SEC. 9. FUNCTIONS OF SELF-REGULATORY ORGANIZATIONS. (a) COLLECTING AGENT.-Each self-regulatory organization shall act as collection agent for SIPC to collect the assessments payable by all members of SIPC for whom such self-regulatory organization is the examining authority, and members of SIPC who are not members of any self-regulatory organization shall make payment direct to SIPC. An examining authority shall be obligated to remit to SIPC assessments made under section 4 only to the extent that payments of such assessments are received by such examining authority. (b) IMMUNITY.-No self-regulatory organization shall have any liability to any person for any action taken or omitted in good faith pursuant to section 5(a)(1). (c) INSPECTIONS.-The self-regulatory organization of which a member of SIPC is a member shall inspect or examine such member for compliance with applicable financial responsibility rules, except that if a member of SIPC is a member of more than one self-regulatory organization, SIPC shall designate one of such self-regulatory organizations to inspect or examine such member of SIPC for compliance with applicable financial responsibility rules. Such self-regulatory organization shall be selected by SIPC on the basis of regulatory procedures employed, availability of staff, convenience of location, and such other factors as SIPC may consider appropriate for the protection of customers of its members. (d) REPORTS.-There shall be filed with SIPC by the self-regulatory organizations such reports of inspections or examinations of the members of SIPC (or copies thereof) as may be designated by SIPC by bylaw or rule. (e) CONSULTATION.-SIPC shall consult and cooperate with the self-regulatory organizations toward the end: (1) that there may be developed and carried into effect procedures reasonably designed to detect approaching financial difficulty upon the part of any member of SIPC; (2) that, as nearly as may be practicable, examinations to ascertain whether members of SIPC are in compliance with applicable financial responsibility rules will be conducted by the selfregulatory organizations under appropriate standards (both as to method and scope) and reports of such examinations will, where appropriate, be standard in form; and (3) that, as frequently as may be practicable under the circumstances, each member of SIPC will file financial information with, and be examined by, the self-regulatory organization which is the examining authority for such member. (f) FINANCIAL CONDITION OF MEMBERS.-Notwithstanding the limitations contained in sections 15A and 19 of the 1934 Act and without limiting its powers under those or other sections of the 1934 Act, the Commission may by such rules or regulations as it determines to be necessary or appropriate in the public interest and to effectuate the purposes of this Act (1) require any self-regulatory organization to adopt any specified alteration of or supplement to its rules, practices, and procedures with respect to the frequency and scope of inspections and examinations relating to the financial condition of members of such self-regulatory organization and the selection and qualification of examiners; (2) require any self-regulatory organization to furnish SIPC and the Commission with reports and records or copies thereof relating to the financial condition of members of such self-regulatory organization; and 84 STAT. 1654 52 Stat. 1070; 78 Stat. 574. 48 Stat. 898; 82 Stat. 453. 15 USC 780-3, 78s. 84 STAT. 1655 (3) require any self-regulatory organization to inspect or examine any members of such self-regulatory organization in relation to the financial condition of such members. In the case of a broker or dealer who is a member of more than one self-regulatory organization the Commission, to the extent practicable, shall avoid requiring duplication of examinations, inspections, and reports. SEC. 10. PROHIBITED ACTS. (a) FAILURE TO PAY ASSESSMENT, ETC.-If a member of SIPC shall fail to file any report or information required pursuant to this Act, or shall fail to pay when due all or any part of an assessment made upon such member pursuant to this Act, and such failure shall not have been cured, by the filing of such report or information or by the making of such payment, together with interest thereon, within five days after receipt by such member of written notice of such failure given by or on behalf of SIPC, it shall be unlawful for such member, unless specifically authorized by the Commission, to engage in business as a broker or dealer. If such member denies that he owes all or any part of the amount specified in such notice, he may after payment of the full amount so specified commence an action against SIPC in the appropriate United States district court to recover the amount he denies owing. (b) ENGAGING IN BUSINESS AFTER APPOINTMENT OF TRUSTEE.—It shall be unlawful for any broker or dealer for whom a trustee has been appointed pursuant to this Act to engage thereafter in business as a broker or dealer, unless the Commission otherwise determines in the public interest. The Commission may by order bar or suspend for any period, any officer, director, general partner, owner of 10 per centum or more of the voting securities, or controlling person of any broker or dealer for whom a trustee has been appointed pursuant to this Act from being or becoming associated with a broker or dealer, if after appropriate notice and opportunity for hearing, the Commission shall determine such bar or suspension to be in the public interest. (c) EMBEZZLEMENT, ETC., OF ASSETS OF SIPC.-Whoever steals, unlawfully abstracts, unlawfully and willfully converts to his own use or to the use of another, or embezzles any of the moneys, securities, or other assets of SIPC shall be fined not more than $50,000 or imprisoned not more than five years or both. SEC. 11. MISCELLANEOUS PROVISIONS. (a) PUBLIC INSPECTION OF REPORTS.-Any notice, report, or other document filed with SIPC pursuant to this Act shall be available for public inspection unless SIPC or the Commission shall determine that disclosure thereof is not in the public interest. Nothing herein shall act to deny documents or information to the Congress of the United States or the committees of either House having jurisdiction over financial institutions, securities regulation, or related matters under the rules of each body. Nor shall the Commission be denied any document or information which the Commission, in its judgment, needs. (b) APPLICATION OF ACT TO FOREIGN MEMBERS.-Except as otherwise provided by rule or regulation of the Commission, if the head office of a member is located, and the member's principal business is conducted, outside the United States, the provisions of this Act shall apply to such member only in respect of the business of such member conducted in the United States. (c) LIABILITY OF MEMBERS OF SIPC.-Except for such assessments as may be made upon such member pursuant to the provisions of section 4, no member of SIPC shall have any liability under this Act as a member of SIPC for, or in connection with, any act or omission of any other broker or dealer whether in connection with the conduct of the business or affairs of such broker or dealer or otherwise and, without limiting the generality of the foregoing, no member shall have any liability for or in respect of any indebtedness or other liability of SIPC. (d) LIABILITY OF SIPC AND DIRECTORS.-Neither SIPC nor any of its Directors shall have any liability to any person for any action taken or omitted in good faith under or in connection with any matter contemplated by this Act. (e) ADVERTISING.-SIPC shall by bylaw or rule prescribe the manner in which a member of SIPC may display any sign or signs (or include in any advertisement a statement) relating to the protection to customers and their accounts, or any other protections, afforded under this Act. No member may display any such sign, or include in an advertisement any such statement, except in accordance with such bylaws and rules. 84 STAT. 1656 83 Stat. 710. 26 USC 162. (f) SIPC EXEMPT FROM TAXATION. SIPC, its property, its franchise, capital, reserves, surplus, and its income, shall be exempt from all taxation now or hereafter imposed by the United States or by any State or local taxing authority, except that any real property and any tangible personal property (other than cash and securities) of SIPC shall be subject to State and local taxation to the same extent according to its value as other real and tangible personal property is taxed. Assessments made upon a member of SIPC shall constitute ordinary and necessary expenses in carrying on the business of such member for the purpose of section 162 (a) of the Internal Revenue 68A Stat. 45; Code of 1954. The contribution and transfer to SIPC of funds or securities held by any trust established by a national securities exchange prior to January 1, 1970, for the purpose of providing assistance to customers of members of such exchange, shall not result in any taxable gain to such trust or give rise to any taxable income to any member of SIPC under any provision of the Internal Revenue Code of 1954, nor shall such contribution or transfer, or any reduction in assessments made pursuant to this Act, in any way affect the status, as ordinary and necessary expenses under section 162(a) of the Internal Revenue Code of 1954, of any contributions made to such trust by such exchange at any time prior to such transfer. Upon dissolution of SIPC, none of its net assets shall inure to the benefit of any of its members. (g) SECTION 20 (a) or 1934 ACT NOT TO APPLY.-The provisions of subsection (a) of section 20 of the 1934 Act shall not apply to any liability under or in connection with this Act. (h) SEC STUDY OF UNSAFE OR UNSOUND PRACTICES.-Not later than twelve months after the date of enactment of this Act, the Commission shall compile a list of unsafe or unsound practices by members of SIPC in conducting their business and report to the Congress (1) the steps being taken under the authority of existing law to eliminate those practices and (2) recommendations concerning additional legislation which may be needed to eliminate those unsafe or unsound practices. SEC. 12. DEFINITIONS. For purposes of this Act: (1) SELF-REGULATORY ORGANIZATION.-The term "self-regulatory organization" means a national securities exchange or a national securities association registered pursuant to subsection (b) of section 15A of the 1934 Act. 68A Stat. 3. 26 USC 1 et seg. 48 Stat. 899. 15 USC 78t. Report to 52 Stat. 1070; 78 Stat. 574. 15 USC 780-3. 84 STAT. 1657 Ante, p. 1653. (2) FINANCIAL RESPONSIBILTY RULES.-The term "financial responsibility rules" means the rules and regulations pertaining to financial responsibility and related practices which are applicable to a broker or dealer, as prescribed by the Commission under subsection (c)(3) of section 15 of the 1934 Act or prescribed by a national securities exchange. (3) EXAMINING AUTHORITY.-The term "examining authority" means, with respect to any member of SIPC, the self-regulatory organization which inspects or examines such member of SIPČ or the Commission if such member of SIPC is not a member of any self-regulatory organization. Approved December 30, 1970. LEGISLATIVE HISTORY: HOUSE REPORTS: No. 91-1613 (Comm. on Interstate and Foreign Commerce) SENATE REPORT No. 91-1218 accompanying S. 2348 (Comm. on Banking and CONGRESSIONAL RECORD, Vol. 116 (1970): Deo. 1, considered and passed House. Dec. 10, considered and passed Senate, amended, in lieu of S. 2348 94th Congress, S. 249 June 4, 1975 An Act To amend the Securities Exchange Act of 1934 to remove barriers to competition, to foster the development of a national securities market system and a national clearance and settlement system, to make uniform the Securities and Exchange Commission's authority over self-regulatory organizations, to provide for the regulation of brokers, dealers and banks trading in municipal securities, to facilitate the collection and public dissemination of information concerning the holdings of and transactions in securities by institutional investment managers, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Securities Acts Amendments of 1975". Securities Acts Amendments of SEC. 2. Section 2 of the Securities Exchange Act of 1934 (15 U.S.C. 1975. 78b) is amended by inserting immediately before the phrase "and to 15 USC 78a impose requirements necessary to make such regulation and control note. reasonably complete and effective," the following: "to remove impedi- Necessity for regulation. ments to and perfect the mechanisms of a national market system for securities and a national system for the clearance and settlement of securities transactions and the safeguarding of securities and funds related thereto,". SEC. 3. Section 3 of the Securities Exchange Act of 1934 (15 Definitions. U.S.C. 78c) is amended as follows: (1) Paragraph (3) of subsection (a) thereof is amended to read as follows: 66 “(3) (A) The term 'member' when used with respect to a national securities exchange means (i) any natural person permitted to effect transactions on the floor of the exchange without the services of another person acting as broker, (ii) any registered broker or dealer with which such a natural person is associated, (iii) any registered broker or dealer permitted to designate as a representative such a natural person, and (iv) any other registered broker or dealer which agrees to be regulated by such exchange and with respect to which the exchange undertakes to enforce compliance with the provisions of this title, the rules and regulations thereunder, and its own rules. For purposes of sections (b)(1), 6(b) (4), 6(b)(6), 6(b) (7), 6(d), 17(d), 19(d), 19(e), 19(g), 19(h), and 21 of this title, the term Post, pp. 104, 'member' when used with respect to a national securities exchange 137, 146, 154. also means, to the extent of the rules of the exchange specified by the Commission, any person required by the Commission to comply with such rules pursuant to section 6 (f) of this title. "(B) The term 'member' when used with respect to a registered securities association means any broker or dealer who agrees to be regulated by such association and with respect to whom the association undertakes to enforce compliance with the provisions of this title, the rules and regulations thereunder, and its own rules.". (2) Paragraph (9) thereof is amended to read as follows: "(9) The term 'person' means a natural person, company, government, or political subdivision, agency, or instrumentality of a government.". (3) Paragraph (12) of subsection (a) thereof is amended to read as follows: "(12) The term 'exempted security' or 'exempted securities' includes 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 appropriate in the public interest or |