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REGULATION OF THE USE OF MANIPULATIVE DEVICES

SEC. 9. It shall be unlawful for any person, directly or indirectly, by use of any means or instrumentality of interstate commerce or of the mails or of any facility of any national securities exchange

(a) To effect a short sale of any security registered on a national securities exchange, except in accordance with such rules and regulations as the Commission may prescribe as appropriate or necessary in the public interest or for the protection of investors;

(b) To use or employ any stop-loss order in connection with the purchase or sale of any security registered on a national securities exchange, except in accordance with such rules and regulations as the Commission shall prescribe as appropriate or necessary in the public interest or for the protection of investors; or

(c) To use or employ in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered any manipulative device or contrivance which the Commission may by its rules and regulations find detrimental to the public interest or to the proper protection of investors.

SEGREGATION AND LIMITATION OF THE FUNCTIONS OF BROKER, SPECIALIST, AND DEALER

SEC. 10. (a) Membership of a national securities exchange shall be limited to brokers, except as hereinafter provided. It shall be unlawful for any member of a national securities exchange to act as a dealer except as hereinafter provided.

(b) Subject to such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors to insure compliance with the provisions of this subsection, the rules of a national securities exchange may permit a member to be registered as an odd-lot dealer and as such to buy and sell for his own account so far as may be reasonably necessary to carry on such odd-lot transactions. It shall be unlawful for an odd-lot dealer to act as a broker.

(c) Subject to such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to insure compliance with the provisions of this subsection, the rules of a national securities exchange may provide for the registration of members with the privilege of acting as dealers, and any member so registered shall have the privilege of acting as a dealer and as a broker within the limitations of this subsection. It shall be unlawful for any member with or without the privilege of acting as a dealer (except an odd-lot dealer, or a specialist dealer provided for in subsection (e) hereof), while on the trading premises of such exchange to effect any transaction on such exchange for his own account or while on the trading premises of such exchange as a broker to give an order to another member to be executed for his own account. But where, because of the limited volume of transactions effected on an exchange, it is, in the judgment of the Commission impracticable and not in the public interest to deny access to the trading premises of an exchange to a member with the privilege of acting as a dealer for the purpose of effecting or clearing any transaction on the exchange for his own account, the Commission shall have the power, on application of such exchange and on a showing that the rules of the exchange prevent excessive trading by members, to permit the members of such exchange to effect transactions thereon for their own account, subject to such terms and conditions as the Commission may prescribe as necessary or appropriate for the protection of investors.

(d) It shall be unlawful for a member with the privilege of acting as a dealer who also acts as a broker to effect any transaction in a security by use of any facility of a national securities exchange or otherwise, or for any person who both as a broker and a dealer transacts a business in securities through the medium of a member or through the use of the mails or any means or instrumentality of interstate commerce to effect any transaction in a security by use of any facility of a national securities exchange or otherwise, (1) if in connection with any such transaction he directly or indirectly extends or maintains or arranges for the extension or maintenance of credit for a customer on any security (other than an exempted security) which was a part of a new

issue offered to the public by him as a dealer or distributor within six mouths prior to such transaction or (2) unless, if the transaction is with a customer, he discloses to such customer in writing any interest he may have in connection with the security which is the subject matter of transaction and offers the customer a reasonable time not exceeding ten days to refuse the transaction after the disclosure if the disclosure is not made at the time of the taking of the order and confirmed in writing substantially simultaneously therewith.

(e) Subject to such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors to insure compliance with the provisions of this subsection, the rules of a national securities exchange may permit the registration of a specialist, as a dealer or broker, but it shall be unlawful fo ra specialist registered as a dealer to act as a broker or for a specialist registered as a broker to act as a dealer. It shall be unlawful for any specialist registered as a broker (1) to effect on the exchange any transaction on a discretionary order, or (2) to disclose to any person other than an official of the exchange, a representative of the Commission, or a specialist registered as a broker who may be acting for him, information in regard to orders placed with him which is not available to all members of the exchange, but nothing herein shall be construed to prevent the rules of an exchange requiring the disclosure to all members of all orders placed with a specialist. An exchange may provide that officers or employees of the exchange may perform the functions of specialists as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

(f) The Commission is directed to make a study of the feasibility and desirability of the complete divorcement of the functions of dealer and broker and to report the results of its study and its recommendations to Congress on or before January 1, 1936.

REGISTRATION REQUIREMENTS FOR SECURITIES

SEC. 11. (a) It shall be unlawful for any person to effect any transaction in any security other than an exempted security on a national securities exchange unless a registration is effective as to such security in accordance with the provisions of this Act and the rules and regulations thereunder, and unless such security has been issued.

(b) A security may be registered with a national securities exchange upon application by the issuer, by filing with such exchange and with the Commission

(I) An undertaking by the issuer to comply, and so far as is within its power to enforce compliance by its officers, directors, and stockholders, with the provisions of this Act and any amendents thereto and with the rules and regulations made or to be made thereunder and not to lend any funds, except upon exempted securities, at the money post of any exchange or to any member thereof or to any broker or dealer who transacts a business in securities through the medium of any such member except in accordance with such rules and regulations as the Federal Reserve Board may prescribe: Provided, That the provisions of this paragraph in regard to lending shall not apply to a member bank of the Federal Reserve System;

(II) Such information as to the issuer and affiliates as the Commission may by rules and regulations require, as necessary or appropriate in the public interest or for the protection of investors, in respect of

(1) the organization, financial structure, nature, and operations of the business;

(2) the terms, position, rights, and privileges of the different classes of securities outstanding;

(3) terms on which securities have been or are to be offered to the public; (4) the directors, officers, and principal security holders and underwriters, their remuneration and their interests in the securities of and material contracts with the issuer and affiliates;

(5) remuneration to others than directors and officers exceeding $20,000 per

annum ;

(6) bonus and profit-sharing arrangements;

(7) management and service contracts;

(8) options in respect of securities existing or to be created;

(9) material contracts not made in the ordinary course of business, and material patents;

(10) balance sheets for preceding years, certified by independent public accountants or otherwise, as the Commission may prescribe;

(11) profit and loss statements for preceding years, certified by independent public accountants or otherwise, as the Commission may prescribe; and

(12) any similar matters, information regarding which the Commission deems necessary to insure the proper protection of investors and fair dealing in the security.

(III) Copies of articles of incorporation, bylaws, trust indentures, or corresponding documents, whatever the names, underwriting arrangements, and other documents of the issuer and affiliates which the Commission by rules and regulations may require as necessary or appropriate to insure the proper protection of investors and fair dealing in the security.

(c) If in the judgment of the Commission any report or reports required under subsection (b) are inapplicable to any specified class or classes of issuers, the Commission shall require in lieu thereof the submission of such reports, if any, as it may deem applicable to such class of issuers.

(d) If the exchange authorities certify to the Commission that the security has been approved by the exchange for listing and registration, the registration shall become effective thirty days after the filing of such certification with the Commission or within such shorter period of time as the Commission may determine. A security registered with a national securities exchange may be withdrawn or stricken from listing and registration in accordance with the rules of the exchange and upon such terms as the Commission may impose for the protection of investors upon application by the issuer or the exchange to the Commission.

(e) Notwithstanding the foregoing provisions of this section, the Commission may by such rules and regulations as it deems necessary or appropriate in the public interest or for the protection of investors permit securities listed on any exchange at the time the registration of such exchange as a national securities exchange becomes effective, to be registered provisionally for a period ending not later than April 1, 1935, without complying with the provisions of this section.

(f) The Commission is directed to make a study of trading in unlisted securities upon exchanges and to report the results of its study and its recommendations to Congress on or before January 3, 1935. If the Commission deems such action necessary or appropriate for the protection of investors, it may by rules and regulations prescribe terms and conditions under which, upon the application of any national securities exchange, such exchange may continue until March 1, 1935, or until such earlier date as may be prescribed by law, unlisted trading privileges to which a security had been admitted on such exchange prior to March 1, 1934, and for such purpose exempt such security from the provisions of this section 11 and section 12. A security for which unlisted trading privileges are so continued shall be considered a "security registered on a national securities exchange" within the meaning of all other sections of this Act. The rules and regulations of the Commission relating to such unlisted trading privileges for securities shall require that quotations of transactions upon any national securities exchange shall clearly indicate the difference between fully listed securities and securities admitted to unlisted trading privileges only.

PERIODICAL AND OTHER REPORTS

SEC. 12. (a) The Commission may require every issuer of a security registered on a national securities exchange to file with the exchange and with the Commission in accordance with, and in such form and detail and at such times as may be prescribed by, such rules and regulations of the Commission may prescribe as necessary or appropriate to insure the proper protection of investors and fair dealing in the security.

(1) Such information and documents as the Commission may require to keep reasonably current the information and documents filed pursuant to section 11;

(2) Such annual, quarterly, monthly, and/or other reports, the annual reports to be certified by an independent public accountant or otherwise, as the Commission may prescribe,

(b) The Commission may prescribe, in regard to such reports, the form or forms in which the required information shall be set forth, the items or details to be shown in the balance sheet and the 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 dfferentiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable, of separate and/or 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 the accounts relate to any person whose accounting is subject to the provisions of any law of the United States, or any rule or regulation made thereunder, the rules and regulations of the Commission with respect to accounts shall not be inconsistent with the requirements imposed by such law or authority in respect of the same subject matter,

(c) If in the judgment of the Commission any report or reports required under subsection (a) are inapplicable to any specified class or classes of issuers, the Commission shall require in lieu thereof the submission of such reports, if any, as it may deem applicable to such class or classes of issuers.

(d) If an issuer fails to file information, documents, or reports as required by this section, the Commission, in its discretion, after notice and an opportunity for a hearing, may remove any of its securities from a national securities exchange.

PROXIES

SEC. 13. (a) It shall be unlawful for any person, by the use of the mails or of any means or instrumentality of interstate commerce or of any facility of any national securities exchange or otherwise, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered on any national securities exchange unless (i) at such time prior to such solicitation as the Commission shall by rule or regulation prescribe the persons named to exercise such proxy, consent, or authorization shall file with the Commission a statement setting forth the purposes of the proxy, consent, or authorization, the persons to exercise it, their relations to and interest in the security, the names and addresses of the persons from whom similar proxies, consents, or authorizations are being solicited, and such further information, and in such form and detail, as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors, and (ii) every such solicitation shall include or be accompanied by such statement or such part thereof (except the names and addresses of the persons solicited) as the Commission shall by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors.

(b) It shall be unlawful for any member of a national securities exchange or any broker or dealer who transacts a business in securities through the medium of any such member to give a proxy, consent, or authorization in respect of any security registered on a national securities exchange and carried for the account of a customer without a specific written authorization from such customer.

OVER-THE-COUNTER MARKETS

SEC. 14. It shall be unlawful for any broker or dealer singly or in concert with any other person or persons to make use of the mails or any means or instrumentality of interstate commerce for the purpose of making or creating or enabling another to make or create a market for both the purchase and sale of any security (other than an exempted security) except on a national securities exchange, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to insure to investors protection comparable to that provided by and under authority of this Act in the case of national securities exchanges. The rules and regulations of the Commission may provide for the regulation of all transactions on such markets, for the registration with the Commission of dealers or brokers making or creating such a market, and for the registration of the securities for which they make or create a market.

DIRECTORS, OFFICERS, AND PRINCIPAL STOCK HOLDERS

SEC. 15. (a) Every person who is directly or indirectly the beneficial owner of more than 5 per centum of any class of any equity security (other than an exempted security) which is registered on a national securities exchange, or who is a director or an officer of the issuer of such security shall file with the exchange and with the Commission, at the time of the registration of such security or within ten days after he becomes such beneficial owner, or director, or officer, the amount of all equity securities of such issuer of which he is the beneficial owner, and within ten days after the close of each calendar month, if there has been any change in such ownership during such month, shall file with the exchange and the Commission a statement indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

(b) Any profit realized by such beneficial owner, director, or officer from any purchase and sale or sale and purchase of any such registered equity security within a period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Such suit may be instituted in law or equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter. For the purposes of this subsection the profit shall be the difference between the aggregate amount for which such security was purchased and sold during the six months' period irrespective of the certificates for such security received or delivered pursuant to such purchases and sales. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale or sale and purchase of the security involved, nor any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer.

(c) It shall be unlawful for any such person, directly or indirectly, to sell any such registered equity security, if the person selling or his principal does not own the security sold or if the person selling or his principal owns the security but does not deliver it against such sale within twenty days, or place it within five days in the mails or other usual channels of transportation, unless such person proves that he was unable to make delivery within such time or to do so would cause undue inconvenience or expense.

ACCOUNTS AND RECORDS, REPORTS, EXAMINATIONS OF EXCHANGES, MEMBERS, AND OTHERS

SEC. 16. Every national securities exchange, every member thereof, every broker or dealer who transacts a business in securities through the medium of such member, every broker or dealer making or creating a market for both the purchase and sale of securities through the mails or the use of any means or instrumentality of interstate commerce, shall make, and keep and preserve for such periods, such accounts, correspondence, memoranda, papers, books, and other records and make such reports as the Commission by its rules and regulations may prescribe. The accounts, correspondence, memoranda, papers, books, and other records of such persons shall be subject at any time or from time to time to such reasonable periodic, special, or other examinations by examiners or other representatives of the Commission as the Commission may deem necessary or appropriate in the public interest or for the protection of investors, and the reasonable cost of such examinations, including the compensation of the examiners, may be assessed by the Commission and when so assessed shall be paid by the person examined. Any representatives of the Commission designated by it shall have access to the premises or any part thereof of any national securities exchange.

45381-34-41

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