Current as of: February 2010 (a) Congressional findings; facilitating establishment of system
(1) The Congress finds that -
(A) The prompt and accurate clearance and settlement of
securities transactions, including the transfer of record
ownership and the safeguarding of securities and funds related
thereto, are necessary for the protection of investors and
persons facilitating transactions by and acting on behalf of
investors.
(B) Inefficient procedures for clearance and settlement impose
unnecessary costs on investors and persons facilitating
transactions by and acting on behalf of investors.
(C) New data processing and communications techniques create
the opportunity for more efficient, effective, and safe
procedures for clearance and settlement.
(D) The linking of all clearance and settlement facilities and
the development of uniform standards and procedures for clearance
and settlement will reduce unnecessary costs and increase the
protection of investors and persons facilitating transactions by
and acting on behalf of investors.
(2)(A) The Commission is directed, therefore, having due regard
for the public interest, the protection of investors, the
safeguarding of securities and funds, and maintenance of fair
competition among brokers and dealers, clearing agencies, and
transfer agents, to use its authority under this chapter -
(i) to facilitate the establishment of a national system for
the prompt and accurate clearance and settlement of transactions
in securities (other than exempt securities); and
(ii) to facilitate the establishment of linked or coordinated
facilities for clearance and settlement of transactions in
securities, securities options, contracts of sale for future
delivery and options thereon, and commodity options;
in accordance with the findings and to carry out the objectives set
forth in paragraph (1) of this subsection.
(B) The Commission shall use its authority under this chapter to
assure equal regulation under this chapter of registered clearing
agencies and registered transfer agents. In carrying out its
responsibilities set forth in subparagraph (A)(ii) of this
paragraph, the Commission shall coordinate with the Commodity
Futures Trading Commission and consult with the Board of Governors
of the Federal Reserve System.
(b) Registration of clearing agencies; application; determinations
by Commission requisite to registration of applicant as clearing
agency; denial of participation; discipline; summary proceedings;
exemption; facilities for handling derivatives
(1) Except as otherwise provided in this section, it shall be
unlawful for any clearing agency, unless registered in accordance
with this subsection, directly or indirectly, to make use of the
mails or any means or instrumentality of interstate commerce to
perform the functions of a clearing agency with respect to any
security (other than an exempted security). The Commission, by rule
or order, upon its own motion or upon application, may
conditionally or unconditionally exempt any clearing agency or
security or any class of clearing agencies or securities from any
provisions of this section or the rules or regulations thereunder,
if the Commission finds that such exemption is consistent with the
public interest, the protection of investors, and the purposes of
this section, including the prompt and accurate clearance and
settlement of securities transactions and the safeguarding of
securities and funds. A clearing agency or transfer agent shall not
perform the functions of both a clearing agency and a transfer
agent unless such clearing agency or transfer agent is registered
in accordance with this subsection and subsection (c) of this
section.
(2) A clearing agency may be registered under the terms and
conditions hereinafter provided in this subsection and in
accordance with the provisions of section 78s(a) of this title, by
filing with the Commission an application for registration in such
form as the Commission, by rule, may prescribe containing the rules
of the clearing agency and such other information and documents as
the Commission, by rule, may prescribe as necessary or appropriate
in the public interest or for the prompt and accurate clearance and
settlement of securities transactions.
(3) A clearing agency shall not be registered unless the
Commission determines that -
(A) Such clearing agency is so organized and has the capacity
to be able to facilitate the prompt and accurate clearance and
settlement of securities transactions and derivative agreements,
contracts, and transactions for which it is responsible, to
safeguard securities and funds in its custody or control or for
which it is responsible, to comply with the provisions of this
chapter and the rules and regulations thereunder, to enforce
(subject to any rule or order of the Commission pursuant to
section 78q(d) or 78s(g)(2) of this title) compliance by its
participants with the rules of the clearing agency, and to carry
out the purposes of this section.
(B) Subject to the provisions of paragraph (4) of this
subsection, the rules of the clearing agency provide that any (i)
registered broker or dealer, (ii) other registered clearing
agency, (iii) registered investment company, (iv) bank, (v)
insurance company, or (vi) other person or class of persons as
the Commission, by rule, may from time to time designate as
appropriate to the development of a national system for the
prompt and accurate clearance and settlement of securities
transactions may become a participant in such clearing agency.
(C) The rules of the clearing agency assure a fair
representation of its shareholders (or members) and participants
in the selection of its directors and administration of its
affairs. (The Commission may determine that the representation of
participants is fair if they are afforded a reasonable
opportunity to acquire voting stock of the clearing agency,
directly or indirectly, in reasonable proportion to their use of
such clearing agency.)
(D) The rules of the clearing agency provide for the equitable
allocation of reasonable dues, fees, and other charges among its
participants.
(E) The rules of the clearing agency do not impose any schedule
of prices, or fix rates or other fees, for services rendered by
its participants.
(F) The rules of the clearing agency are designed to promote
the prompt and accurate clearance and settlement of securities
transactions and, to the extent applicable, derivative
agreements, contracts, and transactions, to assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible, to
foster cooperation and coordination with persons engaged in the
clearance and settlement of securities transactions, to remove
impediments to and perfect the mechanism of a national system for
the prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the
public interest; and are not designed to permit unfair
discrimination in the admission of participants or among
participants in the use of the clearing agency, or to regulate by
virtue of any authority conferred by this chapter matters not
related to the purposes of this section or the administration of
the clearing agency.
(G) The rules of the clearing agency provide that (subject to
any rule or order of the Commission pursuant to section 78q(d) or
78s(g)(2) of this title) its participants shall be appropriately
disciplined for violation of any provision of the rules of the
clearing agency by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure, or any
other fitting sanction.
(H) The rules of the clearing agency are in accordance with the
provisions of paragraph (5) of this subsection, and, in general,
provide a fair procedure with respect to the disciplining of
participants, the denial of participation to any person seeking
participation therein, and the prohibition or limitation by the
clearing agency of any person with respect to access to services
offered by the clearing agency.
(I) The rules of the clearing agency do not impose any burden
on competition not necessary or appropriate in furtherance of the
purposes of this chapter.
(4)(A) A registered clearing agency may, and in cases in which
the Commission, by order, directs as appropriate in the public
interest shall, deny participation to any person subject to a
statutory disqualification. A registered clearing agency shall file
notice with the Commission not less than thirty days prior to
admitting any person to participation, if the clearing agency knew,
or in the exercise of reasonable care should have known, that such
person was subject to a statutory disqualification. The notice
shall be in such form and contain such information as the
Commission, by rule, may prescribe as necessary or appropriate in
the public interest or for the protection of investors.
(B) A registered clearing agency may deny participation to, or
condition the participation of, any person if such person does not
meet such standards of financial responsibility, operational
capability, experience, and competence as are prescribed by the
rules of the clearing agency. A registered clearing agency may
examine and verify the qualifications of an applicant to be a
participant in accordance with procedures established by the rules
of the clearing agency.
(5)(A) In any proceeding by a registered clearing agency to
determine whether a participant should be disciplined (other than a
summary proceeding pursuant to subparagraph (C) of this paragraph),
the clearing agency shall bring specific charges, notify such
participant of, and give him an opportunity to defend against such
charges, and keep a record. A determination by the clearing agency
to impose a disciplinary sanction shall be supported by a statement
setting forth -
(i) any act or practice in which such participant has been
found to have engaged, or which such participant has been found
to have omitted;
(ii) the specific provisions of the rules of the clearing
agency which any such act or practice, or omission to act, is
deemed to violate; and
(iii) the sanction imposed and the reasons therefor.
(B) In any proceeding by a registered clearing agency to
determine whether a person shall be denied participation or
prohibited or limited with respect to access to services offered by
the clearing agency, the clearing agency shall notify such person
of, and give him an opportunity to be heard upon, the specific
grounds for denial or prohibition or limitation under consideration
and keep a record. A determination by the clearing agency to deny
participation or prohibit or limit a person with respect to access
to services offered by the clearing agency shall be supported by a
statement setting forth the specific grounds on which the denial or
prohibition or limitation is based.
(C) A registered clearing agency may summarily suspend and close
the accounts of a participant who (i) has been and is expelled or
suspended from any self-regulatory organization, (ii) is in default
of any delivery of funds or securities to the clearing agency, or
(iii) is in such financial or operating difficulty that the
clearing agency determines and so notifies the appropriate
regulatory agency for such participant that such suspension and
closing of accounts are necessary for the protection of the
clearing agency, its participants, creditors, or investors. A
participant so summarily suspended shall be promptly afforded an
opportunity for a hearing by the clearing agency in accordance with
the provisions of subparagraph (A) of this paragraph. The
appropriate regulatory agency for such participant, by order, may
stay any such summary suspension on its own motion or upon
application by any person aggrieved thereby, if such appropriate
regulatory agency determines summarily or after notice and
opportunity for hearing (which hearing may consist solely of the
submission of affidavits or presentation of oral arguments) that
such stay is consistent with the public interest and protection of
investors.
(6) No registered clearing agency shall prohibit or limit access
by any person to services offered by any participant therein.
(7)(A) A clearing agency that is regulated directly or indirectly
by the Commodity Futures Trading Commission through its association
with a designated contract market for security futures products
that is a national securities exchange registered pursuant to
section 78f(g) of this title, and that would be required to
register pursuant to paragraph (1) of this subsection only because
it performs the functions of a clearing agency with respect to
security futures products effected pursuant to the rules of the
designated contract market with which such agency is associated, is
exempted from the provisions of this section and the rules and
regulations thereunder, except that if such a clearing agency
performs the functions of a clearing agency with respect to a
security futures product that is not cash settled, it must have
arrangements in place with a registered clearing agency to effect
the payment and delivery of the securities underlying the security
futures product.
(B) Any clearing agency that performs the functions of a clearing
agency with respect to security futures products must coordinate
with and develop fair and reasonable links with any and all other
clearing agencies that perform the functions of a clearing agency
with respect to security futures products, in order to permit, as
of the compliance date (as defined in section 78f(h)(6)(C) (!1) of
this title), security futures products to be purchased on one
market and offset on another market that trades such products.
(8) A registered clearing agency shall be permitted to provide
facilities for the clearance and settlement of any derivative
agreements, contracts, or transactions that are excluded from the
Commodity Exchange Act [7 U.S.C. 1 et seq.], subject to the
requirements of this section and to such rules and regulations as
the Commission may prescribe as necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of this chapter.
(c) Registration of transfer agents
(1) Except as otherwise provided in this section, it shall be
unlawful for any transfer agent, unless registered in accordance
with this section, directly or indirectly, to make use of the mails
or any means or instrumentality of interstate commerce to perform
the function of a transfer agent with respect to any security
registered under section 78l of this title or which would be
required to be registered except for the exemption from
registration provided by subsection (g)(2)(B) or (g)(2)(G) of that
section. The appropriate regulatory agency, by rule or order, upon
its own motion or upon application, may conditionally or
unconditionally exempt any person or security or class of persons
or securities from any provision of this section or any rule or
regulation prescribed under this section, if the appropriate
regulatory agency finds (A) that such exemption is in the public
interest and consistent with the protection of investors and the
purposes of this section, including the prompt and accurate
clearance and settlement of securities transactions and the
safeguarding of securities and funds, and (B) the Commission does
not object to such exemption.
(2) A transfer agent may be registered by filing with the
appropriate regulatory agency for such transfer agent an
application for registration in such form and containing such
information and documents concerning such transfer agent and any
persons associated with the transfer agent as such appropriate
regulatory agency may prescribe as necessary or appropriate in
furtherance of the purposes of this section. Except as hereinafter
provided, such registration shall become effective 45 days after
receipt of such application by such appropriate regulatory agency
or within such shorter period of time as such appropriate
regulatory agency may determine.
(3) The appropriate regulatory agency for a transfer agent, by
order, shall deny registration to, censure, place limitations on
the activities, functions, or operations of, suspend for a period
not exceeding 12 months, or revoke the registration of such
transfer agent, if such appropriate regulatory agency finds, on the
record after notice and opportunity for hearing, that such denial,
censure, placing of limitations, suspension, or revocation is in
the public interest and that such transfer agent, whether prior or
subsequent to becoming such, or any person associated with such
transfer agent, whether prior or subsequent to becoming so
associated -
(A) has committed or omitted any act, or is subject to an order
or finding, enumerated in subparagraph (A), (D), (E), (H), or (G)
of paragraph (4) of section 78o(b) of this title, has been
convicted of any offense specified in subparagraph (B) of such
paragraph (4) within ten years of the commencement of the
proceedings under this paragraph, or is enjoined from any action,
conduct, or practice specified in subparagraph (C) of such
paragraph (4); or
(B) is subject to an order entered pursuant to subparagraph (C)
of paragraph (4) of this subsection barring or suspending the
right of such person to be associated with a transfer agent.
(4)(A) Pending final determination whether any registration by a
transfer agent under this subsection shall be denied, the
appropriate regulatory agency for such transfer agent, by order,
may postpone the effective date of such registration for a period
not to exceed fifteen days, but if, after notice and opportunity
for hearing (which may consist solely of affidavits and oral
arguments), it shall appear to such appropriate regulatory agency
to be necessary or appropriate in the public interest or for the
protection of investors to postpone the effective date of such
registration until final determination, such appropriate regulatory
agency shall so order. Pending final determination whether any
registration under this subsection shall be revoked, such
appropriate regulatory agency, by order, may suspend such
registration, if such suspension appears to such appropriate
regulatory agency, after notice and opportunity for hearing, to be
necessary or appropriate in the public interest or for the
protection of investors.
(B) A registered transfer agent may, upon such terms and
conditions as the appropriate regulatory agency for such transfer
agent deems necessary or appropriate in the public interest, for
the protection of investors, or in furtherance of the purposes of
this section, withdraw from registration by filing a written notice
of withdrawal with such appropriate regulatory agency. If such
appropriate regulatory agency finds that any transfer agent for
which it is the appropriate regulatory agency, is no longer in
existence or has ceased to do business as a transfer agent, such
appropriate regulatory agency, by order, shall cancel or deny the
registration.
(C) The appropriate regulatory agency for a transfer agent, by
order, shall censure or place limitations on the activities or
functions of any person associated, seeking to become associated,
or, at the time of the alleged misconduct, associated or seeking to
become associated with the transfer agent, or suspend for a period
not exceeding twelve months or bar any such person from being
associated with the transfer agent, if the appropriate regulatory
agency finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations, suspension, or
bar is in the public interest and that such person has committed or
omitted any act, or is subject to an order or finding, enumerated
in subparagraph (A), (D), (E), (H), or (G) or (!2) paragraph (4) of
section 78o(b) of this title, has been convicted of any offense
specified in subparagraph (B) of such paragraph (4) within ten
years of the commencement of the proceedings under this paragraph,
or is enjoined from any action, conduct, or practice specified in
subparagraph (C) of such paragraph (4). It shall be unlawful for
any person as to whom such an order suspending or barring him from
being associated with a transfer agent is in effect willfully to
become, or to be, associated with a transfer agent without the
consent of the appropriate regulatory agency that entered the order
and the appropriate regulatory agency for that transfer agent. It
shall be unlawful for any transfer agent to permit such a person to
become, or remain, a person associated with it without the consent
of such appropriate regulatory agencies, if the transfer agent
knew, or in the exercise of reasonable care should have known, of
such order. The Commission may establish, by rule, procedures by
which a transfer agent reasonably can determine whether a person
associated or seeking to become associated with it is subject to
any such order, and may require, by rule, that any transfer agent
comply with such procedures.
(d) Activities of clearing agencies and transfer agents;
enforcement by appropriate regulatory agencies
(1) No registered clearing agency or registered transfer agent
shall, directly or indirectly, engage in any activity as clearing
agency or transfer agent in contravention of such rules and
regulations (A) as the Commission may prescribe as necessary or
appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of this
chapter, or (B) as the appropriate regulatory agency for such
clearing agency or transfer agent may prescribe as necessary or
appropriate for the safeguarding of securities and funds.
(2) With respect to any clearing agency or transfer agent for
which the Commission is not the appropriate regulatory agency, the
appropriate regulatory agency for such clearing agency or transfer
agent may, in accordance with section 1818 of title 12, enforce
compliance by such clearing agency or transfer agent with the
provisions of this section, sections 78q and 78s of this title, and
the rules and regulations thereunder. For purposes of the preceding
sentence, any violation of any such provision shall constitute
adequate basis for the issuance of an order under section 1818(b)
or 1818(c) of title 12, and the participants in any such clearing
agency and the persons doing business with any such transfer agent
shall be deemed to be "depositors" as that term is used in section
1818(c) of title 12.
(3)(A) With respect to any clearing agency or transfer agent for
which the Commission is not the appropriate regulatory agency, the
Commission and the appropriate regulatory agency for such clearing
agency or transfer agent shall consult and cooperate with each
other, and, as may be appropriate, with State banking authorities
having supervision over such clearing agency or transfer agent
toward the end that, to the maximum extent practicable, their
respective regulatory responsibilities may be fulfilled and the
rules and regulations applicable to such clearing agency or
transfer agent may be in accord with both sound banking practices
and a national system for the prompt and accurate clearance and
settlement of securities transactions. In accordance with this
objective -
(i) the Commission and such appropriate regulatory agency
shall, at least fifteen days prior to the issuance for public
comment of any proposed rule or regulation or adoption of any
rule or regulation concerning such clearing agency or transfer
agent, consult and request the views of the other; and
(ii) such appropriate regulatory agency shall assume primary
responsibility to examine and enforce compliance by such clearing
agency or transfer agent with the provisions of this section and
sections 78q and 78s of this title.
(B) Nothing in the preceding subparagraph or elsewhere in this
chapter shall be construed to impair or limit (other than by the
requirement of notification) the Commission's authority to make
rules under any provision of this chapter or to enforce compliance
pursuant to any provision of this chapter by any clearing agency,
transfer agent, or person associated with a transfer agent with the
provisions of this chapter and the rules and regulations
thereunder.
(4) Nothing in this section shall be construed to impair the
authority of any State banking authority or other State or Federal
regulatory authority having jurisdiction over a person registered
as a clearing agency, transfer agent, or person associated with a
transfer agent, to make and enforce rules governing such person
which are not inconsistent with this chapter and the rules and
regulations thereunder.
(5) A registered transfer agent may not, directly or indirectly,
engage in any activity in connection with the guarantee of a
signature of an endorser of a security, including the acceptance or
rejection of such guarantee, in contravention of such rules and
regulations as the Commission may prescribe as necessary or
appropriate in the public interest, for the protection of
investors, to facilitate the equitable treatment of financial
institutions which issue such guarantees, or otherwise in
furtherance of the purposes of this chapter.
(e) Physical movement of securities certificates
The Commission shall use its authority under this chapter to end
the physical movement of securities certificates in connection with
the settlement among brokers and dealers of transactions in
securities consummated by means of the mails or any means or
instrumentalities of interstate commerce.
(f) Rules concerning transfer of securities and rights and
obligations of involved or affected parties
(1) Notwithstanding any provision of State law, except as
provided in paragraph (3), if the Commission makes each of the
findings described in paragraph (2)(A), the Commission may adopt
rules concerning -
(A) the transfer of certificated or uncertificated securities
(other than government securities issued pursuant to chapter 31
of title 31 or securities otherwise processed within a book-entry
system operated by the Federal Reserve banks pursuant to a
Federal book-entry regulation) or limited interests (including
security interests) therein; and
(B) rights and obligations of purchasers, sellers, owners,
lenders, borrowers, and financial intermediaries (including
brokers, dealers, banks, and clearing agencies) involved in or
affected by such transfers, and the rights of third parties whose
interests in such securities devolve from such transfers.
(2)(A) The findings described in this paragraph are findings by
the Commission that -
(i) such rule is necessary or appropriate for the protection of
investors or in the public interest and is reasonably designed to
promote the prompt, accurate, and safe clearance and settlement
of securities transactions;
(ii) in the absence of a uniform rule, the safe and efficient
operation of the national system for clearance and settlement of
securities transactions will be, or is, substantially impeded;
and
(iii) to the extent such rule will impair or diminish, directly
or indirectly, rights of persons specified in paragraph (1)(B)
under State law concerning transfers of securities (or limited
interests therein), the benefits of such rule outweigh such
impairment or diminution of rights.
(B) In making the findings described in subparagraph (A), the
Commission shall give consideration to the recommendations of the
Advisory Committee established under paragraph (4), and it shall
consult with and consider the views of the Secretary of the
Treasury and the Board of Governors of the Federal Reserve System.
If the Secretary of the Treasury objects, in writing, to any
proposed rule of the Commission on the basis of the Secretary's
view on the issues described in clauses (i), (ii), and (iii) of
subparagraph (A), the Commission shall consider all feasible
alternatives to the proposed rule, and it shall not adopt any such
rule unless the Commission makes an explicit finding that the rule
is the most practicable method for achieving safe and efficient
operation of the national clearance and settlement system.
(3) Any State may, prior to the expiration of 2 years after the
Commission adopts a rule under this subsection, enact a statute
that specifically refers to this subsection and the specific rule
thereunder and establishes, prospectively from the date of
enactment of the State statute, a provision that differs from that
applicable under the Commission's rule.
(4)(A) Within 90 days after October 16, 1990, the Commission
shall (and at such times thereafter as the Commission may
determine, the Commission may), after consultation with the
Secretary of the Treasury and the Board of Governors of the Federal
Reserve System, establish an advisory committee under the Federal
Advisory Committee Act (5 U.S.C. App.). The Advisory Committee
shall be directed to consider and report to the Commission on such
matters as the Commission, after consultation with the Secretary of
the Treasury and the Board of Governors of the Federal Reserve
System, determines, including the areas, if any, in which State
commercial laws and related Federal laws concerning the transfer of
certificated or uncertificated securities, limited interests
(including security interests) in such securities, or the creation
or perfection of security interests in such securities do not
provide the necessary certainty, uniformity, and clarity for
purchasers, sellers, owners, lenders, borrowers, and financial
intermediaries concerning their respective rights and obligations.
(B) The Advisory Committee shall consist of 15 members, of which -
(i) 11 shall be designated by the Commission in accordance with
the Federal Advisory Committee Act; and
(ii) 2 each shall be designated by the Board of Governors of
the Federal Reserve System and the Secretary of the Treasury.
(C) The Advisory Committee shall conduct its activities in
accordance with the Federal Advisory Committee Act. Within 6 months
of its designation, or such longer time as the Commission may
designate, the Advisory Committee shall issue a report to the
Commission, and shall cause copies of that report to be delivered
to the Secretary of the Treasury and the Chairman of the Board of
Governors of the Federal Reserve System.Legislative History ________________________________________________________________________
U.S. Code Provisions: SecuritiesState Laws: Securities
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