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content of registration statements and reports for various classes of exchanges, members, securities, and issuers, and defining accounting, technical, and trade terms used in this Act.
(b) The authority above given the Commission shall include, among other things, authority 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; but insofar as they relate to any common carrier subject to the provisions of section 20 of the Interstate Commerce Act, as amended, the rules and regulations of the Commission with respect to accounts shall not be inconsistent with the requirements imposed by the Interstate Commerce Commission under authority of such section 20.
(c) The authority above given the Commission shall include, among other things, authority to prescribe such rules and regulations for national securities exchanges, their members and persons transacting a business in securities through such members, in addition to those specifically provided in this Act, as it may deem necessary or appropriate in the public interest or for the protection of investors, and may by its rules and regulations more specifically define the form and procedure to be followed in carrying the provisions of this Act into effect. The Commission, among other things, may prescribe the time and method of making settlements, payments, and deliveries, the time and method of calculating margin requirements, and the time and method of closing out under-margined accounts. The Commission, among other things, may by rules and regulations prescribe rules for the conduct of business on exchanges, for the classification of members, for the election of officers and committees to ensure a fair representation of the membership, for the suspension, expulsion, or disciplining of members, for the listing or striking from listing of any security with right of appeal by the issuer to the Commission, for the reporting of transactions on the exchanges and upon tickers maintained by or with the consent of any exchange, including the method of reporting short sales, sales of securities in default in bankruptcy or receivership, and sales involving other special circumstances. The Commission may fix or prescribe the method of fixing uniform rates of commission, interests and other charges, may prescribe minimum units of trading, rules limiting the manner, method, and place of soliciting business, rules for odd-lot purchases and sales, rules regarding minimum deposits on marginal accounts, and rules limiting or prohibiting the registration or trading in any security within a specified period after the issuance or primary distribution thereof, prescribe rules governing the carrying of accounts and to prohibit fictitious or numbered accounts and require the disclosure of the real and beneficial owners thereof. The Commission shall have power to fix the hours of trading, and, if the public interest in its opinion so requires, summarily to suspend trading in any registered security or upon any registered exchange for a period not exceeding ninety days.
(d) The rules and regulations of the Commission shall be effective upon publication in the manner which the Commission shall prescribe.
(e) For the purpose of all investigations which, in the opinion of the Commission, are necessary and proper for the enforcement of this Act, any member of the Commission or any officer or officers designated by it are empowered to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, or other records which the Commission deems relevant or material to the inquiry. Such attendance of witnesses and the production of such records may be required from any place in the United States or any State at any designated place of hearing. Such power of subpena and examination shall not abate or terminate by reason of any action or proceeding brought by the Commission under this Act. The Commission shall have authority to investigate and in its discretion to publish information concerning any facts, conditions, or practices which it may deem necessary and proper as an aid in the prescribing of rules and regulations or the recommendation of further legislation concerning exchanges. If any person subpenaed to attend any inquiry fails to obey the command of his subpena without reasonable cause, or if a person in attendance upon such inquiry shall without reasonable cause refuse to be sworn or to be examined
or to answer a question or to produce any books, papers, correspondence, memoranda, or other records when ordered so to do by the officer conducting such inquiry, he shall be guilty of a misdemeanor and punishable accordingly. Any officer participating in such inquiry and any person examined as a witness upon such inquiry who shall disclose to any person other than a member or officer of the Commission the name of any witness examined or any other information obtained upon such inquiry, except as directed by the Commission or an officer thereof, shall be guilty of a misdemeanor and punishable accordingly.
LIABILITY OF CONTROLLING PERSONS Sec. 19. (a) Every person who, by or through stock ownership, agency, or otherwise, or who pursuant to or in connection with any agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under any provision of this Act or of any rule or regulation made pursuant thereto 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.
(b) It shall be unlawful for any person, directly or indirectly, to do any act or thing which it would be unlawful for such person to do under the provisions of this Act or any rule or regulation thereunder through or by means of any other person who is controlled by such person by or through stock ownership, agency, or otherwise or through or by means of any other person who is controlled by such person and one or more other persons by or through stock ownership, agency, or otherwise for the purpose of avoiding any provisions of this Act or any rule or regulation made thereunder.
(c) It shall be unlawful for any director, officer, or security holder of any issuer of any security registered on a national securities exchange to hinder, delay, or obstruct the making or filing of any document or report required to be filed with the Commission under this Act or any rule or regulation thereunder.
(d) If the spouse of a person subject to any provision of this Act or of any rule or regulation thereunder, or a child or parent residing with such person, or a person holding in trust for such person money or property used in the transaction in question shall effect any transaction in a security which would be a violation of any such provision if effected by such person subject thereto, such person subject thereto shall be deemed to have violated such provision unless he shall sustain the burden of showing that the transaction was not effected with his approval or was not for the purpose of evading such provision.
INJUNCTIONS AND PROSECUTION OF OFFENSES: SUSPENSION OR WITHDRAWAL OF
REGISTRATION OF AN EXCHANGE OR OF A SECURITY
Sec. 20. (a) Whenever the Commission, either upon complaint or otherwise, shall be of the opinion that in the public interest it should make an investigation to determine whether any person has violated or is about to violate any provision of this Act, or of any rule or regulation thereunder, it may investigate such facts, and it may, in its discretion, either require or permit such person, or any person making such complaint, 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.
(b) 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 Act, or of any rule or regulation prescribed under authority thereof, it may in its discretion
(i) Bring an action in any district court of the United States, United States court of any Territory, or the Supreme Court of the District of Columbia 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 title. Any such criminal proceeding may be brought in the district wherein the violation complained of occurred;
(ii) After appropriate notice and opportunity for hearing, make an order suspending for a period not exceeding twelve months or withdrawing altogether the registration of a national securities exchange if the Commission finds that such exchange has violated any provision of this Act or of the rules and regulations thereunder or has failed to enforce compliance therewith by a member or an issuer of a security registered thereon, or withdrawing altogether the registration of a
security the issuer of which has failed to comply with the provisions of this Act or the rules and regulations made thereunder;
(iii) After appropriate notice and opportunity for hearing, make an order suspending for a period not exceeding twelve months or ordering the expulsion altogether from a national securities exchange any member of officer thereof whom it finds has violated any provision of this Act or the rules and regulations thereunder or has effected any transaction for any other person who he has reason to believe is violating in respect of such transaction any provision of this Act or the rules or regulations thereunder.
(c) Upon application of the Commission the district courts of the United States, the United States courts of any Territory, and the Supreme Court of the District of Columbia shall also have jurisdiction to issue writs of mandamus commanding any person to comply with the provisions of this Act or any order of the Commission made in pursuance thereof.
HEARINGS BY COMMISSION
Sec. 21. All hearings shall be public and may be held before the Commission any member or members thereof or an officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.
PUBLIC CHARACTER OF INFORMATION
Sec. 22. The information contained in or filed with any application, report, or document 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.
COURT REVIEW OF ORDERS
Sec. 23. (a) Any person aggrieved by an order of the Commission may obtain a review of such order in the Circuit Court of Appeals of the United States, with in any circuit wherein such person resides or has his principal place of business, or in the Court of Appeals of 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 served upon the Commission, and thereupon the Commission shall certify and file in the court a transcript of the record upon which the order complained of was entered. 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 aditional 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 sections 239 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 346 and 347).
(b) The commencement of proceedings under subsection (a) shall not, unless specifically ordered by the court, operate as a stay of the Commission's order.
SEC. 24. Any person who willfully violates any provision of this Act or any rule or regulation made thereunder, or any person who shall make, or any person including a director, officer, accountant, or agent thereof who willfully is responsible for any statement in any application, report, or document filed with the Commission, which statement is, in the light of the circumstances under which
it was made, false or misleading in any matter sufficiently important to influence the judgment of an average investor, shall upon conviction be fined not more than $25,000 or imprisoned not more than ten years, or both, except that when such person is an exchange, a fine not exceeding $500,000 may be imposed.
JURISDICTION OF OFFENSES AND SUITS
Sec. 25. (a) The district courts of the United States, the United States courts of any Territory, and the Supreme Court of the District of Columbia shall have jurisdiction of offenses and violations under this Act and of all suits in equity and actions at law brought to enforce any liability or duty created by this Act. Any such criminal proceeding may be brought either in the district wherein the exchange involved is operated, or in the district wherein a transaction violating such provision was consummated, or in the district wherein an act or agreement to act constituting such violation was effected. Any such civil suit or action may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as provided in sections 128 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 225 and 347). No costs shall be assessed for or against the Commission in any proceeding under this Act brought by or against it in the Supreme Court or such other courts.
(b) 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 persons 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.
(c) No person shall be excused from attending and testifying or from producing books, papers, contracts, agreements, and other records before the Commission, or in obedience to the subpena of the Commission or any member thereof or any officer designated by it, or in any cause or proceeding instituted by the Commission, on the ground that the testimony or evidence, documentary or otherwise, required of him, may tend to incriminate him or subject him to a penalty or forfeiture; but no individual shall be prosecuted or subject to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled, after having claimed his privilege against self-incrimination, to testify or produce evidence, documentary or otherwise, except that such individual so testifying shall not be exempt from prosecution and punishment for perjury committed in so testifying.
EFFECT OF EXISTING LAW
Sec. 26. (a) The rights and remedies provided by this Act shall be in addition to any and all other rights and remedies that may exist at law or in equity, except that this Act shall supersede such laws of any State as are inconsistent with the provisions or purposes of this Act and such laws of any State as provide for the supervision or regulation of the administration or conduct of business on any exchange which is licensed by the Commission.
(b) Nothing in this Act shall be construed to modify existing law with regard to the binding effect on any member of any exchange of any action taken by the authorities of such exchange to settle disputes between members or with regard to the binding effect of such action on any person who has agreed to be bound thereby or with regard to the binding effect on any member of any disciplinary action taken by the authorities of the exchange as a result of violation of any rule of the exchange, insofar as the action taken is not inconsistent with the provisions of this Act or the rules and regulations of the Commission thereunder.
VALIDITY OF CONTRACTS
Sec. 27. (a) Any condition, stipulation, or provision binding any person to waive compliance with any provision of this Act or of any regulation promulgated pursuant thereto, or of any rule required by such regulation shall be void.
(b) Every contract made in violation of, or the performance of which involves the violation of, any provision of this Act or of any rule or regulation thereunder
shall be void as regards any cause of action arising after the effective date of such provision, regardless of whether the contract was made before or after such effective date.
FOREIGN EXCHANGES Sec. 28. It shall be unlawful for any broker or dealer, directly or indirectly, to make use of the mails or of any means or instrumentality of transportation or communication in interstate commerce for the purpose of effecting on an exchange situated in a place not subject to the jurisdiction of the United States any transaction in any security the issuer of which is a resident of, or is organized under the laws of, or has its principal place of business in, a place subject to the jurisdiction of the United States except in accordance with such rules and regulations as the Commission may prescribe.
Sec. 29. Every national securities exchange shall pay an annual registration fee for the privilege of doing business as a national securities exchange during the preceding calendar year or any part thereof. Such fee shall be paid to the Commission on or before March 15 of each calendar year. Such fee shall be an amount equal to one five-hundredths of 1 per centum of the aggregate dollar amount of the sales of securities transacted on such national securities exchange during the preceding calendar year.
EMPLOYEES OF FEDERAL TRADE COMMISSION Sec. 30. For the purposes of this Act and of the Securities Act of 1933, the Federal Trade Commission may select, employ, and fix the compensation of such employees, attorneys, and agents as shall be necessary for the transaction of the business of the Commission with respect to such Acts without regard to the provisions of other laws applicable to the employment and compensation of officers or employees of the United States.
SEPARABILITY OF PROVISIONS Sec. 31. If any provision of this Act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Act, 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.
Sec. 32. This Act shall become effective on October 1, 1934, except that applications for necessary registrations under this Act may be made to the Commission in accordance with its rules and regulations at any time on and after July 1, 1934: Provided, That section 30 shall become effective immediately upon the enactment of this Act.
STATEMENT OF HON. J. M. LANDIS, COMMISSIONER, FEDERAL
TRADE COMMISSION, WASHINGTON, D.C. Commissioner LANDIS. I do not think, Mr. Chairman, that I need to speak upon the need for regulation of the stock exchanges. That need has been presented to the country at large by much evidence that has been gathered in the other branch of Congress. It has been brought home to the Nation at large by the President's recent message.
This movement for stock exchanges regulations is not something new. The movement really beings, as I see it, back in 1909 at the time when the Hughes Committee made its report to Mr. Hughes, who was then Governor of New York.
The movement for Federal regulation begins in 1913, after the Pujo Committee of this House made its very famous report and projected a bill based on that report.