemptive authority The Commission may, by rule or order, grant such exemptions, in whole or in part, conditionally or unconditionally, to any penny stock or class of penny stocks from the requirements of subsection (b) as the Commission determines to be consistent with the public interest, the protection of investors, and the maintenance of fair and orderly markets.
(d) Commission reporting requirements The Commission shall, in each of the first 5 annual reports (under section 78w(b)(1) of this title) submitted more than 12 months after October 15, 1990, include a description of the status of the penny stock automated quotation system or systems required by subsection (b). Such description shall include—
(1) a review of the development, implementation, and progress of the project, including achievement of significant milestones and current project schedule; and
(2) a review of the activities of registered securities associations and national securities exchanges in the development of the system.
(June 6, 1934, ch. 404, title I, § 17B, as added Pub. L. 101–429, title V, § 506, Oct. 15, 1990, 104 Stat. 955.)
## Notes
Editorial Notes
References in TextSection 78w(b)(1) of this title, referred to in subsec. (d), was omitted from the Code. For further details related to reports referred to in subsec. (d), see Codification note set out under section 78w of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in an Effective Date of 1990 Amendment note under section 77g of this title.
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# 15 U.S.C. § 78qq - Small Business Capital Formation Advisory Committee
## Text
(a) Establishment and purpose (1) Establishment There is established within the Commission the Small Business Capital Formation Advisory Committee (hereafter in this section referred to as the “Committee”).
(2) Functions (A) In general The Committee shall provide the Commission with advice on the Commission’s rules, regulations, and policies with regard to the Commission’s mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, as such rules, regulations, and policies relate to—
(i) capital raising by emerging, privately held small businesses (“emerging companies”) and publicly traded companies with less than $250,000,000 in public market capitalization (“smaller public companies”) through securities offerings, including private and limited offerings and initial and other public offerings;
(ii) trading in the securities of emerging companies and smaller public companies; and
(iii) public reporting and corporate governance requirements of emerging companies and smaller public companies.
(B) Limitation The Committee shall not provide any advice with respect to any policies, practices, actions, or decisions concerning the Commission’s enforcement program.
(b) Membership (1) In general The members of the Committee shall be—
(A) the Advocate for Small Business Capital Formation;
(B) not fewer than 10, and not more than 20, members appointed by the Commission, from among individuals—
(i) who represent—
(I) emerging companies engaging in private and limited securities offerings or considering initial public offerings (“IPO”) (including the companies’ officers and directors);
(II) the professional advisors of such companies (including attorneys, accountants, investment bankers, and financial advisors); and
(III) the investors in such companies (including angel investors, venture capital funds, and family offices);
(ii) who are officers or directors of minority-owned small businesses or women-owned small businesses;
(iii) who represent—
(I) smaller public companies (including the companies’ officers and directors);
(II) the professional advisors of such companies (including attorneys, auditors, underwriters, and financial advisors); and
(III) the pre-IPO and post-IPO investors in such companies (both institutional, such as venture capital funds, and individual, such as angel investors); and
(iv) who represent participants in the marketplace for the securities of emerging companies and smaller public companies, such as securities exchanges, alternative trading systems, analysts, information processors, and transfer agents; and
(C) three non-voting members—
(i) one of whom shall be appointed by the Investor Advocate;
(ii) one of whom shall be appointed by the North American Securities Administrators Association; and
(iii) one of whom shall be appointed by the Administrator of the Small Business Administration.
(2) Term Each member of the Committee appointed under subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) shall serve for a term of 4 years.
(3) Members not Commission employees Members appointed under subparagraph (B), (C)(ii), or (C)(iii) of paragraph (1) shall not be treated as employees or agents of the Commission solely because of membership on the Committee.
(c) Chairman; vice chairman; secretary; assistant secretary (1) In general The members of the Committee shall elect, from among the members of the Committee—
(A) a chairman;
(B) a vice chairman;
(C) a secretary; and
(D) an assistant secretary.
(2) Term Each member elected under paragraph (1) shall serve for a term of 3 years in the capacity for which the member was elected under paragraph (1).
(d) Meetings (1) Frequency of meetings The Committee shall meet—
(A) not less frequently than four times annually, at the call of the chairman of the Committee; and
(B) from time to time, at the call of the Commission.
(2) Notice The chairman of the Committee shall give the members of the Committee written notice of each meeting, not later than 2 weeks before the date of the meeting.
(e) Compensation and travel expenses Each member of the Committee who is not a full-time employee of the United States shall—
(1) be entitled to receive compensation at a rate not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level V of the Executive Schedule under section 5316 of title 5 for each day during which the member is engaged in the actual performance of the duties of the Committee; and
(2) while away from the home or regular place of business of the member in the performance of services for the Committee, be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703 of title 5.
(f) Staff The Commission shall make available to the Committee such staff as the chairman of the Committee determines are necessary to carry out this section.
(g) Review by Commission The Commission shall—
(1) review the findings and recommendations of the Committee; and
(2) each time the Committee submits a finding or recommendation to the Commission, promptly issue a public statement—
(A) assessing the finding or recommendation of the Committee; and
(B) disclosing the action, if any, the Commission intends to take with respect to the finding or recommendation.
(h) Federal Advisory Committee Act The Federal Advisory Committee Act (5 U.S.C. App.) 11 See References in Text note below. shall not apply with respect to the Committee and its activities.
(June 6, 1934, ch. 404, title I, § 40, as added Pub. L. 114–284, § 2(b), Dec. 16, 2016, 130 Stat. 1450.)
## Notes
Editorial Notes
References in TextThe Federal Advisory Committee Act, referred to in subsec. (h), is Pub. L. 92–463, Oct. 6, 1972, 86 Stat. 770, which was set out in the Appendix to Title 5, Government Organization and Employees, and was substantially repealed and restated in chapter 10 (§ 1001 et seq.) of Title 5 by Pub. L. 117–286, §§ 3(a), 7, Dec. 27, 2022, 136 Stat. 4197, 4361. For disposition of sections of the Act into chapter 10 of Title 5, see Disposition Table preceding section 101 of Title 5.
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# 15 U.S.C. § 78r - Liability for misleading statements
## Text
(a) Persons liable; persons entitled to recover; defense of good faith; suit at law or in equity; costs, etc. Any person who shall make or cause to be made any statement in any application, report, or document filed pursuant to this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, which statement 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, shall be liable to any person (not knowing that such statement was false or misleading) who, in reliance upon such statement, shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading. A person seeking to enforce such liability may sue at law or in equity in any court of competent jurisdiction. In any such suit the court may, in its discretion, require an undertaking for the payment of the costs of such suit, and assess reasonable costs, including reasonable attorneys’ fees, against either party litigant.
(b) Contribution Every person who becomes liable to make payment under this section may recover contribution as in cases of contract from any person who, if joined in the original suit, would have been liable to make the same payment.
(c) Period of limitations No action shall be maintained to enforce any liability created under this section unless brought within one year after the discovery of the facts constituting the cause of action and within three years after such cause of action accrued.
(June 6, 1934, ch. 404, title I, § 18, 48 Stat. 897; May 27, 1936, ch. 462, § 5, 49 Stat. 1379.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (a), was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments1936—Subsec. (a). Act May 27, 1936, inserted “or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title”.
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# 15 U.S.C. § 78rr - Data standards for security-based swap reporting
## Text
(a) Requirement The Commission shall, by rule, adopt data standards for all reports related to security-based swaps that are required under this chapter.
(b) Consistency The data standards required under subsection (a) shall incorporate, and ensure compatibility with (to the extent feasible), all applicable data standards established in the rules promulgated under section 5334 of title 12, including, to the extent practicable, by having the characteristics described in clauses (i) through (vi) of subsection (c)(1)(B) of such section 5334.
(June 6, 1934, ch. 404, title I, § 41, as added Pub. L. 117–263, div. E, title LVIII, § 5821(h), Dec. 23, 2022, 136 Stat. 3427.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (a), was in the original “this Act”. See References in Text note set out under section 78a of this title.
Codification Pub. L. 117–263, which directed amendment of the Securities Exchange Act of 1934 by adding this section at the end, is reflected in the source credit above as adding this section to title I of the Securities Exchange Act of 1934, to reflect the probable intent of Congress.
Statutory Notes and Related Subsidiaries
Rule of Construction—No New Disclosure RequirementsEnactment of section not to be construed to require certain additional information to be collected or disclosed, see section 5826 of Pub. L. 117–263, set out as a note under section 77g of this title.
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# 15 U.S.C. § 78t–1 - Liability to contemporaneous traders for insider trading
## Text
(a) Private rights of action based on contemporaneous trading Any person who violates any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security while in possession of material, nonpublic information shall be liable in an action in any court of competent jurisdiction to any person who, contemporaneously with the purchase or sale of securities that is the subject of such violation, has purchased (where such violation is based on a sale of securities) or sold (where such violation is based on a purchase of securities) securities of the same class.
(b) Limitations on liability (1) Contemporaneous trading actions limited to profit gained or loss avoided The total amount of damages imposed under subsection (a) shall not exceed the profit gained or loss avoided in the transaction or transactions that are the subject of the violation.
(2) Offsetting disgorgements against liability The total amount of damages imposed against any person under subsection (a) shall be diminished by the amounts, if any, that such person may be required to disgorge, pursuant to a court order obtained at the instance of the Commission, in a proceeding brought under section 78u(d) of this title relating to the same transaction or transactions.
(3) Controlling person liability No person shall be liable under this section solely by reason of employing another person who is liable under this section, but the liability of a controlling person under this section shall be subject to section 78t(a) of this title.
(4) Statute of limitations No action may be brought under this section more than 5 years after the date of the last transaction that is the subject of the violation.
(c) Joint and several liability for communicating Any person who violates any provision of this chapter or the rules or regulations thereunder by communicating material, nonpublic information shall be jointly and severally liable under subsection (a) with, and to the same extent as, any person or persons liable under subsection (a) to whom the communication was directed.
(d) Authority not to restrict other express or implied rights of action Nothing in this section shall be construed to limit or condition the right of any person to bring an action to enforce a requirement of this chapter or the availability of any cause of action implied from a provision of this chapter.
(e) Provisions not to affect public prosecutions This section shall not be construed to bar or limit in any manner any action by the Commission or the Attorney General under any other provision of this chapter, nor shall it bar or limit in any manner any action to recover penalties, or to seek any other order regarding penalties.
(June 6, 1934, ch. 404, title I, § 20A, as added Pub. L. 100–704, § 5, Nov. 19, 1988, 102 Stat. 4680.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a), (c), (d), and (e), was in the original “this title”. See References in Text note set out under section 78a of this title.
Statutory Notes and Related Subsidiaries
Effective DateSection not applicable to actions occurring before Nov. 19, 1988, see section 9 of Pub. L. 100–704 set out as an Effective Date of 1988 Amendment note under section 78o of this title.
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# 15 U.S.C. § 78t - Liability of controlling persons and persons who aid and abet violations
## Text
(a) Joint and several liability; good faith defense Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable (including to the Commission in any action brought under paragraph (1) or (3) of section 78u(d) of this title), unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.
(b) Unlawful activity through or by means of any other person It shall be unlawful for any person, directly or indirectly, to do any act or thing which it would be unlawful for such person to do under the provisions of this chapter or any rule or regulation thereunder through or by means of any other person.
(c) Hindering, delaying, or obstructing the making or filing of any document, report, or information It shall be unlawful for any director or officer of, or any owner of any securities issued by, any issuer required to file any document, report, or information under this chapter or any rule or regulation thereunder without just cause to hinder, delay, or obstruct the making or filing of any such document, report, or information.
(d) Liability for trading in securities while in possession of material nonpublic information Wherever communicating, or purchasing or selling a security while in possession of, material nonpublic information would violate, or result in liability to any purchaser or seller of the security under any provisions of this chapter, or any rule or regulation thereunder, such conduct in connection with a purchase or sale of a put, call, straddle, option, privilege or security-based swap agreement with respect to such security or with respect to a group or index of securities including such security, shall also violate and result in comparable liability to any purchaser or seller of that security under such provision, rule, or regulation.
(e) Prosecution of persons who aid and abet violations For purposes of any action brought by the Commission under paragraph (1) or (3) of section 78u(d) of this title, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this chapter, or of any rule or regulation issued under this chapter, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.
(f) Limitation on Commission authority The authority of the Commission under this section with respect to security-based swap agreements shall be subject to the restrictions and limitations of section 78c–1(b) of this title.
(June 6, 1934, ch. 404, title I, § 20, 48 Stat. 899; May 27, 1936, ch. 462, § 6, 49 Stat. 1379; Pub. L. 88–467, § 9, Aug. 20, 1964, 78 Stat. 579; Pub. L. 98–376, § 5, Aug. 10, 1984, 98 Stat. 1265; Pub. L. 104–67, title I, § 104, Dec. 22, 1995, 109 Stat. 757; Pub. L. 105–353, title III, § 301(b)(12), Nov. 3, 1998, 112 Stat. 3236; Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(3), title III, § 303(i), (j)], Dec. 21, 2000, 114 Stat. 2763, 2763A–426, 2763A–456; Pub. L. 111–203, title VII, § 762(d)(6), title IX, §§ 929O, 929P(c), July 21, 2010, 124 Stat. 1761, 1862, 1865.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2010—Subsec. (a). Pub. L. 111–203, § 929P(c), inserted “(including to the Commission in any action brought under paragraph (1) or (3) of section 78u(d) of this title)” after “controlled person is liable”. Subsec. (d). Pub. L. 111–203, § 762(d)(6)(A), struck out “(as defined in section 206B of the Gramm-Leach-Bliley Act)” after “security-based swap agreement”. Subsec. (e). Pub. L. 111–203, § 929O, inserted “or recklessly” after “knowingly”. Subsec. (f). Pub. L. 111–203, § 762(d)(6)(B), struck out “(as defined in section 206B of the Gramm-Leach-Bliley Act)” after “security-based swap agreements”. 2000—Subsec. (d). Pub. L. 106–554, § 1(a)(5) [title III, § 303(i)], amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: “Wherever communicating, or purchasing or selling a security while in possession of, material nonpublic information would violate, or result in liability to any purchaser or seller of the security under any provision of this chapter, or any rule or regulation thereunder, such conduct in connection with a purchase or sale of a put, call, straddle, option,, privilege, or security futures product with respect to such security or with respect to a group or index of securities including such security, shall also violate and result in comparable liability to any purchaser or seller of that security under such provision, rule, or regulation.” Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(3)], substituted “, privilege, or security futures product” for “or privilege”. Subsec. (f). Pub. L. 106–554, § 1(a)(5) [title III, § 303(j)], added subsec. (f). 1998—Subsecs. (e), (f). Pub. L. 105–353 redesignated subsec. (f) as (e). 1995—Pub. L. 104–67, § 104(1), substituted “liability of controlling persons and persons who aid and abet violations” for “Liabilities of controlling persons” in section catchline. Subsec. (f). Pub. L. 104–67, § 104(2), added subsec. (f). 1984—Subsec. (d). Pub. L. 98–376 added subsec. (d). 1964—Subsec. (c). Pub. L. 88–467 extended application of provisions of subsec. (c) by substituting the prohibition against any officer or director of, or an owner of securities issued by, a company from hindering, delaying, or obstructing the preparation or filing of any report, document, or information required to be filed under this chapter for existing provisions applicable only to filings by companies with securities registered on a national securities exchange or subject to the provisions of section 78o(d) of this title. 1936—Subsec. (c). Act May 27, 1936, inserted “or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title”.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by sections 929O and 929P(c) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by section 762(d)(6) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date of 1995 AmendmentAmendment by Pub. L. 104–67 not to affect or apply to any private action arising under this chapter or title I of the Securities Act of 1933 (15 U.S.C. 77a et seq.), commenced before and pending on Dec. 22, 1995, see section 108 of Pub. L. 104–67, set out as a note under section 77l of this title.
Effective Date of 1984 AmendmentAmendment by Pub. L. 98–376 effective Aug. 10, 1984, see section 7 of Pub. L. 98–376, set out as a note under section 78c of this title.
Effective Date of 1964 AmendmentAmendment by Pub. L. 88–467 effective Aug. 20, 1964, see section 13 of Pub. L. 88–467, set out as a note under section 78c of this title.
Construction of 1995 AmendmentNothing in amendment by Pub. L. 104–67 to be deemed to create or ratify any implied right of action, or to prevent Commission, by rule or regulation, from restricting or otherwise regulating private actions under this chapter, see section 203 of Pub. L. 104–67, set out as a Construction note under section 78j–1 of this title.
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# 15 U.S.C. § 78u–1 - Civil penalties for insider trading
## Text
(a) Authority to impose civil penalties (1) Judicial actions by Commission authorized Whenever it shall appear to the Commission that any person has violated any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security or security-based swap agreement while in possession of material, nonpublic information in, or has violated any such provision by communicating such information in connection with, a transaction on or through the facilities of a national securities exchange or from or through a broker or dealer, and which is not part of a public offering by an issuer of securities other than standardized options or security futures products, the Commission—
(A) may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by the person who committed such violation; and
(B) may, subject to subsection (b)(1), bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by a person who, at the time of the violation, directly or indirectly controlled the person who committed such violation.
(2) Amount of penalty for person who committed violation The amount of the penalty which may be imposed on the person who committed such violation shall be determined by the court in light of the facts and circumstances, but shall not exceed three times the profit gained or loss avoided as a result of such unlawful purchase, sale, or communication.
(3) Amount of penalty for controlling person The amount of the penalty which may be imposed on any person who, at the time of the violation, directly or indirectly controlled the person who committed such violation, shall be determined by the court in light of the facts and circumstances, but shall not exceed the greater of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of such controlled person’s violation. If such controlled person’s violation was a violation by communication, the profit gained or loss avoided as a result of the violation shall, for purposes of this paragraph only, be deemed to be limited to the profit gained or loss avoided by the person or persons to whom the controlled person directed such communication.
(b) Limitations on liability (1) Liability of controlling persons No controlling person shall be subject to a penalty under subsection (a)(1)(B) unless the Commission establishes that—
(A) such controlling person knew or recklessly disregarded the fact that such controlled person was likely to engage in the act or acts constituting the violation and failed to take appropriate steps to prevent such act or acts before they occurred; or
(B) such controlling person knowingly or recklessly failed to establish, maintain, or enforce any policy or procedure required under section 78o(f) 11 See References in Text note below. of this title or section 80b–4a of this title and such failure substantially contributed to or permitted the occurrence of the act or acts constituting the violation.
(2) Additional restrictions on liability No person shall be subject to a penalty under subsection (a) solely by reason of employing another person who is subject to a penalty under such subsection, unless such employing person is liable as a controlling person under paragraph (1) of this subsection. Section 78t(a) of this title shall not apply to actions under subsection (a) of this section.
(c) Authority of Commission The Commission, by such rules, regulations, and orders as it considers necessary or appropriate in the public interest or for the protection of investors, may exempt, in whole or in part, either unconditionally or upon specific terms and conditions, any person or transaction or class of persons or transactions from this section.
(d) Procedures for collection (1) Payment of penalty to Treasury A penalty imposed under this section shall be payable into the Treasury of the United States, except as otherwise provided in section 7246 of this title and section 78u–6 of this title.
(2) Collection of penalties If a person upon whom such a penalty is imposed shall fail to pay such penalty within the time prescribed in the court’s order, the Commission may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court.
(3) Remedy not exclusive The actions authorized by this section may be brought in addition to any other actions that the Commission or the Attorney General are entitled to bring.
(4) Jurisdiction and venue For purposes of section 78aa of this title, actions under this section shall be actions to enforce a liability or a duty created by this chapter.
(5) Statute of limitations No action may be brought under this section more than 5 years after the date of the purchase or sale. This section shall not be construed to bar or limit in any manner any action by the Commission or the Attorney General under any other provision of this chapter, nor shall it bar or limit in any manner any action to recover penalties, or to seek any other order regarding penalties, imposed in an action commenced within 5 years of such transaction.
(e) Definition For purposes of this section, “profit gained” or “loss avoided” is the difference between the purchase or sale price of the security and the value of that security as measured by the trading price of the security a reasonable period after public dissemination of the nonpublic information.
(f) Limitation on Commission authority The authority of the Commission under this section with respect to security-based swap agreements shall be subject to the restrictions and limitations of section 78c–1(b) of this title.
(g) Duty of Members and employees of Congress (1) In general Subject to the rule of construction under section 10 of the STOCK Act and solely for purposes of the insider trading prohibitions arising under this chapter, including section 78j(b) of this title and Rule 10b–5 thereunder, each Member of Congress or employee of Congress owes a duty arising from a relationship of trust and confidence to the Congress, the United States Government, and the citizens of the United States with respect to material, nonpublic information derived from such person’s position as a Member of Congress or employee of Congress or gained from the performance of such person’s official responsibilities.
(2) Definitions In this subsection—
(A) the term “Member of Congress” means a member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and
(B) the term “employee of Congress” means—
(i) any individual (other than a Member of Congress), whose compensation is disbursed by the Secretary of the Senate or the Chief Administrative Officer of the House of Representatives; and
(ii) any other officer or employee of the legislative branch (as defined in section 13101(11) of title 5).
(3) Rule of construction Nothing in this subsection shall be construed to impair or limit the construction of the existing antifraud provisions of the securities laws or the authority of the Commission under those provisions.
(h) Duty of other Federal officials (1) In general Subject to the rule of construction under section 10 of the STOCK Act and solely for purposes of the insider trading prohibitions arising under this chapter, including section 78j(b) of this title, and Rule 10b–5 thereunder, each executive branch employee, each judicial officer, and each judicial employee owes a duty arising from a relationship of trust and confidence to the United States Government and the citizens of the United States with respect to material, nonpublic information derived from such person’s position as an executive branch employee, judicial officer, or judicial employee or gained from the performance of such person’s official responsibilities.
(2) Definitions In this subsection—
(A) the term “executive branch employee”—
(i) has the meaning given the term “employee” under section 2105 of title 5;
(ii) includes—
(I) the President;
(II) the Vice President; and
(III) an employee of the United States Postal Service or the Postal Regulatory Commission;
(B) the term “judicial employee” has the meaning given that term in section 13101(9) of title 5; and
(C) the term “judicial officer” has the meaning given that term under section 13101(10) of title 5.
(3) Rule of construction Nothing in this subsection shall be construed to impair or limit the construction of the existing antifraud provisions of the securities laws or the authority of the Commission under those provisions.
(i) Participation in initial public offerings An individual described in section 13103(f) of title 5 may not purchase securities that are the subject of an initial public offering (within the meaning given such term in section 78l(f)(1)(G)(i) of this title) in any manner other than is available to members of the public generally.
(June 6, 1934, ch. 404, title I, § 21A, as added Pub. L. 100–704, § 3(a)(2), Nov. 19, 1988, 102 Stat. 4677; amended Pub. L. 101–429, title II, § 202(b), Oct. 15, 1990, 104 Stat. 938; Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(4), title III, § 303(k), (l)], Dec. 21, 2000, 114 Stat. 2763, 2763A–426, 2763A–456, 2763A–457; Pub. L. 107–204, title III, § 308(d)(2), July 30, 2002, 116 Stat. 785; Pub. L. 111–203, title VII, § 762(d)(7), title IX, § 923(b)(2), July 21, 2010, 124 Stat. 1761, 1850; Pub. L. 112–105, §§ 4(b)(2), 9(b)(2)(B), 12, Apr. 4, 2012, 126 Stat. 292, 297, 300; Pub. L. 117–286, § 4(c)(24), Dec. 27, 2022, 136 Stat. 4357.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a) and (d)(4), (5), was in the original “this title”, and this chapter, referred to in subsecs. (g)(1) and (h)(1), was in the original “this Act”. See References in Text note set out under section 78a of this title. Subsec. (f) of section 78o of this title, referred to in subsec. (b)(1)(B), was redesignated (g) by Pub. L. 111–203, title IX, § 929X(c)(1), July 21, 2010, 124 Stat. 1870. Section 10 of the STOCK Act, referred to in subsecs. (g)(1) and (h)(1), is section 10 of Pub. L. 112–105, which is set out as a note preceding section 13101 of Title 5, Government Organization and Employees.
Amendments2022—Subsec. (g)(2)(B)(ii). Pub. L. 117–286, § 4(c)(24)(A), substituted “section 13101(11) of title 5).” for “section 109(11) of the Ethics in Government Act of 1978 (5 U.S.C. App. 109(11))).” Subsec. (h)(2)(B). Pub. L. 117–286, § 4(c)(24)(B)(i), substituted “section 13101(9) of title 5;” for “section 109(8) of the Ethics in Government Act of 1978 (5 U.S.C. App. 109(8));”. Subsec. (h)(2)(C). Pub. L. 117–286, § 4(c)(24)(B)(ii), substituted “section 13101(10) of title 5.” for “section 109(10) of the Ethics in Government Act of 1978 (5 U.S.C. App. 109(10)).” Subsec. (i). Pub. L. 117–286, § 4(c)(24)(C), substituted “section 13103(f) of title 5” for “section 101(f) of the Ethics in Government Act of 1978”. 2012—Subsec. (g). Pub. L. 112–105, § 4(b)(2), added subsec. (g). Subsec. (h). Pub. L. 112–105, § 9(b)(2)(B), added subsec. (h). Subsec. (i). Pub. L. 112–105, § 12, added subsec (i). 2010—Subsec. (a)(1). Pub. L. 111–203, § 762(d)(7)(A), struck out “(as defined in section 206B of the Gramm-Leach-Bliley Act)” after “security-based swap agreement” in introductory provisions. Subsec. (d)(1). Pub. L. 111–203, § 923(b)(2)(A), struck out “(subject to subsection (e) of this section)” after “shall” and inserted “and section 78u–6 of this title” after “section 7246 of this title”. Subsec. (e). Pub. L. 111–203, § 923(b)(2)(B), (C), redesignated subsec. (f) as (e) and struck out former subsec. (e). Prior to amendment, text of subsec. (e) read as follows: “Notwithstanding the provisions of subsection (d)(1) of this section, there shall be paid from amounts imposed as a penalty under this section and recovered by the Commission or the Attorney General, such sums, not to exceed 10 percent of such amounts, as the Commission deems appropriate, to the person or persons who provide information leading to the imposition of such penalty. Any determinations under this subsection, including whether, to whom, or in what amount to make payments, shall be in the sole discretion of the Commission, except that no such payment shall be made to any member, officer, or employee of any appropriate regulatory agency, the Department of Justice, or a self-regulatory organization. Any such determination shall be final and not subject to judicial review.” Subsec. (f). Pub. L. 111–203, § 923(b)(2)(C), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e). Pub. L. 111–203, § 762(d)(7)(B), which directed amendment of subsec. (g) by striking out “(as defined in section 206B of the Gramm-Leach-Bliley Act)”, was executed by making the strike out after “security-based swap agreements” in subsec. (f), to reflect the probable intent of Congress and the redesignation of subsec. (g) as (f) by Pub. L. 111–203, § 923(b)(2)(C). See above and Effective Date of 2010 Amendment note below. Subsec. (g). Pub. L. 111–203, § 923(b)(2)(C), redesignated subsec. (g) as (f). 2002—Subsec. (d)(1). Pub. L. 107–204 inserted “, except as otherwise provided in section 7246 of this title” before period at end. 2000—Subsec. (a)(1). Pub. L. 106–554, § 1(a)(5) [title III, § 303(k)], inserted “or security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act)” after “purchasing or selling a security” in introductory provisions. Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(4)], substituted “standardized options or security futures products, the Commission—” for “standardized options, the Commission—” in introductory provisions. Subsec. (g). Pub. L. 106–554, § 1(a)(5) [title III, § 303(l)], added subsec. (g). 1990—Pub. L. 101–429 inserted “for insider trading” in section catchline.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by section 923(b)(2) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by section 762(d)(7) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date of 1990 AmendmentAmendment by Pub. L. 101–429 effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in a note under section 77g of this title.
Effective DateSection not applicable to actions occurring before Nov. 19, 1988, see section 9 of Pub. L. 100–704 set out as an Effective Date of 1988 Amendment note under section 78o of this title.
Affirmation of Duty of Government Officers and EmployeesPub. L. 112–105, § 4(b)(1), Apr. 4, 2012, 126 Stat. 292, provided that: “The purpose of the amendment made by this subsection [amending this section] is to affirm a duty arising from a relationship of trust and confidence owed by each Member of Congress and each employee of Congress.” [For definitions of “Member of Congress” and “employee of Congress”, see section 2 of Pub. L. 112–105, set out as a note under section 13101 of Title 5, Government Organization and Employees.] Pub. L. 112–105, § 9(b)(2)(A), Apr. 4, 2012, 126 Stat. 297, provided that: “The purpose of the amendment made by this paragraph [amending this section] is to affirm a duty arising from a relationship of trust and confidence owed by each executive branch employee, judicial officer, and judicial employee.” [For definitions of “executive branch employee”, “judicial officer”, and “judicial employee”, see section 2 of Pub. L. 112–105, set out as a note under section 13101 of Title 5, Government Organization and Employees.]
Congressional FindingsPub. L. 100–704, § 2, Nov. 19, 1988, 102 Stat. 4677, provided that: “The Congress finds that— “(1) the rules and regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.] governing trading while in possession of material, nonpublic information are, as required by such Act, necessary and appropriate in the public interest and for the protection of investors; “(2) the Commission has, within the limits of accepted administrative and judicial construction of such rules and regulations, enforced such rules and regulations vigorously, effectively, and fairly; and “(3) nonetheless, additional methods are appropriate to deter and prosecute violations of such rules and regulations.”
Commission Recommendations for Additional Civil Penalty Authority RequiredPub. L. 100–704, § 3(c), Nov. 19, 1988, 102 Stat. 4680, provided that the Securities and Exchange Commission should, within 60 days after Nov. 19, 1988, submit to Congress any recommendations the Commission considers appropriate with respect to the extension of the Commission’s authority to seek civil penalties or impose administrative fines for violations other than those described in this section.
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# 15 U.S.C. § 78u–2 - Civil remedies in administrative proceedings
## Text
(a) Commission authority to assess money penalties (1) In general In any proceeding instituted pursuant to sections 78o(b)(4), 78o(b)(6), 78o–6, 78o–4, 78o–5, 78o–7, or 78q–1 of this title against any person, the Commission or the appropriate regulatory agency may impose a civil penalty if it finds, on the record after notice and opportunity for hearing, that such penalty is in the public interest and that such person—
(A) has willfully violated any provision of the Securities Act of 1933 [15 U.S.C. 77a et seq.], the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], the Investment Advisers Act of 1940 [15 U.S.C. 80b–1 et seq.], or this chapter, or the rules or regulations thereunder, or the rules of the Municipal Securities Rulemaking Board;
(B) has willfully aided, abetted, counseled, commanded, induced, or procured such a violation by any other person;
(C) 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 chapter, 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; or
(D) has failed reasonably to supervise, within the meaning of section 78o(b)(4)(E) of this title, 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; 11 So in original. The semicolon probably should be a period.
(2) Cease-and-desist proceedings In any proceeding instituted under section 78u–3 of this title against any person, the Commission may impose a civil penalty, if the Commission finds, on the record after notice and opportunity for hearing, that such person—
(A) is violating or has violated any provision of this chapter, or any rule or regulation issued under this chapter; or
(B) is or was a cause of the violation of any provision of this chapter, or any rule or regulation issued under this chapter.
(b) Maximum amount of penalty (1) First tier The maximum amount of penalty for each act or omission described in subsection (a) shall be $5,000 for a natural person or $50,000 for any other person.
(2) Second tier Notwithstanding paragraph (1), the maximum amount of penalty for each such act or omission shall be $50,000 for a natural person or $250,000 for any other person if the act or omission described in subsection (a) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.
(3) Third tier Notwithstanding paragraphs (1) and (2), the maximum amount of penalty for each such act or omission shall be $100,000 for a natural person or $500,000 for any other person if—
(A) the act or omission described in subsection (a) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
(B) such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.
(c) Determination of public interest In considering under this section whether a penalty is in the public interest, the Commission or the appropriate regulatory agency may consider—
(1) whether the act or omission for which such penalty is assessed involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement;
(2) the harm to other persons resulting either directly or indirectly from such act or omission;
(3) the extent to which any person was unjustly enriched, taking into account any restitution made to persons injured by such behavior;
(4) whether such person previously has been found by the Commission, another appropriate regulatory agency, or a self-regulatory organization to have violated the Federal securities laws, State securities laws, or the rules of a self-regulatory organization, has been enjoined by a court of competent jurisdiction from violations of such laws or rules, or has been convicted by a court of competent jurisdiction of violations of such laws or of any felony or misdemeanor described in section 78o(b)(4)(B) of this title;
(5) the need to deter such person and other persons from committing such acts or omissions; and
(6) such other matters as justice may require.
(d) Evidence concerning ability to pay In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, a respondent may present evidence of the respondent’s ability to pay such penalty. The Commission or the appropriate regulatory agency may, in its discretion, consider such evidence in determining whether such penalty is in the public interest. Such evidence may relate to the extent of such person’s ability to continue in business and the collectability of a penalty, taking into account any other claims of the United States or third parties upon such person’s assets and the amount of such person’s assets.
(e) Authority to enter order requiring accounting and disgorgement In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, the Commission or the appropriate regulatory agency may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.
(f) Security-based swaps (1) Clearing agency Any clearing agency that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of section 78c–3 of this title shall be liable for a civil money penalty in twice the amount otherwise available for a violation of section 78c–3 of this title.
(2) Security-based swap dealer or major security-based swap participant Any security-based swap dealer or major security-based swap participant that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of section 78c–3 of this title shall be liable for a civil money penalty in twice the amount otherwise available for a violation of section 78c–3 of this title.
(June 6, 1934, ch. 404, title I, § 21B, as added Pub. L. 101–429, title II, § 202(a), Oct. 15, 1990, 104 Stat. 937; amended Pub. L. 107–204, title V, § 501(b), July 30, 2002, 116 Stat. 793; Pub. L. 109–291, § 4(b)(1)(B), Sept. 29, 2006, 120 Stat. 1337; Pub. L. 111–203, title VII, § 773, title IX, § 929P(a)(2), July 21, 2010, 124 Stat. 1802, 1863.)
## Notes
Editorial Notes
References in TextThe Securities Act of 1933, referred to in subsec. (a)(1)(A), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables. The Investment Company Act of 1940, referred to in subsec. (a)(1)(A), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80a–51 of this title and Tables. The Investment Advisers Act of 1940, referred to in subsec. (a)(1)(A), is title II of act Aug. 22, 1940, ch. 686, 54 Stat. 847, which is classified generally to subchapter II (§ 80b–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80b–20 of this title and Tables. This chapter, referred to in subsec. (a)(1)(A), (C), (2), was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2010—Subsec. (a). Pub. L. 111–203, § 929P(a)(2), designated existing provisions as par. (1) and inserted heading, inserted “that such penalty is in the public interest and” before “that such person—” in introductory provisions, redesignated former pars. (1) to (4) as subpars. (A) to (D), respectively, of par. (1) and realigned margins, struck out concluding provisions which read “and that such penalty is in the public interest.”, and added par. (2). Subsec. (f). Pub. L. 111–203, § 773, added subsec. (f). 2006—Subsec. (a). Pub. L. 109–291 inserted “78o–7,” after “78o–5,” in introductory provisions. 2002—Subsec. (a). Pub. L. 107–204 inserted “78o–6,” before “78o–4,” in introductory provisions.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by section 929P(a)(2) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by section 773 of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective DateSection effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in an Effective Date of 1990 Amendment note under section 77g of this title.
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# 15 U.S.C. § 78u–3 - Cease-and-desist proceedings
## Text
(a) Authority of Commission If the Commission finds, after notice and opportunity for hearing, that any person is violating, has violated, or is about to violate any provision of this chapter, or any rule or regulation thereunder, the Commission may publish its findings and enter an order requiring such person, and any other person that is, was, or would be a cause of the violation, due to an act or omission the person knew or should have known would contribute to such violation, to cease and desist from committing or causing such violation and any future violation of the same provision, rule, or regulation. Such order may, in addition to requiring a person to cease and desist from committing or causing a violation, require such person to comply, or to take steps to effect compliance, with such provision, rule, or regulation, upon such terms and conditions and within such time as the Commission may specify in such order. Any such order may, as the Commission deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the Commission may specify, with such provision, rule, or regulation with respect to any security, any issuer, or any other person.
(b) Hearing The notice instituting proceedings pursuant to subsection (a) shall fix a hearing date not earlier than 30 days nor later than 60 days after service of the notice unless an earlier or a later date is set by the Commission with the consent of any respondent so served.
(c) Temporary order (1) In general Whenever the Commission determines that the alleged violation or threatened violation specified in the notice instituting proceedings pursuant to subsection (a), or the continuation thereof, is likely to result in significant dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest, including, but not limited to, losses to the Securities Investor Protection Corporation, prior to the completion of the proceedings, the Commission may enter a temporary order requiring the respondent to cease and desist from the violation or threatened violation and to take such action to prevent the violation or threatened violation and to prevent dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest as the Commission deems appropriate pending completion of such proceedings. Such an order shall be entered only after notice and opportunity for a hearing, unless the Commission determines that notice and hearing prior to entry would be impracticable or contrary to the public interest. A temporary order shall become effective upon service upon the respondent and, unless set aside, limited, or suspended by the Commission or a court of competent jurisdiction, shall remain effective and enforceable pending the completion of the proceedings.
(2) Applicability Paragraph (1) shall apply only to a respondent that acts, or, at the time of the alleged misconduct acted, as a broker, dealer, investment adviser, investment company, municipal securities dealer, government securities broker, government securities dealer, registered public accounting firm (as defined in section 7201 of this title), or transfer agent, or is, or was at the time of the alleged misconduct, an associated person of, or a person seeking to become associated with, any of the foregoing.
(3) Temporary freeze (A) In general (i) Issuance of temporary order Whenever, during the course of a lawful investigation involving possible violations of the Federal securities laws by an issuer of publicly traded securities or any of its directors, officers, partners, controlling persons, agents, or employees, it shall appear to the Commission that it is likely that the issuer will make extraordinary payments (whether compensation or otherwise) to any of the foregoing persons, the Commission may petition a Federal district court for a temporary order requiring the issuer to escrow, subject to court supervision, those payments in an interest-bearing account for 45 days.
(ii) Standard A temporary order shall be entered under clause (i), only after notice and opportunity for a hearing, unless the court determines that notice and hearing prior to entry of the order would be impracticable or contrary to the public interest.
(iii) Effective period A temporary order issued under clause (i) shall—
(I) become effective immediately;
(II) be served upon the parties subject to it; and
(III) unless set aside, limited or suspended by a court of competent jurisdiction, shall remain effective and enforceable for 45 days.
(iv) Extensions authorized The effective period of an order under this subparagraph may be extended by the court upon good cause shown for not longer than 45 additional days, provided that the combined period of the order shall not exceed 90 days.
(B) Process on determination of violations (i) Violations charged If the issuer or other person described in subparagraph (A) is charged with any violation of the Federal securities laws before the expiration of the effective period of a temporary order under subparagraph (A) (including any applicable extension period), the order shall remain in effect, subject to court approval, until the conclusion of any legal proceedings related thereto, and the affected issuer or other person, shall have the right to petition the court for review of the order.
(ii) Violations not charged If the issuer or other person described in subparagraph (A) is not charged with any violation of the Federal securities laws before the expiration of the effective period of a temporary order under subparagraph (A) (including any applicable extension period), the escrow shall terminate at the expiration of the 45-day effective period (or the expiration of any extension period, as applicable), and the disputed payments (with accrued interest) shall be returned to the issuer or other affected person.
(d) Review of temporary orders (1) Commission review At any time after the respondent has been served with a temporary cease-and-desist order pursuant to subsection (c), the respondent may apply to the Commission to have the order set aside, limited, or suspended. If the respondent has been served with a temporary cease-and-desist order entered without a prior Commission hearing, the respondent may, within 10 days after the date on which the order was served, request a hearing on such application and the Commission shall hold a hearing and render a decision on such application at the earliest possible time.
(2) Judicial review Within—
(A) 10 days after the date the respondent was served with a temporary cease-and-desist order entered with a prior Commission hearing, or
(B) 10 days after the Commission renders a decision on an application and hearing under paragraph (1), with respect to any temporary cease-and-desist order entered without a prior Commission hearing,
the respondent may apply to the United States district court for the district in which the respondent resides or has its principal place of business, or for the District of Columbia, for an order setting aside, limiting, or suspending the effectiveness or enforcement of the order, and the court shall have jurisdiction to enter such an order. A respondent served with a temporary cease-and-desist order entered without a prior Commission hearing may not apply to the court except after hearing and decision by the Commission on the respondent’s application under paragraph (1) of this subsection.
(3) No automatic stay of temporary order The commencement of proceedings under paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order.
(4) Exclusive review Section 78y of this title shall not apply to a temporary order entered pursuant to this section.
(e) Authority to enter order requiring accounting and disgorgement In any cease-and-desist proceeding under subsection (a), the Commission may enter an order requiring accounting and dis­gorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.
(f) Authority of the Commission to prohibit persons from serving as officers or directors In any cease-and-desist proceeding under subsection (a), the Commission may issue an order to prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any person who has violated section 78j(b) of this title or the rules or regulations thereunder, from acting as an officer or director of any issuer that has a class of securities registered pursuant to section 78l of this title, or that is required to file reports pursuant to section 78o(d) of this title, if the conduct of that person demonstrates unfitness to serve as an officer or director of any such issuer.
(June 6, 1934, ch. 404, title I, § 21C, as added Pub. L. 101–429, title II, § 203, Oct. 15, 1990, 104 Stat. 939; amended Pub. L. 107–204, § 3(b)(3), title XI, §§ 1103, 1105(a), July 30, 2002, 116 Stat. 749, 807, 809; Pub. L. 111–203, title IX, § 985(b)(8), July 21, 2010, 124 Stat. 1934.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsec. (a), was in the original “this title”. See References in Text note set out under section 78a of this title. Section 7201 of this title, referred to in subsec. (c)(2), was in the original “section 2 of the Sarbanes-Oxley Act of 2002”, Pub. L. 107–204, which enacted section 7201 of this title and amended section 78c of this title.
Amendments2010—Subsec. (c)(2). Pub. L. 111–203 substituted “Paragraph (1)” for “paragraph (1) subsection”. 2002—Subsec. (c)(2). Pub. L. 107–204, § 1103(b), substituted “paragraph (1)” for “This”. Pub. L. 107–204, § 3(b)(3), inserted “registered public accounting firm (as defined in section 7201 of this title),” after “government securities dealer,”. Subsec. (c)(3). Pub. L. 107–204, § 1103(a), added par. (3). Subsec. (f). Pub. L. 107–204, § 1105(a), added subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective DateSection effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in an Effective Date of 1990 Amendment note under section 77g of this title.
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# 15 U.S.C. § 78u–4 - Private securities litigation
## Text
(a) Private class actions (1) In general The provisions of this subsection shall apply in each private action arising under this chapter that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.
(2) Certification filed with complaint (A) In general Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that—
(i) states that the plaintiff has reviewed the complaint and authorized its filing;
(ii) states that the plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff’s counsel or in order to participate in any private action arising under this chapter;
(iii) states that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;
(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint;
(v) identifies any other action under this chapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve as a representative party on behalf of a class; and
(vi) states that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff’s pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4).
(B) Nonwaiver of attorney-client privilege The certification filed pursuant to subparagraph (A) shall not be construed to be a waiver of the attorney-client privilege.
(3) Appointment of lead plaintiff (A) Early notice to class members (i) In general Not later than 20 days after the date on which the complaint is filed, the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class—
(I) of the pendency of the action, the claims asserted therein, and the purported class period; and
(II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.
(ii) Multiple actions If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter is filed, only the plaintiff or plaintiffs in the first filed action shall be required to cause notice to be published in accordance with clause (i).
(iii) Additional notices may be required under Federal rules Notice required under clause (i) shall be in addition to any notice required pursuant to the Federal Rules of Civil Procedure.
(B) Appointment of lead plaintiff (i) In general Not later than 90 days after the date on which a notice is published under subparagraph (A)(i), the court shall consider any motion made by a purported class member in response to the notice, including any motion by a class member who is not individually named as a plaintiff in the complaint or complaints, and shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereafter in this paragraph referred to as the “most adequate plaintiff”) in accordance with this subparagraph.
(ii) Consolidated actions If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter has been filed, and any party has sought to consolidate those actions for pretrial purposes or for trial, the court shall not make the determination required by clause (i) until after the decision on the motion to consolidate is rendered. As soon as practicable after such decision is rendered, the court shall appoint the most adequate plaintiff as lead plaintiff for the consolidated actions in accordance with this paragraph.
(iii) Rebuttable presumption (I) In general Subject to subclause (II), for purposes of clause (i), the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that—
(aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i);
(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and
(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.
(II) Rebuttal evidence The presumption described in subclause (I) may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff—
(aa) will not fairly and adequately protect the interests of the class; or
(bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class.
(iv) Discovery For purposes of this subparagraph, discovery relating to whether a member or members of the purported plaintiff class is the most adequate plaintiff may be conducted by a plaintiff only if the plaintiff first demonstrates a reasonable basis for a finding that the presumptively most adequate plaintiff is incapable of adequately representing the class.
(v) Selection of lead counsel The most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class.
(vi) Restrictions on professional plaintiffs Except as the court may otherwise permit, consistent with the purposes of this section, a person may be a lead plaintiff, or an officer, director, or fiduciary of a lead plaintiff, in no more than 5 securities class actions brought as plaintiff class actions pursuant to the Federal Rules of Civil Procedure during any 3-year period.
(4) Recovery by plaintiffs The share of any final judgment or of any settlement that is awarded to a representative party serving on behalf of a class shall be equal, on a per share basis, to the portion of the final judgment or settlement awarded to all other members of the class. Nothing in this paragraph shall be construed to limit the award of reasonable costs and expenses (including lost wages) directly relating to the representation of the class to any representative party serving on behalf of a class.
(5) Restrictions on settlements under seal The terms and provisions of any settlement agreement of a class action shall not be filed under seal, except that on motion of any party to the settlement, the court may order filing under seal for those portions of a settlement agreement as to which good cause is shown for such filing under seal. For purposes of this paragraph, good cause shall exist only if publication of a term or provision of a settlement agreement would cause direct and substantial harm to any party.
(6) Restrictions on payment of attorneys’ fees and expenses Total attorneys’ fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class.
(7) Disclosure of settlement terms to class members Any proposed or final settlement agreement that is published or otherwise disseminated to the class shall include each of the following statements, along with a cover page summarizing the information contained in such statements:
(A) Statement of plaintiff recovery The amount of the settlement proposed to be distributed to the parties to the action, determined in the aggregate and on an average per share basis.
(B) Statement of potential outcome of case (i) Agreement on amount of damages If the settling parties agree on the average amount of damages per share that would be recoverable if the plaintiff prevailed on each claim alleged under this chapter, a statement concerning the average amount of such potential damages per share.
(ii) Disagreement on amount of damages If the parties do not agree on the average amount of damages per share that would be recoverable if the plaintiff prevailed on each claim alleged under this chapter, a statement from each settling party concerning the issue or issues on which the parties disagree.
(iii) Inadmissibility for certain purposes A statement made in accordance with clause (i) or (ii) concerning the amount of damages shall not be admissible in any Federal or State judicial action or administrative proceeding, other than an action or proceeding arising out of such statement.
(C) Statement of attorneys’ fees or costs sought If any of the settling parties or their counsel intend to apply to the court for an award of attorneys’ fees or costs from any fund established as part of the settlement, a statement indicating which parties or counsel intend to make such an application, the amount of fees and costs that will be sought (including the amount of such fees and costs determined on an average per share basis), and a brief explanation supporting the fees and costs sought. Such information shall be clearly summarized on the cover page of any notice to a party of any proposed or final settlement agreement.
(D) Identification of lawyers’ representatives The name, telephone number, and address of one or more representatives of counsel for the plaintiff class who will be reasonably available to answer questions from class members concerning any matter contained in any notice of settlement published or otherwise disseminated to the class.
(E) Reasons for settlement A brief statement explaining the reasons why the parties are proposing the settlement.
(F) Other information Such other information as may be required by the court.
(8) Security for payment of costs in class actions In any private action arising under this chapter that is certified as a class action pursuant to the Federal Rules of Civil Procedure, the court may require an undertaking from the attorneys for the plaintiff class, the plaintiff class, or both, or from the attorneys for the defendant, the defendant, or both, in such proportions and at such times as the court determines are just and equitable, for the payment of fees and expenses that may be awarded under this subsection.
(9) Attorney conflict of interest If a plaintiff class is represented by an attorney who directly owns or otherwise has a beneficial interest in the securities that are the subject of the litigation, the court shall make a determination of whether such ownership or other interest constitutes a conflict of interest sufficient to disqualify the attorney from representing the plaintiff class.
(b) Requirements for securities fraud actions (1) Misleading statements and omissions In any private action arising under this chapter in which the plaintiff alleges that the defendant—
(A) made an untrue statement of a material fact; or
(B) omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading;
the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.
(2) Required state of mind (A) In general Except as provided in subparagraph (B), in any private action arising under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.
(B) Exception In the case of an action for money damages brought against a credit rating agency or a controlling person under this chapter, it shall be sufficient, for purposes of pleading any required state of mind in relation to such action, that the complaint state with particularity facts giving rise to a strong inference that the credit rating agency knowingly or recklessly failed—
(i) to conduct a reasonable investigation of the rated security with respect to the factual elements relied upon by its own methodology for evaluating credit risk; or
(ii) to obtain reasonable verification of such factual elements (which verification may be based on a sampling technique that does not amount to an audit) from other sources that the credit rating agency considered to be competent and that were independent of the issuer and underwriter.
(3) Motion to dismiss; stay of discovery (A) Dismissal for failure to meet pleading requirements In any private action arising under this chapter, the court shall, on the motion of any defendant, dismiss the complaint if the requirements of paragraphs (1) and (2) are not met.
(B) Stay of discovery In any private action arising under this chapter, all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party.
(C) Preservation of evidence (i) In general During the pendency of any stay of discovery pursuant to this paragraph, unless otherwise ordered by the court, any party to the action with actual notice of the allegations contained in the complaint shall treat all documents, data compilations (including electronically recorded or stored data), and tangible objects that are in the custody or control of such person and that are relevant to the allegations, as if they were the subject of a continuing request for production of documents from an opposing party under the Federal Rules of Civil Procedure.
(ii) Sanction for willful violation A party aggrieved by the willful failure of an opposing party to comply with clause (i) may apply to the court for an order awarding appropriate sanctions.
(D) Circumvention of stay of discovery Upon a proper showing, a court may stay discovery proceedings in any private action in a State court, as necessary in aid of its jurisdiction, or to protect or effectuate its judgments, in an action subject to a stay of discovery pursuant to this paragraph.
(4) Loss causation In any private action arising under this chapter, the plaintiff shall have the burden of proving that the act or omission of the defendant alleged to violate this chapter caused the loss for which the plaintiff seeks to recover damages.
(c) Sanctions for abusive litigation (1) Mandatory review by court In any private action arising under this chapter, upon final adjudication of the action, the court shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion.
(2) Mandatory sanctions If the court makes a finding under paragraph (1) that a party or attorney violated any requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion, the court shall impose sanctions on such party or attorney in accordance with Rule 11 of the Federal Rules of Civil Procedure. Prior to making a finding that any party or attorney has violated Rule 11 of the Federal Rules of Civil Procedure, the court shall give such party or attorney notice and an opportunity to respond.
(3) Presumption in favor of attorneys’ fees and costs (A) In general Subject to subparagraphs (B) and (C), for purposes of paragraph (2), the court shall adopt a presumption that the appropriate sanction—
(i) for failure of any responsive pleading or dispositive motion to comply with any requirement of Rule 11(b) of the Federal Rules of Civil Procedure is an award to the opposing party of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation; and
(ii) for substantial failure of any complaint to comply with any requirement of Rule 11(b) of the Federal Rules of Civil Procedure is an award to the opposing party of the reasonable attorneys’ fees and other expenses incurred in the action.
(B) Rebuttal evidence The presumption described in subparagraph (A) may be rebutted only upon proof by the party or attorney against whom sanctions are to be imposed that—
(i) the award of attorneys’ fees and other expenses will impose an unreasonable burden on that party or attorney and would be unjust, and the failure to make such an award would not impose a greater burden on the party in whose favor sanctions are to be imposed; or
(ii) the violation of Rule 11(b) of the Federal Rules of Civil Procedure was de minimis.
(C) Sanctions If the party or attorney against whom sanctions are to be imposed meets its burden under subparagraph (B), the court shall award the sanctions that the court deems appropriate pursuant to Rule 11 of the Federal Rules of Civil Procedure.
(d) Defendant’s right to written interrogatories In any private action arising under this chapter in which the plaintiff may recover money damages, the court shall, when requested by a defendant, submit to the jury a written interrogatory on the issue of each such defendant’s state of mind at the time the alleged violation occurred.
(e) Limitation on damages (1) In general Except as provided in paragraph (2), in any private action arising under this chapter in which the plaintiff seeks to establish damages by reference to the market price of a security, the award of damages to the plaintiff shall not exceed the difference between the purchase or sale price paid or received, as appropriate, by the plaintiff for the subject security and the mean trading price of that security during the 90-day period beginning on the date on which the information correcting the misstatement or omission that is the basis for the action is disseminated to the market.
(2) Exception In any private action arising under this chapter in which the plaintiff seeks to establish damages by reference to the market price of a security, if the plaintiff sells or repurchases the subject security prior to the expiration of the 90-day period described in paragraph (1), the plaintiff’s damages shall not exceed the difference between the purchase or sale price paid or received, as appropriate, by the plaintiff for the security and the mean trading price of the security during the period beginning immediately after dissemination of information correcting the misstatement or omission and ending on the date on which the plaintiff sells or repurchases the security.
(3) “Mean trading price” defined For purposes of this subsection, the “mean trading price” of a security shall be an average of the daily trading price of that security, determined as of the close of the market each day during the 90-day period referred to in paragraph (1).
(f) Proportionate liability (1) Applicability Nothing in this subsection shall be construed to create, affect, or in any manner modify, the standard for liability associated with any action arising under the securities laws.
(2) Liability for damages (A) Joint and several liability Any covered person against whom a final judgment is entered in a private action shall be liable for damages jointly and severally only if the trier of fact specifically determines that such covered person knowingly committed a violation of the securities laws.
(B) Proportionate liability (i) In general Except as provided in subparagraph (A), a covered person against whom a final judgment is entered in a private action shall be liable solely for the portion of the judgment that corresponds to the percentage of responsibility of that covered person, as determined under paragraph (3).
(ii) Recovery by and costs of covered person In any case in which a contractual relationship permits, a covered person that prevails in any private action may recover the attorney’s fees and costs of that covered person in connection with the action.
(3) Determination of responsibility (A) In general In any private action, the court shall instruct the jury to answer special interrogatories, or if there is no jury, shall make findings, with respect to each covered person and each of the other persons claimed by any of the parties to have caused or contributed to the loss incurred by the plaintiff, including persons who have entered into settlements with the plaintiff or plaintiffs, concerning—
(i) whether such person violated the securities laws;
(ii) the percentage of responsibility of such person, measured as a percentage of the total fault of all persons who caused or contributed to the loss incurred by the plaintiff; and
(iii) whether such person knowingly committed a violation of the securities laws.
(B) Contents of special interrogatories or findings The responses to interrogatories, or findings, as appropriate, under subparagraph (A) shall specify the total amount of damages that the plaintiff is entitled to recover and the percentage of responsibility of each covered person found to have caused or contributed to the loss incurred by the plaintiff or plaintiffs.
(C) Factors for consideration In determining the percentage of responsibility under this paragraph, the trier of fact shall consider—
(i) the nature of the conduct of each covered person found to have caused or contributed to the loss incurred by the plaintiff or plaintiffs; and
(ii) the nature and extent of the causal relationship between the conduct of each such person and the damages incurred by the plaintiff or plaintiffs.
(4) Uncollectible share (A) In general Notwithstanding paragraph (2)(B), upon 11 So in original. Probably should be preceded by “if,”. motion made not later than 6 months after a final judgment is entered in any private action, the court determines that all or part of the share of the judgment of the covered person is not collectible against that covered person, and is also not collectible against a covered person described in paragraph (2)(A), each covered person described in paragraph (2)(B) shall be liable for the uncollectible share as follows:
(i) Percentage of net worth Each covered person shall be jointly and severally liable for the uncollectible share if the plaintiff establishes that—
(I) the plaintiff is an individual whose recoverable damages under the final judgment are equal to more than 10 percent of the net worth of the plaintiff; and
(II) the net worth of the plaintiff is equal to less than $200,000.
(ii) Other plaintiffs With respect to any plaintiff not described in subclauses (I) and (II) of clause (i), each covered person shall be liable for the uncollectible share in proportion to the percentage of responsibility of that covered person, except that the total liability of a covered person under this clause may not exceed 50 percent of the proportionate share of that covered person, as determined under paragraph (3)(B).
(iii) Net worth For purposes of this subparagraph, net worth shall be determined as of the date immediately preceding the date of the purchase or sale (as applicable) by the plaintiff of the security that is the subject of the action, and shall be equal to the fair market value of assets, minus liabilities, including the net value of the investments of the plaintiff in real and personal property (including personal residences).
(B) Overall limit In no case shall the total payments required pursuant to subparagraph (A) exceed the amount of the uncollectible share.
(C) Covered persons subject to contribution A covered person against whom judgment is not collectible shall be subject to contribution and to any continuing liability to the plaintiff on the judgment.
(5) Right of contribution To the extent that a covered person is required to make an additional payment pursuant to paragraph (4), that covered person may recover contribution—
(A) from the covered person originally liable to make the payment;
(B) from any covered person liable jointly and severally pursuant to paragraph (2)(A);
(C) from any covered person held proportionately liable pursuant to this paragraph who is liable to make the same payment and has paid less than his or her proportionate share of that payment; or
(D) from any other person responsible for the conduct giving rise to the payment that would have been liable to make the same payment.
(6) Nondisclosure to jury The standard for allocation of damages under paragraphs (2) and (3) and the procedure for reallocation of uncollectible shares under paragraph (4) shall not be disclosed to members of the jury.
(7) Settlement discharge (A) In general A covered person who settles any private action at any time before final verdict or judgment shall be discharged from all claims for contribution brought by other persons. Upon entry of the settlement by the court, the court shall enter a bar order constituting the final discharge of all obligations to the plaintiff of the settling covered person arising out of the action. The order shall bar all future claims for contribution arising out of the action—
(i) by any person against the settling covered person; and
(ii) by the settling covered person against any person, other than a person whose liability has been extinguished by the settlement of the settling covered person.
(B) Reduction If a covered person enters into a settlement with the plaintiff prior to final verdict or judgment, the verdict or judgment shall be reduced by the greater of—
(i) an amount that corresponds to the percentage of responsibility of that covered person; or
(ii) the amount paid to the plaintiff by that covered person.
(8) Contribution A covered person who becomes jointly and severally liable for damages in any private action may recover contribution from any other person who, if joined in the original action, would have been liable for the same damages. A claim for contribution shall be determined based on the percentage of responsibility of the claimant and of each person against whom a claim for contribution is made.
(9) Statute of limitations for contribution In any private action determining liability, an action for contribution shall be brought not later than 6 months after the entry of a final, nonappealable judgment in the action, except that an action for contribution brought by a covered person who was required to make an additional payment pursuant to paragraph (4) may be brought not later than 6 months after the date on which such payment was made.
(10) Definitions For purposes of this subsection—
(A) a covered person “knowingly commits a violation of the securities laws”—
(i) with respect to an action that is based on an untrue statement of material fact or omission of a material fact necessary to make the statement not misleading, if—
(I) that covered person makes an untrue statement of a material fact, with actual knowledge that the representation is false, or omits to state a fact necessary in order to make the statement made not misleading, with actual knowledge that, as a result of the omission, one of the material representations of the covered person is false; and
(II) persons are likely to reasonably rely on that misrepresentation or omission; and
(ii) with respect to an action that is based on any conduct that is not described in clause (i), if that covered person engages in that conduct with actual knowledge of the facts and circumstances that make the conduct of that covered person a violation of the securities laws;
(B) reckless conduct by a covered person shall not be construed to constitute a knowing commission of a violation of the securities laws by that covered person;
(C) the term “covered person” means—
(i) a defendant in any private action arising under this chapter; or
(ii) a defendant in any private action arising under section 77k of this title, who is an outside director of the issuer of the securities that are the subject of the action; and
(D) the term “outside director” shall have the meaning given such term by rule or regulation of the Commission.
(June 6, 1934, ch. 404, title I, § 21D, as added and amended Pub. L. 104–67, title I, § 101(b), title II, § 201(a), Dec. 22, 1995, 109 Stat. 743, 758; Pub. L. 105–353, title I, § 101(b)(2), title III, § 301(b)(13), Nov. 3, 1998, 112 Stat. 3233, 3236; Pub. L. 111–203, title IX, § 933(b), July 21, 2010, 124 Stat. 1883.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title. The Federal Rules of Civil Procedure, referred to in subsecs. (a)(1), (3)(A)(iii), (B)(iii)(I)(cc), (vi), (8), (b)(3)(C)(i), and (c), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure.
Amendments2010—Subsec. (b)(2). Pub. L. 111–203 designated existing provisions as subpar. (A), inserted heading, substituted “Except as provided in subparagraph (B), in any” for “In any”, and added subpar. (B). 1998—Subsec. (b)(3)(D). Pub. L. 105–353, § 101(b)(2), added subpar. (D). Subsecs. (f), (g). Pub. L. 105–353, § 301(b)(13)(B), redesignated subsec. (g) as (f). Subsec. (g)(2)(B)(i). Pub. L. 105–353, § 301(b)(13)(A), substituted “subparagraph (A)” for “paragraph (1)”. 1995—Subsec. (g). Pub. L. 104–67, § 201(a), added subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective Date of 1998 AmendmentAmendment by section 101(b)(2) of Pub. L. 105–353 not to affect or apply to any action commenced before and pending on Nov. 3, 1998, see section 101(c) of Pub. L. 105–353, set out as a note under section 77p of this title.
Effective Date of 1995 AmendmentAmendment by Pub. L. 104–67 not to affect or apply to any private action arising under securities laws commenced before and pending on Dec. 22, 1995, see section 202 of Pub. L. 104–67, set out as a note under section 77k of this title.
Effective DateThis section not to affect or apply to any private action arising under this chapter or title I of the Securities Act of 1933 (15 U.S.C. 77a et seq.), commenced before and pending on Dec. 22, 1995, see section 108 of Pub. L. 104–67, set out as an Effective Date of 1995 Amendment note under section 77l of this title.
ConstructionNothing in section to be deemed to create or ratify any implied right of action, or to prevent Commission, by rule or regulation, from restricting or otherwise regulating private actions under this chapter, see section 203 of Pub. L. 104–67, set out as a note under section 78j–1 of this title.
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---
# 15 U.S.C. § 78u–5 - Application of safe harbor for forward-looking statements
## Text
(a) Applicability This section shall apply only to a forward-looking statement made by—
(1) an issuer that, at the time that the statement is made, is subject to the reporting requirements of section 78m(a) of this title or section 78o(d) of this title;
(2) a person acting on behalf of such issuer;
(3) an outside reviewer retained by such issuer making a statement on behalf of such issuer; or
(4) an underwriter, with respect to information provided by such issuer or information derived from information provided by such issuer.
(b) Exclusions Except to the extent otherwise specifically provided by rule, regulation, or order of the Commission, this section shall not apply to a forward-looking statement—
(1) that is made with respect to the business or operations of the issuer, if the issuer—
(A) during the 3-year period preceding the date on which the statement was first made—
(i) was convicted of any felony or misdemeanor described in clauses (i) through (iv) of section 78o(b)(4)(B) of this title; or
(ii) has been made the subject of a judicial or administrative decree or order arising out of a governmental action that—
(I) prohibits future violations of the antifraud provisions of the securities laws;
(II) requires that the issuer cease and desist from violating the antifraud provisions of the securities laws; or
(III) determines that the issuer violated the antifraud provisions of the securities laws;
(B) makes the forward-looking statement in connection with an offering of securities by a blank check company;
(C) issues penny stock;
(D) makes the forward-looking statement in connection with a rollup transaction; or
(E) makes the forward-looking statement in connection with a going private transaction; or
(2) that is—
(A) included in a financial statement prepared in accordance with generally accepted accounting principles;
(B) contained in a registration statement of, or otherwise issued by, an investment company;
(C) made in connection with a tender offer;
(D) made in connection with an initial public offering;
(E) made in connection with an offering by, or relating to the operations of, a partnership, limited liability company, or a direct participation investment program; or
(F) made in a disclosure of beneficial ownership in a report required to be filed with the Commission pursuant to section 78m(d) of this title.
(c) Safe harbor (1) In general Except as provided in subsection (b), in any private action arising under this chapter that is based on an untrue statement of a material fact or omission of a material fact necessary to make the statement not misleading, a person referred to in subsection (a) shall not be liable with respect to any forward-looking statement, whether written or oral, if and to the extent that—
(A) the forward-looking statement is—
(i) identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement; or
(ii) immaterial; or
(B) the plaintiff fails to prove that the forward-looking statement—
(i) if made by a natural person, was made with actual knowledge by that person that the statement was false or misleading; or
(ii) if made by a business entity; 11 So in original. The semicolon probably should be a comma. was—
(I) made by or with the approval of an executive officer of that entity; and
(II) made or approved by such officer with actual knowledge by that officer that the statement was false or misleading.
(2) Oral forward-looking statements In the case of an oral forward-looking statement made by an issuer that is subject to the reporting requirements of section 78m(a) of this title or section 78o(d) of this title, or by a person acting on behalf of such issuer, the requirement set forth in paragraph (1)(A) shall be deemed to be satisfied—
(A) if the oral forward-looking statement is accompanied by a cautionary statement—
(i) that the particular oral statement is a forward-looking statement; and
(ii) that the actual results might differ materially from those projected in the forward-looking statement; and
(B) if—
(i) the oral forward-looking statement is accompanied by an oral statement that additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in a readily available written document, or portion thereof;
(ii) the accompanying oral statement referred to in clause (i) identifies the document, or portion thereof, that contains the additional information about those factors relating to the forward-looking statement; and
(iii) the information contained in that written document is a cautionary statement that satisfies the standard established in paragraph (1)(A).
(3) Availability Any document filed with the Commission or generally disseminated shall be deemed to be readily available for purposes of paragraph (2).
(4) Effect on other safe harbors The exemption provided for in paragraph (1) shall be in addition to any exemption that the Commission may establish by rule or regulation under subsection (g).
(d) Duty to update Nothing in this section shall impose upon any person a duty to update a forward-looking statement.
(e) Dispositive motion On any motion to dismiss based upon subsection (c)(1), the court shall consider any statement cited in the complaint and any cautionary statement accompanying the forward-looking statement, which are not subject to material dispute, cited by the defendant.
(f) Stay pending decision on motion In any private action arising under this chapter, the court shall stay discovery (other than discovery that is specifically directed to the applicability of the exemption provided for in this section) during the pendency of any motion by a defendant for summary judgment that is based on the grounds that—
(1) the statement or omission upon which the complaint is based is a forward-looking statement within the meaning of this section; and
(2) the exemption provided for in this section precludes a claim for relief.
(g) Exemption authority In addition to the exemptions provided for in this section, the Commission may, by rule or regulation, provide exemptions from or under any provision of this chapter, including with respect to liability that is based on a statement or that is based on projections or other forward-looking information, if and to the extent that any such exemption is consistent with the public interest and the protection of investors, as determined by the Commission.
(h) Effect on other authority of Commission Nothing in this section limits, either expressly or by implication, the authority of the Commission to exercise similar authority or to adopt similar rules and regulations with respect to forward-looking statements under any other statute under which the Commission exercises rulemaking authority.
(i) Definitions For purposes of this section, the following definitions shall apply:
(1) Forward-looking statement The term “forward-looking statement” means—
(A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items;
(B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer;
(C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission;
(D) any statement of the assumptions underlying or relating to any statement described in subparagraph (A), (B), or (C);
(E) any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer; or
(F) a statement containing a projection or estimate of such other items as may be specified by rule or regulation of the Commission.
(2) Investment company The term “investment company” has the same meaning as in section 80a–3(a) of this title.
(3) Going private transaction The term “going private transaction” has the meaning given that term under the rules or regulations of the Commission issued pursuant to section 78m(e) of this title.
(4) Person acting on behalf of an issuer The term “person acting on behalf of an issuer” means any officer, director, or employee of such issuer.
(5) Other terms The terms “blank check company”, “rollup transaction”, “partnership”, “limited liability company”, “executive officer of an entity” and “direct participation investment program”, have the meanings given those terms by rule or regulation of the Commission.
(June 6, 1934, ch. 404, title I, § 21E, as added Pub. L. 104–67, title I, § 102(b), Dec. 22, 1995, 109 Stat. 753.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (c)(1), (f), and (g), was in the original “this title”. See References in Text note set out under section 78a of this title.
Statutory Notes and Related Subsidiaries
Effective DateThis section not to affect or apply to any private action arising under this chapter or title I of the Securities Act of 1933 (15 U.S.C. 77a et seq.), commenced before and pending on Dec. 22, 1995, see section 108 of Pub. L. 104–67, set out as an Effective Date of 1995 Amendment note under section 77l of this title.
ConstructionNothing in section to be deemed to create or ratify any implied right of action, or to prevent Commission, by rule or regulation, from restricting or otherwise regulating private actions under this chapter, see section 203 of Pub. L. 104–67, set out as a note under section 78j–1 of this title.
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# 15 U.S.C. § 78u–6 - Securities whistleblower incentives and protection
## Text
(a) Definitions In this section the following definitions shall apply:
(1) Covered judicial or administrative action The term “covered judicial or administrative action” means any judicial or administrative action brought by the Commission under the securities laws that results in monetary sanctions exceeding $1,000,000.
(2) Fund The term “Fund” means the Securities and Exchange Commission Investor Protection Fund.
(3) Original information The term “original information” means information that—
(A) is derived from the independent knowledge or analysis of a whistleblower;
(B) is not known to the Commission from any other source, unless the whistleblower is the original source of the information; and
(C) is not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news media, unless the whistleblower is a source of the information.
(4) Monetary sanctions The term “monetary sanctions”, when used with respect to any judicial or administrative action, means—
(A) any monies, including penalties, disgorgement, and interest, ordered to be paid; and
(B) any monies deposited into a disgorgement fund or other fund pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)), as a result of such action or any settlement of such action.
(5) Related action The term “related action”, when used with respect to any judicial or administrative action brought by the Commission under the securities laws, means any judicial or administrative action brought by an entity described in subclauses (I) through (IV) of subsection (h)(2)(D)(i) that is based upon the original information provided by a whistleblower pursuant to subsection (a) that led to the successful enforcement of the Commission action.
(6) Whistleblower The term “whistleblower” means any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.
(b) Awards (1) In general In any covered judicial or administrative action, or related action, the Commission, under regulations prescribed by the Commission and subject to subsection (c), shall pay an award or awards to 1 or more whistleblowers who voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action, in an aggregate amount equal to—
(A) not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions; and
(B) not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.
(2) Payment of awards Any amount paid under paragraph (1) shall be paid from the Fund.
(c) Determination of amount of award; denial of award (1) Determination of amount of award (A) Discretion The determination of the amount of an award made under subsection (b) shall be in the discretion of the Commission.
(B) Criteria In determining the amount of an award made under subsection (b), the Commission—
(i) shall take into consideration—
(I) the significance of the information provided by the whistleblower to the success of the covered judicial or administrative action;
(II) the degree of assistance provided by the whistleblower and any legal representative of the whistleblower in a covered judicial or administrative action;
(III) the programmatic interest of the Commission in deterring violations of the securities laws by making awards to whistleblowers who provide information that lead to the successful enforcement of such laws; and
(IV) such additional relevant factors as the Commission may establish by rule or regulation; and
(ii) shall not take into consideration the balance of the Fund.
(2) Denial of award No award under subsection (b) shall be made—
(A) to any whistleblower who is, or was at the time the whistleblower acquired the original information submitted to the Commission, a member, officer, or employee of—
(i) an appropriate regulatory agency;
(ii) the Department of Justice;
(iii) a self-regulatory organization;
(iv) the Public Company Accounting Oversight Board; or
(v) a law enforcement organization;
(B) to any whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award under this section;
(C) to any whistleblower who gains the information through the performance of an audit of financial statements required under the securities laws and for whom such submission would be contrary to the requirements of section 78j–1 of this title; or
(D) to any whistleblower who fails to submit information to the Commission in such form as the Commission may, by rule, require.
(d) Representation (1) Permitted representation Any whistleblower who makes a claim for an award under subsection (b) may be represented by counsel.
(2) Required representation (A) In general Any whistleblower who anonymously makes a claim for an award under subsection (b) shall be represented by counsel if the whistleblower anonymously submits the information upon which the claim is based.
(B) Disclosure of identity Prior to the payment of an award, a whistleblower shall disclose the identity of the whistleblower and provide such other information as the Commission may require, directly or through counsel for the whistleblower.
(e) No contract necessary No contract with the Commission is necessary for any whistleblower to receive an award under subsection (b), unless otherwise required by the Commission by rule or regulation.
(f) Appeals Any determination made under this section, including whether, to whom, or in what amount to make awards, shall be in the discretion of the Commission. Any such determination, except the determination of the amount of an award if the award was made in accordance with subsection (b), may be appealed to the appropriate court of appeals of the United States not more than 30 days after the determination is issued by the Commission. The court shall review the determination made by the Commission in accordance with section 706 of title 5.
(g) Investor Protection Fund (1) Fund established There is established in the Treasury of the United States a fund to be known as the “Securities and Exchange Commission Investor Protection Fund”.
(a) Use of Fund 11 So in original. Probably should be designated “(2)”. The Fund shall be available to the Commission, without further appropriation or fiscal year limitation, for paying awards to whistleblowers as provided in subsection (b).
(3) Deposits and credits (A) In general There shall be deposited into or credited to the Fund an amount equal to—
(i) any monetary sanction collected by the Commission in any judicial or administrative action brought by the Commission under the securities laws that is not added to a disgorgement fund or other fund under section 308 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246) or otherwise distributed to victims of a violation of the securities laws, or the rules and regulations thereunder, underlying such action, unless the balance of the Fund at the time the monetary sanction is collected exceeds $300,000,000;
(ii) any monetary sanction added to a disgorgement fund or other fund under section 308 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246) that is not distributed to the victims for whom the Fund was established, unless the balance of the disgorgement fund at the time the determination is made not to distribute the monetary sanction to such victims exceeds $200,000,000; and
(iii) all income from investments made under paragraph (4).
(B) Additional amounts If the amounts deposited into or credited to the Fund under subparagraph (A) are not sufficient to satisfy an award made under subsection (b), there shall be deposited into or credited to the Fund an amount equal to the unsatisfied portion of the award from any monetary sanction collected by the Commission in the covered judicial or administrative action on which the award is based.
(4) Investments (A) Amounts in Fund may be invested The Commission may request the Secretary of the Treasury to invest the portion of the Fund that is not, in the discretion of the Commission, required to meet the current needs of the Fund.
(B) Eligible investments Investments shall be made by the Secretary of the Treasury in obligations of the United States or obligations that are guaranteed as to principal and interest by the United States, with maturities suitable to the needs of the Fund as determined by the Commission on the record.
(C) Interest and proceeds credited The interest on, and the proceeds from the sale or redemption of, any obligations held in the Fund shall be credited to the Fund.
(5) Reports to Congress Not later than October 30 of each fiscal year beginning after July 21, 2010, the Commission shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives a report on—
(A) the whistleblower award program, established under this section, including—
(i) a description of the number of awards granted; and
(ii) the types of cases in which awards were granted during the preceding fiscal year;
(B) the balance of the Fund at the beginning of the preceding fiscal year;
(C) the amounts deposited into or credited to the Fund during the preceding fiscal year;
(D) the amount of earnings on investments made under paragraph (4) during the preceding fiscal year;
(E) the amount paid from the Fund during the preceding fiscal year to whistleblowers pursuant to subsection (b);
(F) the balance of the Fund at the end of the preceding fiscal year; and
(G) a complete set of audited financial statements, including—
(i) a balance sheet;
(ii) income statement; and
(iii) cash flow analysis.
(h) Protection of whistleblowers (1) Prohibition against retaliation (A) In general No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower—
(i) in providing information to the Commission in accordance with this section;
(ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or
(iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), this chapter, including section 78j–1(m) of this title, section 1513(e) of title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.
(B) Enforcement (i) Cause of action An individual who alleges discharge or other discrimination in violation of subparagraph (A) may bring an action under this subsection in the appropriate district court of the United States for the relief provided in subparagraph (C).
(ii) Subpoenas A subpoena requiring the attendance of a witness at a trial or hearing conducted under this section may be served at any place in the United States.
(iii) Statute of limitations (I) In general An action under this subsection may not be brought—
(aa) more than 6 years after the date on which the violation of subparagraph (A) occurred; or
(bb) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the employee alleging a violation of subparagraph (A).
(II) Required action within 10 years Notwithstanding subclause (I), an action under this subsection may not in any circumstance be brought more than 10 years after the date on which the violation occurs.
(C) Relief Relief for an individual prevailing in an action brought under subparagraph (B) shall include—
(i) reinstatement with the same seniority status that the individual would have had, but for the discrimination;
(ii) 2 times the amount of back pay otherwise owed to the individual, with interest; and
(iii) compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.
(2) Confidentiality (A) In general Except as provided in subparagraphs (B) and (C), the Commission and any officer or employee of the Commission shall not disclose any information, including information provided by a whistleblower to the Commission, which could reasonably be expected to reveal the identity of a whistleblower, except in accordance with the provisions of section 552a of title 5, unless and until required to be disclosed to a defendant or respondent in connection with a public proceeding instituted by the Commission or any entity described in subparagraph (C). For purposes of section 552 of title 5, this paragraph shall be considered a statute described in subsection (b)(3)(B) of such section.
(B) Exempted statute For purposes of section 552 of title 5, this paragraph shall be considered a statute described in subsection (b)(3)(B) of such section 552.
(C) Rule of construction Nothing in this section is intended to limit, or shall be construed to limit, the ability of the Attorney General to present such evidence to a grand jury or to share such evidence with potential witnesses or defendants in the course of an ongoing criminal investigation.
(D) Availability to government agencies (i) In general Without the loss of its status as confidential in the hands of the Commission, all information referred to in subparagraph (A) may, in the discretion of the Commission, when determined by the Commission to be necessary to accomplish the purposes of this chapter and to protect investors, be made available to—
(I) the Attorney General of the United States;
(II) an appropriate regulatory authority;
(III) a self-regulatory organization;
(IV) a State attorney general in connection with any criminal investigation;
(V) any appropriate State regulatory authority;
(VI) the Public Company Accounting Oversight Board;
(VII) a foreign securities authority; and
(VIII) a foreign law enforcement authority.
(ii) Confidentiality (I) In general Each of the entities described in subclauses (I) through (VI) of clause (i) shall maintain such information as confidential in accordance with the requirements established under subparagraph (A).
(II) Foreign authorities Each of the entities described in subclauses (VII) and (VIII) of clause (i) shall maintain such information in accordance with such assurances of confidentiality as the Commission determines appropriate.
(3) Rights retained Nothing in this section shall be deemed to diminish the rights, privileges, or remedies of any whistleblower under any Federal or State law, or under any collective bargaining agreement.
(i) Provision of false information A whistleblower shall not be entitled to an award under this section if the whistleblower—
(1) knowingly and willfully makes any false, fictitious, or fraudulent statement or representation; or
(2) uses any false writing or document knowing the writing or document contains any false, fictitious, or fraudulent statement or entry.
(j) Rulemaking authority The Commission shall have the authority to issue such rules and regulations as may be necessary or appropriate to implement the provisions of this section consistent with the purposes of this section.
(June 6, 1934, ch. 404, title I, § 21F, as added Pub. L. 111–203, title IX, § 922(a), July 21, 2010, 124 Stat. 1841; amended Pub. L. 119–21, title III, § 30003(b), July 4, 2025, 139 Stat. 126.)
## Notes
Editorial Notes
References in TextThe Sarbanes-Oxley Act of 2002, referred to in subsec. (h)(1)(A)(iii), is Pub. L. 107–204, July 30, 2002, 116 Stat. 745. For complete classification of this Act to the Code, see Short Title note set out under section 7201 of this title and Tables. This chapter, referred to in subsec. (h)(1)(A)(iii), was in the original “the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)”. This chapter, referred to in subsec. (h)(2)(D)(i), was in the original “this Act”. See References in Text note set out under section 78a of this title.
Amendments2025—Subsec. (g)(2). Pub. L. 119–21, which directed that subsec. (g)(2) of this section be “amended to read as follows:” with a designation and heading of “(a) Use of Fund”, was executed to par. (2) of subsec. (g) as directed, to reflect the probable intent of Congress. Prior to amendment, text read as follows: “The Fund shall be available to the Commission, without further appropriation or fiscal year limitation, for— “(A) paying awards to whistleblowers as provided in subsection (b); and “(B) funding the activities of the Inspector General of the Commission under section 78d(i) of this title.”
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
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---
# 15 U.S.C. § 78u–7 - Implementation and transition provisions for whistleblower protection
## Text
(a) Implementing rules The Commission shall issue final regulations implementing the provisions of section 78u–6 of this title, as added by this subtitle, not later than 270 days after July 21, 2010.
(b) Original information Information provided to the Commission in writing by a whistleblower shall not lose the status of original information (as defined in section 78u–6(a)(3) of this title, as added by this subtitle) solely because the whistleblower provided the information prior to the effective date of the regulations, if the information is provided by the whistleblower after July 21, 2010.
(c) Awards A whistleblower may receive an award pursuant to section 78u–6 of this title, as added by this subtitle, regardless of whether any violation of a provision of the securities laws, or a rule or regulation thereunder, underlying the judicial or administrative action upon which the award is based, occurred prior to July 21, 2010.
(d) Administration and enforcement The Securities and Exchange Commission shall establish a separate office within the Commission to administer and enforce the provisions of section 78u–6 of this title (as add 11 So in original. Probably should be “added”. by section 922(a)).22 See References in Text note below. Such office shall report annually to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on its activities, whistleblower complaints, and the response of the Commission to such complaints.
(Pub. L. 111–203, title IX, § 924, July 21, 2010, 124 Stat. 1850.)
## Notes
Editorial Notes
References in TextThis subtitle, referred to in subsecs. (a) to (c), means subtitle B (§§ 921–929Z) of title IX of Pub. L. 111–203. Section 922(a), referred to in subsec. (d), means section 922(a) of Pub. L. 111–203.
Codification Section was enacted as part of the Investor Protection and Securities Reform Act of 2010, and also as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and not as part of the Securities Exchange Act of 1934 which comprises this chapter.
Statutory Notes and Related Subsidiaries
Effective DateSection effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of Title 12, Banks and Banking.
Definitions For definitions of “Commission” and “securities laws” as used in this section, see section 5301 of Title 12, Banks and Banking.
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# 15 U.S.C. § 78v - Hearings by Commission
## Text
Hearings may be public and may be held before the Commission, any member or members thereof, or any officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.
(June 6, 1934, ch. 404, title I, § 22, 48 Stat. 901.)
## Notes
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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title: "15 U.S.C. § 78w"
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---
# 15 U.S.C. § 78w - Rules, regulations, and orders; annual reports
## Text
(a) Power to make rules and regulations; considerations; public disclosure (1) The Commission, the Board of Governors of the Federal Reserve System, and the other agencies enumerated in section 78c(a)(34) of this title shall each have power to make such rules and regulations as may be necessary or appropriate to implement the provisions of this chapter for which they are responsible or for the execution of the functions vested in them by this chapter, and may for such purposes classify persons, securities, transactions, statements, applications, reports, and other matters within their respective jurisdictions, and prescribe greater, lesser, or different requirements for different classes thereof. No provision of this chapter imposing any liability shall apply to any act done or omitted in good faith in conformity with a rule, regulation, or order of the Commission, the Board of Governors of the Federal Reserve System, other agency enumerated in section 78c(a)(34) of this title, or any self-regulatory organization, notwithstanding that such rule, regulation, or order may thereafter be amended or rescinded or determined by judicial or other authority to be invalid for any reason.
(2) The Commission and the Secretary of the Treasury, in making rules and regulations pursuant to any provisions of this chapter, shall consider among other matters the impact any such rule or regulation would have on competition. The Commission and the Secretary of the Treasury shall not adopt any such rule or regulation which would impose a burden on competition not necessary or appropriate in furtherance of the purposes of this chapter. The Commission and the Secretary of the Treasury shall include in the statement of basis and purpose incorporated in any rule or regulation adopted under this chapter, the reasons for the Commission’s or the Secretary’s determination that any burden on competition imposed by such rule or regulation is necessary or appropriate in furtherance of the purposes of this chapter.
(3) The Commission and the Secretary, in making rules and regulations pursuant to any provision of this chapter, considering any application for registration in accordance with section 78s(a) of this title, or reviewing any proposed rule change of a self-regulatory organization in accordance with section 78s(b) of this title, shall keep in a public file and make available for copying all written statements filed with the Commission and the Secretary and all written communications between the Commission or the Secretary and any person relating to the proposed rule, regulation, application, or proposed rule change: Provided, however, That the Commission and the Secretary shall not be required to keep in a public file or make available for copying any such statement or communication which it may withhold from the public in accordance with the provisions of section 552 of title 5.
(b) Annual report to Congress (1) The Commission, the Board of Governors of the Federal Reserve System, and the other agencies enumerated in section 78c(a)(34) of this title shall each make an annual report to the Congress on its work for the preceding year, and shall include in each such report whatever information, data, and recommendations for further legislation it considers advisable with regard to matters within its respective jurisdiction under this chapter.
(2) The appropriate regulatory agency for a self-regulatory organization shall include in its annual report to the Congress for each fiscal year, a summary of its oversight activities under this chapter with respect to such self-regulatory organization, including a description of any examination conducted as part of such activities of any such organization, any material recommendation presented as part of such activities to such organization for changes in its organization or rules, and any action by such organization in response to any such recommendation.
(3) The appropriate regulatory agency for any class of municipal securities dealers shall include in its annual report to the Congress for each fiscal year a summary of its regulatory activities pursuant to this chapter with respect to such municipal securities dealers, including the nature of and reason for any sanction imposed pursuant to this chapter against any such municipal securities dealer.
(4) The Commission shall also include in its annual report to the Congress for each fiscal year—
(A) a summary of the Commission’s oversight activities with respect to self-regulatory organizations for which it is not the appropriate regulatory agency, including a description of any examination of any such organization, any material recommendation presented to any such organization for changes in its organization or rules, and any action by any such organization in response to any such recommendations;
(B) a statement and analysis of the expenses and operations of each self-regulatory organization in connection with the performance of its responsibilities under this chapter, for which purpose data pertaining to such expenses and operations shall be made available by such organization to the Commission at its request;
(C) the steps the Commission has taken and the progress it has made toward ending the physical movement of the securities certificate in connection with the settlement of securities transactions, and its recommendations, if any, for legislation to eliminate the securities certificate;
(D) the number of requests for exemptions from provisions of this chapter received, the number granted, and the basis upon which any such exemption was granted;
(E) a summary of the Commission’s regulatory activities with respect to municipal securities dealers for which it is not the appropriate regulatory agency, including the nature of, and reason for, any sanction imposed in proceedings against such municipal securities dealers;
(F) a statement of the time elapsed between the filing of reports pursuant to section 78m(f) of this title and the public availability of the information contained therein, the costs involved in the Commission’s processing of such reports and tabulating such information, the manner in which the Commission uses such information, and the steps the Commission has taken and the progress it has made toward requiring such reports to be filed and such information to be made available to the public in machine language;
(G) information concerning (i) the effects its rules and regulations are having on the viability of small brokers and dealers; (ii) its attempts to reduce any unnecessary reporting burden on such brokers and dealers; and (iii) its efforts to help to assure the continued participation of small brokers and dealers in the United States securities markets;
(H) a statement detailing its administration of the Freedom of Information Act, section 552 of title 5, including a copy of the report filed pursuant to subsection (d) of such section; and
(I) the steps that have been taken and the progress that has been made in promoting the timely public dissemination and availability for analytical purposes (on a fair, reasonable, and nondiscriminatory basis) of information concerning government securities transactions and quotations, and its recommendations, if any, for legislation to assure timely dissemination of (i) information on transactions in regularly traded government securities sufficient to permit the determination of the prevailing market price for such securities, and (ii) reports of the highest published bids and lowest published offers for government securities (including the size at which persons are willing to trade with respect to such bids and offers).
(c) Procedure for adjudication The Commission, by rule, shall prescribe the procedure applicable to every case pursuant to this chapter of adjudication (as defined in section 551 of title 5) not required to be determined on the record after notice and opportunity for hearing. Such rules shall, as a minimum, provide that prompt notice shall be given of any adverse action or final disposition and that such notice and the entry of any order shall be accompanied by a statement of written reasons.
(d) Cease-and-desist procedures Within 1 year after October 15, 1990, the Commission shall establish regulations providing for the expeditious conduct of hearings and rendering of decisions under section 78u–3 of this title, section 77h–1 of this title, section 80a–9(f) of this title, and section 80b–3(k) of this title.
(June 6, 1934, ch. 404, title I, § 23, 48 Stat. 901; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; May 27, 1936, ch. 462, § 8, 49 Stat. 1379; Pub. L. 88–467, § 10, Aug. 20, 1964, 78 Stat. 580; Pub. L. 94–29, § 18, June 4, 1975, 89 Stat. 155; Pub. L. 99–571, title I, § 102(j), Oct. 28, 1986, 100 Stat. 3220; Pub. L. 100–181, title III, §§ 324, 325, Dec. 4, 1987, 101 Stat. 1259; Pub. L. 101–429, title II, § 204, Oct. 15, 1990, 104 Stat. 940; Pub. L. 103–202, title I, § 107, Dec. 17, 1993, 107 Stat. 2351; Pub. L. 109–351, title IV, § 401(a)(3), Oct. 13, 2006, 120 Stat. 1973; Pub. L. 111–203, title III, § 376(4), July 21, 2010, 124 Stat. 1569.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a) to (c), was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments2010—Subsec. (b)(1). Pub. L. 111–203 struck out “, other than the Office of Thrift Supervision,” before “shall each make”. 2006—Subsec. (b)(1). Pub. L. 109–351 inserted “other than the Office of Thrift Supervision,” before “shall each”. 1993—Subsec. (b)(4)(C) to (K). Pub. L. 103–202, § 107, redesignated subpars. (E) to (G) and (I) to (K) as (C) to (E) and (F) to (H), respectively, added a new subpar. (I), and struck out former subpars. (C), (D), and (H). Prior to amendment, subpars. (C), (D), and (H) read as follows: “(C) beginning in 1975 and ending in 1980, information, data, and recommendations with respect to the development of a national system for the prompt and accurate clearance and settlement of securities transactions, including a summary of the regulatory activities, operational capabilities, financial resources, and plans of self-regulatory organizations and registered transfer agents with respect thereto; “(D) beginning in 1975 and ending in 1980, a description of the steps taken, and an evaluation of the progress made, toward the establishment of a national market system, and recommendations for further legislation it considers advisable with respect to such system; “(H) beginning in 1975 and ending in 1980, a description of the effect the absence of any schedule or fixed rates of commissions, allowances, discounts, or other fees to be charged by members for effecting transactions on a national securities exchange is having on the maintenance of fair and orderly markets and the development of a national market system for securities;”. 1990—Subsec. (d). Pub. L. 101–429 added subsec. (d). 1987—Subsec. (a)(1). Pub. L. 100–181, § 324(1), inserted “or” before “any self-regulatory organization” in last sentence. Subsec. (a)(3). Pub. L. 100–181, § 324(2), inserted “shall” after “section 78s(b) of this title,”. Subsec. (b)(4)(F). Pub. L. 100–181, § 325, substituted “the” for “The”. 1986—Subsec. (a)(2). Pub. L. 99–571, § 102(j)(1), (2), inserted “and the Secretary of the Treasury” in three places and “or the Secretary’s” in one place. Subsec. (a)(3). Pub. L. 99–571, § 102(j)(3), (4), inserted “and the Secretary” in three places and “or the Secretary” in one place. 1975—Subsec. (a). Pub. L. 94–29 designated existing provisions as par. (1), inserted references to other agencies enumerated in section 78c(a)(34) of this title, regulations appropriate to implement the provisions of this chapter for which the agencies are responsible, the classification of persons, transactions, statements, applications, and reports, the prescribing of greater, lesser, or different requirements for different classifications, and the non-liability of self-regulatory organization, and added pars. (2) and (3). Subsec. (b). Pub. L. 94–29 designated existing provisions as par. (1), substituted “The Commission, the Board of Governors of the Federal Reserve System, and the other agencies enumerated in section 78c(a)(34) of this title, shall each make an annual report to the Congress on its work for the preceding year, and shall include in each such report whatever information, data, and recommendations for further legislation it considers advisable with regard to matters within its respective jurisdiction under this chapter” for “The Commission and the Board of Governors of the Federal Reserve System, respectively, shall include in their annual reports to Congress such information, data, and recommendation for further legislation as they may deem advisable with regard to matters within their respective jurisdictions under this chapter. The Commission shall include in its annual reports to the Congress for the fiscal years ended on June 30 of 1965, 1966, and 1967 information, data, and recommendations specifically related to the operation of the amendments to this chapter made by the Securities Acts Amendments of 1964”, and added pars. (2) to (4). Subsec. (c). Pub. L. 94–29 added subsec. (c). 1964—Subsec. (b). Pub. L. 88–467 required the Commission in its annual reports to Congress for fiscal years ending June 30, 1965, 1966, and 1967, to furnish information, data, and recommendations specifically related to the operations of the amendments to the Securities Exchange Act of 1934 made by the Securities Act Amendments of 1964. 1936—Subsec. (a). Act May 27, 1936, inserted second sentence.
Statutory Notes and Related Subsidiaries
Change of Name Section 203(a) of act Aug. 23, 1935, substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the transfer date, see section 351 of Pub. L. 111–203, set out as a note under section 906 of Title 2, The Congress.
Effective Date of 1990 AmendmentAmendment by Pub. L. 101–429 effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in a note under section 77g of this title.
Effective Date of 1986 AmendmentAmendment by Pub. L. 99–571 effective 270 days after Oct. 28, 1986, see section 401 of Pub. L. 99–571, set out as an Effective Date note under section 78o–5 of this title.
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Effective Date of 1964 AmendmentAmendment by Pub. L. 88–467 effective Aug. 20, 1964, see section 13 of Pub. L. 88–467, set out as a note under section 78c of this title.
Construction of 1993 AmendmentAmendment by Pub. L. 103–202 not to be construed to govern initial issuance of any public debt obligation or to grant any authority to (or extend any authority of) the Securities and Exchange Commission, any appropriate regulatory agency, or a self-regulatory organization to prescribe any procedure, term, or condition of such initial issuance, to promulgate any rule or regulation governing such initial issuance, or to otherwise regulate in any manner such initial issuance, see section 111 of Pub. L. 103–202, set out as a note under section 78o–5 of this title.
Termination of Reporting RequirementsFor termination, effective May 15, 2000, of provisions of law requiring submittal to Congress of any annual, semiannual, or other regular periodic report listed in House Document No. 103–7 (in which the 2nd item on page 143, the 18th item on page 167, the 7th item on page 172, and 18th item on page 190 identify a reporting provision which, as subsequently amended, is contained in subsec. (b) of this section), see section 3003 of Pub. L. 104–66, as amended, set out as a note under section 1113 of Title 31, Money and Finance.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78x - Public availability of information
## Text
(a) “Records” defined For purposes of section 552 of title 5 the term “records” includes all applications, statements, reports, contracts, correspondence, notices, and other documents filed with or otherwise obtained by the Commission pursuant to this chapter or otherwise.
(b) Disclosure or personal use It shall be unlawful for any member, officer, or employee of the Commission to disclose to any person other than a member, officer, or employee of the Commission, or to use for personal benefit, any information contained in any application, statement, report, contract, correspondence, notice, or other document filed with or otherwise obtained by the Commission (1) in contravention of the rules and regulations of the Commission under section 552 of title 5, or (2) in circumstances where the Commission has determined pursuant to such rules to accord confidential treatment to such information.
(c) Confidential disclosures The Commission may, in its discretion and upon a showing that such information is needed, provide all “records” (as defined in subsection (a)) and other information in its possession to such persons, both domestic and foreign, as the Commission by rule deems appropriate if the person receiving such records or information provides such assurances of confidentiality as the Commission deems appropriate.
(d) Records obtained from foreign securities authorities Except as provided in subsection (g), the Commission shall not be compelled to disclose records obtained from a foreign securities authority if (1) the foreign securities authority has in good faith determined and represented to the Commission that public disclosure of such records would violate the laws applicable to that foreign securities authority, and (2) the Commission obtains such records pursuant to (A) such procedure as the Commission may authorize for use in connection with the administration or enforcement of the securities laws, or (B) a memorandum of understanding. For purposes of section 552 of title 5, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552.
(e) Freedom of Information Act For purposes of section 552(b)(8) of title 5 (commonly referred to as the Freedom of Information Act)—
(1) the Commission is an agency responsible for the regulation or supervision of financial institutions; and
(2) any entity for which the Commission is responsible for regulating, supervising, or examining under this chapter is a financial institution.
(f) Sharing privileged information with other authorities (1) Privileged information provided by the Commission The Commission shall not be deemed to have waived any privilege applicable to any information by transferring that information to or permitting that information to be used by—
(A) any agency (as defined in section 6 of title 18);
(B) the Public Company Accounting Oversight Board;
(C) any self-regulatory organization;
(D) any foreign securities authority;
(E) any foreign law enforcement authority; or
(F) any State securities or law enforcement authority.
(2) Nondisclosure of privileged information provided to the Commission The Commission shall not be compelled to disclose privileged information obtained from any foreign securities authority, or foreign law enforcement authority, if the authority has in good faith determined and represented to the Commission that the information is privileged.
(3) Nonwaiver of privileged information provided to the Commission (A) In general Federal agencies, State securities and law enforcement authorities, self-regulatory organizations, and the Public Company Accounting Oversight Board shall not be deemed to have waived any privilege applicable to any information by transferring that information to or permitting that information to be used by the Commission.
(B) Exception The provisions of subparagraph (A) shall not apply to a self-regulatory organization or the Public Company Accounting Oversight Board with respect to information used by the Commission in an action against such organization.
(4) Definitions For purposes of this subsection—
(A) the term “privilege” includes any work-product privilege, attorney-client privilege, governmental privilege, or other privilege recognized under Federal, State, or foreign law;
(B) the term “foreign law enforcement authority” means any foreign authority that is empowered under foreign law to detect, investigate or prosecute potential violations of law; and
(C) the term “State securities or law enforcement authority” means the authority of any State or territory that is empowered under State or territory law to detect, investigate, or prosecute potential violations of law.
(g) Savings provision Nothing in this section shall—
(1) alter the Commission’s responsibilities under the Right to Financial Privacy Act (12 U.S.C. 3401 et seq.), as limited by section 78u(h) of this title, with respect to transfers of records covered by such statutes, or
(2) authorize the Commission to withhold information from the Congress or prevent the Commission from complying with an order of a court of the United States in an action commenced by the United States or the Commission.
(June 6, 1934, ch. 404, title I, § 24, 48 Stat. 901; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; Pub. L. 94–29, § 19, June 4, 1975, 89 Stat. 158; Pub. L. 101–550, title II, § 202(a), Nov. 15, 1990, 104 Stat. 2715; Pub. L. 111–203, title IX, §§ 929I(a), 929K, July 21, 2010, 124 Stat. 1857, 1860; Pub. L. 111–257, § 1(a), Oct. 5, 2010, 124 Stat. 2646.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a) and (e)(2), was in the original “this title”. See References in Text note set out under section 78a of this title. The Right to Financial Privacy Act, referred to in subsec. (g)(1), probably means the Right to Financial Privacy Act of 1978, title XI of Pub. L. 95–630, Nov. 10, 1978, 92 Stat. 3697, which is classified generally to chapter 35 (§ 3401 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 3401 of Title 12 and Tables.
Amendments2010—Subsec. (d). Pub. L. 111–203, § 929K(1), substituted “subsection (g)” for “subsection (f)”. Pub. L. 111–203, § 929I(a)(1), substituted “subsection (f)” for “subsection (e)”. Subsec. (e). Pub. L. 111–257 added subsec. (e) and struck out former subsec. (e). Prior to amendment, text read as follows: “(1) In general.—Except as provided in subsection (g), the Commission shall not be compelled to disclose records or information obtained pursuant to section 78q(b) of this title, or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this chapter, including surveillance, risk assessments, or other regulatory and oversight activities. “(2) Treatment of information.—For purposes of section 552 of title 5, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552. Collection of information pursuant to section 78q of this title shall be an administrative action involving an agency against specific individuals or agencies pursuant to section 3518(c)(1) of title 44.” Pub. L. 111–203, § 929K(2), substituted “subsection (g)” for “subsection (f)” in par. (1). Pub. L. 111–203, § 929I(a)(3), added subsec. (e). Former subsec. (e) redesignated (f). Subsec. (f). Pub. L. 111–203, § 929K(4), added subsec. (f). Former subsec. (f) redesignated (g). Pub. L. 111–203, § 929I(a)(2), redesignated subsec. (e) as (f). Subsec. (g). Pub. L. 111–203, § 929K(3), redesignated subsec. (f) as (g). 1990—Subsec. (b). Pub. L. 101–550, § 202(a)(1), struck out at end “Nothing in this subsection shall authorize the Commission to withhold information from the Congress.” Subsecs. (c) to (e). Pub. L. 101–550, § 202(a)(2), added subsecs. (c) to (e). 1975—Subsec. (a). Pub. L. 94–29 substituted “For purposes of section 552 of title 5, the term ‘records’ includes all applications, statements, reports, contracts, correspondence, notices, and other documents filed with or otherwise obtained by the Commission pursuant to this chapter or otherwise” for “Nothing in this chapter shall be construed to require, or to authorize the Commission to require, the revealing of trade secrets or processes in any application, report, or document filed with the Commission under this chapter”. Subsecs. (b), (c). Pub. L. 94–29 redesignated subsec. (c) as (b) and substituted “application, statement, report, contract, correspondence, notice, or other document filed with or otherwise obtained by the Commission (1) in contravention of the rules and regulations of the Commission under section 552 of title 5, or (2) in circumstances where the Commission has determined pursuant to such rules to accord confidential treatment for such information. Nothing in this subsection shall authorize the Commission to withhold information from Congress” for “application, report, or document filed with the Commission which is not made available to the public pursuant to subsection (b) of this section: Provided, That the Commission may make available to the Board of Governors of the Federal Reserve System any information requested by the Board for the purpose of enabling it to perform its duties under this chapter”. Former subsec. (b), providing for written objection to public disclosure of information, was struck out.
Statutory Notes and Related Subsidiaries
Change of Name Section 203(a) of act Aug. 23, 1935, substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Effective Date of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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# 15 U.S.C. § 78y - Court review of orders and rules
## Text
(a) Final Commission orders; persons aggrieved; petition; record; findings; affirmance, modification, enforcement, or setting aside of orders; remand to adduce additional evidence (1) A person aggrieved by a final order of the Commission entered pursuant to this chapter may obtain review of the order in the United States Court of Appeals for the circuit in which he resides or has his principal place of business, or for the District of Columbia Circuit, by filing in such court, within sixty days after the entry of the order, a written petition requesting that the order be modified or set aside in whole or in part.
(2) A copy of the petition shall be transmitted forthwith by the clerk of the court to a member of the Commission or an officer designated by the Commission for that purpose. Thereupon the Commission shall file in the court the record on which the order complained of is entered, as provided in section 2112 of title 28 and the Federal Rules of Appellate Procedure.
(3) On the filing of the petition, the court has jurisdiction, which becomes exclusive on the filing of the record, to affirm or modify and enforce or to set aside the order in whole or in part.
(4) The findings of the Commission as to the facts, if supported by substantial evidence, are conclusive.
(5) If either party applies to the court for leave to adduce additional evidence and shows to the satisfaction of the court that the additional evidence is material and that there was reasonable ground for failure to adduce it before the Commission, the court may remand the case to the Commission for further proceedings, in whatever manner and on whatever conditions the court considers appropriate. If the case is remanded to the Commission, it shall file in the court a supplemental record containing any new evidence, any further or modified findings, and any new order.
(b) Commission rules; persons adversely affected; petition; record; affirmance, enforcement, or setting aside of rules; findings; transfer of proceedings (1) A person adversely affected by a rule of the Commission promulgated pursuant to section 78f, 78i(h)(2), 78k, 78k–1, 78o(c)(5) or (6), 78o–3, 78q, 78q–1, or 78s of this title may obtain review of this rule in the United States Court of Appeals for the circuit in which he resides or has his principal place of business or for the District of Columbia Circuit, by filing in such court, within sixty days after the promulgation of the rule, a written petition requesting that the rule be set aside.
(2) A copy of the petition shall be transmitted forthwith by the clerk of the court to a member of the Commission or an officer designated for that purpose. Thereupon, the Commission shall file in the court the rule under review and any documents referred to therein, the Commission’s notice of proposed rulemaking and any documents referred to therein, all written submissions and the transcript of any oral presentations in the rulemaking, factual information not included in the foregoing that was considered by the Commission in the promulgation of the rule or proffered by the Commission as pertinent to the rule, the report of any advisory committee received or considered by the Commission in the rulemaking, and any other materials prescribed by the court.
(3) On the filing of the petition, the court has jurisdiction, which becomes exclusive on the filing of the materials set forth in paragraph (2) of this subsection, to affirm and enforce or to set aside the rule.
(4) The findings of the Commission as to the facts identified by the Commission as the basis, in whole or in part, of the rule, if supported by substantial evidence, are conclusive. The court shall affirm and enforce the rule unless the Commission’s action in promulgating the rule is found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege, or immunity; in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; or without observance of procedure required by law.
(5) If proceedings have been instituted under this subsection in two or more courts of appeals with respect to the same rule, the Commission shall file the materials set forth in paragraph (2) of this subsection in that court in which a proceeding was first instituted. The other courts shall thereupon transfer all such proceedings to the court in which the materials have been filed. For the convenience of the parties in the interest of justice that court may thereafter transfer all the proceedings to any other court of appeals.
(c) Objections not urged before Commission; stay of orders and rules; transfer of enforcement or review proceedings (1) No objection to an order or rule of the Commission, for which review is sought under this section, may be considered by the court unless it was urged before the Commission or there was reasonable ground for failure to do so.
(2) The filing of a petition under this section does not operate as a stay of the Commission’s order or rule. Until the court’s jurisdiction becomes exclusive, the Commission may stay its order or rule pending judicial review if it finds that justice so requires. After the filing of a petition under this section, the court, on whatever conditions may be required and to the extent necessary to prevent irreparable injury, may issue all necessary and appropriate process to stay the order or rule or to preserve status or rights pending its review; but (notwithstanding section 705 of title 5) no such process may be issued by the court before the filing of the record or the materials set forth in subsection (b)(2) of this section unless: (A) the Commission has denied a stay or failed to grant requested relief, (B) a reasonable period has expired since the filing of an application for a stay without a decision by the Commission, or (C) there was reasonable ground for failure to apply to the Commission.
(3) When the same order or rule is the subject of one or more petitions for review filed under this section and an action for enforcement filed in a district court of the United States under section 78u(d) or (e) of this title, that court in which the petition or the action is first filed has jurisdiction with respect to the order or rule to the exclusion of any other court, and thereupon all such proceedings shall be transferred to that court; but, for the convenience of the parties in the interest of justice, that court may thereafter transfer all the proceedings to any other court of appeals or district court of the United States, whether or not a petition for review or an action for enforcement was originally filed in the transferee court. The scope of review by a district court under section 78u(d) or (e) of this title is in all cases the same as by a court of appeals under this section.
(d) Other appropriate regulatory agencies (1) For purposes of the preceding subsections of this section, the term “Commission” includes the agencies enumerated in section 78c(a)(34) of this title insofar as such agencies are acting pursuant to this chapter and the Secretary of the Treasury insofar as he is acting pursuant to section 78o–5 of this title.
(2) For purposes of subsection (a)(4) of this section and section 706 of title 5, an order of the Commission pursuant to section 78s(a) of this title denying registration to a clearing agency for which the Commission is not the appropriate regulatory agency or pursuant to section 78s(b) of this title disapproving a proposed rule change by such a clearing agency shall be deemed to be an order of the appropriate regulatory agency for such clearing agency insofar as such order was entered by reason of a determination by such appropriate regulatory agency pursuant to section 78s(a)(2)(C) or 78s(b)(4)(C) of this title that such registration or proposed rule change would be inconsistent with the safeguarding of securities or funds.
(June 6, 1934, ch. 404, title I, § 25, 48 Stat. 901; June 7, 1934, ch. 426, 48 Stat. 926; June 25, 1948, ch. 646, § 32(a), 62 Stat. 991; May 24, 1949, ch. 139, § 127, 63 Stat. 107; Pub. L. 85–791, § 10, Aug. 28, 1958, 72 Stat. 945; Pub. L. 94–29, § 20, June 4, 1975, 89 Stat. 158; Pub. L. 99–571, title I, § 102(k), Oct. 28, 1986, 100 Stat. 3220; Pub. L. 101–432, § 6(b), Oct. 16, 1990, 104 Stat. 975.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in subsecs. (a)(1) and (d)(1), was in the original “this title”. See References in Text note set out under section 78a of this title. The Federal Rules of Appellate Procedure, referred to in subsec. (a)(2), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure.
Amendments1990—Subsec. (b)(1). Pub. L. 101–432 inserted “78i(h)(2),” after “section 78f,”. 1986—Subsec. (d)(1). Pub. L. 99–571 inserted “and the Secretary of the Treasury insofar as he is acting pursuant to section 78o–5 of this title”. 1975—Subsec. (a). Pub. L. 94–29 revised existing provisions into five numbered paragraphs. Subsec. (b). Pub. L. 94–29 substituted provisions permitting persons adversely affected by any rule promulgated by the Commission pursuant to sections 78f, 78k, 78k–1, 78o(c)(5) or (6), 78o–3, 78q, 78q–1, or 78s of this title to obtain direct review in an appropriate Court of Appeals for provisions that commencement of proceedings under subsec. (a) shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order. Subsecs. (c), (d). Pub. L. 94–29 added subsecs. (c) and (d). 1958—Subsec. (a). Pub. L. 85–791, in second sentence, substituted “transmitted by the clerk of the court to” for “served upon”, struck out “certify and” before “file in the court”, struck out “a transcript of” after “file in the court”, and inserted “as provided in section 2112 of title 28”, and, in third sentence, substituted “petition” for “transcript”, and “jurisdiction, which upon the filing of the record shall be exclusive” for “exclusive jurisdiction”.
Statutory Notes and Related Subsidiaries
Change of Name Act June 25, 1948, eff. Sept. 1, 1948, as amended by act May 24, 1949, substituted “court of appeals” for “circuit court of appeals”. Act June 7, 1934, substituted “United States Court of Appeals for the District of Columbia” for “Court of Appeals for District of Columbia”.
Effective Date of 1986 AmendmentAmendment by Pub. L. 99–571 effective 270 days after Oct. 28, 1986, see section 401 of Pub. L. 99–571, set out as an Effective Date note under section 78o–5 of this title.
Effective Date of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
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text_hash: "5f946215270c2ee76465daeedc83c0bf60d1c18dd098dde22f800b819e139903"
retrieved_at: "2026-07-04"
confidence: "official"
tags: ["legal", "us-code"]
---
# 15 U.S.C. § 78z - Unlawful representations
## Text
No action or failure to act by the Commission or the Board of Governors of the Federal Reserve System, in the administration of this chapter shall be construed to mean that the particular authority has in any way passed upon the merits of, or given approval to, any security or any transaction or transactions therein, nor shall such action or failure to act with regard to any statement or report filed with or examined by such authority pursuant to this chapter or rules and regulations thereunder, be deemed a finding by such authority that such statement or report is true and accurate on its face or that it is not false or misleading. It shall be unlawful to make, or cause to be made, to any prospective purchaser or seller of a security any representation that any such action or failure to act by any such authority is to be so construed or has such effect.
(June 6, 1934, ch. 404, title I, § 26, 48 Stat. 902; Pub. L. 105–353, title III, § 301(b)(5), Nov. 3, 1998, 112 Stat. 3236.)
## Notes
Editorial Notes
References in TextThis chapter, referred to in text, was in the original “this title”. See References in Text note set out under section 78a of this title.
Amendments1998—Pub. L. 105–353 substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Executive Documents
Transfer of Functions For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.