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countries as a basis for determining and establishing prices at which securities are bought and sold; as a basis for determining and establishing the amount of taxes owing to the United States and to the several States by owners, buyers, and sellers of securities; and as a basis for determining and establishing the value of collateral for bank loans. Such transactions involve in substantial proportions the securities of issuers engaged in interstate commerce. Such transactions involve the use of credit; directly affect the financing of trade, industry, and transportation in interstate commerce; directly affect and influence the volume of interstate commerce; and constitute an indispensable part of the current of interstate commerce. Such transactions give rise at times to a large volume of speculation in securities. Frequently the prices of securities on such exchanges and over-the-counter markets are susceptible to manipulation and control, and the dissemination of such prices gives rise to excessive speculation. By reason of such manipulation, control, and excessive speculation, there occur sudden and unreasonable fluctuations in the prices of securities on such exchanges. Such sudden and unreasonable fluctuations in prices coupled with excessive speculation and minipulation cause alternately unreasodable expansion and unreasonable contraction of the volume of credit available for trade, transportation, and industry in interstate commerce, and thus directly burden such commerce. Such sudden and unreasonable fluctuations 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 the fair valuation of collateral for bank loans. Such sudden and unreasonable fluctuations constitute an obstrue. tion to and a burden upon interstate commerce and upon the national banking and Federal Reserve Systems. The national credit is intimately related to and affected by the prices for which securities are sold and offered for sale upon exchanges and on over-the-counter markets. National emergencies, which produce wide-spread 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 control of security prices and by excessive speculation on exchanges and over-the-counter markets. To meet the national emergencies resulting from such manipulation, control, and excessive speculation the Federal Government is put to vast expense, with a consequent burden upon the national credit. Public regulation of transactions in securities on exchanges and on over-thecounter markets, and the regulation or prohibition of all means or devices or methods which are apt to cause manipulation or control of such transactions, or which are likely to lead to excessive speculation, are hereby declared to be imperative in the public interest for the protection of interstate commerce, the national credit, the Federal taxing power, and the national banking and Federal Reserve Systems. To make such regulations effective and to insure the maintenance of fair and honest markets in such transactions, control of the listing of securities on such exchanges and markets, of the making of appropriate reports, of transactions by officers, directors, and persons holding fiduciary positions and of other matters is equally imperative and necessary.

DEFINITIONS

SEC. 3. (a) When used in this Act, unless the context otherwise requires

(1) The term "exchange" means any organization, association, or group of persons, whether incorporated or unincorporated, who constitute, maintain, or provide a market place or facilities for bringing together purchasers and sellers of secuities or otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood and as it may be further defined by the Federal Trade Commission.

(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. 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 of service.

(3) The term "member" when used with reference to an exchange means any person who is permitted either to effect transactions on the exchange without the services of another person acting as broker or to make use of the facilities of an exchange for transactions thereon without payment of a commission or fee or with the payment of a commission or fee which is less than

that charged the general public, or any firm of which a member is a partner, or any partner of such firm.

(4) Subject to paragraph 7 of this section, the term “broker” means any person engaged in the business of effecting transactions in securities for the account of others.

(5) Subject to paragraph 7 of this section, the term "dealer" means any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise.

(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) a banking institution doing business under the laws of any State the business of which is substantially confined to banking and which is supervised by a State banking commission or similar official, or (d) a receiver, conservator, or other liquidating agent of any institution included in clause (a), (b), or (c) of this paragraph.

(7) The term “ broker” or “ dealer" shall not include a bank or any person insofar as he buys or sells a security or securities for his own account and not as a part of a regular business.

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

(9) The term " issuer” means any person who issues or proposes to issue any security or who guarantees a security either as to principal or income; 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.

(10) The term “person” means an individual, a corporation, a partnership, an association, a joint-stock company, a business trust, or any unincorporated organization.

(11) The term "security” means any note, stock, treasury stock, 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 certificates, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, 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 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.

(12) The term “equity security” means any stock or similar security; or any security convertible, with or without consideration, into such a security and any warrant or right to subscribe to or purchase such a security; or any other security which the Commission shall deem to be of similar nature and consider necessary or appropriate by rules and regulations to treat as an equity security.

(13) The term "exempted security” or “ exempted securities” shall include securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States, such securities issued or guaranteed by corporations in which the United States has a direct or indirect interest as shall be designated for exemption by the Secretary of the Treasury, and such other securities and instruments as the Commission may by such rules and regulations as it deems necessary or appropriate in the public interest or for 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 Act which by their terms are inapplicable to an * exempted security" or to "exempted securities."

(14) The terms "buy" and "purchase" each include any purchase or any contract to buy, purchase, or otherwise acquire.

(15) The terms "sale" and "sell " each include any sale or any contract to sell or otherwise dispose of.

(16) The term “Commission" means the Federal Trade Commission.

(17) The term “State” means any State of the United States, the District of Columbia, Alaska, Hawaii, Puerto Rico, the Philippine Islands, the Canal Zone, the Virgin Islands, or any other possession of the United States.

(18) 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 the United States.

(b) No provision of this Act 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 thereto.

(c) The Commission (or as to matters within their respective jurisdictions, the Federal Reserve Board, the Comptroller of the Currency, and the Interstate Commerce Commission) shall have power by rules and regulations to define or further define accounting, technical and trade terms used in this Act. and such definitions shall have the force of law.

PROHIBITIONS UPON UNREGISTERED EXCHANGES SEO. 4. Unless an exchange within the jurisdiction of the United States is registered as a national securities exchange under section 5 of this Act, it shall 'be unlawful for any broker, dealer, or exchange, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce for the purpose of using any facility of such exchange to effect any transaction in a security or to report any such transaction.

REGISTRATION OF NATIONAL SECURITIES EXCHANGES

SEC. 5. (a) Any exchange may be registered with the Commission as a *national securities exchange under the terms and conditions hereinafter provided in this section by filing a registration statement in such form as the Commission may prescribe containing the undertakngs, setting forth the information, and accompanied by the documents below specified:

(1) An undertaking to comply, and to enforce so far as is within its powers compliance by its members and by issuers whose securities are registered thereon, with the provisions of this Act, and any amendment thereto and any rule or regulation made or to be made thereunder.

(2) Such data as to its organization, rules of procedure, and membership, and such other information as the Commission may by rules and regulations require as being necessary or appropriate in the public interest or for the protection of investors.

(3) Copies of its constitution, articles of incorporation, with all amendments thereto, and of its existing bylaws or rules or instruments corresponding thereto, whatever the name, which are hereinafter collectively referred to as the "rules of the exchange."

(4) An undertaking to furnish to the Commission copies of any amendments to the rules of the exchange forthwith upon their adoption.

(b) No registration shall be granted or remain in force unless the rules of the exchange include provision for the expulsion, suspension, or disciplining of a member for conduct or proceeding inconsistent with just and equitable principles of trade, and declare that the violation of any provisions of this Act or any rule or regulation thereunder shall be considered conduct or proceeding inconsistent with just and equitable principles of trade.

(c) Nothing in this Act shall be construed to prevent any exchange from adopting and enforcing any rule not inconsistent with this Act and the rules and regulations made thereunder and the applicable laws of the State in which it is located.

(d) If it appears to the Commission that the exchange applying for registrtion is so organized as to be able to comply with the provisions of this Act and the rules and regulations thereunder and that the rules of the exchange

are just and adequate to insure fair dealing and to protect investors, the Commission shall cause such exchange to be registered as a national securities exchange.

(e) Within thirty days after the filing of the application, the Commission shall enter an order either granting or, after appropriate notice and opportunity for hearing, denying an application for registration as a national securities exchange, unless the exchange applying for registration shall withdraw its application or consent to the Commission's deferring action on its application for a stated longer period after the date of filing. The filing with the Commission of an application for registration by an exchange shall be deemed to have taken place upon the receipt thereof. Amendments to an application may be made upon such terms as the Commission may prescribe.

(f) An exchange may, upon appropriate application in accordance with the rules and regulations of the Commission, and upon such terms as the Commission may deem necessary for the protection of investors, withdraw its registration.

MARGIN REQUIREMENTS ON LONG ACCOUNTS SEC. 6. (a) It shall be unlawful for any member of a national securities exchange or any broker or dealer who transacts business in securities through the medium of any such member, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer without collateral or on any collateral other than exempted securities and/or securities registered upon a national securities exchange.

(b) Subject to the provisions of subsection (c) of this section, it shall be unlawful for any member of a national securities exchange or any broker who transacts a business in securities through the medium of any such member, directly or indirectly, to extend credit or arrange for the extension of credit to or for any customer on any security (other than an exempted security) registered on a national securities exchange in an amount exceeding whichever is the higher of

(1) Forty per centum of the current market price, or

(2) If such security has been traded in on a national exchange for a period not less than thirty-six months, 100 per centum of the lowest price at which such security has sold during the preceding thirty-six months, but not more than 75 per centum of the current market price. If such security has been traded in for a period less than thirty-six months, such amount, but not more than 75 per centum of the current market price, as the Federal Reserve Board may by its rules and regulations prescribe as appropriate or necessary in the public interest or for the protection of investors. For the purpose of this subclause, up to July 1, 1936, the lowest price at which such security has sold on or after July 1, 1933, may be taken in lieu of, and considered as, the lowest price at which such security has sold during the preceding thirty-six months.

Notwithstanding the provisions of this subsection, it shall be lawful for any member of a national securities exchange or any broker or dealer who transaets a business in securities through the medium of a member to extend credit to a customer on a security registered upon a national securities exchange, where such credit is extended in taking over the account of such customer from a member of a national securities exchange or any other broker or dealer, provided that the maintenance of such credit shall be subject to this Act in the same manner and to the same extent as it would have been if it had been maintained by the member or person from whom the account was transferred.

(c) Notwithstanding the provisions of subsection (b) or (e)

(1) Any credit intially extended in conformity with the provisions of subsection (b) or (e) on any security (other than an exempt security) registered on a national securities exchange may be maintained so long as such credit does not exceed an amount equal to, which ever is the higher, of

(i) Sixty per centum of the current market price, or

(ii) If such security has been traded in for a period of not less than thirtysix months, 100 per centum of the lowest price at which such security has sold during the preceeding thirty-six months, but not more than 85 per centum of the current market price. If such security has been traded in for a period of less than thirty-six months, such amount, but not more than 85 per centum of the current market price, as the Federal Reserve Board may by its rules and regulations prescribe as appropriate or necessary in the public interest or for the protection of investors. For the purpose of this subclause, up to July 1, 1836, the lowest price at which such security has sold on or after July 1, 1933,

may be taken in lieu of, and considered as, the lowest price at which such security has sold during the preceding thirty-six months.

(2) No credit initially extended in conformity with the provisions of subsection (b) or (e) on any security (other than an exempt security) registered on a national securities exchange shall be increased by reason of any payment to or withdrawal by the borrower to an amount exceeding that which at the time of such payment or withdrawal might be extended in conformity with the provisions of subsection (b) or (e) of this section.

(3) A security or securities registered on any national securities exchange may be substituted for any security or securities upon which credit was initially extended in conformity with the provisions of subsection (b) or (e): Provided, That the amount of such credit is not increased and does not exceed the amount permitted by subclause (1) of this subsection (c).

(d) Notwithstanding the provisions of subsections (b), (c), and (e) of this -section, the Federal Reserve Board may by rules and regulations prescribe (i) such higher margin requirements for all or specified classes of securities for stated periods of time as it may deem necessary to prevent the excessive use of credit to finance speculative transactions in securities, and (ii) such other and different margin requirements (whether higher or lower) for arbitrage transactions as it may deem necessary or appropriate in the public interest or for the protection of investors.

Although the limitations of this section 6 upon the extension and mainte.nance of credit shall, except in the extraordinary circumstances hereinafter referred to, be strictly adhered to by the Federal Reserve Board as the considered policy of Congress, the Federal Reserve Board may, notwithstanding the other provisions of this section 6, in situations where it deems such action vitally essential to the accommodation of commerce and industry and with regard to its bearing on the general credit situation of the country, by rules and regulations permit lower margin requirements for particular securities or transactions or classes of securities or transactions and for particular periods. Such rules and regulations may permit accounts to be carried for a limited period and under specified conditions although margins extended or maintained are not equal to those required by subsection (b), (c), or (e) of this section. No person who shall comply with such rules and regulations shall be deemed to have violated any provisions of this section 6.

(e) It shall be unlawful for any person to extend or maintain credit or to arrange for the extension or maintenance of credit to any person upon any security registered on a national securities exchange, in an amount exceeding the amount which it is lawful for a member of a national securities exchange to extend or maintain to or for any customer on such security, if such credit is extended or maintained in contravention of any rules and regulations that the Federal Reserve Board may prescribe to prevent such excess being used for the purchase or carrying of any security. The provisions of this subsection shall not apply to a person making a loan other than in the ordinary course of business, nor to a loan on an exempted security, nor to a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of an exchange, nor to any loan by a bank on a security other than an equity security. Nothing herein contained, however, shall be construed to prevent the issuer selling a security to an officer or employee or such issue being paid for in installments by such officer or employee.

(f) The provisions of this section shall not apply on or before January 31, 1939, to any loan, renewal, or extension thereof made on any security or securities prior to the enactment of this Act or on any exempted securities and/or securities registered on a national securities exchange substituted therefor, provided that at no time shall the amount by which the loan exceeds the maximum loan which may be maintained under subsection (c) or (e) of this section 6 be increased by any substitution or withdrawal, and provided further that when and after the market value of securities registered on a national securities exchange securing any such loan, extension, or renewal would permit an initial extension under this section 6 of the amount of credit represented by such loan, extension, or renewal, the provisions of this section 6 shall apply to the maintenance of such credit.

(g) The Federal Reserve Board in cooperation with the Commission shall study the feasibility of fixing maximum loan values on the basis of the earn. ings of the issuer over a period of years and the feasibility of other methods of determining margins, and shall report the results of its study and its recom. mendations to Congress on or before January 3, 1935.

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