U.S. Code > Title 15 > Chapter 2B > § 78h - Restrictions on borrowing and lending by members, brokers, and dealers
Current as of: February 2010 (a) Transactions relating to purchase or sale of security
It shall be unlawful for any person, directly or indirectly, by
the use of the mails or any means or instrumentality of interstate
commerce, or of any facility of any national securities exchange,
or for any member of a national securities exchange -
(1) 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 market for any such security, (A) 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 with 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 knowledge that an
order or orders of substantially the same size, at substantially
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 or in connection with any security-based swap
agreement (as defined in section 206B of the Gramm-Leach-Bliley
Act) with respect to such security 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 or a
security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act) with respect to such security, to induce
the purchase or sale of any security registered on a national
securities exchange or any security-based swap agreement (as
defined in section 206B of the Gramm-Leach-Bliley Act) with
respect to such security 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 price of such
security.
(4) If a dealer or broker, or the person selling or offering
for sale or purchasing or offering to purchase the security or a
security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act) with respect to such security, to make,
regarding any security registered on a national securities
exchange or any security-based swap agreement (as defined in
section 206B of the Gramm-Leach-Bliley Act) with respect to such
security, for the purpose of inducing the purchase or sale of
such security or such security-based swap agreement, any
statement which 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, 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
purchasing or offering to purchase the security or a security-
based swap agreement (as defined in section 206B of the Gramm-
Leach-Bliley Act) with respect to such security, to induce the
purchase of any security registered on a national securities
exchange or any security-based swap agreement (as defined in
section 206B of the Gramm-Leach-Bliley Act) with respect to such
security 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 pegging, fixing, or stabilizing the price of such
security in contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate in the
public interest or for the protection of investors.
(b) Transactions relating to puts, calls, straddles, or options
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 (A) any put, call, straddle,
or other option or privilege of buying the security from or
selling the security to another without being bound to do so; or
(B) any security futures product on the security; or
(2) any transaction in connection with any security with
relation to which he has, directly or indirectly, any interest in
any (A) such put, call, straddle, option, or privilege; or (B)
such security futures product; 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 (A) such put, call,
straddle, option, or privilege; or (B) such security futures
product with relation to such security.
(c) Endorsement or guarantee of puts, calls, straddles, or options
It shall be unlawful for any member of a national securities
exchange directly or indirectly to endorse or guarantee the
performance of any put, call, straddle, option, or privilege in
relation to any security registered on a national securities
exchange, 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) Registered warrant, right, or convertible security not included
in "put", "call", "straddle", or "option"
The terms "put", "call", "straddle", "option", or "privilege" as
used in this section shall not include any registered warrant,
right, or convertible security.
(e) Persons liable; suits at law or in equity
Any person who willfully participates in any act or transaction
in violation of subsections (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 constituting the violation
and within three years after such violation.
(f) Subsection (a) not applicable to exempted securities
The provisions of subsection (a) of this section shall not apply
to an exempted security.
(g) Foreign currencies and security futures products
(1) Notwithstanding any other provision of law, the Commission
shall have the authority to regulate the trading of any put, call,
straddle, option, or privilege on any security, certificate of
deposit, or group or index of securities (including any interest
therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange
relating to foreign currency (but not, with respect to any of the
foregoing, an option on a contract for future delivery other than a
security futures product).
(2) Notwithstanding the Commodity Exchange Act [7 U.S.C. 1 et
seq.], the Commission shall have the authority to regulate the
trading of any security futures product to the extent provided in
the securities laws.
(h) Limitations on practices that affect market volatility
It shall be unlawful for any person, by the use of the mails or
any means or instrumentality of interstate commerce or of any
facility of any national securities exchange, to use or employ any
act or practice in connection with the purchase or sale of any
equity security in contravention of such rules or regulations as
the Commission may adopt, consistent with the public interest, the
protection of investors, and the maintenance of fair and orderly
markets -
(1) to prescribe means reasonably designed to prevent
manipulation of price levels of the equity securities market or a
substantial segment thereof; and
(2) to prohibit or constrain, during periods of extraordinary
market volatility, any trading practice in connection with the
purchase or sale of equity securities that the Commission
determines (A) has previously contributed significantly to
extraordinary levels of volatility that have threatened the
maintenance of fair and orderly markets; and (B) is reasonably
certain to engender such levels of volatility if not prohibited
or constrained.
In adopting rules under paragraph (2), the Commission shall,
consistent with the purposes of this subsection, minimize the
impact on the normal operations of the market and a natural
person's freedom to buy or sell any equity security.
(i) Limitation on Commission authority
The authority of the Commission under this section with respect
to security-based swap agreements (as defined in section 206B of
the Gramm-Leach-Bliley Act) shall be subject to the restrictions
and limitations of section 78c-1(b) of this title.Legislative History ________________________________________________________________________
U.S. Code Provisions: SecuritiesState Laws: Securities
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