(1) The term “exchange”
means any organization, association, or group of persons, whether
incorporated or unincorporated, which constitutes, maintains, or provides
a market place or facilities for bringing together purchasers and
sellers of securities or for otherwise performing with respect to
securities the functions commonly performed by a stock exchange as
that term is generally understood, and includes the market place and the market
facilities maintained by such exchange.
(2) The term “facility” when used with
respect to an exchange includes its premises, tangible or intangible
property whether on the premises or not, any right to the use of such
premises or property or any service thereof for the purpose of effecting
or reporting a transaction on an exchange (including, among other
things, any system of communication to or from the exchange, by ticker
or otherwise, maintained by or with the consent of the exchange),
and any right of the exchange to the use of any property or service.
5-002
(3) (A)
The term “member” when used with respect to a national securities
exchange means (i) any natural person permitted to effect transactions
on the floor of the exchange without the services of another person
acting as broker, (ii) any registered broker or dealer with which
such a natural person is associated, (iii) any registered broker or
dealer permitted to designate as a representative such a natural person,
and (iv) any other registered broker or dealer which agrees to be
regulated by such exchange and with respect to which the exchange
undertakes to enforce compliance with the provisions of this title,
the rules and regulations thereunder, and its own rules. For purposes
of sections 6(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 association undertakes to enforce compliance with the
provisions of this title, the rules and regulations thereunder, and
its own rules.
5-003
(4) (A) The term “broker”
means any person engaged in the business of effecting transactions
in securities for the account of others.
(B) A bank shall not be considered to
be a broker because the bank engages in any one or more of the following
activities under the conditions described:
(i) The bank
enters into a contractual or other written arrangement with a broker
or dealer registered under this title under which the broker or dealer
offers brokerage services on or off the premises of the bank if—
(I) such broker or dealer is clearly identified
as the person performing the brokerage services;
(II) the broker or dealer performs brokerage
services in an area that is clearly marked and, to the extent practicable,
physically separate from the routine deposit-taking activities of
the bank;
(III) any materials
used by the bank to advertise or promote generally the availability
of brokerage services under the arrangement clearly indicate that
the brokerage services are being provided by the broker or dealer
and not by the bank;
(IV)
any materials used by the bank to advertise or promote generally the
availability of brokerage services under the arrangement are in compliance
with the Federal securities laws before distribution;
(V) bank employees (other than
associated persons of a broker or dealer who are qualified pursuant
to the rules of a self-regulatory organization) perform only clerical
or ministerial functions in connection with brokerage transactions
including scheduling appointments with the associated persons of a
broker or dealer, except that bank employees may forward customer funds or
securities and may describe in general terms the types of investment
vehicles available from the bank and the broker or dealer under the
arrangement;
(VI) bank
employees do not receive incentive compensation for any brokerage
transaction unless such employees are associated persons of a broker
or dealer and are qualified pursuant to the rules of a self-regulatory
organization, except that the bank employees may receive compensation
for the referral of any customer if the compensation is a nominal
one-time cash fee of a fixed dollar amount and the payment of the
fee is not contingent on whether the referral results in a transaction;
(VII) such services are
provided by the broker or dealer on a basis in which all customers
that receive any services are fully disclosed to the broker or dealer;
(VIII) the bank does not
carry a securities account of the customer except as permitted under
clause (ii) or (viii) of this subparagraph; and
(IX) the bank, broker, or dealer informs
each customer that the brokerage services are provided by the broker
or dealer and not by the bank and that the securities are not deposits
or other obligations of the bank, are not guaranteed by the bank,
and are not insured by the Federal Deposit Insurance Corporation.
(ii) The bank
effects transactions in a trustee capacity, or effects transactions
in a fiduciary capacity in its trust department or other department
that is regularly examined by bank examiners for compliance with fiduciary
principles and standards, and—
(I) is chiefly compensated for such transactions, consistent with
fiduciary principles and standards, on the basis of an administration
or annual fee (payable on a monthly, quarterly, or other basis), a
percentage of assets under management, or a flat or capped per order
processing fee equal to not more than the cost incurred by the bank
in connection with executing securities transactions for trustee and
fiduciary customers, or any combination of such fees; and
(II) does not publicly solicit
brokerage business, other than by advertising that it effects transactions
in securities in conjunction with advertising its other trust activities.
(iii) The
bank effects transactions in—
(I) commercial paper, bankers acceptances, or commercial bills;
(II) exempted securities;
(III) qualified Canadian
government obligations as defined in section 5136 of the Revised Statutes,
in conformity with section 15C of this title and the rules and regulations
thereunder, or obligations of the North American Development Bank;
or
(IV) any standardized,
credit enhanced debt security issued by a foreign government pursuant
to the March 1989 plan of then Secretary of the Treasury Brady, used
by such foreign government to retire outstanding commercial bank loans.
(iv)
(I) The bank effects transactions, as part of its transfer agency
activities, in the securities of an issuer as part of any pension,
retirement, profit-sharing, bonus, thrift, savings, incentive, or
other similar benefit plan for the employees of that issuer or its
affiliates (as defined in section 2 of the Bank Holding Company Act
of 1956), if the bank does not solicit transactions or provide investment
advice with respect to the purchase or sale of securities in connection
with the plan.
(II) The
bank effects transactions, as part of its transfer agency activities,
in the securities of an issuer as part of that issuer’s dividend reinvestment
plan, if—
(aa) the bank does not solicit
transactions or provide investment advice with respect to the purchase
or sale of securities in connection with the plan; and
(bb) the bank does not net shareholders’
buy and sell orders, other than for programs for odd-lot holders or
plans registered with the Commission.
(III) The bank effects transactions, as part
of its transfer agency activities, in the securities of an issuer
as part of a plan or program for the purchase or sale of that issuer’s
shares, if—
(aa) the bank does not solicit
transactions or provide investment advice with respect to the purchase
or sale of securities in connection with the plan or program; and
(bb) the bank does not
net shareholders’ buy and sell orders, other than for programs for
odd-lot holders or plans registered with the Commission.
(IV) The exception to being
considered a broker for a bank engaged in activities described in
subclauses (I), (II), and (III) will not be affected by delivery of
written or electronic plan materials by a bank to employees of the
issuer, shareholders of the issuer, or members of affinity groups
of the issuer, so long as such materials are—
(aa) comparable in scope or nature to that
permitted by the Commission as of the date of the enactment of the
Gramm-Leach-Bliley Act; or
(bb) otherwise permitted by the Commission.
(v) The bank effects transactions
as part of a program for the investment or reinvestment of deposit
funds into any no-load, open-end management investment company registered
under the Investment Company Act of 1940 that holds itself out as
a money market fund.
(vi)
The bank effects transactions for the account of any affiliate of
the bank (as defined in section 2 of the Bank Holding Company Act
of 1956) other than—
(I) a registered broker or dealer; or
(II) an affiliate that is engaged in merchant
banking, as described in section 4(k)(4)(H) of the Bank Holding Company
Act of 1956.
(vii) The bank—
(I) effects sales as part of a primary offering of securities not
involving a public offering, pursuant to section 3(b), 4(2), or 4(5)
of the Securities Act of 1933 or the rules and regulations issued
thereunder;
(II) at any
time after the date that is 1 year after the date of the enactment
of the Gramm-Leach-Bliley Act, is not affiliated with a broker or
dealer that has been registered for more than 1 year in accordance
with this Act, and engages in dealing, market making, or underwriting
activities, other than with respect to exempted securities; and
(III) if the bank is not
affiliated with a broker or dealer, does not effect any primary offering
described in subclause (I) the aggregate amount of which exceeds 25
percent of the capital of the bank, except that the limitation of
this subclause shall not apply with respect to any sale of government
securities or municipal securities.
(viii)
(I) The bank, as part of customary banking activities—
(aa) provides safekeeping or custody services
with respect to securities, including the exercise of warrants and
other rights on behalf of customers;
(bb) facilitates the transfer of funds or
securities, as a custodian or a clearing agency, in connection with the
clearance and settlement of its customers’ transactions in securities;
(cc) effects securities lending
or borrowing transactions with or on behalf of customers as part of
services provided to customers pursuant to division (aa) or (bb) or
invests cash collateral pledged in connection with such transactions;
(dd) holds securities pledged
by a customer to another person or securities subject to purchase
or resale agreements involving a customer, or facilitates the pledging
or transfer of such securities by book entry or as otherwise provided
under applicable law, if the bank maintains records separately identifying
the securities and the customer; or
(ee) serves as a custodian or provider of
other related administrative services to any individual retirement
account, pension, retirement, profit sharing, bonus, thrift savings,
incentive, or other similar benefit plan.
(II) The exception to being considered
a broker for a bank engaged in activities described in subclause (I)
shall not apply if the bank, in connection with such activities, acts
in the United States as a carrying broker (as such term, and different
formulations thereof, are used in section 15(c)(3) of this title and
the rules and regulations thereunder) for any broker or dealer, unless
such carrying broker activities are engaged in with respect to government
securities (as defined in paragraph (42) of this subsection).
(ix) The bank effects transactions
in identified banking products
* as defined in section 206 of the Gramm-Leach-Bliley
Act.
(x) The bank effects
transactions in municipal securities.
(xi) The bank effects, other than in transactions
referred to in clauses (i) through (x), not more than 500 transactions
in securities in any calendar year, and such transactions are not
effected by an employee of the bank who is also an employee of a broker
or dealer.
(C) The exception to being considered
a broker for a bank engaged in activities described in clauses (ii),
(iv), and (viii) of subparagraph (B) shall not apply if the activities
described in such provisions result in the trade in the United States
of any security that is a publicly traded security in the United States,
unless—
(i) the bank directs such trade to a registered
broker or dealer for execution;
(ii) the trade is a cross trade or other substantially
similar trade of a security that—
(I) is made by the bank or between the bank and an affiliated fiduciary;
and
(II) is not in contravention
of fiduciary principles established under applicable Federal or State
law; or
(iii)
the trade is conducted in some other manner permitted under rules,
regulations, or orders as the Commission may prescribe or issue.
(D)
For purposes of subparagraph (B)(ii), the term “fiduciary capacity”
means—
(i) in the capacity as trustee, executor,
administrator, registrar of stocks and bonds, transfer agent, guardian,
assignee, receiver, or custodian under a uniform gift to minor act,
or as an investment adviser if the bank receives a fee for its investment
advice;
(ii) in any capacity
in which the bank possesses investment discretion on behalf of another;
or
(iii) in any other similar
capacity.
(E) The term “broker” does not include
a bank that—
(i) was, on the day before the date of enactment
of the Gramm-Leach-Bliley Act, subject to section 15(e); and
(ii) is subject to such restrictions
and requirements as the Commission considers appropriate.
(F) The Commission
and the Board of Governors of the Federal Reserve System shall jointly
adopt a single set of rules or regulations to implement the exceptions
in subparagraph (B).
5-003.1
(5) (A) The term “dealer”
means any person engaged in the business of buying and selling securities
(not including security-based swaps, other than security-based swaps
with or for persons that are not eligible contract participants) for
such person’s own account through a broker or otherwise.
(B) The term “dealer” does
not include a person that buys or sells securities (not including
security-based swaps, other than security-based swaps with or for
persons that are not eligible contract participants) for such person’s
own account, either individually or in a fiduciary capacity, but not
as a part of a regular business.
(C) A bank shall not be considered to
be a dealer because the bank engages in any of the following activities
under the conditions described:
(i) The bank buys or sells—
(I) commercial paper, bankers acceptances,
or commercial bills;
(II) exempted securities;
(III) qualified Canadian government obligations as defined in section
5136 of the Revised Statutes of the United States, in conformity with
section 15C of this title and the rules and regulations thereunder,
or obligations of the North American Development Bank; or
(IV) any standardized, credit
enhanced debt security issued by a foreign government pursuant to
the March 1989 plan of then Secretary of the Treasury Brady, used
by such foreign government to retire outstanding commercial bank loans.
(ii) The bank
buys or sells securities for investment purposes—
(I) for the bank; or
(II) for accounts for which the bank acts
as a trustee or fiduciary.
(iii) The bank engages in the issuance or
sale to qualified investors, through a grantor trust or other separate
entity, of securities backed by or representing an interest in notes,
drafts, acceptances, loans, leases, receivables, other obligations
(other than securities of which the bank is not the issuer), or pools
of any such obligations predominantly originated by—
(I) the bank;
(II) an affiliate of any such bank other
than a broker or dealer; or
(III) a syndicate of banks of which the bank is a member, if the
obligations or pool of obligations consists of mortgage obligations
or consumer-related receivables.
(iv) The bank buys or sells identified banking
products, as defined in section 206 of the Gramm-Leach-Bliley Act.
5-004
(6) The term “bank” means (A) a banking
institution organized under the laws of the United States or a Federal
savings association, as defined in section 2(5) of the Home Owners’
Loan Act, (B) a member bank of the Federal Reserve System, (C) any
other banking institution or savings association, as defined in section
2(4) of the Home Owners’ Loan Act, whether incorporated or not, doing
business under the laws of any State or of the United States, a substantial
portion of the business of which consists of receiving deposits or
exercising fiduciary powers similar to those permitted to national
banks under the authority of the Comptroller of the Currency pursuant
to the first section of Public Law 87-722 (12 U.S.C. 92a), and which
is supervised and examined by State or Federal authority having supervision
over banks or savings associations, and which is not operated for
the purpose of evading the provisions of this title, and (D) a receiver,
conservator, or other liquidating agent of any institution or firm
included in clauses (A), (B), or (C) of this paragraph.
5-005
(7) The term “director” means any director
of a corporation or any person performing similar functions with respect
to any organization, whether incorporated or unincorporated.
(8) The term “issuer” means
any person who issues or proposes to issue any security; except that
with respect to certificates of deposit for securities, voting-trust
certificates, or collateral-trust certificates, or with respect to
certificates of interest or shares in an unincorporated investment
trust not having a board of directors or of the fixed, restricted
management, or unit type, the term “issuer” means the person or persons
performing the acts and assuming the duties of depositor or manager
pursuant to the provisions of the trust or other agreement or instrument
under which such securities are issued; and except that with respect
to equipment-trust certificates or like securities, the term “issuer”
means the person by whom the equipment or property is, or is to be,
used.
5-006
(9) The term “person”
means a natural person, company, government, or political subdivision,
agency, or instrumentality of a government.
(10) The term “security” means any note,
stock, treasury stock, security future, security-based swap, bond,
debenture, certificate of interest or participation in any profit-sharing
agreement or in any oil, gas, or other mineral royalty or lease, any
collateral-trust certificate, preorganization certificate or subscription,
transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, any put, call, straddle, option,
or privilege on any security, certificate of deposit, or group or
index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to foreign currency,
or in general, any instrument commonly known as a “security”; or any
certificate of interest or participation in, temporary or interim
certificate for, receipt for, or warrant or right to subscribe to
or purchase, any of the foregoing; but shall not include currency
or any note, draft, bill of exchange, or banker’s acceptance which
has a maturity at the time of issuance of not exceeding nine months,
exclusive of days of grace, or any renewal thereof the maturity of
which is likewise limited.
5-007
(11) The term “equity security” means any
stock or similar security; or any security future on any such security;
or any security convertible, with or without consideration, into such
a security, or carrying any warrant or right to subscribe to or purchase
such a security; or any such warrant or right; or any other security
which the Commission shall deem to be of similar nature and consider
necessary or appropriate, by such rules and regulations as it may
prescribe in the public interest or for the protection of investors,
to treat as an equity security.
5-008
(12) (A) The term
“exempted security” or “exempted securities” includes—
(i) government
securities, as defined in paragraph (42) of this subsection;
(ii) municipal securities, as defined
in paragraph (29) of this subsection;
(iii) any interest or participation in any
common trust fund or similar fund 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;
(iv) any interest
or participation in a single trust fund, or a collective trust fund
maintained by a bank, or any security arising out of a contract issued by an insurance
company, which interest, participation, or security is issued in connection
with a qualified plan as defined in subparagraph (C) of this paragraph;
(v) any security issued
by or any interest or participation in any pooled income fund, collective
trust fund, collective investment fund, or similar fund that is excluded
from the definition of an investment company under section 3(c)(10)(B)
of the Investment Company Act of 1940;
(vi) solely for purposes of sections 12, 13,
14, and 16 of this title, any security issued by or any interest or
participation in any church plan, company, or account that is excluded
from the definition of an investment company under section 3(c)(14)
of the Investment Company Act of 1940; and
(vii) such other securities (which may include,
among others, unregistered securities, the market in which is predominantly
intrastate) as the Commission may, by such rules and regulations as
it deems consistent with the public interest and the protection of
investors, either unconditionally or upon specified terms and conditions
or for stated periods, exempt from the operation of any one or more
provisions of this title which by their terms do not apply to an “exempted
security” or to “exempted securities”.
(B) (i) Notwithstanding
subparagraph (A)(i) of this paragraph, government securities shall
not be deemed to be “exempted securities” for the purposes of section
17A of this title.
(ii)
Notwithstanding subparagraph (A)(ii) of this paragraph, municipal
securities shall not be deemed to be “exempted securities” for the
purposes of sections 15 and 17A of this title.
(C) For purposes of
subparagraph (A)(iv) of this paragraph, the term “qualified plan”
means (i) a stock bonus, pension, or profit-sharing plan which meets
the requirements for qualification under section 401 of the Internal
Revenue Code of 1954, (ii) an annuity plan which meets the requirements
for the deduction of the employer’s contribution under section 404(a)(2)
of such Code, (iii) a governmental plan as defined in section 414(d)
of such Code which has been established by an employer for the exclusive
benefit of its employees or their beneficiaries for the purpose of
distributing to such employees or their beneficiaries the corpus and
income of the funds accumulated under such plan, if under such plan
it is impossible, prior to the satisfaction of all liabilities with
respect to such employees and their beneficiaries, for any part of
the corpus or income to be used for, or diverted to, purposes other
than the exclusive benefit of such employees or their beneficiaries,
or (iv) a church plan, company, or account that is excluded from the
definition of an investment company under section 3(c)(14) of the
Investment Company Act of 1940, other than any plan described in clause
(i), (ii), or (iii) of this subparagraph which (I) covers employees
some or all of whom are employees within the meaning of section 401(c)
of such Code, or (II) is a plan funded by an annuity contract described
in section 403(b) of such Code.
5-009
(13) The terms “buy” and “purchase” each
include any contract to buy, purchase, or otherwise acquire. For security
futures products, such term includes any contract, agreement, or transaction
for future delivery. For security-based swaps, such terms include
the execution, termination (prior to its scheduled maturity date),
assignment, exchange, or similar transfer or conveyance of, or extinguishing
of rights or obligations under, a security-based swap, as the context
may require.
(14) The
term “sale” and “sell” each include any contract to sell or otherwise
dispose of. For security futures products, such term includes any
contract, agreement, or transaction for future delivery. For security-based
swaps, such terms include the execution, termination (prior to
its scheduled maturity date), assignment, exchange, or similar transfer
or conveyance of, or extinguishing of rights or obligations under,
a security-based swap, as the context may require.
(15) The term “Commission” means the Securities
and Exchange Commission established by section 4 of this title.
(16) The term “State”
means any State of the United States, the District of Columbia, Puerto
Rico, the Virgin Islands, or any other possession of the United States.
(17) The term “interstate
commerce” means trade, commerce, transportation, or communication
among the several States, or between any foreign country and any State,
or between any State and any place or ship outside thereof. The term
also includes intrastate use of (A) any facility of a national securities
exchange or of a telephone or other interstate means of communication,
or (B) any other interstate instrumentality.
5-010
(18) The term “person associated with a
broker or dealer” or “associated person of a broker or dealer” means
any partner, officer, director, or branch manager of such broker or
dealer (or any person occupying a similar status or performing similar
functions), any person directly or indirectly controlling, controlled
by, or under common control with such broker or dealer, or any employee
of such broker or dealer, except that any person associated with a
broker or dealer whose functions are solely clerical or ministerial
shall not be included in the meaning of such term for purposes of
section 15(b) of this title (other than paragraph (6) thereof).
5-011
(19) The terms “investment
company”, affiliated “person”, “insurance company”, “separate account”,
and “company” have the same meanings as in the Investment Company
Act of 1940.
(20) The
terms “investment adviser” and “underwriter” have the same meanings
as in the Investment Advisers Act of 1940.
(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.
5-012
(22) (A) The term “securities information
processor” means any person engaged in the business of (i) collecting,
processing, or preparing for distribution or publication, or assisting,
participating in, or coordinating the distribution or publication of,
information with respect to transactions in or quotations for any
security (other than an exempted security) or (ii) distributing or
publishing (whether by means of a ticker tape, a communications network,
a terminal display device, or otherwise) on a current and continuing
basis, information with respect to such transactions or quotations.
The term “securities information processor” does not include any bona
fide newspaper, news magazine, or business or financial publication
of general and regular circulation, any self-regulatory organization,
any bank, broker, dealer, building and loan, savings and loan, or
homestead association, or cooperative bank, if such bank, broker,
dealer, association, or cooperative bank would be deemed to be a securities
information processor solely by reason of functions performed by such
institutions as part of customary banking, brokerage, dealing, association,
or cooperative bank activities, or any common carrier, as defined
in section 3 of the Communications Act of 1934, subject to the jurisdiction
of the Federal Communications Commission or a State commission as
defined in section 3 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 with respect
to transactions in or quotations for any security.
5-013
(B) The term “exclusive processor” means
any securities information processor or self-regulatory organization
which, directly or indirectly, engages on an exclusive basis on behalf
of any national securities exchange or registered securities association,
or any national securities exchange or registered securities association
which engages on an exclusive basis on its own behalf, in collecting,
processing, or preparing for distribution or publication any information
with respect to (i) transactions or quotations on or effected or made
by means of any facility of such exchange or (ii) quotations distributed
or published by means of any electronic system operated or controlled
by such association.
5-014
(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 comparison of data respecting the terms
of settlement of securities transactions, to reduce the number of
settlements of securities transactions, or for the allocation of securities
settlement responsibilities. Such term also means any person, such
as a securities depository, who (i) acts as a custodian of securities
in connection with a system for the central handling of securities
whereby all securities of a particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred,
loaned, or pledged by bookkeeping entry without physical delivery
of securities certificates, or (ii) otherwise permits or facilitates
the settlement of securities transactions or the hypothecation or
lending of securities without physical delivery of securities certificates.
5-015
(B) The term “clearing agency”
does not include (i) any Federal Reserve bank, Federal home loan bank,
or Federal land bank; (ii) any national securities exchange or registered
securities association solely by reason of its providing facilities
for comparison of data respecting the terms of settlement of securities
transactions effected on such exchange or by means of any electronic
system operated or controlled by such association; (iii) any bank,
broker, dealer, building and loan, savings and loan, or homestead
association, or cooperative bank if such bank, broker, dealer, association,
or cooperative bank would be deemed to be a clearing agency solely by reason
of functions performed by such institution as part of customary banking,
brokerage, dealing, association, or cooperative banking activities,
or solely by reason of acting on behalf of a clearing agency or a
participant therein in connection with the furnishing by the clearing
agency of services to its participants or the use of services of the
clearing agency by its participants, unless the Commission, by rule,
otherwise provides as necessary or appropriate to assure the prompt
and accurate clearance and settlement of securities transactions or
to prevent evasion of this 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.
5-016
(24) The term “participant”
when used with respect to a clearing agency means any person who uses
a clearing agency to clear or settle securities transactions or to
transfer, pledge, lend, or hypothecate securities. Such term does
not include a person whose only use of a clearing agency is (A) through
another person who is a participant or (B) as a pledgee of securities.
(25) The term “transfer
agent” means any person who engages on behalf of an issuer of securities
or on behalf of itself as an issuer of securities in (A) countersigning
such securities upon issuance; (B) monitoring the issuance of such
securities with a view to preventing unauthorized issuance, a function
commonly performed by a person called a registrar; (C) registering
the transfer of such securities; (D) exchanging or converting such
securities; or (E) transferring record ownership of securities by
bookkeeping entry without physical issuance of securities certificates.
The term “transfer agent” does not include any insurance company or
separate account which performs such functions solely with respect
to variable annuity contracts or variable life policies which it issues
or any registered clearing agency which performs such functions solely
with respect to options contracts which it issues.
5-017
(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 23(b) of this title) the Municipal Securities Rulemaking
Board established by section 15B of this title.
(27) The term “rules of an exchange”, “rules
of an association”, or “rules of a clearing agency” means the constitution,
articles of incorporation, bylaws, and rules, or instruments corresponding
to the foregoing, of an exchange, association of brokers and dealers,
or clearing agency, respectively, and such of the stated policies,
practices, and interpretations of such exchange, association, or clearing
agency as the Commission, by rule, may determine to be necessary or
appropriate in the public interest or for the protection of investors
to be deemed to be rules of such exchange, association, or clearing
agency.
5-018
(28) The term “rules of
a self-regulatory organization” means the rules of an exchange which
is a national securities exchange, the rules of an association of
brokers and dealers which is a registered securities association,
the rules of a clearing agency which is a registered clearing agency,
or the rules of the Municipal Securities Rulemaking Board.
(29) The term “municipal securities” means
securities which are direct obligations of, or obligations guaranteed
as to principal or interest by, a State or any political subdivision
thereof, or any agency or instrumentality of a State or any political
subdivision thereof, or any municipal corporate instrumentality of
one or more States, or any security which is an industrial development
bond (as defined in Section 103(c)(2) of the Internal Revenue Code
of 1954) the interest on which 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 section 103(c) does not apply to such
security.
5-019
(30) The term “municipal
securities dealer” means any person (including a separately identifiable
department or division of a bank) engaged in the business of buying
and selling municipal securities for his own account, through a broker
or otherwise, but does not include—
(A) any person insofar as
he buys or sells such securities for his own account, either individually
or in some fiduciary capacity, but not as a part of a regular business;
or
(B) a bank, unless
the bank is engaged in the business of buying and selling municipal
securities for its own account other than in a fiduciary capacity,
through a broker or otherwise: Provided, however, That if the
bank is engaged in such business through a separately identifiable
department or division (as defined by the Municipal Securities Rulemaking
Board in accordance with section 15B(b)(2)(H) of this title), the
department or division and not the bank itself shall be deemed to
be the municipal securities dealer.
5-020
(31) The term “municipal securities broker”
means a broker engaged in the business of effecting transactions in
municipal securities for the account of others.
(32) The term “person associated with a
municipal securities dealer” when used with respect to a municipal
securities dealer which is a bank or a division or department of a
bank means any person directly engaged in the management, direction,
supervision, or performance of any of the municipal securities dealer’s
activities with respect to municipal securities, and any person directly
or indirectly controlling such activities or controlled by the municipal
securities dealer in connection with such activities.
(33) The term “municipal securities investment
portfolio” means all municipal securities held for investment and
not for sale as part of a regular business by a municipal securities
dealer or by a person, directly or indirectly, controlling, controlled
by, or under common control with a municipal securities dealer.
5-021
(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, a subsidiary or a department or division
of any such bank, a Federal savings association (as defined in section
3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))),
the deposits of which are insured by the Federal Deposit Insurance
Corporation, or a subsidiary or department or division of any such
Federal savings association;
(ii) the Board of Governors of the Federal Reserve System, in the
case of a State member bank of the Federal Reserve System, a subsidiary
or a department or division thereof, a bank holding company, a subsidiary
of a bank holding company which is a bank other than a bank specified
in clause (i), (iii), or (iv) of this subparagraph, a subsidiary or
a department or division of such subsidiary, or a savings and loan
holding company;
(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), subsidiary or department or division
of any such bank, a State savings association (as defined in section
3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))),
the deposits of which are insured by the Federal Deposit Insurance
Corporation, or a subsidiary or a department or division of any such
State savings association; and
(iv) the Commission in the case of all other
municipal securities dealers.
5-022
(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, a subsidiary of any such bank, a Federal
savings association (as defined in section 3(b)(2) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which
are insured by the Federal Deposit Insurance Corporation, or a subsidiary
of any such Federal savings association;
(ii) the Board of Governors of the Federal
Reserve System, in the case of a State member bank of the Federal
Reserve System, a subsidiary thereof, a bank holding company, a subsidiary
of a bank holding company that is a bank other than a bank specified
in clause (i) or (iii) of this subparagraph, or a savings and loan
holding company;
(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), a subsidiary of any such bank, a State
savings association (as defined in section 3(b)(3) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which
are insured by the Federal Deposit Insurance Corporation, or a subsidiary
of any such State savings association; and
(iv) the Commission in the case of all other
clearing agencies and transfer agents.
5-023
(C) When used with respect to a participant
or applicant to become a participant in a clearing agency or a person
requesting or having access to services offered by a clearing agency:
(i) the Comptroller of the Currency, in the case of a national bank
or a Federal savings association (as defined in section 3(b)(2) of
the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2))), the deposits
of which are insured by the Federal Deposit Insurance Corporation
when the appropriate regulatory agency for such clearing agency is
not the Commission;
(ii)
the Board of Governors of the Federal Reserve System in the case of
a State member bank of the Federal Reserve System, a bank holding
company, a subsidiary of a bank holding company that is a bank other
than a bank specified in clause (i) or (iii) of this subparagraph,
or a savings and loan holding company 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) or a State savings association (as defined in section 3(b)(3)
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the
deposits of which are insured by the Federal Deposit Insurance Corporation
when the appropriate regulatory agency for such clearing agency is
not the Commission; and
(iv) the Commission in all other cases.
5-024
(D) When used with respect to an institutional
investment manager which is a bank the deposits of which are insured
in accordance with the Federal Deposit Insurance Act:
(i) the Comptroller
of the Currency, in the case of a national bank or a Federal savings
association (as defined in section 3(b)(2) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(b)(2))), the deposits of which are insured
by the Federal Deposit Insurance Corporation;
(ii) the Board of Governors of the Federal
Reserve System, in the case of any other member bank of the Federal
Reserve System; and
(iii)
the Federal Deposit Insurance Corporation, in the case of any other
insured bank or a State savings association (as defined in section
3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))),
the deposits of which are insured by the Federal Deposit Insurance
Corporation.
(E) When used with respect to a national
securities exchange or registered securities association, member thereof,
person associated with a member thereof, applicant to become a member
thereof or to become associated with a member thereof, or person requesting
or having access to services offered by such exchange or association
or member thereof, or the Municipal Securities Rulemaking Board, the
Commission.
5-025
(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 Federal savings association (as defined
in section 3(b)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1813(b)(2))), the deposits of which are insured by the Federal Deposit
Insurance Corporation;
(ii) the Board of Governors of the Federal Reserve System in the
case of any other member bank of the Federal Reserve System;
(iii) the Federal Deposit Insurance
Corporation, in the case of any other bank the deposits of which are
insured in accordance with the Federal Deposit Insurance Act or a
State savings association (as defined in section 3(b)(3) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(b)(3))), the deposits of which
are insured by the Federal Deposit Insurance Corporation; and
(iv) the Commission in the case
of all other such persons.
As used in this paragraph, the terms “bank holding company”
and “subsidiary of a bank holding company” have the meanings given
them in section 2 of the Bank Holding Company Act of 1956.
5-025.1
(G) When used with respect to a government
securities broker or government securities dealer, or person associated
with a government securities broker or government securities dealer:
(i) the Comptroller of the Currency, in the case of a national bank,
a Federal savings association (as defined in section 3(b)(2) of the
Federal Deposit Insurance Act), the deposits of which are insured
by the Federal Deposit Insurance Corporation, or a Federal branch
or Federal agency of a foreign bank (as such terms are used in the
International Banking Act of 1978);
(ii) the Board of Governors of the Federal
Reserve System, in the case of a State member bank of the Federal
Reserve System, a foreign bank, an uninsured State branch or State
agency of a foreign bank, a commercial lending company owned or controlled
by a foreign bank (as such terms are used in the International Banking
Act of 1978), or a corporation organized or having an agreement with
the Board of Governors of the Federal Reserve System pursuant to section
25 or section 25A of the Federal Reserve Act;
(iii) the Federal Deposit Insurance Corporation,
in the case of a bank insured by the Federal Deposit Insurance Corporation
(other than a member of the Federal Reserve System or a Federal savings
bank), a State savings association (as defined in section 3(b)(3)
of the Federal Deposit Insurance Act), the deposits of which are insured
by the Federal Deposit Insurance Corporation (as such terms are used
in the International Banking Act of 1978); and
(iv) the Commission, in the case of all other
government securities brokers and government securities dealers.
(H)
When used with respect to an institution described in subparagraph
(D), (F), or (G) of section 1841 (c)(2), or held under section 1843
(f) of title 12—
(i) the Comptroller of the Currency, in the
case of a national bank;
(ii) the Board of Governors of the Federal Reserve System, in the
case of a State member bank of the Federal Reserve System or any corporation
chartered under section 25A of the Federal Reserve Act [12 U.S.C.
611 et seq.];
(iii) the
Federal Deposit Insurance Corporation, in the case of any other bank
the deposits of which are insured in accordance with the Federal Deposit
Insurance Act [12 U.S.C. 1811 et seq.]; or
(iv) the Commission in the case of all other
such institutions.
As used in this paragraph, the terms
“bank holding company” and “subsidiary of a bank holding company”
have the meanings given them in section 1841 of title 12. As used
in this paragraph, the term “savings and loan holding company” has
the same meaning as in section 1467a (a) of title 12.
5-026
(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) make
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.
5-027
(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 which the Commission determines
is unfair and not necessary or appropriate in furtherance of the purposes
of this title.
(37)
The term “records” means accounts, correspondence, memorandums, tapes,
discs, papers, books, and other documents or transcribed information
of any type, whether expressed in ordinary or machine language.
(38) The term “market
maker” means any specialist permitted to act as a dealer, any dealer
acting in the capacity of block positioner, and any dealer who, with
respect to a security, holds himself out (by entering quotations in
an inter-dealer communications system or otherwise) as being willing
to buy and sell such security for his own account on a regular or
continuous basis.
5-028
(39) A person
is subject to a “statutory disqualification” with respect to membership
or participation in, or association with a member of, a self-regulatory
organization, foreign equivalent of a self-regulatory organization,
foreign or international securities exchange, 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, contract market or foreign equivalent
designated pursuant to section 5 of the Commodity Exchange Act (7
U.S.C. 7), or any substantially equivalent foreign statute or regulation,
or futures association registered under section 17 of such Act (7
U.S.C. 21), or any substantially equivalent foreign statute or regulation,
or has been and is denied trading privileges on any such contract
market;
(B) is subject
to—
(i) an order of the Commission, other appropriate
regulatory agency, or foreign financial regulatory authority—
(I) denying, suspending for a period not
exceeding 12 months, or revoking his registration as a broker, dealer,
municipal securities dealer, government securities broker, government
securities dealer, security-based swap dealer, or major security-based
swap participant or limiting his activities as a foreign person performing
a function substantially equivalent to any of the above; or
(II) barring or suspending for
a period not exceeding 12 months his being associated with a broker,
dealer, municipal securities dealer, government securities broker,
government securities dealer, security-based swap dealer, major security-based
swap participant, or foreign person performing a function substantially
equivalent to any of the above;
(ii) an order of the Commodity Futures Trading
Commission denying, suspending, or revoking his registration under
the Commodity Exchange Act (7 U.S.C. 1 et seq.); or
(iii) an order by a foreign financial regulatory
authority denying, suspending, or revoking the person’s authority
to engage in transactions in contracts of sale of a commodity for
future delivery or other instruments traded on or subject to the rules
of a contract market, board of trade, or foreign equivalent thereof;
(C)
by his conduct while associated with a broker, dealer, municipal securities
dealer, government securities broker, government securities dealer,
security-based swap dealer, or major security-based swap participant
or while associated with an entity or person required to be registered
under the Commodity Exchange Act, has been found to be a cause of
any effective suspension, expulsion, or order of the character described
in subparagraph (A) or (B) of this paragraph, and in entering such
a suspension, expulsion, or order, the Commission, an appropriate
regulatory agency, or any such self-regulatory organization shall
have jurisdiction to find whether or not any person was a cause thereof;
(D) by his conduct
while associated with any broker, dealer, municipal securities dealer,
government securities broker, government securities dealer, security-based
swap dealer, major security-based swap participant, or any other entity
engaged in transactions in securities, or while associated with an
entity engaged in transactions in contracts of sale of a commodity
for future delivery or other instruments traded on or subject to the
rules of a contract market, board of trade, or foreign equivalent
thereof, has been found to be a cause of any effective suspension,
expulsion, or order by a foreign or international securities exchange
or foreign financial regulatory authority empowered by a foreign government
to administer or enforce its laws relating to financial transactions
as described in subparagraph (A) or (B) of this paragraph;
(E) has associated with
him any person who is known, or in the exercise of reasonable care
should be known, to him to be a person described by subparagraph (A),
(B), (C), or (D) of this paragraph; or
(F) has committed or omitted any act,
or is subject to an order or finding, enumerated in subparagraph (D),
(E), (H), or (G) of paragraph (4) of section 15(b) of this 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 organization, is enjoined from any action,
conduct, or practice specified in subparagraph (C) of such paragraph
(4), has willfully made or caused to be made in any application for
membership or participation in, or to become associated with a member
of, a self-regulatory organization, report required to be filed with
a self-regulatory organization, or proceeding before a self-regulatory
organization, any statement which was at the time, and in the light
of the circumstances under which it was made, false or misleading
with respect to any material fact, or has omitted to state in any
such application, report, or proceeding any material fact which is
required to be stated therein.
5-029
(40) The term “financial responsibility
rules” means the rules and regulations of the Commission or the rules
and regulations prescribed by any self-regulatory organization relating
to financial responsibility and related practices which are designated
by the Commission, by rule or regulation, to be financial responsibility
rules.
5-029.1
(41) The term “mortgage
related security” means a security that meets standards of credit-worthiness
as established by the Commission, and either:
(A) represents
ownership of one or more promissory notes or certificates of interest
or participation in such notes (including any rights designed to assure
servicing of, or the receipt or timeliness of receipt by the holders
of such notes, certificates, or participations of amounts payable
under, such notes, certificates, or participations), which notes:
(i) are directly secured by a first lien on a single parcel of real
estate, including stock allocated to a dwelling unit in a residential
cooperative housing corporation, upon which is located a dwelling
or mixed residential and commercial structure, on a residential manufactured
home as defined in section 603(6) of the National Manufactured Housing
Construction and Safety Standards Act of 1974, whether such manufactured
home is considered real or personal property under the laws of the
State in which it is to be located or on one or more parcels of real
estate upon which is located one or more commercial structures; and
(ii) were originated by
a savings and loan association, savings bank, commercial bank, credit
union, insurance company, or similar institution which is supervised
and examined by a Federal or State authority, or by a mortgagee approved
by the Secretary of Housing and Urban Development pursuant to sections
203 and 211 of the National Housing Act, or, where such notes involve
a lien on the manufactured home, by any such institution or by any
financial institution approved for insurance by the Secretary of Housing
and Urban Development pursuant to section 2 of the National Housing
Act; or
(B) is secured by one or more promissory notes or certificates of
interest or participations in such notes (with or without recourse
to the issuer thereof) and, by its terms, provides for payments of
principal in relation to payments, or reasonable projections of payments,
on notes meeting the requirements of subparagraphs (A)(i) and (ii)
or certificates of interest or participations in promissory notes
meeting such requirements.
For the purpose of this paragraph, the term “promissory
note”, when used in connection with a manufactured home, shall also
include a loan, advance, or credit sale as evidence by a retail installment
sales contract or other instrument.
5-029.11
(42) The term “government securities” means—
(A) securities which are direct obligations of, or obligations guaranteed
as to principal or interest by, the United States;
(B) securities which are issued or guaranteed
by the Tennessee Valley Authority or corporations in which the United
States has a direct or indirect interest and which are designated
by the Secretary of the Treasury for exemption as necessary or appropriate
in the public interest or for the protection of investors;
(C) securities issued or
guaranteed as to principal or interest by any corporation the securities
of which are designated, by statute specifically naming such corporation,
to constitute exempt securities within the meaning of the laws administered
by the Commission;
(D) for purposes of sections 15C and 17A, any put, call, straddle,
option, or privilege on a security described in subparagraph (A),
(B), or (C) other than a put, call, straddle, option, or privilege—
(i) that is traded on one or more national securities exchanges;
or
(ii) for which quotations
are disseminated through an automated quotation system operated by
a registered securities association; or
(E) for purposes of sections
15, 15C, and 15A as applied to a bank, a qualified Canadian government
obligation as defined in section 5136 of the Revised Statutes of the
United States.
5-029.12
(43) The term “government securities broker”
means any person regularly engaged in the business of effecting transactions
in government securities for the account of others, but does not include—
(A) any corporation the securities of which are government securities
under subparagraph (B) or (C) of paragraph (42) of this subsection;
or
(B) any person
registered with the Commodity Futures Trading Commission, any contract
market designated by the Commodity Futures Trading Commission, such
contract market’s affiliated clearing organization, or any floor trader
on such contract market, solely because such person effects transactions
in government securities that the Commission, after consultation with
the Commodity Futures Trading Commission, has determined by rule or
order to be incidental to such person’s futures-related business.
5-029.13
(44) The term “government
securities dealer” means any person engaged in the business of buying
and selling government securities for his own account, through a broker
or otherwise, but does not include—
(A) any person insofar
as he buys or sells such securities for his own account, either individually
or in some fiduciary capacity, but not as a part of a regular business;
(B) any corporation
the securities of which are government securities under subparagraph
(B) or (C) of paragraph (42) of this subsection;
(C) any bank, unless the bank is engaged
in the business of buying and selling government securities for its
own account other than in a fiduciary capacity, through a broker or
otherwise; or
(D)
any person registered with the Commodity Futures Trading Commission,
any contract market designated by the Commodity Futures Trading Commission,
such contract market’s affiliated clearing organization, or any floor
trader on such contract market, solely because such person effects
transactions in government securities that the Commission, after consultation
with the Commodity Futures Trading Commission, has determined by rule
or order to be incidental to such person’s futures-related business.
5-029.14
(45) The term “person
associated with a government securities broker or government securities
dealer” means any partner, officer, director, or branch manager of
such government
securities broker or government securities dealer (or any person occupying
a similar status or performing similar functions), and any other employee
of such government securities broker or government securities dealer
who is engaged in the management, direction, supervision, or performance
of any activities relating to government securities, and any person
directly or indirectly controlling, controlled by, or under common
control with such government securities broker or government securities
dealer.
5-029.15
(46) The term “financial
institution” means—
(A) a bank (as defined in paragraph
(6) of this subsection);
(B) a foreign bank (as such term is
used in the International Banking Act of 1978); and
(C) a savings association (as defined
in section 3(b) of the Federal Deposit Insurance Act) the deposits
of which are insured by the Federal Deposit Insurance Corporation.
(47) The
term “securities laws” means the Securities Act of 1933 (15 U.S.C.
77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.), the Sarbanes-Oxley Act of 2002, the Trust Indenture Act of
1939 (15 U.S.C. 77aaa et seq.), the Investment Company Act of 1940
(15 U.S.C. 80a-1 et seq.), the Investment Advisers Act of 1940 (15
U.S.C. 80b et seq.), and the Securities Investor Protection Act of
1970 (15 U.S.C. 78aaa et seq.).
(48) The term “registered broker or dealer”
means a broker or dealer registered or required to register pursuant
to section 15 or 15B of this title, except that in paragraph (3) of
this subsection and sections 6 and 15A the term means such a broker
or dealer and a government securities broker or government securities
dealer registered or required to register pursuant to section 15C(a)(1)(A)
of this title.
5-029.16
(49)
The term “person associated with a transfer agent” and “associated
person of a transfer agent” mean any person (except an employee whose
functions are solely clerical or ministerial) directly engaged in
the management, direction, supervision, or performance of any of the
transfer agent’s activities with respect to transfer agent functions,
and any person directly or indirectly controlling such activities
or controlled by the transfer agent in connection with such activities.
(50) The term “foreign
securities authority” means any foreign government, or any governmental
body or regulatory organization empowered by a foreign government
to administer or enforce its laws as they relate to securities matters.
5-029.17
(51) (A) The term “penny stock”
means any equity security other than a security that is—
(i) registered
or approved for registration and traded on a national securities exchange
that meets such criteria as the Commission shall prescribe by rule
or regulation for purposes of this paragraph;
(ii) authorized for quotation on an automated
quotation system sponsored by a registered securities association,
if such system (I) was established and in operation before January
1, 1990, and (II) meets such criteria as the Commission shall prescribe
by rule or regulation for purposes of this paragraph;
(iii) issued by an investment company registered
under the Investment Company Act of 1940;
(iv) excluded, on the basis of exceeding a
minimum price, net tangible assets of the issuer, or other relevant
criteria, from the definition of such term by rule or regulation which
the Commission shall prescribe for purposes of this paragraph; or
(v) exempted, in whole or
in part, conditionally or unconditionally, from the definition of
such term by rule, regulation, or order prescribed by the Commission.
(B) The Commission may,
by rule, regulation, or order, designate any equity security or class
of equity securities described in clause (i) or (ii) of subparagraph
(A) as within the meaning of the term “penny stock” if such security
or class of securities is traded other than on a national securities
exchange or through an automated quotation system described in clause
(ii) of subparagraph (A).
(C) In exercising its authority under
this paragraph to prescribe rules, regulations, and orders, the Commission
shall determine that such rule, regulation, or order is consistent
with the public interest and the protection of investors.
5-029.18
(52) The term “foreign
financial regulatory authority” means any (A) foreign securities authority,
(B) other governmental body or foreign equivalent of a self-regulatory
organization empowered by a foreign government to administer or enforce
its laws relating to the regulation of fiduciaries, trusts, commercial
lending, insurance, trading in contracts of sale of a commodity for
future delivery, or other instruments traded on or subject to the
rules of a contract market, board of trade, or foreign equivalent,
or other financial activities, or (C) membership organization a function
of which is to regulate participation of its members in activities
listed above.
(56) The term “security futures product”
means a security future or any put, call, straddle, option, or privilege
on any security future.
(57) (A) The term “margin”, when
used with respect to a security futures product, means the amount,
type, and form of collateral required to secure any extension or maintenance
of credit, or the amount, type, and form of collateral required as
a performance bond related to the purchase, sale, or carrying of a
security futures product.
(B) The terms “margin level” and “level
of margin”, when used with respect to a security futures product,
mean the amount of margin required to secure any extension or maintenance
of credit, or the amount of margin required as a performance bond
related to the purchase, sale, or carrying of a security futures product.
(C) The terms “higher
margin level” and “higher level of margin”, when used with respect
to a security futures product, mean a margin level established by
a national securities exchange registered pursuant to section 6(g)
that is higher than the minimum amount established and in effect pursuant
to section 7(c)(2)(B).
(58) The term “audit committee” means—
(A) a committee (or equivalent body) established by and amongst the
board of directors of an issuer for the purpose of overseeing the
accounting and financial reporting processes of the issuer and audits
of the financial statements of the issuer; and
(B) if no such committee exists with
respect to an issuer, the entire board of directors of the issuer.
(59) The
term “registered public accounting firm” has the same meaning as in
section 2 of the Sarbanes-Oxley Act of 2002.
5-029.32
(60) The term “credit rating” means an
assessment of the creditworthiness of an obligor as an entity or with
respect to specific securities or money market instruments.
(61) The term “credit rating
agency” means any person—
(A) engaged in the business of issuing
credit ratings on the Internet or through another readily accessible
means, for free or for a reasonable fee, but does not include a commercial
credit reporting company;
(B) employing either a quantitative
or qualitative model, or both, to determine credit ratings; and
(C) receiving fees
from either issuers, investors, or other market participants, or a
combination thereof.
(62) The term “nationally recognized statistical
rating organization” means a credit rating agency that—
(A) issues
credit ratings certified by qualified institutional buyers, in accordance
with section 15E(a)(1)(B)(ix), with respect to—
(i) financial institutions,
brokers, or dealers;
(ii)
insurance companies;
(iii)
corporate issuers;
(iv)
issuers of asset-backed securities (as that term is defined in section
1101(c) of part 229 of title 17, Code of Federal Regulations, as in
effect on the date of enactment of this paragraph);
(v) issuers of government securities, municipal
securities, or securities issued by a foreign government; or
(vi) a combination of one or more
categories of obligors described in any of clauses (i) through (v);
and
(B) is registered under section 15E.
(63) The term “person associated with”
a nationally recognized statistical rating organization means any
partner, officer, director, or branch manager of a nationally recognized
statistical rating organization (or any person occupying a similar
status or performing similar functions), any person directly or indirectly
controlling, controlled by, or under common control with a nationally
recognized statistical rating organization, or any employee of a nationally
recognized statistical rating organization.
(64) The term “qualified institutional
buyer” has the meaning given such term in section 230.144A(a) of title
17, Code of Federal Regulations, or any successor thereto.
(65) The term “eligible contract
participant” has the same meaning as in section 1a of the Commodity
Exchange Act (7 U.S.C. 1a).
(66) The term “major swap participant”
has the same meaning as in section 1a of the Commodity Exchange Act
(7 U.S.C. 1a).
(67) (A) The term “major security-based
swap participant” means any person—
(i) who is not a security-based
swap dealer; and
(ii)(I) who maintains
a substantial position in security-based swaps for any of the major
security-based swap categories, as such categories are determined
by the Commission, excluding both positions held for hedging or mitigating
commercial risk and positions maintained by any employee benefit plan
(or any contract held by such a plan) as defined in paragraphs (3)
and (32) of section 3 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1002) for the primary purpose of hedging or mitigating
any risk directly associated with the operation of the plan;
(II) whose outstanding security-based
swaps create substantial counterparty exposure that could have serious
adverse effects on the financial stability of the United States banking
system or financial markets; or
(III) that is a financial entity that—
(aa) is highly leveraged relative to the
amount of capital such entity holds and that is not subject to capital
requirements established by an appropriate Federal banking agency;
and
(bb) maintains a substantial
position in outstanding security-based swaps in any major security-based
swap category, as such categories are determined by the Commission.
(B) For purposes of subparagraph (A),
the Commission shall define, by rule or regulation, the term “substantial
position” at the threshold that the Commission determines to be prudent
for the effective monitoring, management, and oversight of entities
that are systemically important or can significantly impact the financial
system of the United States. In setting the definition under this
subparagraph, the Commission shall consider the person’s relative
position in uncleared as opposed to cleared security-based swaps and
may take into consideration the value and quality of collateral held
against counterparty exposures.
(C) For purposes of subparagraph (A),
a person may be designated as a major security-based swap participant
for 1 or more categories of security-based swaps without being classified
as a major security-based swap participant for all classes of security-based
swaps.
(68) (A) Except as provided in
subparagraph (B), the term “security-based swap” means any agreement,
contract, or transaction that—
(i) is a swap, as that term is
defined under section 1a of the Commodity Exchange Act (without regard
to paragraph (47)(B)(x) of such section); and
(ii) is based on—
(I) an index that is a narrow-based security index, including any
interest therein or on the value thereof;
(II) a single security or loan, including
any interest therein or on the value thereof; or
(III) the occurrence, nonoccurrence,
or extent of the occurrence of an event relating to a single issuer
of a security or the issuers of securities in a narrow-based security
index, provided that such event directly affects the financial statements,
financial condition, or financial obligations of the issuer.
(B)
The term “security-based swap” shall be construed to include a master
agreement that provides for an agreement, contract, or transaction
that is a security-based swap pursuant to subparagraph (A), together
with all supplements to any such master agreement, without regard
to whether the master agreement contains an agreement, contract, or
transaction that is not a security-based swap pursuant to subparagraph
(A), except that the master agreement shall be considered to be a
security-based swap only with respect to each agreement, contract,
or transaction under the master agreement that is a security-based
swap pursuant to subparagraph (A).
(C) The term “security-based swap” does
not include any agreement, contract, or transaction that meets the
definition of a security-based swap only because such agreement, contract,
or transaction references, is based upon, or settles through the transfer,
delivery, or receipt of an exempted security under paragraph (12),
as in effect on the date of enactment of the Futures Trading Act of
1982 (other than any municipal security as defined in paragraph (29)
as in effect on the date of enactment of the Futures Trading Act of
1982), unless such agreement, contract, or transaction is of the character
of, or is commonly known in the trade as, a put, call, or other option.
(D) The term “security-based
swap” includes any agreement, contract, or transaction that is as
described in subparagraph (A) and also is based on the value of 1
or more interest or other rates, currencies, commodities, instruments
of indebtedness, indices, quantitative measures, other financial or
economic interest or property of any kind (other than a single security
or a narrow-based security index), or the occurrence, non-occurrence,
or the extent of the occurrence of an event or contingency associated
with a potential financial, economic, or commercial consequence (other
than an event described in subparagraph (A)(ii)(III)).
(E) The term “index” means
an index or group of securities, including any interest therein or
based on the value thereof.
(69) The term “swap” has the same meaning
as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
(70) (A)
The term “person associated with a security-based swap dealer or major
security-based swap participant” or “associated person of a security-based
swap dealer or major security-based swap participant” means—
(i) any partner,
officer, director, or branch manager of such security-based swap dealer
or major security-based swap participant (or any person occupying
a similar status or performing similar functions);
(ii) any person directly or indirectly controlling,
controlled by, or under common control with such security-based swap
dealer or major security-based swap participant; or
(iii) any employee of such security-based
swap dealer or major security-based swap participant.
(B) Other than for purposes
of section 15F(l)(2), the term “person associated with a security-based
swap dealer or major security-based swap participant” or “associated
person of a security-based swap dealer or major security-based swap
participant” does not include any person associated with a security-based
swap dealer or major security-based swap participant whose functions
are solely clerical or ministerial.
(71) (A)
The term “security-based swap dealer” means any person who—
(i) holds themself
out as a dealer in security-based swaps;
(ii) makes a market in security-based swaps;
(iii) regularly enters into
security-based swaps with counterparties as an ordinary course of
business for its own account; or
(iv) engages in any activity causing it to
be commonly known in the trade as a dealer or market maker in security-based
swaps.
(B) A person may be designated as a security-based swap dealer for
a single type or single class or category of security-based swap or
activities and considered not to be a security-based swap dealer for
other types, classes, or categories of security-based swaps or activities.
(C) The term “security-based
swap dealer” does not include a person that enters into security-based
swaps for such person’s own account, either individually or in a fiduciary
capacity, but not as a part of regular business.
(D) The Commission shall exempt from
designation as a security-based swap dealer an entity that engages
in a de minimis quantity of security-based swap dealing in connection
with transactions with or on behalf of its customers. The Commission
shall promulgate regulations to establish factors with respect to
the making of any determination to exempt.
(72) The term “appropriate
Federal banking agency” has the same meaning as in section 3(q) of
the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
(73) The term “Board” means
the Board of Governors of the Federal Reserve System.
(74) The term “prudential regulator” has
the same meaning as in section 1a of the Commodity Exchange Act (7
U.S.C. 1a).
(75) The
term “security-based swap data repository” means any person that collects
and maintains information or records with respect to transactions
or positions in, or the terms and conditions of, security-based swaps
entered into by third parties for the purpose of providing a centralized
recordkeeping facility for security-based swaps.
(76) The term “swap dealer” has the same
meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).
(77)
* The term “security-based swap execution
facility” means a trading system or platform in which multiple participants
have the ability to execute or trade security-based swaps by accepting
bids and offers made by multiple participants in the facility or system,
through any means of interstate commerce, including any trading facility,
that—
(A) facilitates the execution of security-based
swaps between persons; and
(B) is not a national securities exchange.
(77) The term “asset-backed security”—
(A) means a fixed-income
or other security collateralized by any type of self-liquidating financial
asset (including a loan, a lease, a mortgage, or a secured or unsecured
receivable) that allows the holder of the security to receive payments
that depend primarily on cash flow from the asset, including—
(i) a collateralized
mortgage obligation;
(ii)
a collateralized debt obligation;
(iii) a collateralized bond obligation;
(iv) a collateralized debt
obligation of asset-backed securities;
(v) a collateralized debt obligation of collateralized
debt obligations; and
(vi) a security that the Commission, by rule, determines to be an
asset-backed security for purposes of this section; and
(B) does not include
a security issued by a finance subsidiary held by the parent company
or a company controlled by the parent company, if none of the securities
issued by the finance subsidiary are held by an entity that is not
controlled by the parent company.
(78) (A)
For purposes of sections 9, 10, 16, 20, and 21A of this Act, and section
17 of the Securities Act of 1933 (15 U.S.C. 77q), the term “security-based
swap agreement” means a swap agreement as defined in section 206A
of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) of which a material
term is based on the price, yield, value, or volatility of any
security or any group or index of securities, or any interest therein.
(B) The term “security-based
swap agreement” does not include any security-based swap.
[15 USC 78c. Amended
by acts of Aug. 23, 1935 (49 Stat. 704); Aug. 20, 1964 (78 Stat. 565);
Dec. 14, 1970 (84 Stat. 1435); Dec. 22, 1970 (84 Stat. 1499); June
4, 1975 (89 Stat. 97); May 21, 1978 (92 Stat. 274); Oct. 13, 1982
(96 Stat. 1409); Aug. 10, 1984 (98 Stat. 1265); Oct. 3, 1984 (98 Stat.
1689); Oct. 28, 1986 (100 Stat. 3214-3216); Dec. 4, 1987 (101 Stat
1253, 1254); Nov. 19, 1988 (102 Stat. 4681); Aug. 9, 1989 (103 Stat.
441); Oct. 15, 1990 (104 Stat. 952); Nov. 15, 1990 (104 Stat. 2717,
2718); Dec. 17, 1993 (107 Stat. 2350, 2352); Sept. 23, 1994 (108 Stat.
2198, 2241); Dec. 8, 1995 (109 Stat. 684); Oct. 11, 1996 (110 Stat.
3424, 3447); Nov. 3, 1998 (112 Stat. 3235, 3236); Nov. 12, 1999 (113
Stat. 1385, 1390, 1394, 1395, 1406); Dec. 21, 2000 (114 Stat. 2763A-413);
July 30, 2002 (116 Stat. 749, 773, 796); Oct. 25, 2004 (118 Stat.
1666); Oct. 30, 2004 (118 Stat. 2232); Dec. 8, 2004 (118 Stat. 3267);
Sept. 29, 2006 (120 Stat. 1328); Oct. 13, 2006 (120 Stat. 1968, 1971,
1972); and July 21, 2010 (124 Stat. 1566-1569, 1755, 1883, 1886, 1890).
Acts of June 25, 1959 (73 Stat. 142) and July 12, 1960 (74 Stat. 412)
deleted the words “Alaska” and “Hawaii,” respectively, from paragraph
(16). The words “Philippine Islands” were deleted from the definition
of “State” in paragraph (16) under authority of Proc. No. 2695, effective
July 4, 1946, which recognized the independence of the Philippine
Islands. The proclamation is set out as a note under 22 USC 1394.
Section 206 of the Gramm-Leach-Bliley Act (15 USC 78c
note), referred to in paragraphs (4) and (5) of this section, reads
as follows:
(a) Definition of identified banking product. For purposes of paragraphs (4) and (5) of section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a) (4), (5)), the term “identified
banking product” means—
(1) a deposit account, savings account,
certificate of deposit, or other deposit instrument issued by a bank;
(2) a banker’s acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit
card or similar arrangement;
(5) a participation in a loan which the bank or an
affiliate of the bank (other than a broker or dealer) funds, participates
in, or owns that is sold—
(A) to qualified investors; or
(B) to other persons that—
(i) have the opportunity to review and assess any
material information, including information regarding the borrower’s
creditworthiness; and
(ii) based on such factors as financial
sophistication, net worth, and knowledge and experience in financial
matters, have the capability to evaluate the information available,
as determined under generally applicable banking standards or guidelines;
or
(6) any swap agreement, including credit and equity
swaps, except that an equity swap that is sold directly to any person
other than a qualified investor (as defined in section 3(a)(54) of
the Securities [Exchange] Act of 1934) shall not be treated as an
identified banking product.
(b) Definition of swap agreement. For purposes
of subsection (a)(6), the term “swap agreement” means any individually
negotiated contract, agreement, warrant, note, or option that is based,
in whole or in part, on the value of, any interest in, or any quantitative
measure or the occurrence of any event relating to, one or more commodities,
securities, currencies, interest or other rates, indices, or other
assets, but does not include any other identified banking product,
as defined in paragraphs (1) through (5) of subsection (a).
(c) Classification limited. Classification of
a particular product as an identified banking product pursuant to
this section shall not be construed as finding or implying that such
product is or is not a security for any purpose under the securities
laws, or is or is not an account, agreement, contract, or transaction
for any purpose under the Commodity Exchange Act.
(d) Incorporated definitions. For purposes of
this section, the terms “bank” and “qualified investor” have the same
meanings as given in section 3(a) of the Securities Exchange Act of
1934, as amended by this Act.
Section 206A of the Gramm-Leach-Bliley Act (15 U.S.C.
78c note), as added by act of December 21, 2000 and amended by act
of July 21, 2010 (124 Stat. 1759), reads as follows:
Section 206A—Swap Agreements
(a) In general. Except as provided in subsection
(b), as used in this section, the term “swap agreement” means any
agreement, contract, or transaction that—
(1) is a put, call, cap, floor, collar, or similar
option of any kind for the purchase or sale of, or based on the value
of, one or more interest or other rates, currencies, commodities,
indices, quantitative measures, or other financial or economic interests
or property of any kind;
(2) provides for any purchase, sale, payment or delivery
(other than a dividend on an equity security) that is dependent on
the occurrence, non-occurrence, or the extent of the occurrence of
an event or contingency associated with a potential financial, economic,
or commercial consequence;
(3) provides on an executory basis for the exchange,
on a fixed or contingent basis, of one or more payments based on the
value or level of one or more interest or other rates, currencies,
commodities, securities, instruments of indebtedness, indices, quantitative
measures, or other financial or economic interests or property of
any kind, or any interest therein or based on the value thereof, and
that transfers, as between the parties to the transaction, in whole
or in part, the financial risk associated with a future change in
any such value or level without also conveying a current or future
direct or indirect ownership interest in an asset (including any enterprise
or investment pool) or liability that incorporates the financial risk
so transferred, including any such agreement, contract, or transaction
commonly known as an interest rate swap, including a rate floor, rate
cap, rate collar, cross-currency rate swap, basis swap, currency swap,
equity index swap, equity swap, debt index swap, debt swap, credit
spread, credit default swap, credit swap, weather swap, or commodity
swap;
(4) provides for the purchase or sale,
on a fixed or contingent basis, of any commodity, currency, instrument,
interest, right, service, good, article, or property of any kind;
or
(5) is any combination or permutation of, or option
on, any agreement, contract, or transaction described in any of paragraphs
(1) through (4).
(b) Exclusions. The term “swap
agreement” does not include—
(1) any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities,
including any interest therein or based on the value thereof;
(2) any put, call, straddle, option, or privilege entered
into on a national securities exchange registered pursuant to section
6(a) of the Securities Exchange Act of 1934 relating to foreign currency;
(3) any agreement, contract, or transaction providing
for the purchase or sale of one or more securities on a fixed basis;
(4) any agreement, contract, or transaction providing
for the purchase or sale of one or more securities on a contingent
basis, unless such agreement, contract, or transaction predicates
such purchase or sale on the occurrence of a bona fide contingency
that might reasonably be expected to affect or be affected by the
creditworthiness of a party other than a party to the agreement, contract,
or transaction;
(5) any note, bond, or evidence of indebtedness that
is a security as defined in section 2(a)(1) of the Securities Act
of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934;
or
(6) any agreement, contract, or transaction that is—
(A) based on a security; and
(B) entered into directly or through an underwriter
(as defined in section 2(a) of the Securities Act of 1933) by the
issuer of such security for the purposes of raising capital, unless
such agreement, contract, or transaction is entered into to manage
a risk associated with capital raising.
(c) Rule of construction regarding master agreements. As used in this section, the term “swap agreement” shall be construed
to include a master agreement that provides for an agreement, contract,
or transaction that is a swap agreement pursuant to subsections (a)
and (b), together with all supplements to any such master agreement,
without regard to whether the master agreement contains an agreement,
contract, or transaction that is not a swap agreement pursuant to
subsections (a) and (b), except that the master agreement shall be
considered to be a swap agreement only with respect to each agreement,
contract, or transaction under the master agreement that is a swap
agreement pursuant to subsections (a) and (b).
Sections 206B and 206C of the Gramm-Leach-Bliley Act
(Pub. L. 106-102; 15 U.S.C. 78c note) were repealed by act of July
21, 2010 (124 Stat. 1759).]
