§ 78s. — Registration, responsibilities, and oversight of selfregulatory organizations.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC78s]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2B--SECURITIES EXCHANGES
Sec. 78s. Registration, responsibilities, and oversight of self-
regulatory organizations
(a) Registration procedures; notice of filing; other regulatory agencies
(1) The Commission shall, upon the filing of an application for
registration as a national securities exchange, registered securities
association, or registered clearing agency, pursuant to section 78f,
78o-3, or 78q-1 of this title, respectively, publish notice of such
filing and afford interested persons an opportunity to submit written
data, views, and arguments concerning such application. Within ninety
days of the date of publication of such notice (or within such longer
period as to which the applicant consents), the Commission shall--
(A) by order grant such 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 eighty days of the date of
a publication of notice 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 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 such registration if it finds that the
requirements of this chapter and the rules and regulations thereunder
with respect to the applicant are satisfied. The Commission shall deny
such registration if it does not make such finding.
(2) With respect to an application for registration filed by a
clearing agency for which the Commission is not the appropriate
regulatory agency--
(A) The Commission shall not grant registration prior to the
sixtieth day after the date of publication of notice of the filing
of such application unless the appropriate regulatory agency for
such clearing agency has notified the Commission of such appropriate
regulatory agency's determination that such clearing agency is so
organized and has the capacity to be able to safeguard securities
and funds in its custody or control or for which it is responsible
and that the rules of such clearing agency are designed to assure
the safeguarding of such securities and funds.
(B) The Commission shall institute proceedings in accordance
with paragraph (1)(B) of this subsection to determine whether
registration should be denied if the appropriate regulatory agency
for such clearing agency notifies the Commission within sixty days
of the date of publication of notice of the filing of such
application of such appropriate regulatory agency's (i)
determination that such clearing agency may not be so organized or
have the capacity to be able to safeguard securities or funds in its
custody or control or for which it is responsible or that the rules
of such clearing agency may not be designed to assure the
safeguarding of such securities and funds and (ii) reasons for such
determination.
(C) The Commission shall deny registration if the appropriate
regulatory agency for such clearing agency notifies the Commission
prior to the conclusion of proceedings instituted in accordance with
paragraph (1)(B) of this subsection of such appropriate regulatory
agency's (i) determination that such clearing agency is not so
organized or does not have the capacity to be able to safeguard
securities or funds in its custody or control or for which it is
responsible or that the rules of such clearing agency are not
designed to assure the safeguarding of such securities or funds and
(ii) reasons for such determination.
(3) A self-regulatory organization may, upon such terms and
conditions as the Commission, by rule, deems necessary or appropriate 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 self-regulatory
organization is no longer in existence or has ceased to do business in
the capacity specified in its application for registration, the
Commission, by order, shall cancel its registration. Upon the withdrawal
of a national securities association from registration or the
cancellation, suspension, or revocation of the registration of a
national securities association, the registration of any association
affiliated therewith shall automatically terminate.
(b) Proposed rule changes; notice; proceedings
(1) Each self-regulatory organization shall file with the
Commission, in accordance with such rules as the Commission may
prescribe, copies of any proposed rule or any proposed change in,
addition to, or deletion from the rules of such self-regulatory
organization (hereinafter in this subsection collectively referred to as
a ``proposed rule change'') accompanied by a concise general statement
of the basis and purpose of such proposed rule change. The Commission
shall, upon the filing of any proposed rule change, publish notice
thereof together with the terms of substance of the proposed rule change
or a description of the subjects and issues involved. The Commission
shall give interested persons an opportunity to submit written data,
views, and arguments concerning such proposed rule change. No proposed
rule change shall take effect unless approved by the Commission or
otherwise permitted in accordance with the provisions of this
subsection.
(2) Within thirty-five days of the date of publication of notice of
the filing of a proposed rule change in accordance with paragraph (1) of
this subsection, or within such longer period as the Commission may
designate up to ninety days of such date if it finds such longer period
to be appropriate and publishes its reasons for so finding or as to
which the self-regulatory organization consents, the Commission shall--
(A) by order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved. Such proceedings shall include notice
of the grounds for disapproval under consideration and opportunity
for hearing and be concluded within one hundred eighty days of the
date of publication of notice of the filing of the proposed rule
change. At the conclusion of such proceedings the Commission, by
order, shall approve or disapprove such proposed rule change. The
Commission may extend the time for conclusion of such proceedings
for up to sixty 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 self-regulatory organization consents.
The Commission shall approve a proposed rule change of a self-regulatory
organization if it finds that such proposed rule change is consistent
with the requirements of this chapter and the rules and regulations
thereunder applicable to such organization. The Commission shall
disapprove a proposed rule change of a self-regulatory organization if
it does not make such finding. The Commission shall not approve any
proposed rule change prior to the thirtieth day after the date of
publication of notice of the filing thereof, unless the Commission finds
good cause for so doing and publishes its reasons for so finding.
(3)(A) Notwithstanding the provisions of paragraph (2) of this
subsection, a proposed rule change may take effect upon filing with the
Commission if designated by the self-regulatory organization as (i)
constituting a stated policy, practice, or interpretation with respect
to the meaning, administration, or enforcement of an existing rule of
the self-regulatory organization, (ii) establishing or changing a due,
fee, or other charge imposed by the self-regulatory organization, or
(iii) concerned solely with the administration of the self-regulatory
organization or other matters which the Commission, by rule, consistent
with the public interest and the purposes of this subsection, may
specify as without the provisions of such paragraph (2).
(B) Notwithstanding any other provision of this subsection, a
proposed rule change may be put into effect summarily if it appears to
the Commission that such action is necessary for the protection of
investors, the maintenance of fair and orderly markets, or the
safeguarding of securities or funds. Any proposed rule change so put
into effect shall be filed promptly thereafter in accordance with the
provisions of paragraph (1) of this subsection.
(C) Any proposed rule change of a self-regulatory organization which
has taken effect pursuant to subparagraph (A) or (B) of this paragraph
may be enforced by such organization to the extent it is not
inconsistent with the provisions of this chapter, the rules and
regulations thereunder, and applicable Federal and State law. At any
time within sixty days of the date of filing of such a proposed rule
change in accordance with the provisions of paragraph (1) of this
subsection, the Commission summarily may abrogate the change in the
rules of the self-regulatory organization made thereby and require that
the proposed rule change be refiled in accordance with the provisions of
paragraph (1) of this subsection and reviewed in accordance with the
provisions of paragraph (2) of this subsection, if it appears to the
Commission that 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. Commission action pursuant to the
preceding sentence shall not affect the validity or force of the rule
change during the period it was in effect and shall not be reviewable
under section 78y of this title nor deemed to be ``final agency action''
for purposes of section 704 of title 5.
(4) With respect to a proposed rule change filed by a registered
clearing agency for which the Commission is not the appropriate
regulatory agency--
(A) The Commission shall not approve any such proposed rule
change prior to the thirtieth day after the date of publication of
notice of the filing whereof unless the appropriate regulatory
agency for such clearing agency has notified the Commission of such
appropriate regulatory agency's determination that the proposed rule
change is consistent with the safeguarding of securities and funds
in the custody or control of such clearing agency or for which it is
responsible.
(B) The Commission shall institute proceedings in accordance
with paragraph (2)(B) of this subsection to determine whether any
such proposed rule change should be disapproved, if the appropriate
regulatory agency for such clearing agency notifies the Commission
within thirty days of the date of publication of notice of the
filing of the proposed rule change of such appropriate regulatory
agency's (i) determination that the proposed rule change may be
inconsistent with the safeguarding of securities or funds in the
custody or control of such clearing agency or for which it is
responsible and (ii) reasons for such determination.
(C) The Commission shall disapprove any such proposed rule
change if the appropriate regulatory agency for such clearing agency
notifies the Commission prior to the conclusion of proceedings
instituted in accordance with paragraph (2)(B) of this subsection of
such appropriate regulatory agency's (i) determination that the
proposed rule change is inconsistent with the safeguarding of
securities or funds in the custody or control of such clearing
agency or for which it is responsible and (ii) reasons for such
determination.
(D) The Commission shall abrogate any change in the rules of
such a clearing agency made by a proposed rule change which has
taken effect pursuant to paragraph (3) of this subsection, require
that the proposed rule change be refiled in accordance with the
provisions of paragraph (1) of this subsection, and reviewed in
accordance with the provisions of paragraph (2) of this subsection,
if the appropriate regulatory agency for such clearing agency
notifies the Commission within thirty days of the date of filing of
such proposed rule change of such appropriate regulatory agency's
(i) determination that the rules of such clearing agency as so
changed may be inconsistent with the safeguarding of securities or
funds in the custody or control of such clearing agency or for which
it is responsible and (ii) reasons for such determination.
(5) The Commission shall consult with and consider the views of the
Secretary of the Treasury prior to approving a proposed rule filed by a
registered securities association that primarily concerns conduct
related to transactions in government securities, except where the
Commission determines that an emergency exists requiring expeditious or
summary action and publishes its reasons therefor. If the Secretary of
the Treasury comments in writing to the Commission on a proposed rule
that has been published for comment, the Commission shall respond in
writing to such written comment before approving the proposed rule. If
the Secretary of the Treasury determines, and notifies the Commission,
that such rule, 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
Commission shall, prior to adopting the proposed rule, find that such
rule is necessary and appropriate in furtherance of the purposes of this
section notwithstanding the Secretary's determination.
(6) In approving rules described in paragraph (5), the Commission
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.
(7) Security futures product rule changes.--
(A) Filing required.--A self-regulatory organization that is an
exchange registered with the Commission pursuant to section 78f(g)
of this title or that is a national securities association
registered pursuant to section 78o-3(k) of this title shall file
with the Commission, in accordance with such rules as the Commission
may prescribe, copies of any proposed rule change or any proposed
change in, addition to, or deletion from the rules of such self-
regulatory organization (hereinafter in this paragraph collectively
referred to as a ``proposed rule change'') that relates to higher
margin levels, fraud or manipulation, recordkeeping, reporting,
listing standards, or decimal pricing for security futures products,
sales practices for security futures products for persons who effect
transactions in security futures products, or rules effectuating
such self-regulatory organization's obligation to enforce the
securities laws. Such proposed rule change shall be accompanied by a
concise general statement of the basis and purpose of such proposed
rule change. The Commission shall, upon the filing of any proposed
rule change, promptly publish notice thereof together with the terms
of substance of the proposed rule change or a description of the
subjects and issues involved. The Commission shall give interested
persons an opportunity to submit data, views, and arguments
concerning such proposed rule change.
(B) Filing with cftc.--A proposed rule change filed with the
Commission pursuant to subparagraph (A) shall be filed concurrently
with the Commodity Futures Trading Commission. Such proposed rule
change may take effect upon filing of a written certification with
the Commodity Futures Trading Commission under section 7a-2(c) of
title 7, upon a determination by the Commodity Futures Trading
Commission that review of the proposed rule change is not necessary,
or upon approval of the proposed rule change by the Commodity
Futures Trading Commission.
(C) Abrogation of rule changes.--Any proposed rule change of a
self-regulatory organization that has taken effect pursuant to
subparagraph (B) may be enforced by such self-regulatory
organization to the extent such rule is not inconsistent with the
provisions of this chapter, the rules and regulations thereunder,
and applicable Federal law. At any time within 60 days of the date
of the filing of a written certification with the Commodity Futures
Trading Commission under section 7a-2(c) of title 7, the date the
Commodity Futures Trading Commission determines that review of such
proposed rule change is not necessary, or the date the Commodity
Futures Trading Commission approves such proposed rule change, the
Commission, after consultation with the Commodity Futures Trading
Commission, may summarily abrogate the proposed rule change and
require that the proposed rule change be refiled in accordance with
the provisions of paragraph (1), if it appears to the Commission
that such proposed rule change unduly burdens competition or
efficiency, conflicts with the securities laws, or is inconsistent
with the public interest and the protection of investors. Commission
action pursuant to the preceding sentence shall not affect the
validity or force of the rule change during the period it was in
effect and shall not be reviewable under section 78y of this title
nor deemed to be a final agency action for purposes of section 704
of title 5.
(D) Review of resubmitted abrogated rules.--
(i) Proceedings.--Within 35 days of the date of publication
of notice of the filing of a proposed rule change that is
abrogated in accordance with subparagraph (C) and refiled in
accordance with paragraph (1), or within such longer period as
the Commission may designate up to 90 days after such date if
the Commission finds such longer period to be appropriate and
publishes its reasons for so finding or as to which the self-
regulatory organization consents, the Commission shall--
(I) by order approve such proposed rule change; or
(II) after consultation with the Commodity Futures
Trading Commission, institute proceedings to determine
whether the proposed rule change should be disapproved.
Proceedings under subclause (II) shall include notice of the
grounds for disapproval under consideration and opportunity
for hearing and be concluded within 180 days after the date
of publication of notice of the filing of the proposed rule
change. At the conclusion of such proceedings, the
Commission, by order, shall approve or disapprove such
proposed rule change. The Commission may extend the time for
conclusion of such proceedings for up to 60 days if the
Commission finds good cause for such extension and publishes
its reasons for so finding or for such longer period as to
which the self-regulatory organization consents.
(ii) Grounds for approval.--The Commission shall approve a
proposed rule change of a self-regulatory organization under
this subparagraph if the Commission finds that such proposed
rule change does not unduly burden competition or efficiency,
does not conflict with the securities laws, and is not
inconsistent with the public interest or the protection of
investors. The Commission shall disapprove such a proposed rule
change of a self-regulatory organization if it does not make
such finding. The Commission shall not approve any proposed rule
change prior to the 30th day after the date of publication of
notice of the filing thereof, unless the Commission finds good
cause for so doing and publishes its reasons for so finding.
(8) Decimal pricing.--Not later than 9 months after the date on
which trading in any security futures product commences under this
chapter, all self-regulatory organizations listing or trading security
futures products shall file proposed rule changes necessary to implement
decimal pricing of security futures products. The Commission may not
require such rules to contain equal minimum increments in such decimal
pricing.
(9) Consultation with cftc.--
(A) Consultation required.--The Commission shall consult with
and consider the views of the Commodity Futures Trading Commission
prior to approving or disapproving a proposed rule change filed by a
national securities association registered pursuant to section 78o-
3(a) of this title or a national securities exchange subject to the
provisions of subsection (a) of this section that primarily concerns
conduct related to transactions in security futures products, except
where the Commission determines that an emergency exists requiring
expeditious or summary action and publishes its reasons therefor.
(B) Responses to cftc comments and findings.--If the Commodity
Futures Trading Commission comments in writing to the Commission on
a proposed rule that has been published for comment, the Commission
shall respond in writing to such written comment before approving or
disapproving the proposed rule. If the Commodity Futures Trading
Commission determines, and notifies the Commission, that such rule,
if implemented or as applied, would--
(i) adversely affect the liquidity or efficiency of the
market for security futures products; or
(ii) impose any burden on competition not necessary or
appropriate in furtherance of the purposes of this section,
the Commission shall, prior to approving or disapproving the
proposed rule, find that such rule is necessary and appropriate in
furtherance of the purposes of this section notwithstanding the
Commodity Futures Trading Commission's determination.
(c) Amendment by Commission of rules of self-regulatory organizations
The Commission, by rule, may abrogate, add to, and delete from
(hereinafter in this subsection collectively referred to as ``amend'')
the rules of a self-regulatory organization (other than a registered
clearing agency) as the Commission deems necessary or appropriate to
insure the fair administration of the self-regulatory organization, to
conform its rules to requirements of this chapter and the rules and
regulations thereunder applicable to such organization, or otherwise in
furtherance of the purposes of this chapter, in the following manner:
(1) The Commission shall notify the self-regulatory organization
and publish notice of the proposed rulemaking in the Federal
Register. The notice shall include the text of the proposed
amendment to the rules of the self-regulatory organization and a
statement of the Commission's reasons, including any pertinent
facts, for commencing such proposed rulemaking.
(2) The Commission shall give interested persons an opportunity
for the oral presentation of data, views, and arguments, in addition
to an opportunity to make written submissions. A transcript shall be
kept of any oral presentation.
(3) A rule adopted pursuant to this subsection shall incorporate
the text of the amendment to the rules of the self-regulatory
organization and a statement of the Commission's basis for and
purpose in so amending such rules. This statement shall include an
identification of any facts on which the Commission considers its
determination so to amend the rules of the self-regulatory agency to
be based, including the reasons for the Commission's conclusions as
to any of such facts which were disputed in the rulemaking.
(4)(A) Except as provided in paragraphs (1) through (3) of this
subsection, rulemaking under this subsection shall be in accordance
with the procedures specified in section 553 of title 5 for
rulemaking not on the record.
(B) Nothing in this subsection shall be construed to impair or
limit the Commission's power to make, or to modify or alter the
procedures the Commission may follow in making, rules and
regulations pursuant to any other authority under this chapter.
(C) Any amendment to the rules of a self-regulatory organization
made by the Commission pursuant to this subsection shall be
considered for all purposes of this chapter to be part of the rules
of such self-regulatory organization and shall not be considered to
be a rule of the Commission.
(5) With respect to rules described in subsection (b)(5) of this
section, the Commission shall consult with and consider the views of
the Secretary of the Treasury before abrogating, adding to, and
deleting from such rules, except where the Commission determines
that an emergency exists requiring expeditious or summary action and
publishes its reasons therefor.
(d) Notice of disciplinary action taken by self-regulatory organization
against a member or participant; review of action by appropriate
regulatory agency; procedure
(1) If any self-regulatory organization imposes any final
disciplinary sanction on any member thereof or participant therein,
denies membership or participation to any applicant, or prohibits or
limits any person in respect to access to services offered by such
organization or member thereof or if any self-regulatory organization
(other than a registered clearing agency) imposes any final disciplinary
sanction on any person associated with a member or bars any person from
becoming associated with a member, the self-regulatory organization
shall promptly file notice thereof with the appropriate regulatory
agency for the self-regulatory organization and (if other than the
appropriate regulatory agency for the self-regulatory organization) the
appropriate regulatory agency for such member, participant, applicant,
or other person. The notice shall be in such form and contain such
information as the appropriate regulatory agency for the self-regulatory
organization, by rule, may prescribe as necessary or appropriate in
furtherance of the purposes of this chapter.
(2) Any action with respect to which a self-regulatory organization
is required by paragraph (1) of this subsection to file notice shall be
subject to review by the appropriate regulatory agency for such member,
participant, applicant, or other person, on its own motion, or upon
application by any person aggrieved thereby filed within thirty days
after the date such notice was filed with such appropriate regulatory
agency and received by such aggrieved person, or within such longer
period as such appropriate regulatory agency may determine. Application
to such appropriate regulatory agency for review, or the institution of
review by such appropriate regulatory agency on its own motion, shall
not operate as a stay of such action unless such appropriate regulatory
agency otherwise orders, summarily or after notice and opportunity for
hearing on the question of a stay (which hearing may consist solely of
the submission of affidavits or presentation of oral arguments). Each
appropriate regulatory agency shall establish for appropriate cases an
expedited procedure for consideration and determination of the question
of a stay.
(3) The provisions of this subsection shall apply to an exchange
registered pursuant to section 78f(g) of this title or a national
securities association registered pursuant to section 78o-3(k) of this
title only to the extent that such exchange or association imposes any
final disciplinary sanction for--
(A) a violation of the Federal securities laws or the rules and
regulations thereunder; or
(B) a violation of a rule of such exchange or association, as to
which a proposed change would be required to be filed under this
section, except that, to the extent that the exchange or association
rule violation relates to any account, agreement, contract, or
transaction, this subsection shall apply only to the extent such
violation involves a security futures product.
(e) Disposition of review; cancellation, reduction, or remission of
sanction
(1) In any proceeding to review a final disciplinary sanction
imposed by a self-regulatory organization on a member thereof or
participant therein or a person associated with such a member, after
notice and opportunity for hearing (which hearing may consist solely of
consideration of the record before the self-regulatory organization and
opportunity for the presentation of supporting reasons to affirm,
modify, or set aside the sanction)--
(A) if the appropriate regulatory agency for such member,
participant, or person associated with a member finds that such
member, participant, or person associated with a member has engaged
in such acts or practices, or has omitted such acts, as the self-
regulatory organization has found him to have engaged in or omitted,
that such acts or practices, or omissions to act, are in violation
of such provisions of this chapter, the rules or regulations
thereunder, the rules of the self-regulatory organization, or, in
the case of a registered securities association, the rules of the
Municipal Securities Rulemaking Board as have been specified in the
determination of the self-regulatory organization, and that such
provisions are, and were applied in a manner, consistent with the
purposes of this chapter, such appropriate regulatory agency, by
order, shall so declare and, as appropriate, affirm the sanction
imposed by the self-regulatory organization, modify the sanction in
accordance with paragraph (2) of this subsection, or remand to the
self-regulatory organization for further proceedings; or
(B) if such appropriate regulatory agency does not make any such
finding it shall, by order, set aside the sanction imposed by the
self-regulatory organization and, if appropriate, remand to the
self-regulatory organization for further proceedings.
(2) If the appropriate regulatory agency for a member, participant,
or person associated with a member, having due regard for the public
interest and the protection of investors, finds after a proceeding in
accordance with paragraph (1) of this subsection that a sanction imposed
by a self-regulatory organization upon such member, participant, or
person associated with a member imposes any burden on competition not
necessary or appropriate in furtherance of the purposes of this chapter
or is excessive or oppressive, the appropriate regulatory agency may
cancel, reduce, or require the remission of such sanction.
(f) Dismissal of review proceeding
In any proceeding to review the denial of membership or
participation in a self-regulatory organization to any applicant, the
barring of any person from becoming associated with a member of a self-
regulatory organization, or the prohibition or limitation by a self-
regulatory organization of any person with respect to access to services
offered by the self-regulatory organization or any member thereof, if
the appropriate regulatory agency for such applicant or person, after
notice and opportunity for hearing (which hearing may consist solely of
consideration of the record before the self-regulatory organization and
opportunity for the presentation of supporting reasons to dismiss the
proceeding or set aside the action of the self-regulatory organization)
finds that the specific grounds on which such denial, bar, or
prohibition or limitation is based exist in fact, that such denial, bar,
or prohibition or limitation is in accordance with the rules of the
self-regulatory organization, and that such rules are, and were applied
in a manner, consistent with the purposes of this chapter, such
appropriate regulatory agency, by order, shall dismiss the proceeding.
If such appropriate regulatory agency does not make any such finding or
if it finds that such denial, bar, or prohibition or limitation imposes
any burden on competition not necessary or appropriate in furtherance of
the purposes of this chapter, such appropriate regulatory agency, by
order, shall set aside the action of the self-regulatory organization
and require it to admit such applicant to membership or participation,
permit such person to become associated with a member, or grant such
person access to services offered by the self-regulatory organization or
member thereof.
(g) Compliance with rules and regulations
(1) Every self-regulatory organization shall comply with the
provisions of this chapter, the rules and regulations thereunder, and
its own rules, and (subject to the provisions of section 78q(d) of this
title, paragraph (2) of this subsection, and the rules thereunder)
absent reasonable justification or excuse enforce compliance--
(A) in the case of a national securities exchange, with such
provisions by its members and persons associated with its members;
(B) in the case of a registered securities association, with
such provisions and the provisions of the rules of the Municipal
Securities Rulemaking Board by its members and persons associated
with its members; and
(C) in the case of a registered clearing agency, with its own
rules by its participants.
(2) The Commission, by rule, consistent with the public interest,
the protection of investors, and the other purposes of this chapter, may
relieve any self-regulatory organization of any responsibility under
this chapter to enforce compliance with any specified provision of this
chapter or the rules or regulations thereunder by any member of such
organization or person associated with such a member, or any class of
such members or persons associated with a member.
(h) Suspension or revocation of self-regulatory organization's
registration; censure; other sanctions
(1) The appropriate regulatory agency for a self-regulatory
organization 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 suspend for a period not exceeding twelve months or revoke the
registration of such self-regulatory organization, or to censure or
impose limitations upon the activities, functions, and operations of
such self-regulatory organization, if such appropriate regulatory agency
finds, on the record after notice and opportunity for hearing, that such
self-regulatory organization has violated or is unable to comply with
any provision of this chapter, the rules or regulations thereunder, or
its own rules or without reasonable justification or excuse has failed
to enforce compliance--
(A) in the case of a national securities exchange, with any such
provision by a member thereof or a person associated with a member
thereof;
(B) in the case of a registered securities association, with any
such provision or any provision of the rules of the Municipal
Securities Rulemaking Board by a member thereof or a person
associated with a member thereof; or
(C) in the case of a registered clearing agency, with any
provision of its own rules by a participant therein.
(2) The appropriate regulatory agency for a self-regulatory
organization 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 suspend for a period not exceeding twelve months or expel from such
self-regulatory organization any member thereof or participant therein,
if such member or participant is subject to an order of the Commission
pursuant to section 78o(b)(4) of this title or if such appropriate
regulatory agency finds, on the record after notice and opportunity for
hearing, that such member or participant has willfully violated or has
effected any transaction for any other person who, such member or
participant had reason to believe, was violating with respect to such
transaction--
(A) in the case of a national securities exchange, any provision
of the Securities Act of 1933 [15 U.S.C. 77a et seq.], the
Investment Advisers Act of 1940 [15 U.S.C. 80b-1 et seq.], the
Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.], this
chapter, or the rules or regulations under any of such statutes;
(B) in the case of a registered securities association, any
provision of the Securities Act of 1933, the Investment Advisers Act
of 1940, the Investment Company Act of 1940, this chapter, the rules
or regulations under any of such statutes, or the rules of the
Municipal Securities Rulemaking Board; or
(C) in the case of a registered clearing agency, any provision
of the rules of the clearing agency.
(3) The appropriate regulatory agency for a national securities
exchange or registered securities association 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 suspend for a period not exceeding
twelve months or to bar any person from being associated with a member
of such national securities exchange or registered securities
association, if such person is subject to an order of the Commission
pursuant to section 78o(b)(6) of this title or if such appropriate
regulatory agency finds, on the record after notice and opportunity for
hearing, that such person has willfully violated or has effected any
transaction for any other person who, such person associated with a
member had reason to believe, was violating with respect to such
transaction--
(A) in the case of a national securities exchange, any provision
of the Securities Act of 1933, the Investment Advisers Act of 1940,
the Investment Company Act of 1940, this chapter, or the rules or
regulations under any of such statutes; or
(B) in the case of a registered securities association, any
provision of the Securities Act of 1933, the Investment Advisers Act
of 1940, the Investment Company Act of 1940, this chapter, the rules
or regulations under any of the statutes, or the rules of the
Municipal Securities Rulemaking Board.
(4) The appropriate regulatory agency for a self-regulatory
organization 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 officer or director of such self-
regulatory organization, if such appropriate regulatory agency finds, on
the record after notice and opportunity for hearing, that such officer
or director has willfully violated any provision of this chapter, the
rules or regulations thereunder, or the rules of such self-regulatory
organization, willfully abused his authority, or without reasonable
justification or excuse has failed to enforce compliance--
(A) in the case of a national securities exchange, with any such
provision by any member or person associated with a member;
(B) in the case of a registered securities association, with any
such provision or any provision of the rules of the Municipal
Securities Rulemaking Board by any member or person associated with
a member; or
(C) in the case of a registered clearing agency, with any
provision of the rules of the clearing agency by any participant.
(i) Appointment of trustee
If a proceeding under subsection (h)(1) of this section results in
the suspension or revocation of the registration of a clearing agency,
the appropriate regulatory agency for such clearing agency may, upon
notice to such clearing agency, apply to any court of competent
jurisdiction specified in section 78u(d) or 78aa of this title for the
appointment of a trustee. In the event of such an application, the court
may, to the extent it deems necessary or appropriate, take exclusive
jurisdiction of such clearing agency and the records and assets thereof,
wherever located; and the court shall appoint the appropriate regulatory
agency for such clearing agency or a person designated by such
appropriate regulatory agency as trustee with power to take possession
and continue to operate or terminate the operations of such clearing
agency in an orderly manner for the protection of participants and
investors, subject to such terms and conditions as the court may
prescribe.
(June 6, 1934, ch. 404, title I, Sec. 19, 48 Stat. 898; Pub. L. 87-196,
Sept. 5, 1961, 75 Stat. 465; Pub. L. 87-561, July 27, 1962, 76 Stat.
247; Pub. L. 90-438, July 29, 1968, 82 Stat. 453; Pub. L. 91-94, Oct.
20, 1969, 83 Stat. 141; Pub. L. 91-410, Sept. 25, 1970, 84 Stat. 862;
Pub. L. 94-29, Sec. 16, June 4, 1975, 89 Stat. 146; Pub. L. 103-202,
title I, Sec. 106(c), Dec. 17, 1993, 107 Stat. 2350; Pub. L. 105-353,
title III, Sec. 301(b)(11), Nov. 3, 1998, 112 Stat. 3236; Pub. L. 106-
554, Sec. 1(a)(5) [title II, Sec. 202(b), (c)], Dec. 21, 2000, 114 Stat.
2763, 2763A-418, 2763A-421.)
References in Text
This chapter, referred to in subsecs. (a)(1), (b)(2), (3)(C),
(7)(C), (8), (c), (d)(1), (e)(1)(A), (2), (f), (g), and (h), was in the
original ``this title''. See References in Text note set out under
section 78a of this title.
The Securities Act of 1933, referred to in subsec. (h), is act May
27, 1933, ch. 38, title I, 48 Stat. 74, as amended, which is classified
generally to subchapter I (Sec. 77a et seq.) of chapter 2A of this
title. For complete classification of this Act to the Code, see section
77a of this title and Tables.
The Investment Advisers Act of 1940, referred to in subsec. (h), is
title II of act Aug. 22, 1940, ch. 686, 54 Stat. 847, as amended, which
is classified generally to subchapter II (Sec. 80b-1 et seq.) of chapter
2D of this title. For complete classification of this Act to the Code,
see section 80b-20 of this title and Tables.
The Investment Company Act of 1940, referred to in subsec. (h), is
title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as amended, which
is classified generally to subchapter I (Sec. 80a-1 et seq.) of chapter
2D of this title. For complete classification of this Act to the Code,
see section 80a-51 of this title and Tables.
Amendments
2000--Subsec. (b)(7). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 202(b)(1)], added par. (7).
Subsec. (b)(8). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 202(b)(2)], added par. (8).
Subsec. (b)(9). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 202(b)(3)], added par. (9).
Subsec. (d)(3). Pub. L. 106-554, Sec. 1(a)(5) [title II,
Sec. 202(c)], added par. (3).
1998--Subsec. (c)(5). Pub. L. 105-353 realigned margins.
1993--Subsec. (b)(5), (6). Pub. L. 103-202, Sec. 106(c)(1), added
pars. (5) and (6).
Subsec. (c)(5). Pub. L. 103-202, Sec. 106(c)(2), added par. (5).
1975--Pub. L. 94-29 amended section generally, substituting
provisions covering the registration, responsibilities, and oversight of
self-regulatory organizations by the Commission for provisions covering
only the Commission's powers with respect to exchanges and securities,
with a view to consolidating and expanding the Commission's oversight
powers with respect to self-regulatory organizations, their members,
participants, and officers, and with a view to giving the Commission
identical powers over all self-regulatory organizations, including
registered clearing agencies, and substantially strengthening the
Commission's ability to assure that these organizations carry out their
statutory responsibilities.
1970--Subsec. (e)(1). Pub. L. 91-410 substituted ``December 31,
1970'' for ``September 1, 1970''.
1969--Subsec. (e). Pub. L. 91-94 substituted ``September 1, 1970''
for ``September 1, 1969'' in par. (1), and ``$945,000'' for ``$875,000''
in par. (4).
1968--Subsec. (e). Pub. L. 90-438 added subsec. (e).
1962--Subsec. (d). Pub. L. 87-561 substituted ``April 3, 1963'' for
``January 3, 1963'' and ``$950,000'' for ``$750,000''.
1961--Subsec. (d). Pub. L. 87-196 added subsec. (d).
Effective Date of 1975 Amendment
Amendment by Pub. L. 94-29 effective June 4, 1975, except for
amendment of subsec. (g) by Pub. L. 94-29 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.
Construction of 1993 Amendment
Amendment by Pub. L. 103-202 not to be construed to govern initial
issuance of any public debt obligation or to grant any authority to (or
extend any authority of) the Securities and Exchange Commission, any
appropriate regulatory agency, or a self-regulatory organization to
prescribe any procedure, term, or condition of such initial issuance, to
promulgate any rule or regulation governing such initial issuance, or to
otherwise regulate in any manner such initial issuance, see section 111
of Pub. L. 103-202, set out as a note under section 78o-5 of this title.
Transfer of Functions
For transfer of functions of Securities and Exchange Commission,
with certain exceptions, to Chairman of such Commission, see Reorg. Plan
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat.
1265, set out under section 78d of this title.
Review of Regulatory Structures and Procedures With Respect to Penny
Stocks; Report
Pub. L. 101-429, title V, Sec. 510, Oct. 15, 1990, 104 Stat. 957,
directed Comptroller General, in consultation with Securities and
Exchange Commission, to conduct a review of rules, procedures,
facilities, and oversight and enforcement activities of self-regulatory
organizations under Securities Exchange Act of 1934, with respect to
penny stocks (within the meaning of 15 U.S.C. 78c(a)(51)), and, within
one year after Oct. 15, 1990, to submit a report on the review including
a statement of findings and such recommendations as the Comptroller
General considered appropriate with respect to legislative or
administrative changes.
Section Referred to in Other Sections
This section is referred to in sections 78c, 78d-1, 78f, 78l, 78o-3,
78q, 78q-1, 78w, 78y, 78bb, 78hh, 80a-22, 7217 of this title.
