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U.S. Code as of:
01/19/04
Section 78c. Definitions and application
(a) Definitions
When used in this chapter, unless the context otherwise requires
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(1) The term "exchange" means any organization, association, or
group of persons, whether incorporated or unincorporated, which
constitutes, maintains, or provides a market place or facilities
for bringing together purchasers and sellers of securities or for
otherwise performing with respect to securities the functions
commonly performed by a stock exchange as that term is generally
understood, and includes the market place and the market
facilities maintained by such exchange.
(2) The term "facility" when used with respect to an exchange
includes its premises, tangible or intangible property whether on
the premises or not, any right to the use of such premises or
property or any service thereof for the purpose of effecting or
reporting a transaction on an exchange (including, among other
things, any system of communication to or from the exchange, by
ticker or otherwise, maintained by or with the consent of the
exchange), and any right of the exchange to the use of any
property or service.
(3)(A) The term "member" when used with respect to a national
securities exchange means (i) any natural person permitted to
effect transactions on the floor of the exchange without the
services of another person acting as broker, (ii) any registered
broker or dealer with which such a natural person is associated,
(iii) any registered broker or dealer permitted to designate as a
representative such a natural person, and (iv) any other
registered broker or dealer which agrees to be regulated by such
exchange and with respect to which the exchange undertakes to
enforce compliance with the provisions of this chapter, the rules
and regulations thereunder, and its own rules. For purposes of
sections 78f(b)(1), 78f(b)(4), 78f(b)(6), 78f(b)(7), 78f(d),
78q(d), 78s(d), 78s(e), 78s(g), 78s(h), and 78u of this title,
the term "member" when used with respect to a national securities
exchange also means, to the extent of the rules of the exchange
specified by the Commission, any person required by the
Commission to comply with such rules pursuant to section 78f(f)
of this title.
(B) The term "member" when used with respect to a registered
securities association means any broker or dealer who agrees to
be regulated by such association and with respect to whom the
association undertakes to enforce compliance with the provisions
of this chapter, the rules and regulations thereunder, and its
own rules.
(4) Broker. -
(A) In general. - The term "broker" means any person engaged
in the business of effecting transactions in securities for the
account of others.
(B) Exception for certain bank activities. - A bank shall not
be considered to be a broker because the bank engages in any
one or more of the following activities under the conditions
described:
(i) Third party brokerage arrangements. - The bank enters
into a contractual or other written arrangement with a broker
or dealer registered under this chapter under which the
broker or dealer offers brokerage services on or off the
premises of the bank if -
(I) such broker or dealer is clearly identified as the
person performing the brokerage services;
(II) the broker or dealer performs brokerage services in
an area that is clearly marked and, to the extent
practicable, physically separate from the routine
deposit-taking activities of the bank;
(III) any materials used by the bank to advertise or
promote generally the availability of brokerage services
under the arrangement clearly indicate that the brokerage
services are being provided by the broker or dealer and not
by the bank;
(IV) any materials used by the bank to advertise or
promote generally the availability of brokerage services
under the arrangement are in compliance with the Federal
securities laws before distribution;
(V) bank employees (other than associated persons of a
broker or dealer who are qualified pursuant to the rules of
a self-regulatory organization) perform only clerical or
ministerial functions in connection with brokerage
transactions including scheduling appointments with the
associated persons of a broker or dealer, except that bank
employees may forward customer funds or securities and may
describe in general terms the types of investment vehicles
available from the bank and the broker or dealer under the
arrangement;
(VI) bank employees do not receive incentive compensation
for any brokerage transaction unless such employees are
associated persons of a broker or dealer and are qualified
pursuant to the rules of a self-regulatory organization,
except that the bank employees may receive compensation for
the referral of any customer if the compensation is a
nominal one-time cash fee of a fixed dollar amount and the
payment of the fee is not contingent on whether the
referral results in a transaction;
(VII) such services are provided by the broker or dealer
on a basis in which all customers that receive any services
are fully disclosed to the broker or dealer;
(VIII) the bank does not carry a securities account of
the customer except as permitted under clause (ii) or
(viii) of this subparagraph; and
(IX) the bank, broker, or dealer informs each customer
that the brokerage services are provided by the broker or
dealer and not by the bank and that the securities are not
deposits or other obligations of the bank, are not
guaranteed by the bank, and are not insured by the Federal
Deposit Insurance Corporation.
(ii) Trust activities. - The bank effects transactions in a
trustee capacity, or effects transactions in a fiduciary
capacity in its trust department or other department that is
regularly examined by bank examiners for compliance with
fiduciary principles and standards, and -
(I) is chiefly compensated for such transactions,
consistent with fiduciary principles and standards, on the
basis of an administration or annual fee (payable on a
monthly, quarterly, or other basis), a percentage of assets
under management, or a flat or capped per order processing
fee equal to not more than the cost incurred by the bank in
connection with executing securities transactions for
trustee and fiduciary customers, or any combination of such
fees; and
(II) does not publicly solicit brokerage business, other
than by advertising that it effects transactions in
securities in conjunction with advertising its other trust
activities.
(iii) Permissible securities transactions. - The bank
effects transactions in -
(I) commercial paper, bankers acceptances, or commercial
bills;
(II) exempted securities;
(III) qualified Canadian government obligations as
defined in section 24 of title 12, in conformity with
section 78o-5 of this title and the rules and regulations
thereunder, or obligations of the North American
Development Bank; or
(IV) any standardized, credit enhanced debt security
issued by a foreign government pursuant to the March 1989
plan of then Secretary of the Treasury Brady, used by such
foreign government to retire outstanding commercial bank
loans.
(iv) Certain stock purchase plans. -
(I) Employee benefit plans. - The bank effects
transactions, as part of its transfer agency activities, in
the securities of an issuer as part of any pension,
retirement, profit-sharing, bonus, thrift, savings,
incentive, or other similar benefit plan for the employees
of that issuer or its affiliates (as defined in section
1841 of title 12), if the bank does not solicit
transactions or provide investment advice with respect to
the purchase or sale of securities in connection with the
plan.
(II) Dividend reinvestment plans. - The bank effects
transactions, as part of its transfer agency activities, in
the securities of an issuer as part of that issuer's
dividend reinvestment plan, if -
(aa) the bank does not solicit transactions or provide
investment advice with respect to the purchase or sale of
securities in connection with the plan; and
(bb) the bank does not net shareholders' buy and sell
orders, other than for programs for odd-lot holders or
plans registered with the Commission.
(III) Issuer plans. - The bank effects transactions, as
part of its transfer agency activities, in the securities
of an issuer as part of a plan or program for the purchase
or sale of that issuer's shares, if -
(aa) the bank does not solicit transactions or provide
investment advice with respect to the purchase or sale of
securities in connection with the plan or program; and
(bb) the bank does not net shareholders' buy and sell
orders, other than for programs for odd-lot holders or
plans registered with the Commission.
(IV) Permissible delivery of materials. - The exception
to being considered a broker for a bank engaged in
activities described in subclauses (I), (II), and (III)
will not be affected by delivery of written or electronic
plan materials by a bank to employees of the issuer,
shareholders of the issuer, or members of affinity groups
of the issuer, so long as such materials are -
(aa) comparable in scope or nature to that permitted by
the Commission as of November 12, 1999; or
(bb) otherwise permitted by the Commission.
(v) Sweep accounts. - The bank effects transactions as part
of a program for the investment or reinvestment of deposit
funds into any no-load, open-end management investment
company registered under the Investment Company Act of 1940
[15 U.S.C. 80a-1 et seq.] that holds itself out as a money
market fund.
(vi) Affiliate transactions. - The bank effects
transactions for the account of any affiliate of the bank (as
defined in section 1841 of title 12) other than -
(I) a registered broker or dealer; or
(II) an affiliate that is engaged in merchant banking, as
described in section 1843(k)(4)(H) of title 12.
(vii) Private securities offerings. - The bank -
(I) effects sales as part of a primary offering of
securities not involving a public offering, pursuant to
section 3(b), 4(2), or 4(6) of the Securities Act of 1933
[15 U.S.C. 77c(b), 77d(2), 77d(6)] or the rules and
regulations issued thereunder;
(II) at any time after the date that is 1 year after
November 12, 1999, is not affiliated with a broker or
dealer that has been registered for more than 1 year in
accordance with this chapter, and engages in dealing,
market making, or underwriting activities, other than with
respect to exempted securities; and
(III) if the bank is not affiliated with a broker or
dealer, does not effect any primary offering described in
subclause (I) the aggregate amount of which exceeds 25
percent of the capital of the bank, except that the
limitation of this subclause shall not apply with respect
to any sale of government securities or municipal
securities.
(viii) Safekeeping and custody activities. -
(I) In general. - The bank, as part of customary banking
activities -
(aa) provides safekeeping or custody services with
respect to securities, including the exercise of warrants
and other rights on behalf of customers;
(bb) facilitates the transfer of funds or securities,
as a custodian or a clearing agency, in connection with
the clearance and settlement of its customers'
transactions in securities;
(cc) effects securities lending or borrowing
transactions with or on behalf of customers as part of
services provided to customers pursuant to division (aa)
or (bb) or invests cash collateral pledged in connection
with such transactions;
(dd) holds securities pledged by a customer to another
person or securities subject to purchase or resale
agreements involving a customer, or facilitates the
pledging or transfer of such securities by book entry or
as otherwise provided under applicable law, if the bank
maintains records separately identifying the securities
and the customer; or
(ee) serves as a custodian or provider of other related
administrative services to any individual retirement
account, pension, retirement, profit sharing, bonus,
thrift savings, incentive, or other similar benefit plan.
(II) Exception for carrying broker activities. - The
exception to being considered a broker for a bank engaged
in activities described in subclause (I) shall not apply if
the bank, in connection with such activities, acts in the
United States as a carrying broker (as such term, and
different formulations thereof, are used in section
78o(c)(3) of this title and the rules and regulations
thereunder) for any broker or dealer, unless such carrying
broker activities are engaged in with respect to government
securities (as defined in paragraph (42) of this
subsection).
(ix) Identified banking products. - The bank effects
transactions in identified banking products as defined in
section 206 of the Gramm-Leach-Bliley Act.
(x) Municipal securities. - The bank effects transactions
in municipal securities.
(xi) De minimis exception. - The bank effects, other than
in transactions referred to in clauses (i) through (x), not
more than 500 transactions in securities in any calendar
year, and such transactions are not effected by an employee
of the bank who is also an employee of a broker or dealer.
(C) Execution by broker or dealer. - The exception to being
considered a broker for a bank engaged in activities described
in clauses (ii), (iv), and (viii) of subparagraph (B) shall not
apply if the activities described in such provisions result in
the trade in the United States of any security that is a
publicly traded security in the United States, unless -
(i) the bank directs such trade to a registered broker or
dealer for execution;
(ii) the trade is a cross trade or other substantially
similar trade of a security that -
(I) is made by the bank or between the bank and an
affiliated fiduciary; and
(II) is not in contravention of fiduciary principles
established under applicable Federal or State law; or
(iii) the trade is conducted in some other manner permitted
under rules, regulations, or orders as the Commission may
prescribe or issue.
(D) Fiduciary capacity. - For purposes of subparagraph
(B)(ii), the term "fiduciary capacity" means -
(i) in the capacity as trustee, executor, administrator,
registrar of stocks and bonds, transfer agent, guardian,
assignee, receiver, or custodian under a uniform gift to
minor act, or as an investment adviser if the bank receives a
fee for its investment advice;
(ii) in any capacity in which the bank possesses investment
discretion on behalf of another; or
(iii) in any other similar capacity.
(E) Exception for entities subject to section 78o(e). - The
term "broker" does not include a bank that -
(i) was, on the day before November 12, 1999, subject to
section 78o(e) of this title; and
(ii) is subject to such restrictions and requirements as
the Commission considers appropriate.
(5) Dealer. -
(A) In general. - The term "dealer" means any person engaged
in the business of buying and selling securities for such
person's own account through a broker or otherwise.
(B) Exception for person not engaged in the business of
dealing. - The term "dealer" does not include a person that
buys or sells securities for such person's own account, either
individually or in a fiduciary capacity, but not as a part of a
regular business.
(C) Exception for certain bank activities. - A bank shall not
be considered to be a dealer because the bank engages in any of
the following activities under the conditions described:
(i) Permissible securities transactions. - The bank buys or
sells -
(I) commercial paper, bankers acceptances, or commercial
bills;
(II) exempted securities;
(III) qualified Canadian government obligations as
defined in section 24 of title 12, in conformity with
section 78o-5 of this title and the rules and regulations
thereunder, or obligations of the North American
Development Bank; or
(IV) any standardized, credit enhanced debt security
issued by a foreign government pursuant to the March 1989
plan of then Secretary of the Treasury Brady, used by such
foreign government to retire outstanding commercial bank
loans.
(ii) Investment, trustee, and fiduciary transactions. - The
bank buys or sells securities for investment purposes -
(I) for the bank; or
(II) for accounts for which the bank acts as a trustee or
fiduciary.
(iii) Asset-backed transactions. - The bank engages in the
issuance or sale to qualified investors, through a grantor
trust or other separate entity, of securities backed by or
representing an interest in notes, drafts, acceptances,
loans, leases, receivables, other obligations (other than
securities of which the bank is not the issuer), or pools of
any such obligations predominantly originated by -
(I) the bank;
(II) an affiliate of any such bank other than a broker or
dealer; or
(III) a syndicate of banks of which the bank is a member,
if the obligations or pool of obligations consists of
mortgage obligations or consumer-related receivables.
(iv) Identified banking products. - The bank buys or sells
identified banking products, as defined in section 206 of the
Gramm-Leach-Bliley Act.
(6) The term "bank" means (A) a banking institution organized
under the laws of the United States, (B) a member bank of the
Federal Reserve System, (C) any other banking institution,
whether incorporated or not, doing business under the laws of any
State or of the United States, a substantial portion of the
business of which consists of receiving deposits or exercising
fiduciary powers similar to those permitted to national banks
under the authority of the Comptroller of the Currency pursuant
to section 92a of title 12, and which is supervised and examined
by State or Federal authority having supervision over banks, and
which is not operated for the purpose of evading the provisions
of this chapter, and (D) a receiver, conservator, or other
liquidating agent of any institution or firm included in clauses
(A), (B), or (C) of this paragraph.
(7) The term "director" means any director of a corporation or
any person performing similar functions with respect to any
organization, whether incorporated or unincorporated.
(8) The term "issuer" means any person who issues or proposes
to issue any security; except that with respect to certificates
of deposit for securities, voting-trust certificates, or
collateral-trust certificates, or with respect to certificates of
interest or shares in an unincorporated investment trust not
having a board of directors or of the fixed, restricted
management, or unit type, the term "issuer" means the person or
persons performing the acts and assuming the duties of depositor
or manager pursuant to the provisions of the trust or other
agreement or instrument under which such securities are issued;
and except that with respect to equipment-trust certificates or
like securities, the term "issuer" means the person by whom the
equipment or property is, or is to be, used.
(9) The term "person" means a natural person, company,
government, or political subdivision, agency, or instrumentality
of a government.
(10) The term "security" means any note, stock, treasury stock,
security future, bond, debenture, certificate of interest or
participation in any profit-sharing agreement or in any oil, gas,
or other mineral royalty or lease, any collateral-trust
certificate, preorganization certificate or subscription,
transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, any put,
call, straddle, option, or privilege on any security, certificate
of deposit, or group or index of securities (including any
interest therein or based on the value thereof), or any put,
call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency, or in general,
any instrument commonly known as a "security"; or any certificate
of interest or participation in, temporary or interim certificate
for, receipt for, or warrant or right to subscribe to or
purchase, any of the foregoing; but shall not include currency or
any note, draft, bill of exchange, or banker's acceptance which
has a maturity at the time of issuance of not exceeding nine
months, exclusive of days of grace, or any renewal thereof the
maturity of which is likewise limited.
(11) The term "equity security" means any stock or similar
security; or any security future on any such security; or any
security convertible, with or without consideration, into such a
security, or carrying any warrant or right to subscribe to or
purchase such a security; or any such warrant or right; or any
other security which the Commission shall deem to be of similar
nature and consider necessary or appropriate, by such rules and
regulations as it may prescribe in the public interest or for the
protection of investors, to treat as an equity security.
(12)(A) The term "exempted security" or "exempted securities"
includes -
(i) government securities, as defined in paragraph (42) of
this subsection;
(ii) municipal securities, as defined in paragraph (29) of
this subsection;
(iii) any interest or participation in any common trust fund
or similar fund that is excluded from the definition of the
term "investment company" under section 3(c)(3) of the
Investment Company Act of 1940 [15 U.S.C. 80a-3(c)(3)];
(iv) any interest or participation in a single trust fund, or
a collective trust fund maintained by a bank, or any security
arising out of a contract issued by an insurance company, which
interest, participation, or security is issued in connection
with a qualified plan as defined in subparagraph (C) of this
paragraph;
(v) any security issued by or any interest or participation
in any pooled income fund, collective trust fund, collective
investment fund, or similar fund that is excluded from the
definition of an investment company under section 3(c)(10)(B)
of the Investment Company Act of 1940 [15 U.S.C.
80a-3(c)(10)(B)];
(vi) solely for purposes of sections 78l, 78m, 78n, and 78p
of this title, any security issued by or any interest or
participation in any church plan, company, or account that is
excluded from the definition of an investment company under
section 3(c)(14) of the Investment Company Act of 1940 [15
U.S.C. 80a-3(c)(14)]; and
(vii) such other securities (which may include, among others,
unregistered securities, the market in which is predominantly
intrastate) as the Commission may, by such rules and
regulations as it deems consistent with the public interest and
the protection of investors, either unconditionally or upon
specified terms and conditions or for stated periods, exempt
from the operation of any one or more provisions of this
chapter which by their terms do not apply to an "exempted
security" or to "exempted securities".
(B)(i) Notwithstanding subparagraph (A)(i) of this paragraph,
government securities shall not be deemed to be "exempted
securities" for the purposes of section 78q-1 of this title.
(ii) Notwithstanding subparagraph (A)(ii) of this paragraph,
municipal securities shall not be deemed to be "exempted
securities" for the purposes of sections 78o and 78q-1 of this
title.
(C) For purposes of subparagraph (A)(iv) of this paragraph, the
term "qualified plan" means (i) a stock bonus, pension, or
profit-sharing plan which meets the requirements for
qualification under section 401 of title 26, (ii) an annuity plan
which meets the requirements for the deduction of the employer's
contribution under section 404(a)(2) of title 26, or (iii) a
governmental plan as defined in section 414(d) of title 26 which
has been established by an employer for the exclusive benefit of
its employees or their beneficiaries for the purpose of
distributing to such employees or their beneficiaries the corpus
and income of the funds accumulated under such plan, if under
such plan it is impossible, prior to the satisfaction of all
liabilities with respect to such employees and their
beneficiaries, for any part of the corpus or income to be used
for, or diverted to, purposes other than the exclusive benefit of
such employees or their beneficiaries, other than any plan
described in clause (i), (ii), or (iii) of this subparagraph
which (I) covers employees some or all of whom are employees
within the meaning of section 401(c) of title 26, or (II) is a
plan funded by an annuity contract described in section 403(b) of
title 26.
(13) The terms "buy" and "purchase" each include any contract
to buy, purchase, or otherwise acquire. For security futures
products, such term includes any contract, agreement, or
transaction for future delivery.
(14) The terms "sale" and "sell" each include any contract to
sell or otherwise dispose of. For security futures products, such
term includes any contract, agreement, or transaction for future
delivery.
(15) The term "Commission" means the Securities and Exchange
Commission established by section 78d of this title.
(16) The term "State" means any State of the United States, the
District of Columbia, Puerto Rico, the Virgin Islands, or any
other possession of the United States.
(17) The term "interstate commerce" means trade, commerce,
transportation, or communication among the several States, or
between any foreign country and any State, or between any State
and any place or ship outside thereof. The term also includes
intrastate use of (A) any facility of a national securities
exchange or of a telephone or other interstate means of
communication, or (B) any other interstate instrumentality.
(18) The term "person associated with a broker or dealer" or
"associated person of a broker or dealer" means any partner,
officer, director, or branch manager of such broker or dealer (or
any person occupying a similar status or performing similar
functions), any person directly or indirectly controlling,
controlled by, or under common control with such broker or
dealer, or any employee of such broker or dealer, except that any
person associated with a broker or dealer whose functions are
solely clerical or ministerial shall not be included in the
meaning of such term for purposes of section 78o(b) of this title
(other than paragraph (6) thereof).
(19) The terms "investment company", "affiliated person",
"insurance company", "separate account", and "company" have the
same meanings as in the Investment Company Act of 1940 [15 U.S.C.
80a-1 et seq.].
(20) The terms "investment adviser" and "underwriter" have the
same meanings as in the Investment Advisers Act of 1940 [15
U.S.C. 80b-1 et seq.].
(21) The term "person associated with a member" or "associated
person of a member" when used with respect to a member of a
national securities exchange or registered securities association
means any partner, officer, director, or branch manager of such
member (or any person occupying a similar status or performing
similar functions), any person directly or indirectly
controlling, controlled by, or under common control with such
member, or any employee of such member.
(22)(A) The term "securities information processor" means any
person engaged in the business of (i) collecting, processing, or
preparing for distribution or publication, or assisting,
participating in, or coordinating the distribution or publication
of, information with respect to transactions in or quotations for
any security (other than an exempted security) or (ii)
distributing or publishing (whether by means of a ticker tape, a
communications network, a terminal display device, or otherwise)
on a current and continuing basis, information with respect to
such transactions or quotations. The term "securities information
processor" does not include any bona fide newspaper, news
magazine, or business or financial publication of general and
regular circulation, any self-regulatory organizations, any bank,
broker, dealer, building and loan, savings and loan, or homestead
association, or cooperative bank, if such bank, broker, dealer,
association, or cooperative bank would be deemed to be a
securities information processor solely by reason of functions
performed by such institutions as part of customary banking,
brokerage, dealing, association, or cooperative bank activities,
or any common carrier, as defined in section 153 of title 47,
subject to the jurisdiction of the Federal Communications
Commission or a State commission, as defined in section 153 of
title 47, unless the Commission determines that such carrier is
engaged in the business of collecting, processing, or preparing
for distribution or publication, information with respect to
transactions in or quotations for any security.
(B) The term "exclusive processor" means any securities
information processor or self-regulatory organization which,
directly or indirectly, engages on an exclusive basis on behalf
of any national securities exchange or registered securities
association, or any national securities exchange or registered
securities association which engages on an exclusive basis on its
own behalf, in collecting, processing, or preparing for
distribution or publication any information with respect to (i)
transactions or quotations on or effected or made by means of any
facility of such exchange or (ii) quotations distributed or
published by means of any electronic system operated or
controlled by such association.
(23)(A) The term "clearing agency" means any person who acts as
an intermediary in making payments or deliveries or both in
connection with transactions in securities or who provides
facilities for comparison of data respecting the terms of
settlement of securities transactions, to reduce the number of
settlements of securities transactions, or for the allocation of
securities settlement responsibilities. Such term also means any
person, such as a securities depository, who (i) acts as a
custodian of securities in connection with a system for the
central handling of securities whereby all securities of a
particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred, loaned, or
pledged by bookkeeping entry without physical delivery of
securities certificates, or (ii) otherwise permits or facilitates
the settlement of securities transactions or the hypothecation or
lending of securities without physical delivery of securities
certificates.
(B) The term "clearing agency" does not include (i) any Federal
Reserve bank, Federal home loan bank, or Federal land bank; (ii)
any national securities exchange or registered securities
association solely by reason of its providing facilities for
comparison of data respecting the terms of settlement of
securities transactions effected on such exchange or by means of
any electronic system operated or controlled by such association;
(iii) any bank, broker, dealer, building and loan, savings and
loan, or homestead association, or cooperative bank if such bank,
broker, dealer, association, or cooperative bank would be deemed
to be a clearing agency solely by reason of functions performed
by such institution as part of customary banking, brokerage,
dealing, association, or cooperative banking activities, or
solely by reason of acting on behalf of a clearing agency or a
participant therein in connection with the furnishing by the
clearing agency of services to its participants or the use of
services of the clearing agency by its participants, unless the
Commission, by rule, otherwise provides as necessary or
appropriate to assure the prompt and accurate clearance and
settlement of securities transactions or to prevent evasion of
this chapter; (iv) any life insurance company, its registered
separate accounts, or a subsidiary of such insurance company
solely by reason of functions commonly performed by such entities
in connection with variable annuity contracts or variable life
policies issued by such insurance company or its separate
accounts; (v) any registered open-end investment company or unit
investment trust solely by reason of functions commonly performed
by it in connection with shares in such registered open-end
investment company or unit investment trust, or (vi) any person
solely by reason of its performing functions described in
paragraph (25)(E) of this subsection.
(24) The term "participant" when used with respect to a
clearing agency means any person who uses a clearing agency to
clear or settle securities transactions or to transfer, pledge,
lend, or hypothecate securities. Such term does not include a
person whose only use of a clearing agency is (A) through another
person who is a participant or (B) as a pledgee of securities.
(25) The term "transfer agent" means any person who engages on
behalf of an issuer of securities or on behalf of itself as an
issuer of securities in (A) countersigning such securities upon
issuance; (B) monitoring the issuance of such securities with a
view to preventing unauthorized issuance, a function commonly
performed by a person called a registrar; (C) registering the
transfer of such securities; (D) exchanging or converting such
securities; or (E) transferring record ownership of securities by
bookkeeping entry without physical issuance of securities
certificates. The term "transfer agent" does not include any
insurance company or separate account which performs such
functions solely with respect to variable annuity contracts or
variable life policies which it issues or any registered clearing
agency which performs such functions solely with respect to
options contracts which it issues.
(26) The term "self-regulatory organization" means any national
securities exchange, registered securities association, or
registered clearing agency, or (solely for purposes of sections
78s(b), 78s(c), and 78w(b) (!1) of this title) the Municipal
Securities Rulemaking Board established by section 78o-4 of this
title.
(27) The term "rules of an exchange", "rules of an
association", or "rules of a clearing agency" means the
constitution, articles of incorporation, bylaws, and rules, or
instruments corresponding to the foregoing, of an exchange,
association of brokers and dealers, or clearing agency,
respectively, and such of the stated policies, practices, and
interpretations of such exchange, association, or clearing agency
as the Commission, by rule, may determine to be necessary or
appropriate in the public interest or for the protection of
investors to be deemed to be rules of such exchange, association,
or clearing agency.
(28) The term "rules of a self-regulatory organization" means
the rules of an exchange which is a national securities exchange,
the rules of an association of brokers and dealers which is a
registered securities association, the rules of a clearing agency
which is a registered clearing agency, or the rules of the
Municipal Securities Rulemaking Board.
(29) The term "municipal securities" means securities which are
direct obligations of, or obligations guaranteed as to principal
or interest by, a State or any political subdivision thereof, or
any agency or instrumentality of a State or any political
subdivision thereof, or any municipal corporate instrumentality
of one or more States, or any security which is an industrial
development bond (as defined in section 103(c)(2) (!1) of title
26) the interest on which is excludable from gross income under
section 103(a)(1) (!1) of title 26 if, by reason of the
application of paragraph (4) or (6) of section 103(c) (!1) of
title 26 (determined as if paragraphs (4)(A), (5), and (7) were
not included in such section 103(c)),(!1) paragraph (1) of such
section 103(c) (!1) does not apply to such security.
(30) The term "municipal securities dealer" means any person
(including a separately identifiable department or division of a
bank) engaged in the business of buying and selling municipal
securities for his own account, through a broker or otherwise,
but does not include -
(A) any person insofar as he buys or sells such securities
for his own account, either individually or in some fiduciary
capacity, but not as a part of a regular business; or
(B) a bank, unless the bank is engaged in the business of
buying and selling municipal securities for its own account
other than in a fiduciary capacity, through a broker or
otherwise: Provided, however, That if the bank is engaged in
such business through a separately identifiable department or
division (as defined by the Municipal Securities Rulemaking
Board in accordance with section 78o-4(b)(2)(H) of this title),
the department or division and not the bank itself shall be
deemed to be the municipal securities dealer.
(31) The term "municipal securities broker" means a broker
engaged in the business of effecting transactions in municipal
securities for the account of others.
(32) The term "person associated with a municipal securities
dealer" when used with respect to a municipal securities dealer
which is a bank or a division or department of a bank means any
person directly engaged in the management, direction,
supervision, or performance of any of the municipal securities
dealer's activities with respect to municipal securities, and any
person directly or indirectly controlling such activities or
controlled by the municipal securities dealer in connection with
such activities.
(33) The term "municipal securities investment portfolio" means
all municipal securities held for investment and not for sale as
part of a regular business by a municipal securities dealer or by
a person, directly or indirectly, controlling, controlled by, or
under common control with a municipal securities dealer.
(34) The term "appropriate regulatory agency" means -
(A) When used with respect to a municipal securities dealer:
(i) the Comptroller of the Currency, in the case of a
national bank or a bank operating under the Code of Law for
the District of Columbia, or a subsidiary or a department or
division of any such bank;
(ii) the Board of Governors of the Federal Reserve System,
in the case of a State member bank of the Federal Reserve
System, a subsidiary or a department or division thereof, a
bank holding company, a subsidiary of a bank holding company
which is a bank other than a bank specified in clause (i) or
(iii) of this subparagraph, or a subsidiary or a department
or division of such subsidiary;
(iii) the Federal Deposit Insurance Corporation, in the
case of a bank insured by the Federal Deposit Insurance
Corporation (other than a member of the Federal Reserve
System), or a subsidiary or department or division thereof;
and
(iv) the Commission in the case of all other municipal
securities dealers.
(B) When used with respect to a clearing agency or transfer
agent:
(i) the Comptroller of the Currency, in the case of a
national bank or a bank operating under the Code of Law for
the District of Columbia, or a subsidiary of any such bank;
(ii) the Board of Governors of the Federal Reserve System,
in the case of a State member bank of the Federal Reserve
System, a subsidiary thereof, a bank holding company, or a
subsidiary of a bank holding company which is a bank other
than a bank specified in clause (i) or (iii) of this
subparagraph;
(iii) the Federal Deposit Insurance Corporation, in the
case of a bank insured by the Federal Deposit Insurance
Corporation (other than a member of the Federal Reserve
System), or a subsidiary thereof; and
(iv) the Commission in the case of all other clearing
agencies and transfer agents.
(C) When used with respect to a participant or applicant to
become a participant in a clearing agency or a person
requesting or having access to services offered by a clearing
agency:
(i) The Comptroller of the Currency, in the case of a
national bank or a bank operating under the Code of Law for
the District of Columbia when the appropriate regulatory
agency for such clearing agency is not the Commission;
(ii) the Board of Governors of the Federal Reserve System
in the case of a State member bank of the Federal Reserve
System, a bank holding company, or a subsidiary of a bank
holding company, or a subsidiary of a bank holding company
which is a bank other than a bank specified in clause (i) or
(iii) of this subparagraph when the appropriate regulatory
agency for such clearing agency is not the Commission;
(iii) the Federal Deposit Insurance Corporation, in the
case of a bank insured by the Federal Deposit Insurance
Corporation (other than a member of the Federal Reserve
System) when the appropriate regulatory agency for such
clearing agency is not the Commission; and
(iv) the Commission in all other cases.
(D) When used with respect to an institutional investment
manager which is a bank the deposits of which are insured in
accordance with the Federal Deposit Insurance Act [12 U.S.C.
1811 et seq.]:
(i) the Comptroller of the Currency, in the case of a
national bank or a bank operating under the Code of Law for
the District of Columbia;
(ii) the Board of Governors of the Federal Reserve System,
in the case of any other member bank of the Federal Reserve
System; and
(iii) the Federal Deposit Insurance Corporation, in the
case of any other insured bank.
(E) When used with respect to a national securities exchange
or registered securities association, member thereof, person
associated with a member thereof, applicant to become a member
thereof or to become associated with a member thereof, or
person requesting or having access to services offered by such
exchange or association or member thereof, or the Municipal
Securities Rulemaking Board, the Commission.
(F) When used with respect to a person exercising investment
discretion with respect to an account;
(i) the Comptroller of the Currency, in the case of a
national bank or a bank operating under the Code of Law for
the District of Columbia;
(ii) the Board of Governors of the Federal Reserve System
in the case of any other member bank of the Federal Reserve
System;
(iii) the Federal Deposit Insurance Corporation, in the
case of any other bank the deposits of which are insured in
accordance with the Federal Deposit Insurance Act [12 U.S.C.
1811 et seq.]; and
(iv) the Commission in the case of all other such persons.
(G) When used with respect to a government securities broker
or government securities dealer, or person associated with a
government securities broker or government securities dealer:
(i) the Comptroller of the Currency, in the case of a
national bank, a bank in the District of Columbia examined by
the Comptroller of the Currency, or a Federal branch or
Federal agency of a foreign bank (as such terms are used in
the International Banking Act of 1978 [12 U.S.C. 3101 et
seq.]);
(ii) the Board of Governors of the Federal Reserve System,
in the case of a State member bank of the Federal Reserve
System, a foreign bank, an uninsured State branch or State
agency of a foreign bank, a commercial lending company owned
or controlled by a foreign bank (as such terms are used in
the International Banking Act of 1978), or a corporation
organized or having an agreement with the Board of Governors
of the Federal Reserve System pursuant to section 25 or
section 25A of the Federal Reserve Act [12 U.S.C. 601 et
seq., 611 et seq.];
(iii) the Federal Deposit Insurance Corporation, in the
case of a bank insured by the Federal Deposit Insurance
Corporation (other than a member of the Federal Reserve
System or a Federal savings bank) or an insured State branch
of a foreign bank (as such terms are used in the
International Banking Act of 1978);
(iv) the Director of the Office of Thrift Supervision, in
the case of a savings association (as defined in section 3(b)
of the Federal Deposit Insurance Act [12 U.S.C. 1813(b)]) the
deposits of which are insured by the Federal Deposit
Insurance Corporation; (!2)
(v) the Commission, in the case of all other government
securities brokers and government securities dealers.
(H) When used with respect to an institution described in
subparagraph (D), (F), or (G) of section 1841(c)(2), or held
under section 1843(f) of title 12 -
(i) the Comptroller of the Currency, in the case of a
national bank or a bank in the District of Columbia examined
by the Comptroller of the Currency;
(ii) the Board of Governors of the Federal Reserve System,
in the case of a State member bank of the Federal Reserve
System or any corporation chartered under section 25A of the
Federal Reserve Act [12 U.S.C. 611 et seq.];
(iii) the Federal Deposit Insurance Corporation, in the
case of any other bank the deposits of which are insured in
accordance with the Federal Deposit Insurance Act [12 U.S.C.
1811 et seq.]; or
(iv) the Commission in the case of all other such
institutions.
As used in this paragraph, the terms "bank holding company" and
"subsidiary of a bank holding company" have the meanings given
them in section 1841 of title 12, and the term "District of
Columbia savings and loan association" means any association
subject to examination and supervision by the Office of Thrift
Supervision under section 1466a of title 12.
(35) A person exercises "investment discretion" with respect to
an account if, directly or indirectly, such person (A) is
authorized to determine what securities or other property shall
be purchased or sold by or for the account, (B) makes decisions
as to what securities or other property shall be purchased or
sold by or for the account even though some other person may have
responsibility for such investment decisions, or (C) otherwise
exercises such influence with respect to the purchase and sale of
securities or other property by or for the account as the
Commission, by rule, determines, in the public interest or for
the protection of investors, should be subject to the operation
of the provisions of this chapter and the rules and regulations
thereunder.
(36) A class of persons or markets is subject to "equal
regulation" if no member of the class has a competitive advantage
over any other member thereof resulting from a disparity in their
regulation under this chapter which the Commission determines is
unfair and not necessary or appropriate in furtherance of the
purposes of this chapter.
(37) The term "records" means accounts, correspondence,
memorandums, tapes, discs, papers, books, and other documents or
transcribed information of any type, whether expressed in
ordinary or machine language.
(38) The term "market maker" means any specialist permitted to
act as a dealer, any dealer acting in the capacity of block
positioner, and any dealer who, with respect to a security, holds
himself out (by entering quotations in an inter-dealer
communications system or otherwise) as being willing to buy and
sell such security for his own account on a regular or continuous
basis.
(39) A person is subject to a "statutory disqualification" with
respect to membership or participation in, or association with a
member of, a self-regulatory organization, if such person -
(A) has been and is expelled or suspended from membership or
participation in, or barred or suspended from being associated
with a member of, any self-regulatory organization, foreign
equivalent of a self-regulatory organization, foreign or
international securities exchange, contract market designated
pursuant to section 5 of the Commodity Exchange Act (7 U.S.C.
7), or any substantially equivalent foreign statute or
regulation, or futures association registered under section 17
of such Act (7 U.S.C. 21), or any substantially equivalent
foreign statute or regulation, or has been and is denied
trading privileges on any such contract market or foreign
equivalent;
(B) is subject to -
(i) an order of the Commission, other appropriate
regulatory agency, or foreign financial regulatory authority
-
(I) denying, suspending for a period not exceeding 12
months, or revoking his registration as a broker, dealer,
municipal securities dealer, government securities broker,
or government securities dealer or limiting his activities
as a foreign person performing a function substantially
equivalent to any of the above; or
(II) barring or suspending for a period not exceeding 12
months his being associated with a broker, dealer,
municipal securities dealer, government securities broker,
government securities dealer, or foreign person performing
a function substantially equivalent to any of the above;
(ii) an order of the Commodity Futures Trading Commission
denying, suspending, or revoking his registration under the
Commodity Exchange Act (7 U.S.C. 1 et seq.); or
(iii) an order by a foreign financial regulatory authority
denying, suspending, or revoking the person's authority to
engage in transactions in contracts of sale of a commodity
for future delivery or other instruments traded on or subject
to the rules of a contract market, board of trade, or foreign
equivalent thereof;
(C) by his conduct while associated with a broker, dealer,
municipal securities dealer, government securities broker, or
government securities dealer, or while associated with an
entity or person required to be registered under the Commodity
Exchange Act, has been found to be a cause of any effective
suspension, expulsion, or order of the character described in
subparagraph (A) or (B) of this paragraph, and in entering such
a suspension, expulsion, or order, the Commission, an
appropriate regulatory agency, or any such self-regulatory
organization shall have jurisdiction to find whether or not any
person was a cause thereof;
(D) by his conduct while associated with any broker, dealer,
municipal securities dealer, government securities broker,
government securities dealer, or any other entity engaged in
transactions in securities, or while associated with an entity
engaged in transactions in contracts of sale of a commodity for
future delivery or other instruments traded on or subject to
the rules of a contract market, board of trade, or foreign
equivalent thereof, has been found to be a cause of any
effective suspension, expulsion, or order by a foreign or
international securities exchange or foreign financial
regulatory authority empowered by a foreign government to
administer or enforce its laws relating to financial
transactions as described in subparagraph (A) or (B) of this
paragraph;
(E) has associated with him any person who is known, or in
the exercise of reasonable care should be known, to him to be a
person described by subparagraph (A), (B), (C), or (D) of this
paragraph; or
(F) has committed or omitted any act, or is subject to an
order or finding, enumerated in subparagraph (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) or any other felony within ten years of the date
of the filing of an application for membership or participation
in, or to become associated with a member of, such
self-regulatory organization, is enjoined from any action,
conduct, or practice specified in subparagraph (C) of such
paragraph (4), has willfully made or caused to be made in any
application for membership or participation in, or to become
associated with a member of, a self-regulatory organization,
report required to be filed with a self-regulatory
organization, or proceeding before a self-regulatory
organization, any statement which was at the time, and in the
light of the circumstances under which it was made, false or
misleading with respect to any material fact, or has omitted to
state in any such application, report, or proceeding any
material fact which is required to be stated therein.
(40) The term "financial responsibility rules" means the rules
and regulations of the Commission or the rules and regulations
prescribed by any self-regulatory organization relating to
financial responsibility and related practices which are
designated by the Commission, by rule or regulation, to be
financial responsibility rules.
(41) The term "mortgage related security" means a security that
is rated in one of the two highest rating categories by at least
one nationally recognized statistical rating organization, and
either:
(A) represents ownership of one or more promissory notes or
certificates of interest or participation in such notes
(including any rights designed to assure servicing of, or the
receipt or timeliness of receipt by the holders of such notes,
certificates, or participations of amounts payable under, such
notes, certificates, or participations), which notes:
(i) are directly secured by a first lien on a single parcel
of real estate, including stock allocated to a dwelling unit
in a residential cooperative housing corporation, upon which
is located a dwelling or mixed residential and commercial
structure, on a residential manufactured home as defined in
section 5402(6) of title 42, whether such manufactured home
is considered real or personal property under the laws of the
State in which it is to be located, or on one or more parcels
of real estate upon which is located one or more commercial
structures; and
(ii) were originated by a savings and loan association,
savings bank, commercial bank, credit union, insurance
company, or similar institution which is supervised and
examined by a Federal or State authority, or by a mortgagee
approved by the Secretary of Housing and Urban Development
pursuant to sections 1709 and 1715b of title 12, or, where
such notes involve a lien on the manufactured home, by any
such institution or by any financial institution approved for
insurance by the Secretary of Housing and Urban Development
pursuant to section 1703 of title 12; or
(B) is secured by one or more promissory notes or
certificates of interest or participations in such notes (with
or without recourse to the issuer thereof) and, by its terms,
provides for payments of principal in relation to payments, or
reasonable projections of payments, on notes meeting the
requirements of subparagraphs (A)(i) and (ii) or certificates
of interest or participations in promissory notes meeting such
requirements.
For the purpose of this paragraph, the term "promissory note",
when used in connection with a manufactured home, shall also
include a loan, advance, or credit sale as evidence (!3) by a
retail installment sales contract or other instrument.
(42) The term "government securities" means -
(A) securities which are direct obligations of, or
obligations guaranteed as to principal or interest by, the
United States;
(B) securities which are issued or guaranteed by corporations
in which the United States has a direct or indirect interest
and which are designated by the Secretary of the Treasury for
exemption as necessary or appropriate in the public interest or
for the protection of investors;
(C) securities issued or guaranteed as to principal or
interest by any corporation the securities of which are
designated, by statute specifically naming such corporation, to
constitute exempt securities within the meaning of the laws
administered by the Commission;
(D) for purposes of sections 78o-5 and 78q-1 of this title,
any put, call, straddle, option, or privilege on a security
described in subparagraph (A), (B), or (C) other than a put,
call, straddle, option, or privilege -
(i) that is traded on one or more national securities
exchanges; or
(ii) for which quotations are disseminated through an
automated quotation system operated by a registered
securities association; or
(E) for purposes of sections 78o, 78o-5, and 78q-1 of this
title as applied to a bank, a qualified Canadian government
obligation as defined in section 24 of title 12.
(43) The term "government securities broker" means any person
regularly engaged in the business of effecting transactions in
government securities for the account of others, but does not
include -
(A) any corporation the securities of which are government
securities under subparagraph (B) or (C) of paragraph (42) of
this subsection; or
(B) any person registered with the Commodity Futures Trading
Commission, any contract market designated by the Commodity
Futures Trading Commission, such contract market's affiliated
clearing organization, or any floor trader on such contract
market, solely because such person effects transactions in
government securities that the Commission, after consultation
with the Commodity Futures Trading Commission, has determined
by rule or order to be incidental to such person's
futures-related business.
(44) The term "government securities dealer" means any person
engaged in the business of buying and selling government
securities for his own account, through a broker or otherwise,
but does not include -
(A) any person insofar as he buys or sells such securities
for his own account, either individually or in some fiduciary
capacity, but not as a part of a regular business;
(B) any corporation the securities of which are government
securities under subparagraph (B) or (C) of paragraph (42) of
this subsection;
(C) any bank, unless the bank is engaged in the business of
buying and selling government securities for its own account
other than in a fiduciary capacity, through a broker or
otherwise; or
(D) any person registered with the Commodity Futures Trading
Commission, any contract market designated by the Commodity
Futures Trading Commission, such contract market's affiliated
clearing organization, or any floor trader on such contract
market, solely because such person effects transactions in
government securities that the Commission, after consultation
with the Commodity Futures Trading Commission, has determined
by rule or order to be incidental to such person's
futures-related business.
(45) The term "person associated with a government securities
broker or government securities dealer" means any partner,
officer, director, or branch manager of such government
securities broker or government securities dealer (or any person
occupying a similar status or performing similar functions), and
any other employee of such government securities broker or
government securities dealer who is engaged in the management,
direction, supervision, or performance of any activities relating
to government securities, and any person directly or indirectly
controlling, controlled by, or under common control with such
government securities broker or government securities dealer.
(46) The term "financial institution" means -
(A) a bank (as defined in paragraph (6) of this subsection);
(B) a foreign bank (as such term is used in the International
Banking Act of 1978); and
(C) a savings association (as defined in section 3(b) of the
Federal Deposit Insurance Act [12 U.S.C. 1813(b)]) the deposits
of which are insured by the Federal Deposit Insurance
Corporation.
(47) The term "securities laws" means the Securities Act of
1933 (15 U.S.C. 77a et seq.), the Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.), the Sarbanes-Oxley Act of 2002 [15
U.S.C. 7201 et seq.], the Public Utility Holding Company Act of
1935 (15 U.S.C. 79a et seq.) [15 U.S.C. 79 et seq.], the Trust
Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.), the Investment
Advisers Act of 1940 (15 U.S.C. 80b et seq.) [15 U.S.C. 80b-1 et
seq.], and the Securities Investor Protection Act of 1970 (15
U.S.C. 78aaa et seq.).
(48) The term "registered broker or dealer" means a broker or
dealer registered or required to register pursuant to section 78o
or 78o-4 of this title, except that in paragraph (3) of this
subsection and sections 78f and 78o-3 of this title the term
means such a broker or dealer and a government securities broker
or government securities dealer registered or required to
register pursuant to section 78o-5(a)(1)(A) of this title.
(49) The term "person associated with a transfer agent" and
"associated person of a transfer agent" mean any person (except
an employee whose functions are solely clerical or ministerial)
directly engaged in the management, direction, supervision, or
performance of any of the transfer agent's activities with
respect to transfer agent functions, and any person directly or
indirectly controlling such activities or controlled by the
transfer agent in connection with such activities.
(50) The term "foreign securities authority" means any foreign
government, or any governmental body or regulatory organization
empowered by a foreign government to administer or enforce its
laws as they relate to securities matters.
(51)(A) The term "penny stock" means any equity security other
than a security that is -
(i) registered or approved for registration and traded on a
national securities exchange that meets such criteria as the
Commission shall prescribe by rule or regulation for purposes
of this paragraph;
(ii) authorized for quotation on an automated quotation
system sponsored by a registered securities association, if
such system (I) was established and in operation before January
1, 1990, and (II) meets such criteria as the Commission shall
prescribe by rule or regulation for purposes of this paragraph;
(iii) issued by an investment company registered under the
Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.];
(iv) excluded, on the basis of exceeding a minimum price, net
tangible assets of the issuer, or other relevant criteria, from
the definition of such term by rule or regulation which the
Commission shall prescribe for purposes of this paragraph; or
(v) exempted, in whole or in part, conditionally or
unconditionally, from the definition of such term by rule,
regulation, or order prescribed by the Commission.
(B) The Commission may, by rule, regulation, or order,
designate any equity security or class of equity securities
described in clause (i) or (ii) of subparagraph (A) as within the
meaning of the term "penny stock" if such security or class of
securities is traded other than on a national securities exchange
or through an automated quotation system described in clause (ii)
of subparagraph (A).
(C) In exercising its authority under this paragraph to
prescribe rules, regulations, and orders, the Commission shall
determine that such rule, regulation, or order is consistent with
the public interest and the protection of investors.
(52) The term "foreign financial regulatory authority" means
any (A) foreign securities authority, (B) other governmental body
or foreign equivalent of a self-regulatory organization empowered
by a foreign government to administer or enforce its laws
relating to the regulation of fiduciaries, trusts, commercial
lending, insurance, trading in contracts of sale of a commodity
for future delivery, or other instruments traded on or subject to
the rules of a contract market, board of trade, or foreign
equivalent, or other financial activities, or (C) membership
organization a function of which is to regulate participation of
its members in activities listed above.
(53)(A) The term "small business related security" means a
security that is rated in 1 of the 4 highest rating categories by
at least 1 nationally recognized statistical rating organization,
and either -
(i) represents an interest in 1 or more promissory notes or
leases of personal property evidencing the obligation of a
small business concern and originated by an insured depository
institution, insured credit union, insurance company, or
similar institution which is supervised and examined by a
Federal or State authority, or a finance company or leasing
company; or
(ii) is secured by an interest in 1 or more promissory notes
or leases of personal property (with or without recourse to the
issuer or lessee) and provides for payments of principal in
relation to payments, or reasonable projections of payments, on
notes or leases described in clause (i).
(B) For purposes of this paragraph -
(i) an "interest in a promissory note or a lease of personal
property" includes ownership rights, certificates of interest
or participation in such notes or leases, and rights designed
to assure servicing of such notes or leases, or the receipt or
timely receipt of amounts payable under such notes or leases;
(ii) the term "small business concern" means a business that
meets the criteria for a small business concern established by
the Small Business Administration under section 632(a) of this
title;
(iii) the term "insured depository institution" has the same
meaning as in section 3 of the Federal Deposit Insurance Act
[12 U.S.C. 1813]; and
(iv) the term "insured credit union" has the same meaning as
in section 1752 of title 12.
(54) Qualified investor. -
(A) Definition. - Except as provided in subparagraph (B), for
purposes of this chapter, the term "qualified investor" means -
(i) any investment company registered with the Commission
under section 8 of the Investment Company Act of 1940 [15
U.S.C. 80a-8];
(ii) any issuer eligible for an exclusion from the
definition of investment company pursuant to section 3(c)(7)
of the Investment Company Act of 1940 [15 U.S.C.
80a-3(c)(7)];
(iii) any bank (as defined in paragraph (6) of this
subsection), savings association (as defined in section 3(b)
of the Federal Deposit Insurance Act [12 U.S.C. 1813(b)]),
broker, dealer, insurance company (as defined in section
2(a)(13) of the Securities Act of 1933 [15 U.S.C.
77b(a)(13)]), or business development company (as defined in
section 2(a)(48) of the Investment Company Act of 1940 [15
U.S.C. 80a-2(a)(48)]);
(iv) any small business investment company licensed by the
United States Small Business Administration under section
301(c) [15 U.S.C. 681(c)] or (d) (!4) of the Small Business
Investment Act of 1958;
(v) any State sponsored employee benefit plan, or any other
employee benefit plan, within the meaning of the Employee
Retirement Income Security Act of 1974 [29 U.S.C. 1001 et
seq.], other than an individual retirement account, if the
investment decisions are made by a plan fiduciary, as defined
in section 3(21) of that Act [29 U.S.C. 1002(21)], which is
either a bank, savings and loan association, insurance
company, or registered investment adviser;
(vi) any trust whose purchases of securities are directed
by a person described in clauses (i) through (v) of this
subparagraph;
(vii) any market intermediary exempt under section 3(c)(2)
of the Investment Company Act of 1940 [15 U.S.C.
80a-3(c)(2)];
(viii) any associated person of a broker or dealer other
than a natural person;
(ix) any foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978 [12 U.S.C. 3101(7)]);
(x) the government of any foreign country;
(xi) any corporation, company, or partnership that owns and
invests on a discretionary basis, not less than $25,000,000
in investments;
(xii) any natural person who owns and invests on a
discretionary basis, not less than $25,000,000 in
investments;
(xiii) any government or political subdivision, agency, or
instrumentality of a government who owns and invests on a
discretionary basis not less than $50,000,000 in investments;
or
(xiv) any multinational or supranational entity or any
agency or instrumentality thereof.
(B) Altered thresholds for asset-backed securities and loan
participations. - For purposes of subsection (a)(5)(C)(iii) of
this section and section 206(a)(5) of the Gramm-Leach-Bliley
Act, the term "qualified investor" has the meaning given such
term by subparagraph (A) of this paragraph except that clauses
(xi) and (xii) shall be applied by substituting "$10,000,000"
for "$25,000,000".
(C) Additional authority. - The Commission may, by rule or
order, define a "qualified investor" as any other person,
taking into consideration such factors as the financial
sophistication of the person, net worth, and knowledge and
experience in financial matters.
(55)(A) The term "security future" means a contract of sale for
future delivery of a single security or of a narrow-based
security index, including any interest therein or based on the
value thereof, except an exempted security under paragraph (12)
of this subsection as in effect on January 11, 1983 (other than
any municipal security as defined in paragraph (29) of this
subsection as in effect on January 11, 1983). The term "security
future" does not include any agreement, contract, or transaction
excluded from the Commodity Exchange Act [7 U.S.C. 1 et seq.]
under section 2(c), 2(d), 2(f), or 2(g) of the Commodity Exchange
Act [7 U.S.C. 2(c), (d), (f), (g)] (as in effect on December 21,
2000) or sections 27 to 27f of title 7.
(B) The term "narrow-based security index" means an index -
(i) that has 9 or fewer component securities;
(ii) in which a component security comprises more than 30
percent of the index's weighting;
(iii) in which the five highest weighted component securities
in the aggregate comprise more than 60 percent of the index's
weighting; or
(iv) in which the lowest weighted component securities
comprising, in the aggregate, 25 percent of the index's
weighting have an aggregate dollar value of average daily
trading volume of less than $50,000,000 (or in the case of an
index with 15 or more component securities, $30,000,000),
except that if there are two or more securities with equal
weighting that could be included in the calculation of the
lowest weighted component securities comprising, in the
aggregate, 25 percent of the index's weighting, such securities
shall be ranked from lowest to highest dollar value of average
daily trading volume and shall be included in the calculation
based on their ranking starting with the lowest ranked
security.
(C) Notwithstanding subparagraph (B), an index is not a
narrow-based security index if -
(i)(I) it has at least nine component securities;
(II) no component security comprises more than 30 percent of
the index's weighting; and
(III) each component security is -
(aa) registered pursuant to section 78l of this title;
(bb) one of 750 securities with the largest market
capitalization; and
(cc) one of 675 securities with the largest dollar value of
average daily trading volume;
(ii) a board of trade was designated as a contract market by
the Commodity Futures Trading Commission with respect to a
contract of sale for future delivery on the index, before
December 21, 2000;
(iii)(I) a contract of sale for future delivery on the index
traded on a designated contract market or registered
derivatives transaction execution facility for at least 30 days
as a contract of sale for future delivery on an index that was
not a narrow-based security index; and
(II) it has been a narrow-based security index for no more
than 45 business days over 3 consecutive calendar months;
(iv) a contract of sale for future delivery on the index is
traded on or subject to the rules of a foreign board of trade
and meets such requirements as are jointly established by rule
or regulation by the Commission and the Commodity Futures
Trading Commission;
(v) no more than 18 months have passed since December 21,
2000, and -
(I) it is traded on or subject to the rules of a foreign
board of trade;
(II) the offer and sale in the United States of a contract
of sale for future delivery on the index was authorized
before December 21, 2000; and
(III) the conditions of such authorization continue to be
met; or
(vi) a contract of sale for future delivery on the index is
traded on or subject to the rules of a board of trade and meets
such requirements as are jointly established by rule,
regulation, or order by the Commission and the Commodity
Futures Trading Commission.
(D) Within 1 year after December 21, 2000, the Commission and
the Commodity Futures Trading Commission jointly shall adopt
rules or regulations that set forth the requirements under clause
(iv) of subparagraph (C).
(E) An index that is a narrow-based security index solely
because it was a narrow-based security index for more than 45
business days over 3 consecutive calendar months pursuant to
clause (iii) of subparagraph (C) shall not be a narrow-based
security index for the 3 following calendar months.
(F) For purposes of subparagraphs (B) and (C) of this paragraph
-
(i) the dollar value of average daily trading volume and the
market capitalization shall be calculated as of the preceding 6
full calendar months; and
(ii) the Commission and the Commodity Futures Trading
Commission shall, by rule or regulation, jointly specify the
method to be used to determine market capitalization and dollar
value of average daily trading volume.
(56) The term "security futures product" means a security
future or any put, call, straddle, option, or privilege on any
security future.
(57)(A) The term "margin", when used with respect to a security
futures product, means the amount, type, and form of collateral
required to secure any extension or maintenance of credit, or the
amount, type, and form of collateral required as a performance
bond related to the purchase, sale, or carrying of a security
futures product.
(B) The terms "margin level" and "level of margin", when used
with respect to a security futures product, mean the amount of
margin required to secure any extension or maintenance of credit,
or the amount of margin required as a performance bond related to
the purchase, sale, or carrying of a security futures product.
(C) The terms "higher margin level" and "higher level of
margin", when used with respect to a security futures product,
mean a margin level established by a national securities exchange
registered pursuant to section 78f(g) of this title that is
higher than the minimum amount established and in effect pursuant
to section 78g(c)(2)(B) of this title.
(58) Audit committee. - The term "audit committee" means -
(A) a committee (or equivalent body) established by and
amongst the board of directors of an issuer for the purpose of
overseeing the accounting and financial reporting processes of
the issuer and audits of the financial statements of the
issuer; and
(B) if no such committee exists with respect to an issuer,
the entire board of directors of the issuer.
(59) Registered public accounting firm. - The term "registered
public accounting firm" has the same meaning as in section 2 of
the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7201].
(b) Power to define technical, trade, accounting, and other terms
The Commission and the Board of Governors of the Federal Reserve
System, as to matters within their respective jurisdictions, shall
have power by rules and regulations to define technical, trade,
accounting, and other terms used in this chapter, consistently with
the provisions and purposes of this chapter.
(c) Application to governmental departments or agencies
No provision of this chapter shall apply to, or be deemed to
include, any executive department or independent establishment of
the United States, or any lending agency which is wholly owned,
directly or indirectly, by the United States, or any officer,
agent, or employee of any such department, establishment, or
agency, acting in the course of his official duty as such, unless
such provision makes specific reference to such department,
establishment, or agency.
(d) Issuers of municipal securities
No issuer of municipal securities or officer or employee thereof
acting in the course of his official duties as such shall be deemed
to be a "broker", "dealer", or "municipal securities dealer" solely
by reason of buying, selling, or effecting transactions in the
issuer's securities.
(e) Charitable organizations
(1) Exemption
Notwithstanding any other provision of this chapter, but
subject to paragraph (2) of this subsection, a charitable
organization, as defined in section 3(c)(10)(D) of the Investment
Company Act of 1940 [15 U.S.C. 80a-3(c)(10)(D)], or any trustee,
director, officer, employee, or volunteer of such a charitable
organization acting within the scope of such person's employment
or duties with such organization, shall not be deemed to be a
"broker", "dealer", "municipal securities broker", "municipal
securities dealer", "government securities broker", or
"government securities dealer" for purposes of this chapter
solely because such organization or person buys, holds, sells, or
trades in securities for its own account in its capacity as
trustee or administrator of, or otherwise on behalf of or for the
account of -
(A) such a charitable organization;
(B) a fund that is excluded from the definition of an
investment company under section 3(c)(10)(B) of the Investment
Company Act of 1940 [15 U.S.C. 80a-3(c)(10)(B)]; or
(C) a trust or other donative instrument described in section
3(c)(10)(B) of the Investment Company Act of 1940 [15 U.S.C.
80a-3(c)(10)(B)], or the settlors (or potential settlors) or
beneficiaries of any such trust or other instrument.
(2) Limitation on compensation
The exemption provided under paragraph (1) shall not be
available to any charitable organization, or any trustee,
director, officer, employee, or volunteer of such a charitable
organization, unless each person who, on or after 90 days after
December 8, 1995, solicits donations on behalf of such charitable
organization from any donor to a fund that is excluded from the
definition of an investment company under section 3(c)(10)(B) of
the Investment Company Act of 1940 [15 U.S.C. 80a-3(c)(10)(B)],
is either a volunteer or is engaged in the overall fund raising
activities of a charitable organization and receives no
commission or other special compensation based on the number or
the value of donations collected for the fund.
(f) Consideration of promotion of efficiency, competition, and
capital formation
Whenever pursuant to this chapter the Commission is engaged in
rulemaking, or in the review of a rule of a self-regulatory
organization, and is required to consider or determine whether an
action is necessary or appropriate in the public interest, the
Commission shall also consider, in addition to the protection of
investors, whether the action will promote efficiency, competition,
and capital formation.
(g) Church plans
No church plan described in section 414(e) of title 26, no person
or entity eligible to establish and maintain such a plan under
title 26, no company or account that is excluded from the
definition of an investment company under section 3(c)(14) of the
Investment Company Act of 1940 [15 U.S.C. 80a-3(c)(14)], and no
trustee, director, officer or employee of or volunteer for such
plan, company, account person, or entity, acting within the scope
of that person's employment or activities with respect to such
plan, shall be deemed to be a "broker", "dealer", "municipal
securities broker", "municipal securities dealer", "government
securities broker", "government securities dealer", "clearing
agency", or "transfer agent" for purposes of this chapter -
(1) solely because such plan, company, person, or entity buys,
holds, sells, trades in, or transfers securities or acts as an
intermediary in making payments in connection with transactions
in securities for its own account in its capacity as trustee or
administrator of, or otherwise on behalf of, or for the account
of, any church plan, company, or account that is excluded from
the definition of an investment company under section 3(c)(14) of
the Investment Company Act of 1940 [15 U.S.C. 80a-3(c)(14)]; and
(2) if no such person or entity receives a commission or other
transaction-related sales compensation in connection with any
activities conducted in reliance on the exemption provided by
this subsection.
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