Current through P.L. 106-274, approved 9-22-2000 [HSB 5/15/2001 -- includes amendments made by Commodity Futures Modernization Act of 2000]

This subchapter may be cited as the "Securities Act of 1933."

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 1, 48 Stat. 74.)

HISTORICAL AND STATUTORY NOTES 

Short Title

1980 Acts. Pub.L. 96-477, Title VI, § 601, Oct. 21, 1980, 94 Stat. 2294, provided:  "This title [amending sections 77b and 77d of this title] may be cited as the 'Small Business Issuers' Simplification Act of 1980'."

Current through P.L. 106-274, approved 9-22-2000

(a) Definitions

When used in this subchapter, unless the context otherwise requires--

(1) The term "security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

(2) The term "person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof.  As used in this paragraph the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security.

(3) The term "sale" or "sell" shall include every contract of sale or disposition of a security or interest in a security, for value.  The term "offer to sell", "offer for sale", or "offer" shall include every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value.  The terms defined in this paragraph and the term "offer to buy" as used in subsection (c) of section 77e of this title shall not include preliminary negotiations or agreements between an issuer (or any person directly or indirectly controlling or controlled by an issuer, or under direct or indirect common control with an issuer) and any underwriter or among underwriters who are or are to be in privity of contract with an issuer (or any person directly or indirectly controlling or controlled by an issuer, or under direct or indirect common control with an issuer).  Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing, shall be conclusively presumed to constitute a part of the subject of such purchase and to have been offered and sold for value.  The issue or transfer of a right or privilege, when originally issued or transferred with a security, giving the holder of such security the right to convert such security into another security of the same issuer or of another person, or giving a right to subscribe to another security of the same issuer or of another person, which right cannot be exercised until some future date, shall not be deemed to be an offer or sale of such other security;  but the issue or transfer of such other security upon the exercise of such right of conversion or subscription shall be deemed a sale of such other security. Any offer or sale of a security futures product by or on behalf of the issuer of the securities underlying the security futures product, an affiliate of the issuer, or an underwriter, shall constitute a contract for sale of, sale of, offer for sale, or offer to sell the underlying securities.

(4) The term "issuer" means every person who issues or proposes to issue any security;  except that with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors (or persons performing similar functions) or of the fixed, restricted management, or unit type, the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued;  except that in the case of an unincorporated association which provides by its articles for limited liability of any or all of its members, or in the case of a trust, committee, or other legal entity, the trustees or members thereof shall not be individually liable as issuers of any security issued by the association, trust, committee, or other legal entity;  except that with respect to equipment-trust certificates or like securities, the term "issuer" means the person by whom the equipment or property is or is to be used;  and except that with respect to fractional undivided interests in oil, gas, or other mineral rights, the term "issuer" means the owner of any such right or of any interest in such right (whether whole or fractional) who creates fractional interests therein for the purpose of public offering.

(5) The term "Commission" means the Securities and Exchange Commission.

(6) The term "Territory" means Puerto Rico, the Virgin Islands, and the insular possessions of the United States.

(7) The term "interstate commerce" means trade or commerce in securities or any transportation or communication relating thereto among the several States or between the District of Columbia or any Territory of the United States and any State or other Territory, or between any foreign country and any State, Territory, or the District of Columbia, or within the District of Columbia.

(8) The term "registration statement" means the statement provided for in section 77f of this title, and includes any amendment thereto and any report, document, or memorandum filed as part of such statement or incorporated therein by reference.

(9) The term "write" or "written" shall include printed, lithographed, or any means of graphic communication.

(10) The term "prospectus" means any prospectus, notice, circular, advertisement, letter, or communication, written or by radio or television, which offers any security for sale or confirms the sale of any security;  except that (a) a communication sent or given after the effective date of the registration statement (other than a prospectus permitted under subsection (b) of section 77j of this title) shall not be deemed a prospectus if it is proved that prior to or at the same time with such communication a written prospectus meeting the requirements of subsection (a) of section 77j of this title at the time of  [FN1] such communication was sent or given to the person to whom the communication was made, and (b) a notice, circular, advertisement, letter, or communication in respect of a security shall not be deemed to be a prospectus if it states from whom a written prospectus meeting the requirements of section 77j of this title may be obtained and, in addition, does no more than identify the security, state the price thereof, state by whom orders will be executed, and contain such other information as the Commission, by rules or regulations deemed necessary or appropriate in the public interest and for the protection of investors, and subject to such terms and conditions as may be prescribed therein, may permit.

(11) The term "underwriter" means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking;  but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission.  As used in this paragraph the term "issuer" shall include, in addition to an issuer, any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.

(12) The term "dealer" means any person who engages either for all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person.

(13) The term "insurance company" means a company which is organized as an insurance company, whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies, and which is subject to supervision by the insurance commissioner, or a similar official or agency, of a State or territory or the District of Columbia;  or any receiver or similar official or any liquidating agent for such company, in his capacity as such.

(14) The term "separate account" means an account established and maintained by an insurance company pursuant to the laws of any State or territory of the United States, the District of Columbia, or of Canada or any province thereof, under which income, gains and losses, whether or not realized, from assets allocated to such account, are, in accordance with the applicable contract, credited to or charged against such account without regard to other income, gains, or losses of the insurance company.

(15) The term "accredited investor" shall mean--

(i) a bank as defined in section 77c(a)(2) of this title whether acting in its individual or fiduciary capacity;  an insurance company as defined in paragraph (13) of this subsection;  an investment company registered under the Investment Company Act of 1940 [15 U.S.C.A. § 80a-1 et seq.] or a business development company as defined in section 2(a)(48) of that Act [15 U.S.C.A.  380a-2(a)(48)];  a Small Business Investment Company licensed by the Small Business Administration;  or an employee benefit plan, including an individual retirement account, which is subject to the provisions of the Employee Retirement Income Security Act of 1974 [29 U.S.C.A. § 1001 et seq.], if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act [29 U.S.C.A. § 1002(21)], which is either a bank, insurance company, or registered investment adviser;  or

(ii) any person who, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial matters, or amount of assets under management qualifies as an accredited investor under rules and regulations which the Commission shall prescribe.

(16) The terms "security future", "narrow-based security index", and  "security futures product" have the same meanings as provided in section  3(a)(55) of the Securities Exchange Act of 1934.

(b) Consideration of promotion of efficiency, competition, and capital formation

Whenever pursuant to this subchapter the Commission is engaged in rulemaking and is required to consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 2, 48 Stat. 74;  June 6, 1934, c. 404, §§ 201, 210, 48 Stat. 905, 908;  Aug. 10, 1954, c. 667, Title I, §§ 1 to 4, 68 Stat. 683;  June 25, 1959, Pub.L. 86-70, § 12(a), 73 Stat. 143;  July 12, 1960, Pub.L. 86-624, § 7(a), 74 Stat. 412;  Dec. 14, 1970, Pub.L. 91-547, § 27(a), 84 Stat. 1433;  Oct. 21, 1980, Pub.L. 96-477, Title VI, § 603, 94 Stat. 2294;  Oct. 13, 1982, Pub.L. 97-303, § 1, 96 Stat. 1409;  Dec. 4, 1987, Pub.L. 100-181, Title II, §§ 201, 202, 101 Stat. 1252;  Oct. 11, 1996, Pub.L. 104-290, Title I, § 106(a), 110 Stat. 3424.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, § 301(a)(1), 112 Stat. 3235.)

[FN1]  So in original.

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

1959 Acts. Senate Report No. 331, see 1959 U.S. Code Cong. and Adm. News, p. 1675.

1960 Acts. Senate Report No. 1681, see 1960 U.S. Code Cong. and Adm. News, p. 2963.

1970 Acts. Senate Report No. 91-184 and Conference Report No. 91-1631, see 1970 U.S. Code Cong. and Adm. News, p. 4897.

1980 Acts. House Report No. 96-1341, see 1980 U.S. Code Cong. and Adm. News, p. 4800.

1982 Acts. House Report No. 97-626, see 1982 U.S. Code Cong. and Adm. News, p. 2780.

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

1996 Acts. House Report No. 104-622 and House Conference Report No. 104-864, see 1996 U.S. Code Cong. and Adm. News, p. 3877.

References in Text

The Investment Company Act of 1940, referred to in subsec. (a)(15)(i), is Title I of Act Aug. 22, 1940, c. 686, 54 Stat. 789, which is classified generally to subchapter I (section 80a-1 et seq.) of chapter 2D of this title.  Section 2(a)(48) of such Act is classified to section 80a-2(a)(48) of this title.  For complete classification of this Act to the Code, see section 80a-51 of this title and Tables.

The Employee Retirement Income Security Act of 1974, referred to in subsec. (a)(15)(i), is Pub.L. 93-406, Sept. 2, 1974, 88 Stat. 832, as amended, which is classified principally to chapter 18 (section 1001 et seq.) of Title 29, Labor.  Section 3(21) of such Act is classified to section 1002(21) of Title 29.  For complete classification of this Act to the Code, see Short Title note set out under section 1001 Title 29 and Tables.

Codifications

Words "Philippine Islands" were deleted from the definition of term "Territory" under authority of Proc.No.2695, eff. July 4, 1946, 11 F.R. 7517, 60 Stat. 1352, which granted independence to the Philippine Islands. Proc.No.2695 was issued pursuant to section 1394 of Title 22, Foreign Relations and Intercourse, and is set out as a note under that section.

Amendments

1998 Amendments. Subsec. (a)(15)(i).  Pub.L. 105-353, § 301(a)(1), added "of this subsection" after "paragraph 13" and made technical corrections which did not affect the text.

1996 Amendments. Subsec. (a).  Pub.L. 104-290, § 106(a)(1), designated existing provisions as subsec. (a) "Definitions".

Subsec. (b).  Pub.L. 104-290, § 106(a)(2), added subsec. (b).

1987 Amendments. Par. (5). Pub.L. 100-181, § 201, substituted "Securities and Exchange Commission" for "Federal Trade Commission".

Par. (6). Pub.L. 100-181, § 202, deleted from definition of term "Territory" reference to "Canal Zone," following "Puerto Rico,".

1982 Amendments. Par. (1). Pub.L. 97-303 inserted "any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency," following "mineral rights,".

1980 Amendments. Par. (15).  Pub.L. 96-477 added par. (15).

1970 Amendments. Pars. (13), (14).  Pub.L. 91-547 added pars. (13) and (14).

1960 Amendments. Par. (6).  Pub.L. 86-624 eliminated reference to Hawaii from par. (6).

1959 Amendments. Par. (6).  Pub.L. 86-70 eliminated reference to Alaska from par. (6).

1954 Amendments. Act Aug. 10, 1954, in pars. (3), (8), (10), and (11), redefined the term "sale" so as to distinguish between "offers" and "sales", clarified the definition of "registration statement", and conformed the definition of "prospectus" to changes made by Act Aug. 10, 1954, to sections 77e and 77j of this title.

1934 Amendments. Act June 6, 1934, § 201, amended pars. (1), (4), and (10).

Effective and Applicability Provisions

1970 Acts. Amendment by Pub.L. 91-547 effective Dec. 14, 1970, see section 30 of Pub.L. 91-547, set out as a note under section 80a-52 of this title.

1954 Acts. Section 501 of Act Aug. 10, 1954, provided that:  "This Act [amending this section, sections 77c to 77e, 77j, 77l, 77q, 77v, 77ccc to 77fff, 77xxx, 78k, 79l, 80a-2 and 80a-24 of this title] shall take effect sixty days after the date of its enactment [Aug. 10, 1954]."

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.

Act June 6, 1934, § 210, transferred to Securities and Exchange Commission the powers, duties, and functions of the Federal Trade Commission under this subchapter by substituting the Securities and Exchange Commission for the Federal Trade Commission in the definition of "Commission" in par. (5).

 (a) NON-SECURITY-BASED SWAP AGREEMENTS.--The definition of 'security' in section 2(a)(1) of this title does not include any non-security-based swapagreement (as defined in section 206C of the Gramm-Leach-Bliley Act).
 (b) SECURITY-BASED SWAP AGREEMENTS.--
  (1) The definition of "security" in section 2(a)(1) of this title does not include any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act).
  (2) The Commission is prohibited from registering, or requiring, recommending, or suggesting, the registration under this title of any security-based swap agreement (as defined in section 206B of the Gramm-Leach- Bliley Act).  If the Commission becomes aware that a registrant has filed a registration statement with respect to such a swap agreement, the Commission shall promptly so notify the registrant.  Any such registration  statement with respect to such a swap agreement shall be void and of no force or effect.
  "(3) The Commission is prohibited from--
   "(A) promulgating, interpreting, or enforcing rules;  or
   "(B) issuing orders of general applicability;
  under this title 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 (as defined in section 206B of the Gramm-Leach-Bliley Act).
  (4) References in this title 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 defined in section 206B of the Gramm-Leach-Bliley Act), as the context may require..
[(a) AMENDMENT.--Title II of the Gramm-Leach-Bliley Act (Public Law 106-102) is amended by inserting after section 206 the following new sections:
"SEC. 206A. SWAP AGREEMENT.
 "(a) IN GENERAL.--Except as provided in subsection (b), as used in this section, the term 'swap agreement' means any agreement, contract, or transaction between eligible contract participants (as defined in section 1a(12) of the Commodity Exchange Act as in effect on the date of the enactment of this section), other than a person that is an eligible contract participant under section 1a(12)(C) of the Commodity Exchange Act, the material terms of which (other than price and quantity) are subject to individual negotiation, and that--
  "(1) is a put, call, cap, floor, collar, or similar option of any kind for the purchase or sale of, or based on the value of, one or more interest or other rates, currencies, commodities, indices, quantitative measures, or other financial or economic interests or property of any kind;
  "(2) provides for any purchase, sale, payment or delivery (other than a dividend on an equity security) that is dependent on the occurrence, non- occurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence;
  "(3) provides on an executory basis for the exchange, on a fixed or contingent basis, of one or more payments based on the value or level of one or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind, or any interest therein or based on the value thereof, and that transfers, as between the parties to the transaction, in whole or in part, the financial risk associated with a future change in any such value or level without also conveying a current or future direct or indirect ownership interest in an asset (including any enterprise or investment pool) or liability that incorporates the financial risk so transferred, including any such agreement, contract, or transaction commonly known as an interest rate swap, including a rate floor,  rate cap, rate collar, cross-currency rate swap, basis swap, currency swap, equity index swap, equity swap, debt index swap, debt swap, credit spread, credit default swap, credit swap, weather swap, or commodity swap;
  "(4) provides for the purchase or sale, on a fixed or contingent basis, of any commodity, currency, instrument, interest, right, service, good, article, or property of any kind;  or
  "(5) is any combination or permutation of, or option on, any agreement, contract, or transaction described in any of paragraphs (1) through (4).
 "(b) EXCLUSIONS.--The term 'swap agreement' does not include--
  "(1) any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on the value thereof;
  "(2) any put, call, straddle, option, or privilege entered into on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 relating to foreign currency;
  "(3) any agreement, contract, or transaction providing for the purchase or sale of one or more securities on a fixed basis;
  "(4) any agreement, contract, or transaction providing for the purchase or sale of one or more securities on a contingent basis, unless such agreement, contract, or transaction predicates such purchase or sale on the occurrence of  a bona fide contingency that might reasonably be expected to affect or be affected by the creditworthiness of a party other than a party to the agreement, contract, or transaction;
  "(5) any note, bond, or evidence of indebtedness that is a security as defined in section 2(a)(1) of the Securities Act of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934;  or
  "(6) any agreement, contract, or transaction that is--
   "(A) based on a security;  and
    "(B) entered into directly or through an underwriter (as defined in section 2(a) of the Securities Act of 1933) by the issuer of such security for the purposes of raising capital, unless such agreement, contract, or transaction is entered into to manage a risk associated with capital raising.
 "(c) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS.--As used in this section, the term 'swap agreement' shall be construed to include a master agreement that provides for an agreement, contract, or transaction that is a swap agreement pursuant to subsections (a) and (b), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a swap agreement pursuant to subsections (a) and (b), except that the master agreement shall be considered to be a swap agreement only with respect to each agreement, contract, or transaction under the master agreement that is a swap agreement pursuant to subsections (a) and (b).
"SEC. 206B. SECURITY-BASED SWAP AGREEMENT.
 "As used in this section, the term 'security-based swap agreement' means a swap agreement (as defined in section 206A) of which a material term is based on the price, yield, value, or volatility of any security or any group or index of securities, or any interest therein.
"SEC. 206C. NON-SECURITY-BASED SWAP AGREEMENT.
 "As used in this section, the term 'non-security-based swap agreement' means any swap agreement (as defined in section 206A) that is not a security-based swap agreement (as defined in section 206B).".
 (b) SECURITY DEFINITION.--As used in the amendment made by subsection (a), the term "security" has the same meaning as in section 2(a)(1) of the Securities Act of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934.]

Current through P.L. 106-274, approved 9-22-2000

(a) Exempted securities

Except as hereinafter expressly provided, the provisions of this subchapter shall not apply to any of the following classes of securities:

(1) Reserved.

(2) Any security issued or guaranteed by the United States or any territory thereof, or by the District of Columbia, or by any State of the United States, or by any political subdivision of a State or territory, or by any public instrumentality of one or more States or territories, or by any person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States;  or any certificate of deposit for any of the foregoing;  or any security issued or guaranteed by any bank;  or any security issued by or representing an interest in or a direct obligation of a Federal Reserve bank;  or any interest or participation in any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its capacity as trustee, executor, administrator, or guardian;  or any security which is an industrial development bond (as defined in section 103(c)(2) of Title 26) the interest on which is excludable from gross income under section 103(a)(1) of Title 26 if, by reason of the application of paragraph (4) or (6) of section 103(c) of Title 26 (determined as if paragraphs (4)(A), (5), and (7) were not included in such section 103(c) ), paragraph (1) of such section 103(c) does not apply to such security;  or any interest or participation in a single trust fund, or in a collective trust fund maintained by a bank, or any security arising out of a contract issued by an insurance company, which interest, participation, or security is issued in connection with (A) a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of Title 26, (B) an annuity plan which meets the requirements for the deduction of the employer's contributions under section 404(a)(2) of Title 26, or (C) a governmental plan as defined in section 414(d) of Title 26 which has been established by an employer for the exclusive benefit of its employees or their beneficiaries for the purpose of distributing to such employees or their beneficiaries the corpus and income of the funds accumulated under such plan, if under such plan it is impossible, prior to the satisfaction of all liabilities with respect to such employees and their beneficiaries, for any part of the corpus or income to be used for, or diverted to, purposes other than the exclusive benefit of such employees or their beneficiaries, other than any plan described in clause (A), (B), or (C) of this paragraph (i) the contributions under which are held in a single trust fund or in a separate account maintained by an insurance company for a single employer and under which an amount in excess of the employer's contribution is allocated to the purchase of securities (other than interests or participations in the trust or separate account itself) issued by the employer or any company directly or indirectly controlling, controlled by, or under common control with the employer, (ii) which covers employees some or all of whom are employees within the meaning of section 401(c)(1) of Title 26, or (iii) which is a plan funded by an annuity contract described in section 403(b) of Title 26.  The Commission, by rules and regulations or order, shall exempt from the provisions of section 77e of this title any interest or participation issued in connection with a stock bonus, pension, profit-sharing, or annuity plan which covers employees some or all of whom are employees within the meaning of section 401(c)(1) of Title 26, if and to the extent that the Commission determines this to be necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this subchapter.  For purposes of this paragraph, a security issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank;  and the term "bank" means any national bank, or any banking institution organized under the laws of any State, territory, or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official;  except that in the case of a common trust fund or similar fund, or a collective trust fund, the term "bank" has the same meaning as in the Investment Company Act of 1940 [15 U.S.C.A. § 80a-1 et seq.];

(3) Any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited;

(4) Any security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual;  or any security of a fund that is excluded from the definition of an investment company under section 80a-3(c)(10)(B) of this title;

(5) Any security issued (A) by a savings and loan association, building and loan association, cooperative bank, homestead association, or similar institution, which is supervised and examined by State or Federal authority having supervision over any such institution;  or (B) by (i) a farmer's cooperative organization exempt from tax under section 521 of Title 26, (ii) a corporation described in section 501(c)(16) of Title 26 and exempt from tax under section 501(a) of Title 26, or (iii) a corporation described in section 501(c)(2) of Title 26 which is exempt from tax under section 501(a) of Title 26 and is organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization or corporation described in clause (i) or (ii);

(6) Any interest in a railroad equipment trust.  For purposes of this paragraph "interest in a railroad equipment trust" means any interest in an equipment trust, lease, conditional sales contract, or other similar arrangement entered into, issued, assumed, guaranteed by, or for the benefit of, a common carrier to finance the acquisition of rolling stock, including motive power;

(7) Certificates issued by a receiver or by a trustee or debtor in possession in a case under Title 11, with the approval of the court;

(8) Any insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions, of any State or Territory of the United States or the District of Columbia;

(9) Except with respect to a security exchanged in a case under Title 11, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange;

(10) Except with respect to a security exchanged in a case under Title 11, any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval;

(11) Any security which is a part of an issue offered and sold only to persons resident within a single State or Territory, where the issuer of such security is a person resident and doing business within or, if a corporation, incorporated by and doing business within, such State or Territory.

(12) Any equity security issued in connection with the acquisition by a holding company of a bank under section 1842(a) of Title 12 or a savings association under section 1467a(e) of Title 12, if--

(A) the acquisition occurs solely as part of a reorganization in which security holders exchange their shares of a bank or savings association for shares of a newly formed holding company with no significant assets other than securities of the bank or savings association and the existing subsidiaries of the bank or savings association;

(B) the security holders receive, after that reorganization, substantially the same proportional share interests in the holding company as they held in the bank or savings association, except for nominal changes in shareholders' interests resulting from lawful elimination of fractional interests and the exercise of dissenting shareholders' rights under State or Federal law;

(C) the rights and interests of security holders in the holding company are substantially the same as those in the bank or savings association prior to the transaction, other than as may be required by law;  and

(D) the holding company has substantially the same assets and liabilities, on a consolidated basis, as the bank or savings association had prior to the transaction.

For purposes of this paragraph, the term "savings association" means a savings association (as defined in section 1813(b) of Title 12) the deposits of which are insured by the Federal Deposit Insurance Corporation.

(13) Any security issued by or any interest or participation in any church plan, company or account that is excluded from the definition of an investment company under section 80a-3(c)(14) of this title.

(14) Any security futures product that is--
   (A) cleared by a clearing agency registered under section 17A of the Securities Exchange Act of 1934 or exempt from registration under subsection (b)(7) of such section 17A;  and
   (B) traded on a national securities exchange or a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934.

(b) Additional exemptions

The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of securities to the securities exempted as provided in this section, if it finds that the enforcement of this subchapter with respect to such securities is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering;  but no issue of securities shall be exempted under this subsection where the aggregate amount at which such issue is offered to the public exceeds $5,000,000.

(c) Securities issued by small investment company

The Commission may from time to time by its rules and regulations and subject to such terms and conditions as may be prescribed therein, add to the securities exempted as provided in this section any class of securities issued by a small business investment company under the Small Business Investment Act of 1958 [15 U.S.C.A. § 661 et seq.] if it finds, having regard to the purposes of that Act, that the enforcement of this subchapter with respect to such securities is not necessary in the public interest and for the protection of investors.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 3, 48 Stat. 75;  June 6, 1934, c. 404, Title II, § 202, 48 Stat. 906;  Feb. 4, 1887, c. 104, Title II, § 214, as added Aug. 9, 1935, c. 498, 49 Stat. 557, and amended June 29, 1938, c. 811, § 15, 52 Stat. 1240;  May 15, 1945, c. 122, 59 Stat. 167;  Aug. 10, 1954, c. 667, Title I, § 5, 68 Stat. 684;  Aug. 21, 1958, Pub.L. 85-699, Title III, § 307(a), 72 Stat. 694;  Aug. 10, 1970, Pub.L. 91-373, Title IV, § 401(a), 84 Stat. 718;  Dec. 14, 1970, Pub.L. 91-547, § 27(b), (c), 84 Stat. 1434;  Dec. 19, 1970, Pub.L. 91-565, 84 Stat. 1480;  Dec. 22, 1970, Pub.L. 91-567, § 6(a), 84 Stat. 1498;  Feb. 5, 1976, Pub.L. 94-210, Title III, § 308(a)(1), (3), 90 Stat. 56, 57;  May 21, 1978, Pub.L. 95-283, § 18, 92 Stat. 275;  Oct. 6, 1978, Pub.L. 95-425, § 2, 92 Stat. 962;  Nov. 6, 1978, Pub.L. 95-598, Title III, § 306, 92 Stat. 2674;  Oct. 21, 1980, Pub.L. 96-477, Title III, § 301, Title VII, § 701, 94 Stat. 2291, 2294;  Sept. 20, 1982, Pub.L. 97-261, § 19(d), 96 Stat. 1121;  Dec. 4, 1987, Pub.L. 100-181, Title II, §§ 203, 204, 101 Stat. 1252;  Sept. 23, 1994, Pub.L. 103-325, Title III, § 320, 108 Stat. 2225;  Dec. 8, 1995, Pub.L. 104-62, § 3, 109 Stat. 684;  Oct. 11, 1996, Pub.L. 104-290, Title V, § 508(b), 110 Stat. 3447.)

TEXT

AMENDMENT OF SUBSECTION (A)(2)

< Pub.L. 106-102, Title II, §§ 221(a), 225, Nov. 12, 1999, 113 Stat. 1401, 1402, provided that, effective 18 months after November 12, 1999, subsec. (a)(2) of this section is amended by striking ";  or any interest or participation in any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its capacity as trustee, executor, administrator, or guardian;" and inserting ";  or any interest or participation in any common trust fund or similar fund that is excluded from the definition of the term 'investment company' under section 80a-3(c)(3) of this title;". >

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

1958 Acts. House Report No. 2060 and Conference Report No. 2492, see 1958 U.S. Code Cong. and Adm. News, p. 3678.

1970 Acts. Senate Report No. 91-184 and Conference Report No. 91-1631, see 1970 U.S. Code Cong. and Adm. News, p. 4897.

House Report No. 91-1654, see 1970 U.S. Code Cong. and Adm. News, p. 5023.

House Report No. 91-1655, see 1970 U.S. Code Cong. and Adm. News, p. 5025.

1976 Acts. Senate Report No. 94-499 and Senate Conference Report No. 94-595, see 1976 U.S. Code Cong. and Adm. News, p. 14.

1978 Acts. Senate Report No. 95-763, see 1978 U.S. Code Cong. and Adm. News, p. 764.

Senate Report No. 95-1057, see 1978 U.S. Code Cong. and Adm. News, p. 2421.

Senate Report No. 95-989 and House Report No. 95-595, see 1978 U.S. Code Cong. and Adm. News, p. 5787.

1980 Acts. House Report No. 96-1341, see 1980 U.S. Code Cong. and Adm. News, p. 4800.

1982 Acts. Senate Report No. 97-411 and House Conference Report No. 97-780, see 1982 U.S. Code Cong. and Adm. News, p. 2308.

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

1994 Acts. Senate Report No. 103-169 and House Conference Report No. 103-652, see 1994 U.S. Code Cong. and Adm. News, p. 1881.

1995 Acts. House Report No. 104-333, see 1995 U.S. Code Cong. and Adm. News, p. 619.

1996 Acts. House Report No. 104-622 and House Conference Report No. 104-864, see 1996 U.S. Code Cong. and Adm. News, p. 3877.

1999 Acts. House Conference Report No. 106-434, see 1999 U.S. Code Cong. and Adm. News, p. 245.

References in Text

Section 103 of Title 26, referred to in subsec. (a)(2), which related to interest on certain governmental obligations was amended generally by Pub.L. 99-514, Title XIII, § 1301(a), Oct. 22, 1986, 100 Stat. 2602, and as so amended relates to interest on State and local bonds.  Section 103(b)(2) (formerly section 103(c)(2)), which prior to the general amendment defined industrial development bond, relates to the applicability of the interest exclusion to arbitrage bonds.

The Investment Company Act of 1940, referred to in subsec. (a)(2), (4), is Title I of Act Aug. 22, 1940, c. 686, 54 Stat. 789, as amended, which is classified generally to subchapter I (section 80a-1 et seq.) of chapter 2D of this title.  Section 3(c)(10)(B) of such Act is classified to section 80a-3(c)(10)(B) of this title.  For complete classification of this Act to the Code, see section 80a-51 of this title and Tables.

The Small Business Investment Act of 1958, referred to in subsec. (c), is Pub.L. 85-699, Aug. 21, 1958, 72 Stat. 689, which is classified generally to chapter 14B (section 661 et seq.) of this title.  For complete classification of this Act to the Code, see Short Title note set out under section 661 of this title and Tables.

Amendments

1999 Amendments. Subsec. (a)(2). Pub.L. 106-102, § 221(a), substituted ";  or any interest or participation in any common trust fund or similar fund that is excluded from the definition of the term 'investment company' under section 80a-3(c)(3) of this title;" for ";  or any interest or participation in any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its capacity as trustee, executor, administrator, or guardian;".

1996 Amendments. Subsec. (a)(13).  Pub.L. 104-290, § 508(b), added par. (13).

1995 Amendments. Subsec. (a)(4).  Pub.L. 104-62, § 3, inserted "or any security of a fund that is excluded from the definition of an investment company under section 3(c)(10)(B) of the Investment Company Act of 1940".

1994 Amendments. Subsec. (a)(12).  Pub.L. 103-325, § 320, added par. (12).

1987 Amendments. Subsec. (a)(1).  Pub.L. 100-181, § 203, substituted "Reserved." for "Any security which, prior to or within sixty days after May 27, 1933, has been sold or disposed of by the issuer or bona fide offered to the public, but this exemption shall not apply to any new offering of any such security by an issuer or underwriter subsequent to such sixty days.".

Subsec. (a)(5)(A).  Pub.L. 100-181, § 204, struck out exception provision following "any such institution" reading ", except that the foregoing exemption shall not apply with respect to any such security where the issuer takes from the total amount paid or deposited by the purchaser, by way of any fee, cash value or other device whatsoever, either upon termination of the investment at maturity or before maturity, an aggregate amount in excess of 3 per centum of the face value of such security".

1982 Amendments. Subsec. (a)(6). Pub.L. 97-261 struck out "security issued by a motor carrier the issuance of which is subject to the provisions of section 11302 of Title 49, or any" after "Any".

1980 Amendments. Subsec. (a)(2).  Pub.L. 96-477, § 701, provided that single trust funds did not have to be maintained by banks in order to qualify for exemption from the provisions of this subchapter, substituted provisions relating to securities arising out of contracts issued by insurance companies for provisions relating to separate accounts maintained by insurance companies, provided that an interest, participation, or security could be issued in connection with certain governmental plans as defined in section 414(d) of Title 26 and qualify for exemption from the provisions of this subchapter, and excluded from exemption plans described in cls. (A), (B), or (C) of par. (2) which were funded by annuity contracts described in section 403(b) of Title 26.

Subsec. (b). Pub.L. 96-477, § 301, substituted "$5,000,000" for "$2,000,000".

1978 Amendments. Subsec. (a)(7).  Pub.L. 95-598, § 306(a), substituted "or debtor in possession in a case under Title 11" for "in bankruptcy".

Subsec. (a)(9), (10). Pub.L. 95-598, § 306(b), substituted "Except with respect to a security exchanged in a case under Title 11, any" for "Any".

Subsec. (b). Pub.L. 95-425 substituted "$2,000,000" for "$1,500,000".

Pub.L. 95-283 substituted "$1,500,000" for "$500,000".

1976 Amendments. Subsec. (a)(6).  Pub.L. 94-210, § 308(a)(1), (3), substituted provisions relating to any security issued by a motor carrier, subject to the provisions of section 314 of Title 49, or any interest in a railroad equipment trust, and provisions defining "interest in a railroad equipment trust", for provisions relating to any security issued by a common or contract carrier, subject to the provisions of section 20a of Title 49.

1970 Amendments. Subsec. (a)(2).  Pub.L. 91-567 exempted any interest or participation in any common trust fund or similar fund maintained by a bank exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its capacity as trustee, executor, administrator, or guardian, any security which is an industrial development bond the interest on which is excludable from gross income under section 103(a)(1) of Title 26, any interest or participation in a single or collective trust fund maintained by a bank or in a separate account maintained by an insurance company which interest or participation is issued in connection with a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of Title 26, or an annuity plan which meets the requirements for the deduction of the employer's contribution under section 404(a)(2) of Title 26, directed the Commission to exempt from the provisions of section 77e of this title any interest or participation issued in connection with a stock bonus, pension, profit-sharing, or annuity plan which covers employees some or all of whom are employees within the meaning of section 401(c)(1) of Title 26 if and to the extent that the Commission determines this to be necessary or appropriate in the public interest and consistent with the protection of investors, and provided that for the purposes of this paragraph a security issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank, and that in the case of a common trust fund or similar fund, or a collective trust fund, the term "bank" has the same meaning as in the Investment Company Act of 1940.

Pub.L. 91-547, § 27(b), deleted following security of a Federal Reserve bank reference to industrial development bonds the interest on which is excludable from gross income under section 103(a)(1) of Title 26, and exempted from registration provisions interests or participations in common trust funds maintained by a bank for collective investment of assets held by it in a fiduciary capacity;  interests or participations in bank collective trust funds maintained for funding of employees' stock bonus, pension, or profit-sharing plans;  interests or participations in separate accounts maintained by insurance companies for funding certain stock-bonus, pension, or profit-sharing plans which meet the requirements for qualification under section 401 of Title 26;  and interests or participations issued by bank collective trust funds or insurance company separate accounts for funding certain stock-bonus, pension, profit-sharing, or annuity plans when the Commission by rule, regulation, or order determines this to be necessary in the public interest;  provided that a security issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank;  substituted where first appearing "security issued or guaranteed by any bank" for "security issued or guaranteed by any national bank, or by any banking institution organized under the laws of any State or Territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or Territorial banking commission or similar official", the latter provision now incorporated in a separate definition of term "bank";  and made the Investment Company Act definition of bank applicable as in the case of a common trust fund or similar fund, or a collective trust fund.

Pub.L. 91-373 added reference to industrial development bonds the interest on which is excludable from gross income under section 103(a)(1) of Title 26.

Subsec. (a)(5). Pub.L. 91-547, § 27(c), designated existing provisions as cl. (A), included cooperative bank issues, required the issuer to be an institution which is supervised and examined by State or Federal authority having supervision over such institution, deleted provision following "similar institution" reading "substantially all the business of which is confined to the making of loans to members" and substituted provisions designated as cl. (B) for prior provision relating to a security issued by a farmers' cooperative association as defined in paragraphs (12), (13), and (14) of section 103 of the Revenue Act of 1932.

Subsec. (b). Pub.L. 91-565 substituted "$500,000" for "$300,000."

1958 Amendments. Subsec. (c).  Pub.L. 85-699 added subsec. (c).

1954 Amendments. Subsec. (a)(11).  Act Aug. 10, 1954 inserted "offered and" preceding "sold".

1945 Amendments. Subsec. (b).  Act May 15, 1945 substituted "$300,000" for "$100,000".

1938 Amendments. Subsec. (a)(6).  Act June 29, 1938 reenacted par. (6) without change.

1935 Amendments. Subsec. (a)(6).  Act Feb. 4, 1887 as added by Act Aug. 9, 1935, included a security issued by a contract carrier.

1934 Amendments. Subsec. (a).  Act June 6, 1934 amended pars. (2), (4), and (8) and added pars. (9), (10), and (11).

Effective and Applicability Provisions

1999 Acts. Pub.L. 106-102, Title II, § 225, Nov. 12, 1999, 113 Stat. 1402, provided that:  "This subtitle [Subtitle B of Title II (§§ 211 to 225) of Pub.L. 106-102, Nov. 12, 1999, 113 Stat. 1396 to 1402;  enacting section 80b-10a of this title, amending sections 77c, 78c, 80a-2, 80a-3, 80a-9, 80a-10, 80a-17, 80a-26, 80a-34, and 80b-2 of this title, and enacting this note] shall take effect 18 months after the date of the enactment of this Act [Nov. 12, 1999]."

1995 Acts. Section 7 of Pub.L. 104-62 provided that:  "This Act and the amendments made by this Act [enacting section 80a-3a of this title and amending this section and sections 78c, 78l, 80a-3, 80a-7, and 80b-3 of this title] shall apply in all administrative and judicial actions pending on or commenced after the date of enactment of this Act [Dec. 8, 1995], as a defense to any claim that any person, security, interest, or participation of the type described in this Act and the amendments made by this Act [enacting section 80a-3a of this title and amending this section and sections 78c, 78l, 80a-3, 80a-7, and 80b-3 of this title] is subject to the provisions of the Securities Act of 1933 [section 77a et seq. of this title], the Securities Exchange Act of 1934 [section 78a et seq. of this title], the Investment Company Act of 1940 [section 80a-1 et seq. of this title], or the Investment Advisers Act of 1940 [section 80b-1 et seq. of this title], or any State statute or regulation preempted as provided in section 6 of this Act [section 80a-3a of this title], except as otherwise specifically provided in such Acts or State law."

1982 Acts. Amendment by Pub.L. 97-261 to subsec. (a)(6) of this section effective the 60th day after Sept. 20, 1982, see section 31(a) of Pub.L. 97-261.

1978 Acts. Amendment of subsec. (a)(7), (9), and (10) effective Oct. 1, 1979, see section 402(a) of Pub.L. 95-598, set out as a note preceding section 101 of Title 11, Bankruptcy.

1976 Acts. Section 308(d)(1) of Pub.L. 94-210 provided that:  "The amendments made by subsection (a) of this section [amending subsec. (a)(6) of this section and section 77s of this title and section 314 of Title 49, Transportation] shall take effect on the 60th day after the date of enactment of this Act [Feb. 5, 1976], but shall not apply to any bona fide offering of a security made by the issuer, or by or through an underwriter, before such 60th day."

1970 Acts. Section 6(d) of Pub.L. 91-567 provided that:  "The amendments made by this section [to subsec. (a)(2) of this section and sections 77ddd(a)(4) and 78c(a)(12) of this title] shall apply with respect to securities sold after January 1, 1970."

Amendment of subsec. (a)(2) and (5) of this section and enactment of note provisions hereunder by Pub.L. 91-547 effective Dec. 14, 1970, see section 30 of Pub.L. 91-547, set out as a note under section 80a-52 of this title.

Section 401(c) of Pub.L. 91-373 provided that:  "The amendments made by this section [amending this section and section 78c(a)(12) of this title] shall apply with respect to securities sold after January 1, 1970."

1954 Acts. Amendment effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

Repeals

Act Feb. 14, 1887, c. 104, Title II, § 214, as added Aug. 9, 1935, c. 498, 49 Stat. 557, cited as a credit to this section, was repealed by Pub.L. 97-449,§ 7(b), Jan. 12, 1983, 96 Stat. 2443.

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.

Securities and Investment Company Provisions Inapplicable to Certain Life Insurance Benefits Issued Prior to March 23, 1959

Section 29 of Pub.L. 91-547 provided that:  "The provisions of the Securities Act of 1933 [this subchapter] and the Investment Company Act of 1940 [section 80a-1 et seq. of this title] shall not apply, except for purposes of definition of terms used in this section, to any interest or participation (including any separate account or other fund providing for the sharing of income or gains and losses, and any interest or participation in such account or fund) in any contract, certificate, or policy providing for life insurance benefits which was issued prior to March 23, 1959, by an insurance company, if (1) the form of such contract, certificate, or policy was approved by the insurance commissioner, or similar official or agency, of a State, territory or the District of Columbia, and (2) under such contract, certificate, or policy not to exceed 49 per centum of the gross premiums or other consideration paid was to be allocated to a separate account or other fund providing for the sharing of income or gains and losses.  Nothing herein contained shall be taken to imply that any such interest or participation constitutes a 'security' under any other laws of the United States."

Current through P.L. 106-274, approved 9-22-2000

The provisions of section 77e of this title shall not apply to--

(1) transactions by any person other than an issuer, underwriter, or dealer.

(2) transactions by an issuer not involving any public offering.

(3) transactions by a dealer (including an underwriter no longer acting as an underwriter in respect of the security involved in such transaction), except--

(A) transactions taking place prior to the expiration of forty days after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter,

(B) transactions in a security as to which a registration statement has been filed taking place prior to the expiration of forty days after the effective date of such registration statement or prior to the expiration of forty days after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter after such effective date, whichever is later (excluding in the computation of such forty days any time during which a stop order issued under section 77h of this title is in effect as to the security), or such shorter period as the Commission may specify by rules and regulations or order, and

(C) transactions as to securities constituting the whole or a part of an unsold allotment to or subscription by such dealer as a participant in the distribution of such securities by the issuer or by or through an underwriter.

With respect to transactions referred to in clause (B), if securities of the issuer have not previously been sold pursuant to an earlier effective registration statement the applicable period, instead of forty days, shall be ninety days, or such shorter period as the Commission may specify by rules and regulations or order.

(4) brokers' transactions executed upon customers' orders on any exchange or in the over-the-counter market but not the solicitation of such orders.

(5)(A) Transactions  [FN1] involving offers or sales of one or more promissory notes directly secured by a first lien on a single parcel of real estate upon which is located a dwelling or other residential or commercial structure, and participation interests in such notes--

(i) where such securities are originated by a savings and loan association, savings bank, commercial bank, or similar banking institution which is supervised and examined by a Federal or State authority, and are offered and sold subject to the following conditions:

(a) the minimum aggregate sales price per purchaser shall not be less than $250,000;

(b) the purchaser shall pay cash either at the time of the sale or within sixty days thereof;  and

(c) each purchaser shall buy for his own account only;  or

(ii) where such securities are originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to sections 1709 and 1715b of Title 12 and are offered or sold subject to the three conditions specified in subparagraph (A)(i) to any institution described in such subparagraph or to any insurance company subject to the supervision of the insurance commissioner, or any agency or officer performing like function, of any State or territory of the United States or the District of Columbia, or the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Government National Mortgage Association.

(B) Transactions  [FN1] between any of the entities described in subparagraph (A)(i) or (A)(ii) involving non-assignable contracts to buy or sell the foregoing securities which are to be completed within two years, where the seller of the foregoing securities pursuant to any such contract is one of the parties described in subparagraph (A)(i) or (A)(ii) who may originate such securities and the purchaser of such securities pursuant to any such contract is any institution described in subparagraph (A)(i) or any insurance company described in subparagraph (A)(ii), the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, or the Government National Mortgage Association and where the foregoing securities are subject to the three conditions for sale set forth in subparagraphs (A)(i)(a) through (c).

(C) The  [FN1] exemption provided by subparagraphs (A) and (B) shall not apply to resales of the securities acquired pursuant thereto, unless each of the conditions for sale contained in subparagraphs (A)(i)(a) through (c) are satisfied.

(6) transactions involving offers or sales by an issuer solely to one or more accredited investors, if the aggregate offering price of an issue of securities offered in reliance on this paragraph does not exceed the amount allowed under section 77c(b) of this title, if there is no advertising or public solicitation in connection with the transaction by the issuer or anyone acting on the issuer's behalf, and if the issuer files such notice with the Commission as the Commission shall prescribe.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 4, 48 Stat. 77;  June 6, 1934, c. 404, Title II, § 203, 48 Stat. 906;  Aug. 10, 1954, c. 667, Title I, § 6, 68 Stat. 684;  Aug. 20, 1964, Pub.L. 88-467, § 12, 78 Stat. 580;  June 4, 1975, Pub.L. 94-29,§ 30, 89 Stat. 169;  Oct. 21, 1980, Pub.L. 96-477, Title VI, § 602, 94 Stat. 2294.)

[FN1]  So in original.  Probably should not be capitalized.

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

1964 Acts. House Report No. 1418, see 1964 U.S. Code Cong. and Adm. News, p. 3013.

1975 Acts. Senate Report No. 94-75 and House Conference Report No. 94-229, see 1975 U.S. Code Cong. and Adm. News, p. 179.

1980 Acts. House Report No. 96-1341, see 1980 U.S. Code Cong. and Adm. News, p. 4800.

Amendments

1980 Amendments. Par. (6).  Pub.L. 96-477 added par. (6).

1975 Amendments. Par. (5).  Pub.L. 94-29 added par. (5).

1964 Amendments. Pub.L. 88-467 substituted in the introductory statement "shall not apply to--" for "shall not apply to any of the following transactions:".

Par. (1). Pub.L. 88-467 reenacted the existing first provision of par. (1) and eliminated the second and third provisions, which are now incorporated in pars. (2) and (3)(A) to (C).

Par. (2). Pub.L. 88-467 redesignated the second provision of former par. (1) as par. (2).  Former par. (2) redesignated par. (4).

Par. (3). Pub.L. 88-467 redesignated the third provision of former par. (1) as par. (3), designated the excepted transactions as cls. (A) to (C), inserted in cl. (B) "or such shorter period as the Commission may specify by rules and regulations or order" and added the sentence relating to the applicable period to transactions referred to in cl. (B).

Par. (4). Pub.L. 88-467 redesignated former par. (2) as par. (4) and substituted "over-the-counter market" for "open or counter market".

1954 Amendments. Act Aug. 10, 1954 reduced from 1 year to 40 days the period during which the delivery of a prospectus is required in trading transactions as distinguished from initial distribution of the new securities.

1934 Amendments. Act June 6, 1934, among other changes, repealed a former par. (3), provisions of which are now covered by section 77c(9), (10) of this title.

Effective and Applicability Provisions

1975 Acts. Amendment 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.

1964 Acts. Amendment 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.

1954 Acts. Amendment by Act Aug. 10, 1954, effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

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.

Current through P.L. 106-274, approved 9-22-2000

(a) Sale or delivery after sale of unregistered securities

Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly--

(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise;  or

(2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale.

(b) Necessity of prospectus meeting requirements of section 77j of this title

It shall be unlawful for any person, directly or indirectly--

(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to carry or transmit any prospectus relating to any security with respect to which a registration statement has been filed under this subchapter, unless such prospectus meets the requirements of section 77j of this title;  or

(2) to carry or cause to be carried through the mails or in interstate commerce any such security for the purpose of sale or for delivery after sale, unless accompanied or preceded by a prospectus that meets the requirements of subsection (a) of section 77j of this title.

(c) Necessity of filing registration statement

It shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed as to such security, or while the registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under section 77h of this title.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 5, 48 Stat. 77;  June 6, 1934, c. 404, Title II, § 204, 48 Stat. 906;  Aug. 10, 1954, c. 667, Title I, § 7, 68 Stat. 684.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

Amendments

1954 Amendments. Subsec. (a)(1).  Act Aug. 10, 1954 deleted "or offer to buy" following "to sell".

Subsec. (b).  Act Aug. 10, 1954, in par. (1), substituted "with respect to which a registration statement has been filed" for "registered" and in par. (2) omitted "to" following "to carry or" and added "subsection (a) of" preceding "section 77j of this title".

Subsec. (c).  Act Aug. 10, 1954 added subsec. (c).

1934 Amendments. Subsec. (c).  Act June 6, 1934 repealed subsec. (c), the provisions of which were replaced by section 77c(a)(11) of this title.

Effective and Applicability Provisions

1954 Acts. Amendment effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

Increased Access to Foreign Business Information

Pub.L. 104-290, Title I, § 109, Oct. 11, 1996, 110 Stat. 3426, provided that:  "Not later than 1 year after the date of enactment of this Act [Oct. 11, 1996], the Commission shall adopt rules under the Securities Act of 1933 [this subchapter] concerning the status under the registration provisions of the Securities Act of 1933 of foreign press conferences and foreign press releases by persons engaged in the offer and sale of securities."

Current through P.L. 106-274, approved 9-22-2000

(a) Method of registration

Any security may be registered with the Commission under the terms and conditions hereinafter provided, by filing a registration statement in triplicate, at least one of which shall be signed by each issuer, its principal executive officer or officers, its principal financial officer, its comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or persons performing similar functions, by the majority of the persons or board having the power of management of the issuer), and in case the issuer is a foreign or Territorial person by its duly authorized representative in the United States;  except that when such registration statement relates to a security issued by a foreign government, or political subdivision thereof, it need be signed only by the underwriter of such security.  Signatures of all such persons when written on the said registration statements shall be presumed to have been so written by authority of the person whose signature is so affixed and the burden of proof, in the event such authority shall be denied, shall be upon the party denying the same.  The affixing of any signature without the authority of the purported signer shall constitute a violation of this subchapter.  A registration statement shall be deemed effective only as to the securities specified therein as proposed to be offered.

(b) Registration fee

(1) Recovery of cost of services

The Commission shall, in accordance with this subsection, collect registration fees that are designed to recover the costs to the government of the securities registration process, and costs related to such process, including enforcement activities, policy and rulemaking activities, administration, legal services, and international regulatory activities.

(2) Fee payment required

At the time of filing a registration statement, the applicant shall pay to the Commission a fee that shall be equal to the sum of the amounts (if any) determined under the rates established by paragraphs (3) and (4).  The Commission shall publish in the Federal Register notices of the fee rates applicable under this section for each fiscal year.

(3) General revenue fees

The rate determined under this paragraph is a rate equal to $200 per $1,000,000 of the maximum aggregate price at which such securities are proposed to be offered, except that during fiscal year 2007 and any succeeding fiscal year such rate is equal to $67 per $1,000,000 of the maximum aggregate price at which such securities are proposed to be offered.  Fees collected during any fiscal year pursuant to this paragraph shall be deposited and credited as general revenues of the Treasury.

(4) Offsetting collection fees

(A) In general

Except as provided in subparagraphs (B) and (C), the rate determined under this paragraph is a rate equal to the following amount per $1,000,000 of the maximum aggregate price at which such securities are proposed to be offered:

(i) $95 during fiscal year 1998;

(ii) $78 during fiscal year 1999;

(iii) $64 during fiscal year 2000;

(iv) $50 during fiscal year 2001;

(v) $39 during fiscal year 2002;

(vi) $28 during fiscal year 2003;

(vii) $9 during fiscal year 2004;

(viii) $5 during fiscal year 2005;  and

(ix) $0 during fiscal year 2006 or any succeeding fiscal year.

(B) Limitation;  deposit

Except as provided in subparagraph (C), no amounts shall be collected pursuant to this paragraph (4) for any fiscal year except to the extent provided in advance in appropriations Acts.  Fees collected during any fiscal year pursuant to this paragraph shall be deposited and credited as offsetting collections in accordance with appropriations Acts.

(C) Lapse of appropriations

If on the first day of a fiscal year a regular appropriation to the Commission has not been enacted, the Commission shall continue to collect fees (as offsetting collections) under this paragraph at the rate in effect during the preceding fiscal year, until such a regular appropriation is enacted.

(5) Pro rata application of rates

The rates required by this subsection shall be applied pro rata to amounts and balances equal to less than $1,000,000.

(c) Time registration effective

The filing with the Commission of a registration statement, or of an amendment to a registration statement, shall be deemed to have taken place upon the receipt thereof, but the filing of a registration statement shall not be deemed to have taken place unless it is accompanied by a United States postal money order or a certified bank check or cash for the amount of the fee required under subsection (b) of this section.

(d) Information available to public

The information contained in or filed with any registration statement shall be made available to the public under such regulations as the Commission may prescribe, and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such reasonable charge as the Commission may prescribe.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 6, 48 Stat. 78;  Oct. 22, 1965, Pub.L. 89-289,§ 1, 79 Stat. 1051;  Dec. 4, 1987, Pub.L. 100-181, Title II, § 205, 101 Stat. 1252;  Oct. 11, 1996, Pub.L. 104-290, Title IV, § 404, 110 Stat. 3441.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1965 Acts. House Report No. 1015, see 1965 U.S. Code Cong. and Adm. News, p. 3762.

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

1996 Acts. House Report No. 104-622 and House Conference Report No. 104-864, see 1996 U.S. Code Cong. and Adm. News, p. 3877.

Amendments

1996 Amendments. Subsec. (b).  Pub.L. 104-290, § 404, substituted provisions set out as pars. (1) to (5) relating to recovery of cost of services, fee payment required, general revenue fees, offsetting collection fees, and pro rata application of rates, respectively, for provisions providing that applicant pay fee of one-fiftieth of 1 per centum of the maximum aggregate price at which securities are proposed to be offered, but not less than $100.

1987 Amendments. Subsec. (e). Pub.L. 100-181 struck out the subsection which had originally provided that no registration statement should be filed within the first 40 days following May 27, 1933.

1965 Amendments. Subsec. (b).  Pub.L. 89-289 substituted "one-fiftieth" for "one one-hundredth" and "$100" for "$25".

Effective and Applicability Provisions

1965 Acts. Section 2 of Pub.L. 89-289 provided that:  "The amendment made by the first section of this Act [amending this section] shall take effect January 1, 1966."

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Availability of Funds Collected Under Fee Rate and Offsetting Collection Authority

Pub.L. 105-46, § 113, Sept. 30, 1997, 111 Stat. 1156, provided that:  "Notwithstanding any other provision of this joint resolution [H.J. Res. 94, which was enacted as Pub.L. 105-46], except section 106 [section 106 of Pub.L. 105-46 was not classified to the Code], the amount made available to the Securities and Exchange Commission, under the heading Salaries and Expenses, shall include, in addition to direct appropriations, the amount it collects under the fee rate and offsetting collection authority contained in Public Law 104-208 [set out as the "Increase in Fees" note under this section], which fee rate and offsetting collection authority shall remain in effect during the period of this joint resolution."

Similar provisions were contained in the following continuing Appropriations Acts:

Pub.L. 104-99, Title II, § 209, Jan. 26, 1996, 110 Stat. 37.

Pub.L. 104-56, § 119, Nov. 20, 1995, 109 Stat. 552.

Pub.L. 104-54, § 119, Jan. 4, 1995, 109 Stat. 544.

Pub.L. 104-31, § 120, Sept. 30, 1995, 109 Stat. 282.

Increase in Fees

Pub.L. 104-208, Div. A, Title I, § 101(a) [Title V], Sept. 30, 1996, 110 Stat. 3009-___, provided in part:  "That immediately upon enactment of this Act [Pub.L. 104-208, 110 Stat. 3009, which was approved Sept. 30, 1996], the rate of fees under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) [subsec. (b) of this section] shall increase from one-fiftieth of one percentum to one-thirty-third of one percentum, and such increase shall be deposited as an offsetting collection to this appropriation, to remain available until expended, to recover costs of services of the securities registration process."

Similar provisions were contained in the following prior Appropriations Act:

Pub.L. 104-134, Title I, § 101[(a)] [Title V], Apr. 26, 1996, 110 Stat. 1321-60;  renumbered Title I Pub.L. 104-140, § 1(a), May 2, 1996, 110 Stat. 1327.

Increase in Registration Fees and Deposit Into Treasury

Pub.L. 103-352, Oct. 10, 1994, 108 Stat. 3148, provided that:

"Section 1. Continued collection of revenues authorized.

"During fiscal year 1995, the rate of fees under section 6(b) of the Securities Act of 1933 (15 U.S.C. 77f(b)) [subsec. (b) of this section] shall remain at 1/29 of 1 percent.

"Sec. 2. Deposit of collections.

"The fees collected under section 6(b) of the Securities Act of 1933 [subsec. (b) of this section] (to the extent attributable to a rate in excess of 1/50 of 1 percent by reason of section 1 of this Act) shall be deposited as an offsetting collection to the amounts appropriated to the Securities and Exchange Commission for fiscal year 1995, to remain available until expended."

Similar Provisions

Similar provisions were contained in the following prior Appropriations Acts:

Pub.L. 103-121, Title I, Oct. 27, 1993, 197 Stat. 1168.

Pub.L. 102-395, Title I, Oct. 6, 1992, 106 Stat. 1848.

Pub.L. 102-140, Title I, Oct. 28, 1991, 105 Stat. 798.

Pub.L. 101-515, Title V, Nov. 5, 1990, 104 Stat. 2139.

Pub.L. 101-162, Title V, Nov. 21, 1989, 103 Stat. 1022.

Current through P.L. 106-274, approved 9-22-2000

(a) The registration statement, when relating to a security other than a security issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in Schedule A of section 77aa of this title, and when relating to a security issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in Schedule B of section 77aa of this title;  except that the Commission may by rules or regulations provide that any such information or document need not be included in respect of any class of issuers or securities if it finds that the requirement of such information or document is inapplicable to such class and that disclosure fully adequate for the protection of investors is otherwise required to be included within the registration statement.  If any accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, is named as having prepared or certified any part of the registration statement, or is named as having prepared or certified a report or valuation for use in connection with the registration statement, the written consent of such person shall be filed with the registration statement.  If any such person is named as having prepared or certified a report or valuation (other than a public official document or statement) which is used in connection with the registration statement, but is not named as having prepared or certified such report or valuation for use in connection with the registration statement, the written consent of such person shall be filed with the registration statement unless the Commission dispenses with such filing as impracticable or as involving undue hardship on the person filing the registration statement.  Any such registration statement shall contain such other information, and be accompanied by such other documents, as the Commission may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors.

(b)(1) The Commission shall prescribe special rules with respect to registration statements filed by any issuer that is a blank check company.  Such rules may, as the Commission determines necessary or appropriate in the public interest or for the protection of investors--

(A) require such issuers to provide timely disclosure, prior to or after such statement becomes effective under section 77h of this title, of (i) information regarding the company to be acquired and the specific application of the proceeds of the offering, or (ii) additional information necessary to prevent such statement from being misleading;

(B) place limitations on the use of such proceeds and the distribution of securities by such issuer until the disclosures required under subparagraph (A) have been made;  and

(C) provide a right of rescission to shareholders of such securities.

(2) The Commission may, as it determines consistent with the public interest and the protection of investors, by rule or order exempt any issuer or class of issuers from the rules prescribed under paragraph (1).

(3) For purposes of paragraph (1) of this subsection, the term "blank check company" means any development stage company that is issuing a penny stock (within the meaning of section 78c(a)(51) of this title) and that--

(A) has no specific business plan or purpose;  or

(B) has indicated that its business plan is to merge with an unidentified company or companies.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 7, 48 Stat. 78;  Oct. 15, 1990, Pub.L. 101-429, Title V, § 508, 104 Stat. 956.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1990 Acts. House Report Nos. 101-616 and 101-617, see U.S. Code Cong. and Adm. News, p. 1379.

Amendments

1990 Amendments. Subsec. (a).  Pub.L. 101-429, § 508(1), designated existing provision as subsec. (a).

Subsec. (b).  Pub.L. 101-429, § 508(2), added subsec. (b).

Effective and Applicability Provisions

1990 Acts. Section 1(c) of Pub.L. 101-429 provided that:

"(1) In general.--Except as provided in paragraphs (2) and (3), the amendments made by 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 sections 78a, 78o, and 78s of this title] shall be effective upon enactment [Oct. 15, 1990].

"(2) Civil penalties.--

"(A) In general.--No civil penalty may be imposed pursuant to the amendments made by this Act on the basis of conduct occurring before the date of enactment of this Act [Oct. 15, 1990].

"(B) Accounting and disgorgement.--Subparagraph (A) shall not operate to preclude the Securities and Exchange Commission from ordering an accounting or disgorgement pursuant to the amendments made by this Act.

"(3) Special rules for Title V.--

"(A) Sections 503 and 504.--Except as provided in subparagraph (C), sections 503 [enacting section 78c(a)(51) of this title] and 504 [amending section 78o(b)(6) of this title] shall be effective 12 months after the date of enactment of this Act [Oct. 15, 1990] or upon the issuance of final regulations initially implementing such section, whichever is earlier.

"(B) Sections 505 and 508.--Except as provided in subparagraph (C), sections 505 [enacting section 78o(g) of this title] and 508 [amending this section] shall be effective 18 months after the date of enactment of this Act [Oct. 15, 1990] or upon the issuance of final regulations initially implementing such sections, whichever is earlier.

"(C) Commencement of rulemaking.--Not later than 180 days after the date of enactment of this Act [Oct. 15, 1990], the Commission shall commence rulemaking proceedings to implement sections 503, 505, and 508."

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

(a) Effective date of registration statement

Except as hereinafter provided, the effective date of a registration statement shall be the twentieth day after the filing thereof or such earlier date as the Commission may determine, having due regard to the adequacy of the information respecting the issuer theretofore available to the public, to the facility with which the nature of the securities to be registered, their relationship to the capital structure of the issuer and the rights of holders thereof can be understood, and to the public interest and the protection of investors.  If any amendment to any such statement is filed prior to the effective date of such statement, the registration statement shall be deemed to have been filed when such amendment was filed;  except that an amendment filed with the consent of the Commission, prior to the effective date of the registration statement, or filed pursuant to an order of the Commission, shall be treated as a part of the registration statement.

(b) Incomplete or inaccurate registration statement

If it appears to the Commission that a registration statement is on its face incomplete or inaccurate in any material respect, the Commission may, after notice by personal service or the sending of confirmed telegraphic notice not later than ten days after the filing of the registration statement, and opportunity for hearing (at a time fixed by the Commission) within ten days after such notice by personal service or the sending of such telegraphic notice, issue an order prior to the effective date of registration refusing to permit such statement to become effective until it has been amended in accordance with such order.  When such statement has been amended in accordance with such order the Commission shall so declare and the registration shall become effective at the time provided in subsection (a) of this section or upon the date of such declaration, whichever date is the later.

(c) Effective date of amendment to registration statement

An amendment filed after the effective date of the registration statement, if such amendment, upon its face, appears to the Commission not to be incomplete or inaccurate in any material respect, shall become effective on such date as the Commission may determine, having due regard to the public interest and the protection of investors.

(d) Untrue statements or omissions in registration statement

If it appears to the Commission at any time that the registration statement includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may, after notice by personal service or the sending of confirmed telegraphic notice, and after opportunity for hearing (at a time fixed by the Commission) within fifteen days after such notice by personal service or the sending of such telegraphic notice, issue a stop order suspending the effectiveness of the registration statement.  When such statement has been amended in accordance with such stop order, the Commission shall so declare and thereupon the stop order shall cease to be effective.

(e) Examination for issuance of stop order

The Commission is empowered to make an examination in any case in order to determine whether a stop order should issue under subsection (d) of this section.  In making such examination the Commission or any officer or officers designated by it shall have access to and may demand the production of any books and papers of, and may administer oaths and affirmations to and examine, the issuer, underwriter, or any other person, in respect of any matter relevant to the examination, and may, in its discretion, require the production of a balance sheet exhibiting the assets and liabilities of the issuer, or its income statement, or both, to be certified to by a public or certified accountant approved by the Commission.  If the issuer or underwriter shall fail to cooperate, or shall obstruct or refuse to permit the making of an examination, such conduct shall be proper ground for the issuance of a stop order.

(f) Notice requirements

Any notice required under this section shall be sent to or served on the issuer, or, in case of a foreign government or political subdivision thereof, to or on the underwriter, or, in the case of a foreign or Territorial person, to or on its duly authorized representative in the United States named in the registration statement, properly directed in each case of telegraphic notice to the address given in such statement.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 8, 48 Stat. 79;  Aug. 22, 1940, c. 686, Title III, § 301, 54 Stat. 857.)

HISTORICAL AND STATUTORY NOTES 

Amendments

1940 Amendments. Subsec. (a).  Act Aug. 22, 1940 amended subsec. (a) generally.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

(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 subchapter, 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) of this section 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) of this section, 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 proceeding.  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

This subsection 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, 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.

(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) of this section, 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 77i(a) 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), of this section, 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.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 8A, as added Oct. 15, 1990, Pub.L. 101-429, Title I, § 102, 104 Stat. 933.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1990 Acts. House Report Nos. 101-616 and 101-617, see U.S. Code Cong. and Adm. News, p. 1379.

Effective and Applicability Provisions

1990 Acts. Section effective Oct. 15, 1990, with special provisions for imposition of civil penalties and accounting and disgorgement, see section 1(c)(1) and (2) of Pub.L. 101-429, set out as a note under section 77g of this title.

Current through P.L. 106-274, approved 9-22-2000

(a) Any person aggrieved by an order of the Commission may obtain a review of such order in the court of appeals of the United States, within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such Court, within sixty days after the entry of such order, a written petition praying that the order of the Commission be modified or be set aside in whole or in part.  A copy of such petition shall be forthwith transmitted by the clerk of the court to the Commission, and thereupon the Commission shall file in the court the record upon which the order complained of was entered, as provided in section 2112 of Title 28.  No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission.  The finding of the Commission as to the facts, if supported by evidence, shall be conclusive.  If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the hearing before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper.  The Commission may modify its findings as to the facts, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original order.  The jurisdiction of the court shall be exclusive and its judgment and decree, affirming, modifying, or setting aside, in whole or in part, any order of the Commission, shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in section 1254 of Title 28.

(b) The commencement of proceedings under subsection (a) of this section shall not, unless specifically ordered by the court, operate as a stay of the Commission's order.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 9, 48 Stat. 80;  June 7, 1934, c. 426, 48 Stat. 926;  June 25, 1948, c. 646, § 32(a), 62 Stat. 991;  May 24, 1949, c. 139, § 127, 63 Stat. 107;  Aug. 28, 1958, Pub.L. 85-791, § 9, 72 Stat. 945;  Dec. 4, 1987, Pub.L. 100-181, Title II, § 206, 101 Stat. 1252.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1958 Acts. Senate Report No. 2129, see 1958 U.S. Code Cong. and Adm. News, p. 3996.

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

Amendments

1987 Amendments. Subsec. (a).  Pub.L. 100-181, § 206(1) to (3), substituted in the first sentence "court of appeals" for "Circuit Court of Appeals" and "United States Court of Appeals for the District of Columbia" for "Court of Appeals of the District of Columbia" and in the last sentence "section 1254 of Title 28" for "sections 239 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 346 and 347)", respectively.

1958 Amendments. Subsec. (a).  Pub.L. 85-791 substituted "transmitted by the clerk of the court to" for "served upon", eliminated "certify and" preceding "file in the court" and, "a transcript of" following "file in the court", and inserted "as provided in section 2112 of Title 28".

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

(a) Information in registration statement;  documents not required

Except to the extent otherwise permitted or required pursuant to this subsection or subsections (c), (d), or (e) of this section--

(1) a prospectus relating to a security other than a security issued by a foreign government or political subdivision thereof, shall contain the information contained in the registration statement, but it need not include the documents referred to in paragraphs (28) to (32), inclusive, of schedule A of section 77aa of this title;

(2) a prospectus relating to a security issued by a foreign government or political subdivision thereof shall contain the information contained in the registration statement, but it need not include the documents referred to in paragraphs (13) and (14) of schedule B of section 77aa of this title;

(3) notwithstanding the provisions of paragraphs (1) and (2) of this subsection when a prospectus is used more than nine months after the effective date of the registration statement, the information contained therein shall be as of a date not more than sixteen months prior to such use, so far as such information is known to the user of such prospectus or can be furnished by such user without unreasonable effort or expense;

(4) there may be omitted from any prospectus any of the information required under this subsection which the Commission may by rules or regulations designate as not being necessary or appropriate in the public interest or for the protection of investors.

(b) Summarizations and omissions allowed by rules and regulations

In addition to the prospectus permitted or required in subsection (a) of this section, the Commission shall by rules or regulations deemed necessary or appropriate in the public interest or for the protection of investors permit the use of a prospectus for the purposes of subsection (b)(1) of section 77e of this title which omits in part or summarizes information in the prospectus specified in subsection (a) of this section.  A prospectus permitted under this subsection shall, except to the extent the Commission by rules or regulations deemed necessary or appropriate in the public interest or for the protection of investors otherwise provides, be filed as part of the registration statement but shall not be deemed a part of such registration statement for the purposes of section 77k of this title.  The Commission may at any time issue an order preventing or suspending the use of a prospectus permitted under this subsection, if it has reason to believe that such prospectus has not been filed (if required to be filed as part of the registration statement) or includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which such prospectus is or is to be used, not misleading.  Upon issuance of an order under this subsection, the Commission shall give notice of the issuance of such order and opportunity for hearing by personal service or the sending of confirmed telegraphic notice.  The Commission shall vacate or modify the order at any time for good cause or if such prospectus has been filed or amended in accordance with such order.

(c) Additional information required by rules and regulations

Any prospectus shall contain such other information as the Commission may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors.

(d) Classification of prospectuses

In the exercise of its powers under subsections (a), (b), or (c) of this section, the Commission shall have authority to classify prospectuses according to the nature and circumstances of their use or the nature of the security, issue, issuer, or otherwise, and, by rules and regulations and subject to such terms and conditions as it shall specify therein, to prescribe as to each class the form and contents which it may find appropriate and consistent with the public interest and the protection of investors.

(e) Information in conspicuous part of prospectus

The statements or information required to be included in a prospectus by or under authority of subsections (a), (b), (c), or (d) of this section, when written, shall be placed in a conspicuous part of the prospectus and, except as otherwise permitted by rules or regulations, in type as large as that used generally in the body of the prospectus.

(f) Prospectus consisting of radio or television broadcast

In any case where a prospectus consists of a radio or television broadcast, copies thereof shall be filed with the Commission under such rules and regulations as it shall prescribe.  The Commission may by rules and regulations require the filing with it of forms and prospectuses used in connection with the offer or sale of securities registered under this subchapter.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 10, 48 Stat. 81;  June 6, 1934, c. 404, Title II, § 205, 48 Stat. 906;  Aug. 10, 1954, c. 667, Title I, § 8, 68 Stat. 685.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

Amendments

1954 Amendments. Act Aug. 10, 1954 complemented changes in section 77e of this title by Act Aug. 10, 1954, permitted offering activities in the waiting period and in so doing rearranged the sequence of the subsections, added the new material contained in subsec. (b) and renumbered subsecs. (c) and (d) as (e) and (f), respectively.

1934 Amendments. Subsec. (b)(1).  Act June 6, 1934 amended subsec. (b)(1).

Effective and Applicability Provisions

1954 Acts. Amendment effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

(a) Persons possessing cause of action;  persons liable

In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue--

(1) every person who signed the registration statement;

(2) every person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted;

(3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner;

(4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him;

(5) every underwriter with respect to such security.

If such person acquired the security after the issuer has made generally available to its security holders an earning statement covering a period of at least twelve months beginning after the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such omission, but such reliance may be established without proof of the reading of the registration statement by such person.

(b) Persons exempt from liability upon proof of issues

Notwithstanding the provisions of subsection (a) of this section no person, other than the issuer, shall be liable as provided therein who shall sustain the burden of proof--

(1) that before the effective date of the part of the registration statement with respect to which his liability is asserted (A) he had resigned from or had taken such steps as are permitted by law to resign from, or ceased or refused to act in, every office, capacity, or relationship in which he was described in the registration statement as acting or agreeing to act, and (B) he had advised the Commission and the issuer in writing that he had taken such action and that he would not be responsible for such part of the registration statement;  or

(2) that if such part of the registration statement became effective without his knowledge, upon becoming aware of such fact he forthwith acted and advised the Commission, in accordance with paragraph (1) of this subsection, and, in addition, gave reasonable public notice that such part of the registration statement had become effective without his knowledge;  or

(3) that (A) as regards any part of the registration statement not purporting to be made on the authority of an expert, and not purporting to be a copy of or extract from a report or valuation of an expert, and not purporting to be made on the authority of a public official document or statement, he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading;  and (B) as regards any part of the registration statement purporting to be made upon his authority as an expert or purporting to be a copy of or extract from a report or valuation of himself as an expert, (i) he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) such part of the registration statement did not fairly represent his statement as an expert or was not a fair copy of or extract from his report or valuation as an expert;  and (C) as regards any part of the registration statement purporting to be made on the authority of an expert (other than himself) or purporting to be a copy of or extract from a report or valuation of an expert (other than himself), he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement of the expert or was not a fair copy of or extract from the report or valuation of the expert;  and (D) as regards any part of the registration statement purporting to be a statement made by an official person or purporting to be a copy of or extract from a public official document, he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue, or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement made by the official person or was not a fair copy of or extract from the public official document.

(c) Standard of reasonableness

In determining, for the purpose of paragraph (3) of subsection (b) of this section, what constitutes reasonable investigation and reasonable ground for belief, the standard of reasonableness shall be that required of a prudent man in the management of his own property.

(d) Effective date of registration statement with regard to underwriters

If any person becomes an underwriter with respect to the security after the part of the registration statement with respect to which his liability is asserted has become effective, then for the purposes of paragraph (3) of subsection (b) of this section such part of the registration statement shall be considered as having become effective with respect to such person as of the time when he became an underwriter.

(e) Measure of damages;  undertaking for payment of costs

The suit authorized under subsection (a) of this section may be to recover such damages as shall represent the difference between the amount paid for the security (not exceeding the price at which the security was offered to the public) and (1) the value thereof as of the time such suit was brought, or (2) the price at which such security shall have been disposed of in the market before suit, or (3) the price at which such security shall have been disposed of after suit but before judgment if such damages shall be less than the damages representing the difference between the amount paid for the security (not exceeding the price at which the security was offered to the public) and the value thereof as of the time such suit was brought:  Provided, That if the defendant proves that any portion or all of such damages represents other than the depreciation in value of such security resulting from such part of the registration statement, with respect to which his liability is asserted, not being true or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading, such portion of or all such damages shall not be recoverable.  In no event shall any underwriter (unless such underwriter shall have knowingly received from the issuer for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interests in the underwriting) be liable in any suit or as a consequence of suits authorized under subsection (a) of this section for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public.  In any suit under this or any other section of this subchapter the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees, and if judgment shall be rendered against a party litigant, upon the motion of the other party litigant, such costs may be assessed in favor of such party litigant (whether or not such undertaking has been required) if the court believes the suit or the defense to have been without merit, in an amount sufficient to reimburse him for the reasonable expenses incurred by him, in connection with such suit, such costs to be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard.

(f) Joint and several liability;  liability of outside director

(1) Except as provided in paragraph (2), all or any one or more of the persons specified in subsection (a) of this section shall be jointly and severally liable, and every person who becomes liable to make any payment under this section may recover contribution as in cases of contract from any person who, if sued separately, would have been liable to make the same payment, unless the person who has become liable was, and the other was not, guilty of fraudulent misrepresentation.

(2)(A) The liability of an outside director under subsection (e) of this section shall be determined in accordance with section 78u-4(f) of this title.

(B) For purposes of this paragraph, the term "outside director" shall have the meaning given such term by rule or regulation of the Commission.

(g) Offering price to public as maximum amount recoverable

In no case shall the amount recoverable under this section exceed the price at which the security was offered to the public.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 11, 48 Stat. 82;  June 6, 1934, c. 404, Title II, § 206, 48 Stat. 907;  Dec. 22, 1995, Pub.L. 104-67, Title II, § 201(b), 109 Stat. 762.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, § 301(a)(2), 112 Stat. 3235.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1995 Acts. Senate Report No. 104-98 and House Conference Report No. 104-369, see 1995 U.S. Code Cong. and Adm. News, p. 679.

Amendments

1998 Amendments. Subsec. (f)(2)(A).  Pub.L. 105-353, § 301(a)(2), struck out "section 78u-4(g)" and inserted "section 78u-4(f)".  This former reference to section 78u-4(g) of this title was in the original "section 38 of the Securities Exchange Act of 1934", which was translated as meaning section 21D(g) of that Act to reflect the probable intent of Congress, because that Act did not contain a section 38 and because section 21D(g) related to proportionate liability.

1995 Amendments. Subsec. (f)(1).  Pub.L. 104-67, § 201(b)(1), designated existing provisions as par. (1), and as so designated, substituted "Except as provided in paragraph (2), all" for "All".

Subsec. (f)(2).  Pub.L. 104-67, § 201(b)(2), added par. (2).

1934 Amendments. Subsec. (a).  Act June 6, 1934 added last paragraph.

Subsecs. (b)(3), (c) to (e).  Act June 6, 1934 amended subsecs. (b)(3), (c) to (e).

Effective and Applicability Provisions

1995 Acts. Section 202 of Pub.L. 104-67 provided that:  "The amendments made by this title [amending this section and section 78u-4 of this title, and enacting provisions set out as a note under section 78j-1 of this title] shall not affect or apply to any private action arising under the securities laws commenced before and pending on the date of enactment of this Act [Dec. 22, 1995]."

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Construction of 1995 Amendment

Nothing in Pub.L. 104-67 or the amendment of this section by section 201(b) of Pub.L. 104-67 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 and Exchange Act of 1934, see section 203 of Pub.L. 104-67, set out as a note under section 78j-1 of this title.

Current through P.L. 106-274, approved 9-22-2000

(a) In general

Any person who--

(1) offers or sells a security in violation of section 77e of this title, or

(2) offers or sells a security (whether or not exempted by the provisions of section 77c of this title, other than paragraph (2) and (14) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission,

shall be liable, subject to subsection (b) of this section, to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

(b) Loss causation

In an action described in subsection (a)(2) of this section, if the person who offered or sold such security proves that any portion or all of the amount recoverable under subsection (a)(2) of this section represents other than the depreciation in value of the subject security resulting from such part of the prospectus or oral communication, with respect to which the liability of that person is asserted, not being true or omitting to state a material fact required to be stated therein or necessary to make the statement not misleading, then such portion or amount, as the case may be, shall not be recoverable.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 12, 48 Stat. 84;  Aug. 10, 1954, c. 667, Title I, § 9, 68 Stat. 686;  Dec. 22, 1995, Pub.L. 104-67, Title I, § 105, 109 Stat. 757.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

1995 Acts. Senate Report No. 104-98 and House Conference Report No. 104-369, see 1995 U.S. Code Cong. and Adm. News, p. 679.

Amendments

1995 Amendments. Subsec. (a).  Pub.L. 104-67, § 105(1), (2), designated existing provisions as subsec. (a), and as so designated, inserted reference to liability loss causation exception as provided in subsec. (b).

Subsec. (b).  Pub.L. 104-67, § 105(3), added subsec. (b).

1954 Amendments. Act Aug. 10, 1954 inserted in pars. (1) and (2) "offers or" preceding "sells".

Effective and Applicability Provisions

1995 Acts. Section 108 of Pub.L. 104-67 provided that:  "The amendments made by this title [enacting sections 77z-1, 77z-2, 78u-4 and 78u-5 of this title and amending this section and sections 77t, 78o, 78t and 78u of this title and section 1964 of Title 18, Crimes and Criminal Procedure] shall not affect or apply to any private action arising under title I of the Securities Exchange Act of 1934 [Title I of Act June 6, 1934, c. 404, as amended, which is classified generally to chapter 2B (section 78a et seq.) of this title] or title I of the Securities Act of 1933 [this subchapter], commenced before and pending on the date of enactment of this Act [December 22, 1995]."

1954 Acts. Amendment effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

Construction of 1995 Amendment

Nothing in Pub.L. 104-67 or the amendment of this section by section 105 of Pub.L. 104-67 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 and Exchange Act of 1934, see section 203 of Pub.L. 104-67, set out as a note under section 78j-1 of this title.

Current through P.L. 106-274, approved 9-22-2000

No action shall be maintained to enforce any liability created under section 77k or 77l(a)(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 77l(a)(1) of this title, unless brought within one year after the violation upon which it is based.  In no event shall any such action be brought to enforce a liability created under section 77k or 77l(a)(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 13, 48 Stat. 84;  June 6, 1934, c. 404, Title II, § 207, 48 Stat. 908.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, § 301(a)(3), 112 Stat. 3235.)

HISTORICAL AND STATUTORY NOTES 

Amendments

1998 Amendments. Pub.L. 105-353, § 301(a)(3), struck out "section 77l(2)" each place it appeared and inserted "section 77l(a)(2)" and struck out "section 77l(1)" each place it appeared and inserted "section 77l(a)(1)".

1934 Amendments. Act June 6, 1934 substituted "one year" for "two years", "three years" for "ten years", and added "or under section 77l(2) of this title more than three years after the sale".

Current through P.L. 106-274, approved 9-22-2000

Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 14, 48 Stat. 84.)

HISTORICAL AND STATUTORY NOTES 

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 77k or 77l of this title, 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, unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 15, 48 Stat. 84;  June 6, 1934, c. 404, Title II, § 208, 48 Stat. 908.)

HISTORICAL AND STATUTORY NOTES 

Amendments

1934 Amendments. Act June 6, 1934 exempted from liability controlling persons having no knowledge or reasonable grounds for belief.

Current through P.L. 106-274, approved 9-22-2000

(a) Remedies additional

Except as provided in subsection (b), the rights and remedies provided by this subchapter [15 U.S.C.A. § 77a et seq.] shall be in addition to any and all other rights and remedies that may exist at law or in equity.

(b) 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--

(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security;  or

(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.

(c) Removal of covered class actions

Any covered class action brought in any State court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b).

(d) Preservation of certain actions

(1) Actions under State law of State of incorporation

(A) Actions preserved

Notwithstanding subsection (b) or (c), a covered class action described in subparagraph (B) of this paragraph 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.

(B) Permissible actions

A covered class action is described in this subparagraph 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 the issuer that--

(I) is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer;  and

(II) concerns decisions of those equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters' or appraisal rights.

(2) State actions

(A) In general

Notwithstanding any other provision of this section, nothing in this section 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.

(B) State pension plan defined

For purposes of this paragraph, the term "State pension plan" means a pension plan established and maintained for its employees by the government of the State or political subdivision thereof, or by any agency or instrumentality thereof.

(3) Actions under contractual agreements between issuers and indenture trustees

Notwithstanding subsection (b) or (c), 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.

(4) Remand of removed actions

In an action that has been removed from a State court pursuant to subsection (c), 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.

(e) 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.

(f) Definitions

For purposes of this section, the following definitions shall apply:

(1) 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.

(2) Covered class action--

(A) In general

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.

(B) Exception for derivative actions

Notwithstanding subparagraph (A), the term "covered class action" does not include an exclusively derivative action brought by one or more shareholders on behalf of a corporation.

(C) 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.

(D) 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.

(3) 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 77r(b) of this title 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 this subchapter pursuant to rules issued by the Commission under section 77d(2) of this title.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 16, 48 Stat. 84.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title I, § 101(a)(1), 112 Stat. 3227.)

HISTORICAL AND STATUTORY NOTES 

Amendments

1998 Amendments. Pub.L. 105-353, § 101(a)(1), rewrote the section and section heading, which formerly read:

"§ 77p.  Additional remedies

"The rights and remedies provided by this subchapter shall be in addition to any and all other rights and remedies that may exist at law or in equity."

Effective and Applicability Provisions

1998 Acts. Pub.L. 105-353, § 101(c), provided that:  "The amendments made by this section [amending this section and sections 77v, 77z-1, 78u-4, and 78bb of this title] shall not affect or apply to any action commenced before and pending on the date of enactment of this Act [Nov. 3, 1998]."

Current through P.L. 106-274, approved 9-22-2000

(a) Use of interstate commerce for purpose of fraud or deceit

It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act) by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly--

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

(b) Use of interstate commerce for purpose of offering for sale

It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.

(c) Exemptions, of section 77c not applicable to this section

The exemptions provided in section 77c of this title shall not apply to the provisions of this section.

(d) The authority of the Commission under this section with respect to security-based swap agreements (as defined in section 206B of the Gramm-Leach- Bliley Act) shall be subject to the restrictions and limitations of section 2A(b) of this title.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 17, 48 Stat. 84;  Aug. 10, 1954, c. 667, Title I, § 10, 68 Stat. 686.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

Amendments

1954 Amendments. Subsec. (a).  Act Aug. 10, 1954 inserted in the introductory paragraph "offer or" preceding "sale".

Effective and Applicability Provisions

1954 Acts. Amendment effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

Current through P.L. 106-274, approved 9-22-2000

(a) Scope of exemption

Except as otherwise provided in this section, no law, rule, regulation, or order, or other administrative action of any State or any political subdivision thereof--

(1) requiring, or with respect to, registration or qualification of securities, or registration or qualification of securities transactions, shall directly or indirectly apply to a security that--

(A) is a covered security;  or

(B) will be a covered security upon completion of the transaction;

(2) shall directly or indirectly prohibit, limit, or impose any conditions upon the use of--

(A) with respect to a covered security described in subsection (b) of this section, any offering document that is prepared by or on behalf of the issuer;  or

(B) any proxy statement, report to shareholders, or other disclosure document relating to a covered security or the issuer thereof that is required to be and is filed with the Commission or any national securities organization registered under section 78o-3 of this title, except that this subparagraph does not apply to the laws, rules, regulations, or orders, or other administrative actions of the State of incorporation of the issuer;  or

(3) shall directly or indirectly prohibit, limit, or impose conditions, based on the merits of such offering or issuer, upon the offer or sale of any security described in paragraph (1).

(b) Covered securities

For purposes of this section, the following are covered securities:

(1) Exclusive Federal registration of nationally traded securities

A security is a covered security if such security is--

(A) listed, or authorized for listing, on the New York Stock Exchange or the American Stock Exchange, or listed, or authorized for listing, on the National Market System of the Nasdaq Stock Market (or any successor to such entities);

(B) listed, or authorized for listing, on a national securities exchange (or tier or segment thereof) that has listing standards that the Commission determines by rule (on its own initiative or on the basis of a petition) are substantially similar to the listing standards applicable to securities described in subparagraph (A);  or

(C) is a security of the same issuer that is equal in seniority or that is a senior security to a security described in subparagraph (A) or (B).

(2) Exclusive Federal registration of investment companies

A security is a covered security if such security is a security issued by an investment company that is registered, or that has filed a registration statement, under the Investment Company Act of 1940.

(3) Sales to qualified purchasers

A security is a covered security with respect to the offer or sale of the security to qualified purchasers, as defined by the Commission by rule.  In prescribing such rule, the Commission may define the term "qualified purchaser" differently with respect to different categories of securities, consistent with the public interest and the protection of investors.

(4) Exemption in connection with certain exempt offerings

A security is a covered security with respect to a transaction that is exempt from registration under this subchapter pursuant to--

(A) paragraph (1) or (3) of section 77d of this title, and the issuer of such security files reports with the Commission pursuant to section 78m or 78o(d) of this title;

(B) section 77d(4) of this title;

(C) section 77c(a) of this title, other than the offer or sale of a security that is exempt from such registration pursuant to paragraph (4), (10), or (11) of such section, except that a municipal security that is exempt from such registration pursuant to paragraph (2) of such section is not a covered security with respect to the offer or sale of such security in the State in which the issuer of such security is located;  or

(D) Commission rules or regulations issued under section 77d(2) of this title, except that this subparagraph does not prohibit a State from imposing notice filing requirements that are substantially similar to those required by rule or regulation under section 77d(2) of this title that are in effect on September 1, 1996.

(c) Preservation of authority

(1) Fraud authority

Consistent with this section, the securities commission (or any agency or officer performing like functions) of any State shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions with respect to fraud or deceit, or unlawful conduct by a broker or dealer, in connection with securities or securities transactions.

(2) Preservation of filing requirements

(A) Notice filings permitted

Nothing in this section prohibits the securities commission (or any agency or office performing like functions) of any State from requiring the filing of any document filed with the Commission pursuant to this subchapter, together with annual or periodic reports of the value of securities sold or offered to be sold to persons located in the State (if such sales data is not included in documents filed with the Commission), solely for notice purposes and the assessment of any fee, together with a consent to service of process and any required fee.

(B) Preservation of fees

(i) In general

Until otherwise provided by law, rule, regulation, or order, or other administrative action of any State, or any political subdivision thereof, adopted after October 11, 1996, filing or registration fees with respect to securities or securities transactions shall continue to be collected in amounts determined pursuant to State law as in effect on the day before such date.

(ii) Schedule

The fees required by this subparagraph shall be paid, and all necessary supporting data on sales or offers for sales required under subparagraph (A), shall be reported on the same schedule as would have been applicable had the issuer not relied on the exemption provided in subsection (a) of this section.

(C) Availability of preemption contingent on payment of fees

(i) In general

During the period beginning on October 11, 1996, and ending 3 years after October 11, 1996, the securities commission (or any agency or office performing like functions) of any State may require the registration of securities issued by any issuer who refuses to pay the fees required by subparagraph (B).

(ii) Delays

For purposes of this subparagraph, delays in payment of fees or underpayments of fees that are promptly remedied shall not constitute a refusal to pay fees.

(D) Fees not permitted on listed securities

Notwithstanding subparagraphs (A), (B), and (C), no filing or fee may be required with respect to any security that is a covered security pursuant to subsection (b)(1) of this section, or will be such a covered security upon completion of the transaction, or is a security of the same issuer that is equal in seniority or that is a senior security to a security that is a covered security pursuant to subsection (b)(1) of this section.

(3) Enforcement of requirements

Nothing in this section shall prohibit the securities commission (or any agency or office performing like functions) of any State from suspending the offer or sale of securities within such State as a result of the failure to submit any filing or fee required under law and permitted under this section.

(d) Definitions

For purposes of this section, the following definitions shall apply:

(1) Offering document

The term "offering document"--

(A) has the meaning given the term "prospectus" in section 77b(a)(10) of this title, but without regard to the provisions of subparagraphs (a) and (b) of that section;  and

(B) includes a communication that is not deemed to offer a security pursuant to a rule of the Commission.

(2) Prepared by or on behalf of the issuer

Not later than 6 months after October 11, 1996, the Commission shall, by rule, define the term "prepared by or on behalf of the issuer" for purposes of this section.

(3) State

The term "State" has the same meaning as in section 78c of this title.

(4) Senior security

The term "senior security" means any bond, debenture, note, or similar obligation or instrument constituting a security and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets or payment of dividends.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 18, 48 Stat. 85;  Oct. 11, 1996, Pub.L. 104-290, Title I, § 102(a), 110 Stat. 3417.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, §§ 301(a)(4), 302, 112 Stat. 3235, 3237.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1996 Acts. House Report No. 104-622 and House Conference Report No. 104-864, see 1996 U.S. Code Cong. and Adm. News, p. 3877.

References in Text

The Investment Company Act of 1940, referred to in subsec. (b)(2), is Act Aug. 22, 1940, c. 686, Title I, 54 Stat. 789, as amended, which is classified principally to subchapter I (section 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.

Amendments

1998 Amendments. Subsec. (b)(1)(A).  Pub.L. 105-353, § 301(a)(4)(A),  inserted ", or authorized for listing," after "Exchange, or listed".

Subsec. (b)(4)(C).  Pub.L. 105-353, struck out "paragraph (4) or (11)" and inserted "paragraph (4), (10), or (11)".

Subsec. (c)(2)(B)(i).  Pub.L. 105-353, § 301(a)(4)(B), made technical corrections which did not affect the text.

Subsec. (c)(2)(C)(i).  Pub.L. 105-353, § 301(a)(4)(C), made technical corrections which did not affect the text.

Subsec. (d)(1)(A).  Pub.L. 105-353, § 301(a)(4)(D), struck out "section 77b(10)" and inserted "section 77b(a)(10)" and struck out "subparagraphs (A) and (B)" and inserted "subparagraphs (a) and (b)".

Subsec. (d)(2).  Pub.L. 105-353, § 301(a)(4)(E), struck out "date of enactment of the Securities Amendments Act of 1996" and inserted "October 11, 1996".

Subsec. (d)(4).  Pub.L. 105-353, § 301(a)(4)(F), struck out "For purposes of this paragraph, the" and inserted "The".

1996 Amendments. Pub.L. 104-290, § 102(a), amended section generally by substituting provisions set out as subsecs. (a) to (d) relating to exemption from State regulation of securities offerings for provisions providing that nothing in this subchapter shall affect State jurisdiction over any security or any person.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Study and Report on Uniformity of State Regulatory Requirements

Section 102(b) of Pub.L. 104-290 provided that:  "The Commission shall conduct a study, after consultation with States, issuers, brokers, and dealers, on the extent to which uniformity of State regulatory requirements for securities or securities transactions has been achieved for securities that are not covered securities (within the meaning of section 18 of the Securities Act of 1933, as amended by paragraph (1) of this subsection [this section]).  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 such study."

Current through P.L. 106-274, approved 9-22-2000

(a) Authority to purchase, hold, and invest in securities;  securities considered as obligations of United States

(1) Any person, trust, corporation, partnership, association, business trust, or business entity created pursuant to or existing under the laws of the United States or any State shall be authorized to purchase, hold, and invest in securities that are--

(A) offered and sold pursuant to section 77d(5) of this title,

(B) mortgage related securities (as that term is defined in section 78c(a)(41) of this title),

(C) small business related securities (as defined in section 78c(a)(53) of this title), or

(D) securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association,

to the same extent that such person, trust, corporation, partnership, association, business trust, or business entity is authorized under any applicable law to purchase, hold or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.

(2) Where State law limits the purchase, holding, or investment in obligations issued by the United States by such a person, trust, corporation, partnership, association, business trust, or business entity, such securities that are--

(A) offered and sold pursuant to section 77d(5) of this title,

(B) mortgage related securities (as that term is defined in section 78c(a)(41) of this title),

(C) small business related securities (as defined in section 78c(a)(53) of this title), or

(D) securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association,

shall be considered to be obligations issued by the United States for purposes of the limitation.

(b) Exception;  validity of contracts under prior law

The provisions of subsection (a) of this section shall not apply with respect to a particular person, trust, corporation, partnership, association, business trust, or business entity or class thereof in any State that, prior to the expiration of seven years after October 3, 1984, enacts a statute that specifically refers to this section and either prohibits or provides for a more limited authority to purchase, hold, or invest in such securities by any person, trust, corporation, partnership, association, business trust, or business entity or class thereof than is provided in subsection (a) of this section.  The enactment by any State of any statute of the type described in the preceding sentence shall not affect the validity of any contractual commitment to purchase, hold, or invest that was made prior thereto and shall not require the sale or other disposition of any securities acquired prior thereto.

(c) Registration and qualification requirements;  exemption;  subsequent enactment by State

Any securities that are offered and sold pursuant to section 77d(5) of this title, that are mortgage related securities (as that term is defined in section 78c(a)(41) of this title), or that are small business related securities (as defined in section 78c(a)(53) of this title) shall be exempt from any law of any State with respect to or requiring registration or qualification of securities or real estate to the same extent as any obligation issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.  Any State may, prior to the expiration of seven years after October 3, 1984, enact a statute that specifically refers to this section and requires registration or qualification of any such security on terms that differ from those applicable to any obligation issued by the United States.

(d) Implementation

(1) Limitation

The provisions of subsections (a) and (b) of this section concerning small business related securities shall not apply with respect to a particular person, trust, corporation, partnership, association, business trust, or business entity or class thereof in any State that, prior to the expiration of 7 years after September 23, 1994, enacts a statute that specifically refers to this section and either prohibits or provides for a more limited authority to purchase, hold, or invest in such small business related securities by any person, trust, corporation, partnership, association, business trust, or business entity or class thereof than is provided in this section.  The enactment by any State of any statute of the type described in the preceding sentence shall not affect the validity of any contractual commitment to purchase, hold, or invest that was made prior to such enactment, and shall not require the sale or other disposition of any small business related securities acquired prior to the date of such enactment.

(2) State registration or qualification requirements

Any State may, not later than 7 years after September 23, 1994, enact a statute that specifically refers to this section and requires registration or qualification of any small business related securities on terms that differ from those applicable to any obligation issued by the United States.

CREDIT(S)

1997 Main Volume

(Pub.L. 98-440, Title I, § 106, Oct. 3, 1984, 98 Stat. 1691;  Pub.L. 103-325, Title II, § 207, Sept. 23, 1994, 108 Stat. 2199.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1984 Acts. Senate Report No. 98-293, see 1984 U.S. Code Cong. and Adm. News, p. 2809.

1994 Acts. Senate Report No. 103-169 and House Conference Report No. 103-652, see 1994 U.S. Code Cong. and Adm. News, p. 1881.

Codifications

Section was enacted as part of the Secondary Mortgage Market Enhancement Act of 1984, and not as part of the Securities Act of 1933, which comprises this subchapter.

Amendments

1994 Amendments. Subsec. (a)(1)(B).  Pub.L. 103-325, § 207(a)(1), struck "or" at end of subpar.(B).

Subsec. (a)(1)(C).  Pub.L. 103-325, § 207(a)(3), added subpar. (C).  Former subpar. (C) redesignated (D).

Subsec. (a)(1)(D).  Pub.L. 103-325, § 207(a)(2), redesignated subpar. (C) as (D).

Subsec. (a)(2)(B).  Pub.L. 103-325, § 207(b)(1), struck "or" at end of subpar. (B).

Subsec. (a)(2)(C).  Pub.L. 103-325, § 207(b)(3), added subpar. (C).  Former subpar. (C) redesignated (D).

Subsec. (a)(2)(D).  Pub.L. 103-325, § 207(b)(2), redesignated subpar. (C) as (D).

Subsec. (c).  Pub.L. 103-325, § 207 (c)(1), (2), substituted in first sentence:  ", that are mortgage related securities" for "or that are mortgage related securities";  and ", or that are small business related securities (as defined in section 78c(a)(53) of this title) shall be exempt" for "shall be exempt", respectively.

Subsec. (d).  Pub.L. 103-325, § 207(d), added subsec. (d).

Current through P.L. 106-274, approved 9-22-2000

(a) The Commission shall have authority from time to time to make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this subchapter, including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers, and defining accounting, technical, and trade terms used in this subchapter.  Among other things, the Commission shall have authority, for the purposes of this subchapter, to prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and earning statement, and the methods to be followed in the preparation of accounts, in the appraisal or valuation of assets and liabilities, in the determination of depreciation and depletion, in the differentiation of recurring and nonrecurring income, in the differentiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable, of consolidated balance sheets or income accounts of any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.  The rules and regulations of the Commission shall be effective upon publication in the manner which the Commission shall prescribe.  No provision of this subchapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commission, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

(b) For the purpose of all investigations which, in the opinion of the Commission, are necessary and proper for the enforcement of this subchapter, any member of the Commission or any officer or officers designated by it are empowered to administer oaths and affirmations, subpena witnesses, take evidence, and require the production of any books, papers, or other documents which the Commission deems relevant or material to the inquiry.  Such attendance of witnesses and the production of such documentary evidence may be required from any place in the United States or any Territory at any designated place of hearing.

(c)(1) The Commission is authorized to cooperate with any association composed of duly constituted representatives of State governments whose primary assignment is the regulation of the securities business within those States, and which, in the judgment of the Commission, could assist in effectuating greater uniformity in Federal-State securities matters.  The Commission shall, at its discretion, cooperate, coordinate, and share information with such an association for the purposes of carrying out the policies and projects set forth in paragraphs (2) and (3).

(2) It is the declared policy of this subsection that there should be greater Federal and State cooperation in securities matters, including--

(A) maximum effectiveness of regulation,

(B) maximum uniformity in Federal and State regulatory standards,

(C) minimum interference with the business of capital formation, and

(D) a substantial reduction in costs and paperwork to diminish the burdens of raising investment capital (particularly by small business) and to diminish the costs of the administration of the Government programs involved.

(3) The purpose of this subsection is to engender cooperation between the Commission, any such association of State securities officials, and other duly constituted securities associations in the following areas:

(A) the sharing of information regarding the registration or exemption of securities issues applied for in the various States;

(B) the development and maintenance of uniform securities forms and procedures;  and

(C) the development of a uniform exemption from registration for small issuers which can be agreed upon among several States or between the States and the Federal Government.  The Commission shall have the authority to adopt such an exemption as agreed upon for Federal purposes.  Nothing in this subchapter shall be construed as authorizing preemption of State law.

(4) In order to carry out these policies and purposes, the Commission shall conduct an annual conference as well as such other meetings as are deemed necessary, to which representatives from such securities associations, securities self-regulatory organizations, agencies, and private organizations involved in capital formation shall be invited to participate.

(5) For fiscal year 1982, and for each of the three succeeding fiscal years, there are authorized to be appropriated such amounts as may be necessary and appropriate to carry out the policies, provisions, and purposes of this subsection.  Any sums so appropriated shall remain available until expended.

(6) Notwithstanding any other provision of law, neither the Commission nor any other person shall be required to establish any procedures not specifically required by the securities laws, as that term is defined in section 78c(a)(47) of this title, or by chapter 5 of Title 5, in connection with cooperation, coordination, or consultation with--

(A) any association referred to in paragraph (1) or (3) or any conference or meeting referred to in paragraph (4), while such association, conference, or meeting is carrying out activities in furtherance of the provisions of this subsection;  or

(B) any forum, agency, or organization, or group referred to in section 80c-1 of this title, while such forum, agency, organization, or group is carrying out activities in furtherance of the provisions of such section 80c-1.

As used in this paragraph, the terms "association" "conference", "meeting", "forum", "agency", "organization", and "group" include any committee, subgroup, or representative of such entities.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 19, 48 Stat. 85;  June 6, 1934, c. 404, Title II, § 209, 48 Stat. 908;  Feb. 5, 1976, Pub.L. 94-210, Title III, § 308(a)(2), 90 Stat. 57;  Oct. 21, 1980, Pub.L. 96-477, Title V, § 505, 94 Stat. 2292;  Dec. 4, 1987, Pub.L. 100-181, Title II, § 207, 101 Stat. 1252.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1976 Acts. Senate Report No. 94-499 and Senate Conference Report No. 94-595, see 1976 U.S. Code Cong. and Adm. News, p. 14.

1980 Acts. House Report No. 96-1341, see 1980 U.S. Code Cong. and Adm. News, p. 4800.

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

Amendments

1987 Amendments. Subsec. (c)(6).  Pub.L. 100-181 added par. (6).

1980 Amendments. Subsec. (c).  Pub.L. 96-477 added subsec. (c).

1976 Amendments. Subsec. (a).  Pub.L. 94-210 struck out provisions relating to rules and regulations applicable to any common carrier subject to the provisions of section 20 of Title 49.

1934 Amendments. Subsec. (a).  Act June 6, 1934 inserted "technical" in the first sentence and excepted from liability good faith compliance with rules and regulations.

Effective and Applicability Provisions

1980 Acts. Amendment by Pub.L. 96-477 effective Jan. 1, 1981, see section 507 of Pub.L. 96-477, set out as a note under other section 80c of this title.

1976 Acts. Amendment by Pub.L. 94-210 effective the 60th day after Feb. 5, 1976, but not applicable to any bona fide offering of a security made by the issuer, or by or through an underwriter, before such 60th day, see section 308(d)(1) of Pub.L. 94-210, set out as a note under section 77c of this title.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

(a) Investigation of violations

Whenever it shall appear to the Commission, either upon complaint or otherwise, that the provisions of this subchapter, or of any rule or regulation prescribed under authority thereof, have been or are about to be violated, it may, in its discretion, either require or permit such person to file with it a statement in writing, under oath, or otherwise, as to all the facts and circumstances concerning the subject matter which it believes to be in the public interest to investigate, and may investigate such facts.

(b) Action for injunction or criminal prosecution in district court

Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this subchapter, or of any rule or regulation prescribed under authority thereof, the Commission may, in its discretion, bring an action in any district court of the United States, or United States court of any Territory, to enjoin such acts or practices, and upon a proper showing, a permanent or temporary injunction or restraining order shall be granted without bond.  The Commission may transmit such evidence as may be available concerning such acts or practices to the Attorney General who may, in his discretion, institute the necessary criminal proceedings under this subchapter.  Any such criminal proceeding may be brought either in the district wherein the transmittal of the prospectus or security complained of begins, or in the district wherein such prospectus or security is received.

(c) Writ of mandamus

Upon application of the Commission, the district courts of the United States and the United States courts of any Territory shall have jurisdiction to issue writs of mandamus commanding any person to comply with the provisions of this subchapter or any order of the Commission made in pursuance thereof.

(d) Money penalties in civil actions

(1) Authority of Commission

Whenever it shall appear to the Commission that any person has violated any provision of this subchapter, the rules or regulations thereunder, or a cease-and-desist order entered by the Commission pursuant to section 77h-1 of this title, other than by committing a violation subject to a penalty pursuant to section 78u-1 of this title, the Commission may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, upon a proper showing, a civil penalty to be paid by the person who committed such violation.

(2) Amount of penalty

(A) First tier

The amount of the penalty shall be determined by the court in light of the facts and circumstances.  For each violation, the amount of the penalty shall not exceed the greater of (i) $5,000 for a natural person or $50,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation.

(B) Second tier

Notwithstanding subparagraph (A), the amount of penalty for each such violation shall not exceed the greater of (i) $50,000 for a natural person or $250,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation, if the violation described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.

(C) Third tier

Notwithstanding subparagraphs (A) and (B), the amount of penalty for each such violation shall not exceed the greater of (i) $100,000 for a natural person or $500,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation, if--

(I) the violation described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement;  and

(II) such violation directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons.

(3) Procedures for collection

(A) Payment of penalty to Treasury

A penalty imposed under this section shall be payable into the Treasury of the United States.

(B) 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.

(C) Remedy not exclusive

The actions authorized by this subsection may be brought in addition to any other action that the Commission or the Attorney General is entitled to bring.

(D) Jurisdiction and venue

For purposes of section 77v of this title, actions under this section shall be actions to enforce a liability or a duty created by this subchapter.

(4) Special provisions relating to a violation of a cease-and-desist order

In an action to enforce a cease-and-desist order entered by the Commission pursuant to section 77h-1 of this title, each separate violation of such order shall be a separate offense, except that in the case of a violation through a continuing failure to comply with such an order, each day of the failure to comply with the order shall be deemed a separate offense.

(e) Authority of court to prohibit persons from serving as officers and directors

In any proceeding under subsection (b) of this section, the court may prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any person who violated section 77q(a)(1) of this title 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 person's conduct demonstrates substantial unfitness to serve as an officer or director of any such issuer.

(f) Prohibition of attorneys' fees paid from Commission disgorgement funds

Except as otherwise ordered by the court upon motion by the Commission, or, in the case of an administrative action, as otherwise ordered by the Commission, funds disgorged as the result of an action brought by the Commission in Federal court, or as a result of any Commission administrative action, shall not be distributed as payment for attorneys' fees or expenses incurred by private parties seeking distribution of the disgorged funds.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 20, 48 Stat. 86;  June 25, 1936, c. 804, 49 Stat. 1921;  June 25, 1948, c. 646, § 32(b), 62 Stat. 991;  May 24, 1949, c. 139, § 127, 63 Stat. 107;  Dec. 4, 1987, Pub.L. 100-181, Title II, § 208, 101 Stat. 1253;  Oct. 15, 1990, Pub.L. 101-429, Title I, § 101, 104 Stat. 932;  Dec. 22, 1995, Pub.L. 104-67, Title I, § 103(b)(1), 109 Stat. 756.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

1990 Acts. House Report Nos. 101-616 and 101-617, see U.S. Code Cong. and Adm. News, p. 1379.

1995 Acts. Senate Report No. 104-98 and House Conference Report No. 104-369, see 1995 U.S. Code Cong. and Adm. News, p. 679.

Amendments

1995 Amendments. Subsec. (f).  Pub.L. 104-67, § 103(b)(1), added subsec. (f).

1990 Amendments. Subsecs. (d), (e).  Pub.L. 101-429 added subsecs. (d) and (e).

1987 Amendments. Subsec. (b).  Pub.L. 100-181, § 208(a), substituted in the first sentence "the Commission may, in its discretion" for "it may in its discretion".

Subsec. (c).  Pub.L. 100-181, § 208(b), inserted a comma after "Commission" where first appearing, and deleted the comma following "Territory" and the word "also" preceding "have jurisdiction".

Effective and Applicability Provisions

1995 Acts. Amendment by Pub.L. 104-67 shall not affect or apply to any private action arising under this subchapter or chapter 2B (section 78a et seq.) of this title 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.

1990 Acts. Amendment by Pub.L. 101-429 effective on Oct. 15, 1990, with special provisions for imposition of civil penalties and accounting and disgorgement, see section 1(c)(1) and (2) of Pub.L. 101-429, set out as a note under section 77g of this title.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Construction of 1995 Amendment

Nothing in Pub.L. 104-67 or the amendment of this section by section 103(b)(1) of Pub.L. 104-67 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 and Exchange Act of 1934, see section 203 of Pub.L. 104-67, set out as a note under section 78j-1 of this title.

Current through P.L. 106-274, approved 9-22-2000

All hearings shall be public and may be held before the Commission or an officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 21, 48 Stat. 86.)

HISTORICAL AND STATUTORY NOTES 

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

(a) Federal and State courts;  venue;  service of process;  review;  removal;  costs

The district courts of the United States and United States courts of any Territory, shall have jurisdiction of offenses and violations under this subchapter and under the rules and regulations promulgated by the Commission in respect thereto, and, concurrent with State and Territorial courts, except as provided in section 77p of this title with respect to covered class actions, of all suits in equity and actions at law brought to enforce any liability or duty created by this subchapter.  Any such suit or action may be brought in the district wherein the defendant is found or is an inhabitant or transacts business, or in the district where the offer or sale took place, if the defendant participated therein, 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.  Judgments and decrees so rendered shall be subject to review as provided in sections 1254, 1291, 1292, and 1294 of Title 28.    Except as provided in section 77p(c) of this title, no case arising under this subchapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States.    No costs shall be assessed for or against the Commission in any proceeding under this subchapter brought by or against it in the Supreme Court or such other courts.

(b) Contumacy or refusal to obey subpena;  contempt

In case of contumacy or refusal to obey a subpena issued to any person, any of the said United States courts, within the jurisdiction of which said person guilty of contumacy or refusal to obey is found or resides, upon application by the Commission may issue to such person an order requiring such person to appear before the Commission, or one of its examiners designated by it, there to produce documentary evidence if so ordered, or there to give evidence touching the matter in question;  and any failure to obey such order of the court may be punished by said court as a contempt thereof.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 22, 48 Stat. 86;  June 25, 1936, c. 804, 49 Stat. 1921;  June 25, 1948, c. 646, § 32(b), 62 Stat. 991;  May 24, 1949, c. 139, § 127, 63 Stat. 107;  Aug. 10, 1954, c. 667, Title I, § 11, 68 Stat. 686;  Oct. 15, 1970, Pub.L. 91-452, Title II, § 213, 84 Stat. 929;  Dec. 4, 1987, Pub.L. 100-181, Title II, § 209, 101 Stat. 1253.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title I, § 101(a)(3), 112 Stat. 3230.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1954 Acts. House Report No. 1542 and Conference Report No. 2433, see 1954 U.S. Code Cong. and Adm. News, p. 2973.

1970 Acts. House Report No. 91-1549, see 1970 U.S. Code Cong. and Adm. News, p. 4007.

1987 Acts. Senate Report No. 100-105, see 1987 U.S. Code Cong. and Adm. News, p. 2089.

Codifications

As originally enacted subsec. (a) 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".  However, the words "United States District Court for the District of Columbia" have now been deleted entirely as superfluous in view of section 132(a) of Title 28 Judiciary and Judicial Procedure, which states 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 § 88 of Title 28 which states that "the District of Columbia constitutes one judicial district".

Amendments

1998 Amendments. Subsec. (a).  Pub.L. 105-353, § 101(a)(3), inserted "except as provided in section 77p of this title with respect to covered class actions," after "Territorial courts," and struck out "No case" and inserted "Except as provided in section 77p(c) of this title, no case".

1987 Amendments. Subsec. (a).  Pub.L. 100-181, § 209(1) to (3), substituted in the first sentence "United States and" for "United States, the";  struck from the first sentence following "Territory" the phrase "and the United States District Court for the District of Columbia";  and substituted in the third sentence "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)".

1970 Amendments. Subsec. (c).  Pub.L. 91-452 struck out subsec. (c) which related to the immunity from prosecution of any individual compelled to testify or produce evidence, documentary or otherwise, after claiming his privilege against self-incrimination.

1954 Amendments. Subsec. (a).  Act Aug. 10, 1954 inserted in the second sentence "offer or" preceding "sale".

Effective and Applicability Provisions

1998 Acts. Amendments by Pub.L. 105-353, § 101, 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.

1970 Acts. Amendment by Pub.L. 91-452 effective the sixtieth day following Oct. 15, 1970, see section 260 of Pub.L. 91-452, set out as an Effective Date;  Savings Provision note under section 6001 of Title 18, Crimes and Criminal Procedure.

1954 Acts. Amendment effective 60 days after Aug. 10, 1954, see section 501 of Act Aug. 10, 1954, set out as a note under section 77b of this title.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Savings Provision

Amendment by Pub.L. 91-452 not to affect any immunity to which any individual is entitled under this section by reason of any testimony given before the sixtieth day following Oct. 15, 1970, see section 260 of Pub.L. 91-452, set out as an Effective Date;  Savings Provision note under section 6001 of Title 18, Crimes and Criminal Procedure.

Current through P.L. 106-274, approved 9-22-2000

Neither the fact that the registration statement for a security has been filed or is in effect nor the fact that a stop order is not in effect with respect thereto shall be deemed a finding by the Commission that the registration statement is true and accurate on its face or that it does not contain an untrue statement of fact or omit to state a material fact, or be held to mean that the Commission has in any way passed upon the merits of, or given approval to, such security.  It shall be unlawful to make, or cause to be made to any prospective purchaser any representation contrary to the foregoing provisions of this section.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 23, 48 Stat. 87.)

HISTORICAL AND STATUTORY NOTES 

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000

Any person who willfully violates any of the provisions of this subchapter, or the rules and regulations promulgated by the Commission under authority thereof, or any person who willfully, in a registration statement filed under this subchapter, makes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall upon conviction be fined not more than $10,000 or imprisoned not more than five years, or both.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 24, 48 Stat. 87;  June 4, 1975, Pub.L. 94-29,§ 27(a), 89 Stat. 163.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1975 Acts. Senate Report No. 94-75 and House Conference Report No. 94-229, see 1975 U.S. Code Cong. and Adm. News, p. 179.

Amendments

1975 Amendments. Pub.L. 94-29 substituted "$10,000" for "$5,000".

Effective and Applicability Provisions

1975 Acts. Amendment 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.

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the chairman of such commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.

Current through P.L. 106-274, approved 9-22-2000

Nothing in this subchapter shall relieve any person from submitting to the respective supervisory units of the Government of the United States information, reports, or other documents that may be required by any provision of law.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 25, 48 Stat. 87.)

Current through P.L. 106-274, approved 9-22-2000

If any provision of this chapter, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this chapter, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 26, 48 Stat. 88.)

Current through P.L. 106-274, approved 9-22-2000

(a) Private class actions

(1) In general

The provisions of this subsection shall apply to each private action arising under this subchapter 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 subchapter;

(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 subchapter, 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, or served, 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 subchapter 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 subchapter 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 subparagraph.

(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 subchapter 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 the 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 subchapter, 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 subchapter, 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.

(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) 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) Stay of discovery;  preservation of evidence

(1) In general

In any private action arising under this subchapter, 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.

(2) Preservation of evidence

During the pendency of any stay of discovery pursuant to this subsection, 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.

(3) Sanction for willful violation

A party aggrieved by the willful failure of an opposing party to comply with paragraph (2) may apply to the court for an order awarding appropriate sanctions.

(4) 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 subsection.

(c) Sanctions for abusive litigation

(1) Mandatory review by court

In any private action arising under this subchapter, 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 subchapter in which the plaintiff may recover money damages only on proof that a defendant acted with a particular state of mind, 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.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 27, as added Dec. 22, 1995, Pub.L. 104-67, Title I, § 101(a), 109 Stat. 737.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title I, § 101(a)(2), Title III, § 301(a)(5), 112 Stat. 3230, 3235.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1995 Acts. Senate Report No. 104-98 and House Conference Report No. 104-369, see 1995 U.S. Code Cong. and Adm. News, p. 679.

References in Text

The Federal Rules of Civil Procedure, referred to in subsecs. (a)(1), (3)(A)(iii), (B)(iii)(I)(cc), (vi), (b)(2), and (c), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure.

Codifications

Pub.L. 105-353, Title III, § 301(a)(5), Nov. 3, 1998, 112 Stat. 3235, called for the transfer of this section to appear in order after section 26 of the Securities Act of 1933, which is codified as section 77z of this title.  No correction to the Code was necessary in light of the existing order of the sections in the Code.

Amendments

1998 Amendments. Subsec. (b)(4).  Pub.L. 105-353, § 101(a)(2), added par. (4).

Effective and Applicability Provisions

1998 Acts. Amendments by Pub.L. 105-353, § 101, 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.

1995 Acts. This section shall not affect or apply to any private action arising under this subchapter or chapter 2B (section 78a et seq.) of this title 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.

Construction

Nothing in Pub.L. 104-67 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 and Exchange Act of 1934, see section 203 of Pub.L. 104-67, set out as a note under section 78j-1 of this title.

Current through P.L. 106-274, approved 9-22-2000

(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) or 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 the 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) of this section, in any private action arising under this subchapter 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) of this section 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; [FN1]  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) or 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 could 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 differ materially 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) of this section.

(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) of this section, the court shall consider any statement cited in the complaint and 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 subchapter, 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 subchapter, 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) Penny stock

The term "penny stock" has the same meaning as in section 78c(a)(51) of this title, and the rules and regulations, or orders issued pursuant to that section.

(4) 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.

(5) Securities laws

The term "securities laws" has the same meaning as in section 78c of this title.

(6) Person acting on behalf of an issuer

The term "person acting on behalf of an issuer" means an officer, director, or employee of the issuer.

(7) Other terms

The terms "blank check company", "roll-up 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.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 27A, as added Dec. 22, 1995, Pub.L. 104-67, Title I, § 102(a), 109 Stat. 749.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, § 301(a)(5), 112 Stat. 3235.)

[FN1]  So in original.  The semicolon probably should be a comma.

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1995 Acts. Senate Report No. 104-98 and House Conference Report No. 104-369, see 1995 U.S. Code Cong. and Adm. News, p. 679.

Codifications

Pub.L. 105-353, Title III, § 301(a)(5), Nov. 3, 1998, 112 Stat. 3235, called for the transfer of this section to appear in order together with sections 77z-1 and 77z-3 after section 26 of the Securities Act of 1933, which is codified as section 77z of this title.  No correction to the Code was necessary in light of the existing order of the sections in the Code.

Effective and Applicability Provisions

1995 Acts. This section shall not affect or apply to any private action arising under this subchapter or chapter 2B (section 78a et seq.) of this title 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.

Construction

Nothing in Pub.L. 104-67 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 and Exchange Act of 1934, see section 203 of Pub.L. 104-67, set out as a note under section 78j-1 of this title.

Current through P.L. 106-274, approved 9-22-2000

The Commission, by rule or regulation, 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 subchapter or of any rule or regulation issued under subchapter, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, § 28, as added Oct. 11, 1996, Pub.L. 104-290, Title I, § 105(a), 110 Stat. 3424.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, § 301(a)(5), 112 Stat. 3235.)

HISTORICAL AND STATUTORY NOTES 

Revision Notes and Legislative Reports

1996 Acts. House Report No. 104-622 and House Conference Report No. 104-864, see 1996 U.S. Code Cong. and Adm. News, p. 3877.

Codifications

Pub.L. 105-353, Title III, § 301(a)(5), Nov. 3, 1998, 112 Stat. 3235, called for the transfer of this section to appear in order together with sections 77z-1 and 77z-2 after section 26 of the Securities Act of 1933, which is codified as section 77z of this title.  No correction to the Code was necessary in light of the existing order of the sections in the Code.

Current through P.L. 106-274, approved 9-22-2000

Credits     •     Historical·Notes     •     West·References     •     Notes·Of·Decisions

SCHEDULE A

(1) The name under which the issuer is doing or intends to do business;

(2) the name of the State or other sovereign power under which the issuer is organized;

(3) the location of the issuer's principal business office, and if the issuer is a foreign or territorial person, the name and address of its agent in the United States authorized to receive notice;

(4) the names and addresses of the directors or persons performing similar functions, and the chief executive, financial and accounting officers, chosen or to be chosen if the issuer be a corporation, association, trust, or other entity;  of all partners, if the issuer be a partnership;  and of the issuer, if the issuer be an individual;  and of the promoters in the case of a business to be formed, or formed within two years prior to the filing of the registration statement;

(5) the names and addresses of the underwriters;

(6) the names and addresses of all persons, if any, owning of record or beneficially, if known, more than 10 per centum of any class of stock of the issuer, or more than 10 per centum in the aggregate of the outstanding stock of the issuer as of a date within twenty days prior to the filing of the registration statement;

(7) the amount of securities of the issuer held by any person specified in paragraphs (4), (5), and (6) of this schedule, as of a date within twenty days prior to the filing of the registration statement, and, if possible, as of one year prior thereto, and the amount of the securities, for which the registration statement is filed, to which such persons have indicated their intention to subscribe;

(8) the general character of the business actually transacted or to be transacted by the issuer;

(9) a statement of the capitalization of the issuer, including the authorized and outstanding amounts of its capital stock and the proportion thereof paid up, the number and classes of shares in which such capital stock is divided, par value thereof, or if it has no par value, the stated or assigned value thereof, a description of the respective voting rights, preferences, conversion and exchange rights, rights to dividends, profits, or capital of each class, with respect to each other class, including the retirement and liquidation rights or values thereof;

(10) a statement of the securities, if any, covered by options outstanding or to be created in connection with the security to be offered, together with the names and addresses of all persons, if any, to be allotted more than 10 per centum in the aggregate of such options;

(11) the amount of capital stock of each class issued or included in the shares of stock to be offered;

(12) the amount of the funded debt outstanding and to be created by the security to be offered, with a brief description of the date, maturity, and character of such debt, rate of interest, character of amortization provisions, and the security, if any, therefor.  If substitution of any security is permissible, a summarized statement of the conditions under which such substitution is permitted.  If substitution is permissible without notice, a specific statement to that effect;

(13) the specific purposes in detail and the approximate amounts to be devoted to such purposes, so far as determinable, for which the security to be offered is to supply funds, and if the funds are to be raised in part from other sources, the amounts thereof and the sources thereof, shall be stated;

(14) the remuneration, paid or estimated to be paid, by the issuer or its predecessor, directly or indirectly, during the past year and ensuing year to (a) the directors or persons performing similar functions, and (b) its officers and other persons, naming them wherever such remuneration exceeded $25,000 during any such year;

(15) the estimated net proceeds to be derived from the security to be offered;

(16) the price at which it is proposed that the security shall be offered to the public or the method by which such price is computed and any variation therefrom at which any portion of such security is proposed to be offered to any persons or classes of persons, other than the underwriters, naming them or specifying the class.  A variation in price may be proposed prior to the date of the public offering of the security, but the Commission shall immediately be notified of such variation;

(17) all commissions or discounts paid or to be paid, directly or indirectly, by the issuer to the underwriters in respect of the sale of the security to be offered.  Commissions shall include all cash, securities, contracts, or anything else of value, paid, to be set aside, disposed of, or understandings with or for the benefit of any other persons in which any underwriter is interested, made, in connection with the sale of such security.  A commission paid or to be paid in connection with the sale of such security by a person in which the issuer has an interest or which is controlled or directed by, or under common control with, the issuer shall be deemed to have been paid by the issuer.  Where any such commission is paid the amount of such commission paid to each underwriter shall be stated;

(18) the amount or estimated amounts, itemized in reasonable detail, of expenses, other than commissions specified in paragraph (17) of this schedule, incurred or borne by or for the account of the issuer in connection with the sale of the security to be offered or properly chargeable thereto, including legal, engineering, certification, authentication, and other charges;

(19) the net proceeds derived from any security sold by the issuer during the two years preceding the filing of the registration statement, the price at which such security was offered to the public, and the names of the principal underwriters of such security;

(20) any amount paid within two years preceding the filing of the registration statement or intended to be paid to any promoter and the consideration for any such payment;

(21) the names and addresses of the vendors and the purchase price of any property, or good will, acquired or to be acquired, not in the ordinary course of business, which is to be defrayed in whole or in part from the proceeds of the security to be offered, the amount of any commission payable to any person in connection with such acquisition, and the name or names of such person or persons, together with any expense incurred or to be incurred in connection with such acquisition, including the cost of borrowing money to finance such acquisition;

(22) full particulars of the nature and extent of the interest, if any, of every director, principal executive officer, and of every stockholder holding more than 10 per centum of any class of stock or more than 10 per centum in the aggregate of the stock of the issuer, in any property acquired, not in the ordinary course of business of the issuer, within two years preceding the filing of the registration statement or proposed to be acquired at such date;

(23) the names and addresses of counsel who have passed on the legality of the issue;

(24) dates of and parties to, and the general effect concisely stated of every material contract made, not in the ordinary course of business, which contract is to be executed in whole or in part at or after the filing of the registration statement or which contract has been made not more than two years before such filing.  Any management contract or contract providing for special bonuses or profit-sharing arrangements, and every material patent or contract for a material patent right, and every contract by or with a public utility company or an affiliate thereof, providing for the giving or receiving of technical or financial advice or service (if such contract may involve a charge to any party thereto at a rate in excess of $2,500 per year in cash or securities or anything else of value), shall be deemed a material contract;

(25) a balance sheet as of a date not more than ninety days prior to the date of the filing of the registration statement showing all of the assets of the issuer, and nature and cost thereof, whenever determinable, in such detail and in such form as the Commission shall prescribe (with intangible items segregated), including any loan in excess of $20,000 to any officer, director, stockholder or person directly or indirectly controlling or controlled by the issuer, or person under direct or indirect common control with the issuer.  All the liabilities of the issuer in such detail and such form as the Commission shall prescribe, including surplus of the issuer showing how and from what sources such surplus was created, all as of a date not more than ninety days prior to the filing of the registration statement.  If such statement be not certified by an independent public or certified accountant, in addition to the balance sheet required to be submitted under this schedule, a similar detailed balance sheet of the assets and liabilities of the issuer, certified by an independent public or certified accountant, of a date not more than one year prior to the filing of the registration statement, shall be submitted;

(26) a profit and loss statement of the issuer showing earnings and income, the nature and source thereof, and the expenses and fixed charges in such detail and such form as the Commission shall prescribe for the latest fiscal year for which such statement is available and for the two preceding fiscal years, year by year, or, if such issuer has been in actual business for less than three years, then for such time as the issuer has been in actual business, year by year.  If the date of the filing of the registration statement is more than six months after the close of the last fiscal year, a statement from such closing date to the latest practicable date.  Such statement shall show what the practice of the issuer has been during the three years or lesser period as to the character of the charges, dividends or other distributions made against its various surplus accounts, and as to depreciation, depletion, and maintenance charges, in such detail and form as the Commission shall prescribe, and if stock dividends or avails from the sale of rights have been credited to income, they shall be shown separately with a statement of the basis upon which the credit is computed.  Such statement shall also differentiate between any recurring and nonrecurring income and between any investment and operating income.  Such statement shall be certified by an independent public or certified accountant;

(27) if the proceeds, or any part of the proceeds, of the security to be issued is to be applied directly or indirectly to the purchase of any business, a profit and loss statement of such business certified by an independent public or certified accountant, meeting the requirements of paragraph (26) of this schedule, for the three preceding fiscal years, together with a balance sheet, similarly certified, of such business, meeting the requirements of paragraph (25) of this schedule of a date not more than ninety days prior to the filing of the registration statement or at the date such business was acquired by the issuer if the business was acquired by the issuer more than ninety days prior to the filing of the registration statement;

(28) a copy of any agreement or agreements (or, if identical agreements are used, the forms thereof) made with any underwriter, including all contracts and agreements referred to in paragraph (17) of this schedule;

(29) a copy of the opinion or opinions of counsel in respect to the legality of the issue, with a translation of such opinion, when necessary, into the English language;

(30) a copy of all material contracts referred to in paragraph (24) of this schedule, but no disclosure shall be required of any portion of any such contract if the Commission determines that disclosure of such portion would impair the value of the contract and would not be necessary for the protection of the investors;

(31) unless previously filed and registered under the provisions of this subchapter, and brought up to date, (a) a copy of its articles of incorporation, with all amendments thereof and of its existing bylaws or instruments corresponding thereto, whatever the name, if the issuer be a corporation;  (b) copy of all instruments by which the trust is created or declared, if the issuer is a trust;  (c) a copy of its articles of partnership or association and all other papers pertaining to its organization, if the issuer is a partnership, unincorporated association, joint-stock company, or any other form of organization;  and

(32) a copy of the underlying agreements or indentures affecting any stock, bonds, or debentures offered or to be offered.

In case of certificates of deposit, voting trust certificates, collateral trust certificates, certificates of interest or shares in unincorporated investment trusts, equipment trust certificates, interim or other receipts for certificates, and like securities, the Commission shall establish rules and regulations requiring the submission of information of a like character applicable to such cases, together with such other information as it may deem appropriate and necessary regarding the character, financial or otherwise, of the actual issuer of the securities and/or the person performing the acts and assuming the duties of depositor or manager.

(1) Name of borrowing government or subdivision thereof;

(2) specific purposes in detail and the approximate amounts to be devoted to such purposes, so far as determinable, for which the security to be offered is to supply funds, and if the funds are to be raised in part from other sources, the amounts thereof and the sources thereof, shall be stated;

(3) the amount of the funded debt and the estimated amount of the floating debt outstanding and to be created by the security to be offered, excluding intergovernmental debt, and a brief description of the date, maturity, character of such debt, rate of interest, character of amortization provisions, and the security, if any, therefor.  If substitution of any security is permissible, a statement of the conditions under which such substitution is permitted.  If substitution is permissible without notice, a specific statement to that effect;

(4) whether or not the issuer or its predecessor has, within a period of twenty years prior to the filing of the registration statement, defaulted on the principal or interest of any external security, excluding intergovernmental debt, and, if so, the date, amount, and circumstances of such default, and the terms of the succeeding arrangement, if any;

(5) the receipts, classified by source, and the expenditures, classified by purpose, in such detail and form as the Commission shall prescribe for the latest fiscal year for which such information is available and the two preceding fiscal years, year by year;

(6) the names and addresses of the underwriters;

(7) the name and address of its authorized agent, if any, in the United States;

(8) the estimated net proceeds to be derived from the sale in the United States of the security to be offered;

(9) the price at which it is proposed that the security shall be offered in the United States to the public or the method by which such price is computed.  A variation in price may be proposed prior to the date of the public offering of the security, but the Commission shall immediately be notified of such variation;

(10) all commissions paid or to be paid, directly or indirectly, by the issuer to the underwriters in respect of the sale of the security to be offered.  Commissions shall include all cash, securities, contracts, or anything else of value, paid, to be set aside, disposed of, or understandings with or for the benefit of any other persons in which the underwriter is interested, made, in connection with the sale of such security.  Where any such commission is paid, the amount of such commission paid to each underwriter shall be stated;

(11) the amount or estimated amounts, itemized in reasonable detail, of expenses, other than the commissions specified in paragraph (10) of this schedule, incurred or borne by or for the account of the issuer in connection with the sale of the security to be offered or properly chargeable thereto, including legal, engineering, certification, and other charges;

(12) the names and addresses of counsel who have passed upon the legality of the issue;

(13) a copy of any agreement or agreements made with any underwriter governing the sale of the security within the United States;  and

(14) an agreement of the issuer to furnish a copy of the opinion or opinions of counsel in respect to the legality of the issue, with a translation, where necessary, into the English language.  Such opinion shall set out in full all laws, decrees, ordinances, or other acts of Government under which the issue of such security has been authorized.

CREDIT(S)

1997 Main Volume

(May 27, 1933, c. 38, Title I, schedules A, B, 48 Stat. 88, 91.)

2000 Electronic Update

(As amended Nov. 3, 1998, Pub.L. 105-353, Title III, § 301(a)(6), 112 Stat. 3235.)

HISTORICAL AND STATUTORY NOTES 

Amendments

1998 Amendments. Par. (28).  Pub.L. 105-353, § 301(a)(6), struck out "identic" and inserted "identical".

Transfer of Functions

For transfer of the functions of the Securities and Exchange Commission, with certain exceptions, to the 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.

Current through P.L. 106-274, approved 9-22-2000 [HSB 5/15/2001 -- includes  amendments made by Commodity Futures Modernization Act of 2000]

This chapter may be cited as the "Securities Exchange Act of 1934."

CREDIT(S)

1997 Main Volume

(June 6, 1934, c. 404, Title I, § 1, 48 Stat. 881.)

Current through P.L. 106-274, approved 9-22-2000

For the reasons hereinafter enumerated, transactions in securities as commonly conducted upon securities exchanges and over-the-counter markets are affected 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.

CREDIT(S)

1997 Main Volume

(June 6, 1934, c. 404, Title I, § 2, 48 Stat. 881;  June 4, 1975, Pub.L. 94-29,§ 2, 89 Stat. 97.)

Current through P.L. 106-274, approved 9-22-2000

(a) Definitions

When used in this chapter, unless the context otherwise requires--

(1) The term "exchange" means any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood, and includes the market place and the market facilities maintained by such exchange.

(2) The term "facility" when used with respect to an exchange includes its premises, tangible or intangible property whether on the premises or not, any right to the use of such premises or property or any service thereof for the purpose of effecting or reporting a transaction on an exchange (including, among other things, any system of communication to or from the exchange, by ticker or otherwise, maintained by or with the consent of the exchange), and any right of the exchange to the use of any property or service.

(3)(A) The term "member" when used with respect to a national securities exchange means (i) any natural person permitted to effect transactions on the floor of the exchange without the services of another person acting as broker, (ii) any registered broker or dealer with which such a natural person is associated, (iii) any registered broker or dealer permitted to designate as a representative such a natural person, and (iv) any other registered broker or dealer which agrees to be regulated by such exchange and with respect to which the exchange undertakes to enforce compliance with the provisions of this chapter, the rules and regulations thereunder, and its own rules.  For purposes of sections 78f(b)(1), 78f(b)(4), 78f(b)(6), 78f(b)(7), 78f(d), 78q(d), 78s(d), 78s(e), 78s(g), 78s(h), and 78u of this title, the term "member" when used with respect to a national securities exchange also means, to the extent of the rules of the exchange specified by the Commission, any person required by the Commission to comply with such rules pursuant to section 78f(f) of this title.

(B) The term "member" when used with respect to a registered securities association means any broker or dealer who agrees to be regulated by such association and with respect to whom the association undertakes to enforce compliance with the provisions of this chapter, the rules and regulations thereunder, and its own rules.

(4) Broker

 (A) In general 

 The term "broker" means any person engaged in the business of effecting transactions in securities for the account of others. 

 (B) Exception for certain bank activities 

 A bank shall not be considered to be a broker because the bank engages in any one or more of the following activities under the conditions described: 

 (i) Third party brokerage arrangements 

 The bank enters into a contractual or other written arrangement with a broker or dealer registered under this chapter under which the broker or dealer offers brokerage services on or off the premises of the bank if-- 

 (I) such broker or dealer is clearly identified as the person performing the brokerage services; 

 (II) the broker or dealer performs brokerage services in an area that is clearly marked and, to the extent practicable, physically separate from the routine deposit-taking activities of the bank; 

 (III) any materials used by the bank to advertise or promote generally the availability of brokerage services under the arrangement clearly indicate that the brokerage services are being provided by the broker or dealer and not by the bank; 

 (IV) any materials used by the bank to advertise or promote generally the availability of brokerage services under the arrangement are in compliance with the Federal securities laws before distribution; 

 (V) bank employees (other than associated persons of a broker or dealer who are qualified pursuant to the rules of a self-regulatory organization) perform only clerical or ministerial functions in connection with brokerage transactions including scheduling appointments with the associated persons of a broker or dealer, except that bank employees may forward customer funds or securities and may describe in general terms the types of investment vehicles available from the bank and the broker or dealer under the arrangement; 

 (VI) bank employees do not receive incentive compensation for any brokerage transaction unless such employees are associated persons of a broker or dealer and are qualified pursuant to the rules of a self-regulatory organization,except that the bank employees may receive compensation for the referral of any customer if the compensation is a nominal one-time cash fee of a fixed dollar amount and the payment of the fee is not contingent on whether the referral results in a transaction; 

 (VII) such services are provided by the broker or dealer on a basis in which all customers that receive any services are fully disclosed to the broker or dealer; 

 (VIII) the bank does not carry a securities account of the customer except as permitted under clause (ii) or (viii) of this subparagraph;  and 

 (IX) the bank, broker, or dealer informs each customer that the brokerage services are provided by the broker or dealer and not by the bank and that the securities are not deposits or other obligations of the bank, are not guaranteed by the bank, and are not insured by the Federal Deposit Insurance Corporation. 

 (ii) Trust activities 

 The bank effects transactions in a trustee capacity, or effects transactions in a fiduciary capacity in its trust department or other department that is regularly examined by bank examiners for compliance with fiduciary principles and standards, and-- 

 (I) is chiefly compensated for such transactions, consistent with fiduciary principles and standards, on the basis of an administration or annual fee (payable on a monthly, quarterly, or other basis), a percentage of assets under management, or a flat or capped per order processing fee equal to not more than the cost incurred by the bank in connection with executing securities transactions for trustee and fiduciary customers, or any combination of such fees;  and 

 (II) does not publicly solicit brokerage business, other than by advertising that it effects transactions in securities in conjunction with advertising its other trust activities. 

 (iii) Permissible securities transactions 

 The bank effects transactions in-- 

 (I) commercial paper, bankers acceptances, or commercial bills; 

 (II) exempted securities; 

 (III) qualified Canadian government obligations as defined in section 24 of Title 12, in conformity with section 78o-5 of this title and the rules and regulations thereunder, or obligations of the North American Development Bank;  or 

 (IV) any standardized, credit enhanced debt security issued by a foreign government pursuant to the March 1989 plan of then Secretary of the Treasury Brady, used by such foreign government to retire outstanding commercial bank loans. 

 (iv) Certain stock purchase plans 

 (I) Employee benefit plans 

 The bank effects transactions, as part of its transfer agency activities, in the securities of an issuer as part of any pension, retirement, profit-sharing, bonus, thrift, savings, incentive, or other similar benefit plan for the employees of that issuer or its affiliates (as defined in section 1841 of Title 12), if the bank does not solicit transactions or provide investment advice with respect to the purchase or sale of securities in connection with the plan. 

 (II) Dividend reinvestment plans 

 The bank effects transactions, as part of its transfer agency activities, in the securities of an issuer as part of that issuer's dividend reinvestment plan, if-- 

 (aa) the bank does not solicit transactions or provide investment advice with respect to the purchase or sale of securities in connection with the plan;  and 

 (bb) the bank does not net shareholders' buy and sell orders, other than for programs for odd-lot holders or plans registered with the Commission. 

 (III) Issuer plans 

 The bank effects transactions, as part of its transfer agency activities, in the securities of an issuer as part of a plan or program for the purchase or sale of that issuer's shares, if-- 

 (aa) the bank does not solicit transactions or provide investment advice with respect to the purchase or sale of securities in connection with the plan or program;  and 

 (bb) the bank does not net shareholders' buy and sell orders, other than for programs for odd-lot holders or plans registered with the Commission. 

 (IV) Permissible delivery of materials 

 The exception to being considered a broker for a bank engaged in activities described in subclauses (I), (II), and (III) will not be affected by delivery of written or electronic plan materials by a bank to employees of the issuer, shareholders of the issuer, or members of affinity groups of the issuer, so long as such materials are-- 

 (aa) comparable in scope or nature to that permitted by the Commission as of November 12, 1999;  or 

 (bb) otherwise permitted by the Commission. 

 (v) Sweep accounts 

 The bank effects transactions as part of a program for the investment or reinvestment of deposit funds into any no-load, open-end management investment company registered under the Investment Company Act of 1940 [15 U.S.C.A. § 80a-1 et seq.] that holds itself out as a money market fund. 

 (vi) Affiliate transactions 

 The bank effects transactions for the account of any affiliate of the bank (as defined in section 1841 of Title 12) other than-- 

 (I) a registered broker or dealer;  or 

 (II) an affiliate that is engaged in merchant banking, as described in section 1843(k)(4)(H) of Title 12. 

 (vii) Private securities offerings 

 The bank-- 

 (I) effects sales as part of a primary offering of securities not involving a public offering, pursuant to section 77c(b), 77d(2), or 77d(6) of this title or the rules and regulations issued thereunder; 

 (II) at any time after the date that is 1 year after November 12, 1999, is not affiliated with a broker or dealer that has been registered for more than 1 year in accordance with this chapter, and engages in dealing, market making, or underwriting activities, other than with respect to exempted securities;  and 

 (III) if the bank is not affiliated with a broker or dealer, does not effect any primary offering described in subclause (I) the aggregate amount of which exceeds 25 percent of the capital of the bank, except that the limitation of this subclause shall not apply with respect to any sale of government securities or municipal securities. 

 (viii) Safekeeping and custody activities 

 (I) In general 

 The bank, as part of customary banking activities-- 

 (aa) provides safekeeping or custody services with respect to securities, including the exercise of warrants and other rights on behalf of customers; 

 (bb) facilitates the transfer of funds or securities, as a custodian or a clearing agency, in connection with the clearance and settlement of its customers' transactions in securities; 

 (cc) effects securities lending or borrowing transactions with or on behalf of customers as part of services provided to customers pursuant to division (aa) or (bb) or invests cash collateral pledged in connection with such transactions; 

 (dd) holds securities pledged by a customer to another person or securities subject to purchase or resale agreements involving a customer, or facilitates the pledging or transfer of such securities by book entry or as otherwise provided under applicable law, if the bank maintains records separately identifying the securities and the customer;  or 

 (ee) serves as a custodian or provider of other related administrative services to any individual retirement account, pension, retirement, profit sharing, bonus, thrift savings, incentive, or other similar benefit plan. 

 (II) Exception for carrying broker activities 

 The exception to being considered a broker for a bank engaged in activities described in subclause (I) shall not apply if the bank, in connection with such activities, acts in the United States as a carrying broker (as such term, and different formulations thereof, are used in section 78o(c)(3) of this title and the rules and regulations thereunder) for any broker or dealer, unless such carrying broker activities are engaged in with respect to government securities (as defined in paragraph (42) of this subsection). 

 (ix) Identified banking products 

 The bank effects transactions in identified banking products as defined in section 206 of the Gramm-Leach-Bliley Act [15 U.S.C.A. § 78c note]. 

 (x) Municipal securities 

 The bank effects transactions in municipal securities. 

 (xi) De minimis exception 

 The bank effects, other than in transactions referred to in clauses (i) through (x), not more than 500 transactions in securities in any calendar year, and such transactions are not effected by an employee of the bank who is also an employee of a broker or dealer. 

 (C) Execution by broker or dealer 

 The exception to being considered a broker for a bank engaged in activities described in clauses (ii), (iv), and (viii) of subparagraph (B) shall not apply if the activities described in such provisions result in the trade in the United States of any security that is a publicly traded security in the United States, unless-- 

 (i) the bank directs such trade to a registered broker or dealer for execution; 

 (ii) the trade is a cross trade or other substantially similar trade of a security that-- 

 (I) is made by the bank or between the bank and an affiliated fiduciary;  and 

 (II) is not in contravention of fiduciary principles established under applicable Federal or State law;  or 

 (iii) the trade is conducted in some other manner permitted under rules, regulations, or orders as the Commission may prescribe or issue. 

 (D) Fiduciary capacity 

 For purposes of subparagraph (B)(ii), the term "fiduciary capacity" means-- 

 (i) in the capacity as trustee, executor, administrator, registrar of stocks and bonds, transfer agent, guardian, assignee, receiver, or custodian under a uniform gift to minor act, or as an investment adviser if the bank receives a fee for its investment advice; 

 (ii) in any capacity in which the bank possesses investment discretion on behalf of another;  or 

 (iii) in any other similar capacity. 

 (E) Exception for entities subject to section 78o(e) of this title 

 The term "broker" does not include a bank that-- 

 (i) was, on the day before November 12, 1999, subject to section 78o(e) of this title;  and 

 (ii) is subject to such restrictions and requirements as the Commission considers appropriate. 

(5) Dealer 

 (A) In general 

 The term "dealer" means any person engaged in the business of buying and selling securities for such person's own account through a broker or otherwise. 

 (B) Exception for person not engaged in the business of dealing 

 The term "dealer" does not include a person that buys or sells securities for such person's own account, either individually or in a fiduciary capacity, but not as a part of a regular business. 

 (C) Exception for certain bank activities 

 A bank shall not be considered to be a dealer because the bank engages in any of the following activities under the conditions described: 

 (i) Permissible securities transactions 

 The bank buys or sells-- 

 (I) commercial paper, bankers acceptances, or commercial bills; 

 (II) exempted securities; 

 (III) qualified Canadian government obligations as defined in section 24 of Title 12, in conformity with section 78o-5 of this title and the rules and regulations thereunder, or obligations of the North American Development Bank;  or 

 (IV) any standardized, credit enhanced debt security issued by a foreign government pursuant to the March 1989 plan of then Secretary of the Treasury Brady, used by such foreign government to retire outstanding commercial bank loans. 

 (ii) Investment, trustee, and fiduciary transactions 

 The bank buys or sells securities for investment purposes-- 

 (I) for the bank;  or 

 (II) for accounts for which the bank acts as a trustee or fiduciary. 

 (iii) Asset-backed transactions 

 The bank engages in the issuance or sale to qualified investors, through a grantor trust or other separate entity, of securities backed by or representing an interest in notes, drafts, acceptances, loans, leases, receivables, other obligations (other than securities of which the bank is not the issuer), or pools of any such obligations predominantly originated by-- 

 (I) the bank; 

 (II) an affiliate of any such bank other than a broker or dealer;  or 

 (III) a syndicate of banks of which the bank is a member, if the obligations or pool of obligations consists of mortgage obligations or consumer-related receivables.

 (iv) Identified banking products 

 The bank buys or sells identified banking products, as defined in section 206 of the Gramm-Leach-Bliley Act [15 U.S.C.A. § 78c note].  

(6) The term "bank" means (A) a banking institution organized under the laws of the United States, (B) a member bank of the Federal Reserve System, (C) any other banking institution, whether incorporated or not, doing business under the laws of any State or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers similar to those permitted to national banks under the authority of the Comptroller of the currency pursuant to section 92a of Title 12, and which is supervised and examined by State or Federal authority having supervision over banks, and which is not operated for the purpose of evading the provisions of this chapter, and (D) a receiver, conservator, or other liquidating agent of any institution or firm included in clauses (A), (B), or (C) of this paragraph.

(7) The term "director" means any director of a corporation or any person performing similar functions with respect to any organization, whether incorporated or unincorporated.

(8) The term "issuer" means any person who issues or proposes to issue any security;  except that with respect to certificates of deposit for securities, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors or of the fixed, restricted management, or unit type, the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued;  and except that with respect to equipment-trust certificates or like securities, the term "issuer" means the person by whom the equipment or property is, or is to be, used.

(9) The term "person" means a natural person, company, government, or political subdivision, agency, or instrumentality of a government.

(10) The term "security" means any note, stock, treasury stock, security future, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a "security";  or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing;  but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.

(11) The term "equity security" means any stock or similar security; or any security future on any such security;or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security;  or any such warrant or right;  or any other security which the Commission shall deem to be of similar nature and consider necessary or appropriate, by such rules and regulations as it may prescribe in the public interest or for the protection of investors, to treat as an equity security.

(12)(A) The term "exempted security" or "exempted securities" includes--

(i) government securities, as defined in paragraph (42) of this subsection;

(ii) municipal securities, as defined in paragraph (29) of this subsection;

(iii) any interest or participation in any common trust fund or similar fund that is excluded from the definition of the term "investment company" under section 80a-3(c)(3) of this title;

(iv) any interest or participation in a single trust fund, or a collective trust fund maintained by a bank, or any security arising out of a contract issued by an insurance company, which interest, participation, or security is issued in connection with a qualified plan as defined in subparagraph (C) of this paragraph;

(v) any security issued by or any interest or participation in any pooled income fund, collective trust fund, collective investment fund, or similar fund that is excluded from the definition of an investment company under section 80a-3(c)(10)(B) of this title;

(vi) solely for purposes of sections 78l, 78m, 78n, and, 78p of this title, any security issued by or any interest or participation in any church plan, company, or account that is excluded from the definition of an investment company under section 80a-3(c)(14) of this title;  and

(vii) such other securities (which may include, among others, unregistered securities, the market in which is predominantly intrastate) as the Commission may, by such rules and regulations as it deems consistent with the public interest and the protection of investors, either unconditionally or upon specified terms and conditions or for stated periods, exempt from the operation of any one or more provisions of this chapter which by their terms do not apply to an "exempted security" or to "exempted securities".

(B)(i) Notwithstanding subparagraph (A)(i) of this paragraph, government securities shall not be deemed to be "exempted securities" for the purposes of section 78q-1 of this title.

(ii) Notwithstanding subparagraph (A)(ii) of this paragraph, municipal securities shall not be deemed to be "exempted securities" for the purposes of sections 78o and 78q-1 of this title.

(C) For purposes of subparagraph (A)(iv) of this paragraph, the term "qualified plan" means (i) a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of Title 26, (ii) an annuity plan which meets the requirements for the deduction of the employer's contribution under section 404(a)(2) of Title 26, or (iii) a governmental plan as defined in section 414(d) of Title 26 which has been established by an employer for the exclusive benefit of its employees or their beneficiaries for the purpose of distributing to such employees or their beneficiaries the corpus and income of the funds accumulated under such plan, if under such plan it is impossible, prior to the satisfaction of all liabilities with respect to such employees and their beneficiaries, for any part of the corpus or income to be used for, or diverted to, purposes other than the exclusive benefit of such employees or their beneficiaries, other than any plan described in clause (i), (ii), or (iii) of this subparagraph which (I) covers employees some or all of whom are employees within the meaning of section 401(c) of Title 26, or (II) is a plan funded by an annuity contract described in section 403(b) of Title 26.

(13) The terms "buy" and "purchase" each include any contract to buy, purchase, or otherwise acquire. For security futures products, such term includes any contract, agreement, or transaction for future delivery.

(14) The terms "sale" and "sell" each include any contract to sell or otherwise dispose of. For security futures products, such term includes any contract, agreement, or transaction for future delivery.

(15) The term "Commission" means the Securities and Exchange Commission established by section 78d of this title.

(16) The term "State" means any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or any other possession of the United States.

(17) 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.  The term also includes intrastate use of (A) any facility of a national securities exchange or of a telephone or other interstate means of communication, or (B) any other interstate instrumentality.

(18) The term "person associated with a broker or dealer" or "associated person of a broker or dealer" means any partner, officer, director, or branch manager of such broker or dealer (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such broker or dealer, or any employee of such broker or dealer, except that any person associated with a broker or dealer whose functions are solely clerical or ministerial shall not be included in the meaning of such term for purposes of section 78o(b) of this title (other than paragraph (6) thereof).

(19) The terms "investment company", "affiliated person", "insurance company", "separate account", and "company" have the same meanings as in the Investment Company Act of 1940 [15 U.S.C.A. § 80a-1 et seq.].

(20) The terms "investment adviser" and "underwriter" have the same meanings as in the Investment Advisers Act of 1940 [15 U.S.C.A. § 80b-1 et. seq.].

(21) The term "person associated with a member" or "associated person of a member" when used with respect to a member of a national securities exchange or registered securities association means any partner, officer, director, or branch manager of such member (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such member, or any employee of such member.

(22)(A) The term "securities information processor" means any person engaged in the business of (i) collecting, processing, or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, information with respect to transactions in or quotations for any security (other than an exempted security) or (ii) distributing or publishing (whether by means of a ticker tape, a communications network, a terminal display device, or otherwise) on a current and continuing basis, information with respect to such transactions or quotations.  The term "securities information processor" does not include any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation, any self-regulatory organizations, any bank, broker, dealer, building and loan, savings and loan, or homestead association, or cooperative bank, if such bank, broker, dealer, association, or cooperative bank would be deemed to be a securities information processor solely by reason of functions performed by such institutions as part of customary banking, brokerage, dealing, association, or cooperative bank activities, or any common carrier, as defined in section 153 of Title 47, subject to the jurisdiction of the Federal Communications Commission or a State commission, as defined in section 153 of Title 47, unless the Commission determines that such carrier is engaged in the business of collecting, processing, or preparing for distribution or publication, information with respect to transactions in or quotations for any security.

(B) The term "exclusive processor" means any securities information processor or self-regulatory organization which, directly or indirectly, engages on an exclusive basis on behalf of any national securities exchange or registered securities association, or any national securities exchange or registered securities association which engages on an exclusive basis on its own behalf, in collecting, processing, or preparing for distribution or publication any information with respect to (i) transactions or quotations on or effected or made by means of any facility of such exchange or (ii) quotations distributed or published by means of any electronic system operated or controlled by such association.

(23)(A) The term "clearing agency" means any person who acts as an intermediary in making payments or deliveries or both in connection with transactions in securities or who provides facilities for comparison of data respecting the terms of settlement of securities transactions, to reduce the number of settlements of securities transactions, or for the allocation of securities settlement responsibilities.  Such term also means any person, such as a securities depository, who (i) acts as a custodian of securities in connection with a system for the central handling of securities whereby all securities of a particular class or series of any issuer deposited within the system are treated as fungible and may be transferred, loaned, or pledged by bookkeeping entry without physical delivery of securities certificates, or (ii) otherwise permits or facilitates the settlement of securities transactions or the hypothecation or lending of securities without physical delivery of securities certificates.

(B) The term "clearing agency" does not include (i) any Federal Reserve bank, Federal home loan bank, or Federal land bank;  (ii) any national securities exchange or registered securities association solely by reason of its providing facilities for comparison of data respecting the terms of settlement of securities transactions effected on such exchange or by means of any electronic system operated or controlled by such association;  (iii) any bank, broker, dealer, building and loan, savings and loan, or homestead association, or cooperative bank if such bank, broker, dealer, association, or cooperative bank would be deemed to be a clearing agency solely by reason of functions performed by such institution as part of customary banking, brokerage, dealing, association, or cooperative banking activities, or solely by reason of acting on behalf of a clearing agency or a participant therein in connection with the furnishing by the clearing agency of services to its participants or the use of services of the clearing agency by its participants, unless the Commission, by rule, otherwise provides as necessary or appropriate to assure the prompt and accurate clearance and settlement of securities transactions or to prevent evasion of this chapter;  (iv) any life insurance company, its registered separate accounts, or a subsidiary of such insurance company solely by reason of functions commonly performed by such entities in connection with variable annuity contracts or variable life policies issued by such insurance company or its separate accounts;  (v) any registered open-end investment company or unit investment trust solely by reason of functions commonly performed by it in connection with shares in such registered open-end investment company or unit investment trust, or (vi) any person solely by reason of its performing functions described in paragraph (25)(E) of this subsection.

(24) The term "participant" when used with respect to a clearing agency means any person who uses a clearing agency to clear or settle securities transactions or to transfer, pledge, lend, or hypothecate securities.  Such term does not include a person whose only use of a clearing agency is (A) through another person who is a participant or (B) as a pledgee of securities.

(25) The term "transfer agent" means any person who engages on behalf of an issuer of securities or on behalf of itself as an issuer of securities in (A) countersigning such securities upon issuance;  (B) monitoring the issuance of such securities with a view to preventing unauthorized issuance, a function commonly performed by a person called a registrar;  (C) registering the transfer of such securities;  (D) exchanging or converting such securities;  or (E) transferring record ownership of securities by bookkeeping entry without physical issuance of securities certificates.  The term "transfer agent" does not include any insurance company or separate account which performs such functions solely with respect to variable annuity contracts or variable life policies which it issues or any registered clearing agency which performs such functions solely with respect to options contracts which it issues.

(26) The term "self-regulatory organization" means any national securities exchange, registered securities association, or registered clearing agency, or (solely for purposes of sections 78s(b), 78s(c), and 78w(b) of this title) the Municipal Securities Rulemaking Board established by section 78o-4 of this title.

(27) The term "rules of an exchange", "rules of an association", or "rules of a clearing agency" means the constitution, articles of incorporation, bylaws, and rules, or instruments corresponding to the foregoing, of an exchange, association of brokers and dealers, or clearing agency, respectively, and such of the stated policies, practices, and interpretations of such exchange, association, or clearing agency as the Commission, by rule, may determine to be necessary or appropriate in the public interest or for the protection of investors to be deemed to be rules of such exchange, association, or clearing agency.

(28) The term "rules of a self-regulatory organization" means the rules of an exchange which is a national securities exchange, the rules of an association of brokers and dealers which is a registered securities association, the rules of a clearing agency which is a registered clearing agency, or the rules of the Municipal Securities Rulemaking Board.

(29) The term "municipal securities" means securities which are direct obligations of, or obligations guaranteed as to principal or interest by, a State or any political subdivision thereof, or any agency or instrumentality of a State or any political subdivision thereof, or any municipal corporate instrumentality of one or more States, or any security which is an industrial development bond (as defined in section 103(c)(2) of Title 26) the interest on which is excludable from gross income under section 103(a)(1) of Title 26 if, by reason of the application of paragraph (4) or (6) of section 103(c) of Title 26 (determined as if paragraphs (4)(A), (5), and (7) were not included in such section 103(c)), paragraph (1) of such section 103(c) does not apply to such security.

(30) The term "municipal securities dealer" means any person (including a separately identifiable department or division of a bank) engaged in the business of buying and selling municipal securities for his own account, through a broker or otherwise, but does not include--

(A) any person insofar as he buys or sells such securities for his own account, either individually or in some fiduciary capacity, but not as a part of a regular business;  or

(B) a bank, unless the bank is engaged in the business of buying and selling municipal securities for its own account other than in a fiduciary capacity, through a broker or otherwise:  Provided, however, That if the bank is engaged in such business through a separately identifiable department or division (as defined by the Municipal Securities Rulemaking Board in accordance with section 78o-4(b)(2)(H) of this title), the department or division and not the bank itself shall be deemed to be the municipal securities dealer.

(31) The term "municipal securities broker" means a broker engaged in the business of effecting transactions in municipal securities for the account of others.

(32) The term "person associated with a municipal securities dealer" when used with respect to a municipal securities dealer which is a bank or a division or department of a bank means any person directly engaged in the management, direction, supervision, or performance of any of the municipal securities dealer's activities with respect to municipal securities, and any person directly or indirectly controlling such activities or controlled by the municipal securities dealer in connection with such activities.

(33) The term "municipal securities investment portfolio" means all municipal securities held for investment and not for sale as part of a regular business by a municipal securities dealer or by a person, directly or indirectly, controlling, controlled by, or under common control with a municipal securities dealer.

(34) The term "appropriate regulatory agency" means--

(A) When used with respect to a municipal securities dealer:

(i) the Comptroller of the Currency, in the case of a national bank or a bank operating under the Code of Law for the District of Columbia, or a subsidiary or a department or division of any such bank;

(ii) the Board of Governors of the Federal Reserve System, in the case of a State member bank of the Federal Reserve System, a subsidiary or a department or division thereof, a bank holding company, a subsidiary of a bank holding company which is a bank other than a bank specified in clause (i) or (iii) of this subparagraph, or a subsidiary or a department or division of such subsidiary;

(iii) the Federal Deposit Insurance Corporation, in the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System), or a subsidiary or department or division thereof;  and

(iv) the Commission in the case of all other municipal securities dealers.

(B) When used with respect to a clearing agency or transfer agent:

(i) the Comptroller of the Currency, in the case of a national bank or a bank operating under the Code of Law for the District of Columbia, or a subsidiary of any such bank;

(ii) the Board of Governors of the Federal Reserve System, in the case of a State member bank of the Federal Reserve System, a subsidiary thereof, a bank holding company, or a subsidiary of a bank holding company which is a bank other than a bank specified in clause (i) or (iii) of this subparagraph;

(iii) the Federal Deposit Insurance Corporation, in the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System), or a subsidiary thereof;  and

(iv) the Commission in the case of all other clearing agencies and transfer agents.

(C) When used with respect to a participant or applicant to become a participant in a clearing agency or a person requesting or having access to services offered by a clearing agency:

(i) the Comptroller of the Currency, in the case of a national bank or a bank operating under the Code of Law for the District of Columbia when the appropriate regulatory agency for such clearing agency is not the Commission;

(ii) the Board of Governors of the Federal Reserve System in the case of a State member bank of the Federal Reserve System, a bank holding company, or a subsidiary of a bank holding company, or a subsidiary of a bank holding company which is a bank other than a bank specified in clause (i) or (iii) of this subparagraph when the appropriate regulatory agency for such clearing agency is not the Commission;

(iii) the Federal Deposit Insurance Corporation, in the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System) when the appropriate regulatory agency for such clearing agency is not the Commission;  and

(iv) the Commission in all other cases.

(D) When used with respect to an institutional investment manager which is a bank the deposits of which are insured in accordance with the Federal Deposit Insurance Act [12 U.S.C.A. § 1811 et seq.]:

(i) the Comptroller of the Currency, in the case of a national bank or a bank operating under the Code of Law for the District of Columbia;

(ii) the Board of Governors of the Federal Reserve System, in the case of any other member bank of the Federal Reserve System;  and

(iii) the Federal Deposit Insurance Corporation, in the case of any other insured bank.

(E) When used with respect to a national securities exchange or registered securities association, member thereof, person associated with a member thereof, applicant to become a member thereof or to become associated with a member thereof, or person requesting or having access to services offered by such exchange or association or member thereof, or the Municipal Securities Rulemaking Board, the Commission.

(F) When used with respect to a person exercising investment discretion with respect to an account;

(i) the Comptroller of the Currency, in the case of a national bank or a bank operating under the Code of Law for the District of Columbia;

(ii) the Board of Governors of the Federal Reserve System, in the case of any other member bank of the Federal Reserve System;

(iii) the Federal Deposit Insurance Corporation, in the case of any other bank the deposits of which are insured in accordance with the Federal Deposit Insurance Act [12 U.S.C.A. § 1811 et seq.];  and

(iv) the Commission, in the case of all other such persons.

(G) When used with respect to a government securities broker or government securities dealer, or person associated with a government securities broker or government securities dealer:

(i) the Comptroller of the Currency, in the case of a national bank, a bank in the District of Columbia examined by the Comptroller of the Currency, or a Federal branch or Federal agency of a foreign bank (as such terms are used in the International Banking Act of 1978 [12 U.S.C.A. § 3101 et seq.]);

(ii) the Board of Governors of the Federal Reserve System, in the case of a State member bank of the Federal Reserve System, a foreign bank, an uninsured State branch or State agency of a foreign bank, a commercial lending company owned or controlled by a foreign bank (as such terms are used in the International Banking Act of 1978), or a corporation organized or having an agreement with the Board of Governors of the Federal Reserve System pursuant to section 25 or section 25A of the Federal Reserve Act [12 U.S.C.A. § 601 et seq. or 611 et seq.];

(iii) the Federal Deposit Insurance Corporation, in the case of a bank insured by the Federal Deposit Insurance Corporation (other than a member of the Federal Reserve System or a Federal savings bank) or an insured State branch of a foreign bank (as such terms are used in the International Banking Act of 1978);

(iv) the Director of the Office of Thrift Supervision, in the case of a savings association (as defined in section 1813(b) of Title 12) the deposits of which are insured by the Federal Deposit Insurance Corporation;  [FN1]

(v) the Commission, in the case of all other government securities brokers and government securities dealers.

(H) When used with respect to an institution described in subparagraph (D), (F), or (G) of section 1841(c)(2), or held under section 1843(f), of Title 12--

(i) the Comptroller of the Currency, in the case of a national bank or a bank in the District of Columbia examined by the Comptroller of the Currency;

(ii) the Board of Governors of the Federal Reserve System, in the case of a State member bank of the Federal Reserve System or any corporation chartered under section 25A of the Federal Reserve Act [12 U.S.C.A. § 611 et seq.];

(iii) the Federal Deposit Insurance Corporation, in the case of any other bank the deposits of which are insured in accordance with the Federal Deposit Insurance Act [12 U.S.C.A. § 1811 et seq.];  or

(iv) the Commission in the case of all other such institutions.

As used in this paragraph, the terms "bank holding company" and "subsidiary of a bank holding company" have the meanings given them in section 1841 of Title 12, and the term "District of Columbia savings and loan association" means any association subject to examination and supervision by the Office of Thrift Supervision under section 1466a of Title 12.

(35) A person exercises "investment discretion" with respect to an account if, directly or indirectly, such person (A) is authorized to determine what securities or other property shall be purchased or sold by or for the account, (B) makes decisions as to what securities or other property shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions, or (C) otherwise exercises such influence with respect to the purchase and sale of securities or other property by or for the account as the Commission, by rule, determines, in the public interest or for the protection of investors, should be subject to the operation of the provisions of this chapter and the rules and regulations thereunder.

(36) A class of persons or markets is subject to "equal regulation" if no member of the class has a competitive advantage over any other member thereof resulting from a disparity in their regulation under this chapter which the Commission determines is unfair and not necessary or appropriate in furtherance of the purposes of this chapter.

(37) The term "records" means accounts, correspondence, memorandums, tapes, discs, papers, books, and other documents or transcribed information of any type, whether expressed in ordinary or machine language.

(38) The term "market maker" means any specialist permitted to act as a dealer, any dealer acting in the capacity of block positioner, and any dealer who, with respect to a security, holds himself out (by entering quotations in an inter-dealer communications system or otherwise) as being willing to buy and sell such security for his own account on a regular or continuous basis.

(39) A person is subject to a "statutory disqualification" with respect to membership or participation in, or association with a member of, a self-regulatory organization, if such person--

(A) has been and is expelled or suspended from membership or participation in, or barred or suspended from being associated with a member of, any self-regulatory organization, foreign equivalent of a self-regulatory organization, foreign or international securities exchange, contract market designated pursuant to section 5 of the Commodity Exchange Act (7 U.S.C. 7), or any substantially equivalent foreign statute or regulation, or futures association registered under section 17 of such Act (7 U.S.C. 21), or any substantially equivalent foreign statute or regulation, or has been and is denied trading privileges on any such contract market or foreign equivalent;

(B) is subject to--

(i) an order of the Commission, other appropriate regulatory agency, or foreign financial regulatory authority--

(I) denying, suspending for a period not exceeding 12 months, or revoking his registration as a broker, dealer, municipal securities dealer, government securities broker, or government securities dealer or limiting his activities as a foreign person performing a function substantially equivalent to any of the above;  or

(II) barring or suspending for a period not exceeding 12 months his being associated with a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, or foreign person performing a function substantially equivalent to any of the above;

(ii) an order of the Commodity Futures Trading Commission denying, suspending, or revoking his registration under the Commodity Exchange Act (7 U.S.C. 1 et seq.);   or

(iii) an order by a foreign financial regulatory authority denying, suspending, or revoking the person's authority to engage in transactions in contracts of sale of a commodity for future delivery or other instruments traded on or subject to the rules of a contract market, board of trade, or foreign equivalent thereof;

(C) by his conduct while associated with a broker, dealer, municipal securities dealer, government securities broker, or government securities dealer, or while associated with an entity or person required to be registered under the Commodity Exchange Act [7 U.S.C.A. § 1 et seq.], has been found to be a cause of any effective suspension, expulsion, or order of the character described in subparagraph (A) or (B) of this paragraph, and in entering such a suspension, expulsion, or order, the Commission, an appropriate regulatory agency, or any such self-regulatory organization shall have jurisdiction to find whether or not any person was a cause thereof;

(D) by his conduct while associated with any broker, dealer, municipal securities dealer, government securities broker, government securities dealer, or any other entity engaged in transactions in securities, or while associated with an entity engaged in transactions in contracts of sale of a commodity for future delivery or other instruments traded on or subject to the rules of a contract market, board of trade, or foreign equivalent thereof, has been found to be a cause of any effective suspension, expulsion, or order by a foreign or international securities exchange or foreign financial regulatory authority empowered by a foreign government to administer or enforce its laws relating to financial transactions as described in subparagraph (A) or (B) of this paragraph;

(E) has associated with him any person who is known, or in the exercise of reasonable care should be known, to him to be a person described by subparagraph (A), (B), (C), or (D) of this paragraph;  or

(F) has committed or omitted any act enumerated in subparagraph (D), (E), 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) or any other felony within ten years of the date of the filing of an application for membership or participation in, or to become associated with a member of, such self-regulatory organization, is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4), has willfully made or caused to be made in any application for membership or participation in, or to become associated with a member of, a self-regulatory organization, report required to be filed with a self-regulatory organization, or proceeding before a self-regulatory organization, 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, report, or proceeding any material fact which is required to be stated therein.

(40) The term "financial responsibility rules" means the rules and regulations of the Commission or the rules and regulations prescribed by any self-regulatory organization relating to financial responsibility and related practices which are designated by the Commission, by rule or regulation, to be financial responsibility rules.

(41) The term "mortgage related security" means a security that is rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization, and either:

(A) represents ownership of one or more promissory notes or certificates of interest or participation in such notes (including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of such notes, certificates, or participations of amounts payable under, such notes, certificates, or participations), which notes:

(i) are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, on a residential manufactured home as defined in section 5402(6) of Title 42, whether such manufactured home is considered real or personal property under the laws of the State in which it is to be located or on one or more parcels of real estate upon which is located one or more commercial structures;  and

(ii) were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution which is supervised and examined by a Federal or State authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to sections 1709 and 1715b of Title 12, or, where such notes involve a lien on the manufactured home, by any such institution or by any financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to section 1703 of Title 12;  or

(B) is secured by one or more promissory notes or certificates of interest or participations in such notes (with or without recourse to the issuer thereof) and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, on notes meeting the requirements of subparagraphs (A)(i) and (ii) or certificates of interest or participations in promissory notes meeting such requirements.

For the purpose of this paragraph, the term "promissory note", when used in connection with a manufactured home, shall also include a loan, advance, or credit sale as evidence  [FN2] by a retail installment sales contract or other instrument.

(42) The term "government securities" means--

(A) securities which are direct obligations of, or obligations guaranteed as to principal or interest by, the United States;

(B) securities which are issued or guaranteed by corporations in which the United States has a direct or indirect interest and which are designated by the Secretary of the Treasury for exemption as necessary or appropriate in the public interest or for the protection of investors;

(C) securities issued or guaranteed as to principal or interest by any corporation the securities of which are designated, by statute specifically naming such corporation, to constitute exempt securities within the meaning of the laws administered by the Commission;

(D) for purposes of sections 78o-5 and 78q-1 of this title, any put, call, straddle, option, or privilege on a security described in subparagraph (A), (B), or (C) other than a put, call, straddle, option, or privilege--

(i) that is traded on one or more national securities exchanges;  or

(ii) for which quotations are disseminated through an automated quotation system operated by a registered securities association; or

(E) for purposes of sections 78o, 78o-5, and 78q-1 of this title as applied to a bank, a qualified Canadian government obligation as defined in section 24 of Title 12.

(43) The term "government securities broker" means any person regularly engaged in the business of effecting transactions in government securities for the account of others, but does not include--

(A) any corporation the securities of which are government securities under subparagraph (B) or (C) of paragraph (42) of this subsection;  or

(B) any person registered with the Commodity Futures Trading Commission, any contract market designated by the Commodity Futures Trading Commission, such contract market's affiliated clearing organization, or any floor trader on such contract market, solely because such person effects transactions in government securities that the Commission, after consultation with the Commodity Futures Trading Commission, has determined by rule or order to be incidental to such person's futures-related business.

(44) The term "government securities dealer" means any person engaged in the business of buying and selling government securities for his own account, through a broker or otherwise, but does not include--

(A) any person insofar as he buys or sells such securities for his own account, either individually or in some fiduciary capacity, but not as a part of a regular business;

(B) any corporation the securities of which are government securities under subparagraph (B) or (C) of paragraph (42) of this subsection;

(C) any bank, unless the bank is engaged in the business of buying and selling government securities for its own account other than in a fiduciary capacity, through a broker or otherwise;  or

(D) any person registered with the Commodity Futures Trading Commission, any contract market designated by the Commodity Futures Trading Commission, such contract market's affiliated clearing organization, or any floor trader on such contract market, solely because such person effects transactions in government securities that the Commission, after consultation with the Commodity Futures Trading Commission, has determined by rule or order to be incidental to such person's futures-related business.

(45) The term "person associated with a government securities broker or government securities dealer" means any partner, officer, director, or branch manager of such government securities broker or government securities dealer (or any person occupying a similar status or performing similar functions), and any other employee of such government securities broker or government securities dealer who is engaged in the management, direction, supervision, or performance of any activities relating to government securities, and any person directly or indirectly controlling, controlled by, or under common control with such government securities broker or government securities dealer.

(46) The term "financial institution" means--

(A) a bank (as defined in paragraph (6) of this subsection);

(B) a foreign bank (as such term is used in the International Banking Act of 1978); and

(C) a savings association (as defined in section 1813(b) of Title 12) the deposits of which are insured by the Federal Deposit Insurance Corporation.

(47) The term "securities laws" means the Securities Act of 1933 (15 U.S.C. 77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), the Public Utility Holding Company Act of 1935 (15 U.S.C. 79a et seq.) [15 U.S.C.A. § 79 et seq.], the Trust Indenture Act of 1939 (15 U.S.C. 77aaa 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 et seq.) [15 U.S.C.A. § 80b-1 et seq.], and the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.).

(48) The term "registered broker or dealer" means a broker or dealer registered or required to register pursuant to section 78o or 78o-4 of this title, except that in paragraph (3) of this subsection and sections 78f and 78o-3 of this title the term means such a broker or dealer and a government securities broker or government securities dealer registered or required to register pursuant to section 78o-5(a)(1)(A) of this title.

(49) The term "person associated with a transfer agent" and "associated person of a transfer agent" mean any person (except an employee whose functions are solely clerical or ministerial) directly engaged in the management, direction, supervision, or performance of any of the transfer agent's activities with respect to transfer agent functions, and any person directly or indirectly controlling such activities or controlled by the transfer agent in connection with such activities.

(50) The term "foreign securities authority" means any foreign government, or any governmental body or regulatory organization empowered by a foreign government to administer or enforce its laws as they relate to securities matters.

(51)(A) The term "penny stock" means any equity security other than a security that is--

(i) registered or approved for registration and traded on a national securities exchange that meets such criteria as the Commission shall prescribe by rule or regulation for purposes of this paragraph;

(ii) authorized for quotation on an automated quotation system sponsored by a registered securities association, if such system (I) was established and in operation before January 1, 1990, and (II) meets such criteria as the Commission shall prescribe by rule or regulation for purposes of this paragraph;

(iii) issued by an investment company registered under the Investment Company Act of 1940 [15 U.S.C.A. § 80a-1 et seq.];

(iv) excluded, on the basis of exceeding a minimum price, net tangible assets of the issuer, or other relevant criteria, from the definition of such term by rule or regulation which the Commission shall prescribe for purposes of this paragraph;  or

(v) exempted, in whole or part, conditionally or unconditionally, from the definition of such term by rule, regulation, or order prescribed by the Commission.

(B) The Commission may, by rule, regulation, or order, designate any equity security or class of equity securities described in clause (i) or (ii) of subparagraph (A) as within the meaning of the term "penny stock" if such security or class of securities is traded other than on a national securities exchange or through an automated quotation system described in clause (ii) of subparagraph (A).

(C) In exercising its authority under this paragraph to prescribe rules, regulations, and orders, the Commission shall determine that such rule, regulation, or order is consistent with the public interest and the protection of investors.

(52) The term "foreign financial regulatory authority" means any (A) foreign securities authority, (B) other governmental body or foreign equivalent of a self-regulatory organization empowered by a foreign government to administer or enforce its laws relating to the regulation of fiduciaries, trusts, commercial lending, insurance, trading in contracts of sale of a commodity for future delivery, or other instruments traded on or subject to the rules of a contract market, board of trade, or foreign equivalent, or other financial activities, or (C) membership organization a function of which is to regulate participation of its members in activities listed above.

(53)(A) The term "small business related security" means a security that is rated in 1 of the 4 highest rating categories by at least 1 nationally recognized statistical rating organization, and either--

(i) represents an interest in 1 or more promissory notes or leases of personal property evidencing the obligation of a small business concern and originated by an insured depository institution, insured credit union, insurance company, or similar institution which is supervised and examined by a Federal or State authority, or a finance company or leasing company;  or

(ii) is secured by an interest in 1 or more promissory notes or leases of personal property (with or without recourse to the issuer or lessee) and provides for payments of principal in relation to payments, or reasonable projections of payments, on notes or leases described in clause (i).

(B) For purposes of this paragraph--

(i) an "interest in a promissory note or a lease of personal property" includes ownership rights, certificates of interest or participation in such notes or leases, and rights designed to assure servicing of such notes or leases, or the receipt or timely receipt of amounts payable under such notes or leases;

(ii) the term "small business concern" means a business that meets the criteria for a small business concern established by the Small Business Administration under section 632(a) of this title;

(iii) the term "insured depository institution" has the same meaning as in section 1813 of Title 12;  and

(iv) the term "insured credit union" has the same meaning as in section 1752 of Title 12.

(b) Power to define technical, trade, accounting, and other terms

The Commission and the Board of Governors of the Federal Reserve System, as to matters within their respective jurisdictions, shall have power by rules and regulations to define technical, trade, accounting, and other terms used in this chapter, consistently with the provisions and purposes of this chapter.

(c) Application to governmental departments or agencies

No provision of this chapter shall apply to, or be deemed to include, any executive department or independent establishment of the United States, or any lending agency which is wholly owned, directly or indirectly, by the United States, or any officer, agent, or employee of any such department, establishment, or agency, acting in the course of his official duty as such, unless such provision makes specific reference to such department, establishment, or agency.

(d) Issuers of municipal securities

No issuer of municipal securities or officer or employee thereof acting in the course of his official duties as such shall be deemed to be a "broker", "dealer", or "municipal securities dealer" solely by reason of buying, selling, or effecting transactions in the issuer's securities.

(e) Charitable organizations

(1) Exemption

Notwithstanding any other provision of this chapter, but subject to paragraph (2) of this subsection, a charitable organization, as defined in section 80a-3(c)(10)(D) of this title, or any trustee, director, officer, employee, or volunteer of such a charitable organization acting within the scope of such person's employment or duties with such organization, shall not be deemed to be a "broker", "dealer", "municipal securities broker", "municipal securities dealer", "government securities broker", or "government securities dealer" for purposes of this chapter solely because such organization or person buys, holds, sells, or trades in securities for its own account in its capacity as trustee or administrator of, or otherwise on behalf of or for the account of--

(A) such a charitable organization;

(B) a fund that is excluded from the definition of an investment company under section 80a-3(c)(10)(B) of this title;  or

(C) a trust or other donative instrument described in section 80a-3(c)(10)(B) of this title, or the settlors (or potential settlors) or beneficiaries of any such trust or other instrument.

(2) Limitation on compensation

The exemption provided under paragraph (1) shall not be available to any charitable organization, or any trustee, director, officer, employee, or volunteer of such a charitable organization, unless each person who, on or after 90 days after December 8, 1995, solicits donations on behalf of such charitable organization from any donor to a fund that is excluded from the definition of an investment company under section 80a-3(c)(10)(B) of this title, is either a volunteer or is engaged in the overall fund raising activities of a charitable organization and receives no commission or other special compensation based on the number or the value of donations collected for the fund.

(f) Consideration of promotion of efficiency, competition, and capital formation

Whenever pursuant to this chapter the Commission is engaged in rulemaking, or in the review of a rule of a self-regulatory organization, and is required to consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.

(g) Church plans

No church plan described in section 414(e) of Title 26, no person or entity eligible to establish and maintain such a plan under Title 26, no company or account that is excluded from the definition of an investment company under section 80a-3(c)(14) of this title, and no trustee, director, officer or employee of or volunteer for such plan, company, account person, or entity, acting within the scope of that person's employment or activities with respect to such plan, shall be deemed to be a "broker", "dealer", "municipal securities broker", "municipal securities dealer", "government securities broker", "government securities dealer", "clearing agency", or "transfer agent" for purposes of this chapter--

(1) solely because such plan, company, person, or entity buys, holds, sells, trades in, or transfers securities or acts as an intermediary in making payments in connection with transactions in securities for its own account in its capacity as trustee or administrator of, or otherwise on behalf of, or for the account of, any church plan, company, or account that is excluded from the definition of an investment company under section 80a-3(c)(14) of this title;  and

(2) if no such person or entity receives a commission or other transaction-related sales compensation in connection with any activities conducted in reliance on the exemption provided by this subsection.

(54) Qualified investor 

 (A) Definition 

 Except as provided in subparagraph (B), for purposes of this chapter, the term "qualified investor" means-- 

 (i) any investment company registered with the Commission under section 80a-8 of this title; 

 (ii) any issuer eligible for an exclusion from the definition of investment company pursuant to section 80a-3(c)(7) of this title; 

 (iii) any bank (as defined in paragraph (6) of this subsection), savings association (as defined in section 1813(b) of Title 12), broker, dealer, insurance company (as defined in section 77b(a)(13) of this title), or business development company (as defined in section 80a-2(a)(48) of this title); 

 (iv) any small business investment company licensed by the United States Small Business Administration under section 681(c) or (d) of this title; 

 (v) any State sponsored employee benefit plan, or any other employee benefit plan, within the meaning of the Employee Retirement Income Security Act of 1974, other than an individual retirement account, if the investment decisions are made by a plan fiduciary, as defined in section 1002(21) of Title 29, which is either a bank, savings and loan association, insurance company, or registered investment adviser; 

 (vi) any trust whose purchases of securities are directed by a person described in clauses (i) through (v) of this subparagraph; 

 (vii) any market intermediary exempt under section 80a-3(c)(2) of this title; 

 (viii) any associated person of a broker or dealer other than a natural person; 

 (ix) any foreign bank (as defined in section 3101(b)(7) of Title 12); 

 (x) the government of any foreign country; 

 (xi) any corporation, company, or partnership that owns and invests on a discretionary basis, not less than $25,000,000 in investments; 

 (xii) any natural person who owns and invests on a discretionary basis, not less than $25,000,000 in investments; 

 (xiii) any government or political subdivision, agency, or instrumentality