(a) Registration of all persons
utilizing exchange facilities to effect transactions; exemptions.
(1) It shall be unlawful
for any broker or dealer which is either a person other than a natural
person or a natural person not associated with a broker or dealer
which is a person other than a natural person (other than such a broker
or dealer whose business is exclusively intrastate and who does not
make use of any facility of a national securities exchange) to make
use of the mails or any means or instrumentality of interstate commerce
to effect any transactions in, or to induce or attempt to induce the
purchase or sale of, any security (other than an exempted security
or commercial paper, bankers’ acceptances, or commercial bills) unless
such broker or dealer is registered in accordance with subsection
(b) of this section.
(2) The Commission,
by rule or order, as it deems consistent with the public interest
and the protection of investors, may conditionally or unconditionally
exempt from paragraph (1) of this subsection any broker or dealer
or class of brokers or dealers specified in such rule or order.
(b) Manner of registration
of brokers and dealers.
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(c) Use of manipulative or deceptive
devices; contravention of rules and regulations.
(1) (A) No broker
or dealer shall make use of the mails or any means or instrumentality
of interstate commerce to effect any transaction in, or to induce
or attempt to induce the purchase or sale of, any security (other
than commercial paper, bankers’ acceptances, or commercial bills)
or any security-based swap agreement by means of any manipulative,
deceptive, or other fraudulent device or contrivance.
(B) No broker, dealer, or municipal
securities dealer shall make use of the mails or any means or instrumentality
of interstate commerce to effect any transaction in, or to induce
or attempt to induce the purchase or sale of, any municipal security
or any security-based swap agreement involving a municipal security
by means of any manipulative, deceptive, or other fraudulent device
or contrivance.
(C) No government
securities broker or government securities dealer shall make use of
the mails or any means or instrumentality of interstate commerce to
effect any transaction in, or to induce or to attempt to induce the
purchase or sale of, any government security or any security-based
swap agreement involving a government security by means of any manipulative,
deceptive, or other fraudulent device or contrivance.
(D) The Commission shall, for the purposes
of this paragraph, by rules and regulations define such devices or
contrivances as are manipulative, deceptive, or otherwise fraudulent.
(E) The Commission shall, prior
to adopting any rule or regulation under subparagraph (C), consult
with and consider the views of the Secretary of the Treasury and each
appropriate regulatory agency. If the Secretary of the Treasury or
any appropriate regulatory agency comments in writing on a proposed
rule or regulation of the Commission under such subparagraph (C) that
has been published for comment, the Commission shall respond in writing
to such written comment before adopting the proposed rule. If the
Secretary of the Treasury determines, and notifies the Commission,
that such rule or regulation, if implemented, would, or as applied
does (i) adversely affect the liquidity or efficiency of the market
for government securities; or (ii) impose any burden on competition
not necessary or appropriate in furtherance of the purposes of this
section, the Commission shall, prior to adopting the proposed rule
or regulation, find that such rule or regulation is necessary and
appropriate in furtherance of the purposes of this section notwithstanding
the Secretary’s determination.
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(2) (A) No broker or dealer shall
make use of the mails or any means or instrumentality of interstate
commerce to effect any transaction in, or to induce or attempt to
induce the purchase or sale of, any security (other than an exempted
security or commercial paper, bankers’ acceptances, or commercial
bills) otherwise than on a national securities exchange of which it
is a member, in connection with which such broker or dealer engages
in any fraudulent, deceptive, or manipulative act or practice, or
makes any fictitious quotation.
(B) No municipal securities dealer shall make use of the mails or
any means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase or
sale of, any municipal security in connection with which such municipal
securities dealer engages in any fraudulent, deceptive, or manipulative
act or practice, or makes any fictitious quotation.
(C) No government securities broker
or government securities dealer shall make use of the mails or any
means or instrumentality of interstate commerce to effect any transaction
in, or induce or attempt to induce the purchase or sale of, any government
security in connection with which such government securities broker or government
securities dealer engages in any fraudulent, deceptive, or manipulative
act or practice, or makes any fictitious quotation.
(D) The Commission shall, for the purposes
of this paragraph, by rules and regulations define, and prescribe
means reasonably designed to prevent, such acts and practices as are
fraudulent, deceptive, or manipulative and such quotations as are
fictitious.
(E) The Commission
shall, prior to adopting any rule or regulation under subparagraph
(C), consult with and consider the views of the Secretary of the Treasury
and each appropriate regulatory agency. If the Secretary of the Treasury
or any appropriate regulatory agency comments in writing on a proposed
rule or regulation of the Commission under such subparagraph (C) that
has been published for comment, the Commission shall respond in writing
to such written comment before adopting the proposed rule. If the
Secretary of the Treasury determines, and notifies the Commission,
that such rule or regulation, if implemented, would, or as applied
does (i) adversely affect the liquidity or efficiency of the market
for government securities; or (ii) impose any burden on competition
not necessary or appropriate in furtherance of the purposes of this
section, the Commission shall, prior to adopting the proposed rule
or regulation, find that such rule or regulation is necessary and
appropriate in furtherance of the purposes of this section notwithstanding
the Secretary’s determination.
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(3) (A) No broker or dealer
(other than a government securities broker or government securities
dealer, except a registered broker or dealer) shall make use of the
mails or any means or instrumentality of interstate commerce to effect
any transaction in, or to induce or attempt to induce the purchase
or sale of, any security (other than an exempted security (except
a government security) or commercial paper, bankers’ acceptances,
or commercial bills) in contravention of such rules and regulations
as the Commisson shall prescribe as necessary or appropriate in the
public interest or for the protection of investors to provide safeguards
with respect to the financial responsibility and related practices
of brokers and dealers including, but not limited to, the acceptance
of custody and use of customers’ securities and the carrying and use
of customers’ deposits or credit balances. Such rules and regulations
shall (A) require the maintenance of reserves with respect to customers’
deposits or credit balances, and (B) no later than September 1, 1975,
establish minimum financial responsibility requirements for all brokers
and dealers.
(B) Consistent with
this title, the Commission, in consultation with the Commodity Futures
Trading Commission, shall issue such rules, regulations, or orders
as are necessary to avoid duplicative or conflicting regulations applicable
to any broker or dealer registered with the Commission pursuant to
section 15(b) (except paragraph (11) thereof), that is also registered
with the Commodity Futures Trading Commission pursuant to section
4f(a) of the Commodity Exchange Act (except paragraph (2) thereof),
with respect to the application of: (i) the provisions of section
8, section 15(c)(3), and section 17 of this title and the rules and
regulations thereunder related to the treatment of customer funds,
securities, or property, maintenance of books and records, financial
reporting, or other financial responsibility rules, involving security
futures products; and (ii) similar provisions of the Commodity Exchange
Act and rules and regulations thereunder involving security futures
products.
(C) Notwithstanding
any provision of sections 2(a)(1)(C)(i) or 4d(a)(2) of the Commodity
Exchange Act and the rules and regulations thereunder, and pursuant
to an exemption granted by the Commission under section 36 of this
title or pursuant to a rule or regulation, cash and securities may
be held by a broker or dealer registered pursuant to subsection (b)(1)
and also registered as a futures commission merchant pursuant to section
4f(a)(1) of the Commodity Exchange Act, in a portfolio margining account
carried as a futures account subject to section 4d of the Commodity
Exchange Act and the rules and regulations thereunder, pursuant to
a portfolio margining program approved by the Commodity Futures Trading
Commission, and subject to subchapter IV of chapter 7 of title 11
of the United States Code and the rules and regulations thereunder.
The Commission shall consult with the Commodity Futures Trading Commission
to adopt rules to ensure that such transactions and accounts are subject
to comparable requirements to the extent practicable for similar products.
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(4) If the Commission finds, after
notice and opportunity for a hearing, that any person subject to the
provisions of section 12, 13, 14, or subsection (d) of section 15
of this title or any rule or regulation thereunder has failed to comply
with any such provision, rule, or regulation in any material respect,
the Commission may publish its findings and issue an order requiring
such person, and any person who was a cause of the failure to comply
due to an act or omission the person knew or should have known would
contribute to the failure to comply, to comply, or to take steps to
effect compliance, with such provision or such rule or regulation
thereunder upon such terms and conditions and within such time as
the Commission may specify in such order.
(5) No dealer (other than a specialist
registered on a national securities exchange) acting in the capacity
of market maker or otherwise shall make use of the mails or any means
or instrumentality of interstate commerce to effect any transaction
in, or to induce or attempt to induce the purchase or sale of, any
security (other than an exempted security or a municipal security)
in contravention of such specified and appropriate standards with
respect to dealing as the Commission, by rule, shall prescribe as
necessary or appropriate in the public interest and for the protection
of investors, to maintain fair and orderly markets, or to remove impediments
to and perfect the mechanism of a national market system. Under the
rules of the Commission a dealer in a security may be prohibited from
acting as a broker in that security.
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(6) No broker or dealer shall make use of the mails or any means
or instrumentality of interstate commerce to effect any transaction
in, or to induce or attempt to induce the purchase or sale of, any
security (other than an exempted security, municipal security, commercial
paper, bankers’ acceptances, or commercial bills) in contravention
of such rules and regulations as the Commission shall prescribe as
necessary or appropriate in the public interest and for the protection
of investors or to perfect or remove impediments to a national system
for the prompt and accurate clearance and settlement of securities
transactions, with respect to the time and method of, and the form
and format of documents used in connection with, making settlements
of and payments for transactions in securities, making transfers and
deliveries of securities, and closing accounts. Nothing in this paragraph
shall be construed (A) to affect the authority of the Board of Governors
of the Federal Reserve System, pursuant to section 7 of this title,
to prescribe rules and regulations for the purpose of preventing the
excessive use of credit for the purchase or carrying of securities,
or (B) to authorize the Commission to prescribe rules or regulations
for such purpose.
5-123.1
(7) In connection
with any bid for or purchase of a government security related to an
offering of government securities by or on behalf of an issuer, no
government securities broker, government securities dealer, or bidder
for or purchaser of securities in such offering shall knowingly or willfully
make any false or misleading written statement or omit any fact necessary
to make any written statement made not misleading.
(8) No broker or dealer, or person associated
with a broker or dealer, may solicit or accept, directly or indirectly,
remuneration for assisting an attorney in obtaining the representation
of any person in any private action arising under this title or under
the Securities Act of 1933.
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(d) Supplementary and periodic information.
(1) Each issuer which has filed a registration
statement containing an undertaking which is or becomes operative
under this subsection as in effect prior to August 20, 1964, and each
issuer which shall after such date file a registration statement which
has become effective pursuant to the Securities Act of 1933, as amended,
shall file with the Commission, in accordance with such rules and
regulations as the Commission may prescribe as necessary or appropriate
in the public interest or for the protection of investors, such supplementary
and periodic information, documents, and reports as may be required
pursuant to section 13 of this title in respect of a security registered
pursuant to section 12 of this title. The duty to file under this
subsection shall be automatically suspended if and so long as any
issue of securities of such issuer is registered pursuant to section
12 of this title. The duty to file under this subsection shall also
be automatically suspended as to any fiscal year, other than the fiscal
year within which such registration statement became effective, if,
at the beginning of such fiscal year, the securities of each class,
other than any class of asset-backed securities, to which the registration
statement relates are held of record by less than 300 persons, or,
in the case of a bank, a savings and loan holding company (as defined
in section 10 of the Home Owners’ Loan Act), or a bank holding company,
as such term is defined in section 2 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841), 1,200 persons. For the purposes of this
subsection, the term “class” shall be construed to include all securities
of an issuer which are of substantially similar character and the
holders of which enjoy substantially similar rights and privileges.
The Commission may, for the purpose of this subsection, define by
rules and regulations the term “held of record” as it deems necessary
or appropriate in the public interest or for the protection of investors
in order to prevent circumvention of the provisions of this subsection.
Nothing in this subsection shall apply to securities issued by a foreign
government or political subdivision thereof.
(2) (A) The Commission may, by
rule or regulation, provide for the suspension or termination of the
duty to file under this subsection for any class of asset-backed security,
on such terms and conditions and for such period or periods as the
Commission deems necessary or appropriate in the public interest or
for the protection of investors.
(B) The Commission may, for purposes of this subsection, classify
issuers and prescribe requirements appropriate for each class of issuers
of asset-backed securities.
(e) Notices to customers regarding securities lending. Every registered broker or dealer shall provide notice to its customers
that they may elect not to allow their fully paid securities to be
used in connection with short sales. If a broker or dealer uses a
customer’s securities in connection with short sales, the broker or
dealer shall provide notice to its customer that the broker or dealer
may receive compensation in connection with lending the customer’s
securities. The Commission, by rule, as it deems necessary or appropriate
in the public interest and for the protection of investors, may prescribe
the form, content, time, and manner of delivery of any notice required
under this paragraph.
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(f) Compliance with this
chapter by members not required to be registered. The Commission,
by rule, as it deems necessary or appropriate in the public interest
and for the protection of investors or to assure equal regulation,
may require any member of a national securities exchange not required
to register under this section and any person associated with any such member
to comply with any provision of this title (other than subsection
(a) of this section) or the rules or regulations thereunder which
by its terms regulates or prohibits any act, practice, or course of
business by a “broker or dealer” or “registered broker or dealer”
or a “person associated with a broker or dealer,” respectively.
5-125.1
(g) Brokers’ and dealers’ policies and
procedures on inside information. Every registered broker or
dealer shall establish, maintain, and enforce written policies and
procedures reasonably designed, taking into consideration the nature
of such broker’s or dealer’s business, to prevent the misuse in violation
of this title, or the rules or regulations thereunder, of material,
nonpublic information by such broker or dealer or any person associated
with such broker or dealer. The Commission, as it deems necessary
or appropriate in the public interest or for the protection of investors,
shall adopt rules or regulations to require specific policies or procedures
reasonably designed to prevent misuse in violation of this title (or
the rules or regulations thereunder) of material, nonpublic information.
(k) Standard of conduct.
(1) Notwithstanding any other provision
of this Act or the Investment Advisers Act of 1940, the Commission
may promulgate rules to provide that, with respect to a broker or
dealer, when providing personalized investment advice about securities
to a retail customer (and such other customers as the Commission may
by rule provide), the standard of conduct for such broker or dealer
with respect to such customer shall be the same as the standard of
conduct applicable to an investment adviser under section 211 of the
Investment Advisers Act of 1940. The receipt of compensation based
on commission or other standard compensation for the sale of securities
shall not, in and of itself, be considered a violation of such standard
applied to a broker or dealer. Nothing in this section shall require
a broker or dealer or registered representative to have a continuing
duty of care or loyalty to the customer after providing personalized
investment advice about securities.
(2) Where a broker or dealer sells only proprietary or other limited
range of products, as determined by the Commission, the Commission
may by rule require that such broker or dealer provide notice to each
retail customer and obtain the consent or acknowledgment of the customer.
The sale of only proprietary or other limited range of products by
a broker or dealer shall not, in and of itself, be considered a violation
of the standard set forth in paragraph (1).
(l) Other matters. The Commission shall—
(1) facilitate the provision
of simple and clear disclosures to investors regarding the terms of
their relationships with brokers, dealers, and investment advisers,
including any material conflicts of interest; and
(2) examine and, where appropriate, promulgate
rules prohibiting or restricting certain sales practices, conflicts
of interest, and compensation schemes for brokers, dealers, and investment
advisers that the Commission deems contrary to the public interest
and the protection of investors.
(m) Harmonization of enforcement. The enforcement
authority of the Commission with respect to violations of the standard
of conduct applicable to a broker or dealer providing personalized
investment advice about securities to a retail customer shall include—
(1) the enforcement authority
of the Commission with respect to such violations provided under this
Act; and
(2) the enforcement authority
of the Commission with respect to violations of the standard of conduct
applicable to an investment adviser under the Investment Advisers
Act of 1940, including the authority to impose sanctions for such
violations, and the Commission shall seek to prosecute and sanction
violators of the standard of conduct applicable to a broker or dealer
providing personalized investment advice about securities to a retail
customer under this Act to same extent as the Commission pros ecutes and
sanctions violators of the standard of conduct applicable to an investment
advisor under the Investment Advisers Act of 1940.
(n) Disclosures to retail investors.
(1) Notwithstanding
any other provision of the securities laws, the Commission may issue
rules designating documents or information that shall be provided
by a broker or dealer to a retail investor before the purchase of
an investment product or service by the retail investor.
(2) In developing any rules under paragraph
(1), the Commission shall consider whether the rules will promote
investor protection, efficiency, competition, and capital formation.
(3) Any documents or information designated
under a rule promulgated under paragraph (1) shall—
(A) be in a summary format; and
(B) contain clear and concise information
about—
(i) investment
objectives, strategies, costs, and risks; and
(ii) any compensation or other financial incentive
received by a broker, dealer, or other intermediary in connection
with the purchase of retail investment products.
(o) Authority
to restrict mandatory pre-dispute arbitration. The Commission,
by rule, may prohibit, or impose conditions or limitations on the
use of, agreements that require customers or clients of any broker,
dealer, or municipal securities dealer to arbitrate any future dispute
between them arising under the Federal securities laws, the rules
and regulations thereunder, or the rules of a self-regulatory organization
if it finds that such prohibition, imposition of conditions, or limitations
are in the public interest and for the protection of investors.
[15 USC 78o. As amended by acts of May 27, 1936 (49 Stat.
1377); June 25, 1938 (52 Stat. 1075); Aug. 20, 1964 (78 Stat. 570-574);
Dec. 30, 1970 (84 Stat. 1653); June 4, 1975 (89 Stat. 121); Dec. 19,
1977 (91 Stat. 1500); Aug. 10, 1984 (98 Stat. 1265); Oct. 28, 1986
(100 Stat. 3218); Nov. 19, 1988 (102 Stat. 4679); Nov. 15, 1990 (104
Stat. 2718); Dec. 17, 1993 (107 Stat. 2348, 2349, 2353); Dec. 22,
1995 (109 Stat. 756); Dec. 21, 2000 (114 Stat. 2763A-432, 455); July
21, 2010 (124 Stat. 1646, 1828, 1837, 1841, 1861, 1870, 1896); April
5, 2012 (126 Stat. 326); and Dec. 4, 2015 (129 Stat. 1797).]
