§ 78bb. — Effect on existing law.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78bb]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78bb. Effect on existing law
(a) Addition of rights and remedies; recovery of actual damages; State
securities commissions
Except as provided in subsection (f) of this section, the rights and
remedies provided by this chapter shall be in addition to any and all
other rights and remedies that may exist at law or in equity; but no
person permitted to maintain a suit for damages under the provisions of
this chapter shall recover, through satisfaction of judgment in one or
more actions, a total amount in excess of his actual damages on account
of the act complained of. Except as otherwise specifically provided in
this chapter, nothing in this chapter shall affect the jurisdiction of
the securities commission (or any agency or officer performing like
functions) of any State over any security or any person insofar as it
does not conflict with the provisions of this chapter or the rules and
regulations thereunder. No State law which prohibits or regulates the
making or promoting of wagering or gaming contracts, or the operation of
``bucket shops'' or other similar or related activities, shall
invalidate any put, call, straddle, option, privilege, or other security
subject to this chapter, or apply to any activity which is incidental or
related to the offer, purchase, sale, exercise, settlement, or closeout
of any such security. No provision of State law regarding the offer,
sale, or distribution of securities shall apply to any transaction in a
security futures product, except that this sentence shall not be
construed as limiting any State antifraud law of general applicability.
(b) Modification of disciplinary procedures
Nothing in this chapter shall be construed to modify existing law
with regard to the binding effect (1) on any member of or participant in
any self-regulatory organization of any action taken by the authorities
of such organization to settle disputes between its members or
participants, (2) on any municipal securities dealer or municipal
securities broker of any action taken pursuant to a procedure
established by the Municipal Securities Rulemaking Board to settle
disputes between municipal securities dealers and municipal securities
brokers, or (3) of any action described in paragraph (1) or (2) on any
person who has agreed to be bound thereby.
(c) Continuing validity of disciplinary sanctions
The stay, setting aside, or modification pursuant to section 78s(e)
of this title of any disciplinary sanction imposed by a self-regulatory
organization on a member thereof, person associated with a member, or
participant therein, shall not affect the validity or force of any
action taken as a result of such sanction by the self-regulatory
organization prior to such stay, setting aside, or modification:
Provided, That such action is not inconsistent with the provisions of
this chapter or the rules or regulations thereunder. The rights of any
person acting in good faith which arise out of any such action shall not
be affected in any way by such stay, setting aside, or modification.
(d) Physical location of facilities of registered clearing agencies or
registered transfer agents not to subject changes in beneficial
or record ownership of securities to State or local taxes
No State or political subdivision thereof shall impose any tax on
any change in beneficial or record ownership of securities effected
through the facilities of a registered clearing agency or registered
transfer agent or any nominee thereof or custodian therefor or upon the
delivery or transfer of securities to or through or receipt from such
agency or agent or any nominee thereof or custodian therefor, unless
such change in beneficial or record ownership or such transfer or
delivery or receipt would otherwise be taxable by such State or
political subdivision if the facilities of such registered clearing
agency, registered transfer agent, or any nominee thereof or custodian
therefor were not physically located in the taxing State or political
subdivision. No State or political subdivision thereof shall impose any
tax on securities which are deposited in or retained by a registered
clearing agency, registered transfer agent, or any nominee thereof or
custodian therefor, unless such securities would otherwise be taxable by
such State or political subdivision if the facilities of such registered
clearing agency, registered transfer agent, or any nominee thereof or
custodian therefor were not physically located in the taxing State or
political subdivision.
(e) Exchange, broker, and dealer commissions; brokerage and research
services
(1) No person using the mails, or any means or instrumentality of
interstate commerce, in the exercise of investment discretion with
respect to an account shall be deemed to have acted unlawfully or to
have breached a fiduciary duty under State or Federal law unless
expressly provided to the contrary by a law enacted by the Congress or
any State subsequent to June 4, 1975, solely by reason of his having
caused the account to pay a member of an exchange, broker, or dealer an
amount of commission for effecting a securities transaction in excess of
the amount of commission another member of an exchange, broker, or
dealer would have charged for effecting that transaction, if such person
determined in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided
by such member, broker, or dealer, viewed in terms of either that
particular transaction or his overall responsibilities with respect to
the accounts as to which he exercises investment discretion. This
subsection is exclusive and plenary insofar as conduct is covered by the
foregoing, unless otherwise expressly provided by contract: Provided,
however, That nothing in this subsection shall be construed to impair or
limit the power of the Commission under any other provision of this
chapter or otherwise.
(2) A person exercising investment discretion with respect to an
account shall make such disclosure of his policies and practices with
respect to commissions that will be paid for effecting securities
transactions, at such times and in such manner, as the appropriate
regulatory agency, by rule, may prescribe as necessary or appropriate in
the public interest or for the protection of investors.
(3) For purposes of this subsection a person provides brokerage and
research services insofar as he--
(A) furnishes advice, either directly or through publications or
writings, as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities;
(B) furnishes analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio
strategy, and the performance of accounts; or
(C) effects securities transactions and performs functions
incidental thereto (such as clearance, settlement, and custody) or
required in connection therewith by rules of the Commission or a
self-regulatory organization of which such person is a member or
person associated with a member or in which such person is a
participant.
(4) The provisions of this subsection shall not apply with regard to
securities that are security futures products.
(f) Limitations on remedies
(1) Class action limitations
No covered class action based upon the statutory or common law
of any State or subdivision thereof may be maintained in any State
or Federal court by any private party alleging--
(A) a misrepresentation or omission of a material fact in
connection with the purchase or sale of a covered security; or
(B) that the defendant used or employed any manipulative or
deceptive device or contrivance in connection with the purchase
or sale of a covered security.
(2) Removal of covered class actions
Any covered class action brought in any State court involving a
covered security, as set forth in paragraph (1), shall be removable
to the Federal district court for the district in which the action
is pending, and shall be subject to paragraph (1).
(3) Preservation of certain actions
(A) Actions under State law of State of incorporation
(i) Actions preserved
Notwithstanding paragraph (1) or (2), a covered class
action described in clause (ii) of this subparagraph that is
based upon the statutory or common law of the State in which
the issuer is incorporated (in the case of a corporation) or
organized (in the case of any other entity) may be
maintained in a State or Federal court by a private party.
(ii) Permissible actions
A covered class action is described in this clause if it
involves--
(I) the purchase or sale of securities by the issuer
or an affiliate of the issuer exclusively from or to
holders of equity securities of the issuer; or
(II) any recommendation, position, or other
communication with respect to the sale of securities of
an issuer that--
(aa) is made by or on behalf of the issuer or an
affiliate of the issuer to holders of equity
securities of the issuer; and
(bb) concerns decisions of such equity holders
with respect to voting their securities, acting in
response to a tender or exchange offer, or
exercising dissenters' or appraisal rights.
(B) State actions
(i) In general
Notwithstanding any other provision of this subsection,
nothing in this subsection may be construed to preclude a
State or political subdivision thereof or a State pension
plan from bringing an action involving a covered security on
its own behalf, or as a member of a class comprised solely
of other States, political subdivisions, or State pension
plans that are named plaintiffs, and that have authorized
participation, in such action.
(ii) State pension plan defined
For purposes of this subparagraph, the term ``State
pension plan'' means a pension plan established and
maintained for its employees by the government of a State or
political subdivision thereof, or by any agency or
instrumentality thereof.
(C) Actions under contractual agreements between issuers and
indenture trustees
Notwithstanding paragraph (1) or (2), a covered class action
that seeks to enforce a contractual agreement between an issuer
and an indenture trustee may be maintained in a State or Federal
court by a party to the agreement or a successor to such party.
(D) Remand of removed actions
In an action that has been removed from a State court
pursuant to paragraph (2), if the Federal court determines that
the action may be maintained in State court pursuant to this
subsection, the Federal court shall remand such action to such
State court.
(4) Preservation of State jurisdiction
The securities commission (or any agency or office performing
like functions) of any State shall retain jurisdiction under the
laws of such State to investigate and bring enforcement actions.
(5) Definitions
For purposes of this subsection, the following definitions shall
apply:
(A) Affiliate of the issuer
The term ``affiliate of the issuer'' means a person that
directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with,
the issuer.
(B) Covered class action
The term ``covered class action'' means--
(i) any single lawsuit in which--
(I) damages are sought on behalf of more than 50
persons or prospective class members, and questions of
law or fact common to those persons or members of the
prospective class, without reference to issues of
individualized reliance on an alleged misstatement or
omission, predominate over any questions affecting only
individual persons or members; or
(II) one or more named parties seek to recover
damages on a representative basis on behalf of
themselves and other unnamed parties similarly situated,
and questions of law or fact common to those persons or
members of the prospective class predominate over any
questions affecting only individual persons or members;
or
(ii) any group of lawsuits filed in or pending in the
same court and involving common questions of law or fact, in
which--
(I) damages are sought on behalf of more than 50
persons; and
(II) the lawsuits are joined, consolidated, or
otherwise proceed as a single action for any purpose.
(C) Exception for derivative actions
Notwithstanding subparagraph (B), the term ``covered class
action'' does not include an exclusively derivative action
brought by one or more shareholders on behalf of a corporation.
(D) Counting of certain class members
For purposes of this paragraph, a corporation, investment
company, pension plan, partnership, or other entity, shall be
treated as one person or prospective class member, but only if
the entity is not established for the purpose of participating
in the action.
(E) Covered security
The term ``covered security'' means a security that
satisfies the standards for a covered security specified in
paragraph (1) or (2) of section 18(b) of the Securities Act of
1933 [15 U.S.C. 77r(b)], at the time during which it is alleged
that the misrepresentation, omission, or manipulative or
deceptive conduct occurred, except that such term shall not
include any debt security that is exempt from registration under
the Securities Act of 1933 [15 U.S.C. 77a et seq.] pursuant to
rules issued by the Commission under section 4(2) of that Act
[15 U.S.C. 77d(2)].
(F) Rule of construction
Nothing in this paragraph shall be construed to affect the
discretion of a State court in determining whether actions filed
in such court should be joined, consolidated, or otherwise
allowed to proceed as a single action.
(June 6, 1934, ch. 404, title I, Sec. 28, 48 Stat. 903; Pub. L. 94-29,
Sec. 21, June 4, 1975, 89 Stat. 160; Pub. L. 97-303, Sec. 4, Oct. 13,
1982, 96 Stat. 1409; Pub. L. 100-181, title III, Secs. 327-329, Dec. 4,
1987, 101 Stat. 1259; Pub. L. 104-290, title I, Sec. 103(b), Oct. 11,
1996, 110 Stat. 3422; Pub. L. 105-353, title I, Sec. 101(b)(1), Nov. 3,
1998, 112 Stat. 3230; Pub. L. 106-554, Sec. 1(a)(5) [title II,
Secs. 203(a)(2), 210], Dec. 21, 2000, 114 Stat. 2763, 2763A-422, 2763A-
436.)
References in Text
This chapter, referred to in subsecs. (a) to (c) and (e), was in the
original ``this title''. See References in Text note set out under
section 78a of this title.
The Securities Act of 1933, referred to in subsec. (f)(5)(E), is act
May 27, 1933, ch. 38, title I, 48 Stat. 74, as amended, which is
classified generally to subchapter I (Sec. 77a et seq.) of chapter 2A of
this title. For complete classification of this Act to the Code, see
section 77a of this title and Tables.
Amendments
2000--Subsec. (a). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 210], inserted ``subject to this chapter'' after ``privilege, or
other security'', substituted ``any such security'' for ``any such
instrument, if such instrument is traded pursuant to rules and
regulations of a self-regulatory organization that are filed with the
Commission pursuant to section 78s(b) of this title'', and inserted at
end ``No provision of State law regarding the offer, sale, or
distribution of securities shall apply to any transaction in a security
futures product, except that this sentence shall not be construed as
limiting any State antifraud law of general applicability.''
Subsec. (e)(4). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 203(a)(2)], added par. (4).
1998--Subsec. (a). Pub. L. 105-353, Sec. 101(b)(1)(A), substituted
``Except as provided in subsection (f) of this section, the rights and
remedies'' for ``The rights and remedies''.
Subsec. (f). Pub. L. 105-353, Sec. 101(b)(1)(B), added subsec. (f).
1996--Subsec. (a). Pub. L. 104-290 substituted ``Except as otherwise
specifically provided in this chapter, nothing'' for ``Nothing''.
1987--Subsec. (c). Pub. L. 100-181, Sec. 327, substituted ``on'' for
``or'' after ``self-regulatory organization''.
Subsec. (d). Pub. L. 100-181, Sec. 328, substituted ``change in
beneficial'' for ``change is beneficial''.
Subsec. (e)(1). Pub. L. 100-181, Sec. 329, substituted ``subsequent
to the date of enactment of the Securities Acts Amendments of 1975'' for
``subsequent to the date of enactment of the Securities Acts Amendments
in 1975'', which for purposes of codification was translated as
``subsequent to June 4, 1975,'' thus requiring no change in text.
1982--Subsec. (a). Pub. L. 97-303 inserted provision that no State
law which prohibits or regulates the making or promoting of wagering or
gaming contracts, or the operation of ``bucket shops'' or other similar
or related activities, shall invalidate any put, call, straddle, option,
privilege, or other security, or apply to any activity which is
incidental or related to the offer, purchase, sale, exercise,
settlement, or closeout of any such instrument, if such instrument is
traded pursuant to rules and regulations of a self-regulatory
organization that are filed with the Commission pursuant to section
78s(b) of this title.
1975--Subsec. (b). Pub. L. 94-29, Sec. 21(1), struck out provisions
that nothing in this chapter be construed to modify existing law with
regard to the binding effect on any member of an exchange of any
disciplinary action taken by the authorities of an exchange and made the
remaining provisions applicable to all members of and participants in
all self-regulatory organizations as well as municipal securities
professionals.
Subsecs. (c) to (e). Pub. L. 94-29, Sec. 21(2), added subsecs. (c)
to (e).
Effective Date of 1998 Amendment
Amendment by Pub. L. 105-353 not to affect or apply to any action
commenced before and pending on Nov. 3, 1998, see section 101(c) of Pub.
L. 105-353, set out as a note under section 77p of this title.
Effective Date of 1975 Amendment
Amendment by Pub. L. 94-29 effective June 4, 1975, see section 31(a)
of Pub. L. 94-29, set out as a note under section 78b of this title.
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.
