Full text of Securities Exchange Act of 1934
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[CORRECTED PRINT!
[P u b l i c —
No.
2 91 — 7 3 d C o n g r ess]
[H.R. 9323]
AN ACT
T o provide for the regulation of securities exchanges and of over-the-counter
markets operating in interstate and foreign commerce and through the mails,
to prevent inequitable and unfair practices on such exchanges and markets,
and for other purposes.
Be it enacted by the Senate and H om e of Representatives of the
United States o f America in Congress assembled.
T it l e I — R e g u l a t io n
of
S e c u r it ie s E
xchanges
SHORT TITLE
S e c t io n
1. This Act may be cited as the “ Securities Exchange Act
of 1934.”
NECESSITY FOR REGULATION AS PROVIDED IN THIS TITLE
S eo . 2. For the reasons hereinafter enumerated, transactions in
securities as commonly conducted upon securities exchanges and
over-the-counter markets are affected with a national public interest
which makes it necessary to provide for regulation and control of
such transactions and of practices and matters related thereto,
including transactions by officers, directors, and principal security
holders, to require appropriate reports, and to impose requirements
necessary to make such regulation and control reasonably complete
and effective, in order to protect interstate commerce, the national
credit, the Federal taxing power, to protect and make more effective
the national banking system and Federal Reserve System, and to
insure the maintenance of fair and honest markets in such
transactions:
(1) Such transactions (a) are carried on in large volume by the
public generally and in large part originate outside the States in
which the exchanges and over-the-counter markets are located and/or
are effected by means of the mails and instrumentalities of interstate
commerce; (b) constitute an important part of the current of inter
state commerce; (c) involve in large part the securities of issuers
engaged in interstate commerce; (d) involve the use of credit,
directly affect the financing of trade, industry, and transportation in
interstate commerce, and directly affect and influence the volume
of interstate commerce; and affect the national credit.
(2) The prices established and offered in such transactions are
generally disseminated and quoted throughout the United States and
foreign countries and constitute a basis for determining and estab
lishing the prices at which securities are bought and sold, the
amount of certain taxes owing to the United States and to the several
States by owners, buyers, and sellers of securities, and the value of
collateral for bank loans.
2
[Pub. 291,]
(3) Frequently the prices of securities on such exchanges and
markets are susceptible to manipulation and control, and the dis
semination of such prices gives rise to excessive speculation, result
ing in sudden and unreasonable fluctuations in the prices of securities
which (a) cause alternately unreasonable expansion and unreason
able contraction of the volume of credit available for trade, trans
portation, and industry in interstate commerce, (b) 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 (c) prevent
the fair valuation of collateral for bank loans and/or obstruct the
effective operation of the national banking system and Federal
Reserve System.
(4) National emergencies, which produce widespread unemploy
ment 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 sudden and unreasonable fluctuations of security prices and by
excessive speculation on such exchanges and markets, and to meet
such emergencies the Federal Government is put to such great
expense as to burden the national credit.
DEFINITIONS AND APPLICATION OF TITLE
S ec . 3. (a ) W h e n used in th is title , unless the c on tex t otherw ise
requires—
(1) The term “ exchange” means any organization, association,
or group of persons, whether incorporated or unincorporated, which
constitutes, maintains, or provides a market place or facilities for
bringing together purchasers and sellers of securities or for other
wise performing with respect to securities the functions commonly
performed by a stock exchange as that term is generally understood,
and includes the market place and the market facilities maintained
by such exchange.
(2) The term u 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 prop
erty or any service thereof for the purpose of effecting or reporting
a transaction on an exchange (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 or service.
(3) The term “ member ” when used with respect 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, and includes any firm transacting a business as broker or
dealer of which a member is a partner, and any partner of any
such firm.
(4) The term “ broker ” means any person engaged in the business
of effecting transactions in securities for the account of others, but
does not include a bank.
[PUB. 291J
3
(5)
The term u dealer” means any person engaged in the busi
ness of buying and selling securities for his own account, through
a broker or otherwise, but does not include a bank, or any person
insofar as he buys or sells securities for his own account, either indi
vidually or in some fiduciary capacity, but not as a part of a regular
business.
■' (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) any other banking institution, whether
incorporated or not, doing business under the laws of any State or of
the United States, a substantial portion of the business of which
consists of receiving deposits or exercising fiduciary powers simi
lar to those permitted to national banks under section 11 (k) of the
Federal Reserve Act, as amended, and which is supervised and ex
amined by State or Federal authority having supervision over banks,
and which is not operated for the purpose of evading the pro
visions of this title, and (D) a receiver, conservator, or other liqui
dating agent of any institution or firm included in clauses (A ), (B),
or (C) of this paragraph.
(7) The term “ director ” means any director of a corporation or
any person performing similar functions with respect to any organi
zation, whether incorporated or unincorporated.
(8) The term “ issuer ” means any person who issues or proposes
to issue any security ; 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 44issuer ”
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 certifi
cates or like securities, the term “ issuer ” means the person by whom
the equipment or property is, or is to be, used.
(9) The term u person ” means an individual, a corporation, a
partnership, an association, a joint-stock company, a business trust,
or an unincorporated organization.
(10) The term “ security” means any note, stock, treasury stock,
bond, debenture, certificate of interest or participation in any profitsharing agreement or in any oil, gas, or other mineral royalty or
lease, any collateral-trust certificate, 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 ot
the foregoing; but shall not include currency or any note, draft, bill
of exchange, or banker’s acceptance which has a maturity at the
time of issuance of not exceeding nine months, exclusive of days of
t^race, or any renewal thereof the maturity of which is likewise
limited.
(11) The term “ equity security ” means any stock or similar secur
ity ; or any security convertible, with or witnout consideration, into
4
tPUB. 291.J
such a security, or carrying any warrant or right to subscribe to or
purchase such a security; or any such warrant or right; or any other
security which the Commission shall deem to be of similar nature
and consider necessary or appropriate, by such rules and regulations
as it may prescribe in the public interest or for the protection of
investors, to treat as an equity security.
(12^ 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 as necessary or appro
priate in the public interest or for the protection of investors; securi
ties which are direct obligations of or obligations guaranteed as to
principal or interest by a State or any political subdivision thereof
or any agency or instrumentality of a State or any political subdivi
sion thereof or any municipal corporate instrumentality of one or
more States; and such other securities (which may include, among
others, unregistered securities, the market in which is predominantly
intrastate) 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 title which by their terms do not
apply to an “ exempted security ” or to “ exempted securities.”
(13) The terms “ buy ” and “ purchase ” each include any contract
to buy, purchase, or otherwise acquire.
(14) The terms “ sale” and “ sell” each include any contract to
sell or otherwise dispose of.
(15) The term “ Commission ” means the Securities and Exchange
Commission established by section 4 of this title.
(16) The term “ State ” means any State of the United States, the
District of Columbia, Alaska, Hawaii, Puerto Kico, the Philippine
Islands, the Canal Zone, the Virgin Islands, or any other possession
of the United States.
(17) 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 thereof.
(b) The Commission and the Federal Reserve Board, as to matters
within their respective jurisdictions, shall have power by rules and
regulations to define technical, trade, and accounting terms used
in this title insofar as such definitions are not inconsistent with the
provisions of this title.
(c) No provision of this title 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 to such department, establishment, or agency.
5
CPub . 291.]
SECURITIES AND EXCHANGE COMMISSION
S ec . 4, (a ) There is hereby established a Securities and Exchange
Commission (hereinafter referred to as the “ Commission ” ) to be
composed of five commissioners to be appointed by the President
by and with the advice and consent of the Senate. Not more than
three of such commissioners shall be members of the same political
party, and in making appointments members of different political
parties shall be appointed alternately as nearly as may be practi
cable. No commissioner shall engage in any other business, vocation,
or employment than that of serving as commissioner, nor shall any
commissioner participate, directly or indirectly, in any stock-market
operations or transactions of a character subject to regulation by
the Commission pursuant to this title. Each commissioner shail
receive a salary at the rate of $10,000 a year and shall hold office
for a term of five years, except that (1) any commissioner appointed
to fill a vacancy occurring prior to the expiration of the term for
which his predecessor was appointed, shall be appointed for the
remainder of such term, and (2) the terms of office of the commis
sioners first taking office after the date of enactment of this title
shall expire, as designated by the President at the time of nomina
tion, one at the end of one year, one at the end of two years, one
at the end of three years, one at the end of four years, and one at
the end of five years, after the date of enactment of this title.
(b)
The Commission is authorized to appoint and fix the com
pensation of such officers, attorneys, examiners, and other experts
as may be necessary for carr}dng out its functions under this Act,
without regard to the provisions of other laws applicable to the
employment and compensation of officers and employees of the
United States, and the Commission may, subject to the civil-service
laws, appoint such other officers and employees as are necessary in
the execution of its functions and fix their salaries in accordance
with the Classification Act of 1923, as amended.
TRANSACTIONS ON UNREGISTERED EXCHANGES
S e c . 5. 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 an exchange within or subject to the jurisdiction of the
United States to effect any transaction in a security, or to report
any such transaction, unless such exchange (1) is registered as a
national securities exchange under section 6 of this title, or (2) is
exempted from such registration upon application by the exchange
because, in the opinion of the Commission, by reason of the limited
volume of transactions effected on such exchange, it is not practi
cable and not necessary or appropriate in the public interest or for
the protection of investors to require such registration.
REGISTRATION OF NATIONAL SECURITIES EXCHANGES
6. (a) Any exchange may be registered with the Commission
a national securities exchange under the terms and conditions
hereinafter provided in this section, by filing a registration state
S ec .
as
6
[P ub . 291.1
ment in such form as the Commission may prescribe, containing the
agreements, setting forth the information, and accompanied by the
documents, below specified:
(1) An agreement (which shall not be construed as a waiver of
any constitutional right or any right to contest the validity of any
rule or regulation) to comply, and to enforce so far as is within its
powers compliance by its members, with the provisions of this title,
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 mem
bership, 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 instru
ments corresponding thereto, whatever the name, which are herein
after collectively referred to as the a rules of the exchange ” ; and
(4) An agreement 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 ana equitable principles of trade, and declare that the
willful violation of any provisions of this title or any rule or regula
tion thereunder shall be considered conduct or proceeding incon
sistent with just and equitable principles of trade.
(c) Nothing in this title shall be construed to prevent any exchange
from adopting and enforcing any rule not inconsistent with this title
and the rules and regulations thereunder and the applicable laws of
the State in which it is located.
(d) I f it appears to the Commission that the exchange applying
for registration is so organized as to be able to comply with the
provisions of this title 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 thiny days after the filing of the application, the
Commission shall enter an order either granting or, alter appropri
ate notice and opportunity for hearing, denying registration as a
national securities exchange, unless the exchange applying for regis
tration 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.
tPrjB. 2914
7
MARGIN REQUlRE3rENT3
S e c . 7. (a) For the purpose of preventing the excessive use of
credit for the purchase or carrying of securities, the Federal Reserve
Board shall, prior to the effective date of this section and from time
to time thereafter, prescribe rules and regulations with respect to the
amount of credit that may be initially extended and subsequently
maintained on any security (other than an exempted security) regis
tered on a national securities exchange.* For the initial extension of
credit, such rules and regulations shall be based upon the following
standard: An amount not greater than whichever is the higher of—
(1) 55 per centum of the current market price of the
security, or
(2) 100 per centum of the lowest market price of the security
during the preceding thirty-six calendar months, but not more
than 75 per centum of the current market price.
Such rules and regulations may make appropriate provision with
respect to the carrying of undermargined accounts for limited
periods and under specified conditions; the withdrawal of funds or
securities; the substitution or additional purchases of securities; the
transfer of accounts from one lender to another; special or different
margin requirements for dela}7ed deliveries, short sales, arbitrage
transactions, and securities to which paragraph (2) oi this sub
section does not apply; the bases and the methods to be used in
calculating loans, and margins and market prices; and similar
administrative adjustments and details. For the purposes of para
graph (2) of this subsection, until July 1, 1936, the lowest price
at which a security has sold on or after July 1, 1933, shall be con
sidered as the lowest price at which such security has sold during
the preceding thirty-six calendar months.
(b) Notwithstanding the provisions of subsection (a) of this
section, the Federal Reserve Board, may, from time to time, with
respect to all or specified securities or transactions, or classes of
securities, or classes pf transactions, by such rules and regulations
(1) prescribe such lower margin requirements for the initial exten
sion or maintenance of credit as it deems necessary or appropriate
for the accommodation of commerce and industry, having due regard
to the general credit situation of the country, and (2) prescribe
such higher margin requirements for the initial extension or mainte
nance of credit as it may deem necessary or appropriate to prevent
the excessive use of credit to finance transactions in securities.
(c) It shall be unlawful for any member of a national securities
exchange or any broker or dealer who transacts a business in securi
ties through the medium of any such member, directly or indirectly
to extend or maintain credit or arrange for the extension or mainte
nance of credit to or for any customer—
(1) On any security (other than an exempted security) registered
on a national securities exchange, in contravention of the rules and
regulations which the Federal Reserve Board shall prescribe under
subsections (a) and (b) of this section.
(2) Without collateral or on any collateral other than exempted
securities and/or securities registered upon a national securities
exchange, except in accordance with such rules and regulations as
8
the Federal Reserve Board may prescribe (A) to permit under
specified conditions and for a limited period any such member,
broker, or dealer to maintain a credit initially extended in con
formity with the rules and regulations of the Federal Reserve Board,
and (B) to permit the extension or maintenance of credit in cases
where the extension or maintenance of credit is not for the purpose
of purchasing or carrying securities or of evading or circumventing
the provisions of paragraph (1) of this subsection.
(a) It shall be unlawful for any person not subject to subsection
(c) to extend or maintain credit or to arrange for the extension or
maintenance of credit for N
the purpose of purchasing or carrying
any security registered on a national securities exchange, in contra
vention of such rules and regulations as the Federal Reserve Board
shall prescribe to prevent the excessive use of credit for the pur
chasing or carrying of or trading in securities in circumvention of
the other provisions of this section. Such rules and regulations may
impose upon all loans made for the purpose of purchasing or carry
ing securities registered on national securities exchanges limitations
similar to those imposed upon members, brokers, or dealers by sub
section (c) of this section and the rules and regulations thereunder.
This subsection and the rules and regulations thereunder shall not
apply (A^ to a loan made by a person not in the ordinary course
of his business, £B) to a loan on an exempted security, (C) to a loan
to a dealer to aid in the financing of the distribution of securities
to customers not through the medium of a national securities
exchange, (D) to a loan by a bank on a security other than an equity
security, or (E) to such other loans as the Federal Reserve Board
shall, by such rules and regulations as it may deem necessary or
appropriate in the public interest or for the protection of investors,
exempt, either unconditionally or upon specified terms and condi
tions or for stated periods, from the operation of this subsection
and the rules and regulations thereunder.
(e)
The provisions of this section or the rules and regulations
thereunder shall not apply on or before July 1, 1937, to any loan or
extension of credit made prior to the enactment of this title or to
the maintenance, renewal, or extension of any such loan or credit,
except to the extent that the Federal Reserve Board may by rules
and regulations prescribe as necessary to prevent the circumvention
of the provisions of this section or the rules and regulations there
under by means of withdrawals of funds or securities, substitutions
of securities, or additional purchases or by any other device.
RESTRICTIONS ON BORROWING BY MEMBERS, BROKERS, AND DEAUERS
S e o > 8. It shall be unlawful for any member of a national securi
ties 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 ordinary 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, (2) from any nonmember bank which shall have filed with the Federal Reserve Board
an agreement, which is still in force and which is in the form pre
[PUB* 2914
9
scribed by the Board, undertaking to comply with all provisions of
this Act, the Federal Reserve Act, as amended, and the Banking Act
of 1933, which are applicable to member banks and which relate
to the use of credit to finance transactions in securities, and with
such rules and regulations as may be prescribed pursuant to such
provisions of law or for the purpose of preventing evasions thereof*
or (3) in accordance with such rules and regulations as the Federal
Reserve Board may prescribe to permit loans between such mem
bers and/or brokers and/or dealers, or to permit loans to meet
emergency needs. Any such agreement filed with the Federal
Reserve Board shall be subject to termination at any time by order
of the Board, after appropriate notice and opportunity for hearing,
because of any failure by such bank to comply with the provisions
thereof or with such provisions of law or rules or regulations:
and, for any willful violation of such agreement, such bank shall
be subject to the penalties provided for violations of rules and regu
lations prescribed under this title. The provisions of sections 21
and 25 of this title shall apply in the. case of any such proceeding
or order of the Federal Reserve Board in the same manner as such
rovisions apply in the case of proceedings and orders of the
‘ommission.
(b) To j>ennit in the ordinary course of business as a broker his
aggregate indebtedness to all other persons, including customers’
credit balances (but excluding indebtedness secured by exempted
securities), to exceed such percentage of the net capital (exclusive
of fixed assets and value of exchange membership) employed in the
business, but not exceeding in any case 2,000 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) In contravention of such rules and regulations as the Commis
sion shall prescribe for the protection of investors to hypothecate
or arrange for the hypothecation of any securities carried for the
account of any customer under circumstances (1) that will permit
the. commingling of his securities ’without his written consent with
the securities of any^ other customer, (2) that will permit such
securities to be commingled with the securities of any person other
than a bona fide customer, or (3) that will permit such securities to
be hypothecated, or subjected to any lien or claim of the pledgee,
for a sum in excess of the aggregate indebtedness of such customers
in respect of such securities.
(d) To lend or arrange for the lending of any securities carried
for the account of any customer without the written consent of such
customer.
?
PROHIBITION AGAINST MANIPULATION
OP SECURITY PRICES
Sec. 9. (a) It shall be unlawful for any person, directly or indi
rectly, 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)
^For the purpose of creating a false or misleading appearance
of active trading in any security registered on a national securities
exchange, or a false or misleading appearance with respect to the
Pub. No. 291-----2
10
[P u b . 291J
market for any such security, fA) to effect any transaction in such
security which involves no change in the beneficial ownership
thereof, or (B) to enter an order or orders for the purchase of such
security witn the knowledge that an order or orders of substantially
the same size, at substantially the same time, and at substantially
the same price, for the sale of any such security, has been or will
be entered by or for the same or different parties, or (C) to enter
any order or orders for the sale of any such security with the knowl
edge that an order or orders of substantially the same size, at sub
stantially the same time, and at substantially the same price, for the
purchase of such security, has been or will be entered by or for the
same or different parties.
(2) To effect, alone or with one or more other persons, a series
of transactions in any security registered on a national securities
exchange creating actual or apparent active trading in such security
or raising or depressing the price of such security, for the purpose
of inducing the purchase or sale of such security by others.
(3) If a dealer or broker, or other person selling or offering for
sale or purchasing or offering to purchase the security, to induce the
purchase or sale of any security registered on a national securities
exchange by the circulation or dissemination in the ordinary course
of business of information to the effect that the price of any such
security will or is likely to rise or fall because of market operations
of any one or more persons conducted for the purpose of raising or
depressing the prices of such security.
(4) I f a dealer or broker, or other person selling or offering for
sale or purchasing or offering to purchase the security, to make, re
garding any security registered on a national securities exchange,
for the purpose of inducing the purchase or sale of such security,
any statement which was at the time and in the light of the circum
stances under which it was made, false or misleading with respect
to any material fact, and which he knew or had reasonable ground
to believe was so false or misleading.
(5) For a consideration, received directly or indirectly from a
dealer or broker, or other person selling or offering for sale or pur
chasing or offering to purchase the security, to induce the purchase
or sale of any security registered on a national securities exchange
by the circulation or dissemination of information to the effect that
the price of any such security will or is likely to rise or fall because
of the market operations of any one or more persons conducted for
the purpose of raising or depressing the price of such security.
(6) To effect either alone or with one or more other persons any
series of transactions for the purchase and/or sale of any security
registered on a national securities exchange for the purpose of peg
ging, fixing, or stabilizing the price of such security in contraven
tion of such rules and regulations as the Commission may prescribe
as necessary or appropriate in the public interest or for the pro
tection of investors.
(b^ It shall be unlawful for any person 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—
(1) 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 the security from or selling the secur
ity to anotner without being bound to do so; or
(2) any transaction in connection with any security with relation
to which he has, directly or indirectly, any interest in any such put,
call, straddle, option, or privilege; or
(3) any transaction in any security for the account of any person
who he has reason to believe has, and who actually has, directly or
indirectly, any interest in any such put, call, straddle, option, or
privilege with relation to such security.
(c) It shall be unlawful for any member of a national securities
exchange directly or indirectly to endorse or guarantee the perform
ance of any put, call, straddle, option, or privilege in relation to any
security registered on 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.
(d) The terms “ put ”, “ call ”, “ straddle ”, “ option ”, or “ priv
ilege ” as used in this section shall not include any registered war
rant, right, or convertible security.
(e) Any person who willfully participates in any act or transac
tion in violation of subsection (a) , (b), or (c) of this section, shall
be liable to any person who shall purchase or sell any security at a
price which was 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 any such suit the court may, in its discretion,
require an undertaking for the payment of the costs of such suit,
and assess reasonable costs, including reasonable attorneys’ fees,
against either party litigant. Every person who becomes liable to
make any payment under this subsection may recover contribution
as in cases of contract from any person who, if joined in the original
suit, would have been liable to make the same payment. No action
shall be maintained to enforce any liability created under this section,
unless brought within one year after the discovery of the facts con
stituting the violation and within three years after such violation.
(f) The provisions of this section shall not apply to an exempted
security.
REGULATION OF THE USE OF MANIPULATIVE AND DECEPTIVE DEVICES
Sec. 10. It shall be unlawful for any person, directly or indirectly,
by the 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, or to use or employ any stop-loss order
in connection with the purchase or sale, of any security registered on
a national securities exchange, in contravention of such rules and
regulations as the Commission may prescribe as necessary or appro
priate in the public interest or for the protection of investors.
(b) 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 or deceptive device or
contrivance in contravention of such rules and regulations as the
12
\?VB. 291,1
Commission may prescribe as necessary or appropriate in the public
interest or for the protection of investors,
SEGREGATION AND LIMITATION
OF FUNCTIONS
OF MEMBERS, BROKERS,
AND DEALERS
S ec . 11. (a) The Commission shall prescribe such rules and regu
lations as it deems necessary or appropriate in the public interest or
for the protection of investors, (1) to regulate or prevent floor
trading by members of national securities exchanges, directly or
indirectly for their own account or for discretionary accounts, and
(2) to prevent such excessive trading on the exchange but off the
floor by members, directly or indirectly for their own account, as the
Commission may deem detrimental to the maintenance of a fair and
orderly market. It shall be unlawful for a member to effect any
transaction in a security in contravention of such rules and regula
tions, but such rules and regulations may make such exemptions for
arbitrage transactions, for transactions in exempted securities, and,
within the limitations of subsection (b) of this section, for trans
actions by odd-lot dealers and specialists, as the Commission may
deem necessary or appropriate in the public interest or for the
protection of investors.
(b) When not 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, the rules of a
national securities exchange may permit (1) a member to be regis
tered 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 oddlot transactions, and/or (2) a member to be registered as a specialist.
I f under the rules and regulations of the Commission a specialist is
permitted to act as a dealer, or is limited to acting as a dealer,
such rules and regulations shall restrict his dealings so far as practi
cable to those reasonably necessary to permit him to maintain a fair
and orderly market, ana/or to those necessary to permit him to act
as an odd-lot dealer if the rules of the exchange permit him to act
as an odd-lot dealer. It shall be unlawful for a specialist or an
official of the exchange to disclose information in regard to orders
placed with such specialist which is not available to all members of
the exchange, to any person other than an official of the exchange, a
representative of the Commission, or a specialist who may be acting
for such specialist; but the Commission shall have power to require
disclosure to all members of the exchange of all orders placed with
specialists, under such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for
the protection of investors. It shall also be unlawful for a specialist
acting as a broker to effect on the exchange any transaction except
upon a market or limited price order.
(c) If because of the limited volume of transactions effected on an
exchange, it is in the opinion of the Commission impracticable and
not necessary or appropriate in the public interest or for the protec*
tion of investors to apply any of the foregoing provisions of this
section or the rules and regulations thereunder, the Commission shall
have powei\ upon application of the exchange and on a showing that
the rules ot such exchange are otherwise adequate for the protection
13
(PUB. 291.]
of investors, to exempt such exchange and its members from any such
provision or rules and regulations.
(d) It shall be unlawful for a member of a national securities
exchange who is both a dealer and a broker, or for any person who
both as a broker and a dealer transacts a business in securities
through the medium of a member or otherwise, to effect through tlio
use of any facility of a national securities exchange or of the mails
or of any means or instrumentality of interstate commerce, or other
wise in the case of a member, (l) any transaction in connection
with which, directly or indirectly, he extends or maintains or
arranges for the extension or maintenance of credit to or for a
customer on any security (other than an exempted security) which
was a part of a new issue in the distribution of which he participated
as a member of a selling syndicate or group within six months prior
to such transaction: Provided, That credit shall not be deemed
extended by reason of a bona fide delayed delivery of any such
security against full payment of the entire purchase price thereof
upon such delivery within thirty-five days after such purchase, or
(2) any transaction with respect to any security (other than an
exempted security) unless, if the transaction is with a customer,
he discloses to such customer in writing at or before the completion
of the transaction whether he is acting as a dealer for his own
account, as a broker for such customer, or as a broker for some other
person.
(e) The Commission is directed to make a study of the feasibility
and advisability of the complete segregation oi the functions of
dealer and broker, and to report the results of its study and its
recommendations to the Congress on or before January 3, 1936.
REGISTRATION REQUIREMENTS FOR SECURITIES
S e c . 12. (a) It shall be unlawful for any member, broker, or dealer
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 for such exchange in accordance with
the provisions of this title and the rules and regulations thereunder.
(b)
A security may be registered on a national securities exchange
by the issuer filing an application with the exchange (and filing
with the Commission such duplicate originals thereof as the Com
mission may require), which application shall contain—
(1) Such information, in such detail, as to the issuer and any
erson directly or indirectly controlling or controlled by, or under
irect or indirect common control with, the issuer, and any guarantor
of the security as to principal or interest or both, as the Commission
may by rules and regulations require, as necessary or appropriate in
the public interest or for the protection of investors, m respect of
the following:
(A) the organization, financial structure and nature of the
business;
(B) the termSj position, rights, and privileges of the different
classes of securities outstanding;
(C) the terms on which their securities are to be. and during
the preceding three years have been, offered to the public or
otherwise;
S
14
[FUB.29iJ
(D) the directors, officers, and underwriters, and each security
holder of record holding more than 10 per centum of any class
of any equity security of the issuer (other than an exempted
security) *their remuneration and their interests in the securities
of, and their material contracts with, the issuer and any person
directly or indirectly controlling or controlled by, or under
direct or indirect common control with, the issuer;
(E) remuneration to others than directors and officers exceed
ing $20,000 per annum;
fF) bonus and profit-sharing arrangements;
lG ) management and service contracts;
(H) options existing or to be created in respect of their
securities;
(I) balance sheets for not more than the three preceding
fiscal years, certified if required by the rules and regulations ox
the Commission by independent public accountants;
(J) profit and loss statements for not more than the three
preceding fiscal years, certified if required by the rules and
regulations of the Commission by independent public account
ants; and
(K) any further financial statements which the Commission
may deem necessary or appropriate for the protection of
investors.
(2)
Such copies of articles of incorporation, bylaws, trust inden
tures, or corresponding documents by whatever name known, under
writing arrangements, and other similar documents of, and voting
trust agreements with respect to, the issuer and any person directly
or indirectly controlling or controlled by, or under direct or indirect
common control with; the issuer as the Commission may require as
necessary or appropriate for the proper protection of investors and
to insure fair dealing in the security.
(c) I f in the judgment of the Commission any information
required under subsection (b) is inapplicable to any specified class
or classes of issuers, the Commission shall require in lieu thereof
the submission of such other information of comparable character
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 registra
tion the registration shall become effective thirty days after the
receipt of such certification by the Commission or within such shorter
period of time as the Commission may determine* A security regis
tered 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 deem
necessary to impose for the protection of investors, upon application
by the issuer or the exchange to the Commission; whereupon the
issuer shall be relieved from further compliance with the provisions
of this section and section 13 of this title and any rules or regulations
under such sections as to the securities so withdrawn or stricken.
An unissued security may be registered only 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 rules and regulations shall limit the registration
[Pub. 291.J
15
of an unissued security to cases where such security is a right or
the subject of a right to subscribe or otherwise acquire such security
granted to holders of a previously registered security and where the
primary purpose of such registration is to distribute such unissued
security to such holders.
(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 for a period ending not later than July 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,
1936. Notwithstanding the foregoing provisions of this section, the
Commission may, by such rules and regulations as it deems neces
sary or appropriate for the protection of investors, prescribe terms
and conditions under which, upon the application of any national
securities exchange, such exchange (1) may continue until June 1,
1936, unlisted trading privileges to which a security had been admit
ted on such exchange prior to March 1, 1934, and for such purpose
exempt such security and the issuer thereof from the provisions of
this section and sections 13 and 16, or (2) may extend until July 1,
1935^ unlisted trading privilege to any security registered on any
other national securities exchange which security was listed on such
other exchange on March 1, 1934. 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 this title. 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
S ec . 13. (a) Every issuer of a security registered on a national
securities exchange shall file the information, documents, and
reports below specified with the exchange (and shall file with the
Commission such duplicate originals thereof as the Commission
may require), in accordance with such rules and regulations as the
Commission may prescribe as necessary or appropriate for the
proper protection of investors and to insure 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 12.
(2) Such annual reports, certified if required by the rules and
regulations of the Commission by independent pufilic accountants,
and such quarterly reports, as the Commission may prescribe.
(b)
The Commission may prescribe, in regard to reports made
pursuant to this title, the form or forms in which the required infor
mation shall be set forth, the items or details to be shown in the
16
[P ub . 20LJ
balance sheet and the earning statement, and the methods to be
followed in the preparation of reports, 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 separate and/or consolidated balance sheets or income
accounts of any person directly or indirectly controlling or con
trolled by the issuer, or any person under direct or indirect common
control with the issuer; but m the case of the reports of any person
whose methods of accounting are prescribed under the provisions of
any law of the United States, or any rule or regulation thereunder,
the rules and regulations of the Commission with respect to reports
shall not be inconsistent with the requirements imposed by such
law or rule or regulation in respect of the same subject matter, and,
in the case of carriers subject to the provisions of section 20 of the
Interstate Commerce Act, as amended, or carriers required pur
suant to any other Act of Congress to ma&e reports of the same
general character as those required under such section 20, shall per
mit such carriers to file with the Commission and the exchange
duplicate copies of the reports and other documents filed with the
Interstate Commerce Commission, or with the governmental author
ity administering such other Act of Congress, in lieu of the reports,
information and documents required under this section and section
12 in respect of the same subject matter.
(c)
I f in the judgment of the Commission any report required
under subsection (a) is inapplicable to any specified class or classes
of issuers, the Commission shall require in lieu thereof of the submis
sion of such reports of comparable character as it may deem applica
ble to such class or classes of issuers.
PROXIES
S e c . 14. (a) It shall be unlawful for any person, by the use of the
mails or by 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 in contra
vention of such rules and regulations as the Commission may pre
scribe 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 secur
ities through the medium of any such member to give a proxy, con
sent, or authorization in respect of any security registered on a
national securities exchange and carried for the account of a cus
tomer in contravention ot such rules and regulations as the Com
mission may prescribe as necessary or appropriate in the public inter
est or for the protection of investors.
OVER-THE-COUNTER MARKETS
S eo. 15. It shall be unlawful, in contravention of such rules and
regulations as the Commission may prescribe as necessary or appro
[P u b . 291.1,
17
priate in the public interest and to insure to investors protection
comparable to that provided by and under authority of this title in
the case of national securities exchanges, (1) for any broker or
dealer, singly or 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, otherwise than on a national securities exchange,
for both the purchase and sale of any security (other than an exempted
security or commercial paper, bankers’ acceptances, or commercial
bills, or unregistered securities the market in which is predominantly
intrastate and which have not previously been registered or listed),
or (2) for any broker or dealer to use any facility of any such mar
ket. Such rules and regulations may provide for the regulation of
all transactions by brokers and dealers on any such market, for the
registration with the Commission of dealers and/or brokers making
or creating such a market, and for the registration of the securities
for which they make or create a market and may make special pro
vision with respect to securities or specified classes thereof listed, or
entitled to unlisted trading privileges, upon any exchange on the
date of the enactment of this title, which securities are not registered
under the provisions of section 12 of this title.
DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS
Sec. 16. (a) Every person who is directly or indirectly the bene
ficial owner of more than 10 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, at the time of the registration
of such security or within ten days after he becomes such beneficial
owner, director, or officer, a statement with the exchange (and a du
plicate original thereof with the Commission) of 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 there
after, if there has been any change in such ownership during such
month, shall file with the exchange a statement (and a duplicate
original thereof with the Commission) indicating his ownership at
the close of the calendar month and such changes in his ownership
as have occurred during such calendar month.
(b)
For the purpose 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, any profit real
ized by him from any purchase and sale, or any sale and purchase,
of any equity security of such issuer (other than an exempted secur
ity) within any period of less than six months, unless such security
was acquired m good faith in connection with a debt previously
contracted, shall inure to and be recoverable by the issuer, irrespec
tive 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. Suit to recover such profit may be instituted
at law or in 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
18
[Ptm. 291.J
bring such suit within sixty days after request or shall fail dili
gently to prosecute the same thereafter; but no such suit shall b©
brought more than two years after the date such profit was realized.
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 the sale and purchase, of the security involved, or any
transaction or transactions’ which the Commission l>y rules and regu
lations may exempt as not comprehended within the purpose of this
subsection.
(c) It shall be unlawful for any such beneficial owner, director,
or officer, directly or indirectly, to sell any equity security of such
issuer (other than an exempted security), if the person selling the
security or his principal (1) does not own the security sold, or (2)
if owning the security, does not deliver it against such sale within
twenty days thereafter, or does not within five days after such sale
deposit it in the mails or other usual channels of transportation;
but no person shall be deemed to have violated this subsection if he
proves that notwithstanding the exercise of good faith he was unable
to make such delivery or deposit within such time, or that to do
so would cause undue inconvenience or expense.
(d) The provisions of this section shall not apply to foreign or
domestic arbitrage transactions unless made in contravention of such
rules and regulations as the Commission may adopt in order to
carry out the purposes of this section.
ACCOUNTS
AND
RECORDS, REPORTS, EXAMINATIONS
MEMBERS, AND OTHERS
OF
EXCHANGES,
Seo. IT. (a) Every national securities exchange, every member
thereof, every broker or dealer who transacts a business in securities
througn the medium of any such member, and every broker or
dealer making or creating a market for both the purchase and sale
of securities through the use of the mails or of any means or instru
mentality of interstate commerce, shall make, 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 as necessary or appro
priate in the public Interest or for tne protection of investors. Such
accounts, correspondence, memoranda, papers, books, and other rec
ords 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 os the Commission may
deem necessary or appropriate in the public interest or for the pro
tection of investors.
(b)
Any broker, dealer, or other person extending credit who
is subject to the rules ana regulations prescribed by the Federal
Reserve Board pursuant to this title shall make such reports to the
Board as it may require as necessary or appropriate to enable it
to perform the functions conferred upon it dv this title. I f any
such broker, dealer, or other person shall fail to make any such
report or fail to furnish full information therein, or, if in the
judgment of the Board it is otherwise necessary, such broker, dealer,
or other person shall permit such inspections to be made by the
Board with respect to the business operations of such broker, dealer,
19
{ Pub. 291.]
or other person as^the Board may deem necessary to enable it to
obtain the required information.
LIABILITY FOR MISLEADING STATE1MENTS
S e c . 18. (a) Any person who shall ihake or cause to be made any
statement in any application, report, or document filed pursuant to
this title or any rule or regulation thereunder, which statement was
at the time and in the light of the circumstances under which it was
made false or misleading with respect to any material fact, shall
be liable to any person (not knowing that such statement was false
or misleading) who, in reliance upon such statement, shall have
purchased or sold a security at a price which was affected by such
statement, for damages caused by such reliance, unless the person
sued shall prove that he acted in good faith and had no knowledge
that such statement was false or misleading. A person seeking to
enforce such liability may sue at law or in equity in m y court of
competent jurisdiction. In any such suit the court may, in its dis
cretion, require an undertaking for the payment of the costs of such
suit, and assess reasonable costs, including reasonable attorneys’
fees, against either party litigant.
(b) Every person who becomes liable to make payment under this
section may recover contribution as in cases of contract from any
person who, if joined in the original suit, would have been liable to
make the same payment.
(c) No action shall be maintained to enforce any liability created
under this section unless brought within one year after the discovery
of the facts constituting the cause of action and within three years
after such cause of action accrued.
POWERS W IT H RESPECT TO EXCHANGES AND SECURITIES
S e c . 19. (a) The Commission is authorized, if in its opinion such
action is necessary or appropriate for the protection of investors—
■(1) After appropriate notice and opportunity for hearing, by
order to suspend for a period not exceeding twelve months or to
withdraw the registration of a national securities exchange if the
Commission finds that such exchange has violated any provision of
this title or of the rules and regulations thereunder or has failed
to enforce, so far as is within its power, compliance therewith by a
member or by an issuer of a security registered thereon.
(2) After appropriate notice and opportunity for hearing, by
order to deny, to suspend the effective date of, to suspend for a period
not exceeding twelve months, or to withdraw, the registration of a
security if the Commission finds that the issuer of such security has
failed to comply with any provision of this title or the rules and
regulations thereunder.
(3) After appropriate notice and opportunity for hearing, by
order to suspend for a period not exceeding twelve months or to
expel from a national securities exchange any member or officer
thereof whom the Commission finds has violated any provision of
this title 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 title or
the rules and regulations thereunder.
20
[PtTB. 291.J
(4)
And if in its opinion the public interest so requires, summarily
to suspend trading in any registered security on any national securi
ties exchange for a period not exceeding ten days, or with the ap
proval of tlie President, summarily to suspend all trading on any
national securities exchange for a period not exceeding ninety days.
(b) The Commission is further authorized? if after making appro
priate request in writing to a national securities exchange that such
exchange effect on its own behalf specified changes in its rules and
practices, and after appropriate notice and opportunity for hearing,
the Commission determines that such exchange has not made the
changes so requested, and that such changes are necessary or appro
priate for the protection of investors or to insure fair dealing in
securities traded in upon such exchange or to insure fair administra
tion of such exchange, by rules or regulations or by order to alter or
supplement the rules of such exchange (insofar as necessary or appro
priate to effect such changes) in respect of such matters as (1)
safeguards in respect of the financial responsibility of members and
adequate provision against the evasion of financial responsibility
through the use of corporate forms or special partnerships; (2) the
limitation or prohibition of the registration or trading in any secur
ity within a specified period after the issuance or primary distribu
tion thereof; (3) the listing or striking from listing of any security;
(4) hours of trading; (5) the manner, method, and place of soliciting
business; (6) fictitious or numbered accounts; (7) the time and
method of making settlements, payments, and deliveries and of
closing accounts; (8) the reporting of transactions on the exchange
and upon tickers maintained by or with the consent of the exchange,
including the method of reporting short sales, stopped sales, sales oi
securities of issuers in default, bankruptcy or receivership, and sales
involving other special circumstances; (9) the fixing or reasonable
rates of commission, interest, listing, and other charges; (10) mini
mum units of trading; (11) odd-lot purchases and sales; (12)
minimum deposits on margin accounts; and (13j) similar matters.
(c) The Commission is authorized and directed to make a study
and investigation of the rules of national securities exchanges with
respect to the classification of members, the methods of election of
officers and committees to insure a fair representation of the mem
bership, and the suspension, expulsion, and disciplining of members
of such exchanges. The Commission shall report to the Congress on
or before January 3, 1935, the results of its investigation, together
with its recommendations.
LIABILITIES OF CONTROLLING PERSONS
S e c . 20. (a) Every person who, directly or indirectly, controls any
jerson liable under any provision of this title or of any rule or reguation thereunder 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, unless the controlling person acted
in good faith and did not directly or indirectly induce the act or acts
constituting the violation or cause of action.
(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
f
(PUB. 291j
21
under the provisions of this title or any rule or regulation thereunder
through or by means of any other person.
(c)
It shall be unlawful for any director or officer of, or any owner
of any of the securities issued by, any issuer of any security regis
tered on a national securities exchange, without just cause to hinder,
delay, or obstruct the making or filing of any document, report, or
information, required to be filed under this title or any rule or
regulation thereunder.
INVESTIGATIONS; INJUNCTIONS AND PBOSECTJTION OF OFFENSES
S e c . 21. (a) The Commission may, in its discretion, make such
investigations as it deems necessary to determine whether any person
has violated or is about to violate any provision of this title or any
rule or regulation thereunder, and may require or permit any person
to file with it a statement in writing, under oath or otherwise as the
Commission shall determine, as to all the facts and circumstances
concerning the matter to be investigated. The Commission is author
ized, in its discretion, to publish information concerning any such
violations, and to investigate any facts, conditions, practices, or
matters which it may deem necessary or proper to aid in the enforce
ment of the provisions of this title, in the prescribing of rules and
regulations thereunder, or in securing information to serve as a basis
for recommending further legislation concerning the matters to
which this title relates.
(b) For the purpose of any such investigation^ or any other pro
ceeding under this title, any member of the Commission or any officer
designated by it is 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 any such records may be required from any place in
the United States or any State at any designated place of hearing.
(c) In case of contumacy by, or refusal to obey a subpena issued
to, any person, the Commission may invoke the aid of any court of
the United States within the jurisdiction of which such investigation
or proceeding is carried on, or where such person resides or carries
on business, in requiring the attendance and testimony of witnesses
and the production of books, papers, correspondence, memoranda,
and other records. And such court may issue an order requiring
such person to appear before the Commission or member or officer
designated by the Commission, there to produce records, if so
ordered, or to give testimony touching the matter under investigation
or in question; and any failure to obey such order of the court may
be punished by such court as a contempt thereof. All process in any
sucn case may be served in the judicial district whereof such person
is an inhabitant or wherever he may be found. Any person who
shall, without just cause, fail or refuse to attend and testify or to
answer any lawful inquiry or to produce books, papers, correspond
ence, memoranda, and other records, if in his power so to do, in
obedience to the subpena of the Commission, shall be guilty of a
misdemeanor and, upon conviction, shall be subject to a fine of not
22
[P u b . 291J
more than $1,000 or to imprisonment for a term of not more than
one ve&r. or both,
(d) No person shall be excused from attending and testifying or
from producing books, papers, contracts, agreements, and other
records and documents 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, docu
mentary 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-incrimi
nation, 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.
(e) Whenever it shall appear to the Commission that any person
is engaged or about to engage in any acts or practices which consti
tute or will constitute a violation of the provisions of this title, or
of any rule or regulation thereunder, it may in its discretion bring
an action in the proper district court of the United States, the
Supreme Court of the District of Columbia, or the United States
courts of any Territory or other place subject to the jurisdiction
of the United States, 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 trans
mit such evidence as may be available concerning such acts or prac
tices to the Attorney General^ who may, in his discretion, institute
the necessary criminal proceedings under this title.
(f) Upon application of the Commission the district courts of
the United States, the Supreme Court of the District of Columbia,
and the United States courts oi any Territory or other place subject
to the jurisdiction of the United States, shall also have jurisdiction
to issue writs of mandamus commanding any person to comply
with the provisions of this title or any order of the Commission
made in pursuance thereof.
HEARINGS BY COMMISSION
S e c . 22. Hearings may be public and may be held before the
Commission, any member or members thereof, or any officer or
officers of the Commission designated by it, and appropriate records
thereof shall be kept.
RULES AND REGULATIONS; ANNUAL REPORTS
S ec . 23. (a) The Commission and the Federal Reserve Board
shall each have power to make such rules and regulations as may
be necessary for the execution of the functions vested in them by
this title, and may for such purpose classify issuers, securities,
exchanges, and other persons or matters within their respective
jurisdictions.
(b)
The Commission and the Federal Reserve Board, respec
tively, shall include in their annual reports to Congress such infor
J
[Pub. 291
23
mation, data, and recommendation for further legislation as they
may deem advisable with regard to matters within their respective
jurisdictions under this title.
INFORMATION FILED W IT H THE COMMISSION
S e c . 2 4 . (a ) Nothing in this title shall be construed to require,
or to authorize the Commission to require, the revealing of trade
secrets or processes in any application, report, or document filed
with the Commission under this title.
(b) Any person filing any such application, report, or document
may make written objection to the public disclosure of information
contained therein, stating the grounds for such objection, and the
Commission is authorized to hear objections in any such case where
it deems it advisable. The Commission may, in such cases, make
available to the public the information contained in any such appli
cation, report, or document only when in its judgment a disclosure
of such information is in the public interest; and copies of informa
tion so made available may be furnished to any person at such
reasonable charge and under such reasonable limitations as the
Commission may prescribe.
(c) It shall be unlawful for any member, officer, or employee of
the Commission to disclose to any person other than a member,
officer, or employee of the Commission, or to use for personal benefit,
any information contained in any application, report, or document
filed with the Commission which is not made available to the public
ursuant to subsection (b) of this section: Provided, That the
lommission may make available to the Federal Reserve Board
any information requested by the Board for the purpose of enabling
it to perform its duties under this title.
E
COURT REVIEW OF ORDERS
S ec . 25. (a) Any person aggrieved by an order issued by the Com
mission in a proceeding under this title to which such person is a
party may obtain a review of such order in the Circuit Court of
Appeals of the United States, within 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 set aside in whole or
in part. A copy of such |>etition shall be forthwith served upon
any member of 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, ujson the filing of such tran
script such court shall have exclusive jurisdiction to affirm, modify,
and enforce or set aside such order, in whole or in part. No objec
tion 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 f acts, if supported by sub
stantial evidence, shall be conclusive. I f 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 mate
rial and that there were reasonable grounds for failure to adduce such
24
[P r o -291.1
evidence in the hearing before the Commission, the court may order
such additional 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 substantial evidence, shall be conclusive, and
its recommendation, if any, for the modification or setting aside of
the original order. The judgment and decree of the court, affirming,
modifying, and enforcing or setting aside, in whole or in part, any
such 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.
UNLAWFUL REPRESENTATIONS
S e c . 26. No action or failure to act by the Commission or the Fed
eral Reserve Board, in the administration of this title shall be con
strued to mean that the particular authority has in any way passed
upon the merits of, or given approval to, any security or any transac
tion or transactions therein, nor shall such action or failure to act
with regard to any statement or report filed with or examined by
such authority pursuant to this title or rules and regulations there
under, be deemed a finding by such authority that such statement or
report is true and accurate on its face or that it is not false or mislead
ing. It shall be unlawful to make, or cause to be made, to any pros
pective purchaser or seller of a security any representation that any
such action or failure to act by any such authority is to be so con
strued or has such effect.
JURISDICTION OF OFFENSES AND SUITS
S e c . 27. The district courts of the United States, the Supreme
Court of the District of Columbia, and the United States courts of
any Territory or other place subject to the jurisdiction of the United
States shall have exclusive jurisdiction of violations of this title or
the rules and regulations thereunder, and of all suits in equity and
actions at law brought to enforce any liability or duty created by
this title or the rules and regulations thereunder. Any criminal pro
ceeding may be brought in the district wherein any act or transac
tion constituting the violation occurred. Any suit or action to en
force any liability or duty created by this title or rules and regula
tion s th ereu n der, or to en io in any violation of such title or rules
and reg u la tio n s, may be Drought in any such district or in the
district wherein the defendant is found or is an inhabitant or trans
acts 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 Judir,
c ia l Code, as amended (UJS.C., title 28, secs. 225 and 347)* No
25
IFub. 281.1
costs shall be assessed for or against the Commission in any pro
ceeding under this title brought by or against it in the Supreme
Court or such other courts.
EFFECT ON EXISTING LAW
S e c . 28. (a) The rights and remedies provided by this title shall
be in addition to any and all other rights and remedies that may
exist at law or in equity; but no person permitted to maintain a suit
for damages under the provisions of this title shall recover, through
satisfaction of judgment in one or more actions, a total amount in
excess of his actual damages on account of the act complained of.
Nothing in this title shall affect the jurisdiction of the securities
commission (or any agency or officer performing like functions) of
any State over any security or any person insofar as it does not con
flict with the provisions of this title or the rules and regulations
thereunder.
(b) Nothing in this title shall be construed to modify existing
law (1) with regard to the binding effect on anv member of any
exchange of any action taken by the authorities of such exchange to
settle disputes between its members, or (2) with regard to the
binding effect of such action on any person who has agreed to be
bound thereby, or (3) with regard to the binding effect on any such
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
title or the rules and regulations thereunder.
VALIDITY
OF CONTRACTS
29. (a) Any condition, stipulation, or provision binding any
person to waive compliance with any provision of this title or of any
rule or regulation thereunder, or of any rule of an exchange required
thereby shall be void.
(b) Every contract made in violation of any provision of this
title or of any rule or regulation thereunder, and every contract
(including any contract for listing a security on an exchange)
heretofore or hereafter made the performance of which involves
the violation of, or the continuance of any relationship or practice
in violation of, any provision of this title or any rule or regulation
thereunder, shall be void (1) as regards the rights of any person
who, in violation of any such provision, rule, or regulation, shall
have made or engaged in the performance of any such contract,
and (2) as regards the rights of any person who, not being a party
to such contract, shall have acquired any right thereunder with
actual knowledge of the facts by reason of which the making or
performance of such contract was in violation of any such provi
sion, rule or regulation.
(c) Nothing in this title shall be construed (1) to affect the va
lidity of any loan or extension of credit (or any extension or
renewal thereof) made or of any lien created prior or subsequent
to the enactment of this title, unless at the time of the making of
such loan or extension of credit (or extension or renewal thereof)
or the creating of such lien, the person making such loan or extension
of credit (or extension or renewal thereof) or acquiring such lien
S ec .
26
[P u b . 201.1
r
shall have actual knowledge of facts by reason of which the making
of such loan or extension of credit (or extension or renewal thereof)
or the acquisition of such lien is a violation of the provisions of this
title or any rule or regulation thereunder, or (2) to afford a defense
to the collection of any debt or obligation or the enforcement of any
lien by any person who shall have acquired such debt, obligation, or
lien in good faith for value and without actual knowledge of the
violation of any provision of this title or any rule or regulation
thereunder affecting the legality of such debt, obligation, or lien.
FOREIGN SECURITIES EXCHANGES
S ec . 30* (a) It shall be unlawful for any broker or dealer, directly
or indirectly, to make use of the mails or of any means or instru
mentality of interstate commerce for the purpose of effecting on an
exchange not within or 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 ite principal
place of business in, a place within or subject to the jurisdiction of
the United States, 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 to prevent the
evasion of this title.
(b)
The provisions of this title or of any rule or regulation there. under shall not apply to any person insofar as he transacts a business
in securities without the jurisdiction of the United States, unless
he transacts such business in contravention of such rules and regu
lations as the Commission may prescribe as necessary or appropriate
to prevent the evasion of this title.
REGISTRATION FEES
S e c . 31. E v e r y n a tio n a l securities exch a n ge s h a ll p a y to the C o m
m iss io n on o r b e fo re M a rc h 15 o f each c a le n d a r y e a r a re g is tra tio n
fee f o r the p riv ile g e o f d o in g business as a n a tio n a l securities
e xc h a n ge d u r in g th e p re c e d in g ca len d a r y e a r o r a n y p a rt th e re o f.
S u c h fee s h a ll be in an a m o u n t equal to one five -h u n d re d th s o f 1 p e r
ce ntum o f th e a g g re g a te d o lla r a m o u n t o f th e sales o f securities
transacted o n such n a tio n a l securities exch a nge d u rin g th e p re c e d in g
c a le n d a r y e a r a n d subsequent to its re g is tra tio n as a n a tio n a l secu ri
ties exchange.
PENALTIES
Any person who willfully violates any provision of this
title, or any rule or regulation thereunder the violation of which is
made unlawful or the observance of which is required under the
terms of this title, or any person who willfully and knowingly
makes, or causes to be made, any statement in any application, report,
or document required to be filed under this title or any rule or
regulation thereunder, which statement was false or misleading with
respect to any material fact, shall upon conviction be fined not
more than $10,000, or imprisoned not more than two years, or both,
except that when such person is an exchange, a fine not exceeding
$ 5 0 0 ,0 0 0 may be imposed; but no person shall be subject to im
prisonment under this section for the violation of any rule or regula■tion if he proves that he had no knowledge of such rule or regulation.
S e c . 32.
[Pub. 2914
27
SEPARABILITY OF PROVISIONS
S ec . 33. I f any provision of this Act, or the application of such
provision to any person or circumstances, shall be held invalid, the
remainder of the Act, and the application of such provision to
persons or circumstances other than those as to which it is held
invalid, shall not be affected thereby.
EFFECTIVE DATE
S ec . 34. This Act shall become effective on July 1, 1934, except
that sections 6 and 12(b), (c), (d), and (e) shall become effective
on September 1, 1934; and sections 5, 7, 8, 9(a) (6), 10, 11, 12(a),
13, 14, 15, 16, 17, 18, 19, and 30 shall become effective on October 1,
1934.
T it l e II— A m e n d m e n t s to S e c u r it ie s A c t of 1933
S ec t io n 201. (a) Paragraph (1) 'o? section 2 of the Securities Act
of 1933 is amended to read as follows:*
w(l) The term ‘ security5 means any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral-trust certifi
cate, preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit for
a security, fractional undivided interest in oil, gas, or other mineral
rights, or, in general, any interest or instrument commonly known
as a ‘ security , or any certificate of interest or participation in, tem
porary or interim certificate for, receipt for, guarantee of, or warrant
or right to subscribe to or purchase, any of the foregoing.” ,
(b)
Paragraph (4) of such section 2 is amended to read as follows:
“ (4) The term 6issuer ’ means every person who issues or proposes
to issue any security; except that with respect to certificates of
deposit, 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 persons per
forming similar functions) or of the fixed, restricted management,
or unit type, the term issuer ’ means the person or persons perform
ing the acts and assuming the duties of depositor or manager pur
suant to the provisions of the trust or other agreement or instrument
under which such securities are issued; except that in the case of an
unincorporated association which provides by its articles for limited
liability of any or all of its members, or in the case of a trust, com
mittee, or other legal entity, the trustees or members thereof shall
not be individually liable as issuers of any security issued by the
association, trust, committee, or other legal entity; 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; and except that with respect to fractional undivided
interests in oil, gas, or other mineral rights, the term 4issuer ’ means
the owner of any such right or of any interest in such right (whether
whole or fractional) who creates fractional interests therein for the
purpose of public offering.”
28
(Pub. 291.]
(c)
Paragraph (10) of such section 2 is amended to read as
follows:
“ (10) The term ‘ prospectus’ means any prospectus, notice, circu
lar^ advertisement, letter, or communication, written or by radio,
which offers any security for sale; except that (a) a communication
shall not be deemed a prospectus if it is proved that prior to or at
the same time with such communication a written prospectus meeting
the requirements of section 10 was sent or given to the person to
whom the communication was made, by the person making such
communication or his principal, and (b) a notice, circular, adver
tisement, letter, or communication in respect of a security shall not
be deemed to be a prospectus if it states from whom a written pros
pectus meeting the requirements of section 10 may be obtained and,
m addition, does no more than identify the security, state the price
thereof, and state by whom orders will be executed.”
S ec . 202* (a) Paragraph ( 2 ) of section 3 (a) of such Act is
amended to read as follows: ^
.
“ (2) Any security issued or guaranteed by the United States or
any Territory thereof, or by the District*of Columbia, or by any
State of the United States, or by any political subdivision of a State
or Territory, or by any public instrumentality of one or more States
or Territories, or by any person controlled or supervised by and
acting as an instrumentality of the Government of the United States
pursuant to authority granted by the Congress of the United States,
or any certificate of deposit for any of the foregoing, or any security
issued or guaranteed by any national bank, or by any banking insti
tution organized under the laws of any State or Territory or the
District of Columbia, the business of which is substantially confined
to banking and is supervised by the State or Territorial banking
commission or similar official; or any security issued by or represent
ing an interest in or a direct obligation of a Federal Reserve Dank ” ;
(b) Paragraph (4) of such section 3 (a) is amended by striking
out “ corporation ” and inserting in lieu thereof “ person.”
(c) Such section 3 (a) is further amended by striking out the
period at the end of paragraph (8) and inserting in lieu thereof a
semicolon, and by inserting immediately after such paragraph (8)
the following new paragraphs:
“ (9) Any security exchanged by the issuer with its existing secu
rity holders exclusively where no commission or other remuneration
is paid or given directly or indirectly for soliciting such exchange;
^(10) Any security which is issued in exchange for one or more
bona fide outstanding securities, claims or property interests, or
partly in such exchange and partly for cash, where the terms and
conditions of such issuance and exchange are approved, after a hear
ing upon the fairness of such terms and conditions at which all
persons to whom it is proposed to issue securities in such exchange
shall have the right to appear, by any court, or by any official or
agency of the United States, or by any State or Territorial banking
or insurance commission or other governmental authority expressly
authorized by law to grant such approval;
“ (11) Any security which is a part of an issue sold only to persons
resident within a single State or Territory, where the issuer of such
security is a person resident and doing business within or, if a cor
[P u b . 201.1
29
poration, incorporated by and doing business within, such State or
Territory.”
S e c . 203. (a) Paragraph ( 1 ) of section 4 of such Act is amended
(1) by striking out “ not with or through an underwriter and
and
(2) by striking out “ last ” and inserting in lieu thereof “ first .
(b) Paragraph (3) of such section 4 is hereby repealed.
S e c . 204. Subsection (c) of section 5 of such Act is hereby repealed.
S e c . 205. Paragraph (1 ) of section 1 0 ( b ) of such Act is amended
to read as follows:
“ (:H When a prospectus is used more than thirteen months after
the effective date of the registration statement, the information in the
statements contained therein shall be as of a date not more than
twelve months prior to such use, so far as such information is known
to the user of such prospectus or can be furnished by such user
without unreasonable effort or expense.”
S e c . 20 6 . (a) Section 11 (a) of such Act is amended bv adding
after the last line thereof the following new sentence: If such
person acquired the security after the issuer has made generally
available to its security holders an earning statement covering a
period of at least twelve months beginning after the effective date
of the registration statement, then the right of recovery under this
subsection shall be conditioned on proof that such person acquired
the security relying upon such untrue statement in the registration
statement or relying upon the registration statement and not know
ing of such omission, but such reliance may be established without
proof of the reading of the registration statement by such person.”
(b) Clauses (C) and (D) of paragraph (3) of section 11 (b) of
such Act are amended to read as follows: u (C) as regards any part
of the registration statement purporting to be made on the autnority
of an expert (other than himself) or purporting to be a copy of
or extract from a report or valuation of an expert (other than him
self), he had no reasonable ground to believe and did not believe,
at the time such part of the registration statement became effective,
that the statements therein were untrue or that there was an omission
to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or that such part
of the registration statement did not fairly represent the statement
of the expert or was not a fair copy of or extract from the report
or valuation of the expert; and (D) as regards any part of the
registration statement purporting to be a statement made by an
official person or purporting to be a copy of or extract from a public
official document, he had no reasonable ground to believe and did
not believe, at the time such part of the registration statement
became effective, that the statements therein were untrue, or that
there was an omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
or that such part of the registration statement did not fairly repre
sent the statement made by the official person or was nQt a fair copy
of or extract from the public official document.”
(c) Subsection (c) of such section 11 is amended to read as
follows:
“ (c) In determining, for the purpose of paragraph (3) of sub
section (b) of this section, what constitutes reasonable investigation
30
(Pub. 291J
and reasonable ground for belief, the standard of reasonableness
shall be that required of a prudent man in the management of his
own property.”
(d)
Subsection (e) of such section 11 is amended to read as
follows:
“ (e) The suit authorized under subsection (a) may be to recover
such damages as shall represent the difference between the amount
paid for the security (not exceeding the price at which the security
was offered to the public) and (1) the value thereof as of the time
such suit was brought, or (2) the price at which such security shall
have been disposed of in the market before suit, or (3) the price at
which such security shall have been disposed of after suit but before
judgment if such damages shall be less than the damages repre
senting the difference between the amount paid for the security
(not exceeding the price at which the security was offered to the
ublic) and the value thereof as of the time such suit was brought:
*•
roviaed, That if the defendant proves that any portion or all of
such damages represents other than the depreciation in value of
such security resulting from such part of the registration statement,
with respect to which his liability is asserted, not being true or
omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, such por
tion of or all such damages shall not be recoverable. In no event
shall any underwriter (unless such underwriter shall have know
ingly received from the issuer for acting as an underwriter some
benefit, directly or indirectly, in which all other underwriters sim
ilarly situated did not share in proportion to their respective
interests in the underwriting) be liable in any suit or as a conse
quence of suits authorized under subsection (a) for damages in
excess of the total price at which the securities underwritten by him
and distributed to the public were offered to the public. In any
suit under this or any other section of this title the court may, in
its discretion, require an undertaking for the payment of the costs
of such suit, including reasonable-attorney’s fees, and if judgment
shall be rendered against a party litigant, upon the motion of the
other party litigant, such costs may oe assessed in favor of such
party litigant (whether or not such undertaking has been required)
if the court believes the suit or the defense to have been without
merit, in an amount sufficient to reimburse him for the reasonable
expenses incurred by him, in connection with such suit, such costs
to be taxed in the manner usually provided for taxing of costs in
the court in which the suit was heard.”
Sec. 207. Section 13 of such Act is amended (a) by striking out
“ two years” wherever it appears therein and inserting in lieu
thereof “ one year” ; (b) by striking out “ ten years” and inserting
in lieu thereof “ three years” ; and (c) by inserting immediately
before the period at the end thereof a comma and the following:
“ or under section 12 (2) more than three years after the sale
Sec. 208. Section 15 of such Act is amended by inserting imme
diately before the period at the end thereof a comma and the fol
lowing: “ unless the controlling person had no knowledge of or
reasonable ground to believe in the existence of the facts by reason
of which the liability of the controlled person is alleged to exist”.
?
[Pub. 2911
31
S e c . 209. (a) The first sentence of subsection (a) of section 19 of
such Act is amended by inserting after the word. “ accounting ” a
comma and the word “ technical .
(b) Subsection (a) of such section 19 is further amended by
adding at the end thereof the following new sentence: “ No pro
vision of this title imposing any liability shall apply to any act
done or omitted in good faith in conformity with any rule or regu
lation of the Commission, notwithstanding that such rule or regula
tion may, after such act or omission, be amended or rescinded or be
determined by judicial or other authority to be invalid for any
reason.”
Sec. 210. Upon the expiration of sixty days after the date upon
which a majority of the members of the Securities and Exchange
Commission appointed under section 4 of title I of this Act have
qualified and taken office, all powers, duties, and functions of the
Federal Trade Commission under the Securities Act of 1938 shall
be transferred to such Commission, together with all property,
books, records, and unexpended balances of appropriations used by
or available to the Federal Trade Commission for carrying out its
functions under the Securities Act of 1933. All proceedings, hear
ings, or investigations commenced or pending before the Federal
Trade Commission arising under the Securities Act of 1933 shall be
continued by the Securities and Exchange Commission. All orders,
rules, and regulations which have been issued by the Federal Trade
Commission under the Securities Act of 1933 and which are in effect
shall continue in effect until modified, superseded, revoked, or
repealed. All rights and interests accruing or to accrue under the
Securities Act of 1933, or any provision of any regulation relating
to, or out of action taken by, the Federal Trade Commission under
such Act, shall be followed in all respects and may be exercised and
enforced.
Sec. 211. The Commission is authorized and directed to make a
study and investigation of the work, activities, personnel, and func
tions of protective and reorganization committees in connection
with the reorganization, readjustment, rehabilitation, liquidation,
or consolidation of persons and properties and to report the result
of its studies and investigations and its recommendations to the
Congress on or before January 3, 1936.
Approved, June 6, 1934, 12.15 p. m.
O
@FedFRASER