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U.S. Code as of:
01/19/04
Section 78bb. Effect on existing law
(a) Addition of rights and remedies; recovery of actual damages;
State securities commissions
Except as provided in subsection (f) of this section, the rights
and remedies provided by this chapter shall be in addition to any
and all other rights and remedies that may exist at law or in
equity; but no person permitted to maintain a suit for damages
under the provisions of this chapter shall recover, through
satisfaction of judgment in one or more actions, a total amount in
excess of his actual damages on account of the act complained of.
Except as otherwise specifically provided in this chapter, nothing
in this chapter shall affect the jurisdiction of the securities
commission (or any agency or officer performing like functions) of
any State over any security or any person insofar as it does not
conflict with the provisions of this chapter or the rules and
regulations thereunder. No State law which prohibits or regulates
the making or promoting of wagering or gaming contracts, or the
operation of "bucket shops" or other similar or related activities,
shall invalidate any put, call, straddle, option, privilege, or
other security subject to this chapter, or apply to any activity
which is incidental or related to the offer, purchase, sale,
exercise, settlement, or closeout of any such security. No
provision of State law regarding the offer, sale, or distribution
of securities shall apply to any transaction in a security futures
product, except that this sentence shall not be construed as
limiting any State antifraud law of general applicability.
(b) Modification of disciplinary procedures
Nothing in this chapter shall be construed to modify existing law
with regard to the binding effect (1) on any member of or
participant in any self-regulatory organization of any action taken
by the authorities of such organization to settle disputes between
its members or participants, (2) on any municipal securities dealer
or municipal securities broker of any action taken pursuant to a
procedure established by the Municipal Securities Rulemaking Board
to settle disputes between municipal securities dealers and
municipal securities brokers, or (3) of any action described in
paragraph (1) or (2) on any person who has agreed to be bound
thereby.
(c) Continuing validity of disciplinary sanctions
The stay, setting aside, or modification pursuant to section
78s(e) of this title of any disciplinary sanction imposed by a
self-regulatory organization on a member thereof, person associated
with a member, or participant therein, shall not affect the
validity or force of any action taken as a result of such sanction
by the self-regulatory organization prior to such stay, setting
aside, or modification: Provided, That such action is not
inconsistent with the provisions of this chapter or the rules or
regulations thereunder. The rights of any person acting in good
faith which arise out of any such action shall not be affected in
any way by such stay, setting aside, or modification.
(d) Physical location of facilities of registered clearing agencies
or registered transfer agents not to subject changes in
beneficial or record ownership of securities to State or local
taxes
No State or political subdivision thereof shall impose any tax on
any change in beneficial or record ownership of securities effected
through the facilities of a registered clearing agency or
registered transfer agent or any nominee thereof or custodian
therefor or upon the delivery or transfer of securities to or
through or receipt from such agency or agent or any nominee thereof
or custodian therefor, unless such change in beneficial or record
ownership or such transfer or delivery or receipt would otherwise
be taxable by such State or political subdivision if the facilities
of such registered clearing agency, registered transfer agent, or
any nominee thereof or custodian therefor were not physically
located in the taxing State or political subdivision. No State or
political subdivision thereof shall impose any tax on securities
which are deposited in or retained by a registered clearing agency,
registered transfer agent, or any nominee thereof or custodian
therefor, unless such securities would otherwise be taxable by such
State or political subdivision if the facilities of such registered
clearing agency, registered transfer agent, or any nominee thereof
or custodian therefor were not physically located in the taxing
State or political subdivision.
(e) Exchange, broker, and dealer commissions; brokerage and
research services
(1) No person using the mails, or any means or instrumentality of
interstate commerce, in the exercise of investment discretion with
respect to an account shall be deemed to have acted unlawfully or
to have breached a fiduciary duty under State or Federal law unless
expressly provided to the contrary by a law enacted by the Congress
or any State subsequent to June 4, 1975, solely by reason of his
having caused the account to pay a member of an exchange, broker,
or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of
an exchange, broker, or dealer would have charged for effecting
that transaction, if such person determined in good faith that such
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker, or
dealer, viewed in terms of either that particular transaction or
his overall responsibilities with respect to the accounts as to
which he exercises investment discretion. This subsection is
exclusive and plenary insofar as conduct is covered by the
foregoing, unless otherwise expressly provided by contract:
Provided, however, That nothing in this subsection shall be
construed to impair or limit the power of the Commission under any
other provision of this chapter or otherwise.
(2) A person exercising investment discretion with respect to an
account shall make such disclosure of his policies and practices
with respect to commissions that will be paid for effecting
securities transactions, at such times and in such manner, as the
appropriate regulatory agency, by rule, may prescribe as necessary
or appropriate in the public interest or for the protection of
investors.
(3) For purposes of this subsection a person provides brokerage
and research services insofar as he -
(A) furnishes advice, either directly or through publications
or writings, as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of
securities;
(B) furnishes analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio
strategy, and the performance of accounts; or
(C) effects securities transactions and performs functions
incidental thereto (such as clearance, settlement, and custody)
or required in connection therewith by rules of the Commission or
a self-regulatory organization of which such person is a member
or person associated with a member or in which such person is a
participant.
(4) The provisions of this subsection shall not apply with regard
to securities that are security futures products.
(f) Limitations on remedies
(1) Class action limitations
No covered class action based upon the statutory or common law
of any State or subdivision thereof may be maintained in any
State or Federal court by any private party alleging -
(A) a misrepresentation or omission of a material fact in
connection with the purchase or sale of a covered security; or
(B) that the defendant used or employed any manipulative or
deceptive device or contrivance in connection with the purchase
or sale of a covered security.
(2) Removal of covered class actions
Any covered class action brought in any State court involving a
covered security, as set forth in paragraph (1), shall be
removable to the Federal district court for the district in which
the action is pending, and shall be subject to paragraph (1).
(3) Preservation of certain actions
(A) Actions under State law of State of incorporation
(i) Actions preserved
Notwithstanding paragraph (1) or (2), a covered class
action described in clause (ii) of this subparagraph that is
based upon the statutory or common law of the State in which
the issuer is incorporated (in the case of a corporation) or
organized (in the case of any other entity) may be maintained
in a State or Federal court by a private party.
(ii) Permissible actions
A covered class action is described in this clause if it
involves -
(I) the purchase or sale of securities by the issuer or
an affiliate of the issuer exclusively from or to holders
of equity securities of the issuer; or
(II) any recommendation, position, or other communication
with respect to the sale of securities of an issuer that -
(aa) is made by or on behalf of the issuer or an
affiliate of the issuer to holders of equity securities
of the issuer; and
(bb) concerns decisions of such equity holders with
respect to voting their securities, acting in response to
a tender or exchange offer, or exercising dissenters' or
appraisal rights.
(B) State actions
(i) In general
Notwithstanding any other provision of this subsection,
nothing in this subsection may be construed to preclude a
State or political subdivision thereof or a State pension
plan from bringing an action involving a covered security on
its own behalf, or as a member of a class comprised solely of
other States, political subdivisions, or State pension plans
that are named plaintiffs, and that have authorized
participation, in such action.
(ii) State pension plan defined
For purposes of this subparagraph, the term "State pension
plan" means a pension plan established and maintained for its
employees by the government of a State or political
subdivision thereof, or by any agency or instrumentality
thereof.
(C) Actions under contractual agreements between issuers and
indenture trustees
Notwithstanding paragraph (1) or (2), a covered class action
that seeks to enforce a contractual agreement between an issuer
and an indenture trustee may be maintained in a State or
Federal court by a party to the agreement or a successor to
such party.
(D) Remand of removed actions
In an action that has been removed from a State court
pursuant to paragraph (2), if the Federal court determines that
the action may be maintained in State court pursuant to this
subsection, the Federal court shall remand such action to such
State court.
(4) Preservation of State jurisdiction
The securities commission (or any agency or office performing
like functions) of any State shall retain jurisdiction under the
laws of such State to investigate and bring enforcement actions.
(5) Definitions
For purposes of this subsection, the following definitions
shall apply:
(A) Affiliate of the issuer
The term "affiliate of the issuer" means a person that
directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with,
the issuer.
(B) Covered class action
The term "covered class action" means -
(i) any single lawsuit in which -
(I) damages are sought on behalf of more than 50 persons
or prospective class members, and questions of law or fact
common to those persons or members of the prospective
class, without reference to issues of individualized
reliance on an alleged misstatement or omission,
predominate over any questions affecting only individual
persons or members; or
(II) one or more named parties seek to recover damages on
a representative basis on behalf of themselves and other
unnamed parties similarly situated, and questions of law or
fact common to those persons or members of the prospective
class predominate over any questions affecting only
individual persons or members; or
(ii) any group of lawsuits filed in or pending in the same
court and involving common questions of law or fact, in which
-
(I) damages are sought on behalf of more than 50 persons;
and
(II) the lawsuits are joined, consolidated, or otherwise
proceed as a single action for any purpose.
(C) Exception for derivative actions
Notwithstanding subparagraph (B), the term "covered class
action" does not include an exclusively derivative action
brought by one or more shareholders on behalf of a corporation.
(D) Counting of certain class members
For purposes of this paragraph, a corporation, investment
company, pension plan, partnership, or other entity, shall be
treated as one person or prospective class member, but only if
the entity is not established for the purpose of participating
in the action.
(E) Covered security
The term "covered security" means a security that satisfies
the standards for a covered security specified in paragraph (1)
or (2) of section 18(b) of the Securities Act of 1933 [15
U.S.C. 77r(b)], at the time during which it is alleged that the
misrepresentation, omission, or manipulative or deceptive
conduct occurred, except that such term shall not include any
debt security that is exempt from registration under the
Securities Act of 1933 [15 U.S.C. 77a et seq.] pursuant to
rules issued by the Commission under section 4(2) of that Act
[15 U.S.C. 77d(2)].
(F) Rule of construction
Nothing in this paragraph shall be construed to affect the
discretion of a State court in determining whether actions
filed in such court should be joined, consolidated, or
otherwise allowed to proceed as a single action.
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