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U.S. Code as of:
01/19/04
Section 78l. Registration requirements for securities
(a) General requirement of registration
It shall be unlawful for any member, broker, or dealer to effect
any transaction in any security (other than an exempted security)
on a national securities exchange unless a registration is
effective as to such security for such exchange in accordance with
the provisions of this chapter and the rules and regulations
thereunder. The provisions of this subsection shall not apply in
respect of a security futures product traded on a national
securities exchange.
(b) Procedure for registration; information
A security may be registered on a national securities exchange by
the issuer filing an application with the exchange (and filing with
the Commission such duplicate originals thereof as the Commission
may require), which application shall contain -
(1) Such information, in such detail, as to the issuer and any
person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the issuer, and any
guarantor of the security as to principal or interest or both, as
the Commission may by rules and regulations require, as necessary
or appropriate in the public interest or for the protection of
investors, in respect of the following:
(A) the organization, financial structure, and nature of the
business;
(B) the terms, position, rights, and privileges of the
different classes of securities outstanding;
(C) the terms on which their securities are to be, and during
the preceding three years have been, offered to the public or
otherwise;
(D) the directors, officers, and underwriters, and each
security holder of record holding more than 10 per centum of
any class of any equity security of the issuer (other than an
exempted security), their remuneration and their interests in
the securities of, and their material contracts with, the
issuer and any person directly or indirectly controlling or
controlled by, or under direct or indirect common control with,
the issuer;
(E) remuneration to others than directors and officers
exceeding $20,000 per annum;
(F) bonus and profit-sharing arrangements;
(G) management and service contracts;
(H) options existing or to be created in respect of their
securities;
(I) material contracts, not made in the ordinary course of
business, which are to be executed in whole or in part at or
after the filing of the application or which were made not more
than two years before such filing, and every material patent or
contract for a material patent right shall be deemed a material
contract;
(J) balance sheets for not more than the three preceding
fiscal years, certified if required by the rules and
regulations of the Commission by a registered public accounting
firm;
(K) profit and loss statements for not more than the three
preceding fiscal years, certified if required by the rules and
regulations of the Commission by a registered public accounting
firm; and
(L) any further financial statements which the Commission may
deem necessary or appropriate for the protection of investors.
(2) Such copies of articles of incorporation, bylaws, trust
indentures, or corresponding documents by whatever name known,
underwriting arrangements, and other similar documents of, and
voting trust agreements with respect to, the issuer and any
person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the issuer as the
Commission may require as necessary or appropriate for the proper
protection of investors and to insure fair dealing in the
security.
(3) Such copies of material contracts, referred to in paragraph
(1)(I) above, as the Commission may require as necessary or
appropriate for the proper protection of investors and to insure
fair dealing in the security.
(c) Additional or alternative information
If in the judgment of the Commission any information required
under subsection (b) of this section is inapplicable to any
specified class or classes of issuers, the Commission shall require
in lieu thereof the submission of such other information of
comparable character as it may deem applicable to such class of
issuers.
(d) Effective date of registration; withdrawal of registration
If the exchange authorities certify to the Commission that the
security has been approved by the exchange for listing and
registration, the registration shall become effective thirty days
after the receipt of such certification by the Commission or within
such shorter period of time as the Commission may determine. A
security registered with a national securities exchange may be
withdrawn or stricken from listing and registration in accordance
with the rules of the exchange and, upon such terms as the
Commission may deem necessary to impose for the protection of
investors, upon application by the issuer or the exchange to the
Commission; whereupon the issuer shall be relieved from further
compliance with the provisions of this section and section 78m of
this title and any rules or regulations under such sections as to
the securities so withdrawn or stricken. An unissued security may
be registered only in accordance with such rules and regulations as
the Commission may prescribe as necessary or appropriate in the
public interest or for the protection of investors.
(e) Exemption from provisions of section for period ending not
later than July 1, 1935
Notwithstanding the foregoing provisions of this section, the
Commission may by such rules and regulations as it deems necessary
or appropriate in the public interest or for the protection of
investors, permit securities listed on any exchange at the time the
registration of such exchange as a national securities exchange
becomes effective, to be registered for a period ending not later
than July 1, 1935, without complying with the provisions of this
section.
(f) Unlisted trading privileges for security originally listed on
another national exchange
(1)(A) Notwithstanding the preceding subsections of this section,
any national securities exchange, in accordance with the
requirements of this subsection and the rules hereunder, may extend
unlisted trading privileges to -
(i) any security that is listed and registered on a national
securities exchange, subject to subparagraph (B); and
(ii) any security that is otherwise registered pursuant to this
section, or that would be required to be so registered except for
the exemption from registration provided in subparagraph (B) or
(G) of subsection (g)(2) of this section, subject to subparagraph
(E) of this paragraph.
(B) A national securities exchange may not extend unlisted
trading privileges to a security described in subparagraph (A)(i)
during such interval, if any, after the commencement of an initial
public offering of such security, as is or may be required pursuant
to subparagraph (C).
(C) Not later than 180 days after October 22, 1994, the
Commission shall prescribe, by rule or regulation, the duration of
the interval referred to in subparagraph (B), if any, as the
Commission determines to be necessary or appropriate for the
maintenance of fair and orderly markets, the protection of
investors and the public interest, or otherwise in furtherance of
the purposes of this chapter. Until the earlier of the effective
date of such rule or regulation or 240 days after October 22, 1994,
such interval shall begin at the opening of trading on the day on
which such security commences trading on the national securities
exchange with which such security is registered and end at the
conclusion of the next day of trading.
(D) The Commission may prescribe, by rule or regulation such
additional procedures or requirements for extending unlisted
trading privileges to any security as the Commission deems
necessary or appropriate for the maintenance of fair and orderly
markets, the protection of investors and the public interest, or
otherwise in furtherance of the purposes of this chapter.
(E) No extension of unlisted trading privileges to securities
described in subparagraph (A)(ii) may occur except pursuant to a
rule, regulation, or order of the Commission approving such
extension or extensions. In promulgating such rule or regulation or
in issuing such order, the Commission -
(i) shall find that such extension or extensions of unlisted
trading privileges is consistent with the maintenance of fair and
orderly markets, the protection of investors and the public
interest, and otherwise in furtherance of the purposes of this
chapter;
(ii) shall take account of the public trading activity in such
securities, the character of such trading, the impact of such
extension on the existing markets for such securities, and the
desirability of removing impediments to and the progress that has
been made toward the development of a national market system; and
(iii) shall not permit a national securities exchange to extend
unlisted trading privileges to such securities if any rule of
such national securities exchange would unreasonably impair the
ability of a dealer to solicit or effect transactions in such
securities for its own account, or would unreasonably restrict
competition among dealers in such securities or between such
dealers acting in the capacity of market makers who are
specialists and such dealers who are not specialists.
(F) An exchange may continue to extend unlisted trading
privileges in accordance with this paragraph only if the exchange
and the subject security continue to satisfy the requirements for
eligibility under this paragraph, including any rules and
regulations issued by the Commission pursuant to this paragraph,
except that unlisted trading privileges may continue with regard to
securities which had been admitted on such exchange prior to July
1, 1964, notwithstanding the failure to satisfy such requirements.
If unlisted trading privileges in a security are discontinued
pursuant to this subparagraph, the exchange shall cease trading in
that security, unless the exchange and the subject security
thereafter satisfy the requirements of this paragraph and the rules
issued hereunder.
(G) For purposes of this paragraph -
(i) a security is the subject of an initial public offering if
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(I) the offering of the subject security is registered under
the Securities Act of 1933 [15 U.S.C. 77a et seq.]; and
(II) the issuer of the security, immediately prior to filing
the registration statement with respect to the offering, was
not subject to the reporting requirements of section 78m or
78o(d) of this title; and
(ii) an initial public offering of such security commences at
the opening of trading on the day on which such security
commences trading on the national securities exchange with which
such security is registered.
(2)(A) At any time within 60 days of commencement of trading on
an exchange of a security pursuant to unlisted trading privileges,
the Commission may summarily suspend such unlisted trading
privileges on the exchange. Such suspension shall not be reviewable
under section 78y of this title and shall not be deemed to be a
final agency action for purposes of section 704 of title 5. Upon
such suspension -
(i) the exchange shall cease trading in the security by the
close of business on the date of such suspension, or at such time
as the Commission may prescribe by rule or order for the
maintenance of fair and orderly markets, the protection of
investors and the public interest, or otherwise in furtherance of
the purposes of this chapter; and
(ii) if the exchange seeks to extend unlisted trading
privileges to the security, the exchange shall file an
application to reinstate its ability to do so with the Commission
pursuant to such procedures as the Commission may prescribe by
rule or order for the maintenance of fair and orderly markets,
the protection of investors and the public interest, or otherwise
in furtherance of the purposes of this chapter.
(B) A suspension under subparagraph (A) shall remain in effect
until the Commission, by order, grants approval of an application
to reinstate, as described in subparagraph (A)(ii).
(C) A suspension under subparagraph (A) shall not affect the
validity or force of an extension of unlisted trading privileges in
effect prior to such suspension.
(D) The Commission shall not approve an application by a national
securities exchange to reinstate its ability to extend unlisted
trading privileges to a security unless the Commission finds, after
notice and opportunity for hearing, that the extension of unlisted
trading privileges pursuant to such application is consistent with
the maintenance of fair and orderly markets, the protection of
investors and the public interest, and otherwise in furtherance of
the purposes of this chapter. If the application is made to
reinstate unlisted trading privileges to a security described in
paragraph (1)(A)(ii), the Commission -
(i) shall take account of the public trading activity in such
security, the character of such trading, the impact of such
extension on the existing markets for such a security, and the
desirability of removing impediments to and the progress that has
been made toward the development of a national market system; and
(ii) shall not grant any such application if any rule of the
national securities exchange making application under this
subsection would unreasonably impair the ability of a dealer to
solicit or effect transactions in such security for its own
account, or would unreasonably restrict competition among dealers
in such security or between such dealers acting in the capacity
of marketmakers who are specialists and such dealers who are not
specialists.
(3) Notwithstanding paragraph (2), the Commission shall by rules
and regulations suspend unlisted trading privileges in whole or in
part for any or all classes of securities for a period not
exceeding twelve months, if it deems such suspension necessary or
appropriate in the public interest or for the protection of
investors or to prevent evasion of the purposes of this chapter.
(4) On the application of the issuer of any security for which
unlisted trading privileges on any exchange have been continued or
extended pursuant to this subsection, or of any broker or dealer
who makes or creates a market for such security, or of any other
person having a bona fide interest in the question of termination
or suspension of such unlisted trading privileges, or on its own
motion, the Commission shall by order terminate, or suspend for a
period not exceeding twelve months, such unlisted trading
privileges for such security if the Commission finds, after
appropriate notice and opportunity for hearing, that such
termination or suspension is necessary or appropriate in the public
interest or for the protection of investors.
(5) In any proceeding under this subsection in which appropriate
notice and opportunity for hearing are required, notice of not less
than ten days to the applicant in such proceeding, to the issuer of
the security involved, to the exchange which is seeking to continue
or extend or has continued or extended unlisted trading privileges
for such security, and to the exchange, if any, on which such
security is listed and registered, shall be deemed adequate notice,
and any broker or dealer who makes or creates a market for such
security, and any other person having a bona fide interest in such
proceeding, shall upon application be entitled to be heard.
(6) Any security for which unlisted trading privileges are
continued or extended pursuant to this subsection shall be deemed
to be registered on a national securities exchange within the
meaning of this chapter. The powers and duties of the Commission
under this chapter shall be applicable to the rules of an exchange
in respect of any such security. The Commission may, by such rules
and regulations as it deems necessary or appropriate in the public
interest or for the protection of investors, either unconditionally
or upon specified terms and conditions, or for stated periods,
exempt such securities from the operation of any provision of
section 78m, 78n, or 78p of this title.
(g) Registration of securities by issuer; exemptions
(1) Every issuer which is engaged in interstate commerce, or in a
business affecting interstate commerce, or whose securities are
traded by use of the mails or any means or instrumentality of
interstate commerce shall -
(A) within one hundred and twenty days after the last day of
its first fiscal year ended after July 1, 1964, on which the
issuer has total assets exceeding $1,000,000 and a class of
equity security (other than an exempted security) held of record
by seven hundred and fifty or more persons; and
(B) within one hundred and twenty days after the last day of
its first fiscal year ended after two years from July 1, 1964, on
which the issuer has total assets exceeding $1,000,000 and a
class of equity security (other than an exempted security) held
of record by five hundred or more but less than seven hundred and
fifty persons,
register such security by filing with the Commission a registration
statement (and such copies thereof as the Commission may require)
with respect to such security containing such information and
documents as the Commission may specify comparable to that which is
required in an application to register a security pursuant to
subsection (b) of this section. Each such registration statement
shall become effective sixty days after filing with the Commission
or within such shorter period as the Commission may direct. Until
such registration statement becomes effective it shall not be
deemed filed for the purposes of section 78r of this title. Any
issuer may register any class of equity security not required to be
registered by filing a registration statement pursuant to the
provisions of this paragraph. The Commission is authorized to
extend the date upon which any issuer or class of issuers is
required to register a security pursuant to the provisions of this
paragraph.
(2) The provisions of this subsection shall not apply in respect
of -
(A) any security listed and registered on a national securities
exchange.
(B) any security issued by an investment company registered
pursuant to section 80a-8 of this title.
(C) any security, other than permanent stock, guaranty stock,
permanent reserve stock, or any similar certificate evidencing
nonwithdrawable capital, issued by a savings and loan
association, building and loan association, cooperative bank,
homestead association, or similar institution, which is
supervised and examined by State or Federal authority having
supervision over any such institution.
(D) any security of an issuer organized and operated
exclusively for religious, educational, benevolent, fraternal,
charitable, or reformatory purposes and not for pecuniary profit,
and no part of the net earnings of which inures to the benefit of
any private shareholder or individual; or any security of a fund
that is excluded from the definition of an investment company
under section 80a-3(c)(10)(B) of this title.
(E) any security of an issuer which is a "cooperative
association" as defined in the Agricultural Marketing Act,
approved June 15, 1929, as amended [12 U.S.C. 1141 et seq.], or a
federation of such cooperative associations, if such federation
possesses no greater powers or purposes than cooperative
associations so defined.
(F) any security issued by a mutual or cooperative organization
which supplies a commodity or service primarily for the benefit
of its members and operates not for pecuniary profit, but only if
the security is part of a class issuable only to persons who
purchase commodities or services from the issuer, the security is
transferable only to a successor in interest or occupancy of
premises serviced or to be served by the issuer, and no dividends
are payable to the holder of the security.
(G) any security issued by an insurance company if all of the
following conditions are met:
(i) Such insurance company is required to and does file an
annual statement with the Commissioner of Insurance (or other
officer or agency performing a similar function) of its
domiciliary State, and such annual statement conforms to that
prescribed by the National Association of Insurance
Commissioners or in the determination of such State
commissioner, officer or agency substantially conforms to that
so prescribed.
(ii) Such insurance company is subject to regulation by its
domiciliary State of proxies, consents, or authorizations in
respect of securities issued by such company and such
regulation conforms to that prescribed by the National
Association of Insurance Commissioners.
(iii) After July 1, 1966, the purchase and sales of
securities issued by such insurance company by beneficial
owners, directors, or officers of such company are subject to
regulation (including reporting) by its domiciliary State
substantially in the manner provided in section 78p of this
title.
(H) any interest or participation in any collective trust funds
maintained by a bank or in a separate account maintained by an
insurance company which interest or participation is issued in
connection with (i) a stock-bonus, pension, or profit-sharing
plan which meets the requirements for qualification under section
401 of title 26, or (ii) an annuity plan which meets the
requirements for deduction of the employer's contribution under
section 404(a)(2) of title 26.
(3) The Commission may by rules or regulations or, on its own
motion, after notice and opportunity for hearing, by order, exempt
from this subsection any security of a foreign issuer, including
any certificate of deposit for such a security, if the Commission
finds that such exemption is in the public interest and is
consistent with the protection of investors.
(4) Registration of any class of security pursuant to this
subsection shall be terminated ninety days, or such shorter period
as the Commission may determine, after the issuer files a
certification with the Commission that the number of holders of
record of such class of security is reduced to less than three
hundred persons. The Commission shall after notice and opportunity
for hearing deny termination of registration if it finds that the
certification is untrue. Termination of registration shall be
deferred pending final determination on the question of denial.
(5) For the purposes of this subsection the term "class" shall
include all securities of an issuer which are of substantially
similar character and the holders of which enjoy substantially
similar rights and privileges. The Commission may for the purpose
of this subsection define by rules and regulations the terms "total
assets" and "held of record" as it deems necessary or appropriate
in the public interest or for the protection of investors in order
to prevent circumvention of the provisions of this subsection. For
purposes of this subsection, a security futures product shall not
be considered a class of equity security of the issuer of the
securities underlying the security futures product.
(h) Exemption by rules and regulations from certain provisions of
section
The Commission may by rules and regulations, or upon application
of an interested person, by order, after notice and opportunity for
hearing, exempt in whole or in part any issuer or class of issuers
from the provisions of subsection (g) of this section or from
section 78m, 78n, or 78o(d) of this title or may exempt from
section 78p of this title any officer, director, or beneficial
owner of securities of any issuer, any security of which is
required to be registered pursuant to subsection (g) hereof, upon
such terms and conditions and for such period as it deems necessary
or appropriate, if the Commission finds, by reason of the number of
public investors, amount of trading interest in the securities, the
nature and extent of the activities of the issuer, income or assets
of the issuer, or otherwise, that such action is not inconsistent
with the public interest or the protection of investors. The
Commission may, for the purposes of any of the above-mentioned
sections or subsections of this chapter, classify issuers and
prescribe requirements appropriate for each such class.
(i) Securities issued by banks
In respect of any securities issued by banks and savings
associations the deposits of which are insured in accordance with
the Federal Deposit Insurance Act [12 U.S.C. 1811 et seq.], the
powers, functions, and duties vested in the Commission to
administer and enforce this section and sections 78j-1(m), 78m,
78n(a), 78n(c), 78n(d), 78n(f), and 78p of this title, and sections
7241, 7242, 7243, 7244, 7261(b), 7262, 7264, and 7265 of this
title, (1) with respect to national banks and banks operating under
the Code of Law for the District of Columbia are vested in the
Comptroller of the Currency, (2) with respect to all other member
banks of the Federal Reserve System are vested in the Board of
Governors of the Federal Reserve System, (3) with respect to all
other insured banks are vested in the Federal Deposit Insurance
Corporation, and (4) with respect to savings associations the
accounts of which are insured by the Federal Deposit Insurance
Corporation are vested in the Office of Thrift Supervision. The
Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, and the
Office of Thrift Supervision shall have the power to make such
rules and regulations as may be necessary for the execution of the
functions vested in them as provided in this subsection. In
carrying out their responsibilities under this subsection, the
agencies named in the first sentence of this subsection shall issue
substantially similar regulations to regulations and rules issued
by the Commission under this section and sections 78j-1(m), 78m,
78n(a), 78n(c), 78n(d), 78n(f), and 78p of this title, and sections
7241, 7242, 7243, 7244, 7261(b), 7262, 7264, and 7265 of this
title, unless they find that implementation of substantially
similar regulations with respect to insured banks and insured
institutions are not necessary or appropriate in the public
interest or for protection of investors, and publish such findings,
and the detailed reasons therefor, in the Federal Register. Such
regulations of the above-named agencies, or the reasons for failure
to publish such substantially similar regulations to those of the
Commission, shall be published in the Federal Register within 120
days of October 28, 1974, and, thereafter, within 60 days of any
changes made by the Commission in its relevant regulations and
rules.
(j) Denial, suspension, or revocation of registration; notice and
hearing
The Commission is authorized, by order, as it deems necessary or
appropriate for the protection of investors to deny, to suspend the
effective date of, to suspend for a period not exceeding twelve
months, or to revoke the registration of a security, if the
Commission finds, on the record after notice and opportunity for
hearing, that the issuer, of such security has failed to comply
with any provision of this chapter or the rules and regulations
thereunder. No member of a national securities exchange, broker, or
dealer shall make use of the mails or any means or instrumentality
of interstate commerce to effect any transaction in, or to induce
the purchase or sale of, any security the registration of which has
been and is suspended or revoked pursuant to the preceding
sentence.
(k) Trading suspensions; emergency authority
(1) Trading suspensions
If in its opinion the public interest and the protection of
investors so require, the Commission is authorized by order -
(A) summarily to suspend trading in any security (other than
an exempted security) for a period not exceeding 10 business
days, and
(B) summarily to suspend all trading on any national
securities exchange or otherwise, in securities other than
exempted securities, for a period not exceeding 90 calendar
days.
The action described in subparagraph (B) shall not take effect
unless the Commission notifies the President of its decision and
the President notifies the Commission that the President does not
disapprove of such decision. If the actions described in
subparagraph (A) or (B) involve a security futures product, the
Commission shall consult with and consider the views of the
Commodity Futures Trading Commission.
(2) Emergency orders
(A) The Commission, in an emergency, may by order summarily
take such action to alter, supplement, suspend, or impose
requirements or restrictions with respect to any matter or action
subject to regulation by the Commission or a self-regulatory
organization under this chapter, as the Commission determines is
necessary in the public interest and for the protection of
investors -
(i) to maintain or restore fair and orderly securities
markets (other than markets in exempted securities); or
(ii) to ensure prompt, accurate, and safe clearance and
settlement of transactions in securities (other than exempted
securities).
(B) An order of the Commission under this paragraph (2) shall
continue in effect for the period specified by the Commission,
and may be extended, except that in no event shall the
Commission's action continue in effect for more than 10 business
days, including extensions. If the actions described in
subparagraph (A) involve a security futures product, the
Commission shall consult with and consider the views of the
Commodity Futures Trading Commission. In exercising its authority
under this paragraph, the Commission shall not be required to
comply with the provisions of section 553 of title 5 or with the
provisions of section 78s(c) of this title.
(3) Termination of emergency actions by President
The President may direct that action taken by the Commission
under paragraph (1)(B) or paragraph (2) of this subsection shall
not continue in effect.
(4) Compliance with orders
No member of a national securities exchange, broker, or dealer
shall make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce
the purchase or sale of, any security in contravention of an
order of the Commission under this subsection unless such order
has been stayed, modified, or set aside as provided in paragraph
(5) of this subsection or has ceased to be effective upon
direction of the President as provided in paragraph (3).
(5) Limitations on review of orders
An order of the Commission pursuant to this subsection shall be
subject to review only as provided in section 78y(a) of this
title. Review shall be based on an examination of all the
information before the Commission at the time such order was
issued. The reviewing court shall not enter a stay, writ of
mandamus, or similar relief unless the court finds, after notice
and hearing before a panel of the court, that the Commission's
action is arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.
(6) "Emergency" defined
For purposes of this subsection, the term "emergency" means a
major market disturbance characterized by or constituting -
(A) sudden and excessive fluctuations of securities prices
generally, or a substantial threat thereof, that threaten fair
and orderly markets, or
(B) a substantial disruption of the safe or efficient
operation of the national system for clearance and settlement
of securities, or a substantial threat thereof.
(l) Issuance of any security in contravention of rules and
regulations; application to annuity contracts and variable life
policies
It shall be unlawful for an issuer, any class of whose securities
is registered pursuant to this section or would be required to be
so registered except for the exemption from registration provided
by subsection (g)(2)(B) or (g)(2)(G) of this section, by the use of
any means or instrumentality of interstate commerce, or of the
mails, to issue, either originally or upon transfer, any of such
securities in a form or with a format which contravenes such rules
and regulations as the Commission may prescribe as necessary or
appropriate for the prompt and accurate clearance and settlement of
transactions in securities. The provisions of this subsection shall
not apply to variable annuity contracts or variable life policies
issued by an insurance company or its separate accounts.
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