§ 78o-5. — Government securities brokers and dealers.
[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-5]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78o-5. Government securities brokers and dealers
(a) Registration requirements; notice to regulatory agencies; manner of
registration; exemption from registration requirements
(1)(A) It shall be unlawful for any government securities broker or
government securities dealer (other than a registered broker or dealer
or a financial institution) 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 government
security unless such government securities broker or government
securities dealer is registered in accordance with paragraph (2) of this
subsection.
(B)(i) It shall be unlawful for any government securities broker or
government securities dealer that is a registered broker or dealer or a
financial institution 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 government
security unless such government securities broker or government
securities dealer has filed with the appropriate regulatory agency
written notice that it is a government securities broker or government
securities dealer. When such a government securities broker or
government securities dealer ceases to act as such it shall file with
the appropriate regulatory agency a written notice that it is no longer
acting as a government securities broker or government securities
dealer.
(ii) Such notices shall be in such form and contain such information
concerning a government securities broker or government securities
dealer that is a financial institution and any persons associated with
such government securities broker or government securities dealer as the
Board of Governors of the Federal Reserve System shall, by rule, after
consultation with each appropriate regulatory agency (including the
Commission), prescribe as necessary or appropriate in the public
interest or for the protection of investors. Such notices shall be in
such form and contain such information concerning a government
securities broker or government securities dealer that is a registered
broker or dealer and any persons associated with such government
securities broker or government securities dealer as the Commission
shall, by rule, prescribe as necessary or appropriate in the public
interest or for the protection of investors.
(iii) Each appropriate regulatory agency (other than the Commission)
shall make available to the Commission the notices which have been filed
with it under this subparagraph, and the Commission shall maintain and
make available to the public such notices and the notices it receives
under this subparagraph.
(2) A government securities broker or a government securities dealer
subject to the registration requirement of paragraph (1)(A) of this
subsection may be registered by filing with the Commission an
application for registration in such form and containing such
information and documents concerning such government securities broker
or government securities dealer and any persons associated with such
government securities broker or government securities dealer as the
Commission, by rule, may prescribe as necessary or appropriate in the
public interest or for the protection of investors. Within 45 days of
the date of filing of such application (or within such longer period as
to which the applicant consents), the Commission shall--
(i) by order grant registration, or
(ii) 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 120 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 order granting registration shall not be effective
until such government securities broker or government securities
dealer has become a member of a national securities exchange
registered under section 78f of this title, or a securities
association registered under section 78o-3 of this title, unless the
Commission has exempted such government securities broker or
government securities dealer, by rule or order, from such
membership. The Commission may extend the time for the conclusion of
such proceedings for up to 90 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 government securities
broker or a government 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
government securities broker or government securities dealer registered
or having filed notice under paragraph (1) of this subsection or any
person acting on behalf of such government securities broker or
government securities dealer, irrespective of any use of the mails or
any means or instrumentality of interstate commerce in connection
therewith.
(4) No government securities broker or government securities dealer
that is required to register under paragraph (1)(A) and that is not a
member of the Securities Investor Protection Corporation shall effect
any transaction in any security in contravention of such rules as the
Commission shall prescribe pursuant to this subsection to assure that
its customers receive complete, accurate, and timely disclosure of the
inapplicability of Securities Investor Protection Corporation coverage
to their accounts.
(5) The Secretary of the Treasury (hereinafter in this section
referred to as the ``Secretary''), by rule or order, upon the
Secretary's own motion or upon application, may conditionally or
unconditionally exempt any government securities broker or government
securities dealer, or class of government securities brokers or
government securities dealers, from any provision of subsection (a),
(b), or (d) of this section, other than subsection (d)(3) of this
section, or the rules thereunder, if the Secretary finds that such
exemption is consistent with the public interest, the protection of
investors, and the purposes of this chapter.
(b) Rules with respect to transactions in government securities
(1) The Secretary shall propose and adopt rules to effect the
purposes of this chapter with respect to transactions in government
securities effected by government securities brokers and government
securities dealers as follows:
(A) Such rules shall provide safeguards with respect to the
financial responsibility and related practices of government
securities brokers and government securities dealers including, but
not limited to, capital adequacy standards, the acceptance of
custody and use of customers' securities, the carrying and use of
customers' deposits or credit balances, and the transfer and control
of government securities subject to repurchase agreements and in
similar transactions.
(B) Such rules shall require every government securities broker
and government securities dealer to make reports to and furnish
copies of records to the appropriate regulatory agency, and to file
with the appropriate regulatory agency, annually or more frequently,
a balance sheet and income statement certified by an independent
public accountant, prepared on a calendar or fiscal year basis, and
such other financial statements (which shall, as the Secretary
specifies, be certified) and information concerning its financial
condition as required by such rules.
(C) Such rules shall require records to be made and kept by
government securities brokers and government securities dealers and
shall specify the periods for which such records shall be preserved.
(2) Risk Assessment for Holding Company Systems.--
(A) Obligations to obtain, maintain, and report information.--
Every person who is registered as a government securities broker or
government securities dealer under this section shall obtain such
information and make and keep such records as the Secretary by rule
prescribes concerning the registered person's policies, procedures,
or systems for monitoring and controlling financial and operational
risks to it resulting from the activities of any of its associated
persons, other than a natural person. Such records shall describe,
in the aggregate, each of the financial and securities activities
conducted by, and customary sources of capital and funding of, those
of its associated persons whose business activities are reasonably
likely to have a material impact on the financial or operational
condition of such registered person, including its capital, its
liquidity, or its ability to conduct or finance its operations. The
Secretary, by rule, may require summary reports of such information
to be filed with the registered person's appropriate regulatory
agency no more frequently than quarterly.
(B) Authority to require additional information.--If, as a
result of adverse market conditions or based on reports provided
pursuant to subparagraph (A) of this paragraph or other available
information, the appropriate regulatory agency reasonably concludes
that it has concerns regarding the financial or operational
condition of any government securities broker or government
securities dealer registered under this section, such agency may
require the registered person to make reports concerning the
financial and securities activities of any of such person's
associated persons, other than a natural person, whose business
activities are reasonably likely to have a material impact on the
financial or operational condition of such registered person. The
appropriate regulatory agency, in requiring reports pursuant to this
subparagraph, shall specify the information required, the period for
which it is required, the time and date on which the information
must be furnished, and whether the information is to be furnished
directly to the appropriate regulatory agency or to a self-
regulatory organization with primary responsibility for examining
the registered person's financial and operational condition.
(C) Special provisions with respect to associated persons
subject to federal banking agency regulation.--
(i) Cooperation in implementation.--In developing and
implementing reporting requirements pursuant to subparagraph (A)
of this paragraph with respect to associated persons subject to
examination by or reporting requirements of a Federal banking
agency, the Secretary shall consult with and consider the views
of each such Federal banking agency. If a Federal banking agency
comments in writing on a proposed rule of the Secretary under
this paragraph that has been published for comment, the
Secretary shall respond in writing to such written comment
before adopting the proposed rule. The Secretary shall, at the
request of a Federal banking agency, publish such comment and
response in the Federal Register at the time of publishing the
adopted rule.
(ii) Use of banking agency reports.--A registered government
securities broker or government securities dealer shall be in
compliance with any recordkeeping or reporting requirement
adopted pursuant to subparagraph (A) of this paragraph
concerning an associated person that is subject to examination
by or reporting requirements of a Federal banking agency if such
government securities broker or government securities dealer
utilizes for such recordkeeping or reporting requirement copies
of reports filed by the associated person with the Federal
banking agency pursuant to section 161 of title 12, subchapter
VIII of chapter 3 of title 12, section 1817(a) of title 12,
section 1467a(b) of title 12, or section 1847 of title 12. The
Secretary may, however, by rule adopted pursuant to subparagraph
(A), require any registered government securities broker or
government securities dealer filing such reports with the
appropriate regulatory agency to obtain, maintain, or report
supplemental information if the Secretary makes an explicit
finding, based on information provided by the appropriate
regulatory agency, that such supplemental information is
necessary to inform the appropriate regulatory agency regarding
potential risks to such government securities broker or
government securities dealer. Prior to requiring any such
supplemental information, the Secretary shall first request the
Federal banking agency to expand its reporting requirements to
include such information.
(iii) Procedure for requiring additional information.--Prior
to making a request pursuant to subparagraph (B) of this
paragraph for information with respect to an associated person
that is subject to examination by or reporting requirements of a
Federal banking agency, the appropriate regulatory agency
shall--
(I) notify such banking agency of the information
required with respect to such associated person; and
(II) consult with such agency to determine whether the
information required is available from such agency and for
other purposes, unless the appropriate regulatory agency
determines that any delay resulting from such consultation
would be inconsistent with ensuring the financial and
operational condition of the government securities broker or
government securities dealer or the stability or integrity
of the securities markets.
(iv) Exclusion for examination reports.--Nothing in this
subparagraph shall be construed to permit the Secretary or an
appropriate regulatory agency to require any registered
government securities broker or government securities dealer to
obtain, maintain, or furnish any examination report of any
Federal banking agency or any supervisory recommendations or
analysis contained therein.
(v) Confidentiality of information provided.--No information
provided to or obtained by an appropriate regulatory agency from
any Federal banking agency pursuant to a request under clause
(iii) of this subparagraph regarding any associated person which
is subject to examination by or reporting requirements of a
Federal banking agency may be disclosed to any other person
(other than a self-regulatory organization), without the prior
written approval of the Federal banking agency. Nothing in this
clause shall authorize the Secretary or any appropriate
regulatory agency to withhold information from Congress, or
prevent the Secretary or any appropriate regulatory agency from
complying with a request for information from any other Federal
department or agency requesting the information for purposes
within the scope of its jurisdiction, or complying with an order
of a court of the United States in an action brought by the
United States or the Commission.
(vi) Notice to banking agencies concerning financial and
operational condition concerns.--The Secretary or appropriate
regulatory agency shall notify the Federal banking agency of any
concerns of the Secretary or the appropriate regulatory agency
regarding significant financial or operational risks resulting
from the activities of any government securities broker or
government securities dealer to any associated person thereof
which is subject to examination by or reporting requirements of
the Federal banking agency.
(vii) Definition.--For purposes of this subparagraph, the
term ``Federal banking agency'' shall have the same meaning as
the term ``appropriate Federal banking agency'' in section
1813(q) of title 12.
(D) Exemptions.--The Secretary by rule or order may exempt any
person or class of persons, under such terms and conditions and for
such periods as the Secretary shall provide in such rule or order,
from the provisions of this paragraph, and the rules thereunder. In
granting such exemptions, the Secretary shall consider, among other
factors--
(i) whether information of the type required under this
paragraph is available from a supervisory agency (as defined in
section 3401(6) \1\ of title 12), a State insurance commission
or similar State agency, the Commodity Futures Trading
Commission, or a similar foreign regulator;
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(ii) the primary business of any associated person;
(iii) the nature and extent of domestic or foreign
regulation of the associated person's activities;
(iv) the nature and extent of the registered person's
securities transactions; and
(v) with respect to the registered person and its associated
persons, on a consolidated basis, the amount and proportion of
assets devoted to, and revenues derived from, activities in the
United States securities markets.
(E) Conformity with requirements under section 78q(h).--In
exercising authority pursuant to subparagraph (A) of this paragraph
concerning information with respect to associated persons of
government securities brokers and government securities dealers who
are also associated persons of registered brokers or dealers
reporting to the Commission pursuant to section 78q(h) of this
title, the requirements relating to such associated persons shall
conform, to the greatest extent practicable, to the requirements
under section 78q(h) of this title.
(F) Authority to limit disclosure of information.--
Notwithstanding any other provision of law, the Secretary and any
appropriate regulatory agency shall not be compelled to disclose any
information required to be reported under this paragraph, or any
information supplied to the Secretary or any appropriate regulatory
agency by any domestic or foreign regulatory agency that relates to
the financial or operational condition of any associated person of a
registered government securities broker or a government securities
dealer. Nothing in this paragraph shall authorize the Secretary or
any appropriate regulatory agency to withhold information from
Congress, or prevent the Secretary or any appropriate regulatory
agency from complying with a request for information from any other
Federal department or agency requesting the information for purposes
within the scope of its jurisdiction, or complying with an order of
a court of the United States in an action brought by the United
States or the Commission. For purposes of section 552 of title 5,
this paragraph shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
(3)(A) With respect to any financial institution that has filed
notice as a government securities broker or government securities dealer
or that is required to file notice under subsection (a)(1)(B) of this
section, the appropriate regulatory agency for such government
securities broker or government securities dealer may issue such rules
and regulations with respect to transactions in government securities as
may be necessary to prevent fraudulent and manipulative acts and
practices and to promote just and equitable principles of trade. If the
Secretary of the Treasury determines, and notifies the appropriate
regulatory agency, that such rule or regulation, if implemented, would,
or as applied does (i) adversely affect the liquidity or efficiency of
the market for government securities; or (ii) impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of this section, the appropriate regulatory agency shall, prior to
adopting the proposed rule or regulation, find that such rule or
regulation is necessary and appropriate in furtherance of the purposes
of this section notwithstanding the Secretary's determination.
(B) The appropriate regulatory agency shall consult with and
consider the views of the Secretary prior to approving or amending a
rule or regulation under this paragraph, except where the appropriate
regulatory agency determines that an emergency exists requiring
expeditious and summary action and publishes its reasons therefor. If
the Secretary comments in writing to the appropriate regulatory agency
on a proposed rule or regulation that has been published for comment,
the appropriate regulatory agency shall respond in writing to such
written comment before approving the proposed rule or regulation.
(C) In promulgating rules under this section, the appropriate
regulatory agency shall consider the sufficiency and appropriateness of
then existing laws and rules applicable to government securities
brokers, government securities dealers, and persons associated with
government securities brokers and government securities dealers.
(4) Rules promulgated and orders issued under this section shall--
(A) be designed to prevent fraudulent and manipulative acts and
practices and to protect the integrity, liquidity, and efficiency of
the market for government securities, investors, and the public
interest; and
(B) not be designed to permit unfair discrimination between
customers, issuers, government securities brokers, or government
securities dealers, or to impose any burden on competition not
necessary or appropriate in furtherance of the purposes of this
chapter.
(5) In promulgating rules and issuing orders under this section, the
Secretary--
(A) may appropriately classify government securities brokers and
government securities dealers (taking into account relevant matters,
including types of business done, nature of securities other than
government securities purchased or sold, and character of business
organization) and persons associated with government securities
brokers and government securities dealers;
(B) may determine, to the extent consistent with paragraph (2)
of this subsection and with the public interest, the protection of
investors, and the purposes of this chapter, not to apply, in whole
or in part, certain rules under this section, or to apply greater,
lesser, or different standards, to certain classes of government
securities brokers, government securities dealers, or persons
associated with government securities brokers or government
securities dealers;
(C) shall consider the sufficiency and appropriateness of then
existing laws and rules applicable to government securities brokers,
government securities dealers, and persons associated with
government securities brokers and government securities dealers; and
(D) shall consult with and consider the views of the Commission
and the Board of Governors of the Federal Reserve System, except
where the Secretary determines that an emergency exists requiring
expeditious or summary action and publishes its reasons for such
determination.
(6) If the Commission or the Board of Governors of the Federal
Reserve System comments in writing on a proposed rule of the Secretary
that has been published for comment, the Secretary shall respond in
writing to such written comment before approving the proposed rule.
(7) No government securities broker or government 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 government security in
contravention of any rule under this section.
(c) Sanctions for violations
(1) With respect to any government securities broker or government
securities dealer registered or required to register under subsection
(a)(1)(A) of this section--
(A) The Commission, by order, shall censure, place limitations
on the activities, functions, or operations of, suspend for a period
not exceeding 12 months, or revoke the registration of such
government securities broker or government securities dealer, if it
finds, on the record after notice and opportunity for hearing, that
such censure, placing of limitations, suspension, or revocation is
in the public interest and that such government securities broker or
government securities dealer, or any person associated with such
government securities broker or government securities dealer
(whether prior or subsequent to becoming so associated), 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
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).
(B) Pending final determination whether registration of any
government securities broker or government securities dealer 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
government securities broker or registered government 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 government securities broker or registered government
securities dealer is no longer in existence or has ceased to do
business as a government securities broker or government securities
dealer, the Commission, by order, shall cancel the registration of
such government securities broker or government securities dealer.
(C) The Commission, by order, shall censure or place limitations
on the activities or functions of any person associated, or seeking
to become associated, with a government securities broker or
government securities dealer registered or required to register
under subsection (a)(1)(A) of this section or suspend for a period
not exceeding 12 months or bar any such person from being associated
with such a government securities broker or government 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 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 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).
(2)(A) With respect to any government securities broker or
government securities dealer which is not registered or required to
register under subsection (a)(1)(A) of this section, the appropriate
regulatory agency for such government securities broker or government
securities dealer may, in the manner and for the reasons specified in
paragraph (1)(A) of this subsection, censure, place limitations on the
activities, functions, or operations of, suspend for a period not
exceeding 12 months, or bar from acting as a government securities
broker or government securities dealer any such government securities
broker or government securities dealer, and may sanction any person
associated with such government securities broker or government
securities dealer in the manner and for the reasons specified in
paragraph (1)(C) of this subsection.
(B) In addition, where applicable, such appropriate regulatory
agency may, in accordance with section 1818 of title 12, section 1464 of
title 12, or section 1730 \2\ of title 12, enforce compliance by such
government securities broker or government securities dealer or any
person associated with such government securities broker or government
securities dealer with the provisions of this section and the rules
thereunder.
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(C) For purposes of subparagraph (B) of this paragraph, any
violation of any such provision shall constitute adequate basis for the
issuance of any order under section 1818(b) or (c) of title 12, section
1464(d)(2) or (d)(3) \2\ of title 12, or section 1730(e) or (f) \2\ of
title 12, and the customers of any such government securities broker or
government securities dealer shall be deemed, respectively,
``depositors'' as that term is used in section 1818(c) of title 12,
``savings account holders'' as that term is used in section 1464(d)(3)
\2\ of title 12, or ``insured members'' as that term is used in section
1730(f) \2\ of title 12.
(D) Nothing in this paragraph shall be construed to affect in any
way the powers of such appropriate regulatory agency to proceed against
such government securities broker or government securities dealer under
any other provision of law.
(E) Each appropriate regulatory agency (other than the Commission)
shall promptly notify the Commission after it has imposed any sanction
under this paragraph on a government securities broker or government
securities dealer, or a person associated with a government securities
broker or government securities dealer, and the Commission shall
maintain, and make available to the public, a record of such sanctions
and any sanctions imposed by it under this subsection.
(3) It shall be unlawful for any person as to whom an order entered
pursuant to paragraph (1) or (2) of this subsection suspending or
barring him from being associated with a government securities broker or
government securities dealer is in effect willfully to become, or to be,
associated with a government securities broker or government securities
dealer without the consent of the appropriate regulatory agency, and it
shall be unlawful for any government securities broker or government
securities dealer to permit such a person to become, or remain, a person
associated with it without the consent of the appropriate regulatory
agency, if such government securities broker or government securities
dealer knew, or, in the exercise of reasonable care should have known,
of such order.
(d) Records of brokers and dealers subject to examination
(1) All records of a government securities broker or government
securities dealer are subject at any time, or from time to time, to such
reasonable periodic, special, or other examinations by representatives
of the appropriate regulatory agency for such government securities
broker or government securities dealer as such appropriate regulatory
agency deems necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
this chapter.
(2) Information received by an appropriate regulatory agency, the
Secretary, or the Commission from or with respect to any government
securities broker, government securities dealer, any person associated
with a government securities broker or government securities dealer, or
any other person subject to this section or rules promulgated
thereunder, may be made available by the Secretary or the recipient
agency to the Commission, the Secretary, the Department of Justice, the
Commodity Futures Trading Commission, any appropriate regulatory agency,
any self-regulatory organization, or any Federal Reserve Bank.
(3) Government Securities Trade Reconstruction.--
(A) Furnishing records.--Every government securities broker and
government securities dealer shall furnish to the Commission on
request such records of government securities transactions,
including records of the date and time of execution of trades, as
the Commission may require to reconstruct trading in the course of a
particular inquiry or investigation being conducted by the
Commission for enforcement or surveillance purposes. In requiring
information pursuant to this paragraph, the Commission shall specify
the information required, the period for which it is required, the
time and date on which the information must be furnished, and
whether the information is to be furnished directly to the
Commission, to the Federal Reserve Bank of New York, or to an
appropriate regulatory agency or self-regulatory organization with
responsibility for examining the government securities broker or
government securities dealer. The Commission may require that such
information be furnished in machine readable form notwithstanding
any limitation in subparagraph (B). In utilizing its authority to
require information in machine readable form, the Commission shall
minimize the burden such requirement may place on small government
securities brokers and dealers.
(B) Limitation; construction.--The Commission shall not utilize
its authority under this paragraph to develop regular reporting
requirements, except that the Commission may require information to
be furnished under this paragraph as frequently as necessary for
particular inquiries or investigations for enforcement or
surveillance purposes. This paragraph shall not be construed as
requiring, or as authorizing the Commission to require, any
government securities broker or government securities dealer to
obtain or maintain any information for purposes of this paragraph
which is not otherwise maintained by such broker or dealer in
accordance with any other provision of law or usual and customary
business practice. The Commission shall, where feasible, avoid
requiring any information to be furnished under this paragraph that
the Commission may obtain from the Federal Reserve Bank of New York.
(C) Procedures for requiring information.--At the time the
Commission requests any information pursuant to subparagraph (A)
with respect to any government securities broker or government
securities dealer for which the Commission is not the appropriate
regulatory agency, the Commission shall notify the appropriate
regulatory agency for such government securities broker or
government securities dealer and, upon request, furnish to the
appropriate regulatory agency any information supplied to the
Commission.
(D) Consultation.--Within 90 days after December 17, 1993, and
annually thereafter, or upon the request of any other appropriate
regulatory agency, the Commission shall consult with the other
appropriate regulatory agencies to determine the availability of
records that may be required to be furnished under this paragraph
and, for those records available directly from the other appropriate
regulatory agencies, to develop a procedure for furnishing such
records expeditiously upon the Commission's request.
(E) Exclusion for examination reports.--Nothing in this
paragraph shall be construed so as to permit the Commission to
require any government securities broker or government securities
dealer to obtain, maintain, or furnish any examination report of any
appropriate regulatory agency other than the Commission or any
supervisory recommendations or analysis contained in any such
examination report.
(F) Authority to limit disclosure of information.--
Notwithstanding any other provision of law, the Commission and the
appropriate regulatory agencies shall not be compelled to disclose
any information required or obtained under this paragraph. Nothing
in this paragraph shall authorize the Commission or any appropriate
regulatory agency to withhold information from Congress, or prevent
the Commission or any appropriate regulatory agency from complying
with a request for information from any other Federal department or
agency requesting information for purposes within the scope of its
jurisdiction, or from complying with an order of a court of the
United States in an action brought by the United States, the
Commission, or the appropriate regulatory agency. For purposes of
section 552 of title 5, this subparagraph shall be considered a
statute described in subsection (b)(3)(B) of such section 552.
(e) Membership in national securities exchange; exemptions
(1) It shall be unlawful for any government securities broker or
government securities dealer registered or required to register with the
Commission under subsection (a)(1)(A) of this section to effect any
transaction in, or induce or attempt to induce the purchase or sale of,
any government security, unless such government securities broker or
government securities dealer is a member of a national securities
exchange registered under section 78f of this title or a securities
association registered under section 78o-3 of this title.
(2) The Commission, after consultation with the Secretary, by rule
or order, as it deems consistent with the public interest and the
protection of investors, may conditionally or unconditionally exempt
from paragraph (1) of this subsection any government securities broker
or government securities dealer or class of government securities
brokers or government securities dealers specified in such rule or
order.
(f) Large position reporting
(1) Reporting requirements
The Secretary may adopt rules to require specified persons
holding, maintaining, or controlling large positions in to-be-issued
or recently issued Treasury securities to file such reports
regarding such positions as the Secretary determines to be necessary
and appropriate for the purpose of monitoring the impact in the
Treasury securities market of concentrations of positions in
Treasury securities and for the purpose of otherwise assisting the
Commission in the enforcement of this chapter, taking into account
any impact of such rules on the efficiency and liquidity of the
Treasury securities market and the cost to taxpayers of funding the
Federal debt. Unless otherwise specified by the Secretary, reports
required under this subsection shall be filed with the Federal
Reserve Bank of New York, acting as agent for the Secretary. Such
reports shall, on a timely basis, be provided directly to the
Commission by the person with whom they are filed.
(2) Recordkeeping requirements
Rules under this subsection may require persons holding,
maintaining, or controlling large positions in Treasury securities
to make and keep for prescribed periods such records as the
Secretary determines are necessary or appropriate to ensure that
such persons can comply with reporting requirements under this
subsection.
(3) Aggregation rules
Rules under this subsection--
(A) may prescribe the manner in which positions and accounts
shall be aggregated for the purpose of this subsection,
including aggregation on the basis of common ownership or
control; and
(B) may define which persons (individually or as a group)
hold, maintain, or control large positions.
(4) Definitional authority; determination of reporting
threshold
(A) In prescribing rules under this subsection, the Secretary
may, consistent with the purpose of this subsection, define terms
used in this subsection that are not otherwise defined in section
78c of this title.
(B) Rules under this subsection shall specify--
(i) the minimum size of positions subject to reporting under
this subsection, which shall be no less than the size that
provides the potential for manipulation or control of the supply
or price, or the cost of financing arrangements, of an issue or
the portion thereof that is available for trading;
(ii) the types of positions (which may include financing
arrangements) to be reported;
(iii) the securities to be covered; and
(iv) the form and manner in which reports shall be
transmitted, which may include transmission in machine readable
form.
(5) Exemptions
Consistent with the public interest and the protection of
investors, the Secretary by rule or order may exempt in whole or in
part, conditionally or unconditionally, any person or class of
persons, or any transaction or class of transactions, from the
requirements of this subsection.
(6) Limitation on disclosure of information
Notwithstanding any other provision of law, the Secretary and
the Commission shall not be compelled to disclose any information
required to be kept or reported under this subsection. Nothing in
this subsection shall authorize the Secretary or the Commission to
withhold information from Congress, or prevent the Secretary or the
Commission from complying with a request for information from any
other Federal department or agency requesting information for
purposes within the scope of its jurisdiction, or from complying
with an order of a court of the United States in an action brought
by the United States, the Secretary, or the Commission. For purposes
of section 552 of title 5, this paragraph shall be considered a
statute described in subsection (b)(3)(B) of such section 552.
(g) Effect on other laws; authority of Commission
(1) Nothing in this section except paragraph (2) of this subsection
shall be construed to impair or limit the authority under any other
provision of law of the Commission, the Secretary of the Treasury, the
Board of Governors of the Federal Reserve System, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Director of the
Office of Thrift Supervision, the Federal Savings and Loan Insurance
Corporation, the Secretary of Housing and Urban Development, and the
Government National Mortgage Association.
(2) Notwithstanding any other provision of this chapter, the
Commission shall not have any authority to make investigations of,
require the filing of a statement by, or take any other action under
this chapter against a government securities broker or government
securities dealer, or any person associated with a government securities
broker or government securities dealer, for any violation or threatened
violation of the provisions of this section, other than subsection
(d)(3) of this section \3\ or the rules or regulations thereunder,
unless the Commission is the appropriate regulatory agency for such
government securities broker or government securities dealer. Nothing in
the preceding sentence shall be construed to limit the authority of the
Commission with respect to violations or threatened violations of any
provision of this chapter other than this section (except subsection
(d)(3) of this section), the rules or regulations under any such other
provision, or investigations pursuant to section 78u(a)(2) of this title
to assist a foreign securities authority.
---------------------------------------------------------------------------
\3\ So in original. Probably should be followed by a comma.
---------------------------------------------------------------------------
(June 6, 1934, ch. 404, title I, Sec. 15C, as added Pub. L. 99-571,
title I, Sec. 101, Oct. 28, 1986, 100 Stat. 3208; amended Pub. L. 100-
181, title VIII, Sec. 801(a), Dec. 4, 1987, 101 Stat. 1265; Pub. L. 101-
73, title VII, Sec. 744(u)(3), Aug. 9, 1989, 103 Stat. 441; Pub. L. 101-
432, Sec. 4(b), Oct. 16, 1990, 104 Stat. 970; Pub. L. 101-550, title II,
Sec. 203(c), Nov. 15, 1990, 104 Stat. 2718; Pub. L. 103-202, title I,
Secs. 102-104, 106(a), 108, 109(b)(1), (c), Dec. 17, 1993, 107 Stat.
2345, 2346, 2349, 2351-2353; Pub. L. 105-353, title III,
Sec. 301(b)(10), 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), (5), (b)(1), (2)(B),
(4)(B), (d)(1), (f)(1), and (g)(2), was in the original ``this title''.
See References in Text note set out under section 78a of this title.
Subchapter VIII of chapter 3 of title 12, referred to in subsec.
(b)(2)(C)(ii), was in the original ``section 9 of the Federal Reserve
Act'', meaning section 9 of act Dec. 23, 1913, ch. 6, 38 Stat. 251, as
amended, which is classified generally to subchapter VIII (Sec. 321 et
seq.) of chapter 3 of Title 12, Banks and Banking.
Section 3401(6) of title 12, referred to in subsec. (b)(2)(D)(i),
was redesignated section 3401(7) of title 12 by Pub. L. 101-73, title
IX, Sec. 941(1), Aug. 9, 1989, 103 Stat. 496.f
Section 1730 of title 12, referred to in subsec. (c)(2)(B), (C), was
repealed by Pub. L. 101-73, title IV, Sec. 407, Aug. 9, 1989, 103 Stat.
363.
Section 1464(d)(2) and (d)(3) of title 12, referred to in subsec.
(c)(2)(C), was amended generally by Pub. L. 101-73, title III, Sec. 301,
Aug. 9, 1989, 103 Stat. 282, and, as so amended, no longer relates to
issuance of orders nor contains the term ``savings account holders''.
Amendments
2002--Subsec. (c)(1)(A), (C). 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. (f)(5). Pub. L. 105-353 substituted ``class of
persons'' for ``class or persons''.
1993--Subsec. (a)(2)(ii). Pub. L. 103-202, Sec. 109(b)(1), inserted
``The order granting registration shall not be effective until such
government securities broker or government securities dealer has become
a member of a national securities exchange registered under section 78f
of this title, or a securities association registered under section 78o-
3 of this title, unless the Commission has exempted such government
securities broker or government securities dealer, by rule or order,
from such membership.'' before ``The Commission may extend''.
Subsec. (a)(4). Pub. L. 103-202, Sec. 108(2), added par. (4). Former
par. (4) redesignated (5).
Pub. L. 103-202, Sec. 103(b)(1), inserted ``, other than subsection
(d)(3) of this section,'' after ``subsection (a), (b), or (d) of this
section''.
Subsec. (a)(5). Pub. L. 103-202, Sec. 108(1), redesignated par. (4)
as (5).
Subsec. (b)(3) to (7). Pub. L. 103-202, Sec. 106(a), added par. (3)
and redesignated former pars. (3) to (6) as (4) to (7), respectively.
Subsec. (d)(2). Pub. L. 103-202, Sec. 109(c), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: ``Information
received by any appropriate regulatory agency or the Secretary from or
with respect to any government securities broker or government
securities dealer or with respect to any person associated therewith may
be made available by the Secretary or the recipient agency to the
Commission, the Secretary, any appropriate regulatory agency, and any
self-regulatory organization.''
Subsec. (d)(3). Pub. L. 103-202, Sec. 103(a), added par. (3).
Subsec. (f). Pub. L. 103-202, Sec. 104(2), added subsec. (f). Former
subsec. (f) redesignated (g).
Subsec. (f)(2). Pub. L. 103-202, Sec. 103(b)(2), inserted ``, other
than subsection (d)(3) of this section'' after ``threatened violation of
the provisions of this section'' and ``(except subsection (d)(3) of this
section)'' after ``other than this section''.
Subsec. (g). Pub. L. 103-202, Sec. 104(1), redesignated subsec. (f)
as (g).
Pub. L. 103-202, Sec. 102, struck out subsec. (g) which read as
follows:
``(1) The authority of the Secretary to issue orders and to propose
and adopt rules under this section shall terminate on October 1, 1991.
``(2) All orders and rules--
``(A) which have been issued or adopted by the Secretary, and
``(B) which are in effect on the date specified in paragraph
(1),
shall continue in effect according to their terms.''
1990--Subsec. (b)(2) to (6). Pub. L. 101-432 added par. (2) and
redesignated former pars. (2) to (5) as (3) to (6), respectively.
Subsec. (c)(1)(A), (C). Pub. L. 101-550, Sec. 203(c)(1), substituted
``(A), (D), (E), or (G)'' for ``(A), (D), or (E)''.
Subsec. (f)(2). Pub. L. 101-550, Sec. 203(c)(2), substituted ``the
rules or regulations under any such other provision, or investigations
pursuant to section 78u(a)(2) of this title to assist a foreign
securities authority'' for ``or the rules or regulations under any such
other provision''.
1989--Subsec. (f)(1). Pub. L. 101-73 substituted ``Director of the
Office of Thrift Supervision'' for ``Federal Home Loan Bank Board''.
1987--Subsec. (a)(1)(B)(i). Pub. L. 100-181 substituted ``When
such'' for ``When''.
Effective Date
Title IV of Pub. L. 99-571 provided that:
``SEC. 401. GENERAL EFFECTIVE DATES.
``Except as provided in section 402, this Act [enacting section 78o-
5 of this title and section 9110 of Title 31, Money and Finance,
amending sections 78c, 78o, 78o-3, 78q, 78w, 78y, 80a-9, and 80b-3 of
this title and section 3121 of Title 31, and enacting provisions set out
as notes under sections 78a and 78o-5 of this title] and the amendments
made by this Act shall take effect 270 days after the date of enactment
of this Act [Oct. 28, 1986].
``SEC. 402. EFFECTIVE DATE AND REQUIREMENTS FOR REGULATIONS.
``Notwithstanding section 401, the Secretary of the Treasury and
each appropriate regulatory agency shall, within 120 days after the date
of enactment of this Act [Oct. 28, 1986], publish for notice and public
comment such regulations as are initially required to implement this
Act, which regulations shall become effective as temporary regulations
210 days after the date of enactment of this Act and as final
regulations not later than 270 days after the date of enactment of this
Act.
``SEC. 403. REGISTRATION DATE.
``No person may continue to act as a government securities broker or
government securities dealer after 270 days after the date of enactment
of this Act [Oct. 28, 1986] unless such person has been registered or
has provided notice to the Commission or the appropriate regulatory
agency as required by the amendment made by section 101 of this Act
[enacting section 78o-5 of this title].''
Transitional and Savings Provisions
Section 301 of Pub. L. 99-571 provided that:
``(a) Effect on Pending Administrative Proceedings.--The provisions
of this Act [see Effective Date note above] shall not affect any
proceedings pending on the effective date of this Act [see Effective
Date note above].
``(b) Effect on Pending Judicial Proceedings.--The provisions of
this Act shall not affect suits commenced prior to the effective date of
this Act, and in all such suits, proceedings shall be had, appeals
taken, and judgments rendered in the same manner and effect as if this
Act had not been enacted.
``(c) Discretion of the Federal Reserve Bank of New York.--Nothing
in this Act shall be construed to limit or impair the discretion or
authority of the Federal Reserve Bank of New York to require reports or
establish terms and conditions in connection with the Bank's
relationship with any government securities broker or government
securities dealer, including a primary dealer.
``(d) Jurisdiction of the Commodity Futures Trading Commission.--
Nothing in this Act affects the jurisdiction of the Commodity Futures
Trading Commission as set forth in the Commodity Exchange Act [7 U.S.C.
1 et seq.] over trading of commodity futures contracts and options on
such contracts involving government securities.''
Construction of 1993 Amendment
Section 111 of title I of Pub. L. 103-202 provided that:
``(a) In General.--No provision of, or amendment made by, this title
[amending this section and sections 78c, 78o, 78o-3, 78s, and 78w of
this title and enacting provisions set out as notes below] may be
construed--
``(1) to govern the initial issuance of any public debt
obligation, or
``(2) to grant any authority to (or extend any authority of) the
Securities and Exchange Commission, any appropriate regulatory
agency, or a self-regulatory organization--
``(A) to prescribe any procedure, term, or condition of such
initial issuance,
``(B) to promulgate any rule or regulation governing such
initial issuance, or
``(C) to otherwise regulate in any manner such initial
issuance.
``(b) Exception.--Subsection (a) of this section shall not apply to
the amendment made by section 110 of this Act [amending section 78o of
this title].
``(c) Public Debt Obligation.--For purposes of this section, the
term `public debt obligation' means an obligation subject to the public
debt limit established in section 3101 of title 31, United States
Code.''
Transfer of Functions
Federal Savings and Loan Insurance Corporation abolished and
functions transferred, see sections 401 to 406 of Pub. L. 101-73, set
out as a note under section 1437 of Title 12, Banks and Banking.
Congressional Findings
Section 101 of Pub. L. 103-202 provided that: ``The Congress finds
that--
``(1) the liquid and efficient operation of the government
securities market is essential to facilitate government borrowing at
the lowest possible cost to taxpayers;
``(2) the fair and honest treatment of investors will strengthen
the integrity and liquidity of the government securities market;
``(3) rules promulgated by the Secretary of the Treasury
pursuant to the Government Securities Act of 1986 [see Short Title
of 1986 Amendment note set out under section 78a of this title] have
worked well to protect investors from unregulated dealers and
maintain the efficiency of the government securities market; and
``(4) extending the authority of the Secretary and providing new
authority will ensure the continued strength of the government
securities market.''
Section 1(b) of Pub. L. 99-571 provided that: ``The Congress finds
that transactions in government securities are affected with a public
interest which makes it necessary--
``(1) to provide for the integrity, stability, and efficiency of
such transactions and of matters and practices related thereto;
``(2) to impose adequate regulation of government securities
brokers and government securities dealers generally; and
``(3) to require appropriate financial responsibility,
recordkeeping, reporting, and related regulatory requirements;
in order to protect investors and to insure the maintenance of fair,
honest, and liquid markets in such securities.''
Study of Regulatory System for Government Securities
Section 112 of title I of Pub. L. 103-202 provided that:
``(a) Joint Study.--The Secretary of the Treasury, the Securities
and Exchange Commission, and the Board of Governors of the Federal
Reserve System shall--
``(1) with respect to any rules promulgated or amended after
October 1, 1991, pursuant to section 15C of the Securities Exchange
Act of 1934 [15 U.S.C. 78o-5] or any amendment made by this title
[amending this section and sections 78c, 78o, 78o-3, 78s, and 78w of
this title], and any national securities association rule changes
applicable principally to government securities transactions
approved after October 1, 1991--
``(A) evaluate the effectiveness of such rules in carrying
out the purposes of such Act [15 U.S.C. 78a et seq.]; and
``(B) evaluate the impact of any such rules on the
efficiency and liquidity of the government securities market and
the cost of funding the Federal debt;
``(2) evaluate the effectiveness of surveillance and enforcement
with respect to government securities, and the impact on such
surveillance and enforcement of the availability of automated, time-
sequenced records of essential information pertaining to trades in
such securities; and
``(3) submit to the Congress, not later than March 31, 1998, any
recommendations they may consider appropriate concerning--
``(A) the regulation of government securities brokers and
government securities dealers;
``(B) the dissemination of information concerning quotations
for and transactions in government securities;
``(C) the prevention of sales practice abuses in connection
with transactions in government securities; and
``(D) such other matters as they consider appropriate.
``(b) Treasury Study.--The Secretary of the Treasury, in
consultation with the Securities and Exchange Commission, shall--
``(1) conduct a study of--
``(A) the identity and nature of the business of government
securities brokers and government securities dealers that are
registered with the Securities and Exchange Commission under
section 15C of the Securities Exchange Act of 1934 [15 U.S.C.
78o-5]; and
``(B) the continuing need for, and regulatory and financial
consequences of, a separate regulatory system for such
government securities brokers and government securities dealers;
and
``(2) submit to the Congress, not later than 18 months after the
date of enactment of this Act [Dec. 17, 1993], the Secretary's
recommendations for change, if any, or such other recommendations as
the Secretary considers appropriate.''
Studies and Recommendations With Respect to Extension of Treasury
Authority
Section 103 of Pub. L. 99-571 directed Secretary of the Treasury,
together with Securities and Exchange Commission and Board of Governors
of the Federal Reserve System, to evaluate the effectiveness of the
rules promulgated pursuant to 15 U.S.C. 78o-5 in effecting the purposes
of this chapter, and shall submit to Congress, not later than Oct. 1,
1990, their recommendation with respect to the extension of the
Secretary's authority under 15 U.S.C. 78o-5 and such other
recommendations as they considered appropriate; and directed Comptroller
General to conduct a study of the regulation of government securities
brokers and government securities dealers pursuant to 15 U.S.C. 78o-5
and the effectiveness of the amendments made by this Act in protecting
investors and in effecting the purposes described in 15 U.S.C. 78o-
5(b)(2), and submit to Congress, not later than Mar. 31, 1990, his
recommendations with respect to the extension of the Secretary's
authority under 15 U.S.C. 78o-5 and such other recommendations as he
considered appropriate.
Section Referred to in Other Sections
This section is referred to in sections 78c, 78o, 78u-2, 78y, 78mm,
78lll of this title; title 7 sections 1a, 2; title 26 sections 901, 954.
