§ 77b. — Definitions; promotion of efficiency, competition, and capital formation.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC77b]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2A--SECURITIES AND TRUST INDENTURES
SUBCHAPTER I--DOMESTIC SECURITIES
Sec. 77b. Definitions; promotion of efficiency, competition, and
capital formation
(a) Definitions
When used in this subchapter, unless the context otherwise
requires--
(1) The term ``security'' means any note, stock, treasury stock,
security future, bond, debenture, evidence of indebtedness,
certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, 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, 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, or, in general, any interest or
instrument commonly known as a ``security'', or any certificate of
interest or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing.
(2) The term ``person'' means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any
unincorporated organization, or a government or political
subdivision thereof. As used in this paragraph the term ``trust''
shall include only a trust where the interest or interests of the
beneficiary or beneficiaries are evidenced by a security.
(3) The term ``sale'' or ``sell'' shall include every contract
of sale or disposition of a security or interest in a security, for
value. The term ``offer to sell'', ``offer for sale'', or ``offer''
shall include every attempt or offer to dispose of, or solicitation
of an offer to buy, a security or interest in a security, for value.
The terms defined in this paragraph and the term ``offer to buy'' as
used in subsection (c) of section 77e of this title shall not
include preliminary negotiations or agreements between an issuer (or
any person directly or indirectly controlling or controlled by an
issuer, or under direct or indirect common control with an issuer)
and any underwriter or among underwriters who are or are to be in
privity of contract with an issuer (or any person directly or
indirectly controlling or controlled by an issuer, or under direct
or indirect common control with an issuer). Any security given or
delivered with, or as a bonus on account of, any purchase of
securities or any other thing, shall be conclusively presumed to
constitute a part of the subject of such purchase and to have been
offered and sold for value. The issue or transfer of a right or
privilege, when originally issued or transferred with a security,
giving the holder of such security the right to convert such
security into another security of the same issuer or of another
person, or giving a right to subscribe to another security of the
same issuer or of another person, which right cannot be exercised
until some future date, shall not be deemed to be an offer or sale
of such other security; but the issue or transfer of such other
security upon the exercise of such right of conversion or
subscription shall be deemed a sale of such other security. Any
offer or sale of a security futures product by or on behalf of the
issuer of the securities underlying the security futures product, an
affiliate of the issuer, or an underwriter, shall constitute a
contract for sale of, sale of, offer for sale, or offer to sell the
underlying securities.
(4) The term ``issuer'' 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 performing similar functions) or of the fixed,
restricted management, or unit type, the term ``issuer'' 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; 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, committee, 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 ``issuer'' 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.
(5) The term ``Commission'' means the Securities and Exchange
Commission.
(6) The term ``Territory'' means Puerto Rico, the Virgin
Islands, and the insular possessions of the United States.
(7) The term ``interstate commerce'' means trade or commerce in
securities or any transportation or communication relating thereto
among the several States or between the District of Columbia or any
Territory of the United States and any State or other Territory, or
between any foreign country and any State, Territory, or the
District of Columbia, or within the District of Columbia.
(8) The term ``registration statement'' means the statement
provided for in section 77f of this title, and includes any
amendment thereto and any report, document, or memorandum filed as
part of such statement or incorporated therein by reference.
(9) The term ``write'' or ``written'' shall include printed,
lithographed, or any means of graphic communication.
(10) The term ``prospectus'' means any prospectus, notice,
circular, advertisement, letter, or communication, written or by
radio or television, which offers any security for sale or confirms
the sale of any security; except that (a) a communication sent or
given after the effective date of the registration statement (other
than a prospectus permitted under subsection (b) of section 77j of
this title) 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 subsection (a) of section 77j
of this title at the time of \1\ such communication was sent or
given to the person to whom the communication was made, and (b) a
notice, circular, advertisement, letter, or communication in respect
of a security shall not be deemed to be a prospectus if it states
from whom a written prospectus meeting the requirements of section
77j of this title may be obtained and, in addition, does no more
than identify the security, state the price thereof, state by whom
orders will be executed, and contain such other information as the
Commission, by rules or regulations deemed necessary or appropriate
in the public interest and for the protection of investors, and
subject to such terms and conditions as may be prescribed therein,
may permit.
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\1\ So in original.
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(11) The term ``underwriter'' means any person who has purchased
from an issuer with a view to, or offers or sells for an issuer in
connection with, the distribution of any security, or participates
or has a direct or indirect participation in any such undertaking,
or participates or has a participation in the direct or indirect
underwriting of any such undertaking; but such term shall not
include a person whose interest is limited to a commission from an
underwriter or dealer not in excess of the usual and customary
distributors' or sellers' commission. As used in this paragraph the
term ``issuer'' shall include, in addition to an issuer, any person
directly or indirectly controlling or controlled by the issuer, or
any person under direct or indirect common control with the issuer.
(12) The term ``dealer'' means any person who engages either for
all or part of his time, directly or indirectly, as agent, broker,
or principal, in the business of offering, buying, selling, or
otherwise dealing or trading in securities issued by another person.
(13) The term ``insurance company'' means a company which is
organized as an insurance company, whose primary and predominant
business activity is the writing of insurance or the reinsuring of
risks underwritten by insurance companies, and which is subject to
supervision by the insurance commissioner, or a similar official or
agency, of a State or territory or the District of Columbia; or any
receiver or similar official or any liquidating agent for such
company, in his capacity as such.
(14) The term ``separate account'' means an account established
and maintained by an insurance company pursuant to the laws of any
State or territory of the United States, the District of Columbia,
or of Canada or any province thereof, under which income, gains and
losses, whether or not realized, from assets allocated to such
account, are, in accordance with the applicable contract, credited
to or charged against such account without regard to other income,
gains, or losses of the insurance company.
(15) The term ``accredited investor'' shall mean--
(i) a bank as defined in section 77c(a)(2) of this title
whether acting in its individual or fiduciary capacity; an
insurance company as defined in paragraph (13) of this
subsection; an investment company registered under the
Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] or a
business development company as defined in section 2(a)(48) of
that Act [15 U.S.C. 80a-2(a)(48)]; a Small Business Investment
Company licensed by the Small Business Administration; or an
employee benefit plan, including an individual retirement
account, which is subject to the provisions of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.],
if the investment decision is made by a plan fiduciary, as
defined in section 3(21) of such Act [29 U.S.C. 1002(21)], which
is either a bank, insurance company, or registered investment
adviser; or
(ii) any person who, on the basis of such factors as
financial sophistication, net worth, knowledge, and experience
in financial matters, or amount of assets under management
qualifies as an accredited investor under rules and regulations
which the Commission shall prescribe.
(16) The terms ``security future'', ``narrow-based security
index'', and ``security futures product'' have the same meanings as
provided in section 78c(a)(55) of this title.
(b) Consideration of promotion of efficiency, competition, and capital
formation
Whenever pursuant to this subchapter the Commission is engaged in
rulemaking and is required to consider or determine whether an action is
necessary or appropriate in the public interest, the Commission shall
also consider, in addition to the protection of investors, whether the
action will promote efficiency, competition, and capital formation.
(May 27, 1933, ch. 38, title I, Sec. 2, 48 Stat. 74; June 6, 1934, ch.
404, title II, Sec. 201, 48 Stat. 905; Aug. 10, 1954, ch. 667, title I,
Secs. 1-4, 68 Stat. 683, 684; Pub. L. 86-70, Sec. 12(a), June 25, 1959,
73 Stat. 143; Pub. L. 86-624, Sec. 7(a), July 12, 1960, 74 Stat. 412;
Pub. L. 91-547, Sec. 27(a), Dec. 14, 1970, 84 Stat. 1433; Pub. L. 96-
477, title VI, Sec. 603, Oct. 21, 1980, 94 Stat. 2294; Pub. L. 97-303,
Sec. 1, Oct. 13, 1982, 96 Stat. 1409; Pub. L. 100-181, title II,
Secs. 201, 202, Dec. 4, 1987, 101 Stat. 1252; Pub. L. 104-290, title I,
Sec. 106(a), Oct. 11, 1996, 110 Stat. 3424; Pub. L. 105-353, title III,
Sec. 301(a)(1), Nov. 3, 1998, 112 Stat. 3235; Pub. L. 106-554,
Sec. 1(a)(5) [title II, Sec. 208(a)(1)], Dec. 21, 2000, 114 Stat. 2763,
2763A-434.)
References in Text
The Investment Company Act of 1940, referred to in subsec.
(a)(15)(i), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as
amended, which is classified generally to subchapter I (Sec. 80a-1 et
seq.) of chapter 2D of this title. For complete classification of this
Act to the Code, see section 80a-51 of this title and Tables.
The Employee Retirement Income Security Act of 1974, referred to in
subsec. (a)(15)(i), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as
amended, which is classified principally to chapter 18 (Sec. 1001 et
seq.) of Title 29, Labor. For complete classification of this Act to the
Code, see Short Title note set out under section 1001 of Title 29 and
Tables.
Codification
Words ``Philippine Islands'' deleted from definition of term
``Territory'' under authority of Proc. No. 2695, eff. July 4, 1946, 11
F.R. 7517, 60 Stat. 1352, which granted independence to the Philippine
Islands. Proc. No. 2695 was issued pursuant to section 1394 of Title 22,
Foreign Relations and Intercourse, and is set out as a note under that
section.
Amendments
2000--Subsec. (a)(1). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 208(a)(1)(A)], inserted ``security future,'' after ``treasury
stock,''.
Subsec. (a)(3). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 208(a)(1)(B)], inserted at end ``Any offer or sale of a security
futures product by or on behalf of the issuer of the securities
underlying the security futures product, an affiliate of the issuer, or
an underwriter, shall constitute a contract for sale of, sale of, offer
for sale, or offer to sell the underlying securities.''
Subsec. (a)(16). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 208(a)(1)(C)], added par. (16).
1998--Subsec. (a)(15)(i). Pub. L. 105-353 made technical amendment
to reference in original act which appears in text as reference to
section 77c(a)(2) of this title and inserted ``of this subsection''
after ``paragraph (13)''.
1996--Pub. L. 104-290 designated existing provisions as subsec. (a),
inserted heading, and added subsec. (b).
1987--Par. (5). Pub. L. 100-181, Sec. 201, substituted ``Securities
and Exchange Commission'' for ``Federal Trade Commission''.
Par. (6). Pub. L. 100-181, Sec. 202, struck out reference to Canal
Zone.
1982--Par. (1). Pub. L. 97-303 inserted ``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,''
after ``mineral rights,''.
1980--Par. (15). Pub. L. 96-477 added par. (15).
1970--Pars. (13), (14). Pub. L. 91-547 added pars. (13) and (14).
1960--Par. (6). Pub. L. 86-624 struck out reference to Hawaii.
1959--Par. (6). Pub. L. 86-70 struck out reference to Alaska.
1954--Act Aug. 10, 1954, in pars. (3), (8), (10), and (11),
redefined term ``sale'' so as to distinguish between ``offers'' and
``sales'', clarified definition of ``registration statement'', and
conformed definition of ``prospectus'' to changes made by act Aug. 10,
1954, to sections 77e and 77j of this title.
1934--Act June 6, 1934, amended pars. (1), (4), and (10).
Effective Date of 1970 Amendment
Amendment by Pub. L. 91-547 effective Dec. 14, 1970, see section 30
of Pub. L. 91-547, set out as a note under section 80a-52 of this title.
Effective Date of 1954 Amendment
Section 501 of act Aug. 10, 1954, provided that: ``This Act
[amending this section and sections 77c to 77e, 77j, 77l, 77q, 77v,
77ccc to 77fff, 77xxx, 78k, 78l, 80a-2 and 80a-24 of this title] shall
take effect sixty days after the date of its enactment [Aug. 10,
1954].''
Transfer of Functions
For transfer of functions of Securities and Exchange Commission,
with certain exceptions, to Chairman of such Commission, see Reorg. Plan
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat.
1265, set out under section 78d of this title.
Section Referred to in Other Sections
This section is referred to in sections 77b-1, 77r, 77ccc, 77ddd,
78c, 80a-6, 7004 of this title; title 7 sections 1a, 2; title 11 section
1145; title 12 section 1451; title 29 section 1002; title 42 section
12704.
