An Act to amend the Securities Exchange Act of 1934 to remove barriers to competition, to foster the development of a national securities market system and a national clearance and settlement system, to make uniform the Securities and Exchange Commission's authority over self-regulatory organizations, to provide for the regulation of brokers, dealers and banks trading in municipal securities, to facilitate the collection and public dissemination of information concerning the holdings of and transactions in securities by institutional investment managers, and for other purposes.
PL 94-29 (S.249), enacted 06/04/1975

PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 97 
Public Law 94-29 
94th Congress 
An Act 
To amend the Securities Exchange Act of 1934 to remove barriers to competi-
tion, to foster the development of a national securities market system and a 
national clearance and settlement system, to make uniform the Securities 
and Exchange Commission's authority over self-regulatory organizations, to 
provide for the regulation of brokers, dealers and banks trading in municipal 
securities, to facilitate the collection and public dissemination of information 
concerning the holdings of and transactions in securities by institutional 
Investment managers, and for other purposes. 
Be it enacted hy the Senate and House of Representatives of the 
United States of America in Congress assembled^ That this Act may 
be cited as tlie "Securities Acts Amendments of 1975". 
SEC. 2. Section 2 of the Securities Exchange Act of 1934 (15 U.S.C 
78b) is amended by inserting immediately before the phrase "and to 
impose requirements necessary to make such regulation and control 
reasonably complete and effective," the following: "to remove impedi-
ments to and perfect the mechanisms of a national market system for 
securities and a national system for the clearance and settlement of 
securities transactions and the safeguarding of securities and funds 
related thereto,". 
SEC. 3. Section 3 of the Securities Exchange Act of 1934 (15 
U.S.C. 78c) is amended as follows: 
(1) Paragraph (3) of subsection (a) thereof is amended to read as 
follows: 
"(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 I'egulated by such exchange and with I'espect to which 
the exchange undertakes to enforce compliance with the provisions 
of this title, the rules and regulations thereunder, and its own rules. 
For purposes 6f sections (b)(1), 6(b)(4), 6(b)(6), 6(b)(7), 6(d), 
17(d), 19(d), 19(e), 19(g), 19(h), and 21 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 6(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 associa-
tion undertakes to enforce compliance with the provisions of this 
title, the rules and regulations thereunder, and its own rules.". 
(2) Paragraph (9) thereof is amended to read as follows: 
"(9) The term 'person' means a natural person, company, govern-
ment, or political subdivision, agency, or instrumentality of a govern-
ment.". 
(3) Paragraph (12) of subsection (a) thereof is amended to read 
as follows: 
"(12) The term 'exempted security' or 'exempted securities' includes 
securities which are direct obligations of, or obligations guaranteed as 
to principal or interest by, the United States; such securities issued or 
guaranteed by corporations in which the United States has a direct or 
indirect interest as shall be designated for exemption by the Secretary 
of the Treasury as necessary or appropriate in the public interest or 
June 4, 1975 
[S. 249] 
Securities Acts 
Amendments of 
1975. 
15 u s e 78a note. 
Necessity for 
regulation. 
Definitions. 
Post, pp. 104, 
137, 146, 154. 
89 STAT. 98 
PUBLIC LAW 94-29—JUNE 4, 1975 
for the protection of investors; municipal securities, as defined in sec-
Post, p. 101. 
tion 3(a) (29) of this title: Provided, however, That municipal securi-
ties shall not be deemed to be 'exempted securities' for purposes of 
sections 15, 15A (except subsections (b)(6), (b)(ll), and (g)(2) 
Post, pp. 121, 
thereof), and 17A of this title; any interest or participation in any 
127, 141. 
common trust fund or similar fund maintained by a bank exclusively 
for the collective investment and reinvestment of assets contributed 
thereto by such bank in its capacity as trustee, executor, administrator, 
or guardian; any interest or participation in a collective trust fund 
maintained by a bank or in a separate account maintained by an insur-
ance company which interest or participation is issued in connection 
with (A) a stock bonus, pension, or profit-sharing plan which meets 
the requirements for qualification under section 401 of the Internal 
26 use 401. 
Revenue Code of 1954, or (B) an annuity plan which meets the 
requirements for the deduction of the employer's contribution under 
26 use 404. 
section 404(a)(2) of such Code, other than any plan described in 
clause (A) or (B) of this paragraph which covers employees some or 
all of whom are employees within the meaning of section 401 (c) (1) of 
such Code, and 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 title which by their terms do not apply to an 
'exempted security' or to 'exempted securities'.". 
(4) Paragraphs (17), (18), and (19) of subsection (a) thereof are 
amended to read as follows: 
" (17) The term 'interstate commerce' means trade, commerce, trans-
portation, 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 'asso-
ciated person of a broker or dealer' means any partner, officer, director, 
or branch manager of such broker or dealer (or any person occvipying 
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 
Post, p. 121. 
such term for purposes of section 15(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 
15 use 80a-2. 
as in the Investment Company Act of 1940.". 
(5) Paragraph (21) of subsection (a) thereof is amended to read 
as follows: 
"(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.". 
(6) Subsection (a) thereof is further amended by adding at the end 
thereof the following new paragraphs: 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 99 
"(22) (A) The term 'securities information processor' means any 
person engaged in the business of (i) collecting, processing, or pre-
paring 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 organization, any bank, broker, 
dealer, building and loan, savings and loan, or homestead association, 
or cooperative bank, if such bank, broker, dealer, association, or coop-
erative 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 3(h) of 
the Communications Act of 1934, subject to the jurisdiction of the 47 USC 153. 
Federal Communications Commission or a State commission, as defined 
in section 3(t) of that Act, unless the Commission determines that 
such carrier is engaged in the business of collecting, processing, or 
preparing for distribution or publication, information Math respect 
to transactions in or quotations for any security. 
"(B) The term 'exclusive processor' means any securities informa-
tion processor or self-regulatory organization which, directly or indi-
rectly, 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 trans-
actions, 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) other-
wise 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 con-
trolled 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 
39 STAT. 100 
PUBLIC LAW 94-29—JUNE 4, 1975 
would be deemed to be a clearing agency solely by reason of functions 
performed by such institution as part of customary banking, broker-
age, 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 clear-
ance and settlement of securities transactions or to prevent evasion of 
this title; (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 ajjent' 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 contract 
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 19(b), 19(c), and 
Post, pp. 146, 
23(b) of this title) the Municipal Securities Rulemaking Board estab-
1^^- 
lished by section 15B of this title. 
Post, p. 131. 
"(27) The term 'rules of an exchange', 'rules of an association', or 
'rules of a clearing agency' means the constitution, articles of incor-
poration, bylaws, and rules, or instruments corresponding to the fore-
going, 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 deitermine 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 orfjanization' 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 clear-
ing agency, or the rules of the Municipal Securities Rulemaking 
Board. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 101 
"(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) of the Internal Kevenue Code of 1954) the interest on which 
26 U
S
C 103. 
is excludable from gross income under section 103(a) (1) of such Code 
if, by reason of the application of paragraph (4) or (6) of section 103 
(c) of such Code (determined as if paragraphs (4) (A), (5), and (7) 
were not included in such section 103(c)), paragraph (1) of such sec-
tion 103(c) 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 buy-
ing and selling municipal securities for its own account other 
than in a fiduciary capacity, through a broker or othei-wise: Pro-
vided, 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 accord-
ance with section 15B(b) (2) (H) of this title), the department or Post, p. 131. 
division and not the bank itself shall be deemed to be the mimic-
ipal 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 munic-
ipal 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 con-
trol 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 Sys-
tem, 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 com-
pany which is a bank other than a bank specified in clause 
(i) or (iii) of this subparagraph, or a subsidiary or a depart-
ment or division of such subsidiary; 
"(iii) the Federal Deposit Insurance Corporation, in the 
case of a bank insured by the Federal Deposit Insurance Cor-
57-194 O - 77 - 11 
89 STAT. 102 
PUBLIC LAW 94-29—JUNE 4, 1975 
poration (other than a member of the Federal Reserve Sys-
tem), 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 Sys-
tem, 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 subpara-
graph; 
"(iii) the Federal Deposit Insurance Corporation, in the 
case of a bank insured by the Federal Deposit Insurance Cor-
poration (other than a member of the Federal Reserve Sys-
tem) , or a subsidiary thereof; and 
" (iv) the Commission in the case of all other clearing agen-
cies 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 ser\dces 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 Sys-
tem 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 O)mmission 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 
12 use 1811 
accordance with the Federal Deposit Insurance Act: 
°°*®- 
"(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 Sys-
tem, in the case of any other member bank of the Federal 
Reserve System; and 
"(iii) the Federal Deposit Insurance Corporation, in the 
case oi any other insured bank, 
"(E) When used with respect to a national securities exchange 
or registered securities association, member thereof, person asso-
ciated 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. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 103 
" (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 Keserve Sys-
tem 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 wuth the P'ederal Deposit Insurance Act; and 
"(iv) the Commission in the case of all other such persons. 
As used in this paragraph, the terms 'bank holding company' and 'sub-
sidiary of a bank holding company' have the meanings given them in 
section 2 of the Bank Holding Company Act of 1956. 
12 USC 1841. 
"(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 title 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 title Avhich the Commission determines is unfair and not neces-
sary or appropriate in furtherance of the purposes of this title. 
"(37) The term 'records' means accounts, correspondence, memo-
randums, tapes, discs, papers, books, and other documents or tran-
scribed 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 other-
wise) 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 mem-
ber 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; 
"(B) is subject to an order of the Commission denying, sus-
pending for a period not exceeding twelve months, revoking his 
registration as a broker, dealer, or municipal securities dealer, or 
barring his being associated with a broker, dealer, or municipal 
securities dealer; 
"(C) by his conduct while associated with a broker, dealer, or 
municipal securities dealer, 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 or any such 
self-regulatory organization shall have jurisdiction to find 
whether or not any person was a cause thereof; 
89 STAT. 104 
PUBLIC LAW 94-29—JUNE 4, 1975 
"(D) 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), or (C) of this para-
graph; or 
" ( E ) has committed or omitted any act enumerated in sub-
paragraph (D) or (E) of paragraph (4) of section 15(b) of this 
Post, p. 121. 
title, has been convicted of any offense specified in subparagraph 
(B) of such paragraph (4) 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 orga-
nization, is enjoined from any action, conduct, or practice speci-
fied 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-regula-
tory 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.". 
Rules and 
(7) Subsection (b) thereof is amended to read as follows: 
regulations. 
"(b) 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 title, consistently with the 
provisions and purposes of this title.". 
(8) The section is further amended by adding at the end thereof the 
following new subsection: 
"(d) 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.". 
SEC. 4. Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 
78f) is amended to read as follows: 
Registration. 
Post, p. 146. 
Post, pp. 137, 
146. 
"NATIONAL SECURITIES EXCHANGES 
"SEC. 6. (a) An exchange may be registered as a national securities 
exchange under the terms and conditions hereinafter provided in this 
section and in accordance with the provisions of section 19(a) of this 
title, by filing with the Commission an application for registration in 
such form as the Commission, by rule, may prescribe containing the 
rules of the exchange and such other information and documents as the 
Commission, by rule, may prescribe as necessary or appropriate in the 
public interest or for the protection of investors. 
"(b) An exchange shall not be registered as a national securities 
exchange unless the Commission determines that— 
"(1) Such exchange is so organized and has the capacity to be 
able to carry out the purposes of this title and to comply, and 
(subject to any rule or order of the Commission pursuant to sec-
tion 17(d) or 19(g) (2) of this title) to enforce compliance by 
its members and persons associated with its members, with the 
provisions of this title, the rules and regulations thereunder, and 
the rules of the exchange. 
"(2) Subject to the provisions of subsection (c) of this section, 
the rules of the exchange provide that any registered broker or 
dealer or natural person associated with a registered broker or 
dealer may become a Inember of such exchange and any person 
may become associated with a member thereof. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 105 
"(3) The rules of the exchange assure a fair representation of 
its members in the selection of its directors and administration 
of its affairs and provide that one or more directors shall be rep-
resentative of issuers and investors and not be associated with a 
member of the exchange, broker, or dealer. 
"(4) The rules of the exchange provide for the equitable allo-
cation of reasonable dues, fees, and other chai'ges among its mem-
bers and issuers and other persons using its facilities. 
"(5) The rules of the exchange are designed to prevent fraudu-
lent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordina-
tion with persons engaged in regulating, clearing, settling, proc-
essing information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest; and are not 
designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers, or to regulate by virtue of any author-
ity conferred by this title matters not related to the purposes of 
this title or the administration of the exchange. 
"(6) The rules of the exchange provide that (subject to any 
rule or order of the Commission pursuant to section 17(d) or 19 
(g) (2) of this title) its members and persons associated with its 
members shall be appropriately disciplined for violation of the 
provisions of this title, the rules or regulations thereunder, or the 
rules of the exchange, by expulsion, suspension, limitation of 
activities, functions, and operations, fine, censure, being suspended 
or barred from being associated with a member-, or any other fit-
ting sanction. 
"(7) The rules of the exchange ai-e in accordance with the pro-
visions of subsection (d) of this section, and in general, provide a 
fair procedure for the disciplining of members and persons 
associated with members, the denial of membership to any person 
seeking membership therein, the barring of any person from 
becoming associated w4th a member thereof, and the prohibition 
or limitation by the exchange of any person with respect to access 
to services offered by the exchange or a member thereof. 
"(8) The rules of the exchange do not impose any burden on 
competition not necessary or appropriate in furtherance of the 
purposes of this title. 
"(c)(1) A national securities exchange shall deny membership to 
(A) any person, other than a natural person, which is not a registered 
broker or dealer or (B) any natural person who is not, or is not asso-
ciated with, a registered broker or dealer. 
"(2) A national securities exchange may, and in cases in which 
the Commission, by order, directs as necessary or appropriate in the 
public interest or for the protection shall, deny membership to any 
registered broker or dealer or natural person associated with a regis-
tered broker or dealer, and bar from becoming associated with a mem-
ber any person, w^ho is subject to a statutory disqualification. A national 
securities exchange shall file notice with the Commission not less than 
thirty days prior to admitting any person to membership or permitting 
any person to become associated with a member, if the exchange knew, 
or in the exercise of reasonable care should have known, that such 
person was subject to a statutory disqualification. The notice shall be 
in such form and contain such information as the Commission, by rule, 
may prescribe as necessary or appropriate in the public interest or for 
the protection of investors. 
Post, pp. 137, 
146. 
Membership, 
denial. 
Notice. 
89 STAT. 106 
PUBLIC LAW 94-29—JUNE 4, 1975 
Membership, 
limitation. 
Post, p. 146. 
Disciplinary 
actions. 
"(3) (A) A national securities exchange may deny membership to, 
or condition the membership of, a registered broker or dealer if (i) 
snch broker or dealer does not meet such standards of financial respon-
sibility or operational capability or such broker or dealer or any natural 
person association with such broker or dealer does not meet such stand-
ards of training, experience, and competence as are prescribed by the 
rules of the exchange or (ii) such broker or dealer or person associated 
with such broker or dealer has engaged and there is a reasonable like-
lihood he may again engage in acts or practices inconsistent with just 
and equitable principles of trade. A national securities exchange may 
examine and verify the qualifications of an applicant to become a 
member and the natural persons associated with such an applicant in 
accordance with procedures established by the rules of the exchange. 
" ( B ) A national securities exchange may bar a natural person from 
becoming a member or associated with a member, or condition the 
membership of a natural person or association of a natural person with 
a member, if such natural person (i) does not meet such standards of 
training, experience, and competence as are prescribed by the rules 
of the exchange or (ii) has engaged and there is a reasonable likeli-
hood he may again engage in acts or practices inconsistent with just 
and equitable principles of trade. A national securities exchange may 
examine and verify the qualifications of an applicant to become a 
person associated wnth a member in accordance with procedures estab-
lished by the rules of the exchange and require any person associated 
with a member, or any class of such persons, to be registered with the 
exchange in accordance with procedures so established. 
"(C) A national securities exchange may bar any person from 
becoming associated wnth a member if such person does not agree (i) 
to supply the exchange with such information with respect to its rela-
tionship and dealings with the member as may be specified in the rules 
of the exchange and (ii) to permit the examination of its books and 
records to verify the accuracy of any information so supplied. 
"('4) A national securities exchange may (A) limit the number of 
members of the exchange and (B) the number of members and desig-
nated representatives of members permitted to effect transactions on 
the floor of the exchange without the services of another person acting 
as broker: Provided, 
hotvever, That no national securities exchange 
shall have the authority to decrease the number of memberships in such 
exchange, or the number of members and designated representatives of 
members permitted to effect transactions on the floor of such exchange 
without the services of another person acting as broker, below such 
number in effect on May 1, 1975, or the date such exchange w^as reg-
istered with the Commission, whichever is later: And provided 
further, 
That the Commission, in accordance with the provisions of section 
19(c) of this title, may amend the rules of any national securities 
exchange to increase (but not to decrease) or to remove any limitation 
on the number of memberships in such exchange or the number of 
members or designated representatives of members permitted to effect 
transactions on the floor of the exchange without the services of another 
person acting as broker, if the Commission finds that such limitation 
imposes a burden on competition not necessary or appropriate in fur-
therance of the purposes of this title. 
" ( d ) ( 1 ) In any proceeding by a national securities exchange to 
determine whether a member or person associated with a member 
should be disciplined (other than a summary proceeding pursuant to 
paragraph (3) of this subsection), the exchange shall bring specific 
charges, notify such member or person of, and give him an opportunity 
to defend against, such charges, and keep a record. A determination 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 107 
by the exchange to impose a disciplinary sanction shall be supported 
by a statement setting forth— 
"(A) any act or practice in which such member or person asso-
ciated with a member has been found to have engaged, or which 
such member or person has been found to have omitted; 
"(B) the specific provision of this title, the rules or regulations 
thereunder, or the rules of the excl.ange which any such act or 
practice, or omission to act, is deemed to violate; and 
"(C) the sanction imposed and the reasons therefor. 
"(2) In any proceeding by a national securities exchange to deter- Notice and 
mine whether a person shall be denied membership, barred from hearing, 
becoming associated with a member, or prohibited or limited wnth 
respect to access to services offered by the exchange or a member thereof 
(other than a summary proceeding pursuant to paragraph (3) of this 
subsection), the exchange shall notify such person of, and give him 
an opportunity to be heard upon, the specific grounds for denial, bar, 
or prohibition or limitation under consideration and keep a record. A 
determination by the exchange to deny membership, bar a person from 
becoming associated with a member, or prohibit or limit a person with 
respect to access to services offered by the exchange or a member thereof 
shall be supported by a statement setting forth the specific grounds on 
which the denial, bar, or prohibition or limitation is based. 
"(3) A national securities exchange may summarily (A) suspend a Summary 
member or person associated with a member who has been and is suspension, 
expelled or suspended from any self-regulatory organization or barred 
or suspended from being associated with a member of any self-regula-
tory organization, (B) suspend a member who is in such financial or 
operating difficulty that the exchange deteiinines and so notifies the 
Commission that the member cannot be permitted to continue to do 
business as a member with safety to investors, creditors, other mem-
bers, or the exchange, or (C) limit or prohibit any person with respect 
to access to services offered by the exchange if subparagraph (A) or 
(B) of this paragraph is applicable to such person or, in the case of a 
person who is not a member, if the exchange determines that such per-
son does not meet the qualification requirements or other prerequisites 
for such access and such person cannot be permitted to continue to 
have such access w'ith safety to investors, creditors, members, or the 
exchange. Any person aggrieved by any such summary action shall Hearing, 
be promptly afforded an opportunity for a hearing by the exchange in 
accordance with the provisions of paragraph (1) or (2) of this sub-
section. The Commission, by order, may stay any such summary action 
Stay of action, 
on its own motion or upon application by any person aggrieved 
thereby, if the Commission determines summarily or after notice and 
opportunity for hearing (which hearing may consist solely of the sub-
mission of affidavits or presentation of oral arguments) that such stay 
is consistent with the public interest and the protection of investors. 
"(e) (1) On and after the date of enactment of the Securities Acts 
Rates and fees. 
Amendments of 1975, no national securities exchange may impose any 
schedule or fix rates of commissions, allowances, discounts, or other 
fees to be charged by its members: Provided^ however. That until May 
1, 1976, the preceding provisions of this paragraph shall not prohibit 
any such exchange from imposing or fixing any schedule of commis-
sions, allowances, discounts, or other fees to be charged by its members 
for acting as broker on the floor of the exchange or as odd-lot dealer: 
And provided further. That the Commission, in accordance with the 
provisions of section 19(b) of this title as modified by the provisions Post, p. 146. 
of paragraph (4) of this section, may— 
"(A) permit a national securities exchange, by rule, to impose 
a reasonable schedule or fix reasonable rates of commissions. 
89 STAT. 108 
PUBLIC LAW 94-29—JUNE 4, 1975 
Post, p. 146. 
Information, 
filing with 
Speaker of the 
House and 
President of the 
Senate. 
Oral 
presentations. 
Rules and 
rulings. 
Class 
representative. 
allowances, discounts, or other fees to be charged by its members 
for effecting transactions on such exchange prior to November 1, 
1976, if the Commission finds that such schedule or fixed rates 
of commissions, allowances, discounts, or other fees are in the 
public interest; and 
" ( B ) permit a national securities exchange, by rule, to impose 
a schedule or fix rates of commissions, allowances, discounts, or 
other fees to be charged by its members for effecting transactions 
on such exchange after November 1,1976, if the Commission finds 
that such schedule or fixed rates of commissions, allowances, dis-
counts, or other fees (i) are reasonable in relation to the costs of 
providing the service for which such fees are charged (and the 
Commission publishes the standards employed in 
adjudging 
reasonableness) and (ii) do not impose any burden on compe-
tition not necessary or appropriate in furtherance of the purposes 
of this title, taking into consideration the competitive effects of 
permitting such schedule or fixed rates weighed against the com-
petitive effects of other lawful actions which the Commission is 
authorized to take under this title. 
"(2) Notwithstanding the provisions of section 19(c) of this title, 
the Commission, by rule, may abrogate any exchange rule which 
imposes a schedule or fixes rates of commissions, allowances, discotmts, 
or other fees, if the Commission determines that such schedule or fixed 
rates are no longer reasonable, in the public interest, or necessary to 
accomplish the purposes of this title. 
"(3) Until December 31, 1976, the Commission, on a regular basis, 
shall file with the Speaker of the House and the President of the 
Senate information concerning the effect on the public interest, pro-
tection of investors, and maintenance of fair and orderly markets of 
the absence of any schedule or fixed rates of commissions, allowances, 
discounts, or other fees to be charged by members of any national 
securities exchange for effecting transactions on such exchange. 
"(4) (A) Before approving or disapproving any proposed rule 
change submitted by a national securities exchange wliich would 
impose a schedule or fix rates of commissions, allowances, discounts, or 
other fees to be charged by its members for effecting transactions on 
such exchange, the Commission shall afford interested persons (i) an 
opportunity for oral presentation of data, views, and arguments and 
(ii) with respect to any such rule concerning transactions effected 
after November 1, 1976, if the Commission determines there are dis-
puted issues of material fact, to present such rebuttal submissions and 
to conduct (or have conducted under subparagraph (B) of this para-
graph) such cross-examination as the Commission determines to be 
appropriate and required for full disclosure and proper resolution of 
such disputed issues of material fact. 
"(B) The Commission shall prescribe rules and make rulings con-
cerning any proceeding in accordance with subparagraph (A) of this 
paragraph designed to avoid unnecessary costs or delay. Such rules 
or rulings may (i) impose reasonable time limits on each interested 
person's oral presentations, and (ii) require any cross-examination to 
which a person may be entitled under subparagraph (A) of this para-
graph to be conducted by the Commission on behalf of that person 
in such manner as the Commission determines to be appropriate and 
required for full disclosure and proper resolution of disputed issues 
of material fact. 
"(C) (i) If any class of persons, the members of which are entitled 
to conduct (or have conducted) cross-examination under subpara-
graphs (A) and (B) of this paragraph and which have, in the view 
of the Commission, the same or similar interests in the proceeding, 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 109 
cannot agree upon a single representative of such interests for pur-
poses of cross-examination, the Commission may make rules and rul-
ings specifying the manner in which such interests shall be represented 
and such cross-examination conducted. 
"(ii) No member of any class of persons with respect to which the 
Commission has specified the manner in which its interests shall be 
represented pursuant to clause (i) of this subparagraph shall be 
denied, pursuant to such clause (i), the opportunity to conduct (or 
have conducted) cross-examination as to issues affecting his particu-
lar interests if he satisfies the Commission that he has made a 
reasonable and good faith effort to reach agreement upon group 
representation and there are substantial and relevant issues which 
would not be presented adequately by group representation. 
"(D) A transcript shall be kept of any oral presentation and 
cross-examination. 
"(E) In addition to the bases specified in subsection 25(a), a 
reviewing Court may set aside an order of the Commission under 
section 19(b) approving an exchange rule imposing a schedule or fixes 
lates of commissions, allowances, discounts, or other fees, if the Court 
finds— 
"(1) a Commission determination under paragraph (4) (A) 
that an interested person is not entitled to conduct cross-examina-
tion or make rebuttal submissions, or 
"(2) a Commission rule or ruling under paragraph (4) (B) 
limiting the petitioner's cross-examination or rebuttal sub-
missions, 
has precluded full disclosure and proper resolution of disputed issues 
of material fact which were necessary for fair determination by the 
Commission. 
"(f) The Commission, by rule or order, as it deems necessary or 
appropriate in the public interest and for the protection of investors, 
to maintain fair and orderly markets, or to assure equal regulation, 
may require— 
"(1) any person not a member or a designated representative 
of a member of a national securities exchange effecting trans-
actions on such exchange without the services of another person 
acting as a broker, or 
"(2) any broker or dealer not a member of a national securities 
exchange effecting transactions on such exchange on a regular 
basis, 
to comply with such rules of such exchange as the Commission may 
specify.". 
SEC. 5. Section 8 of the Securities Exchange Act of 1934 (15 U.S.C. 
78h) is amended as follows: 
(1) The first sentence thereof is amended by striking out the phrase 
"any member of a national securities exchange, or any broker or dealer 
who transacts a business in securities through the medium of any such 
member" and by inserting in lieu thereof the phrase "any registered 
broker or dealer, member of a national securities exchange, or broker 
or dealer who transacts a business in securities through the medium 
of any member of a national securities exchange". 
(2) The section is further amended by striking out subsection (b), 
redesignating subsections (c) and (d) thereof as subsections (b) and 
(c) respectively, and amending redesignated subsection (c) to read 
as follows: 
"(c) To lend or arrange for the lending of any securities carried for 
the account of any customer without the written consent of such cus-
tomer or in contravention of such rules and regulations as the Com-
mission shall prescribe for the protection of investors." 
Transcript. 
Post, p. 158. 
Post, p. 146. 
Borrowing by 
members, 
brokers, and 
dealers, 
restrictions. 
89 STAT. 110 
PUBLIC LAW 94-29—JUNE 4, 1975 
Trading by 
members of 
exchanges, 
brokers, and 
dealers. 
15 use 78j. 
SEC. 6. Section 11 of the Securities Exchange Act of 1934 (15 U.S.C. 
78k) is amended as follows : 
(1) The title thereof is amended to read: "TRADING BY MEMBERS OF 
EXCHANGES, BROKERS, AND DEALERS". 
(2) Subsections (a) and (b) thereof are amended to read as follows: 
" (a) (1) It shall be unlawful for any member of a national securities 
exchange to effect any transaction on such exchange for its own 
account, the account of an associated pereon, or an account with respect 
to which it or an associated person thereof exercises investment 
discretion: Provided^ however^ That this paragraph shall not make 
unlawful— 
"(A) any transaction by a dealer acting in the capacity of 
market maker; 
"(B) any transaction for the account of an odd-lot dealer in 
a security in which he is so registered; 
"(C) any stabilizing transaction effected in compliance with 
rules under section 10(b) of this title to facilitate a distribution 
of a security in which the member effecting such transaction is 
participating; 
"(D) any bona fide arbitrage transaction, any bona fide hedge 
transaction involving a long or short position in an equity secu-
rity and a long or short position in a security entitling the holder 
to acquire or sell such equity security, or any risk arbitrage trans-
action in connection with a merger, acquisition, tender offer, or 
similar transaction involving a recapitalization; 
" ( E ) any transaction for the account of a natural person, the 
estate of a natural person, or a trust (other than an investment 
company) created by a natural person for himself or another 
natural person; 
" ( F ) any transaction to offset a transaction made in error; 
"(G) any other transaction for a member's own account pro-
vided that (i) such member is primarily engaged in the business 
of underwriting and distributing securities issued by other per-
sons, selling securities to customers, and acting as broker, or any 
one or more of such activities, and whose gross income normally 
is derived principally from such business and related activities 
and (ii) such transaction is effected in compliance with rules of 
the Commission which, as a minimum, assure that the transaction 
is not inconsistent with the maintenance of fair and orderly 
markets and yields priority, parity, and precedence in execution 
to orders for the account of persons who are not members or asso-
ciated with members of the exchange; and 
" ( H ) any other transaction of a kind which the Commission, 
by rule, determines is consistent with the purposes of this para-
graph, the protection of investors, and the maintenance of fair 
and orderly markets. 
"(2) The Commission, by rule, as it deems necessary or appropriate 
in the public interest and for the protection of investors, to maintain 
fair and orderly markets, or to assure equal regulation of exchange 
markets and markets occurring otherwise than on an exchange, may 
regulate or prohibit: 
" ( A ) transactions on a national securities exchange not unlaw-
ful under paragraph (1) of this subsection effected by any mem-
ber thereof for its own account (unless such member is acting in 
the capacity of market maker or odd-lot dealer), the account of 
an associated person, or an account with respect to which such 
member or an associated person thereof exercises investment dis-
cretion : 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. I l l 
"(B) transactions otherwise than on a national securities 
exchange effected by use of the mails or any means or instrumen-
tality of interstate commerce by any member of a national secu-
rities exchange, broker, or dealer for the account of such member, 
broker, or dealer (unless such member, broker, or dealer is acting 
in the capacity of a market maker) the account of an associated 
person, or an account with respect to Avhich such member, broker, 
or dealer or associated person thereof exercises investment discre-
tion ; and 
"(C) transactions on a national securities exchange effected 
by any broker or dealer not a member thereof for the account of 
such broker or dealer (unless such broker or dealer is acting in 
the capacity of market maker), the account of an associated per-
son, or an account with respect to which such broker or dealer or 
associated person thereof exercises investment discretion. 
"(8) The provisions of paragraph (1) of this subsection insofar as 
they apply to transactions on a national securities exchange effected 
by a member thereof who was a member on May 1, 1975 shall not 
become effective until May 1, 1978. Nothing in this paragraph shall 
be construed to impair or limit the authority of the Commission to 
regulate or prohibit such transactions prior to May 1, 1978, pursuant 
to paragraph (2) of this subsection. 
"(b) When not in contravention of such rules and regulations as 
tlie Commission may prescribe as necessary or appropriate in the pub-
lic intei'est and for the protection of investors, to maintain fair and 
oi-derly markets, or to remove impediments to and perfect the mech-
anism of a national market system, the rules of a national securities 
exchange may permit (1) a member to be registered as an odd-lot 
dealer- and as such to buy and sell for his own account so far as may 
be reasonably necessary to carry on such odd-lot transactions, and 
(2) a member to be registered as a specialist. Under the rules and 
reguhitions of the Commission a specialist may be permitted to act as 
a bi'olver and dealer or limited to acting as a broker or dealer. It shall 
be unlawful for a specialist or an official of the exchange to disclose 
infoT-mation in regard to orders placed with such specialist which is 
not available to all members of the exchange, to any person other than 
an official of the exchange, a representative of the Commission, or a 
specialist Avho may be acting for such specialist: Provided^ however^ 
That the Commission, by rule, may require disclosure to all members 
of tlie exchange of all orders placed with specialists, under such rules 
and T'egulations as the Commission may prescribe as necessary or 
appiopriate in the public interest or for the protection of investors. 
It shall also be unlawful for a specialist permitted to act as a broker 
and dealer to effect on the exchange as broker any transaction except 
upon a market or limited price order.". 
(8) Subsection (e) thereof is repealed. 
SEC. 7. The Securities Exchange Act of 1934 is amended by inserting 
after section 11 (15 U.S.C. 78k) the following new section: 
Effective date. 
Odd-lot dealers 
and specialists. 
Repeal. 
15 use 78k. 
NATIONAL MARKET SYSTEM FOR SECURITIES; SECURITIES INFORMATION 
PROCESSORS 
"SEC. IIA. (a) (1) The Congress finds that— 
"(A) The securities markets are an important national asset 
which must be preserved and strengthened. 
"(B) New data processing and communications techniques 
create the opportunity for more efficient and effective market 
operations. 
15 use 78k-l. 
89 STAT. 112 
PUBLIC LAW 94-29—JUNE 4, 1975 
National market 
system for 
securities, 
establishment. 
Advisory 
committees, 
establishment. 
5 u s e app. I. 
Studies and 
recommendations 
to Congress. 
Securities 
information 
processors. 
Exemption. 
"(C) It is in the public interest and appropriate for the protec-
tion of investors and the maintenance of fair and orderly markets 
to assure— 
"(i) economically efficient execution of securities transac-
tions ; 
"(ii) fair competition among brokers and dealers, among 
exchange markets, and between exchange markets and mar-
kets other than exchange markets; 
"(iii) the availability to brokers, dealers, and investors of 
information with respect to quotations for and transactions in 
securities; 
"(iv) the practicability of brokers executing investors' 
orders in the best market; and 
"(v) an opportunity, consistent with the provisions of 
clauses (i) and (iv) of this subparagraph, for investors' 
orders to be executed without the participation of a dealer. 
"(D) The linking of all markets for qualified securities through 
communication and data processing facilities w^ill foster efficiency, 
enhance competition, increase the information available to brokers, 
dealers, and investors, facilitate the offsetting of investors' orders, 
and contribute to best execution of such orders. 
"(2) The Commission is directed, therefore, having due regard for 
the public interest, the protection of investors, and the maintenance 
of fair and orderly markets, to use its authority under this title to 
facilitate the establishment of a national market system for securities 
(which may include subsystems for particular types of securities with 
unique trading characteristics) in accordance with the findings and to 
carry out the objectives set forth in paragraph (1) of this subsection. 
The Commission, by rule, shall designate the securities or classes of 
securities qualified for trading in the national market system from 
among securities other than exempted securities. (Securities or classes 
of securities so designated hereinafter in this section referred to as 
'qualified securities'.) 
"(3) The Commission is authorized in furtherance of the directive 
m paragraph (2) of this subsection— 
"(A) to create one or more advisory committees pursuant to 
the Federal Advisory Committee Act (which shall be in addi-
tion to the National Market Advisory Board established pursuant 
to subsection (d) of this section) and to employ one or more out-
side experts; 
"(B) by rule or order, to authorize or require self-regulatory 
organizations to act jointly with respect to matters as to which 
they share authority under this title in planning, developing, 
operating, or regulating a national market system (or a sub-
system thereof) or one or more facilities thereof; and 
"(C) to conduct studies and make recommendations to the 
Congress from time to time as to the possible need for modifica-
tions of the scheme of self-regulation provided for in this title 
so as to adapt it to a national market system. 
"(b)(1) Except as otherwise provided in this section, it shall be 
unlawful for any securities information processor unless registered 
in accordance with this subsection, directly or indirectly, to make use 
of the mails or any means or instrumentality of interstate commerce 
to perform the functions of a securities information processor. The 
Commission, by rule or order, upon its own motion or upon application, 
may conditionally or unconditionally exempt any securities informa-
tion processor or class of securities information processors or security 
or class of securities from any provision of this section or the rules or 
regulations thereunder, if the Commission finds that such exemption 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 113 
is consistent with the public interest, the protection of investors, and 
the purposes of this section, including the maintenance of fair and 
orderly markets in securities and the removal of impediments to and 
perfection of the mechanism of a national market system: 
Provided, 
however, 
That a securities information processor not acting as the 
exclusive processor of any information with respect to quotations for 
or transactions in securities is exempt from the requirement to register 
in accordance with this subsection unless the Commission, by rule or 
order, finds that the registration of such securities information proces-
sor is necessary or appropriate in the public interest, for the protection 
of investors, or for the achievement of the purposes of this section. 
" (2) A securities information processor may be registered by filing 
Registration, 
with the Commission an application for registration in such form as 
the Commission, by rule, may prescribe containing the address of its 
principal office, or offices, the names of the securities and markets for 
w^hich it is then acting and for which it proposes to act as a securities 
information processor, and such other information and documents as 
the Commission, by rule, may prescribe with regard to performance 
capability, standards and procedures for the collection, processing, 
distribution, and publication of information with respect to quotations 
for and transaction in securities, personnel qualifications, financial con-
dition, and such other matters as the Commission determines to be 
germane to the provisions of this title and the rules and regulations 
thereunder, or necessary or appropriate in furtherance of the purposes 
of this section. 
"(3) The Commission shall, upon the filing of an application for 
Application, 
registration pursuant to paragraph (2) of this subsection, publish 
notice of filing, 
notice of the filing and afford interested persons an opportunity to sub-
mit written data, views, and arguments concerning such application. 
Within ninety days of the date of the publication of such notice (or 
within such longer period as to which the applicant consents) the Com-
mission shall— 
" (A) by order grant such registration, or 
"(B) institute proceedings to determine whether registration 
should be denied. Such proceedings shall include notice of the 
Hearing, 
grounds for denial under consideration and opportunity for hear-
ing and shall be concluded within one hundred eighty days of the 
date of publication of notice of the filing of the application for 
registration. At the conclusion of such proceedings the Commis-
sion, by order, shall grant or deny such registration. The Commis-
sion may extend the time for the conclusion of such proceedings 
for up to sixty days if it finds good cause for such extension and 
publishes its reasons for so finding or for such longer periods as 
to which the applicant consents. 
The Commission shall grant the registration of a securities informa-
tion processor if the Commission finds that such securities information 
processor is so organized, and has the capacity, to be able to assure the 
prompt, accurate, and reliable performance of its functions as a securi-
ties information processor, comply with the provisions of this title and 
the rules and regulations thereunder, carry out its functions in a 
manner consistent w^ith the purposes of this section, and. insofar as it is 
acting as an exclusive processor, operate fairly and efficientlv. The 
Commission shall deny the registration of a securities information 
processor if the Commission does not make any such finding. 
" (4) A registered securities information processor may, upon such 
Withdrawal from 
terms and conditions as the Commission deems necessary or aporopi'i- 
registration. 
ate in the public interest or for the protection of investors. withdraAV 
from registration by filing a written notice of withdrawal with the 
Commission. If the Commission finds that any registered securities 
89 STAT. 114 
PUBLIC LAW 94-29—JUNE 4, 1975 
Access to 
services, notice of 
prohibition or 
limitation.. 
Review. 
Limitation, 
suspension, or 
revocation of 
registration. 
Notice and 
hearing. 
information processor is no longer in existence or has ceased to do busi-
ness in the capacity specified in its application for registration, the 
Commission, by order, shall cancel the registration. 
"(5) (A) If any registered securities information processor pro-
hibits or limits any person in respect of access to services offered, 
directly or indirectly, by such securities information processor, the reg-
istered securities information processor shall promptly file notice 
thereof with the Commission. The notice shall be in such form and con-
tain such information as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the protection 
of investors. Any prohibition or limitation on access to services with 
respect to which a registered securities information processor is 
required by this paragraph to file notice shall be subject to review by the 
Commission on its own motion, or upon application by any person 
aggrieved thereby filed within thirty days after such notice has been 
filed with the Commission and received by such aggrieved person, or 
within such longer period as the Commission may determine. Appli-
cation to the Commission for review, or the institution of review by the 
Commission on its own motion, shall not operate as a stay of such pro-
hibition or limitation, unless the Commission otherwise orders, sum-
marily or after notice and oppoitunity for hearing on the question of 
a stay (which hearing may consist solely of the submission of affidavits 
or presentation of oral arguments). The Commission shall establish for 
appropriate cases an expedited procedure for consideration and deter-
mination of the question of a stay. 
"(B) In any proceeding to review the prohibition or limitation of 
any person in respect of access to services offered by a registered secu-
rities information processor, if the Commission finds, after notice and 
opportunity for hearing, that such prohibition or limitation is con-
sistent with the provisions of this title and the rules and regulations 
thereunder and that such person has not been discriminated against 
unfairly, the Commission, by order, shall dismiss the proceeding. If 
the Commission does not make any such finding or if it finds that such 
prohibition or limitation imposes any burden on competition not nec-
essary or appropriate in furtherance of the purposes of this title, the 
Commission, by order, shall set aside the prohibition or limitation 
and require the registered securities information processor to permit 
such person access to services offered by the registered securities infor-
mation processor. 
"(6) The Commission, by order, may censure or place limitations 
upon the activities, functions, or operations of any registered securities 
information processor or suspend for a period not exceeding twelve 
months or revoke the registration of any such processor, if the Com-
mission finds, on the record after notice and opportunity for hearing, 
that such censure, placing of limitations, suspension, or revocation is in 
the public interest, necessary or appropriate for the protection of 
investors or to assure the prompt, accurate, or reliable performance of 
the functions of such securities information processor, and that such 
securities information processor has violated or is unable to comply 
with any provision of this title or the rules or regulations thereunder. 
"(c) (1) No self-regulatory organization, member thereof, securities 
information processor, broker, or dealer shall make use of the mails or 
any means or instrumentality of interstate commerce to collect, process, 
distribute, publish, or prepare for distribution or publication any 
information with respect to quotations for or transactions in any secu-
rity other than an exempted security, to assist, participate in, or coordi-
nate the distribution or publication of such information, or to effect any 
transaction in, or to induce or attempt to induce the purchase or sale 
of, any such security in contravention of siich rules and regulations as 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 115 
the Commission shall prescribe as necessary or appropriate in the 
public interest, for the protection of investors, or otherwise in further-
ance of the purposes of this title to— 
" (A) prevent the use, distribution, or publication of fraudulent, 
deceptive, or manipulative information with respect to quotations 
for and transactions in such securities; 
" ( B ) assure the prompt, accurate, reliable, and fair collection, 
processing, distribution, and publication of information with 
respect to quotations for and transactions in such securities and 
the fairness and usefulness of the form and content of such 
information; 
"(C) assure that all securities information processors may, for 
purposes of distribution and publication, obtain on fair and rea-
sonable terms such information with respect to quotations for and 
transactions in such securities as is collected, processed, or pre-
pared for distribution or publication by any exclusive processor 
of such information acting in such capacity; 
" ( D ) assure that all exchange members, brokers, dealers, securi-
ties information processors, and, subject to such limitations as the 
Commission, by rule, may impose as necessary or appropriate for 
the protection of investors or maintenance of fair and orderly 
markets, all other persons may obtain on terms which are not 
unreasonably discriminatory such information with respect to 
quotations for and transactions in such securities as is published 
or distributed by any self-regulatory organization or securities 
information processor; 
" ( E ) assure that all exchange members, brokers, and dealers 
transmit and direct orders for the purchase or sale of qualified 
securities in a manner consistent with the establishment and 
operation of a national market system; and 
" ( F ) assure equal regulation of all markets for qualified secu-
rities and all exchange members, brokers, and dealers effecting 
transactions in such securities. 
" (2) The Commission, by rule, as it deems necessary or appropriate 
in the public interest or for the protection of investors, may require 
any person who has effected the purchase or sale of any qualified 
security by use of the mails or any means or instrumentality of inter-
state commerce to report such purchase or sale to a registered securi-
ties information processor, national securities exchange, or registered 
securities association and require such processor, exchange, or asso-
ciation 
to 
make 
appropriate 
distribution 
and 
publication 
of 
information with respect to such purchase or sale. 
" (3) (A) The Commission, by rule, is authorized to prohibit brokers 
Notice and 
and dealers from effecting transactions in securities registered pursu- hearing, 
ant to section 12(b) otherwise than on a national securities exchange, 15 USC 78Z. 
if the Commission finds, on the record after notice and opportunity 
for hearing, that— 
"(i) as a result of transactions in such securities effected other-
wise than on a national securities exchange the fairness or order-
liness of the markets for such securities has been affected in a 
manner contrary to the public interest or the protection of 
investors; 
"(ii) no rule of any national securities exchange unreasonably 
impairs the ability of any dealer to solicit or effect transactions in 
such securities for his own account or unreasonably restricts com-
petition among dealers in such securities or between dealers 
acting in the capacity of market makers who are specialists in 
such securities and such dealers who are not specialists in such 
securities, and 
89 STAT. 116 
PUBLIC LAW 94-29—JUNE 4, 1975 
Review. 
Report to 
Congress. 
Post, p. 146. 
Post, p. 158. 
National Market 
Advisory Board. 
Establishment; 
membership. 
Study and 
recommendations 
to the 
Commission. 
(iii) the maintenance or restoration of fair and orderly mar-
kets in such, securities may not be assured through other lawful 
means under this title. 
The Commission may conditionally or unconditionally exempt any 
security or transaction or any class of securities or transactions from 
any such prohibition if the Commission deems such exemption con-
sistent with the public interest, the protection of investors, and the 
maintenance of fair and orderly markets. 
"(B) For the purposes of subparagraph (A) of this paragraph, the 
ability of a dealer to solicit or effect transactions in securities for his 
own account shall not be deemed to be unreasonably impaired by any 
rule of an exchange fairly and reasonably prescribing the sequence 
in which orders brought to the exchange must be executed or which has 
been adopted to effect compliance with a rule of the Commission 
promulgated under this title. 
"(4) (A) The Commission is directed to review any and all rules of 
national securities exchanges which limit or condition the ability of 
members to effect transactions in securities otherwise than on such 
exchanges. On or before the ninetieth day following the day of 
enactment of the Securities Acts Amendments of 1975, the Commission 
shall (i) report to the Congress the results of its review, including the 
effects on competition of such rules, and (ii) commence a proceeding 
in accordance with the provisions of section 19(c) of this title to 
amend any such rule imposing a burden on competition which does not 
appear to the Commission to be necessary or appropriate in further-
ance of the purposes of this title. The Commission shall conclude any 
such proceeding within ninety days of the date of publication of 
notice of its commencement. 
"(B) Review pursuant to section 25(b) of this title of any rule 
promulgated by the Commission in accordance with any proceeding 
commenced pursuant to subparagraph (A) of this paragraph shall, 
except as to causes the court considers of greater importance, take 
precedence on the docket over all other causes and shall be assigned for 
consideration at the earliest practicable date and expedited in every 
way. 
"(5) No national securities exchange or registered securities associa-
tion may limit or condition the participation of any member in any 
registered clearing agency. 
"(d)(1) N^ot later than one hundred eighty days after the date 
of enactment of the Securities Acts Amendments of 1975, the Com-
mission shall establish a National Market Advisory Board (here-
inafter in this section referred to as the "Advisory Board") to be 
composed of fifteen members, not all of whom shall be from the same 
geographical area of the United States, appointed bv the Commission 
for a term specified by the Commission of not less than two years or 
more than five years. The Advisory Board shall consist of persons 
associated with brokers and dealers (who shall be a majority) and 
persons not so associated who are representative of the public and, 
to the extent feasible, have knowledge of the securities markets of 
the United States. 
"(2) It shall be the responsibility of the Advisory Board to formu-
late and furnish to the Commission its views on significant regulatory 
proposals made by the Commission or any self-regtdatory organization 
concerning the establishment, operation, and regulation of the markets 
for securities in the United States. 
"(8) (A) The Advisory Board shall study and make recommenda-
tions to the Commission as to the steps it finds appropriate to facilitate 
the establishment of a national market system. Tn so doing, the 
Advisory Board shall assume the responsibilities of any advisory 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 117 
committee appointed to advise the Commission with respect to the 
national market system which is in existence at the time of the estab-
lishment of the Advisory Board. 
"(B) The Advisory Board shall study the possible need for modifi-
cations of the scheme of self-regulation provided for in this title so 
as to adapt it to a national market system, including the need for the 
establishment of a new self-regulatory organization (hereinafter in 
this section referred to as a 'National Market Regulatory Board' or 
'Regulatory Board') to administer the national market system. In the 
event the Advisory Board determines a National Market Regulatory 
Board should be established, it shall make recommendations as to: 
"(i) the point in time at which a Regulatory Board should be 
established; 
" (ii) the composition of a Regulatory Board; 
" (iii) the scope of the authority of a Regulatory Board; 
"(iv) the relationship of a Regulatory Board to the Commis-
sion and to existing self-regulatory organizations; and 
" (v) the manner in Avhich a Regulatory Board should be funded. 
The Advisory Board shall report to the Congress, on or before Decem-
ber 31,1976, the results of such study and its recommendations, includ-
ing such recommendations for legislation as it deems appropriate. 
"(C) In carrying out its responsibilities under this paragraph, the 
Advisory Board shall consult with self-regulatory organizations, 
brokers, dealers, securities information processors, issuers, investors, 
representatives of Government agencies, and other persons interested 
or likely to participate in the establishment, operation, or regulation 
of the national market system. 
"(e) The Commission is authorized and directed to make a study 
of the extent to which persons excluded from the definitions of 
'broker' and 'dealer' maintain accounts on behalf of public customers 
for buying and selling securities registered u^ider section 12 of this 
title and whether such exclusions are consistent with the protection of 
investors and the other purposes of this title. The Commission shall 
report to the Congress, on or before December 31, 1976, the results of 
its study together with such recommendations for legislation as it 
deems advisable.". 
SEC. 8. Section 12(f) of the Securities Exchange Act of 1934 (15 
U.S.C. 781 (f)) is amended as follows: 
(1) Paragraphs (1) and (2) thereof are amended to read as follows: 
"(f) (1) Notwithstanding the foregoing provisions of this section, 
any national securities exchange, subject to the terms and conditions 
hereinafter set forth— 
"(A) may continue unlisted trading privileges to which a 
security had been admitted on such exchange prior to July 1,1964; 
"(B) upon application to and approval of such application by 
the Commission, may extend unlisted trading privileges to any 
security listed and registered on any other national securities 
exchange; and 
"(C) upon application to and approval of such application by 
the Commission, may extend unlisted trading privileges to any 
security registered pursuant to section 12 of this title or which 
would be required to be so registered except for the exemption 
from registration provided in subsection (g) (2) (B) or (g) (2) 
(G) of that section. 
If an extension of unlisted trading privileges to a security is based 
upon its listing and registration on another national securities ex-
change, such privileges shall continue in effect only so long as such 
security remains listed and registered on a national securities exchange. 
Report to 
Congress. 
Legislative 
recommenda-
tions. 
Consultation. 
Study. 
15 u s e 78/. 
Report to 
Congress. 
Legislative 
recommenda-
tions. 
Registration 
requirements for 
securities. 
15 u s e 78/. 
RI-IOA
r>
77
19
89 STAT. 118 
PUBLIC LAW 94-29—JUNE 4, 1975 
Notice and 
"(2) No application pursuant to this subsection shall be approved 
hearing. 
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 and the protection of investors. In considering an application 
for the extension of unlisted trading privileges to a security not listed 
and registered on a national securities exchange, the Commission shall, 
among other matters, take account of the public trading activity in 
such security, the character of such trading, the impact of such exten-
sion 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 shall not 
grant any such application if any rule of the national securities 
exchange making application under this subsection would unreason-
ably impair the ability of any dealer to solicit or effect transactions 
in such security for his own account, or would unreasonably restrict 
competition among dealers in such security or between such dealers 
acting in the capacity of market makers who are specialists and such 
dealei-s who are not specialists.". 
(2) Paragraph (6) thereof is amended by striking out "section 
19(b) of". 
SEC. 9. Section 12 of the Securities pjxchange Act of 1934 (15 
U.S.C. 781) is amended by adding at the end thereof the follov/ing new 
subsections: 
"(j) 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 title or 
the rules and regulations thereunder. No member of a national securi-
ties exchange, broker, or dealer shall make use of the mails or any 
means or instrumentality of interstate commerce to effect any trans-
action in, or to induce the purchase or sale of, any security the registra-
tion of which has been and is suspended or revoked pursuant to the 
preceding sentence. 
Summary 
"(k) If in its opinion the public interest and the protection of 
suspension. 
investors so require, the Commission is authorized summarily to sus-
pend trading in any security (other than an exempted security) for a 
period not exceeding ten days, or with the approval of the President, 
summarily to suspend all trading on any national securities exchange 
or otherwise, in securities other than exempted securities, for a period 
not exceeding ninety days. 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 which trading 
is so suspended. 
"(1) 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 originaHy or upon transfer, any of such securities 
in a form or with a format which contravenes such rules and regu-
lations 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 insur-
ance company or its separate accounts. 
Registration, 
denial, 
suspension, or 
revocation. 
Notice and 
hearing. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 119 
"(m) The Commission is authorized and directed to make a study 
and investigation of the practice of recording the ownership of secu-
rities in the records of the issuer in other than the name of the bene-
ficial owner of such securities to determine (1) whether such practice 
is consistent with the purposes of this title, with particular reference 
to subsection (g) of this section and sections 13, 14, 15(d), 16, and 
17A, and (2) whether steps can be taken to facilitate communica-
tions between issuers and the beneficial owners of their securities while 
at the same time retaining the benefits of such practice. The Commis-
sion shall report to the Congress its preliminary findings within six 
months after the date of enactment of the Securities Acts Amendments 
of 1975, and its final conclusions and recommendations within one year 
of such date.". 
SEC. 10. Section 13 of the Securities Exchange Act of 1934 (16 
U.S.C. 78m) is amended by adding at the end thereof the following 
new subsection: 
"(f)(1) Every institutional investment manager which uses the 
mails, or any means or instrumentality of interstate commerce in the 
course of its business as an institutional investment manager and 
which exercises investment discretion with respect to accounts holding 
equity securities of a class described in section 13(d) (1) of this title 
having an aggregate fair market value on the last trading day in any 
of the preceding twelve months of at least $100,000,000 or such lesser 
amount (but in no case less than $10,000,000) as the Commission, by 
rule, may determine, shall file reports with the Commission in such 
form, for such periods, and at such times after the end of such periods 
as the Commission, by rule, may presci'ibe, but in no event shall such 
reports be filed for periods longer than one year or shorter than one 
quarter. Such reports shall include for each such equity security held 
on the last day of the reporting period by accounts (in aggregate or by 
type as the Commission, by rule, may prescribe) with respect to which 
the institutional investment manager exercises investment discretion 
(other than securities held in amounts w^hich the Commission, by rule, 
determines to be insignificant for purposes of this subsection), the 
name of the issuer and the title, class, C U S I P number, number of 
shares or principal amount, and aggregate fair market value of each 
such security. Such reports may also include for accounts (in aggre-
gate or by type) with respect to which the institutional investment 
manager exercises investment discretion such of the following infor-
mation as the Commission, by rule, prescribes— 
"(A) the name of the issuer and the title, class, C U S I P num-
ber, number of shares or principal amount, and aggregate fair 
market value or cost or amortized cost of each other security 
(other than an exempted security) held on the last day of the 
reporting period by such accounts; 
"(B) the aggregate fair market value or cost or amortized 
cost of exempted securities (in aggregate or by class) held on 
the last day of the reporting period by such accounts; 
"(C) the number of shares of each equity security of a class 
described in section 13(d) (1) of this title held on the last day of 
the reporting period by such accounts with respect to which the 
institutional investment manager possesses sole or shared author-
ity to exercise the voting rights evidenced by such securities; 
" ( D ) the aggregate purchases and aggregate sales during the 
reporting period of each security (other than an exempted 
security) effected by or for such accounts; and 
" ( E ) with respect to any transaction or series of transactions 
having a market value of at least $500,000 or such other amount 
as the Commission, by rule, may determine, effected during the 
Study. 
15 u s e 78m, 
78n, 78o, 78p; 
Post, p. 141. 
Reports to 
Congress. 
Recommenda-
tions to Congress. 
Periodic reports. 
Contents. 
89 STAT. 120 
PUBLIC LAW 94-29—JUNE 4, 1975 
Exemption. 
Information, 
availability to 
public. 
15 use 78m. 
reporting period by or for such accounts in any equity security of 
a class described in section 13(d)(1) of this title— 
"(i) the name of the issuer and the title, class, and CUSIP 
number of the security; 
" (ii) the number of shares or principal amount of the secu-
rity involved in the transaction; 
"(iii) whether the transaction was a purchase or sale; 
" (iv) the per share price or prices at which the transaction 
was effected; 
"(v) the date or dates of the transaction; 
" (vi) the date or dates of the settlement of the transaction; 
"(vii) the broker or dealer through whom the transaction 
was eft'ected; 
"(viii) the market or markets in which the transaction was 
effected; and 
" (ix) such other related information as the Commission, by 
rule, may prescribe. 
"(2) The Commission, by rule or order, may exempt, conditionally 
or unconditionally, any institutional investment manager or security 
or any class of institutional investment managers or securities from 
any or all of the provisions of this subsection or the rules thereunder. 
" (3) The Commission shall make available to the public for a reason-
able fee a list of all equity securities of a class described in section 
13(d)(1) of this title, updated no less frequently than reports are 
required to be filed pursuant to paragraph (1) of this subsection. The 
Commission shall tabulate the information contained in any report 
filed pursuant to this subsection in a manner which will, in the view of 
the Commission, maximize the usefulness of the information to other 
Federal and State authorities and the public. Promptly after the filing 
of any such report, the Commission shall make the information con-
tained therein conveniently available to the public for a reasonable fee 
in such form as the Commission, by rule, may prescribe, except that the 
Commission, as it determines to be necessary or appropriate in the pub-
lic interest or for the protection of investors, may delay or prevent 
public disclosure of any such information in accordance with section 
552 of title 5, United States Code. Notwithstanding the preceding 
sentence, any such information identifying the securities held by the 
account of a natural person or an estate or trust (other than a business 
trust or investment company) shall not be disclosed to the public. 
"(4) In exercising its authority under this subsection, the Commis-
sion shall determine (and so state) that its action is necessary or appro-
priate in the public interest and for the protection of investors or to 
maintain fair and orderly markets or, in granting an exemption, 
that its action is consistent with the protection of investors and the 
Consultation. 
jjurposes of this subsection. In exercising such authority the Commis-
sion shall take such steps as are within its power, including consulting 
with the Comptroller General of the United States, the Director of the 
Office of Management and Budget, the appropriate regulatory agen-
cies. Federal and State authorities which, directly or indirectly, 
require reports from institutional investment managers of information 
substantially similar to that called for by this subsection, national 
securities exchanges, and registered securities associations, (A) to 
achieve uniform, centralized reporting of information concerning the 
securities holdings of and transactions by or for accounts with 
respect to which institutional investment managers exercise investment 
discretion, and (B) consistently with the objective set forth in the 
preceding subparagraph, to avoid unnecessarily duplicative reporting 
by, and minimize the compliance burden on, institutional investment 
managers. Federal authorities which, directly or indirectly, require 
reports from institutional investment managers of information sub-
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 121 
stantially similar to that called for by this subsection shall cooperate 
with the Commission in the performance of its responsibilities under 
the preceding sentence. An institutional investment manager which is 
a bank, the deposits of which are insured in accordance with the 
Federal Deposit Insurance Act, shall file with the appropriate regula-
tory agency a copy of every report filed with the Commission pursuant 
to this subsection. 
"(5) (A) For purposes of this subsection the term 'institutional 
investment manager' includes any person, other than a natural person, 
investing in or buying and selling securities for its own account, and 
any person exercising investment discretion with respect to the account 
of any other person. 
"(B) The Commission shall adopt such rules as it deems necessary 
or appropriate to prevent duplicative reporting pursuant to this sub-
section by two or more institutional investment managers exercising 
investment discretion with respect to the same amoimt.". 
SEC. 11. Section 15 of the Securities Exchange Act of 1934 (15 
U.S.C. 78o) is amended as follows: 
(1) The title thereof is amended to read: "REGISTRATION AND REGU-
LATION OF BROKERS AND DEALERS". 
(2) Subsections (a) and (b) thereof are amended to read as follows: 
" (a) (1) It shall be unlawful for any broker or dealer which is either 
a person other than a natural person or a natural person not associated 
with a broker or dealer which is a person other than a natural person 
(other than such a broker or dealer whose business is exclusively intra-
state and who does not make use of any facility of a national securities 
exchange) to make use of the mails or any means or ins*:rumentality of 
interstate commerce to effect any transactions in, or to induce or 
attempt to induce the purchase or sale of, any security (other than an 
exempted security or commercial paper, bankers' acceptances, or com-
mercial bills) unless such broker or dealer is registered in accordance 
with subsection (b) of this section. 
"(2) The Commission, by rule or order, as it deems consistent with 
the public interest and the protection of investors, may conditionally 
or unconditionally exempt from paragraph (1) of this subsection any 
broker or dealer or class of brokers or dealers specified in such rule 
or order. 
"(b)(1) A broker or dealer may be registered by filing with the 
Commission an application for registration in such form and contain-
ing such information and documents concerning such broker or dealer 
and any persons associated with such broker or dealer as the Com-
mission, by rule, may prescribe as necessary or appropriate in the 
public interest or for the protection of investors. Within forty-five 
days of the date of the filing of such application (or within such longer 
period as to which the applicant consents), the Commission shall— 
" (A) by order grant registration, or 
"(B) institute proceedings to determine whether registration 
should be denied. Such proceedings shall include notice of the 
grounds for denial under consideration and opportunity for 
hearing and shall be concluded within one hundred twenty davs 
of the date of the filing of the application for registration. At the 
conclusion of such proceedings, the Commission, by order, shall 
grant or deny such registration. The Commission may extend 
the time for conclusion of such proceedings for up to ninety days 
if it finds good cause for such extension and publishes its reasons 
for so finding or for such longer period as to which the applicant 
consents. 
The Commission shall grant such registration if the Commission 
finds that the requirements of this section are satisfied. The Commis-
Copies of reports, 
filing. 
12 use 1811 
note. 
"Institution 
investment 
manager." 
Rules. 
Registration and 
regulation of 
brokers and 
dealers. 
Exemption. 
89 STAT. 122 
PUBLIC LAW 94-29—JUNE 4, 1975 
15 u s e 78e. 
Suspension or 
revocation of 
registration. 
Notice and 
hearing. 
sion shall deny such registration if it does not make such a finding or 
if it finds that if the applicant were so registered, its registration 
would be subject to suspension or revocation under paragraph (4) 
of this subsection. 
"(2) (A) An application for registration of a broker or dealer to 
be formed or organized may be made by a broker or dealer to which 
the broker or dealer to be formed or organized is to be the successor. 
Such application, in such form as the Commission, by rule, may pre-
scribe, shall contain such information and documents concerning the 
applicant, the successor, and any persons associated with the appli-
cant or the successor, as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the protection 
of investors. The grant or denial of registration to such an applicant 
shall be in accordance with the procedures set forth in paragraph 
(1) of this subsection. If the Commission grants such regisitration, 
the registration shall terminate on the forty-fifth day after the effec-
tive date thereof, unless prior thereto the successor shall, in accord-
ance with such rules and regulations as the Commission may prescribe, 
adopt the application for registration as its own. 
"(B) Any person who is a broker or dealer solely by reason of act-
ing as a municipal securities dealer or municipal securities broker, 
who so acts through a separately identifiable department or division, 
and who so acted in such a manner on the date of enactment of the 
Securities Acts Amendments of 1975, may, in accordance with such 
terms and conditions as the Commission, by rule, prescribes as neces-
sary and appropriate in the public interest and for the protection of 
investors, register such separately identifiable department or division 
in accordance with this subsection. If any such department or division 
is so registered, the department or division and not such person him-
self shall be the broker or dealer for purposes of this title. 
"(C) Within six months of the date of the granting of registration 
to a broker or dealer, the Commission, or upon the authorization and 
direction of the Commission, a registered securities association or 
national securities exchange of which such broker or dealer is a mem-
ber, shall conduct an inspection of the broker or dealer to determine 
whether it is operating in conformity with the provisions of this title 
and the rules and regulations thereunder: Provided, 
however. 
That 
the Commission may delay such inspection of any class of brokers or 
dealer-s for a period not to exceed six months. 
" (3) Any provision of this title (other than section 5 and subsection 
(a) of this section) which prohibits any act, practice, or course of 
business if the mails or any means or instrumentality of interstate 
commerce is used in connection therewith shall also prohibit any such 
act, practice, or course of business by any registered broker or dealer 
or any person acting on behalf of such a broker or dealer, irrespective 
of any use of the mails or any means or instrumentality of interstate 
commerce in connection therewith. 
" (4) The Commission, by order, shall censure, place limitations on 
the activities, functions, or operations of, suspend for a period not 
exceeding twelve months, or revoke the registration of any broker or 
dealer if it finds, on the record after notice and opportunity for hear-
ing, that such censure, placing of limitations, suspension, or revoca-
tion is in the public interest and that such broker or dealer, whether 
prior or subsequent to becoming such, or any person associated with 
such broker or dealer, whether prior or subsequent to becoming so 
associated— 
"(A) has willfully made or caused to be made in any applica-
tion for registration or report required to be filed with the 
Commission under this title, or in any proceeding before the Com-
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 123 
mission with respect to registration, 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 or report any material 
fact which is required to be stated therein. 
"(B) has been convicted within ten years preceding the filing 
of any application for registration or at any time thereafter of 
any felony or misdemeanor which the Commission finds— 
"(i) involves the purchase or sale of any security, the 
taking of a false oath, the making of a false report, bribery, 
perjury, burglary, or conspiracy to commit any such offense; 
"(ii) arises out of the conduct of the business of a broker, 
dealer, municipal securities dealer, investment adviser, bank, 
insurance company, or fiduciary; 
"(iii) involves the larceny, theft, robbery, extortion, for-
gery, counterfeiting, fraudulent concealment, embezzlement, 
fraudulent conversion, or misappropriation of funds, or secu-
rities ; or 
"(iv) involves the violation of section 152, 1341, 1342, or 
1343 or chapter 25 or 47 of title 18, United States Code. 
"(C) is permanently or temporarily enjoined by order, judg-
ment, or decree of any court of competent jurisdiction from acting 
as an investment adviser, underwriter, broker, dealer, or munici-
pal securities dealer, or as an affiliated person or employee of any 
investment company, bank, or insurance company, or from engag-
ing in or continuing any conduct or practice in connection with 
any such activity, or in connection with the purchase or sale of 
any security. 
"(D) has willfully violated any provision of the Securities Act 
of 1933, the Investment Advisers Act of 1940, the Investment 
Company Act of 1940, this title, the rules or regulations under any 
of such statutes, or the rules of the Municipal Securities Rule-
making Board, or is unable to comply with any such provision. 
"(E) has willfully aided, abetted, counseled, commanded, 
induced, or procured the violation by any other person of any 
provision of the Securities Act of 1933, the Investment Advisers 
Act of 1940, the Investment Company Act of 1940, this title, the 
rules or regulations under any of such statutes, or the rules of 
the Municipal Securities Rulemaking Board, or has failed reason-
ably to supervise, with a view to preventing violations of the 
provisions of such statutes, rules, and regulations, another person 
who commits such a violation, if such other person is subject to 
his supervision. For the purposes of this subparagraph (E) no 
person shall be deemed to have failed reasonably to supervise any 
other person, if— 
"(i) there have been established procedures, and a system 
for applying such procedures, which would reasonably be 
expected to prevent and detect, insofar as practicable, any 
such violation by such other person, and 
"(ii) such person has reasonably discharged the duties 
and obligations incumbent upon him by reason of such pro-
cedures and system without reasonable cause to believe that 
such procedures and system were not being complied with. 
"(F) is subject to an order of the Commission entered pur-
suant to paragraph (6) of this subsection ^b) barring or sus-
pending the right of such person to be associated with a broker 
or dealer. 
"(5) Pending final determination whether any registration under 
this subsection shall be revoked, the Commission, by order, may 
18 u s e 471 et 
seq., 1001 et seq. 
15 u s e 77a. 
15 u s e 80b-20. 
15 u s e 80a-51. 
Suspension. 
Notice and 
hearing. 
89 STAT. 124 
PUBLIC LAW 94-29—JUNE 4, 1975 
Notice and 
hearing. 
Standards of 
operational 
capability. 
Rules and 
regulations. 
suspend such registration, if such suspension appears to the Com-
mission, after notice and opportunity for hearing, to be necessary or 
appropriate in the public interest or for the protection of investors. 
Any registered broker or dealer may, upon such terms and condi-
tions as the Commission deems necessary or appropriate in the public 
interest or for the protection of investors, withdraw from registra-
tion by filing a written notice of withdrawal with the Commission. 
If the Commission finds that any registered broker or dealer is no 
longer in existence or has ceased to do business as a broker or dealer, 
the Commission, by order, shall cancel the registration of such broker 
or dealer. 
"(6) The Commission, by order, shall censure or place limitations 
on the activities or functions of any person associated, or seeking to 
become associated, with a broker or dealer, or suspend for a period 
not exceeding twelve months or bar any such person from being 
associated with a broker or dealer, if the Commission finds, on the 
record after notice and opportunity for hearing, that such censure, 
placing of limitations, suspension, or bar is in the public interest and 
that such person has committed or omitted any act or omission 
enumerated in subparagraph (A), (D), or (E) of paragraph (4) of 
this subsection, has been convicted of any offense specified in sub-
paragraph (B) of said paragraph (4) within ten years of the com-
mencement of the proceedings under this paragraph, or is enjoined 
from any action, conduct, or practice specified in subparagraph (C) 
of said paragraph (4). It shall be unlawful for any person as to 
whom such an order suspending or barring him from being asso-
ciated with a broker or dealer is in effect willfully to become, or to 
be, associated with a broker or dealer without the consent of the 
Commission, and it shall be unlawful for any broker or dealer to 
permit such a person to become, or remain, a person associated with 
him Avithout the consent of the Commission, if such broker or dealer 
knew, or in the exercise of reasonable care should have known, of 
such order. 
"(7) No registered broker or dealer shall effect any transaction 
in, or induce the purchase or sale of, any security unless such broker 
or dealer meets such standards of operational capability and such 
broker or dealer and all natural persons associated with such broker 
or dealer meet such standards of training, experience, competence, 
and such other qualifications as the Commission finds necessary or 
appropriate in the public interest or for the protection of investors. 
The Commission shall establish such standards by rules and regula-
tions, which may— 
"(A) specify that all or any portion of such standards shall 
be applicable to any class of brokers and dealers and persons 
associated with brokers and dealers; 
"(B) require pereons in any such class to pass tests prescribed 
in accordance with such rules and regulations, which tests shall, 
with respect to any class of partners, officers, or supervisory 
employees (which latter term may be defined by the Commission's 
rules and regulations and as so defined shall include branch man-
agers of brokers or dealers) engaged in the management of the 
broker or dealer, include questions relating to bookkeeping, 
accounting, internal control over cash and securities, supervision 
of employees, maintenance of records, and other appropriate mat-
ters; and 
"(C) provide that persons in any such class other than brokers 
and dealers and partners, officers, and supervisory employees of 
brokers or dealers, may be qualified solely on the basis of compli-
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 125 
ance with such standards of training and such other qualifications 
as the Commission finds appropriate. 
The Commission, by rule, may prescribe reasonable fees and charges 
to defray its costs in carrying out this paragraph, including, but not 
limited to, fees for any test administered by it or under its direction. 
The Commission may cooperate with registered securities associations 
and national securities exchanges in devising and administering tests 
and may require registered brokers and dealers and persons associated 
with such brokers and dealers to pass tests administered by or on 
behalf of any such association or exchange and to pay such association 
or exchange reasonable fees or charges to defray the costs incurred by 
such association or exchange in administering such tests. 
"(8) In addition to the fees and charges authorized by paragraph 
(7) of this subsection, each registered broker or dealer not a member 
of a registered securities association shall pay to the Commission such 
reasonable fees and charges as may be necessary to defray the costs of 
the additional regulatory duties required to be performed by the Com-
mission because such brokei- or dealer eifects transactions in securities 
otherwise than on a national securities exchange of which it is a mem-
ber and is not a member of a registered securities association. The 
Commission, by rule, shall establish such fees and charges. 
" (9) No broker or dealer subject to paragraph (8) of this subsection 
shall effect any transaction in, oi; induce the purchase or sale of, any 
security (otherwise than on a national securities exchange of which it 
is a member) in contravention of such rules and regulations as the 
Commission may prescribe designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mecha-
nism of a free and open mai'ket and a national market system, and, 
in gener-al, to protect investors and the public interest. 
"(10) For the purposes of determining whether a person is subject 
to a statutory disqualification under section 6(c) (2), 15A(g) (2), or 
l7A(b) (4) (B) of this title, the term 'Commission' in paragraph (4) 
(B) of this subsection shall mean 'exchange', 'association', or 'clearing 
agency', respectively.". 
(3) Paragraphs (1), (2), and (3) of subsection (c) thereof are 
amended to read as follows: 
"(c)(1) No broker or dealer shall make use of the mails or any 
means or instrumentality of interstate commerce to effect any trans-
action in, or to induce or attempt to induce the purchase or sale of, 
any security (other than commercial paper, bankers' acceptances, or 
commercial bills) otherwise than on a national securities exchange 
of which it is a member by means of any manipulative, deceptive, or 
other fraudulent device or contrivance, and no municipal securities 
dealer shall make use of the mails or any means or instrumentality of 
interstate commerce to effect any transaction in, or to induce or attempt 
to induce the purchase or sale of, any municipal security by means of 
any manipulative, deceptive, or other fraudulent device or contrivance. 
The Commission shall, for the purposes of this paragraph, by rules 
and regulations define such devices or contrivances as are manipula-
tive, deceptive, or otherwise fraudulent. 
" (2) No 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 or attempt to induce the purchase or sale of, any security 
(other than an exempted security or commercial paper, bankers' 
acceptances, or commercial bills) otherwise than on a national secu-
rities exchange of which it is a member, in connection with which 
such broker or dealer engages in any fraudulent, deceptive, or manip-
ulative act or practice, or makes any fictitious quotation, and no 
municipal securities dealer shall make use of the mails or any means 
Fees and charges. 
Additional fees. 
"Commission." 
Ante, p. 104; 
Post, pp. 127, 
141. 
15 u s e 78o. 
Manipulative or 
fraudulent 
devices. 
Manipulative or 
fraudulent acts. 
89 STAT. 126 
PUBLIC LAW 94-29—JUNE 4, 1975 
or instrumentality of interstate commerce to effect any transaction in, 
or to induce or attempt to induce the purchase or sale of, any municipal 
security in connection with which such municipal securities dealer 
engages in any fraudulent, deceptive, or manipulative act or practice, 
or makes any fictitious quotation. The Commission shall, for the pur-
poses of this paragraph, by rules and regulations define, and prescribe 
means reasonably designed to prevent, such acts and practices as are 
fraudulent, deceptive, or manipulative and such quotations as are 
fictitious. 
"(3) No 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 or attempt to induce the purchase or sale of, any secu-
rity (other than an exempted security or commercial paper, bankers' 
acceptances, or commercial bills) in contravention of such rules and 
regulations as the Commission shall prescribe as necessary or appro-
priate in the public interest or for the protection of investors to provide 
safeguards with respect to the financial responsibility and related 
practices of brokers and dealers including, but not limited to, the 
acceptance of custody and use of customers' securities and the carrying 
and use of customers' deposits or credit balances. Such rules and regu-
lations shall (A) require the maintenance of reserves with respect 
to customer's' deposits or credit balances, and (B) no later than Sep-
tember 1,1975, establish minimum financial responsibility requirements 
for all brokers and dealers.". 
15 use 78o. 
(4) Paragraph (5) of subsection (c) thereof is amended to read 
as follows: 
"(5) No dealer (other than a specialist registered on a national 
securities exchange) acting in the capacity of market maker or other-
wise shall make use of the mails or any means or instrumentality of 
interstate commerce to effect any transaction in, or to induce or 
attempt to induce the purchase or sale of, any security (other than an 
exempted security or a municipal security) in contravention of such 
specified and appropriate standards with respect to dealing as the 
Commission, by rule, shall prescribe as necessary or appropriate in 
the public interest and for the protection of investors, to maintain 
fair and orderly markets, or to remove impediments to and perfect 
the mechanism of a national market system. Under the rules of the 
Commission a dealer in a security may be prohibited from acting 
as a broker in that security.". 
(5) Subsection (c) thereof is further amended by adding at the 
end thereof the following new paragraph: 
"(6) No 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 or attempt to induce the purchase or sale of, any security 
(other than an exempted security, municipal security, commercial 
paper, bankers' acceptances, or commercial bills) in contravention of 
such rules and regulations as the Commission shall prescribe as neces-
sary or appropriate in the public interest and for the protection of 
investors or to perfect or remove impediments to a national system for 
the prompt and accurate clearance and settlement of securities transac-
tions, with respect to the time and method of, and the form and format 
of documents used in connection with, making settlements of and pay-
ments for transactions in securities, making transfers and deliveries of 
securities, and closing accounts. Nothing in this paragraph shall be 
construed (A) to affect the authority of the Board of Governors of the 
15 use 78g. 
Federal Reserve System, pursuant to section 7 of this title, to prescribe 
rules and regulations for the purpose of preventing the excessive use of 
credit for the purchase or carrying of securities, or (B) to authorize 
the Commission to prescribe rules or regulations for such purpose.". 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 127 
Registered 
securities 
associations. 
(6] The section is further amended by adding at the end thereof 
15 USC 78o. 
the following new subsection: 
"(e) The Commission, by rule, as it deems necessary or appropriate 
in the public interest and for the protection of investors or to assure 
equal regulation, may require any member of a national securities 
exchange not required to register under section 15 of this title and any Ante, p. 121. 
person associated with any such member to comply with any provision 
of this title (other than section 15 (a)) or the rules or regulations there-
under which by its terms regulates or prohibits any act, practice, or 
course of business by a 'broker or dealer' or 'registered broker or dealer' 
or a 'person associated with a broker or dealer,' respectively.". 
SEC. 12. Section 15A of the Securities Exchange Act of 1934 (15 
U.S.C. 78o-3) is amended as follows: 
(1) The title thereof is amended to read: "REGISTERED SECURITIES 
ASSOCIATIONS". 
(2) Subsections (a) and (b) thereof are amended to read as 
follows: 
"(a) An association of brokers and dealers may be registered as a 
national securities association pursuant to subsection (b), or as an affil-
iated securities association pursuant to subsection (d), under the terms 
and conditions hereinafter provided in this section and in accordance 
with the provisions of section 19(a) of this title, by filing with the Post, p. 146. 
Commission an application for registration in such form as the Com-
mission, by rule, may prescribe containing the rules of the association 
and such other information and documents as the Commission, by rule, 
may prescribe as necessary or appropriate in the public interest or for 
the protection of investors. 
"(b) An association of brokers and dealers shall not be registered 
as a national securities association unless the Commission determines 
* 
that— 
• 
"(1) By reason of the number and geographical distribution 
of its members and the scope of their transactions, such association 
will be able to carry out the purposes of this section. 
"(2) Such association is so organized and has the capacity to 
be able to carry out the purposes of this title and to comply, and 
(subject to any rule or order of the Commission pursuant to sec-
tion 17(d) or 19(g)(2) of this title) to enforce compliance by Post, p. 137. 
its members and persons associated with its members, with the 
provisions of this title, the rules and regulations thereunder, the 
rules of the Municipal Securities Rulemaking Board, and the 
rules of the association. 
"(3) Subject to the provisions of subsection (g) of this section, 
the rules of the association provide that any registered broker or 
dealer may become a member of such association and any person 
may become associated with a member thereof. 
"(4) The rules of the association assure a fair representation 
of its members in the selection of its directors and administration 
of its affairs and provide that one or more directors shall be repre-
sentative of issuers and investors and not be associated with a 
member of the association, broker, or dealer. 
"(5) The rules of the association provide for the equitable 
allocation of reasonable dues, fees, and other charges among mem-
bers and issuers and other persons using any facility or system 
which the association operates or controls. 
" (6) The rules of the association are designed to prevent fraud-
ulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordina-
tion with persons engaged in regulating, clearing, settling, proc-
essing information with respect to, and facilitating transactions 
89 STAT. 128 
PUBLIC LAW 94-29—JUNE 4, 1975 
Post, pp. 137, 
146. 
15 u s e 78o-3. 
"Nonmember 
professional." 
in securities, to remove impediments to and perfect the mecha-
nism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest; and 
are not designed to permit unfair discrimination between cus-
tomers, issuers, brokers, or dealers, to fix minimum profits, to 
impose any schedule or fix rates of commissions, allowances, dis-
counts, or other fees to be charged by its members, or to regulate 
by virtue of any authority conferred by this title matters not 
related to the purposes of this title or the administration of the 
association. 
"(7) The rules of the association provide that (subject to any 
rule or order of the Commission pursuant to section 17(d) or 
19(g) (2) of this title) its members and persons associated with 
its members shall be appropriately disciplined for violation of any 
provision of this title, the rules or regulations thereunder, the 
rules of the Municipal Securities Rulemaking Board, or the rules 
of the association, by expulsion, suspension, limitation of activi-
ties, functions, and operations, fine, censure, being suspended or 
barred from being associated with a member, or any other fitting 
sanction. 
"(8) The rules of the association are in accordance with the 
provisions of subsection (h) of this section, and, in general, pro-
vide a fair procedure for the disciplining of members and persons 
associated with members, the denial of membership to any per-
son seeking membership therein, the barring of any person from 
becoming associated with a member thereof, and the prohibition 
or limitation by the association of any person with respect to 
access to services offered by the association or a member thereof. 
"(9) The rules of the association do not impose any burden 
on competition not necessary or appropriate in furtherance of the 
purposes of this title. 
" (10) The requirements of subsection (c), insofar as these may 
be applicable, are satisfied. 
" (11) The rules of the association include provisions governing 
the form and content of quotations relating to securities sold 
otherwise than on a national securities exchange which may be 
distributed or published by any member or person associated with 
a member, and the persons to whom such quotations may be sup-
plied. Such rules relating to quotations shall be designed to pro-
duce fair and informative quotations, to prevent fictitious or 
misleading quotations, and to promote orderly procedures for 
collecting, distributing, and publishing quotations.". 
(3) The section is amended by striking out subsections (e), (f), 
(g), (h), (j), (k), (1), and (n) thereof, redesignating subsections 
(i) and (m) thereof as subsections (e) and (f), respectively, and 
amending redesignated subsection (e) to read as follows: 
"(e) (1) The rules of a registered securities association may provide 
that no member thereof shall deal with any nonmember professional 
(as defined in paragraph (2) of this subsection) except at the same 
prices, for the same commissions or fees, and on the same terms and 
conditions as are by such member accorded to the general public. 
" (2) For the purposes of this subsection, the term 'nonmember pro-
fessional' shall include (A) with respect to transactions in securities 
other than municipal securities, any registered broker or dealer who is 
not a member of any registered securities association, except such a 
broker or dealer who deals exclusively in commercial paper, bankers' 
acceptances, and commercial bills, and (B) with respect to trans-
actions in municipal securities, any municipal securities dealer (other 
than a bank or division or department of a laank) who is not a member 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 129 
of any registered securities association and any municipal securities 
broker who is not a member of any such association, 
"(3) Nothing in this subsection shall be so construed or applied 
as to prevent (A) any member of a registered securities association 
from granting to any other member of any registered securities asso-
ciation any dealer's discount, allowance, commission, or special terms, 
in connection with the purchase or sale of securities, or (B) any mem-
ber of a registered securities association or any municipal securities 
dealer which is a bank or a division or department of a bank from 
granting to any member of any registered securities association or any 
such municipal securities dealer any dealer's discount, allowance, com-
mission, or special terms in connection with the purchase or sale of 
municipal securities: Provided, 
however, 
That the granting of any 
such discount, allowance, commission, or special terms in connection 
with the purchase or sale of municipal securities shall be subject to 
rules of the Municipal Securities Rulemaking Board adopted pursuant 
to section 15B (b) (2) (K) of this title.". 
(4) The section is further amended by adding at the end thereof the 
following new subsections: 
"(g) (1) A registered securities association shall deny membershij) 
to any person who is not a registered broker or dealer. 
"(2) A registered securities association may, and in cases in which 
the Commission, by order, directs as necessary or appropriate in the 
public interest or for the protection of investors shall, deny member-
ship to any registered broker or dealer, and bar from becoming asso-
ciated with a member any person, who is subject to a statutory 
disqualification. A registered securities association shall file notice 
Notice, 
with the Commission not less than thirty days prior to admitting any 
registered broker or dealer to membership or permitting any person 
to become associated with a member, if the association knew, or in the 
exercise of reasonable care should have known, that such broker or 
dealer or person was subject to a statutory disqualification. The notice 
shall be in such form and contain such information as the Commission, 
by rule, may prescribe as necessary or appropriate in the public inter-
est or for the protection of investors. 
"(3) (A) A registered securities association may deny membership 
to, or condition the membership of, a registered broker or dealer if 
(i) such broker or dealer does not meet such standards of 
financial 
responsibility or operational capability or such broker or dealer 
or any natural person associated with such broker or dealer does not 
meet such standards of training, experience, and competence as are 
prescribed by the rules of the association or (ii) such broker or dealer 
or person associated with such broker or dealer has engaged and there 
is a reasonable likelihood he will again engage in acts or practices 
inconsistent wnth just and equitable principles of trade. A registered 
securities association may examine and verify the qualifications of 
an applicant to become a member and the natural persons associated 
with such an applicant in accordance with procedures established by 
the rules of the association. 
"(B) A registered securities association may bar a natural person 
from becoming associated with a member or condition the association 
of a natural person with a member if such natural person (i) does not 
meet such standards of training, experience, and competence as are pre-
scribed by the rules of the association or (ii) has engaged and there 
is a reasonable likelihood he will again engage in acts or practices 
inconsistent with just and equitable principles of trade. A registered 
securities association may examine and verify the qualifications of an 
applicant to become a person associated w^ith a member in accordance 
with procedures established by the rules of the association and require 
Post, p. 131. 
Membership 
denial 
15 use 78o-3. 
89 STAT. 130 
PUBLIC LAW 94-29—JUNE 4, 1975 
notice. 
Statement. 
a natural person associated with a member, or any class of such nat-
ural persons, to be registered with the association in accordance with 
procedures so established. 
"(C) A registered securities association may bar any person from 
becoming associated with a member if such person does not agree 
(i) to supply the association with such information with respect to 
its relationship and dealings with the member as may be specified in 
the rules of the association and (ii) to permit examination of its books 
and records to verify the accuracy of any information so supplied. 
"(4) A registered securities association may deny membership to a 
registered broker or dealer not engaged in a type of business in which 
the rules of the association require members to be engaged: Provided^ 
however^ That no registered securities association may deny member-
ship to a registered broker or dealer by reason of the amount of such 
type of business done by such broker or dealer or the other types of 
business in which he is engaged. 
Disciplinary 
"(h) (1) In any proceeding by a registered securities association to 
proceedings, 
determine whether a member or person associated with a member 
should be disciplined (other than a summary proceeding pursuant to 
paragraph (3) of this subsection) the association shall bring specific 
charges, notify such member or person of, and give him an opportunity 
to defend against, such charges, and keep a record. A determination by 
the association to impose a disciplinary sanction shall be supported 
by a statement setting forth— 
"(A) any act or practice in which such member or person asso-
ciated with a member has been found to have engaged, or which 
such member or person has been found to have omitted; 
"(B) the specific provision of this title, the rules or regulations 
thereunder, the rules of the Municipal Securities Rulemaking 
Board, or the rules of the association which any such act or prac-
tice, or omission to act, is deemed to violate; and 
"(C) the sanction imposed and the reason therefor. 
Notice and 
"(2) In any proceeding by a registered securities association to 
hearing. 
determine whether a person shall be denied membership, barred from 
becoming associated with a member, or prohibited or limited with 
respect to access to services offered by the association or a member 
thereof (other than a summary proceeding pursuant to paragraph 
(3) of this subsection), the association shall notify such person of 
and give him an opportunity to be heard upon, the specific grounds 
for denial, bar, or prohibition or limitation under consideration and 
keep a record. A determination by the association to deny membership, 
bar a person from becoming associated with a member, or prohibit or 
limit a person with respect to access to services offered by the associa-
tion or a member thereof shall be supported by a statement setting 
forth the specific grounds on which the denial, bar, or prohibition or 
limitation is based. 
Summary 
"(3) A registered securities association may summarily (A) sus-
suspension. 
pend a member or person associated with a member who has been 
and is expelled or suspended from any self-regulatory organization 
or barred or suspended from being associated with a member of any 
self-regulatory organization, (B) suspend a member who is in such 
financial 
or operating difficulty that the association determines and 
so notifies the Commission that the member cannot be permitted to 
continue to do business as a member with safety to investors, cred-
itors, other members, or the association, or (C) limit or prohibit any 
person with respect to access to services offered by the association if 
subparagraph (A) or (B) of this paragraph is applicable to such 
person or, in the case of a person who is not a member, if the associa-
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 131 
tion determines that such person does not meet the qualification 
requirements or other prerequisites for such access and such person 
cannot be permitted to continue to have such access with safety to 
investors, creditors, members, or the association. Any person aggrieved 
by any such summary action shall be promptly afforded an oppor-
tunity for a hearing by the association in accordance with the pro-
visions of paragraph (1) or (2) of this subsection. The Commission, 
by order, may stay any such summary action on its own motion or 
upon application by any person aggrieved thereby, if the Commis-
sion determines summarily or after notice and opportunity for hearing 
(which hearing may consist solely of the submission of affidavits or 
presentation of oral arguments) that such stay is consistent with the 
public interest and the protection of investors.". 
SEC. 13. The Securities Exchange Act of 1934 is amended by insert-
ing after section 15A (15 IJ.S.C. 78o-3) the following new section: 
Notice and 
hearing. 
" M U N I C I P A L 
SECURITIES 
"SEC. 15B. (a) (1) It shall be unlawful for any municipal securities 
dealer (other than one registered as a broker or dealer under section 
15 of this title) to make use of the mails or any means or instrumen-
tality of interstate commerce to effect any transaction in, or to induce 
or attempt to induce the purchase or sale of, any municipal security 
unless such municipal securities dealer is registered in accordance with 
this subsection. 
"(2) A municipal securities dealer may be registered by filing with 
the Commission an application for registration in such form and 
containing such information and documents concerning such munici-
pal securities dealer and any persons associated with such municipal 
securities dealer as the Commission, by rule, may prescribe as neces-
sary or appropriate in the public interest or for the protection of 
investors. Within forty-five days of the date of the filing of such appli-
cation (or within such longer period as to which the applicant con-
sents) , the Commission shall— 
" (A) by order grant registration, or 
"(B) institute proceedings to determine whether registration 
should be denied. Such proceedings shall include notice of the 
grounds for denial under consideration and opportunity for 
hearing and shall be concluded within one hundred twenty days 
of the date of the filing of the application for registration. At 
the conclusion of such proceedings the Commission, by order, 
shall grant or deny such registration. The Commission may extend 
the time for the conclusion of such proceedings for up to ninety 
days if it finds good cause for such extension and publishes its 
reasons for so finding or for such longer period as to which the 
applicant consents. 
The Commission shall grant the registration of a municipal securities 
dealer if the Commission finds that the requirements of this section 
are satisfied. The Commission shall deny such registration if it does 
not make such a finding or if it finds that if the applicant were so 
registered, its registration would be subject to suspension or revoca-
tion under subsection (c) of this section. 
"(3) Any provision of this title (other than section 5 or paragraph 
(1) of this subsection) which prohibits any act, practice, or course 
of business if the mails or any means or instrumentality of interstate 
commerce is used in connection therewith shall also prohibit any 
such act, practice, or course of business by any registered municipal 
securities dealer or any person acting on behalf of such municipal 
Dealer 
registration. 
15 u s e 78o-4. 
Ante, p. 121. 
Application 
filing. 
15 u s e 78e. 
89 STAT. 132 
PUBLIC LAW 94-29—JUNE 4, 1975 
Exemption. 
Municipal 
Securities 
Rulemaking 
Board. 
Establishment; 
membership. 
Term. 
Rules. 
securities dealer, irrespective of any use of the mails or any means or 
instrumentality of interstate commerce in connection therewith. 
"(4) The Commission, by rule or order, upon its own motion or 
upon application, may conditionally or unconditionally exempt any 
broker, dealer, or municipal securities dealer or class of brokers, deal-
ers, or municipal securities dealers from any provision of this section 
or the rules or regulations thereunder, if the Commission finds that 
such exemption is consistent with the public interest, the protection 
of investors, and the purposes of this section. 
"(b)(1) Not later than one hundred twenty days after the date 
of enactment of the Securities Acts Amendments of 1975, the Com-
mission shall establish a Municipal Securities Rulemaking Board 
(hereinafter in this section referred to as the 'Board'), to be composed 
initially of fifteen members appointed by the Commission, which 
shall perform the duties set forth in this section. The initial mem-
bers of the Board shall serve as members for a term of two years, and 
shall consist of (A) five individuals who are not associated with any 
broker, dealer, or municipal securities dealer, at least one of Avhom 
shall be representative of investors in municipal securities, and at 
least one of whom shall be representative of issuers of municipal 
securities (which members are hereinafter referred to as 'public rep-
resentatives') ; (B) five individuals wdio are associated with and rep-
resentative of municipal securities brokers and municipal securities 
dealers which are not banks or subsidiaries or departments or divi-
sions of banks (which members are hereinafter referred to as 'broker-
dealer representatives'); and (C) five individuals who are associated 
with and representative of municipal securities dealers which are 
banks or subsidiaries or departments or divisions of banks (which 
members are hereinafter referred to as 'bank representatives'). Prior 
to the expiration of the terms of office of the iiiitial members of the 
Board, an election shall be held under rules adopted by the Board 
(pursuant to subsection (b) (2) (B) of this section) of the members 
to succeed such initial members. 
" (2) The Board shall propose and adopt rules to effect the purposes 
of this title with respect to transactions in municipal securities effected 
by brokers, dealers, and municipal securities dealers. (Such rules are 
hereinafter collectively referred to in this title as 'rules of the Board'.) 
The rules of the Board, as a minimum, shall: 
"(A) provide that no municipal securities broker or municipal 
securities dealer shall effect any transaction in, or indiice or 
attempt to induce the purchase or sale of, any municipal security 
unless such municipal securities broker or municipal securities 
dealer meets such standards of operational capability and such 
municipal securities broker or municipal securities dealer and 
every natural person associated with such municipal securities 
broker or municipal securities dealer meet such standards of 
training, experience, competence, and such other qualifications as 
the Board finds necessary or appropriate in the public interest 
or for the protection of investors. In connection with the definition 
and application of such standards the Board may— 
"(i) appropriately classify mimicipal securities brokers 
and municipal securities dealers (taking into account relevant 
matters, including types of business done, nature of securities 
other than municipal securities sold, and character of busi-
ness organization), and persons associated with municipal 
securities brokers and municipal securities dealers; 
" (ii) specify that all or any portion of such standards shall 
be applicable to any such class; 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 133 
"(iii) require persons in any such class to pass tests admin-
istered in accordance with subsection (c) (7) of this section; 
and 
"(iv) provide that persons in any such class other than 
municipal securities brokers and municipal securities dealers 
and partners, officers, and supervisory employees of municipal 
securities brokers or municipal securities dealers, may be 
qualified solely on the basis of compliance with such stand-
ards of training and such other qualifications as the Board 
finds appropriate. 
"(B) establish fair procedures for the nomination and election 
of members of the Board and assure fair representation in such 
nominations and elections of municipal securities brokers and 
municipal securities dealers. Such rules shall provide that the 
membei-ship of the Board shall at all times be equally divided 
among public representatives, broker-dealer representatives, and 
bank representatives, and that the public representatives shall be 
subject to approval by the Commission to assure that no one of 
them is associated with any broker, dealer, or municipal securities 
dealer and that at least one is representative of investors in 
municipal securities and at least one is representative of issuers of 
municipal securities. Such rules shall also specify the term mem-
ber's shall serve and may increase the number of members which 
shall constitute the whole Board provided that such number is 
an odd number. 
"(C) be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities, to remove 
impediments to and perfect the mechanism of a free and open 
market in municipal securities, and, in general, to protect investors 
and the public interest; and not be designed to permit unfair dis-
crimination between customers, issuers, municipal securities 
brokers, or municipal securities dealers, to fix minimum profits, 
to impose any schedule or fix rates of commissions, allowances, 
discounts, or other fees to be charged by municipal securities 
broker's or municipal security dealers, to regulate by virtue of any 
authority conferred by this title matters not related to the pur-
poses of this title or the securities or the administration of the 
Board, or to impose any burden or competition not necessary or 
appropriate in furtherance of the purposes of this title. 
"(D) if the Board deems appropriate, provide for the arbitra-
tion of claims, disputes, and controversies relating to transactions 
in municipal securities: Provided^ however^ That no person other 
than a municipal securities broker, municipal securities dealer, or 
person associated with such a municipal securities broker or 
municipal securities dealer may be compelled to submit to such 
arbitration except at his instance and in accordance with sectic 
29 of this title. 
15USC78CC. 
"(E) provide for the periodic examination in accordance with 
subsection (c) (7) of this section of municipal securities brokers 
and municipal securities dealers to determine compliance with 
applicable provisions of this title, the rules and regulations there-
under, and the rules of the Board. Such rules shall specify the 
minimum scope and frequency of such examinations and shall be 
designed to avoid unnecessary regulatory duplication or undue 
R7.1IU n . 77 . IS 
89 STAT. 134 
PUBLIC LAW 94-29—JUNE 4, 1975 
Recordkeeping. 
Ante, p. 97. 
Fees. 
Use of mail or 
instrumentality of 
interstate 
commerce, 
prohibition. 
Notice and 
hearing. 
regulatory burdens for any such municipal securities broker or 
municipal securities dealer. 
"(F) include provisions governing the form and content of 
quotations relating to municipal securities which may be distrib-
uted or published by any municipal securities broker, municipal 
securities dealer, or person associated with such a municipal 
securities broker or municipal securities dealer, and the persons 
to whom such quotations may be supplied. Such rules relating to 
quotations shall be designed to produce fair and informative 
quotations, to prevent fictitious or misleading quotations, and to 
promote orderly procedures for collecting, distributing, and pub-
lishing quotations. 
"(G) prescribe records to be made and kept by municipal 
securities brokers and municipal securities dealers and the periods 
for which such records shall be preserved. 
"(H) define the term 'separately identifiable department or 
division', as that term is used in section 3(a) (30) of this title, in 
accordance with specified and appropriate standards to assure 
that a bank is not deemed to be engaged in the business of buying 
and selling municipal securities through a separately identifiable 
department or division unless such department or division is orga-
nized and administered so as to permit independent examination 
and enforcement of applicable provisions of this title, the rules 
and regulations thereunder, and the rules of the Board. A sepa-
rately identifiable department or division of a bank may be 
engaged in activities other than those relating to municipal 
securities. 
" (I) provide for the operation and administration of the Board, 
including the selection of a Chairman from among the members 
of the Board, the compensation of the members of the Board, and 
the appointment and compensation of such employees, attorneys, 
and consultants as may be necessary or appropriate to carry out 
the Board's functions under this section. 
"(J) provide that each municipal securities broker and each 
municipal securities dealer shall pay to the Board such reasonable 
fees and charges as may be necessary or appropriate to defray 
the costs and expenses of operating and administering the Board. 
Such rules shall specify the amount of such fees and charges. 
"(K) establish the terms and conditions under which any 
municipal securities dealer may sell, or prohibit any municipal 
securities dealer from selling, any part of a new issue of municipal 
securities to a municipal securities investment portfolio during 
the underwriting period. 
" (3) Nothing in this section shall be construed to impair or limit the 
power of the Commission under this title. 
" (c) (1) No broker, dealer, or municipal securities dealer shall make 
use of the mails or any means or instrumentality of interstate com-
merce to effect any transaction in, or to induce or attempt to induce 
the purchase or sale of, any municipal security in contravention of any 
rule of the Board. 
"(2) The Commission, by order, shall censure, place limitations 
on the activities, functions, or operations, suspend for a period not 
exceeding twelve months, or revoke the registration of any municipal 
securities dealer, if it finds, on the record after notice and opportunity 
for hearing, that such censure, placing of limitations, denial, sus-
pension, or revocation, is in the public interest and that such munici-
pal securities dealer has committed or omitted any act or omission 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 135 
Registration, 
suspension. 
Notice and 
hearing. 
Censure. 
Notice and 
hearing. 
enumerated in subparagraph (A), (D), or (E) of paragraph (4) of 
section 15 (b) of this title, has been convicted of any offense specified 
^nte, p. 121 
in subparagraph (B) of such paragraph (4) within ten years of the 
commencement of the proceedings under this paragraph, or is 
enjoined from any action, conduct, or practice specified in subpara-
graph (C) of such paragraph (4). 
"(3) Pending final determination whether any registration under 
this section shall be revoked, the Commission, by order, may suspend 
such registration, if such suspension appears to the Commission, after 
notice and opportunity for hearing, to be necessary or appropriate in 
the public interest or for the protection of investors. Any registered 
municipal securities dealer may, upon such terms and conditions as 
the Commission may deem necessary in the public interest or for the 
protection of investors, withdraw^ from registration by filing a written 
notice of withdrawal with the Commission. If the Commission finds 
that any registered municipal securities dealer is no longer in exist-
ence or has ceased to do business as a municipal securities dealer, the 
Commission, by order, shall cancel the registration of such municipal 
securities dealer. 
"(4) The Commission, by order, sihall censure any person associ-
ated, or seeking to become associated with, a municipal securities dealer 
or suspend for a period not exceeding twelve months or bar any such 
person from being associated with a municipal securities dealer, if the 
Commission finds, on the record after notice and opportunity for 
hearing, that such censure, suspension, or bar is in the public interest 
and that such person has committed or omitted any act or omission 
enumerated in subparagraph (A), (D), or (E) of paragraph (4) of 
section 15(b) of this title, has been convicted of any offense specified 
in subparagraph (B) of such paragraph (4) within ten years of 
the commencement of the proceedings under this paragraph, or is 
enjoined from any action, conduct, or practice specified in subpara-
graph (C) of such paragraph (4). It shall be unlawful for any person 
as to whom an order entered pursuant to this paragraph or paragraph 
(5) of this subsection suspending or barring him from being asso-
ciated with a municipal securities dealer is in effect willfully to become, 
or to be, associated with a municipal securities dealer without the 
consent of the Commission, and it shall be unlawful for any munici-
pal securities dealer to permit such a person to become, or remain, a 
person associated with him without the consent of the Commission, 
if such municipal securities dealer knew, or, in the exercise of reason-
able care should have known, of such order. 
"(5) With respect to any municipal securities dealer for which the 
Commission is not the appropriate regulatory agency, the appropriate 
regulatory agency for such municipal securities dealer may sanction 
any such municipal securities dealer in the manner and for the reasons 
specified in paragraph (2) of this subsection and any person associ-
ated with such municipal securities dealer in the manner and for the 
reasons specified in paragraph (4) of this subsection. In addition, 
such appropriate regulatory agency may, in accordance with section 8 
of the Federal Deposit Insurance Act (12 U.S.C. 1818), enforce com-
pliance by such municipal securities dealer or any person associated 
with such municipal securities dealer with the provisions of this sec-
tion, section 17 of this title, the rules of the Board, and the rules of the 
Commission pertaining to municipal securities dealers, persons asso-
ciated with municipal securities dealers, and transactions in municipal 
securities. For purposes of the preceding sentence, any violation of 
any such provision shall constitute adequate basis for the issuance of 
any order under section 8(b) or 8 (c) of the Federal Deposit Insurance 
Post, p. 137. 
89 STAT. 136 
PUBLIC LAW 94-29—JUNE 4, 1975 
12 use 1818. 
Notice. 
Ante, p. 121. 
Tests. 
Reports to 
Commission. 
Copies. 
Act, and the customers of any such municipal securities dealer shall 
be deemed to be 'depositors' as that term is used in section 8(c) of 
that Act. Nothing in this paragraph shall be construed to affect in any 
way the powers of such appropriate regulatory agency to proceed 
against such municipal securities dealer under any other provision of 
law. 
" (6) (A) The Commission, prior to the entry of an order of investi-
gation, or commencement of any proceedings, against any municipal 
securities dealer, or person associated with any municipal securities 
dealer, for which the Commission is not the appropriate regulatory 
agency, for violation of any provision of this section, section 15(c) (1) 
or 15(c) (2) of this title, any rule or regulation under any such section, 
or any rule of the board, shall (i) give notice to the appropriate regu-
latory agency for such municipal securities dealer of the identity of 
such municipal securities dealer or person associated with such munici-
pal securities dealer and the nature of and basis for such proposed 
action and (iij consult with such appropriate regulatory agency con-
cerning the enect of such proposed action on sound banking practices 
and the feasibility and desirability of coordinating such action with 
any proceeding or proposed proceeding by such appropriate regulatory 
agency against such municipal securities dealer or associated person. 
(B) The appropriate regulatory agency for a municipal securities 
dealer (if other than the Commission), prior to the entry of an order 
of investigation, or commencement of any proceedings, against such 
municipal securities dealer or person associated with such municipal 
securities dealer, for violation of any provision of this section, the 
rules of the Board, or the rules or regulations of the Commission per-
taining to municipal securities dealers, persons associated with munici-
pal securities dealers, or transactions in municipal securities shall 
(i) give notice to the Commission of the identity of such municipal 
securities dealer or person associated with such municipal securities 
dealer and the nature of and basis for such proposed action and (ii) 
consult with the Commission concerning the effect of such proposed 
action on the protection of investors and the feasibility and desirabil-
ity of coordinating such action with any proceeding or proposed pro-
ceeding by the Commission against such municipal securities dealer or 
associated person. 
(C) Nothing in this paragraph shall be construed to impair or limit 
(other than by the requirement of prior consultation) the power of 
the Commission or the appropriate regulatory agency for a municipal 
securities dealer to initiate any action of a class described in this 
paragraph or to affect in any way the power of the Commission or 
such appropriate regulatory agency to initiate any other action pur-
suant to this title or any other provision of law. 
"(7) (A) Tests required pursuant to subsection (b) (2) (A) (iii) of 
this section shall be administered by or on behalf of and periodic 
examinations pursuant to subsection (b)(2)(E) of this section shall be 
conducted by— 
"(i) a registered securities association, in the case of municipal 
securities brokers and municipal securities dealers who are mem-
bers of such association; and 
"(ii) the appropriate regulatory agency for any municipal 
securities broker or municipal securities dealer, in the case of all 
other municipal securities brokers and municipal securities 
dealers. 
"(B) A registered securities association shall make a report of any 
examination conducted pursuant to subsection (b)(2)(E) of this 
section and promptly furnish the Commission a copy thereof and any 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 137 
Infra. 
Board members 
or employees, 
removal or 
censure. 
Notice and 
hearing. 
data supplied to it in connection with such examination. Subject to 
such limitations as the Commission, by rule, determines to be necessary 
or appropriate in the public interest or for the protection of investors, 
the Commission shall, on request, make available to the Board a copy 
of any report of an examination of a municipal securities broker or 
municipal securities dealer made by or furnished to the Commission 
pursuant to this paragraph or section 17(c) (3) of this title. 
"(8) The Commission is authorized, by order, if in its opinion such 
action is necessary or appropriate in the public interest, for the pro-
tection of investors, or otherwise, in furtherance of the purposes of this 
title, to remove from office or censure any member or employee of the 
Board, who, the Commission finds, on the record after notice and 
opportunity for hearing, has willfully (A) violated any provision of 
this title, the rules and regulations thereunder, or the rules of the 
Board or (B) abused his authority. 
"(d) (1) Neither the Commission nor the Board is authorized under 
this title, by rule or regulation, to require any issuer of municipal 
securities, directly or indirectly through a purchaser or prospective 
purchaser of securities from the issuer, to file with the Commission or 
the Board prior to the sale of such securities by the issuer any appli-
cation, report, or document in connection with the issuance, sale, or 
distribution of such securities. 
"(2) The Board is not authorized under this title to require any 
issuer of municipal securities, directly or indirectly through a munici-
pal securities broker or municipal securities dealer or otherwise, to 
furnish to the Board or to a purchaser or a prospective purchaser of 
such securities any application, report, document, or information with 
respect to such issuer: Provided^ however., That the Board may require 
municipal securities brokers and municipal securities dealers to fur-
nish to the Board or purchasers or prospective purchasers of municipal 
securities applications, reports, documents, and information with 
respect to the issuer thereof which is generally available from a source 
other than such issuer. Nothing in this paragraph shall be construed 
to impair or limit the power of the Commission under any provision 
of this title." 
SEC 14. Section 17 of the Securities Exchange Act of 1934 (15 Recordkeeping 
U.S.C. 78q) is amended by striking subsection (a), redesignating 
subsection (b) as subsection (g), and inserting the following as sub-
sections (a), (b), (c), (d), (e), and (f) : 
"(a) (1) Every national securities exchange, member thereof, broker 
or dealer who transacts a business in securities through the medium 
of any such member, registered securities association, registered 
broker or dealer, registered municipal securities dealer, registered 
securities information processor, registered transfer agent, and regis-
tered clearing agency and the Municipal Securities Rulemaking Board 
shall make and keep for prescribed periods such records, furnish such 
copies thereof, and make and disseminate such reports as the Com-
mission, by rule, prescribes as necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of this title. 
"(2) Every registered clearing agency shall also make and keep 
for prescribed periods such records, furnish such copies thereof, and 
make and disseminate such reports, as the appropriate regulatory 
agency for such clearing agency, by rule, prescribes as necessary or 
appropriate for the safeguarding of securities and funds in the cus-
tody or control of such clearing agency or for which it is responsible. 
"(3) Every registered transfer agent shall also make and keep for 
prescribed periods such records, furnish such copies thereof, and make 
Copies. 
89 STAT. 138 
PUBLIC LAW 94-29—JUNE 4, 1975 
Post, p. 141. 
Records, periodic 
examination. 
Notice. 
Ante, p. 97. 
Post, p. 146. 
Report of 
examination. 
such reports as the appropriate regulatory agency for such transfer 
agent, by rule, prescribes as necessary or appropriate in furtherance 
of the purposes of section 17A of this title. 
"(b) All records of persons described in subsection (a) of this sec-
tion are subject at any time, or from time to time, to such reasonable 
periodic, special, or other examinations by representatives of the Com-
mission and the appropriate regulatory agency for such persons as 
the Commission or the appropriate regulatory agency for such persons 
deems necessary or appropriate in the public interest, for the protec-
tion of investors, or otherwise in furtherance of the purposes of this 
title: Pro'vided^ JKnoever^ That the Commission shall, prior to con-
ducting any such examination of a registered clearing agency, reg-
istered transfer agent, or registered municipal securities dealer for 
which it is not the appropriate regulatory agency, give notice to the 
appropriate regulatory agency for such clearing agency, transfer 
agent, or municipal securities dealer of such proposed examination 
and consult with such appropriate regulatory agency concerning 
the feasibility and desirability of coordinating such examination with 
examinations conducted by such appropriate regulatory agency with 
a view to avoiding unnecessary regulatory duplication or imdue regu-
latory burdens for such clearing agency, transfer agent, or municipal 
securities dealer. Nothing in the proviso to the preceding sentence 
shall be construed to impair or limit (other than by the requirement 
of prior consultation) the power of the Commission under this sub-
section to examine any clearing agency, transfer agent, or municipal 
securities dealer or to affect in any way the power of the Commission 
under any other provision of this title or otherwise to inspect, examine, 
or investigate any such clearing agency, transfer agent, or municipal 
securities dealer. 
"(c) (1) Every clearing agency, transfer agent, and municipal secu-
rities dealer for which the Commission is not the appropriate regula-
tory agency shall (A) file with the appropriate regulatory agency for 
such clearing agency, transfer agent, or municipal securities dealer a 
copy of any application, notice, proposal, report, or document filed 
with the Commission by reason of its being a clearing agency, transfer 
agent, or municipal securities dealer and (B) file wnth the Commission 
a copy of any application, notice, proposal, report, or document filed 
with such appropriate regulatory agency by reason of its being a 
clearing agency, transfer agent, or municipal securities dealer. The 
Municipal Securities Rulemaking Board shall file with each agency 
enumerated in section 3(a) (34) (A) of this title copies of every pro-
posed rule change filed with the Commission pursuant to section 19(b) 
of this title. 
"(2) The appropriate regulatory agency for a clearing agency, 
transfer agent, or municipal securities dealer for which the Commis-
sion is not the appropriate regulatory agency shall file with the Com-
mission notice of the commencement of any proceeding and a copy of 
any order entered by such appropriate regulatory agency against such 
clearing agency, transfer agent, or municipal securities dealer, and 
the Commission shall file with such appropriate regulatory agency 
notice of the commencement of any proceeding and a copy of any 
order entered by the Commission against such clearing agency, trans-
fer agent, or municipal securities dealer. 
"(3) The Commission and the appropriate regulatory agency for a 
clearing agency, transfer agent, or municipal securities dealer for 
which the Commission is not the appropriate regulatory agency shall 
each notify the other and make a report of any examination conducted 
by it of such clearing agency, transfer agent, or municipal securities 
PUBLIC LAW 94^29—JUNE 4, 1975 
89 STAT. 139 
dealer, and, upon request, furnish to the other a copy of such report 
and any data supplied to it in connection with such examination. 
"(d) (1) The Commission, by rule or order, as it deems necessary 
or appropriate in the public interest and for the protection of inves-
tors, to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the develop-
ment of a national market system and national system for the clear-
ance and settlement of securities transactions, may— 
" (A) with respect to any person who is a member of or partici-
pant in more than one self-regulatory organization, relieve any 
such self-regulatory organization of any responsibility under this 
title (i) to receive regulatory reports from such person, (ii) to 
examine such person for compliance, or to enforce compliance by 
such person, with specified provisions of this title, the rules and 
regulations thereunder, and its own rules, or (iii) to carry out 
other specified regulatory functions with respect to such person, 
and 
"(B) allocate among self-regulatory organizations the author-
ity to adopt rules with respect to mattere as to which, in the 
absence of such allocation, such self-regulatory organizations 
share authority under this title. 
In making any such rule or entering any such order, the Commission 
shall take into consideration the regulatory capabilities and procedures 
of the self-regulatory organizations, availability of staff, convenience 
of location, unnecessary regulatory duplication, and such other factors 
as the Commission may consider germane to the protection of investors, 
cooperation and coordination among self-regulatory organizations, 
and the development of a national market system and a national 
system for the clearance and settlement of securities transactions. 
The Commission, by rule or order, as it deems necessary or appropriate 
in the public interest and for the protection of investors, may require 
any self-regulatory organization relieved of any responsibility pursu-
ant to this paragraph, and any person with respect to whom such 
responsibility relates, to take such steps as are specified in any such 
rule or order to notify customers of, and persons doing business with, 
such pereon of the limited nature of such self-regulatory organiza-
tion's responsibility for such person's acts, practices, and course of 
business. 
"(2) A self-regulatory organization shall furnish copies of any 
report of examination of any person who is a member of or a par-
ticipant in such self-regulatory organization to any other self-regula-
tory organization of which such person is a member or in which such 
person is a participant upon the request of such person, such other 
self-regulatory organization, or the Commission. 
"(e) (1) (A) Every registered broker or dealer shall annually file 
with the Commission a balance sheet and income statement certified 
by an independent public accountant, prepared on a calendar or fiscal 
year basis, and such other financial statements (which shall, as the 
Commission specifies, be certified) and information concerning its 
financial condition as the Commission, by rule may prescribe as neces-
sary or appropriate in the public interest or for the protection of 
investors. 
"(B) Every registered broker and dealer shall annually send to its 
customers its certified balance sheet and such other financial state-
ments and information concerning its financial condition as the Com-
mission, by rule, may prescribe pursuant to subsection (a) of this 
section. 
Self-regulatoiy 
organizations. 
Filing of balance 
sheet and income 
statement. 
Financial 
statements to 
customers. 
89 STAT. 140 
PUBLIC LAW 94-29—JUNE 4, 1975 
Exem]>tion. 
Missing, lost, 
counterfeit, or 
stolen securities, 
reporting. 
Fingerprints, 
submittal to 
Attorney 
General. 
Exemption. 
National Crime 
Information 
Center facilities. 
Delegation of 
authority. 
"(C) The Commission, by rule or order, may conditionally or 
unconditionally exempt any registered broker or dealer, or class of 
such brokers or dealers, from any provision of this paragraph if the 
Commission determines that such exemption is consistent with the 
public interest and the protection of investors. 
"(2) The Commission, by rule, as it deems necessary or appropriate 
in the public interest or for the protection of investors, may prescribe 
the form and content of financial statements filed pursuant to this title 
and the accounting principles and accounting standards used in their 
preparation. 
"(f) (1) Every national securities exchange, member thereof, regis-
tered securities association, broker, dealer, municipal securities dealer, 
registered transfer agent, registered clearing agency, participant 
tlierein, member of the Federal Reserve System, and bank whose 
deposits are insured by the Federal Deposit Insurance Corporation 
shall— 
"(A) report to the Commission or other person designated by 
the Commission such information about missing, lost, counterfeit, 
or stolen securities, in such form and within such time as the Com-
mission, by rule, determines is necessary or appropriate in the pub-
lic interest or for the protection of investors; such information 
shall be available on request for a reasonable fee, to any such 
exchange, member, association, broker, dealer, municipal securities 
deader, transfer agent, clearing agency, participant, member of 
the Federal Reserve System, or insured bank, and such other per-
sons as the Commission, by rule, designates; and 
"(B) make such inquiry with respect to information reported 
pursuant to this subsection as the Commission, by rule, prescribes 
as necessary or appropriate in the public interest or for the pro-
tection of investors, to determine whether securities in their cus-
tody or control, for which they are responsible, or in which 
they are effecting, clearing, or settling a transaction have been 
reported as missing, lost, counterfeit, or stolen. 
" (2) Every member of a national securities exchange, broker, dealer, 
registered transfer agent, and registered clearing agency, shall require 
that each of its partners, directors, officers, and employees be finger-
printed and shall submit such fingerprints, or cause the same to be 
submitted, to the Attorney General of the United States for identifi-
cation and appropriate processing. The Commission, by rule, may 
exempt from the provisions of this paragraph upon specified terms, 
conditions, and periods, any class of partners, directors, officers, or 
employees of any such member, broker, dealer, transfer agent, or 
clearing agency, if the Commission finds that such action is not incon-
sistent with the public interest or the protection of investors. 
"(3) In order to carry out the authority under paragraphs (1) and 
(2) above, the Commission or its designee may enter into agreement 
with the Attorney General to use the facilities of the National Crime 
Information Center ("NCIC") to receive, store, and disseminate infor-
mation in regard to missing, lost, counterfeit, or stolen securities and 
to permit direct inquiry access to NCIC's file on such securities for 
the financial community. 
"(4) In regard to paragraphs (1), (2), and (3), above insofar 
as such paragraphs apply to any bank or member of the Federal 
Reserve System, the Commission may delegate its authority to: 
"(A) the Comptroller of the Currency as to national banks 
and banks operating under the Code of Law for the District of 
Columbia; 
"(B) the Federal Reserve Board in regard to any member of 
the Federal Reserve System which is not a national bank or a 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 141 
bank operating under the Code of Law for the District of Cokim-
bia; and 
"(C) the Federal Deposit Insurance Corporation for any State 
bank which is insured by the Federal Deposit Insurance Cor-
poration but which is not a member of the Federal Reserve 
System. 
"(5) The Commission shall encourage the insurance industry to 
require their insured to report expeditiously instances of missing, lost, 
counterfeit, or stolen securities to the Commission or to such other 
person as the Commission may, by ru^.e, designate to receive such 
information.". 
SEC. 15. The Securities Exchange Act of 1934 is amended by insert-
ing after section 17 (15 U.S.C. 78q) the following new section: 
" N A T I O N A L SYSTEM FOR CLEARANCE AND SETTLEMENT o r SECURITIES 
TRANSACTIONS 
"SEC. 17A. (a)(1) The Congress finds that— 
15 U
S
C 78q.l. 
"(A) The prompt and accurate clearance and settlement of 
securities transactions, including the transfer of record ownership 
and the safeguarding of securities and funds related thereto, are 
necessary for the protection of investors and persons facilitating 
transactions by and acting on behalf of investors. 
"(B) Inefficient procedures for clearance and settlement impose 
unnecessary costs on investors and persons facilitating transac-
tions by and acting on behalf of mvesitors. 
"(Cj New data processing and communications techniques 
create the opportunity for more efficient, effective, and safe pro-
cedures for clearance and settlement. 
"(D) The linking of all clearance and settlement facilities and 
the development of uniform standards and procedures for clear-
ance and settlement will reduce unnecessary costs and increase 
the protection of investors and persons facilitating transactions 
by and acting on behalf of investors. 
"(2) The Commission is directed, therefore, having due regard for 
the public interest, the protection of investors, the safeguarding of 
securities and funds, and maintenance of fair competition among 
brokers and dealers, clearing agencies, and transfer agents, to use its 
authority under this title to facilitate the establishment of a national 
system for the prompt and accurate clearance and settlement of trans-
actions in securities (other than exempted securities) in accordance 
with the findings and to carry out the objectives set forth in para-
graph (1) of this subsection. The Commission shall use its authority 
under this title to assure equal regulation under this title of registered 
clearing agencies and registered transfer agents. 
"(b)(1) Except as otherwise provided in this section, it shall be 
unlawful for any clearing agency, unless registered in accordance 
with this subsection, directly or indirectly, to make use of the mails 
or any means or instrumentality of interstate commerce to perform 
the functions of a clearing agency with respect to any security (other 
than an exempted security). The Commission, by rule or order, upon Exemption 
its own motion or upon application, may conditionally or uncondi-
tionally exempt any clearing agency or security or any class of clear-
ing agencies or securities from any provisions of this section or the 
rules or regulations thereunder, if the Commission finds that such 
exemption is consistent with the public interest, the protection of 
investors, and the purposes of this section, including the prompt and 
accurate clearance and settlement of securities transactions and the 
safeguarding of securities and funds. A clearing agency or transfer 
Mails or 
instrumentality of 
interstate 
commerce, 
prohibition, use. 
89 STAT. 142 
PUBLIC LAW 94-29—JUNE 4, 1975 
agent shall not perform the functions of both a clearing agency and a 
transfer agent unless such clearing agency or transfer agent is regis-
tered in accordance with this subsection and subsection (c) of this 
section. 
" (2) A clearing agency may be registered under the terms and con-
ditions hereinafter provided in this subsection and in accordance with 
Post, p. 146. 
the provisions of section 19 (a) of this title, by filing with the Commis-
sion an application for registration in such form as the Commission, 
by rule, may prescribe containing the rules of the clearing agency and 
such other information and documents as the Commission, by rule, 
may prescribe as necessary or appropriate in the public interest or for 
the prompt and accurate clearance and settlement of securities trans-
actions. 
Registration 
"(3) A clearing agency shall not be registered unless the Commis-
requirements. 
sion determines that— 
"(A) Such clearing agency is so organized and has the capac-
ity to be able to facilitate the prompt and accurate clearance and 
settlement of securities transactions for which it is responsible, to 
safeguard securities and funds in its custody or control or for 
which it is responsible, to comply with the provisions of this title 
Ante, p. 137. 
and the rules and regulations thereunder, to enforce (subject to 
Post, p. 146. 
any rule or order of the Commission pursuant to section 17(d) or 
19(g)(2) of this title) compliance by its participants with the 
rules of the clearing agency, and to carry out the purposes of this 
section. 
"(B) Subject to the provisions of paragraph (4) of this sub-
section, the rules of the clearing agency provide that any (i) reg-
istered broker or dealer, (ii) other registered clearing agency, (iii) 
registered investment company, (iv) bank, (v) insurance com-
pany, or (vi) other person or class of persons as the Com-
mission, by rule, may from time to time designate as appropriate 
to the development of a national system for the prompt and 
accurate clearance and settlement of securities transactions may 
become a participant in such clearing agency. 
"(C) The rules of the clearing agency assure a fair representa-
tion of its shareholders (or members) and participants in the selec-
tion of its directors and administration of its affairs. (The 
Commission may determine that the representation of partici-
pants is fair if they are afforded a reasonable opportunity to 
acquire voting stock of the clearing agency, directly or indirectly, 
in reasonable proportion to their use of such clearing agency.) 
"(D) The rules of the clearing agency provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
participants. 
"(E) The rules of the clearing agency do not impose any sched-
ule of prices, or fix rates or other fees, for services rendered by its 
participants. 
"(F) The rules of the clearing agency are designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions, to assure the safeguarding of securities and funds 
which are in the custody or control of the clearing agency or for 
which it is responsible, to foster cooperation and coordination with 
persons engaged in the clearance and settlement of securities trans-
actions, to remove impediments to and perfect the mechanism of 
a national system for the prompt and accurate clearance and set-
tlement of securities transactions, and, in general, to protect 
investors and the f)ublic interest; and are not designed to permit 
unfair discrimination in the admission of participants or among 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 143 
Denial of 
participation. 
Notice. 
participants in the use of the clearing agency, or to regulate by 
virtue of any authority conferred by this title matters not related 
to the purposes of this section or the administration of the clear-
ing agency. 
"(G) The rules of the clearing agency provide that (subject 
to any rule or order of the Commission pursuant to section 17(d) 
•^"•^^' P- 137. 
or 19(g) (2) of this title) its participants shall be appropriately 
Post, p. 146. 
disciplined for violation of any provision of the rules of the clear-
ing agency by expulsion, suspension, limitation of activities, func-
tions, and operations, fine, censure, or any other fitting sanction. 
"(H) The rules of the clearing agency are in accordance with 
the provis'ons of paragraph (5) of this subsection, and, in general, 
provide a fair procedure with respect to the disciplining of par-
ticipants, the denial of participation to any person seeking par-
ticipation therein, and the prohibition or limitation by the 
clearing agency of any person with respect to access to services 
offered by the clearing agency. 
"(I) The rules of the clearing agency do not impose any bur-
den on competition not necessary or appropriate in furtherance 
of the purposes of this title. 
"(4) (A) A registered clearing agency may, and in cases in which 
the Commission, by order, directs as appropriate in the public interest 
shall, deny participation to any person subject to a statutory dis-
qualification. A registered clearing agency shall file notice with the 
Commission not less than thirty days prior to admitting any person 
to participation, if the clearing agency knew, or in the exercise of 
reasonable care should have known, that such person was subject to 
a statutory disqualification. The notice shall be in such form and 
contain such information as the Commission, by rule, may prescribe 
as necessary or appropriate in the public interest or for the protection 
of investors. 
"(B) A registered clearing agency may deny participation to, or 
condition the participation of, any person if such person does not 
meet such standards of financial responsibility, operational capa-
bility, experience, and competence as are prescribed by the rules of 
the clearing agency. A registered clearing agency may examine and 
verify the qualifications of an applicant to be a participant in accord-
ance with procedures established by the rules of the clearing agency. 
"(5) (A) In any proceeding by a registered clearing agency to 
determine whether a participant should be disciplined (other than 
a summary proceeding pursuant to subparagraph (C) of this para-
graph), the clearing agency shall bring specific charges, notify such 
participant of, and give him an opportunity to defend against such 
charges, and keep a record. A determination by the clearing agency 
to impose a disciplinary sanction shall be supported by a statement 
setting forth— 
"(i) any act or practice in which such participant has been 
found to have engaged, or which such participant has been found 
to have omitted; 
"(ii) the specific provisions of the rules of the clearing agency 
which any such act or practice, or omission to act, is deemed to 
violate; and 
"(iii) the sanction imposed and the reasons therefor. 
"(B) In any proceeding by a registered clearing agency to deter- 
Notice and 
mine whether a person shall be denied participation or prohibited or 
hearing, 
limited with respect to access to services offered by the clearing 
agency, the clearing agency shall notify such person of, and give him 
an opportunity to be heard upon, the specific grounds for denial or 
Examination and 
verification. 
Notice. 
89 STAT. 144 
PUBLIC LAW 94-29—JUNE 4, 1975 
Summary 
suspension. 
Hearing. 
Stay of 
suspension. 
Use of mails or 
instrumentality of 
interstate 
commerce, 
prohibition. 
15 use 78/. 
Transfer agents 
registration. 
Denial. 
Notice and 
hearing. 
prohibition or limitation under consideration and keep a record. A 
determination by the clearing agency to deny participation or pro-
hibit or limit a person with respect to access to services offered by 
the clearing agency shall be supported by a statement setting forth 
the specific grounds on which the denial or prohibition or limitation 
is based. 
"(C) A registered clearing agency may summarily suspend and 
close the accounts of a participant who (i) has been and is expelled 
or suspended from any self-regulatory organization, (ii) is in default 
of any delivery of funds or securities to the clearing agency, or (iii) 
is in such financial or operating difficulty that the clearing agency 
determines and so notifies the appropriate regulatory agency for sucn 
participant that such suspension and closing of accounts are neces-
sary for the protection of the clearing agency, its participants, 
creditors, or investors. A participant so summarily suspended shall 
be promptly afforded an opportunity for a hearing by the clearing 
agency in accordance with the provisions of subparagraph (A) of 
this paragraph. The appropriate regulatory agency for such par-
ticipant, by order, may stay any such summary suspension on its own 
motion or upon application by any person aggrieved thereby, if such 
appropriate regulatory agency determines summarily or after notice 
and opportunity for hearing (which hearing may consist solely of 
the submission of affidavits or presentation of oral arguments) that 
such stay is consistent with the public interest and protection of 
investors. 
" (6) No registered clearing agency shall prohibit or limit access by 
any person to services offered by any participant therein. 
"(c)(1) Except as otherwise provided in this section, it shall be 
unlawful for any transfer agent, unless registered in accordance with 
this section, directly or indirectly, to make use of the mails or any 
means or instrumentality of interstate commerce to perform the func-
tion of a transfer agent with respect to any security registered under 
section 12 of this title or which would be required to be registered 
except for the exemption from registration provided by subsection 
(g) (2) (B) or (g) (2) (G) of that section. The appropriate regulatory 
agency, by rule or order, upon its own motion or upon application, 
may conditionally or unconditionally exempt any person or security 
or class of persons or securities from any provision of this section or 
any rule or regulation prescribed under this section, if the appropriate 
regulatory agency finds (A) that such exemption is in the public 
interest and consistent with the protection of investors and the pur-
poses of this section, including the prompt and accurate clearance and 
settlement of securities transactions and the safeguarding of securities 
and funds, and (B) the Commission does not object to such exemption. 
"(2) A transfer agent may be registered by filing with the appro-
priate regulatory agency for such transfer agent an application for 
registration in such form and containing such information and docu-
ments concerning such transfer agent as such appropriate regulatory 
agency may prescribe as necessary or appropriate in furtherance of the 
purposes of this section. Except as hereinafter provided, such registra-
tion shall become effective thirty days after receipt of such application 
by such appropriate regulatory agency or within such shorter period 
of time as such appropriate regulatory agency may determine. 
"(3) (A) The appropriate regulatory agency for a transfer agent, 
by order, shall deny registration to, censure, place limitations on the 
activities, functions, or operations of, suspend for a period not exceed-
ing twelve months, or revoke the registration of such transfer agent, 
if such appropriate regulatory agency finds, on the record after notice 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 145 
Notice and 
hearing. 
Notice and 
hearing. 
Notice of 
withdrawal. 
and opportunity for hearing, that such denial, censure, placing of 
limitations, suspension, or revocation is in the public interest and that 
such transfer agent has willfully violated or is unable to comply with 
any provision of this section or section 17 of this title or the rules or Ante, p. 137. 
regulations thereunder. 
"(B) Pending final determination whether any registration by a 
transfer agent under this subsection shall be denied, the appropriate 
regulatory agency for such transfer agent, by order, may postpone 
the effective date of such registi-ation for a period not to exceed fifteen 
days, but if, after notice and opportunity for hearing (which may 
consist solely of affidavits and oral arguments), it shall appear to such 
appropriate regulatory agency to be necessary or appropriate in the 
public interest or for the protection of in\ ostors to postpone the effec-
tive date of such registration until final determination, such appro-
priate regulatory agency shall so order. Pending final determination 
whether any registration under this subsection shall be revoked, such 
appropriate regulatory agency, by order, may suspend such registra-
tion, if such suspension appears to such appropriate regulatory agency, 
after notice and opportunity for hearing, to be necessary or appro-
priate in the public interest or for the protection of investors. 
"(C) A registered transfer agent may, upon such terms and con-
ditions as the appropriate regulatory agency for such transfer agent 
deems necessary or appropriate in the public interest, for the protec-
tion of investors, or in furtherance of the purposes of this section, 
withdraw from registration by filing a written notice of withdrawal 
with such appropriate regulatory agency. If such appropriate regula-
tory agency finds that any transfer agent for which it is the appro-
priate regulatory agency, is no longer in existence or has ceased to do 
business as a transfer agent, such appropriate regulatory agency, by 
order, shall cancel or deny the registration. 
"(d) (1) No registered clearing agency or registered transfer agent 
shall, directly or indirectly, engage in any activity as clearing agency 
or transfer a^ent in contravention of such rules and regulations (A) 
as the Commission may prescribe as necessary or appropriate in the 
public interest, for the protection of investors, or otherwise in further-
ance of the purposes of this title, or (B) as the appropriate regulatory 
agency for such clearing agency or transfer agent may prescribe as 
necessary or appropriate for the safeguarding of securities and funds. 
" (2) With respect to any clearing agency or transfer agent for which 
the Commission is not the appropriate regulatory agency, the appro-
priate regulatory agency for such clearing agency or transfer agent 
may, in accordance with section 8 of the Federal Deposit Insurance Act 
(12 U.S.C. 1818), enforce compliance by such clearing agency or trans-
fer agent with the provisions of this section, sections 17 and 19 of this Post, p. 146. 
title, and the rules and regulations thereunder. For purposes of the 
preceding sentence, any violation of any such provision shall consti-
tute adequate basis for the issuance of an order under section 8(b) or 
8(c) of the Federal Deposit Insurance Act, and the participants in 
any such clearing agency and the persons doing business with any 
such transfer agent shall be deemed to be 'depositors' as that term is 
used in section 8 (c) of that Act. 
"(3) (A) With respect to any clearing agency or transfer agent for Consultation, 
which the Commission is not the appropriate regulatory agency, the 
Commission and the appropriate regulatory agency for such clearing 
agency or transfer agent shall consult and cooperate with each other, 
and, as may be appropriate, with State banking authorities having 
supervision over such clearing agency or transfer agent toward the end 
that, to the maximum extent practicable, theiir respective regulatory 
89 STAT. 146 
PUBLIC LAW 94-29—JUNE 4, 1975 
responsibilities may be fulfilled and the rules and regulations appli-
cable to such clearing agency or transfer agent may be in accord 
with both sound banking practices and a national system for the 
prompt and accurate clearance and settlement of securities transac-
tions. In accordance with this objective— 
"(i) the Commission and such appropriate regulatory agency 
shall, at least fifteen days prior to the issuance for public com-
ment of any proposed rule or regulation or adoption of any rule 
or regulation concerning such clearing agency or transfer agent, 
consult and request the views of the other; and 
"(ii) such appropriate regulatory agency shall assume primary 
responsibility to examine and enforce compliance by such clearing 
agency or transfer agent with the provisions of this section and sec-
Ante, p. 137. 
tions 17 and 19 of this title. 
^'ifra. 
"(B) Nothing in the preceding subparagraph or elsewhere in this 
title shall be construed to impair or limit (other than by the require-
ment of notification) the Commission's authority to make rules under 
any provision of this title or to enforce compliance pursuant to any 
provision of this title by any clearing agency or transfer agent with the 
provisions of this title and the rules and regulations thereunder. 
" (4) Nothing in this section shall be construed to impair the author-
ity of any State banking authority or other State or Federal regu-
latory authority having jurisdiction over a person registered as a clear-
ing agency or transfer agent to make and enforce rules governing such 
person which are not inconsistent with this title and the rules and 
regulations thereunder. 
"(e) The Commission shall use its authority under this title to end 
the physical movement of securities certificates in connection with the 
settlement among brokers and dealers of transactions in securities con-
summated by means of the mails or any means or instrumentalities 
of interstate commerce.". 
SEC. 16. Section 19 of the Securities Exchange Act of 1934 (15 
U.S.C. 78s) is amended to read as follows: 
'REGISTRATION, RESPONSIBILITIES, AND OVERSIGHT OF SELF-REGULATORY 
ORGANIZATIONS 
Notice of filing. 
Ante, pp. 104, 
127, 141. 
Notice and 
hearing. 
Extension. 
"SEC. 19. (a) (1) The Commission shall, upon the filing of an appli-
cation for registration as a national securities exchange, registered 
securities association, or registered clearing agency, pursuant to sec-
tion 6, 15A, or 17A of this title, respectively, publish notice of such 
filing and afford interested persons an opportunity to submit written 
data, views, and arguments concerning such application. Within ninety 
days of the date of publication of such notice (or within such longer 
period as to which the applicant consents), the Commission shall— 
" (A) by order grant such registration, or 
"(B) institute proceedings to determine whether registration 
should be denied. Such proceedings shall include notice of the 
grounds for denial under consideration and opportunity for hear-
ing and shall be concluded within one hundred eighty days of the 
date of a publication of notice of the filing of the application for 
registration. At the conclusion of such proceedings the Commis-
sion, by order, shall grant or deny such registration. The Commis-
sion may extend the time for conclusion of such proceedings for 
up to ninety days if it finds good cause for such extension and 
publishes its reasons for so finding or for such longer period as to 
which the applicant consents. 
The Commission shall grant such registration if it finds that the 
requirements of this title and the rules and regulations thereunder 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 147 
with respect to the applicant are satisfied. The Commission shall deny 
•such registration if it does not make such finding. 
"(2) With respect to an application for registration filed by a 
clearing agency for which the Commission is not the appropriate 
regulatory agency— 
"(A) The Commission shall not grant registration prior to 
the sixtieth day after the date of publication of notice of the filing 
of such application unless the appropriate regulatory agency for 
such clearing agency has notified the Commission of such appro-
priate regulatory agency's determination that such clearing 
agency is so organized and has the capacity to be able to safe-
guard securities and funds in its custody or control or for which 
it is responsible and that the rules of such clearing agency are 
designed to assure the safeguarding of such securities and funds. 
"(B) The Commission shall institute proceedings in accord-
ance with paragraph (1) (B) of this subsection to determine 
whether registration should be denied if the appropriate regula-
tory agency for such clearing agency notifies the Commisison 
within sixty days of the date of publication of notice of the filing 
of such application of such appropriate regulatory agency's (i) 
determination that such clearing agency may not be so organized 
or have the capacity to be able to safeguard securities or funds 
in its custody or control or for which it is responsible or that 
the rules of such clearing agency may not be designed to assure 
the safeguarding of such securities and funds and (ii) reasons 
for such determination. 
"(C) The Commission shall deny registration if the appropriate 
regulatory agency for such clearing agency notifies the Com-
mission prior to the conclusion of proceedings instituted in 
accordance with paragraph (1) (B) of this subsection of such 
appropriate regulatory agency's (i) determination that such clear-
ing agency is not so organized or does not have the capacity to be 
able to safeguard securities or funds in its custody or control or 
for which it is responsible or that the rules of such clearing 
agency are not designed to assure the safeguarding of such 
securities or funds and (ii) reasons for such determination. 
"(3) A self-regulatory organization may, upon such terms and 
conditions as the Commission, by rule, deems necessary or appropriate 
in the public interest or for the protection of investors, withdraw from 
registration by filing a written notice of withdrawal with the Com-
mission. If the Commission finds that any self-regulatory organiza-
tion is no longer in existence or has ceased to do business in the capacity 
specified in its application for registration, the Commission, by 
order, shall cancel its registration. Upon the withdrawal of a national 
securities association from registration or the cancellation, suspen-
sion, or revocation of the registration of a national securities associa-
tion, the registration of any association affiliated therewith shall 
automatically terminate, 
"(b) (1) Each self-regulatory organization shall file with the Com-
mission, in accordance with such rules as the Commission may pre-
scribe, copies of any proposed rule or any proposed change in, addition 
to, or deletion from the rules of such self-regulatory organization 
(hereinafter in this subsection collectively referred to as a 'proposed 
rule change') accompanied by a concise general statement of the basis 
and purpose of such proposed rule change. The Commission shall, 
upon the filing of any proposed rule change, publish notice thereof 
together with the terms of substance of the proposed rule change or 
a description of the subjects and issues involved. The Commission 
Withdrawal from 
registration. 
Affiliate 
registration, 
termination. 
Proposed rule 
change, filing. 
Notice. 
89 STAT. 148 
PUBLIC LAW 94-29—JUNE 4, 1975 
shall give interested persons an opportunity to submit written data, 
views, and arguments concerning such proposed rule change. No pro-
posed rule change shall take effect unless approved by the Commission 
or otherwise permitted in accordance with the provisions of this 
subsection. 
"(2) Within thirty-five days of the date of publication of notice of 
the filing of a proposed rule change in accordance with paragraph 
(1) of this subsection, or within such longer period as the Commission 
may designate up to ninety days of such date if it finds such longer 
period to be appropriate and publishes its reasons for so finding or as 
to which the self-regulatory organization consents, the Commission 
shall— 
" (A) by order approve such proposed rule change, or 
"(B) institute proceedings to determine whether the proposed 
Notice and 
rule change should be disapproved. Such proceedings shall include 
hearing. 
notice of the grounds for disapproval under consideration and 
opportunity for hearing and be concluded within one hundred 
eighty days of the date of publication of notice of the filing of the 
proposed rule change. At the conclusion of such proceedings the 
Commission, by order, shall approve or disapprove such pro-
posed rule change. The Commission may extend the time for con-
clusion of such proceedings for up to sixty days if it finds good 
cause for such extension and publishes its reasons for so finding 
or for such longer period as to which the self-regulatory orga-
nization consents. 
Approval. 
The Commission shall approve a proposed rule change of a self-
regulatory organization if it finds that such proposed rule change is 
consistent witli the requirements of this title and the rules and regula-
Disapproval. 
tions thereunder applicable to such organization. The Commission 
shall disapprove a proposed rule change of a self-regulatory organi-
zation if it does not make such finding. The Commission shall not 
approve any proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing thereof, unless the Commis-
sion finds good cause for so doing and publishes its reasons for so 
finding. 
"(3) (A) Notwithstanding the provisions of paragraph (2) of this 
subsection, a proposed rule change may take effect upon filing with 
the Commission if designated by the self-regulatory organization as 
(i) constituting a stated policy, practice, or interpretation with respect 
to the meaning, administration, or enforcement of an existing rule of 
the self-regulatory organization, (ii) establishing or changing a due, 
fee, or other charge imposed by the self-regulatory organization, or 
(iii) concerned solely with the administration of the self-regulatory 
organization or other matters which the Commission, by rule, consist-
ent with the public interest and the purposes of this subsection, may 
specify as without the provisions of such paragraph (2). 
"(B) Notwithstanding any other provision of this subsection, a 
proposed rule change may be put into effect summarily if it appears to 
the Commission that such action is necessary for the protection of 
investors, the maintenance of fair and orderly markets, or the safe-
guarding of securities or funds. Any proposed rule change so put into 
effect shall be filed promptly thereafter in accordance with the provi-
sions of paragraph (1) of this subsection. 
"(C) Any proposed rule change of a self-regulatory organization 
which has taken effect pursuant to subparagraph (A) or (B) of this 
paragraph may be enforced by such organization to the extent it is not 
inconsistent with the provisions of this title, the rules and regulations 
thereunder, and applicable Federal and State law. At any time within 
sixty days of the date of filing of such a proposed rule change in 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 149 
accordance with the provisions of paragraph (1) of this subsection, 
the Commission summarily may abrogate the change in the rules of the 
self-regulatory organization made thereby and require that the pro-
posed rule change be refiled in accordance with the provisions of 
paragraph (1) of this subsection and reviewed in accordance with the 
provisions of paragraph (2) of this subsection, if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of this title. Commission action pursuant to the pre-
ceding sentence shall not affect the validity or force of the rule change 
during the period it was in effect and shall not be reviewable under 
section 25 of this title nor deemed to be 'final agency action' for pur- Post, p. 158. 
poses of section 704 of title 5, United States Code. 
"(4) With respect to a proposed rule change filed by a registered 
clearing agency for w^hich the Commission is not the appropriate 
regulatory agency—• 
"(A) The Commission shall not approve any such proposed 
rule change prior to the thirtieth day after the date of publication 
of notice of the filing thereof unless the appropriate regulatory 
agency for such clearing agency has notified the Commission of 
such appropriate regulatory agency's determination that the pro-
posed rule change is consistent with the safeguarding of securities 
and funds in the custody or control of such clearing agency or for 
which it is responsible. 
"(B) The Commission shall institute proceedings in accordance 
with paragraph (2) (B) of this subsection to determine whether 
any such proposed rule change should be disapproved, if the 
appropriate regulatory agency for such clearing agency notifies 
the Commission within thirty days of the date of publication of 
notice of the filing of the proposed rule change of such appro-
priate regulatory agency's (i) determination that the proposed 
rule change may be inconsistent with the safeguarding of secu-
rities or funds in the custody or control of such clearing agencv 
or for which it is responsible and (ii) reasons for such 
determination. 
"(C) The Commission shall disapprove any such proposed rule 
change if the appropriate regulatory agency for such clearing 
agency notifies the Commission prior to the conclusion of pro-
ceedings instituted in accordance with paragraph (2) (B) of this 
subsection of such appropiiate i-egulatory agency's (i) deter-
mination that the proposed rule change is inconsistent wnth the 
safeguarding of securities or funds in the custodv or control of 
such clearing agency or for which it is responsible and (ii) rea-
sons for such determination. 
"(D) The Commission shall abrogate any change in the rules 
of such a clearing agency made by a proposed rule change which 
has taken effect pursuant to paragraph (3) of this subsection, 
require that the proposed rule change be refiled in 'accordance 
with the provisions of paragraph (1) of this subsection, and 
reviewed in accordance 'with the provisions of paragraph (2) of 
this subsection, if the appropriate regulatory agency for such 
clearing agency notifies the Commission within thirty days of the 
date of filing of such proposed rule change of such appropriate 
regulatory agency's (i) determination that the rules of such clear-
ing agency as so changed may be inconsistent with the safeguard-
ing of securities or funds in the custody or control of such clearing 
agency or for which it is responsible and (ii) reasons for such 
determination. 
S7.104 n - 77 - 14 
89 STAT. 150 
PUBLIC LAW 94-29—JUNE 4, 1975 
Publication in 
Federal Register. 
Self-regulatory 
organizations, 
final disciplinary 
sanction, notice. 
"(c) The Commission, by rule, may abrogate, add to, and delete 
from (hereinafter in this subsection collectively referred to as 'amend') 
the rules of a self-regulatoiy organization (oither than a registered 
clearing agency) as the Commission deems necessary or appropriate 
to insure the fair administration of the self-regulatory organization, 
to conform its rules to requirements of this title and the rules and 
regulations thereunder applicable to such organization, or otherwise 
in furtherance of the purposes of this title, in the following manner: 
"(1) The Commission shall notify the self-regulatory organi-
zation and publish notice of the proposed rulemaking in the Fed-
eral Register. The notice shall include the text of the proposed 
amendment to the rules of the self-regulatory organization and a 
statement of the Commission's reasons, including any pertinent 
facts, for commencing such proposed rulemaking. 
"(2) The Commission shall give interested persons an oppor-
tunity for the oral presentation of data, views, and arguments, in 
addition to an opportunity to make written submissions. A tran-
script shall be kept of any oral presentation. 
"(3) A rule adopted pui'suant to this subsection shall incor-
porate the text of the amendment to the rules of the self-regulatory 
organization and a statement of the Commission's basis for and 
purpose in so amending such I'ules. This statement shall include 
an identification of any facts on which the Commission considers 
its determination so to amend the i"ules of the self-regulatory 
agency to be based, including the reasons for the Commission s 
conclusions as to any of such facts which were disputed in the rule-
making. 
"(4) (A) Except as provided in paragraphs (1) through (3) 
of this subsection, rulemaking under this subsection shall be in 
accordance with the procedures specified in section 553 of title 5, 
United States Code, for rulemaking not on the record. 
"(B) Nothing in this subsection shall be construed to impair 
or limit the Commission's power to make, or to modify or alter 
the procedures the Commission may follow in making, rules and 
regulations pursuant to any other authority under this title. 
"(C) Any amendment to the rules of a self-regulatory organi-
zation made by the Commission pursuant to this subsection shall 
be considered for all purposes of this title to be part of the rules 
of such self-regulatory organization and shall not be considered 
to be a rule of the Commission. 
"(d) (1) If any self-regulatory organization imposes any final dis-
ciplinary sanction on any member thereof or participant therein, denies 
membership or participation to any applicant, or prohibits or limits 
any person in respect to access to services offered by such organization 
or member thereof or if any self-regulatory organization (other than 
a registered clearing agency) imposes any final disciplinary sanction 
on any person associated with a member or bars any person from 
becoming associated with a member, the self-regulatory organization 
shall promptly file notice thereof with the appropriate regulatory 
agency for the self-regulatory organization and (if other than the 
appropriate regulatory agency for the self-regulatory organization) 
the appropriate regulatory agency for such member, participant, appli-
cant, or other person. The notice shall be in such form and contain 
such information as the appropriate regulatory agency for the self-
regulatory organization, by rule, may prescribe as necessary or 
appropriate in furtherance of the purposes of this title. 
"(2) Any action with respect to which a self-regulatory organiza-
tion is required by paragraph (1) of this subsection to file notice shall 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 151 
be subject to review by the appropriate regulatory agency for such 
member, participant, applicant, or other person, on its own motion, 
or upon application by any person aggrieved thereby filed within 
thirty days after the date such notice was filed with such appropriate 
regulatory agency and received by such aggrieved person, or within 
such longer period as such appropriate regulatory agency may deter-
mine. Application to such appropriate regulatory agency for review, 
or the institution of review by such appropriate regulatory agency on 
its own motion, shall not operate as a stay of such action unless such 
appropriate regulatory agency otherwise orders, summarily or after 
notice and opportunity for hearing on the question of a stay (which 
hearing may consist solely of the submission of affidavits or presenta-
tion of oral arguments). Each appropriate regulatory agency shall 
establish for appropriate cases an expedited procedure for considera-
tion and determination of the question of a stay. 
"(e) (1) In any proceeding to review a final disciplinary sanction 
imposed by a self-regulatory organization on a member thereof or par-
ticipant therein or a person associated with such a member, after 
notice and opportunity for hearing (which hearing may consist solely 
of consideration of the record before the self-regulatory organiza-
tion and opportunity for the presentation of supporting reasons to 
affirm, modify, or set aside the sanction) — 
"(A) if the appropriate regulatory agency for such member, 
participant, or person associated with a member finds that such 
member, participant, or person associated with a member has 
engaged in such acts or practices, or has omitted such acts, as the 
self-regulatory organization has found him to have engaged in or 
omitted, that such acts or practices, or omissions to act, are in 
violation of such provisions of this title, the rules or regulations 
thereunder, the rules of the self-regulatory organization, or, in 
the case of a registered securities association, the rules of the 
Municipal Securities Rulemaking Board as have been specified in 
the determination of the self-regulatory organization, and that 
such provisions are, and were applied in a manner, consistent with 
the purposes of this title, such apropriate regulatory agency, by 
order, shall so declare and, as appropriate, affirm the sanction 
imposed by the self-regulatory organization, modify the sanction 
in accordance with paragraph (2) of this subsection, or remand 
to the self-regulatory organization for further proceedings; or 
"(B) if such appropriate regulatory agency does not make any 
such finding it shall, by order, set aside the sanction imposed by 
the self-regulatory organization and, if appropriate, remand to 
the self-regulatory organization for further proceedings. 
"(2) If the appropriate regulatory agency for a member, partici-
pant, or person associated with a member, having due regard for the 
public interest and the protection of investors, finds after a proceeding 
in accordance with paragraph (1) of this subsection that a sanction 
imposed by a self-regulatory organization upon such member, partici-
pant, or person associated with a member imposes any burden on com-
petition not necessary or appropriate in furtherance of the purposes of 
this title or is excessive or oppressive, the appropriate regulatory 
agency may cancel, reduce, or require the remission of such sanction. 
"(f) In any proceeding to review the denial of membership or par-
ticipation in a self-regulatory organization to any applicant, the bar-
ring of any person from becoming associated with a member of a 
self-regulatory organization, or the prohibition or limitation by a self-
regulatory organization of any person with respect to access to services 
offered by the self-regulatory organization or any member thereof, if 
Review. 
Notice and 
hearing. 
Dismissal of 
proceedings. 
Notice and 
hearing. 
89 STAT. 152 
PUBLIC LAW 94-29—JUNE 4, 1975 
the appropriate regulatory agency for such applicant or person, after 
notice and opportunity for hearing (which hearing may consist solely 
of consideration of the record before the self-regulatory organization 
and opportunity for the presentation of supporting reasons to dismiss 
the proceeding or set aside the action of the self-regulatory organiza-
tion) finds that the specific grounds on which such denial, bar, or pro-
hibition or limitation is based exist in fact, that such denial, bar, or 
prohibition or limitation is in accordance with the rules of the self-
regulatory organization, and that such rules are, and w'ere applied in 
a manner, consistent with the purposes of this title, such appropriate 
regulatory agency, by order, shall dismiss the proceeding. If such 
appropriate regulatory agency does not make any such finding or 
if it finds that such denial, bar, or prohibition or limitation imposes 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of this title, such appropriate regulatory agency, by 
order, shall set aside the action of the self-regulatory organization 
and require it to admit such applicant to membership or participation, 
permit such person to become associated with a member, or grant such 
person access to services offered by the self-regulatory organization or 
member thereof. 
"(g) (1) Every self-regulatory organization shall comply with the 
provisions of this title, the rules and regulations thereunder, and its 
Ante, p. 137. 
own rules, and (subject to the provisions of section 17(d) of this title, 
paragraph (2) of this subsection, and the rules thereunder) absent 
reasonable justification or excuse enforce compliance— 
"(A) in the case of a national securities exchange, with such 
provisions by its members and persons associated with its 
members; 
"(B) in the case of a registered securities association, wnth such 
provisions and the provisions of the rules of the Municipal Secu-
rities Kulemaking Board by its members and persons associated 
with its members; and 
"(C) in the case of a registered clearing agency, with its own 
rules by its participants, 
"(2) The Commission, by rule, consistent with the public interest, 
the protection of investors, and the other purposes of this title, may 
relieve any self-regulatory organization of any responsibility under 
this title to enforce compliance with any specified provision of this 
title or the rules or regulations thereunder by any member of such 
organization or person associated with such a member, or any class of 
such members or persons associated with a member. 
" ( h ) ( 1 ) The appropriate regulatory agency for a eelf-regulatory 
organization is authorized, by order, if in its opinion such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of this title, to 
suspend for a period not exceeding twelve months or revoke the regis-
tration of such self-regulatory organization, or to censure or impose 
limitations upon the activities, functions, and operations of such self-
regulatory organization, if such appropriate regulatory agency finds. 
Notice and 
on the record after notice and opportunity for hearing, that such self-
hearing. 
regulatory organization has violated or is unable to comply with any 
provision of this title, the rules or regulations thereunder, or its owm 
rules or without reasonable justification or excuse has failed to enforce 
compliance— 
"(A) in the case of a national securities exchange, with any 
such provision by a member thereof or a person associated with a 
member thereof; 
"(B) in the case of a registered securities association, with any 
such provision or any provision of the rules of the Municipal 
Registration, 
suspension or 
revocation. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 153 
15 use 77a, 
80b-20. 
15 use 80a-51. 
Securities Rulemaking Board by a member thereof or a person 
associated with a member thereof; or 
"(C) in the case of a registered clearing agency, with any pro-
vision of its own rules by a participant therein. 
"(2) The appropriate regulatory agency for a self-regulatory orga- 
Notice and 
nization is authorized, by order, if in its opinion such action is necessary 
hearing, 
or appropriate in the public interest, for the protection of investors, 
or otherwise in furtherance of the purposes of this title, to suspend 
for a period not exceeding twelve months or expel from such self-
regulatory organization any member thereof or participant therein, if 
such member or participant is subject to an order of the Commission 
pursuant to section 15 (b) (4) of this title or if such appropriate regula- 
Ante, p. 121. 
tory agency finds, on the record after notice and opportunity for 
hearing, that such member or participant has willfully violated or has 
effected any transaction for any other person who, such member or 
participant had reason to believe, was violating with respect to such 
transaction— 
" (A) in the case of a national securities exchange, any provision 
of the Securities Act of 1933, the Investment Advisers Act of 1940, 
the Investment Company Act of 1940, this title, or the rules or 
regulations under any of such statutes; 
" ( B ) in the case of a registered securities association, any pro-
vision of the Securities Act of 1933, the Investment Advisers Act 
of 1940, the Investment Company Act of 1940, this title, the rules 
or regulations under any of such statutes, or the rules of the 
Municipal Securities Rulemaking Board; or 
"(C) in the case of a registered clearing agency, any provision 
of the rules of the clearing agency. 
"(3) The appropriate regulatory agency for a national securities 
exchange or registered securities association is authorized, by order, if 
in its opinion such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance of 
the purposes of this title, to suspend for a period not exceeding twelve 
months or to bar any person from being associated with a member of 
such national securities exchange or registered securities association, if 
such person is subject to an order of the Commission pursuant to section 
15(b) (6) or if such appropriate regulatory agency finds, on the record 
after notice and opportunity for hearing, that such person has willfully 
violated or has effected any transaction for any other person who, such 
person associated with a member had reason to believe, was violating 
with respect to such transaction— 
" (A) in the case of a national securities exchange, any provision 
of the Securities Act of 1933, the Investment Advisers Act of 1940, 
the Investment Company Act of 1940, this title, or the rules or 
regulations under any of such statutes; or 
"(B) in the case of a registered securities association, any pro-
vision of the Securities Act of 1933, the Investment Advisers Act 
of 1940, the Investment Company Act of 1940, this title, the rules 
or regulations under any of the statutes, or the rules of the Munici-
pal Securities Rulemaking Board. 
"(4) The appropriate regulatory agency for a self-regulatory orga- 
Notice and 
nization is authorized, by order, if in its opinion such action is neces- 
hearing, 
sary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of this title, to 
remove from office or censure any officer or director of such self-
regulatory organization, if such appropriate regulatory agency finds, 
on the record after notice and opportunity for hearing, that such officer 
or director has willfully violated any provision of this title, the rules 
Notice and 
hearing. 
89 STAT. 154 
PUBLIC LAW 94-29—JUNE 4, 1975 
Infra. 
15 u s e 78aa. 
Investigations. 
Civil actions. 
or regulations thereunder, or the rules of such self-regulatory orga-
nization, willfully abused his authority, or without reasonable justifi-
cation or excuse has failed to enforce compliance— 
"(A) in the case of a national securities exchange, with any 
such provision by any member or person associated with a 
member; 
"(B) in the case of a registered securities association, with any 
such provision or any provision of the rules of the Municipal 
Securities Rulemaking Board by any member or person associated 
with a member; or 
"(C) in the case of a registered clearing agency, with any provi-
sion of the rules of the clearing agency by any participant. 
"(i) If a proceeding under subsection (h) (1) of this section results 
in the suspension or revocation of the registration of a clearing agency, 
the appropriate regulatory agency for such clearing agency may, upon 
notice to such clearing agency, apply to any court of competent juris-
diction specified in section 21(d) or 27 of this title for the appoint-
ment of a trustee. In the event of such an application, the court may, 
to the extent it deems necessary or appropriate, take exclusive juris-
diction of such clearing agency and the records and assets thereof, 
wherever located; and the court shall appoint the appropriate regu-
latory agency for such clearing agency or a person designated by such 
appropriate regulatory agency as trustee with power to take possession 
and continue to operate or terminate the operations of such clearing 
agency in an orderly manner for the protection of participants and 
investors, subject to such terms and conditions as the court may 
prescribe.". 
SEO. 17. Section 21 of the Securities Exchange Act of 1934 (15 
U.S.C. 78u) is amended as follows: 
(1) Subsection (a) thereof is amended to read as follows: 
"(a) The Commission may, in its discretion, make such investiga-
tions as it deems necessary to determine whether any person has vio-
lated, is violating, or is about to violate any provision of this title, the 
rules or regulations thereunder, the rules of a national securities 
exchange or registered securities association of which such person is a 
member or a person associated with a member, the rules of a registered 
clearing agency in which such person is a participant, or the rules of 
the Municipal Securities Rulemaking Board, and may require or per-
mit any person to file with it a statement in writing, under oath or 
otherwise as the Commission shall determine, as to all the facts and 
circumstances concerning the matter to be investigated. The Com-
mission is authorized in its discretion, to publish information con-
cerning any such violations, and to investigate any facts, conditions, 
practices, or matters which it may deem necessary or proper to aid in 
the enforcement of such provisions, in the prescribing of rules and 
regulations under this title, or in securing information to serve as a 
basis for recommending further legislation concerning the matters to 
which this title relates.". 
(2) Subsections (e) and (f) thereof are redesignated (d) and (e), 
respectively, and amended to read as follows: 
'(d) Wherever it shall appear to the Commission that any person 
is engaged or is about to engage in acts or practices constituting a 
violation of any provision of this title, the rules or regulations there-
under, the rules of a national securities exchange or registered securi-
ties association of which such person is a member or a person associated 
with a member, the rules of a registered clearing agency in which such 
person is a participant, or the rules of the Municipal Securities Rule-
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 155 
making Board, it may in its discretion bring an action in the proper 
district court of the United States, the United States District Court 
for the District of Columbia, or the United States courts of any terri-
tory or other place subject to the jurisdiction of the United States, to 
enjoin such acts or practices, and upon a proper showing a permanent 
or temporary injunction or restraining order shall be granted without 
bond. The Commission may transmit such evidence as may be avail-
able concerning such acts or practices as may constitute a violation of 
any provision of this title or the rules or regulations thereunder to 
the Attorney General, who may, in his discretion, institute the neces-
sary criminal proceedings under this title. 
"(e) Upon application of the Commission the district courts of the 
United States, the United States District Court for the District of 
Columbia, and the United States courts of any territory or other 
place subject to the jurisdiction of the United States shall have juris-
diction to issue writs of mandamus, injunctions, and orders command-
ing (1) any person to comply with the provisions of this title, the 
rules, regulations, and orders thereunder, the rules of a national secu-
rities exchange or registered securities association of which such person 
is a member or person associated with a member, the rules of a 
registered clearing agency in which such person is a participant, the 
rules of the Municipal Securities Rulemaking Board, or any under-
taking contained in a registration statement as provided in subsec-
tion (d) of section 15 of this title, (2) any national securities exchange 
or registered securities association to enforce compliance by its 
members and persons associated with its members with the provisions 
of this title, the rules, regulations, and orders thereunder, and the rules 
of such exchange or association, or (3) any registered clearing agency 
to enforce compliance by its participants with the provisions of the 
rules of such clearing agency.". 
(3) The section is further amended by adding at the end thereof 
the following new subsections: 
"(f) Notwithstanding any other provision of this title, the Com-
mission shall not bring any action pursuant to subsection (d) or (e) 
of this section against any person for violation of, or to command 
compliance with, the rules of a self-regulatory organization unless it 
appears to the Commission that (1) such self-regulaitory organization 
is unable or unwilling to take appropriate action against such person 
in the public interest and for the protection of investors, or (2) such 
action is otherwise necessary or appropriate in the public interest or 
for the protection of investors. 
"(g) Notwithstanding the provisions of section 1407(a) of title 28, 
United States Code, or any other provision of law, no action for equi-
table relief instituted by the Commission pursuant to the securities 
laws shall be consolidated or coordinated with other actions not 
brought by the Commission, even though such other actions may 
involve common questions of fact, unless such consolidation is con-
sented to by the Commission. The term 'securities laws' as used herein 
includes the Securities Act of 1933 (15 U.S.C. 77 et seq.), the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.), the Public Utility Hold-
ing Company Act of 1935 (15 U.S.C. 79a 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-l et seq.), the Investment Advisers Act of 1940 
(15 U.S.C. 80b-l et seq.), and the Securities Investor Protection 
Act of 1970 (15 U.S.C. 78aaa et seq.).". 
SEC. 18. Section 23 of the Securities Exchange Act of 1934 (15 
U.S.C. 78w) is amended to read as follows: 
Ante, p. 121. 
15 u s e 78u. 
"Securities 
laws." 
89 STAT. 156 
PUBLIC LAW 94-29—JUNE 4, 1975 
RULES, REGULATIONS, AND ORDERS; ANNUAL REPORTS 
"SEC. 23. (a) (1) The Commission, the Board of Governors of the 
Federal Eeserve System, and the other agencies enumerated in section 
Ante, p. 97. 
3(a) (34) of this title shall each have power to make such rules and 
regulations as may be necessary or appropriate to implement the pro-
visions of this title for which they are responsible or for the execution 
of the functions vested in them by this title, and may for such pur-
poses classify persons, securities, transactions, statements, applications, 
reports, and other matters within their respective jurisdictions, and 
prescribe greater, lesser, or different requirements for different classes 
thereof. No provision of this title imposing any liability shall apply to 
any act done or omitted in good faith in conformity with a rule, regu-
lation, or order of the Commission, the Board of Governors of the 
Federal Reserve System, other agency enumerated in section 3(a) (34) 
of this title, any self-regulatory organization, notwithstanding that 
such rule, regulation, or order may thereafter be amended or rescinded 
or determined by judicial or other authority to be invalid for any 
reason. 
"(2) The Commission, in making rules and regulations pursuant 
to any provisions of this title, shall consider among other matters the 
impact any such rule or regulation would have on competition. The 
Commission shall not adopt any such rule or regulation which would 
impose a burden on competition not necessary or appropriate in fur-
therance of the purposes of this title. The Commission shall include 
in the statement of basis and purpose incorporated in any rule or 
regulation adopted under this title, the reasons for the Commission's 
determination that any burden on competition imposed by such rule 
or regulation is necessary or appropriate in furtherance of the purposes 
of this title. 
"(3) The Commission, in making rules and regulations pursuant 
to any provision of this title, considering any application for registra-
Ante, p. 146. 
tion in accordance with section 19(a) of this title, or reviewing any 
proposed rule change of a self-regulatory organization in accordance 
with section 19 (b) of this title, keep in a public file and make available 
for copying all written statements filed with the Commission and all 
written communications between the Commission and any person 
relating to the proposed rule, regulation, application, or proposed rule 
change; Provided, however, That the Commission shall not be required 
to keep in a public file or make available for copying any such 
statement or communication which it may withhold from the public in 
accordance with the provisions of section 552 of title 5, United States 
Code. 
Annual report to 
"(b) (1) The Commission, the Board of Governors of the Federal 
Congress. 
Reserve System, and the other agencies enumerated in section 3 (a) (34) 
of this title, shall each make an annual report to the Congress on its 
work for the preceding year, and shall include in each such report 
whatever information, data, and recommendations for 
further 
legislation it considers advisable with regard to matters within its 
respective jurisdiction under this title. 
" (2) The appropriate regulatory agency for a self-regulatory orga-
nization shall include in its annual report to the Congress for each 
fiscal year, a summary of its oversight activities under this title with 
respect to such self-regulatory organization, including a description 
of any examination condiicted as part of such activities of any such 
organization, any material recommendation presented as part of such 
activities to such organization for changes in its organization or rules, 
and any action by such organization in response to any such 
recommendation. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 157 
" (3) The appropriate regulatory agency for any class of municipal 
securities dealers shall include in its annual report to the Congress 
for each fiscal year a summary of its regulatory activities pursuant to 
this title with respect to such municipal securities dealers, including 
the nature of and reason for any sanction imposed pursuant to this 
title against any such municipal securities dealer. 
"(4) The Commission shall also include in its annual report to the 
Congress for each fiscal year— 
"(A) a summary of the Commission's oversight activities with 
respect to self-regulatory organizations for which it is not the 
appropriate regulatory agency, including a description of any 
examination of any such organization, any material recommenda-
tion presented to any such organization for changes in its orga-
nization or rules, and any action by any such organization in 
response to any such recommendations; 
"(B) a statement and analysis of the expenses and operations 
of each self-regulatory organization in connection with the per-
formance of its responsibilities under this title, for which 
purpose data pertaining to such expenses and operations shall 
be made available by such organization to the Commission at its 
request; 
"(C) beginning in 1975 and ending in 1980, information, data, 
and recommendations with respect to the development of a 
national system for the prompt and accurate clearance and settle-
ment of securities transactions, including a summary of the regu-
latory activities, operational capabilities, financial resources, and 
plans of self-regulatory organizations and registered transfer 
agents with respect thereto; 
"(D) beginning in 1975 and ending in 1980, a description of 
the steps taken, and an evaluation of the progress made, toward 
the establishment of a national market system, and recommenda-
tions for further legislation it considers advisable with respect 
to such system; 
"(E) the steps the Commission has taken and the progress it 
has made toward ending the physical movement of the securities 
certificate in connection with the settlement of securities trans-
actions, and its recommendations, if any, for legislation to elim-
inate the securities certificate; 
"(F) The number of requests for exemptions from provisions 
of this title received, the number granted, and the basis upon 
which any such exemption was granted: 
"(G) a summary of the Commission s regulatory activities with 
respect to municipal securities dealers for which it is not the 
appropriate regulatory agency, including the nature of, and reason 
for, any sanction imposed in proceedings against such municipal 
securities dealers; 
"(H) beginning in 1975 and ending in 1980, a description of the 
effect the absence of any schedule or fixed rates of commissions, 
allowances, discounts, or other fees to be charged by members for 
effecting transactions on a national securities exchange is having 
on the maintenance of fair and orderly markets and the develop-
ment of a national market system for securities; 
"(I) a statement of the time elapsed between the filing of 
reports pursuant to section 13 (f) of this title and the public avail- ^"^e, p. 119. 
ability of the information contained therein, the costs involved 
in the Commission's processing of such reports and tabulating 
such information, the manner in which the Commission uses such 
information, and the steps the Commission has taken and the 
89 STAT. 158 
PUBLIC LAW 94-29—JUNE 4, 1975 
progress it has made toward requiring such reports to be filed and 
such information to be made available to the public in machine 
language; 
" ( J ) information concerning (i) the effects its rules and regu-
lations are having on the viability of small brokers and dealers; 
(ii) its attempts to reduce any imnecessary reporting burden on 
such brokers and dealers; and (iii) its efforts to help to assure the 
continued participation of small brokers and dealers in the United 
States securities markets; and 
" ( K ) a statement detailing its administration of the Freedom 
of Information Act, section 552 of title 5, United States Code, 
including a copy of the report filed pursuant to subsection (d) 
of such section. 
•'(c) The Connnission, by rule, shall prescribe the procedure appli-
cable to every case pursuant to this title of adjudication (as defined 
in section 551 of title 5, United States Code) not required to be deter-
mined on the record after notice and opportunity for hearing. Such 
rules shall, as a minimum, provide that prompt notice shall be given 
of any adverse action or final disposition and that such notice and 
the entry of any order shall be accompanied by a statement of writ-
ten reasons.". 
SEC. 19. Section 24 of the Securities Exchange Act of 1934 (15 
U.S.C. 78x) is amended to read as follows: 
"PUBLIC AVAILABILITY or 
INFORMATION 
"Records." 
"SEC. 24. (a) For purposes of section 552 of title 5, United States 
Code, the term 'records' includes all applications, statements, reports, 
contracts, correspondence, notices, and other documents filed with or 
otherwise obtained by the Commission pursuant to this title or other-
wise. 
"(b) It shall be unlawful for any member, officer, or employee of 
the Commission to disclose to any person other than a member, officer, 
or employee of the Commission, or to use for personal benefit, any 
information contained in any application, statement, report, contract, 
correspondence, notice, or other document filed with or otherwise 
obtained by the Commission (1) in contravention of the rules and reg-
ulations of the Commission under section 552 of Title 5, United States 
Code, or (2) in circumstances where the Commission has determined 
pursuant to such rules to accord confidential treatment to such infor-
mation. Nothing in this subsection shall authorize the Commission to 
Avithhold information from the Congress.". 
SEC. 20. Section 25 of the Securities Exchange Act of 1934 (15 
U.S.C. 78y) is amended to read as follows: 
Petition, copy. 
COURT REVIEW OF ORDERS AND RULES 
"SEC. 25. (a) (1) A person aggrieved by a final order of the Com-
mission entered pursuant to this title may obtain review of the order 
in the United States Court of Appeals for the circuit in which he 
I'esides or has his principal place of business, or for the District of 
Columbia Circuit, by filing in such court, within sixty days after the 
entry of the order, a written petition requesting that the order be 
modified or set aside in whole or in part. 
"(2) A copy of the petition shall be transmitted forthwith by the 
clerk of the court to a member of the Commission or an officer desig-
nated by the Commission for that purpose. Thereupon the Commission 
shall file in the court the record on which the order complained of 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 159 
Ante, pp. 104, 
110, 111, 121, 
127, 137, 141, 
146. 
is entered, as provided in section 2112 of title 28, United States Code, 
and the Federal Rules of Appellate Procedure. 
28 U
S
C app. 
"(3) On the filing of the petition, the court has jurisdiction, which Jurisdiction, 
becomes exclusive on the filing of the record, to affirm or modify and 
enforce or to set aside the order in whole or in part. 
" (4) The findings of the Commission as to the facts, if supported by 
substantial evidence, are conclusive. 
"(5) If either party applies to the court for leave to adduce addi-
tional evidence and shows to the satisfaction of the court that the addi-
tional evidence is material and that there was reasonable ground for 
failure to adduce it before the Commission, the court may remand the 
case to the Commission for further proceedings, in whatever manner 
and on whatever conditions the court considers appropriate. If the case 
is remanded to the Commission, it shall file in the court a supplemental 
record containing any new evidence, any further or modified findings, 
and any new order. 
"(b) (1) A person adversely affected by a rule of the Commission 
promulgated pursuant to section 6,11, llA, 15(c) (5) or (6), 15A, 17, 
17A, or 19 of this title may obtain review of this rule in the United 
States Court of Appeals for the circuit in which he resides or has his 
principal place of business or for the District of Columbia Circuit, by 
filing in such court, within sixty days after the promulgation of the 
rule, a written petition requesting that the rule be set aside. 
"(2) A copy of the petition shall be transmitted forthwith by the 
clerk of the court to a member of the Commission or an officer desig-
nated for that purpose. Thereupon, the Commission shall file in the 
court the rule under review and any documents referred to therein, 
the Commission's notice of proposed rulemaking and any documents 
referred to therein, all written submissions and the transcript of any 
oral presentations in the rulemaking, factual information not included 
in the foregoing that was considered by the Commission in the promul-
gation of the rule or proffered by the Commission as pertinent to the 
rule, the report of any advisory committee received or considered by 
the Commission in the rulemaking, and any other materials prescribed 
by the court. 
"(3) On the filing of the petition, the court has jurisdiction, which Jurisdiction, 
becomes exclusive on the filing of the materials set forth in paragraph 
(2) of this subsection, to affirm and enforce or to set aside the rule. 
"(4) The findings of the Commission as to the facts identified by 
the Commission as the basis, in whole or in part, of the rule, if sup-
ported by substantial evidence, are conclusive. The court shall affirm 
and enforce the rule unless the Commission's action in promulgating 
the rule is found to be arbitrary, capricious, an abuse of discretion, or 
otherwise not in accordance with law; contrary to constitutional right, 
power, privilege, or immunity; in excess of statutory jurisdiction, 
authority, or limitations, or short of statutory right; or without observ-
ance of procedure required by law. 
"(5) If proceedings have been instituted under this subsection in 
two or more courts of appeals with respect to the same rule, the Com-
mission shall file the materials set forth in paragraph (2) of this sub-
section in that court in which a proceeding was first instituted. The 
other courts shall thereupon transfer all such proceedings to the court 
in which the materials have been filed. For the convenience of the 
parties in the interest of justice that court may thereafter transfer all 
the proceedings to any other court of appeals. 
"(c) (1) No objection to an order or rule of the Commission, for 
which review is sought under this section, may be considered by the 
court unless it was urged before the Commission or there was reason-
able ground for failure to do so. 
89 STAT. 160 
PUBLIC LAW 94-29—JUNE 4, 1975 
"(2) The filing of a petition under this section does not operate as a 
stay of the Commission's order or rule. Until the court's jurisdiction 
becomes exclusive, the Commission may stay its order or rule pending 
judicial review if it finds that justice so requires. After the filing of a 
petition under this section, the court, on whatever conditions may be 
required and to the extent necessary to prevent irreparable injury, 
may issue all necessary and appropriate process to stay the order or 
rule or to preserve status or rights pending its review; but (notwith--
standing section 705 of title 5, United States Code) no such process 
may be issued by the court before the filing of the record or the mate-
rials set forth in subsection (b)(2) of this section unless: (A) the 
Commission has denied a stay or failed to grant requested relief, (B) 
a reasonable period has expired since the filing of an application for a 
stay without a decision by the Commission, or (C) there was reason-
able ground for failure to apply to the Commission. 
" (3) When the same order or rule is the subject of one or more peti-
tions for review filed under this section and an action for enforcement 
filed in a district court of the United States under section 21 (d) or (e) 
Ante, p. 154. 
of this title, that court in w^hich the petition or the action is first filed 
has jurisdiction w'ith respect to the order or rule to the exclusion of 
any other court, and thereupon all such proceedings shall be trans-
ferred to that court; but, for the convenience of the parties in the 
interest of justice, that court may thereafter transfer all the proceed-
ings to any other court of appeals or district court of the United 
States, w^hether or not a petition for review or an action for enforce-
ment was originally filed in the transferee court. The scope of review 
by a district court under section 21 (d) or (e) of this title is in all cases 
the same as by a court of appeals under this section. 
"(d) (1) For purposes of the preceding subsections of this section, 
the term 'Commission' includes the agencies enumerated in section 
Ante, p. 97. 
3(a) (34) of this title insofar as such agencies are acting pursuant to 
this title. 
"(2) For purposes of subsection (a) (4) of this section and section 
706 of title 5, United States Code, an order of the Commission pur-
Ante, p. 146. 
suant to section 19(a) of this title denying registration to a clearing 
agency for which the Commission is not the appropriate regulatory 
agency or pursuant to section 19(b) of this title disapproving a pro-
posed rule change by such a clearing agency shall be deemed to be an 
order of the appropriate regulatory agency for such clearing agency 
insofar as such order was entered by reason of a determination by such 
appropriate regulatory agency pursuant to section 19(a)(2)(C) or 
19(b)(4)(C) of this title that such registration or proposed rule 
change would be inconsistent with the safeguarding of securities or 
funds.". 
SEC. 21. Section 28 of the Securities Exchange Act of 1934 (15 
U.S.C. 78bb) is amended as follows: 
(1) Subsection (b) thereof is amended to read as follows: 
"(b) Nothing in this title shall be construed to modify existing law 
with regard to the binding effect (1) on any member of or participant 
in any self-regulatory organization of any action taken by the author-
ities of such organization to settle disputes between its members or 
participants, (2) on any municipal securities dealer or municipal 
securities broker of any action taken pursuant to a procedure estab-
lished by the Municipal Securities Rulemaking Board to settle dis-
putes between municipal securities dealers and municipal securities 
brokers, or (3) of any action described in paragraph (1) or (2) on 
any person who has agreed to be bound thereby.". 
(2) The section is further amended by adding at the end thereof 
the following new subsections: 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 161 
"(c) The stay, setting aside, or modification pursuant to section 
19(e) of this title of any disciplinary sanction imposed by a self-regu- 
^'^^C' P- 146. 
latory organization or a member thereof, person associated with a 
member, or participant therein, shall not affect the validity or force 
of any action taken as a result of such sanction by the self-regulatory 
organization prior to such stay, setting aside, or modification: Pro-
vided^ That such action is not inconsistent with the provisions of this 
title or the rules or regulations thereunder. The rights of any person 
acting in good faith which arise out of any such action shall not be 
affected in any way by such stay, setting aside, or modification. 
"(d) N"o State or political subdivision thereof shall impose any tax Taxation, 
on any change in beneficial or record ownership of securities effected 
prohibition, 
through the facilities of a registered clearing agency or registered 
transfer agent or any nominee thereof or custodian therefor or upon 
the delivery or transfer of securities to or through or receipt from 
such agency or agent or any nominee thereof or custodian therefor, 
unless such change is beneficial or record ownership or such transfer 
or delivery or receipt would otherwise be taxable by such State or 
political subdivision if the facilities of such registered clearing agency, 
registered transfer agent, or any nominee thereof or custodian therefor 
were not physically located in the taxing State or political subdivision. 
No State or political subdivision thereof shall impose any tax on 
securities which are deposited in or retained by a registered clearing 
agency, registered transfer agent, or any nominee thereof or custodian 
therefor, unless such securities would otherwise be taxable by such 
State or political subdivision if the facilities of such registered clear-
ing agency, registered transfer agent, or any nominee thereof or cus-
todian therefor were not physically located in the taxing State or 
political subdivision. 
"(e)(1) No person using the mails, or any means or instrumentality 
of interstate commerce, in the exercise of investment discretion with 
respect to an account shall be deemed to have acted unlawfully or to 
have breached a fiduciary duty under State or Federal law unless 
expressly provided to the contrary by a law enacted by the Congress 
or any State subsequent to the date of enactment of the Securities Acts 
Amendments in 1975 solely by reason of his having caused the account 
to pay a member of an exchange, broker, or dealer an amount of 
commission for effecting a securities transaction in excess of the amount 
of commission another member of an exchange, broker, or dealer would 
have charged for effecting that transaction, if such person deter-
mined in good faith that such amount of commission was reasonable 
in relation to the value of the brokerage and research services pro-
vided by such member, broker, or dealer, viewed in terms of either that 
particular transaction or his overall responsibilities with respect to the 
accounts as to which he exercises investment discretion. This subsection 
is exclusive and plenary insofar as conduct is covered by the foregoing, 
unless otherwise expressly provided by contract: Provided^ however, 
That nothing in this subsection shall be construed to impair or limit 
the power of the Commission under any other provision of this title 
or otherwise. 
"(2) A person exercising investment discretion with respect to Disclosure, 
an account shall make such disclosure of his policies and practices 
with respect to commissions that will be paid for effecting securities 
transactions, at such times and in such mannei-, as the appropriate 
regulatory agency, by rule, may prescribe as necessary or appropriate 
in the public interest or for the protection of investors. 
"(3) For purposes of this subsection a person provides brokerage 
and research services insofar as he— 
89 STAT. 162 
PUBLIC LAW 94-29—JUNE 4, 1975 
" ( A ) furnishes advice, either directly or through publications 
or writings, as to the value of securities, the advisability of 
investing in, purchasing, or selling securities, and the avail-
ability of securities or purchasers or sellers of securities; 
"(B) furnishes analyses and reports concerning issuers, indus-
tries, securities, economic factors and trends, portfolio strategy, 
and the performance of accounts; or 
"(C) effects securities transactions and performs 
functions 
incidental thereto (such as clearance, settlement, and custody) or 
required in connection therewith by rules of the Commission or a 
self-regulatory organization of which such person is a member 
or person associated with a member or in which such person is a 
participant.". 
SEC. 22. Section 31 of the Securities Exchange Act of 1934 (15 
U.S.C. 78ee) is amended to read as follows: 
"TRAXSACTIOK FEES 
"SEC. 31. Every national securities exchange shall pay to the Com-
mission on or before March 15 of each calendar year a fee in an amount 
equal to one three-hundredths of 1 per centum of the aggregate dollar 
amount of the sales of securities (other than bonds, debentures, and 
other evidences of indebtedness) transacted on such national securities 
(exchange during each preceding calendar year to which this section 
applies. Every registered broker and dealer shall pay to the Commis-
sion on or before March 15 of each calendar year a fee in an amount 
equal to one three-hundredths of 1 per centum of the aggregate dollar 
amount of the sales of securities registered on a national securities 
exchange (other than bonds, debentures, and other evidences of 
indebtedness) transacted by such broker or dealer otherwise than on 
such an exchange during each preceding calendar year: 
Provided^ 
however^ That no payment shall be required for any calendar year in 
which such payment would be less than one hundred dollars. The Com-
mission, by rule, may exempt any sale of securities or any class of sales 
of securities from any fee imposed by this section, if the Commission 
finds that such exemption is consistent with the public interest, the 
equal regulation of markets and brokers and dealers, and the develop-
ment of a national market system.". 
SEC. 23. Section 32 of the Securities Exchange Act of 1934 (15 
U.S.C. 78ff) is amended as follows: 
(1) Subsection (a) thereof is amended by inserting after the phrase 
"section 15 of this title" the following: "or by any self-regulatory 
organization in connection with an application for membership or 
participation 
therein 
or to become associated 
with 
a 
member 
thereof,". 
(2) Subsection (c) thereof is deleted. 
SEC. 24. The Securities Exchange Act of 1934 (15 U.S.C. 78a ot seq.), 
is amended by adding at the end thereof the following new section: 
"AUTHORIZATION or 
APPROPRIATIONS 
15 use 78kk. 
"SEC. 35. There are hereby authorized to be appropriated to carry 
out the functions, powers, and duties of the Commission not to exceed 
$51,000,000 for the fiscal year ending June 30, 1976 and not to exceed 
$55,000,000 for the fiscal year ending September 30, 1977. For fiscal 
years succeeding the 1977 fiscal year, there may be appropriated such 
sums as the Congress may hereafter authorize by law.". 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 163 
15 use 77h. 
15 use 781. 
SEC. 25. The Act entitled "An Act to authorize the Securities and 
Exchange Commission to delegate certain functions", approved 
August 20, 1962 (15 U.S.C. 78d-l(b)), is amended as follows: 
(1) The last sentence of subsection (a) of the first section thereof 
is amended by striking the phrase "any rule, regulation, or order 
pursuant to section 19(b)" and inserting in lieu thereof "any rule 
pursuant to section 19 (c)". 
(2) Subsection (b) of the first section thereof is amended to read as Review 
follows: 
"(b) With respect to the delegation of any of its functions, as 
provided in subsection (a) of this section, the Commission shall retain 
a discretionary right to review the action of any such division of the 
Commission, individual Commissioner, hearing examiner, employee, 
or employee board, upon its own initiative or upon petition of a party 
to or intervenor in such action, within such time and in such manner 
as the Commission, by rule, shall prescribe: Provided, however, That 
the vote of one member of the Commission shall be sufficient to bring 
any such action before the Commission for review: And provided 
further, That a person or party shall be entitled to review by the Com-
mission if he or it is adversely affected by action at a delegated level 
which (1) denies any request for action pursuant to section 8(a) or 
section 8(c) of the Securities Act of 1933 or the first sentence of section 
12(d) of the Securities Exchange Act of 1934; (2) suspends trading 
in a security pursuant to section 12 (k) of the Securities Exchange Act 
of 1934; or (3) is pursuant to any provision of the Securities Exchange 
Act of 1934 in a case of adjudication, as defined in section 551 of title Ante, p. 118. 
5, United States Code, not required Ijy that Act to be determined on 
the record after notice and opportunity for hearing (except to the 
extent there is involved a matter described in section 554(a) (1) 
through (6) of title 5, United States Code).". 
SEC. 26. Section 9(c) of the Securities Investor Protection Act of 
1970 (15 U.S.C. 78iii(c)) is amended to read as follows: 
"(c) INSPECTIONS.—The self-regulatory organization of which a 
member of SIPC is a member shall inspect or examine such member 
for compliance with applicable financial responsibility rules, except 
that if a member of SIPC is a member of more than one self-regula-
tory organization, the Commission, pursuant to section 17(d) of the 
1934 Act, shall designate one of such self-regulatory organizations 
as responsible for the examination of such member for compliance 
with applicable financial responsibility rules.". 
SEC. 27. (a) Section 24 of the Securities Act of 1933 (15 U.S.C. 
77x) is amended by changing the figure "5,000" to "10,000". 
(b) Section 32(a) of the Securities Exchange Act of 1934 (15 
U.S.C. 78ff(a)) is amended by changing the phrase "or imprisoned 
not more than two years" to read "or imprisoned not more than five 
years". 
(c) Section 29 of the Public Utility Holding Company Act of 1935 
(15 U.S.C. 79z-3) is amended by changing the phrase "or imprisoned 
not more than two years" to read "or imprisoned not more than five 
years". 
(d) Section 325 of the Trust Indenture Act of 1939 (15 U.S.C. 
77yyy) is amended by changing the figure "$5,000" to "$10,000". 
(e) Section 49 of the Investment Company Act of 1940 (15 U.S.C. 
80a-48) is amended by changing the phrase "or imprisoned not more 
than two years" to read "or imprisoned not more than five years". 
(f) Section 217 of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-17) is amended by changing the phrase "imprisoned for not more 
than two years" to read "imprisoned for not more than five years". 
Ante, p. 137. 
Penalties. 
89 STAT. 164 
PUBLIC LAW 94-29—JUNE 4, 1975 
15 use 80a-51. 
SKC. 28. The Investment Company Aci of UHO (15 U.S.C. 80a-15) 
is amended as follows: 
15 use 80a-15., 
(1) Section 15 thereof is amended by adding at the end thereof the 
following new subsection: 
"(f) (1) An investment adviser, or a corporate trustee performing 
the functions of an investment adviser, of a registered investment 
company or an affiliated person of such investment adviser or corpo-
rate trustee may receive any amount or benefit in connection with a 
sale of securities of, or a sale of any other interest in, such investment 
adviser or corporate trustee which results in an assignment of an 
investment advisory contract with such company or the change in 
control of or identity of such corporate trustee, if— 
" ( A ) for a period of three years after the time of such action, 
at least 75 per centum of the members of the board of directors of 
such registered company or such corporate trustee (or successor 
thereto, by reorganization or otherwise) are not (i) interested 
persons of the investment adviser of such company or such cor-
porate trustee, or (ii) interested persons of the predecessor invest-
ment adviser or such corporate trustee; and 
"(B) there is not imposed an unfair burden on such company 
as a result of such transaction or any express or implied terms, 
conditions, or understandings applicable thereto. 
"(2) (A) For the purpose of paragraph (1) (A) of this subsection, 
interested persons of a corporate trustee shall be determined in accord-
15 use 80a-2. 
ance with section 2 ( a ) ( 1 9 ) ( B ) : Provided^ That no person shall be 
deemed to be an interested person of a corporate trustee solely by 
reason of (i) his being a member of its board of directors or advisory 
board or (ii) his membership in the immediate family of any person 
specified in clause (i) of this subparagraph. 
"(B) For the purpose of paragraph (1) (B) of this subsection, an 
unfair burden on a registered investment company includes any 
arrangement, during the two-year period after the date on which any 
such transaction occurs, whereby the investment adviser or corporate 
trustee or predecessor or successor investment advisers or corporate 
trustee or any interested person of any such adviser or any such cor-
porate trustee receives or is entitled to receive any compensation 
directly or indirectly (i) from any person in connection with the pur-
chase or sale of securities or other property to, from, or on behalf of 
such company, other than bona fide ordinary compensation as princi-
pal underwriter for such company, or (ii) from such company or its 
security holders for other than bona fide investment advisory or other 
services. 
"(3) If— 
" ( A ) an assignment of an investment advisory contract with a 
registered investment company results in a successor investment 
adviser to such company, or if there is a change in control of or 
identity of a corporate trustee of a registered investment com-
pany, and such adviser or trustee is then an investment adviser or 
corporate trustee with respect to other assets substantially greater 
in amount than the amount of assets of such company, or 
"(B) as a result of a merger of, or a sale of substantially all 
the assets by, a registered investment company with or to another 
registered investment company with assets substantially greater 
in amount, a transaction occurs which would be subject to para-
graph (1) (A) of this subsection, 
such discrepancy in size of assets shall be considered by the Commis-
sion in determining whether or to what extent an application under 
section 6(c) for exemption from the provisions of paragraph (1) (A) 
should be granted. 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 165 
"(4) Paragraph (1)(A) of this subsection shall not apply to a 
transaction in which a controlling block of outstanding voting securi-
ties of an investment adviser to a registered investment company or of 
a corporate trustee performing the functions of an investment adviser 
to a registered investment company is— 
"(A) distributed to the public and in which there is, in fact, 
no change in the identity of the persons who control such invest-
ment adviser or corporate trustee, or 
"(B) transferred to the investment adviser or the corporate 
trustee, or an affiliated person or persons of such investment 
adviser or corporate trustee, or is transferred from the investment 
adviser or corporate trustee to an affiliated person or persons of 
the investment adviser or corporate trustee: Provided^ That (i) 
each transferee (other than such adviser or trustee) is a natural 
person and (ii) the transferees (other than such adviser or trustee) 
owned in the aggregate more than 25 per centum of such vot-
ing securities for a period of at least six months prior to such 
transfer.", 
(2) Section 15(c) thereof is amended by adding at the end thereof 
a new sentence as follows: "It shall be unlawful for the directors of a 
registered investment company, in connection with their evaluation 
of the terms of any contract whereby a person undertakes regularly to 
serve or act as investment adviser of such company, to take into account 
the purchase price or other consideration any person may have paid 
in connection with a transaction of the type referred to in paragraph 
(1), (3), or (4) of subsection (f).". 
(3) Section 16 thereof is amended as follows: 
(A) in the first sentence of subsection (b) by striking out "The 
provisions of subsection (a) of this section" and inserting in lieu 
thereof "The foregoing provisions of this section"; 
(B) by redesignating subsection (b) as subsection (c), striking 
out "this subsection (b)" therein, and inserting in lieu thereof 
"this subsection (c)"; and 
(C) by adding after subsection (a) thereof the following new 
subsection: 
"(b) Any vacancy on the board of directors of a registered invest-
ment company which occurs in connection with compliance with sec-
tion 15(f) (1) (A) and which must be filled by a person who is not an 
interested person of either party to a transaction subject to section 
15(f) (1) (A) shall be filled only by a person (1) who has been selected 
and proposed for election by a majority of the directors of such com-
pany who are not such interested persons, and (2) who has been elected 
by the holders of the outstanding voting securities of such company, 
except that in the case of the death, disqualification, or bona fide res-
ignation of a director selected and elected pursuant to clauses (1) 
and (2) of this subsection (b), the vacancy created thereby may be 
filled as provided in subsection (a).". 
(4) Section 13(b), 15(d), 18(i), and 32(a) thereof are amended 
by striking out the phrases "subsection (b) of section 16" and "section 
16(b)" wherever they occur and inserting in lieu thereof "section 
16(c)". 
(5) Section 10(e) thereof is amended to read as follows: 
"(e) If by reason of the death, disqualification, or bona fide resigna-
tion of any director or directors, the requirements of the foregoing 
provisions of this section or of section 15(f) (1) in respect of directors 
shall not be met by a registered investment company, the operation of 
such provision shall be suspended as to such registered company— 
15 u s e 80a-15. 
15 u s e 80a-16. 
Registered 
investment 
company, board 
of directors, 
vacancies. 
Ante, p. 164. 
15 u s e 80a-13, 
80a-15, 80a-18, 
80a-31. 
15 u s e 80a-10. 
KW-i tkA. r« _ 77 - 15 
89 STAT. 166 
PUBLIC LAW 94-29—JUNE 4, 1975 
"Investment 
adviser." 
15 use 80a-9. 
15 use 80a-35. 
15 use 80b-20. 
Investment 
adviser, 
registration. 
15 use 80b-3. 
" (1) for a period of thirty days if the vacancy or vacancies may 
be filled by action of the board of directors; 
"(2) for a period of sixty days if a vote of stockholders is 
required to fill the vacancj^ or vacancies; or 
"(3) for such longer period as the Commission may prescribe, 
by rules and regulations upon its own motion or by order upon 
application, as not inconsistent with the protection of investors.", 
(6) Section 9 thereof is amended by adding at the end thereof the 
following new subsection: 
"(d) For the purposes of subsection (a) through (c) of this sec-
tion, the term 'investment adviser' includes a corporate or other trustee 
performing the functions of an investment adviser.". 
(7) Section 36 thereof is further amended by adding at the end 
thereof the following new subsection: 
"(d) For the purposes of subsections (a) through (c) of this sec-
tion, the term 'investment adviser' includes a corporate or other trus-
tee performing the functions of an investment adviser.". 
SEC. 29. The Investment Advisers Act of 1940 (15 U.S.C. 80b) is 
amended as follows: 
(1) Subsection (c) of section 203 thereof is amended to read as 
follows: 
"(c) (1) An investment adviser, or any person who presently con-
templates becoming an investment adviser, may be registered by fil-
ing with the Commission an application for registration in such form 
and containing such of the following information and documents as 
the Commission, by rule, may prescribe as necessary or appropriate 
in the public interest or for the protection of investors: 
"(A) the name and form of organization under which the 
investment adviser engages or intends to engage in business; the 
name of the State or other sovereign power under which such 
investment adviser is organized; the location of his or its prin-
cipal business office and branch offices, if any; the names and 
addresses of his or its partners, officers, directors, and persons 
performing similar functions or, if such an investment adviser 
be an individual, of such individual; and the number of his or 
its employees; 
"(B) the education, the business affiliations for the past ten 
years, and the present business affiliations of such investment 
adviser and of his or its partners, officers, directors, and persons 
performing similar functions and of any controlling person 
thereof; 
"(C) the nature of the business of such investment adviser, 
including the manner of giving advice and rendering analyses 
or reports; 
"(D) a balance sheet certified by an independent public 
accountant and other financial statements (which shall, as the 
Commission specifies, be certified); 
"(E) the nature and scope of the authority of such investment 
adviser with respect to clients' funds and accounts; 
"(F) the basis or bases upon which such investment adviser is 
compensated; 
"(G) whether such investment adviser, or any person associ-
ated with such investment adviser, is subject to any disqualifica-
tion which would be a basis for denial, suspension, or revocation 
of registration of such investment adviser under the provisions of 
subsection (e) of this section; and 
"(H) a statement as to whether the principal business of such 
investment adviser consists or is to consist of acting as invest-
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 167 
ment adviser and a statement as to Avhether a substantial part 
of the business of such investment adviser, consists or is to consist 
of rendering investment supervisory services. 
"(2) Within forty-five days of the date of the filing of such appli-
cation (or within such longer period as to which the applicant con-
sents) the Commission shall— 
" (A) by order grant such registration; or 
"(B) institute proceedings to determine whether registration 
should be denied. Such proceedings shall include notice of the 
grounds for denial under consideration and opportunity for hear-
ing and shall be concluded within one hundred twenty days of 
the date of the filing of the application for registration. At the 
conclusion of such proceedings the Commission, by order, shall 
grant or deny such registration. The Commission may extend 
the time for conclusion of such proceedings for up to ninety days 
if it finds good cause for such extension and publishes its reasons 
for so finding or for such longer period as to which the applicant 
consents. 
The Commission shall grant such registration if the Commission finds 
that the requirements of this section are satisfied. The Commission 
shall deny such registration if it does not make such a finding or if 
it finds that if the applicant were so registered, its registration would 
be subject to suspension or revocation under subsection (e) of this 
section.". 
(2) Subsection (e) of section 203 thereof, is amended to read as 
follows: 
"(e) The Commission, by order, shall censure, place limitations on 
the activities, functions, or operations of, suspend for a period not 
exceeding twelve months, or revoke the registration of any investment 
adviser if it finds, on the record after notice and opportunity for hear-
ing, that such censure, placing of limitations, suspension, or revoca-
tion is in the public interest and that such investment adviser, or any 
person associated with such investment adviser, whether prior to or 
subsequent to becoming so associated— 
" (1) has willfully made or caused to be made in any application 
for registration or report required to be filed with the Commis-
sion under this title, or in any proceeding before the Commission 
with respect to registration, 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 or report any material 
fact which is required to be stated therein. 
"(2) has been convicted within ten years preceding the filing 
of any application for registration or at any time thereafter of 
any felony or misdemeanor which the Commission finds— 
"(A) involves the purchase or sale of any security, the 
taking of a false oath, the making of a false report, bribery, 
perjury, burglary, or conspiracy to commit any such offense; 
"(B) arises out of the conduct of the business of a broker, 
dealer, municipal securities dealer, investment adviser, bank, 
insurance company, or fiduciary; 
"(C) involves the larceny, theft, robbery, extortion, for-
gery, counterfeiting, fraudulent concealment, embezzlement, 
fraudulent conversion, or misappropriation of funds or secu-
rities; or 
"(D) involves the violation of section 152, 1341, 1342, or 
1343 or chapter 25 or 47 of title 18, United States Code. 
"(3) is permanently or temporarily enjoined by order, judg-
ment, or decree of any court of competent jurisdiction from acting 
Notice and 
hearing. 
Censure or 
revocation of 
registration. 
15 use 80b-3. 
Notice and 
hearing. 
18 u s e 471 et 
seq., 1001 et seq. 
89 STAT. 168 
PUBLIC LAW 94-29—JUNE 4, 1975 
15 use 77a, 78a, 
8ba-51. 
Censure or 
limitation. 
15 use 80b-3. 
Notice and 
hearing. 
as an investment adviser, underwriter, broker, dealer, or municipal 
securities dealer, or as an affiliated person or employee of any 
investment company, bank, or insurance company, or from engag-
ing in or continuing any conduct or practice in connection with 
any such activity, or in connection with the purchase or sale of 
any security. 
"(4) has willfully violated any provision of the Securities Act 
of 1933, the Securities Exchange Act of 1934, the Investment 
Company Act of 1940, this title, or the rules or regulations under 
any such statutes or any rule of the Municipal Securities Rule-
making Board, or is unable to comply with any such provision. 
"(5) has willfully aided, abetted, counseled, commanded, 
induced, or procured the violation by any other person of any pro-
vision of the Securities Act of 1933, the Securities Exchange Act 
of 1934, the Investment Company Act of 1940, this title, the rules 
or regulations under any of such statutes, or the rules of the 
Municipal Securities Rulemaking Board, or has failed reasonably 
to supervise, with a view to preventing violations of the provisions 
of such statutes, rules, and regulations, another person who com-
mits such a violation, if such other person is subject to his super-
vision. For the purposes of this paragraph (5) no person shall 
be deemed to have failed reasonably to supervise any person, if— 
"(A) there have been established procedures, and a sys-
tem for applying such procedures, which would reasonably be 
expected to prevent and detect, insofar as practicable, any 
such violation by such other person, and 
"(B) such person has reasonably discharged the duties 
and obligations incumbent upon him by reason of such pro-
cedures and system without reasonable cause to believe that 
such procedures and system were not being complied with. 
"(6) is subject to an order of the Commission entered pursu-
ant to subsection (f) of this section barring or suspending the 
right of such person to be associated with an investment adviser 
which order is in effect with respect to such person.". 
(3) Subsection (f) of section 203 thereof is amended to read as 
follows: 
"(f) The Commission, by order, shall censure or place limitations 
on the activities of any person associated or seeking to become associ-
ated with an investment adviser, or suspend for a period not exceeding 
twelve months or bar any such person from being associated with an 
investment adviser, if the Commission finds, on the record after notice 
and opportunity for hearing, that such censure, placing of limitations, 
suspension, or bar is in the public interest and that such person has 
committed or omitted any act or omission enumerated in paragraph 
(1), (4), or (5) of subsection (e) of this section or has been convicted 
of any offense specified in paragraph (2) of said subsection (e) within 
ten years of the commencement of the proceedings under this subsec-
tion, or is enjoined from any action, conduct, or practice specified in 
paragraph (3) of said subsection (e). It shall be unlawful for any 
person as to whom such an order suspending or barring him from 
being associated with an investment adviser is in effect willfully to 
become, or to be, associated with an investment adviser without the 
consent of the Commission, and it shall be unlawful for any investment 
adviser to permit such a person to become, or remain, a person asso-
ciated with him without the consent of the Commission, if such invest-
ment adviser knew, or in the exercise of reasonable care, should have 
known, of such order.". 
PUBLIC LAW 94-29—JUNE 4, 1975 
89 STAT. 169 
(4) Section 203 thereof is further amended by striking out subsec-
tion (g) thereof and redesignating subsections (h) and (i) thereof as 
subsections (g) and (h), respectively. 
(5) Section 204 thereof is amended to read as follows: 
"SEC. 204. Every investment adviser who makes use of the mails or 
of any means or instrumentality of interstate commerce in connection 
with his or its business as an investment adviser (other than one 
specifically exempted from registration pursuant to section 203(b) 
of this title), shall make and keep for prescribed periods such records 
(as defined in section 3(a) (37) of the Securities Exchange Act of 
1934), furnish such copies thereof, and make and disseminate such 
reports as the Commission, by rule, may prescribe as necessary or 
appropriate in the public interest or for the protection of investors. 
All records (as so defined) of such investment advisers are subject 
at any time, or from time to time, to such reasonable periodic, special, 
or other examinations by representatives of the Commission as the 
Commission deems necessary or appropriate in the public interest 
or for the protection of investors.". 
SEC. 30. Section 4 of the Securities Act of 1933 (15 U.S.C. 77(d)) 
is amended by adding at the end thereof the following new paragraph: 
"(5) (A) Transactions involving offers or sales of one or more 
promissory notes directly secured by a first lien on a single parcel of 
real estate upon which is located a dwelling or other residential or 
commercial structure, and participation interests in such notes— 
"(i) where such securities are originated by a savings and loan 
association, savings bank, commercial bank, or similar banking 
institution which is supervised and examined by a Federal or 
State authority, and are offered and sold subject to the following 
conditions: 
" (a) the minimum aggregate sales price per purchaser shall 
not be less than $250,000; 
"(b) the purchaser shall pay cash either at the time of the 
sale or within sixty days thereof; and 
"(c) each purchaser shall buy for his own account only; or 
"(ii) where such securities are originated by a mortgagee 
approved by the Secretary of Plousing and Urban Development 
pursuant to sections 203 and 211 of the National Housing Act 
and are offered or sold subject to the three conditions specified in 
subparagraph (A) (i) to any institution described in such sub-
paragraph or to any insurance company subject to the supervision 
of the insurance commissioner, or any agency or officer performing 
like function, of any State or territory of the United States or the 
District of Columbia, or the Federal Home Loan Mortgage Cor-
poration, the Federal National Mortgage Association, or the 
Government National Mortgage Association. 
"(B) Transactions between any of the entities described in sub-
paragraph (A)(i) or (A)(ii) hereof involving non-assignable con-
tracts to buy or sell the foregoing securities which are to be completed 
within two years, where the seller of the foregoing securities pursuant 
to any such contract is one of the parties described in subparagraph 
(A)(i) or (A)(ii) who may originate such securities and the pur-
chaser of such securities pursuant to any such contract is any institu-
tion described in subparagraph (A) (i) or any insurance company 
described in subparagraph (A) (ii), the Federal Home Loan Mortgage 
Corporation, Federal National Mortgage Association, or the Govern-
ment National Mortgage Association and where the foregoing 
securities are subject to the three conditions for sale set forth in sub-
paragraphs (A) (i) (a) through (c). 
15 use 80b-3. 
Use of mails oir 
instrumentality of 
interstate 
commerce, 
recordkeeping 
requirements. 
15 u s e 80b-4. 
Ante, p. 97. 
Domestic security 
transactions, 
exemptions. 
12 u s e 1709, 
1715b. 
89 STAT. 170 
PUBLIC LAW 94-29—JUNE 4, 1975 
"(C) The exemption provided by subparagraphs (A) and (B) 
hereof shall not apply to resales of the securities acquired pursuant 
thereto, unless each of the conditions for sale contained in subpara-
graphs (A) (1) (a) through (c) are 
satisfied.". 
Effective date. 
SEC. 31. (a) This Act shall become effective on the date of its enact-
15 use 78b note, ment except as hereinafter provided. The amendments made by this 
Act to sections 3(a) (12), 6(a) through (d), llA(b), 15(a), 15A, 
v4rete, pp.97,104, 
15B(a), 17A(b) and (c), and 19(g) of the Securities Exchange Act 
111, 121, 127, 
of 1934 shall become effective one hundred eighty days after the date 
131, 141, 146. 
of enactment of this Act, and the amendments made by this Act to 
Ante, p. 162. 
section 31 of the Securities Exchange Act of 1934 shall become effec-
tive on January 1, 1976. Neither the provisions of section 3(a)(3), 
6(b)(2), or 6(c)(1) of the Securities Exchange Act of 1934 (as 
amended by this Act) nor any rule or regulation thereunder shall 
apply so as to deprive any person of membership in any national 
securities exchange (or its successor) of which such person was, on the 
date of enactment of this Act, a member or a member firm as defined 
in the constitution of such exchange, or so as to deny membership in 
any such exchange (or its successor) to any natural person who is or 
becomes associated with such member or member firm, 
15 use 78f note. 
(b) If it appears to the Commission at any time within one year of 
the effective date of any amendment made by this Act to the Securities 
Exchange Act of 1934 that the organization or rules of any national 
securities exchange or registered securities association registered with 
the Commission on the date of enactment of this Act do not comply 
with such Act as amended, the Commission shall so notify such 
exchange or association in writing, specifying the respects in which 
the exchange or association is not in compliance with such Act. On 
and after the one hundred eightieth day following the date of receipt 
of such notice by a national securities exchange or registered securities 
association, the Commission, without regard to the provisions of sec-
Ante, p. 146. 
tion 19(h) of the Securities Exchange Act of 1934, as amended by 
this Act, is authorized by order, to suspend the registration of any 
such exchange or association or impose limitations on the activities, 
functions, and operations of any such exchange or association, if the 
Commission finds, after notice and opportunity for hearing, that the 
organization or rules of such exchange or association do not comply 
with such Act. Any such suspension or limitation shall continue in 
effect until the Commission, by order, declares that such exchange 
or association is in compliance with such requirements. 
Approved June 4, 1975. 
LEGISLATIVE HISTORY: 
HOUSE REPORTS No. 94-123 accompanying H.R. 4111 (Comm. on Interstate and 
Foreign Commerce) and No. 94-229 (Comm. of Conference). 
SENATE REPORT No. 94-75 (Comm. on Banking, Housing and Urban Affairs). 
CONGRESSIONAL RECORD, Vol. 121 (1975): 
Apr. 17, considered and passed Senate. 
Apr. 24, considered and passed House, amended, in lieu of H.R. 4111. 
May 20, Senate agreed to conference report. 
May 22, House agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 11, No. 23: 
June 5, Presidential statement.