§ 78o-4. — Municipal securities.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78o-4]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78o-4. Municipal securities
(a) Registration of municipal securities dealers
(1) It shall be unlawful for any municipal securities dealer (other
than one registered as a broker or dealer under section 78o of this
title) to make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce or
attempt to induce the purchase or sale of, any municipal security unless
such municipal securities dealer is registered in accordance with this
subsection.
(2) A municipal securities dealer may be registered by filing with
the Commission an application for registration in such form and
containing such information and documents concerning such municipal
securities dealer and any persons associated with such municipal
securities dealer as the Commission, by rule, may prescribe as necessary
or appropriate in the public interest or for the protection of
investors. Within forty-five days of the date of the filing of such
application (or within such longer period as to which the applicant
consents), the Commission shall--
(A) by order grant registration, or
(B) institute proceedings to determine whether registration
should be denied. Such proceedings shall include notice of the
grounds for denial under consideration and opportunity for hearing
and shall be concluded within one hundred twenty days of the date of
the filing of the application for registration. At the conclusion of
such proceedings the Commission, by order, shall grant or deny such
registration. The Commission may extend the time for the conclusion
of such proceedings for up to ninety days if it finds good cause for
such extension and publishes its reasons for so finding or for such
longer period as to which the applicant consents.
The Commission shall grant the registration of a municipal securities
dealer if the Commission finds that the requirements of this section are
satisfied. The Commission shall deny such registration if it does not
make such a finding or if it finds that if the applicant were so
registered, its registration would be subject to suspension or
revocation under subsection (c) of this section.
(3) Any provision of this chapter (other than section 78e of this
title or paragraph (1) of this subsection) which prohibits any act,
practice, or course of business if the mails or any means or
instrumentality of interstate commerce is used in connection therewith
shall also prohibit any such act, practice, or course of business by any
registered municipal securities dealer or any person acting on behalf of
such municipal securities dealer, irrespective of any use of the mails
or any means or instrumentality of interstate commerce in connection
therewith.
(4) The Commission, by rule or order, upon its own motion or upon
application, may conditionally or unconditionally exempt any broker,
dealer, or municipal securities dealer or class of brokers, dealers, or
municipal securities dealers from any provision of this section or the
rules or regulations thereunder, if the Commission finds that such
exemption is consistent with the public interest, the protection of
investors, and the purposes of this section.
(b) Municipal Securities Rulemaking Board; rules and regulations
(1) Not later than one hundred twenty days after June 4, 1975, the
Commission shall establish a Municipal Securities Rulemaking Board
(hereinafter in this section referred to as the ``Board''), to be
composed initially of fifteen members appointed by the Commission, which
shall perform the duties set forth in this section. The initial members
of the Board shall serve as members for a term of two years, and shall
consist of (A) five individuals who are not associated with any broker,
dealer, or municipal securities dealer (other than by reason of being
under common control with, or indirectly controlling, any broker or
dealer which is not a municipal securities broker or municipal
securities dealer), at least one of whom shall be representative of
investors in municipal securities, and at least one of whom shall be
representative of issuers of municipal securities (which members are
hereinafter referred to as ``public representatives''); (B) five
individuals who are associated with and representative of municipal
securities brokers and municipal securities dealers which are not banks
or subsidiaries or departments or divisions of banks (which members are
hereinafter referred to as ``broker-dealer representatives''); and (C)
five individuals who are associated with and representative of municipal
securities dealers which are banks or subsidiaries or departments or
divisions of banks (which members are hereinafter referred to as ``bank
representatives''). Prior to the expiration of the terms of office of
the initial members of the Board, an election shall be held under rules
adopted by the Board (pursuant to subsection (b)(2)(B) of this section)
of the members to succeed such initial members.
(2) The Board shall propose and adopt rules to effect the purposes
of this chapter with respect to transactions in municipal securities
effected by brokers, dealers, and municipal securities dealers. (Such
rules are hereinafter collectively referred to in this chapter as
``rules of the Board''.) The rules of the Board, as a minimum, shall:
(A) provide that no municipal securities broker or municipal
securities dealer shall effect any transaction in, or induce or
attempt to induce the purchase or sale of, any municipal security
unless such municipal securities broker or municipal securities
dealer meets such standards of operational capability and such
municipal securities broker or municipal securities dealer and every
natural person associated with such municipal securities broker or
municipal securities dealer meet such standards of training,
experience, competence, and such other qualifications as the Board
finds necessary or appropriate in the public interest or for the
protection of investors. In connection with the definition and
application of such standards the Board may--
(i) appropriately classify municipal securities brokers and
municipal securities dealers (taking into account relevant
matters, including types of business done, nature of securities
other than municipal securities sold, and character of business
organization), and persons associated with municipal securities
brokers and municipal securities dealers;
(ii) specify that all or any portion of such standards shall
be applicable to any such class;
(iii) require persons in any such class to pass tests
administered in accordance with subsection (c)(7) of this
section; and
(iv) provide that persons in any such class other than
municipal securities brokers and municipal securities dealers
and partners, officers, and supervisory employees of municipal
securities brokers or municipal securities dealers, may be
qualified solely on the basis of compliance with such standards
of training and such other qualifications as the Board finds
appropriate.
(B) establish fair procedures for the nomination and election of
members of the Board and assure fair representation in such
nominations and elections of municipal securities brokers and
municipal securities dealers. Such rules shall provide that the
membership of the Board shall at all times be equally divided among
public representatives, broker-dealer representatives, and bank
representatives, and that the public representatives shall be
subject to approval by the Commission to assure that no one of them
is associated with any broker, dealer, or municipal securities
dealer (other than by reason of being under common control with, or
indirectly controlling, any broker or dealer which is not a
municipal securities broker or municipal securities dealer) and that
at least one is representative of investors in municipal securities
and at least one is representative of issuers of municipal
securities. Such rules shall also specify the term members shall
serve and may increase the number of members which shall constitute
the whole Board provided that such number is an odd number.
(C) be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
the public interest; and not be designed to permit unfair
discrimination between customers, issuers, municipal securities
brokers, or municipal securities dealers, to fix minimum profits, to
impose any schedule or fix rates of commissions, allowances,
discounts, or other fees to be charged by municipal securities
brokers or municipal securities dealers, to regulate by virtue of
any authority conferred by this chapter matters not related to the
purposes of this chapter or the administration of the Board, or to
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of this chapter.
(D) if the Board deems appropriate, provide for the arbitration
of claims, disputes, and controversies relating to transactions in
municipal securities: Provided, however, That no person other than a
municipal securities broker, municipal securities dealer, or person
associated with such a municipal securities broker or municipal
securities dealer may be compelled to submit to such arbitration
except at his instance and in accordance with section 78cc of this
title.
(E) provide for the periodic examination in accordance with
subsection (c)(7) of this section of municipal securities brokers
and municipal securities dealers to determine compliance with
applicable provisions of this chapter, the rules and regulations
thereunder, and the rules of the Board. Such rules shall specify the
minimum scope and frequency of such examinations and shall be
designed to avoid unnecessary regulatory duplication or undue
regulatory burdens for any such municipal securities broker or
municipal securities dealer.
(F) include provisions governing the form and content of
quotations relating to municipal securities which may be distributed
or published by any municipal securities broker, municipal
securities dealer, or person associated with such a municipal
securities broker or municipal securities dealer, and the persons to
whom such quotations may be supplied. Such rules relating to
quotations shall be designed to produce fair and informative
quotations, to prevent fictitious or misleading quotations, and to
promote orderly procedures for collecting, distributing, and
publishing quotations.
(G) prescribe records to be made and kept by municipal
securities brokers and municipal securities dealers and the periods
for which such records shall be preserved.
(H) define the term ``separately identifiable department or
division'', as that term is used in section 78c(a)(30) of this
title, in accordance with specified and appropriate standards to
assure that a bank is not deemed to be engaged in the business of
buying and selling municipal securities through a separately
identifiable department or division unless such department or
division is organized and administered so as to permit independent
examination and enforcement of applicable provisions of this
chapter, the rules and regulations thereunder, and the rules of the
Board. A separately identifiable department or division of a bank
may be engaged in activities other than those relating to municipal
securities.
(I) provide for the operation and administration of the Board,
including the selection of a Chairman from among the members of the
Board, the compensation of the members of the Board, and the
appointment and compensation of such employees, attorneys, and
consultants as may be necessary or appropriate to carry out the
Board's functions under this section.
(J) provide that each municipal securities broker and each
municipal securities dealer shall pay to the Board such reasonable
fees and charges as may be necessary or appropriate to defray the
costs and expenses of operating and administering the Board. Such
rules shall specify the amount of such fees and charges.
(K) establish the terms and conditions under which any municipal
securities dealer may sell, or prohibit any municipal securities
dealer from selling, any part of a new issue of municipal securities
to a municipal securities investment portfolio during the
underwriting period.
(3) Nothing in this section shall be construed to impair or limit
the power of the Commission under this chapter.
(c) Discipline of municipal securities dealers; censure; suspension or
revocation of registration; other sanctions; investigations
(1) No broker, dealer, or municipal securities dealer shall make use
of the mails or any means or instrumentality of interstate commerce to
effect any transaction in, or to induce or attempt to induce the
purchase or sale of, any municipal security in contravention of any rule
of the Board.
(2) The Commission, by order, shall censure, place limitations on
the activities, functions, or operations, suspend for a period not
exceeding twelve months, or revoke the registration of any municipal
securities dealer, if it finds, on the record after notice and
opportunity for hearing, that such censure, placing of limitations,
denial, suspension, or revocation, is in the public interest and that
such municipal securities dealer has committed or omitted any act, or is
subject to an order or finding, enumerated in subparagraph (A), (D),
(E), (H), or (G) of paragraph (4) of section 78o(b) of this title, has
been convicted of any offense specified in subparagraph (B) of such
paragraph (4) within ten years of the commencement of the proceedings
under this paragraph, or is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such paragraph (4).
(3) Pending final determination whether any registration under this
section shall be revoked, the Commission, by order, may suspend such
registration, if such suspension appears to the Commission, after notice
and opportunity for hearing, to be necessary or appropriate in the
public interest or for the protection of investors. Any registered
municipal securities dealer may, upon such terms and conditions as the
Commission may deem necessary in the public interest or for the
protection of investors, withdraw from registration by filing a written
notice of withdrawal with the Commission. If the Commission finds that
any registered municipal securities dealer is no longer in existence or
has ceased to do business as a municipal securities dealer, the
Commission, by order, shall cancel the registration of such municipal
securities dealer.
(4) The Commission, by order, shall censure or place limitations on
the activities or functions of any person associated, seeking to become
associated, or, at the time of the alleged misconduct, associated or
seeking to become associated with a municipal securities dealer, or
suspend for a period not exceeding twelve months or bar any such person
from being associated with a municipal securities dealer, if the
Commission finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations, suspension, or bar
is in the public interest and that such person has committed any act, or
is subject to an order or finding, enumerated in subparagraph (A), (D),
(E), (H), or (G) of paragraph (4) of section 78o(b) of this title, has
been convicted of any offense specified in subparagraph (B) of such
paragraph (4) within 10 years of the commencement of the proceedings
under this paragraph, or is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such paragraph (4). It shall
be unlawful for any person as to whom an order entered pursuant to this
paragraph or paragraph (5) of this subsection suspending or barring him
from being associated with a municipal securities dealer is in effect
willfully to become, or to be, associated with a municipal securities
dealer without the consent of the Commission, and it shall be unlawful
for any municipal securities dealer to permit such a person to become,
or remain, a person associated with him without the consent of the
Commission, if such municipal securities dealer knew, or, in the
exercise of reasonable care should have known, of such order.
(5) With respect to any municipal securities dealer for which the
Commission is not the appropriate regulatory agency, the appropriate
regulatory agency for such municipal securities dealer may sanction any
such municipal securities dealer in the manner and for the reasons
specified in paragraph (2) of this subsection and any person associated
with such municipal securities dealer in the manner and for the reasons
specified in paragraph (4) of this subsection. In addition, such
appropriate regulatory agency may, in accordance with section 1818 of
title 12, enforce compliance by such municipal securities dealer or any
person associated with such municipal securities dealer with the
provisions of this section, section 78q of this title, the rules of the
Board, and the rules of the Commission pertaining to municipal
securities dealers, persons associated with municipal securities
dealers, and transactions in municipal securities. For purposes of the
preceding sentence, any violation of any such provision shall constitute
adequate basis for the issuance of any order under section 1818(b) or
1818(c) of title 12, and the customers of any such municipal securities
dealer shall be deemed to be ``depositors'' as that term is used in
section 1818(c) of title 12. Nothing in this paragraph shall be
construed to affect in any way the powers of such appropriate regulatory
agency to proceed against such municipal securities dealer under any
other provision of law.
(6)(A) The Commission, prior to the entry of an order of
investigation, or commencement of any proceedings, against any municipal
securities dealer, or person associated with any municipal securities
dealer, for which the Commission is not the appropriate regulatory
agency, for violation of any provision of this section, section
78o(c)(1) or 78o(c)(2) of this title, any rule or regulation under any
such section, or any rule of the Board, shall (i) give notice to the
appropriate regulatory agency for such municipal securities dealer of
the identity of such municipal securities dealer or person associated
with such municipal securities dealer, the nature of and basis for such
proposed action, and whether the Commission is seeking a monetary
penalty against such municipal securities dealer or such associated
person pursuant to section 78u-2 of this title; and (ii) consult with
such appropriate regulatory agency concerning the effect of such
proposed action on sound banking practices and the feasibility and
desirability of coordinating such action with any proceeding or proposed
proceeding by such appropriate regulatory agency against such municipal
securities dealer or associated person.
(B) The appropriate regulatory agency for a municipal securities
dealer (if other than the Commission), prior to the entry of an order of
investigation, or commencement of any proceedings, against such
municipal securities dealer or person associated with such municipal
securities dealer, for violation of any provision of this section, the
rules of the Board, or the rules or regulations of the Commission
pertaining to municipal securities dealers, persons associated with
municipal securities dealers, or transactions in municipal securities
shall (i) give notice to the Commission of the identity of such
municipal securities dealer or person associated with such municipal
securities dealer and the nature of and basis for such proposed action
and (ii) consult with the Commission concerning the effect of such
proposed action on the protection of investors and the feasibility and
desirability of coordinating such action with any proceeding or proposed
proceeding by the Commission against such municipal securities dealer or
associated person.
(C) Nothing in this paragraph shall be construed to impair or limit
(other than by the requirement of prior consultation) the power of the
Commission or the appropriate regulatory agency for a municipal
securities dealer to initiate any action of a class described in this
paragraph or to affect in any way the power of the Commission or such
appropriate regulatory agency to initiate any other action pursuant to
this chapter or any other provision of law.
(7)(A) Tests required pursuant to subsection (b)(2)(A)(iii) of this
section shall be administered by or on behalf of and periodic
examinations pursuant to subsection (b)(2)(E) of this section shall be
conducted by--
(i) a registered securities association, in the case of
municipal securities brokers and municipal securities dealers who
are members of such association; and
(ii) the appropriate regulatory agency for any municipal
securities broker or municipal securities dealer, in the case of all
other municipal securities brokers and municipal securities dealers.
(B) A registered securities association shall make a report of any
examination conducted pursuant to subsection (b)(2)(E) of this section
and promptly furnish the Commission a copy thereof and any data supplied
to it in connection with such examination. Subject to such limitations
as the Commission, by rule, determines to be necessary or appropriate in
the public interest or for the protection of investors, the Commission
shall, on request, make available to the Board a copy of any report of
an examination of a municipal securities broker or municipal securities
dealer made by or furnished to the Commission pursuant to this paragraph
or section 78q(c)(3) of this title.
(8) The Commission is authorized, by order, if in its opinion such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise, in furtherance of the purposes of
this chapter, to remove from office or censure any member or employee of
the Board, who, the Commission finds, on the record after notice and
opportunity for hearing, has willfully (A) violated any provision of
this chapter, the rules and regulations thereunder, or the rules of the
Board or (B) abused his authority.
(d) Issuance of municipal securities
(1) Neither the Commission nor the Board is authorized under this
chapter, by rule or regulation, to require any issuer of municipal
securities, directly or indirectly through a purchaser or prospective
purchaser of securities from the issuer, to file with the Commission or
the Board prior to the sale of such securities by the issuer any
application, report, or document in connection with the issuance, sale,
or distribution of such securities.
(2) The Board is not authorized under this chapter to require any
issuer of municipal securities, directly or indirectly through a
municipal securities broker or municipal securities dealer or otherwise,
to furnish to the Board or to a purchaser or a prospective purchaser of
such securities any application, report, document, or information with
respect to such issuer: Provided, however, That the Board may require
municipal securities brokers and municipal securities dealers to furnish
to the Board or purchasers or prospective purchasers of municipal
securities applications, reports, documents, and information with
respect to the issuer thereof which is generally available from a source
other than such issuer. Nothing in this paragraph shall be construed to
impair or limit the power of the Commission under any provision of this
chapter.
(June 6, 1934, ch. 404, title I, Sec. 15B, as added Pub. L. 94-29,
Sec. 13, June 4, 1975, 89 Stat. 131; amended Pub. L. 98-38, Sec. 4, June
6, 1983, 97 Stat. 207; Pub. L. 100-181, title III, Secs. 318-320, Dec.
4, 1987, 101 Stat. 1256, 1257; Pub. L. 101-429, title II, Sec. 205, Oct.
15, 1990, 104 Stat. 941; Pub. L. 101-550, title II, Sec. 203(c)(1), Nov.
15, 1990, 104 Stat. 2718; Pub. L. 105-353, title III, Sec. 301(b)(9),
Nov. 3, 1998, 112 Stat. 3236; Pub. L. 107-204, title VI,
Sec. 604(c)(1)(B), July 30, 2002, 116 Stat. 796.)
References in Text
This chapter, referred to in subsecs. (a)(3), (b)(2), (3),
(c)(6)(C), (8), and (d), was in the original ``this title''. See
References in Text note set out under section 78a of this title.
Amendments
2002--Subsec. (c)(2), (4). Pub. L. 107-204 substituted ``, or is
subject to an order or finding,'' for ``or omission'' and ``(H), or
(G)'' for ``or (G)''.
1998--Subsec. (c)(4). Pub. L. 105-353 substituted ``convicted of any
offense'' for ``convicted by any offense'' in first sentence.
1990--Subsec. (c)(2), (4). Pub. L. 101-550 substituted ``(A), (D),
(E), or (G)'' for ``(A), (D), or (E)''.
Subsec. (c)(6)(A). Pub. L. 101-429 substituted ``, the nature'' for
``and the nature'' and ``proposed action, and whether the Commission is
seeking a monetary penalty against such municipal securities dealer or
such associated person pursuant to section 78u-2 of this title; and''
for ``proposed action and''.
1987--Subsec. (b)(2)(C). Pub. L. 100-181, Sec. 318, substituted
``municipal securities dealers, to regulate'' for ``municipal security
dealers, to regulate'' ``purposes of this chapter'' for ``purposes of
this chapter or the securities'', and ``burden on competition'' for
``burden or competition''.
Subsec. (c)(4). Pub. L. 100-181, Sec. 319, substituted new first
sentence for former first sentence which read as follows: ``The
Commission, by order, shall censure any person associated, or seeking to
become associated with, a municipal securities dealer or suspend for a
period not exceeding twelve months or bar any such person from being
associated with a municipal securities dealer, if the Commission finds,
on the record after notice and opportunity for hearing, that such
censure, suspension, or bar is in the public interest and that such
person has committed or omitted any act or omission enumerated in
subparagraph (A), (D), or (E) of paragraph (4) of section 78o(b) of this
title, has been convicted of any offense specified in subparagraph (B)
of such paragraph (4) within ten years of the commencement of the
proceedings under this paragraph, or is enjoined from any action,
conduct, or practice specified in subparagraph (C) of such paragraph
(4).''
Subsec. (c)(6)(A). Pub. L. 100-181, Sec. 320, substituted ``Board''
for ``board''.
1983--Subsec. (b)(1)(A). Pub. L. 98-38, Sec. 4(a), inserted ``(other
than by reason of being under common control with, or indirectly
controlling, any broker or dealer which is not a municipal securities
broker or municipal securities dealer)'' after ``securities dealer''.
Subsec. (b)(2)(B). Pub. L. 98-38, Sec. 4(b), inserted ``(other than
by reason of being under common control with, or indirectly controlling,
any broker or dealer which is not a municipal securities broker or
municipal securities dealer)'' after ``broker, dealer, or municipal
securities dealer''.
Effective Date of 1990 Amendment
Amendment by Pub. L. 101-429 effective Oct. 15, 1990, with
provisions relating to civil penalties and accounting and disgorgement,
see section 1(c)(1), (2) of Pub. L. 101-429, set out in a note under
section 77g of this title.
Effective Date
Section effective June 4, 1975, except for subsec. (a) which is
effective 180 days after June 4, 1975, see section 31(a) of Pub. L. 94-
29, set out as a note under section 78b of this title.
Section Referred to in Other Sections
This section is referred to in sections 78c, 78o, 78s, 78u-2, 78y,
78lll, 80a-22 of this title.
