reafter to affiliation with a registered national arities association, the Commission shall revoke registration of such affiliated securities.

ociation.

(f) A registered securities association (whether tional or affiliated) may, upon such reasonable tice as the Commission may deem necessary in > public interest or for the protection of invess, withdraw from registration by filing with → Commission a written notice of withdrawal such form as the Commission may by rules and gulations prescribe. Upon the withdrawal of a tional securities association from registration, e registration of any association affiliated thereith shall automatically terminate.

(g) If any registered securities association vhether national or affiliated) shall take any displinary action against any member thereof, or all deny admission to any broker or dealer seekg membership therein, such action shall be subct to review by the Commission, on its own moon, or upon application by any person aggrieved hereby filed within sixty days after such action as been taken or within such longer period as he Commission may determine. Application to ne Commission for review, or the institution of eview by the Commission on its own motion, shall perate as a stay of such action until an order is ssued upon such review pursuant to subsecon (h).

(h) (1) In a proceeding to review disciplinary ction taken by a registered securities association gainst a member thereof, if the Commission, after ppropriate notice and opportunity for hearing, pon consideration of the record before the assoiation and such other evidence as it may deem elevant, shall (A) find that such member has ngaged in such acts or practices, or has omitted uch act, as the association has found him to have ngaged in or omitted, and (B) shall determine hat such acts or practices, or omission to act, are n violation of such rules of the association as have been designated in the determination of the assoiation, the Commission shall by order dismiss the proceeding, unless it appears to the Commission hat such action should be modified in accordance with paragraph (2) of this subsection. The Commission shall likewise determine whether the acts or practices prohibited, or the omission of any act required, by any such rule constitute conduct in

consistent with just and equitable principles of trade, and shall so declare. If it appears to the Commission that the evidence does not warrant the finding required in clause (A) or if the Commission shall determine that such acts or practices as are found to have been engaged in are not prohibited by the designated rule or rules of the association, or that such act as is found to have been omitted is not required by such designated rule or rules, the Commission shall by order set aside the action of the association.

(2) If, after appropriate notice and opportunity for hearing, the Commission finds that any penalty imposed upon a member is excessive or oppressive, having due regard to the public interest, the Commission shall by order cancel, reduce, or require the remission of such penalty.

(3) In any proceeding to review the denial of membership in a registered securities association, if the Commission, after appropriate notice and hearing, and upon consideration of the record before the association and such other evidence as it may deem relevant, shall determine that the specific grounds on which such denial is based exist in fact and are valid under this section, the Commission shall by order dismiss the proceeding; otherwise, the Commission shall by order set aside the action of the association and require it to admit the applicant broker or dealer to membership therein.

(i) (1) The rules of a registered securities association may provide that no member thereof shall deal with any nonmember broker or dealer (as defined in paragraph (2) of this subsection) except at the same prices, for the same commissions or fees, and on the same terms and conditions as are by such member accorded to the general public.

(2) For the purposes of this subsection, the term "nonmember broker or dealer" shall include any broker or dealer who makes use of the mails or of any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security otherwise than on a national securities exchange, who is not a member of any registered securities association, except a broker or dealer who deals exclusively in commercial paper, bankers' acceptances, or commercial bills.

(3) Nothing in this subsection shall be so construed or applied as to prevent any member of a registered securities association from granting to any other member of any registered securities. association any dealer's discount, allowance, commieson, or special terms.

(1) Every registered securities association shall file with the Commission 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, copies of any changes in or additions to the rules of the aexciation, and such other information and documents as the Commission may require to keep curtent or to supplement the registration statement and documents filed pursuant to subsection (a). Any change in or addition to the rules of a regis fensi securities association shall take effect upon The thirtieth day after the filing of a copy thereof wh the Commission, or upon such earlier date exão Crission may determine, unless the Com*** soft shell enter an ender disapproving such or addi, on; and the Commisten stall ents an onder unless such change or addition lymers on to de consistent wit of stilsøet on ♪ and suber

public interest or for the protection of in or to effectuate the purposes of this section. respect to: (1) The basis for, and proced connection with, the denial of membership r disciplining of members; (2) the method: adoption of any change in or addition to the of the association; (3) the method of ch officers and directors; and (4) affiliation be registered securities associations.

(1) The Commission is authorized, if su tion appears to it to be necessary or approp in the public interest or for the protection c vestors or to carry out the purposes of this tion

(1) after appropriate notice and tunity for hearing, by order to suspend period not exceeding 12 months or to r the registration of a registered securitie sociation, if the Commission finds that: association has violated any provision of title or any rule or regulation there has failed to enforce compliance with its rules, er has engaged in any cther ::: tending to defeat the purposes of this sec

2) after appropriate note and 197 mity for hearing, by order to suspend fir pod not exceeding 18 months or terpelt & registered securities associato ryne thereef who the Commi

m) Nothing in this section shall be construed apply with respect to any transaction by a ker or dealer in any exempted security.

n) If any provision of this section is in cont with any provision of any law of the United tes in force on the date this section takes effect, provision of this section shall prevail.1 rectors, Officers, and Principal Stockholders SECTION 16. (a) Every person who is directly or lirectly the beneficial owner of more than 10 per itum of any class of any equity security (other in an exempted security) which is registered on national securities exchange, or who is a director an officer of the issuer of such security, shall e, at the time of the registration of such security within ten days after he becomes such beneficial ner, director, or officer, a statement with the change (and a duplicate original thereof with e Commission) of the amount of all equity serities of such issuer of which he is the beneficial vner, and within ten days after the close of each lendar month thereafter, if there has been any ange in such ownership during such month, shall le with the exchange a statement (and a dupliate original thereof with the Commission) indiating his ownership at the close of the calendar _onth and such changes in his ownership as have ccurred during such calendar month.

(b) For the purpose of preventing the unfair e of information which may have been obtained such beneficial owner, director, or officer by eason of his relationship to the issuer, any profit ealized by him from any purchase and sale, or ny sale and purchase, of any equity security of uch issuer (other than an exempted security) within any period of less than six months, unless uch security was acquired in good faith in conection with a debt previously contracted, shall nure to and be recoverable by the issuer, irrespecve of any intention on the part of such beneficial wner, director, or officer in entering into such ansaction of holding the security purchased or f not repurchasing the security sold for a period xceeding six months. Suit to recover such profit may be instituted at law or in equity in any court f competent jurisdiction by the issuer, or by the wner of any security of the issuer in the name and n behalf of the issuer if the issuer shall fail or

1 SECTION 15A was added by Public No. 719, 75th Cong., (52 cat. 1070).

refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be 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 by rules and regulations 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 of Exchanges, Members, and Others

SECTION 17. (a) Every national securities exchange, every member thereof, every broker or dealer who transacts a business in securities through the medium of any such member, every registered securities association, and every broker or dealer registered pursuant to section 15 of this title, shall make, keep, and preserve for

2 SECTION 5 of Public No. 719, 75th Cong., (52 Stat. 1076). added "every registered securities association."

SECTION 4 of Public No. 621, 74th Cong., (49 Stat. 1379). substituted "every broker or dealer registered pursuant to section 15 of this title" for "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 instrumentality of interstate commerce," which was deleted by that amendment.

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 appropriate in the public interest or for the protection of investors. Such accounts, correspondence, memoranda, papers, books, and other records 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 as the Commission may deem necessary or appropriate in the public interest or for the protection of investors.

(b) Any broker, dealer, or other person extending credit who is subject to the rules and regulations prescribed by the Board of Governors of the Federal Reserve System 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 by this title. If 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, or other person as the Board may deem necessary to enable it to obtain the required information.

Liability for Misleading Statements

SECTION 18. (a) Any person who shall make or cause to be made any statement in any application, report, or document filed pursuant to this title or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 15 of this title, 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

1 SECTION 5 of Public No. 621, 74th Cong., (49 Stat. 1379). added "or any undertaking contained in a registration statement as provided in subsection (d) of section 15 of this title."

that such statement was false or misleading person seeking to enforce such liability at law or in equity in any court of compete isdiction. In any such suit the court may discretion, require an undertaking for the ment of the costs of such suit, and assess res able costs, including reasonable attorneys: against either party litigant.

(b) Every person who becomes liable to payment under this section may recover contr tion as in cases of contract from any person if joined in the original suit, would have liable to make the same payment.

(c) No action shall be maintained to e any liability created under this section I brought within one year after the discovery the facts constituting the cause of action within three years after such cause of action crued.

Powers With Respect to Exchanges
and Securities

SECTION 19. (a) The Commission is author if in its opinion such action is necessary or propriate for the protection of investors

(1) After appropriate notice and opport for hearing, by order to suspend for a period: exceeding twelve months or to withdraw them. istration of a national securities exchange if: Commission finds that such exchange has vics any provision of this title or of the rules regulations thereunder or has failed to enforce far as is within its power, compliance there by a member or by an issuer of a security reg tered thereon.

(2) After appropriate notice and opportun for hearing, by order to deny, to suspend the e fective date of, to suspend for a period not e ceeding twelve months, or to withdraw, the reg tration of a security if the Commission finds t the issuer of such security has failed to comp": with any provision of this title or the rules regulations thereunder.

(3) After appropriate notice and opportun for hearing, by order to suspend for a period ri exceeding twelve months or to expel from a tional securities exchange any member or of thereof whom the Commission finds has vicl any provision of this title or the rules and reg

tions thereunder, or has effected any transacti

any other person who, he has reason to be, is violating in respect of such transaction provision of this title or the rules and regulais thereunder.

4) And if in its opinion the public interest equires, summarily to suspend trading in any stered security on any national securities exnge for a period not exceeding ten days, or h the approval of the President, summarily to pend all trading on any national securities exnge for a period not exceeding ninety days. b) The Commission is further authorized, if er making appropriate request in writing to a ional securities exchange that such exchange ect on its own behalf specified changes in its es and practices, and after appropriate notice d opportunity for hearing, the Commission demines that such exchange has not made the anges so requested, and that such changes are cessary or appropriate for the protection of vestors or to insure fair dealing in securities ided in upon such exchange or to insure fair ministration of such exchange, by rules or regutions or by order to alter or supplement the les of such exchange (insofar as necessary or propriate to effect such changes) in respect of ch matters as (1) safeguards in respect of the nancial responsibility of members and adequate rovision against the evasion of financial responsility through the use of corporate forms or special artnerships; (2) the limitation or prohibition of e registration or trading in any security within specified period after the issuance or primary istribution thereof; (3) the listing or striking om listing of any security; (4) hours of tradng; (5) the manner, method, and place of solicitng business; (6) fictitious or numbered accounts; 7) the time and method of making settlements, ayments, and deliveries and of closing accounts; 8) the reporting of transactions on the exchange nd upon tickers maintained by or with the conent of the exchange, including the method of reorting short sales, stopped sales, sales of securies of issuers in default, bankruptcy or receiverhip, and sales involving other special circumtances; (9) the fixing of reasonable rates of commission, interest, listing, and other charges; (10) minimum units of trading; (11) odd-lot purhases and sales; (12) minimum deposits on marin accounts; and (13) 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 membership, 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 SECTION 20. (a) Every person who, directly or indirectly, controls any person liable under any provision of this title or of any rule or regulation 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 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 registered 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 or any undertaking contained in a registration statement as provided in subsection (d) of section 15 of this title.1

Investigations; Injunctions and Prosecution of Offenses

SECTION 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

1 SECTION 6 of Public No. 621, 74th Cong., (49 Stat. 1379), added "or any undertaking contained in a registration statement as provided in subsection (d) of section 15 of this title."