§ 78i. — Manipulation of security prices.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78i]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78i. Manipulation of security prices
(a) Transactions relating to purchase or sale of security
It shall be unlawful for any person, directly or indirectly, by the
use of the mails or any means or instrumentality of interstate commerce,
or of any facility of any national securities exchange, or for any
member of a national securities exchange--
(1) For the purpose of creating a false or misleading appearance
of active trading in any security registered on a national
securities exchange, or a false or misleading appearance with
respect to the market for any such security, (A) to effect any
transaction in such security which involves no change in the
beneficial ownership thereof, or (B) to enter an order or orders for
the purchase of such security with the knowledge that an order or
orders of substantially the same size, at substantially the same
time, and at substantially the same price, for the sale of any such
security, has been or will be entered by or for the same or
different parties, or (C) to enter any order or orders for the sale
of any such security with the knowledge that an order or orders of
substantially the same size, at substantially the same time, and at
substantially the same price, for the purchase of such security, has
been or will be entered by or for the same or different parties.
(2) To effect, alone or with one or more other persons, a series
of transactions in any security registered on a national securities
exchange or in connection with any security-based swap agreement (as
defined in section 206B of the Gramm-Leach-Bliley Act) with respect
to such security creating actual or apparent active trading in such
security, or raising or depressing the price of such security, for
the purpose of inducing the purchase or sale of such security by
others.
(3) If a dealer or broker, or other person selling or offering
for sale or purchasing or offering to purchase the security or a
security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act) with respect to such security, to induce the
purchase or sale of any security registered on a national securities
exchange or any security-based swap agreement (as defined in section
206B of the Gramm-Leach-Bliley Act) with respect to such security by
the circulation or dissemination in the ordinary course of business
of information to the effect that the price of any such security
will or is likely to rise or fall because of market operations of
any one or more persons conducted for the purpose of raising or
depressing the price of such security.
(4) If a dealer or broker, or the person selling or offering for
sale or purchasing or offering to purchase the security or a
security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act) with respect to such security, to make,
regarding any security registered on a national securities exchange
or any security-based swap agreement (as defined in section 206B of
the Gramm-Leach-Bliley Act) with respect to such security, for the
purpose of inducing the purchase or sale of such security or such
security-based swap agreement, any statement which 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, and which he knew
or had reasonable ground to believe was so false or misleading.
(5) For a consideration, received directly or indirectly from a
dealer or broker, or other person selling or offering for sale or
purchasing or offering to purchase the security or a security-based
swap agreement (as defined in section 206B of the Gramm-Leach-Bliley
Act) with respect to such security, to induce the purchase of any
security registered on a national securities exchange or any
security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act) with respect to such security by the
circulation or dissemination of information to the effect that the
price of any such security will or is likely to rise or fall because
of the market operations of any one or more persons conducted for
the purpose of raising or depressing the price of such security.
(6) To effect either alone or with one or more other persons any
series of transactions for the purchase and/or sale of any security
registered on a national securities exchange for the purpose of
pegging, fixing, or stabilizing the price of such security in
contravention of such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for
the protection of investors.
(b) Transactions relating to puts, calls, straddles, or options
It shall be unlawful for any person to effect, by use of any
facility of a national securities exchange, in contravention of such
rules and regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors--
(1) any transaction in connection with any security whereby any
party to such transaction acquires (A) any put, call, straddle, or
other option or privilege of buying the security from or selling the
security to another without being bound to do so; or (B) any
security futures product on the security; or
(2) any transaction in connection with any security with
relation to which he has, directly or indirectly, any interest in
any (A) such put, call, straddle, option, or privilege; or (B) such
security futures product; or
(3) any transaction in any security for the account of any
person who he has reason to believe has, and who actually has,
directly or indirectly, any interest in any (A) such put, call,
straddle, option, or privilege; or (B) such security futures product
with relation to such security.
(c) Endorsement or guarantee of puts, calls, straddles, or options
It shall be unlawful for any member of a national securities
exchange directly or indirectly to endorse or guarantee the performance
of any put, call, straddle, option, or privilege in relation to any
security registered on a national securities exchange, in contravention
of such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the protection of
investors.
(d) Registered warrant, right, or convertible security not included in
``put'', ``call'', ``straddle'', or ``option''
The terms ``put'', ``call'', ``straddle'', ``option'', or
``privilege'' as used in this section shall not include any registered
warrant, right, or convertible security.
(e) Persons liable; suits at law or in equity
Any person who willfully participates in any act or transaction in
violation of subsections (a), (b), or (c) of this section, shall be
liable to any person who shall purchase or sell any security at a price
which was affected by such act or transaction, and the person so injured
may sue in law or in equity in any court of competent jurisdiction to
recover the damages sustained as a result of any such act or
transaction. In any such suit the court may, in its discretion, require
an undertaking for the payment of the costs of such suit, and assess
reasonable costs, including reasonable attorneys' fees, against either
party litigant. Every person who becomes liable to make any payment
under this subsection may recover contribution as in cases of contract
from any person who, if joined in the original suit, would have been
liable to make the same payment. No action shall be maintained to
enforce any liability created under this section, unless brought within
one year after the discovery of the facts constituting the violation and
within three years after such violation.
(f) Subsection (a) not applicable to exempted securities
The provisions of subsection (a) of this section shall not apply to
an exempted security.
(g) Foreign currencies and security futures products
(1) Notwithstanding any other provision of law, the Commission shall
have the authority to regulate the trading of 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 (but
not, with respect to any of the foregoing, an option on a contract for
future delivery other than a security futures product).
(2) Notwithstanding the Commodity Exchange Act [7 U.S.C. 1 et seq.],
the Commission shall have the authority to regulate the trading of any
security futures product to the extent provided in the securities laws.
(h) Limitations on practices that affect market volatility
It shall be unlawful for any person, by the use of the mails or any
means or instrumentality of interstate commerce or of any facility of
any national securities exchange, to use or employ any act or practice
in connection with the purchase or sale of any equity security in
contravention of such rules or regulations as the Commission may adopt,
consistent with the public interest, the protection of investors, and
the maintenance of fair and orderly markets--
(1) to prescribe means reasonably designed to prevent
manipulation of price levels of the equity securities market or a
substantial segment thereof; and
(2) to prohibit or constrain, during periods of extraordinary
market volatility, any trading practice in connection with the
purchase or sale of equity securities that the Commission determines
(A) has previously contributed significantly to extraordinary levels
of volatility that have threatened the maintenance of fair and
orderly markets; and (B) is reasonably certain to engender such
levels of volatility if not prohibited or constrained.
In adopting rules under paragraph (2), the Commission shall, consistent
with the purposes of this subsection, minimize the impact on the normal
operations of the market and a natural person's freedom to buy or sell
any equity security.
(i) Limitation on Commission authority
The authority of the Commission under this section with respect to
security-based swap agreements (as defined in section 206B of the Gramm-
Leach-Bliley Act) shall be subject to the restrictions and limitations
of section 78c-1(b) of this title.
(June 6, 1934, ch. 404, title I, Sec. 9, 48 Stat. 889; Pub. L. 97-303,
Sec. 3, Oct. 13, 1982, 96 Stat. 1409; Pub. L. 101-432, Sec. 6(a), Oct.
16, 1990, 104 Stat. 975; Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 205(a)(1), (2), title III, Sec. 303(b), (c)], Dec. 21, 2000, 114
Stat. 2763, 2763A-425, 2763A-426, 2763A-453, 2763A-454.)
References in Text
Section 206B of the Gramm-Leach-Bliley Act, referred to in subsecs.
(a)(2) to (5) and (i), is section 206B of Pub. L. 106-102, which is set
out in a note under section 78c of this title.
The Commodity Exchange Act, referred to in subsec. (g)(2), is act
Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which is classified
generally to chapter 1 (Sec. 1 et seq.) of Title 7, Agriculture. For
complete classification of this Act to the Code, see section 1 of Title
7 and Tables.
Amendments
2000--Subsec. (a)(2) to (5). Pub. L. 106-554, Sec. 1(a)(5) [title
III, Sec. 303(b)], amended pars. (2) to (5) generally. Prior to
amendment, pars. (2) to (5) read as follows:
``(2) To effect, alone or with one or more other persons, a series
of transactions in any security registered on a national securities
exchange creating actual or apparent active trading in such security or
raising or depressing the price of such security, for the purpose of
inducing the purchase or sale of such security by others.
``(3) If a dealer or broker, or other person selling or offering for
sale or purchasing or offering to purchase the security, to induce the
purchase or sale of any security registered on a national securities
exchange by the circulation or dissemination in the ordinary course of
business of information to the effect that the price of any such
security will or is likely to rise or fall because of market operations
of any one or more persons conducted for the purpose of raising or
depressing the prices of such security.
``(4) If a dealer or broker, or other person selling or offering for
sale or purchasing or offering to purchase the security, to make,
regarding any security registered on a national securities exchange, for
the purpose of inducing the purchase or sale of such security, any
statement which 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, and which he knew or had reasonable ground to believe was
so false or misleading.
``(5) For a consideration, received directly or indirectly from a
dealer or broker, or other person selling or offering for sale or
purchasing or offering to purchase the security, to induce the purchase
or sale of any security registered on a national securities exchange by
the circulation or dissemination of information to the effect that the
price of any such security will or is likely to rise or fall because of
the market operations of any one or more persons conducted for the
purpose of raising or depressing the price of such security.''
Subsec. (b)(1). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 205(a)(1)(A)], inserted ``(A)'' after ``acquires'' and substituted
``; or (B) any security futures product on the security; or'' for ``;
or''.
Subsec. (b)(2). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 205(a)(1)(B)], inserted ``(A)'' after ``interest in any'' and
substituted ``; or (B) such security futures product; or'' for ``; or''.
Subsec. (b)(3). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 205(a)(1)(C)], inserted ``(A)'' after ``interest in any'' and ``;
or (B) such security futures product'' after ``privilege''.
Subsec. (g). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 205(a)(2)], designated existing provisions as par. (1), inserted
``other than a security futures product'' after ``future delivery'', and
added par. (2).
Subsec. (i). Pub. L. 106-554, Sec. 1(a)(5) [title III, Sec. 303(c)],
added subsec. (i).
1990--Subsec. (h). Pub. L. 101-432 added subsec. (h).
1982--Subsec. (f). Pub. L. 97-303, Sec. 3(1), substituted ``The
provisions of subsection (a) of this section shall not apply'' for ``The
provisions of this section shall not apply''.
Subsec. (g). Pub. L. 97-303, Sec. 3(2), added subsec. (g).
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 78j, 78y, 78hh of this
title.
