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 maintenance 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 earnings 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 recommendations to Congress on or before January 3, 1935.

RESTRICTIONS OF MEMBERS' BORROWING

SEC. 7. 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, directly or indirectly

(a) To borrow in the course of business as a broker or dealer on any security (other than an exempted security) registered on a national securities exchange except (1) from or through a member bank of the Federal Reserve System, or (2) in accordance with such rules and regulations as the Federal Reserve Board may prescribe to permit limited loans between members and/or brokers or dealers who transact a business in securities through the medium of a member, or to permit loans from or through others than member banks in localities where there are no member banks, or to meet emergency needs.

(b) To permit in the ordinary course of business as a broker his aggregate indebtedness to all other persons, including customers' credit balances (but excluding indebtedness on exempted securities) to exceed such percentage of the net capital (exclusive of fixed assets and value of exchange membership) employed in the business, not exceeding 1,000 per centum, as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors.

(c) To hypothecate or arrange for the hypothecation of securities carried for customers' accounts except free and clear from the liens of other creditors or to commingle any of such securities with those of any person other than a bona-fide customer.

(d) To hypothecate or arrange for the hypothecation of any securities carried for the account of a customer under circumstances that will permit the commingling of the securities of one customer with those of any other person, without the written consent of such customer.

(e) To lend or arrange for the lending of securities pledged by or carried for the account of any customer without the consent of such customer.

PROHIBITION AGAINST MANIPULATION OF SECURITY PRICES

SEO. 8. (a) It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange

(1) To effect any fictitious transaction in any security registered on a national securities exchange or in any security not so registered, or any transaction which purports to be a sale of any such security but involves no change in the beneficial ownership thereof.

(2) To effect for his own or another's account transactions for both the purchase and sale of any security registered on a national securities exchange or of any security not so registered at substantially the same time at substantially the same price, whether such transactions of purchase and sale be with the same or with different parties, for the purpose of creating a false or misleading appearance of active trading in such security or securities, or a false or misleading appearance in respect of the market for such security or securities. (3) To effect, either alone or in concert with one or more other persons, any transaction for the purchase and sale of any security or securities registered on any national securities exchange or of any security or securities not so registered for the purpose of raising or depressing the price of such security or securities.

(4) If a dealer or broker, to circulate or disseminate in the ordinary course of business information to the effect that the price of any security or securities registered on a national securities exchange or any security or securities not so registered will or is likely to rise or fall partly or wholly because of the market activity of any one or more persons, if the person circulating or disseminating such information has reason to believe that the circulation or dissemination of such information on his part may induce the purchase or sale of any such security in the expectation of such market activity.

(5) If a dealer or broker or other person selling or offering for sale or purchasing or offering to purchase the security, to make, regarding any security registered on a national securities exchange or any security not so registered, for the purpose of inducing the purchase or sale of such security, any statement which is, in the light of the circumstances under which it was made, false or

misleading in respect of any matter sufficiently important to influence the judgment of an average investor.

(6) To circulate or disseminate for a consideration any information to the effect that the price of any security or securities registered on a national securities exchange or any security or securities not so registered will or is likely to rise or fall partly or wholly because of the market activity of any one or more persons, or to pay or receive any consideration for circulating and disseminating such information.

(7) To circulate or disseminate for a consideration received, directly or indirectly, from any dealer or broker or other person selling or offering for sale or purchasing or offering to purchase the security any information regarding any security registered on a national securities exchange or any security not so registered, unless such information is published as an advertisement; or to pay or receive any consideration for circulating or disseminating such information.

(8) To engage in any series of transactions for the purchase and sale of any security registered on a national securities exchange or any security not so registered which has the purpose of pegging, fixing, or stabilizing the price of such security in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors or without having prior thereto reported to the exchange authorities and to the Commission such information regarding the purpose and nature of such transactions or operations. the details thereof and the person or persons interested therein as the Commission by rules and regulations may prescribe as appropriate or necessary in the public interest or for the protection of investors.

(9) To effect by use of any facility of a national securities exchange, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors

(i) any transaction in connection with any security whereby any party to such transaction acquires any put, call, straddle, or other option or privilege of buying a security from or selling a security to another party to the transaction without being bound to do so; or

(ii) any transaction in connection with any security with relation to which he has, directly or indirectly, any interest in such put, call, straddle, option, or privilege; or

(iii) any transaction in any security for account of any person who, he has reason to believe, has, directly or indirectly, any interest in any such put, call, straddle, option, or privilege with relation to such security; or if a member, directly or indirectly, to endorse or guarantee the performance of any put, call, straddle, option, or privilege in relation to any security registered on a national securities exchange. The terms "put", "call", "straddle", "option", or "privilege" as used in this paragraph shall not include any registered warrant, right, or convertible security.

(b) Any person who willfully participates in any act or transaction, which act or transaction is in violation of subsection (a) of this section, shall be liable to any person who shall purchase or sell any security the price of which may have been affected by such act or transaction, and the person so injured may sue in law or in equity in any court of competent jurisdiction to recover the damages sustained as a result of any such act or transaction. In case of a civil suit based on a violation of subclause (5) of subsection (a) of this section 8 the defendant shall not be liable if he shall sustain the burden of proving that he acted in good faith and did not believe that the statement was false or, misleading: Provided, That a statement limited to facts set forth in any application, report, or document filed with the Commission shall not be deemed false or misleading, unless the person making the statement believed that it was false or misleading.

(c) 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.

(d) No action shall be maintained to enforce any liability created under this section unless brought within two years after the cause of action accrued.

(e) The provisions of this section shall not apply to an exempted security.

REGULATION OF THE USE OF MANIPULATIVE DEVICES

SEO. 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 months 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;