15 U.S.C. § 78g — Margin requirements

Page 262 TITLE 15—COMMERCE AND TRADE § 78g fees to be charged by its members for transacting busi- ness on the exchange, and empowered the Commission to regulate any broker or dealer who effects trans- actions on an exchange on a regular basis but who is not a member of that exchange and any person who ef- fects transactions on an exchange without the services of another person acting as broker. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by section 957 of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Amendment by sections 721(e)(8) and 734(b)(2) of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rule- making, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of Title 7, Agriculture. Amendment by section 763(e) of Pub. L. 111–203 effec- tive on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regu- lation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title. EFFECTIVE DATE OF 1993 AMENDMENT Pub. L. 103–202, title III, § 304, Dec. 17, 1993, 107 Stat. 2367, provided that: ‘‘(a) EFFECTIVE DATE.— ‘‘(1) IN GENERAL.—The amendments made by section 303 [amending this section and section 78o–3 of this title] shall become effective 12 months after the date of enactment of this Act [Dec. 17, 1993]. ‘‘(2) RULEMAKING AUTHORITY.—Notwithstanding paragraph (1), the authority of the Securities and Ex- change Commission, a registered securities associa- tion, and a national securities exchange to commence rulemaking proceedings for the purpose of issuing rules pursuant to the amendments made by section 303 is effective on the date of enactment of this Act. ‘‘(3) REVIEW OF FILINGS PRIOR TO EFFECTIVE DATE.— Prior to the effective date of regulations promulgated pursuant to this title [amending this section and sec- tions 78n and 78o–3 of this title and enacting provi- sions set out as notes under sections 78a and 78n of this title], the Securities and Exchange Commission shall continue to review and declare effective reg- istration statements and amendments thereto relat- ing to limited partnership rollup transactions in ac- cordance with applicable regulations then in effect. ‘‘(b) EFFECT ON EXISTING AUTHORITY.—The amend- ments made by this title [amending this section and sections 78n and 78o–3 of this title] shall not limit the authority of the Securities and Exchange Commission, a registered securities association, or a national securi- ties exchange under any provision of the Securities Ex- change Act of 1934 [15 U.S.C. 78a et seq.], or preclude the Commission or such association or exchange from imposing, under any other such provision, a remedy or procedure required to be imposed under such amend- ments.’’ EFFECTIVE DATE OF 1975 AMENDMENT Amendment by Pub. L. 94–29 effective June 4, 1975, ex- cept for amendment of subsecs. (a) through (d) by Pub. L. 94–29 to be effective 180 days after June 4, 1975, with provisions of subsecs. (b)(2) and (c)(6), as amended by Pub. L. 94–29, or rules or regulations thereunder, not to apply in a way so as to deprive any person of member- ship in any national securities exchange (or its suc- cessor) of which such person was, on June 4, 1975, a member or a member firm as defined in the constitu- tion of such exchange, or so as to deny membership in any such exchange (or its successor) to a natural per- son who is or becomes associated with such member or member firm, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title. CHANGES IN ORGANIZATION AND RULES OF NATIONAL SECURITIES EXCHANGES AND REGISTERED SECURITIES ASSOCIATIONS Pub. L. 94–29, § 31(b), June 4, 1975, 89 Stat. 170, pro- vided that: ‘‘If it appears to the Commission at any time within one year of the effective date of any amendment made by this Act [see Short Title of 1975 Amendment note under section 78a of this title] to the Securities Exchange Act of 1934 that the organization or rules of any national securities exchange or reg- istered securities association registered with the Com- mission on the date of enactment of this Act [June 4, 1975] do not comply with such Act as amended, the Commission shall so notify such exchange or associa- tion in writing, specifying the respects in which the ex- change or association is not in compliance with such Act. On and after the one hundred eightieth day fol- lowing the date of receipt of such notice by a national securities exchange or registered securities association, the Commission, without regard to the provisions of section 19(h) of the Securities Exchange Act of 1934 [section 78s(h) of this title], 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 ex- change or association, if the Commission finds, after notice and opportunity for hearing, that the organiza- tion or rules of such exchange or association do not comply with such Act. Any such suspension or limita- tion shall continue in effect until the Commission, by order, declares that such exchange or association is in compliance with such requirements.’’ Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 78g. Margin requirements (a) Rules and regulations for extension of credit; standard for initial extension; undermar- gined accounts For the purpose of preventing the excessive use of credit for the purchase or carrying of se- curities, the Board of Governors of the Federal Reserve System shall, prior to October 1, 1934, and from time to time thereafter, prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security or a security futures product). For the initial extension of credit, such rules and regulations shall be based upon the following standard: An amount not greater than whichever is the higher of— (1) 55 per centum of the current market price of the security, or (2) 100 per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than 75 per centum of the current market price. Such rules and regulations may make appro- priate provision with respect to the carrying of undermargined accounts for limited periods and Page 263 TITLE 15—COMMERCE AND TRADE § 78g under specified conditions; the withdrawal of funds or securities; the substitution or addi- tional purchases of securities; the transfer of ac- counts from one lender to another; special or different margin requirements for delayed deliv- eries, short sales, arbitrage transactions, and se- curities to which paragraph (2) of this sub- section does not apply; the bases and the meth- ods to be used in calculating loans, and margins and market prices; and similar administrative adjustments and details. For the purposes of paragraph (2) of this subsection, until July 1, 1936, the lowest price at which a security has sold on or after July 1, 1933, shall be considered as the lowest price at which such security has sold during the preceding thirty-six calendar months. (b) Lower and higher margin requirements Notwithstanding the provisions of subsection (a) of this section, the Board of Governors of the Federal Reserve System, may, from time to time, with respect to all or specified securities or transactions, or classes of securities, or class- es of transactions, by such rules and regulations (1) prescribe such lower margin requirements for the initial extension or maintenance of credit as it deems necessary or appropriate for the accom- modation of commerce and industry, having due regard to the general credit situation of the country, and (2) prescribe such higher margin requirements for the initial extension or main- tenance of credit as it may deem necessary or appropriate to prevent the excessive use of cred- it to finance transactions in securities. (c) Unlawful credit extension to customers (1) Prohibition It shall be unlawful for any member of a na- tional securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any cus- tomer— (A) on any security (other than an exempt- ed security), except as provided in paragraph (2), in contravention of the rules and regula- tions which the Board of Governors of the Federal Reserve System (hereafter in this section referred to as the ‘‘Board’’) shall pre- scribe under subsections (a) and (b); or (B) without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board may prescribe— (i) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit ini- tially extended in conformity with the rules and regulations of the Board; and (ii) to permit the extension or mainte- nance of credit in cases where the exten- sion or maintenance of credit is not for the purpose of purchasing or carrying securi- ties or of evading or circumventing the provisions of subparagraph (A). (2) Margin regulations (A) Compliance with margin rules required It shall be unlawful for any broker, dealer, or member of a national securities exchange to, directly or indirectly, extend or maintain credit to or for, or collect margin from any customer on, any security futures product unless such activities comply with the regu- lations— (i) which the Board shall prescribe pur- suant to subparagraph (B); or (ii) if the Board determines to delegate the authority to prescribe such regula- tions, which the Commission and the Com- modity Futures Trading Commission shall jointly prescribe pursuant to subparagraph (B). If the Board delegates the authority to pre- scribe such regulations under clause (ii) and the Commission and the Commodity Futures Trading Commission have not jointly pre- scribed such regulations within a reasonable period of time after the date of such delega- tion, the Board shall prescribe such regula- tions pursuant to subparagraph (B). (B) Criteria for issuance of rules The Board shall prescribe, or, if the au- thority is delegated pursuant to subpara- graph (A)(ii), the Commission and the Com- modity Futures Trading Commission shall jointly prescribe, such regulations to estab- lish margin requirements, including the es- tablishment of levels of margin (initial and maintenance) for security futures products under such terms, and at such levels, as the Board deems appropriate, or as the Commis- sion and the Commodity Futures Trading Commission jointly deem appropriate— (i) to preserve the financial integrity of markets trading security futures products; (ii) to prevent systemic risk; (iii) to require that— (I) the margin requirements for a secu- rity future product be consistent with the margin requirements for comparable option contracts traded on any exchange registered pursuant to section 78f(a) of this title; and (II) initial and maintenance margin levels for a security future product not be lower than the lowest level of margin, exclusive of premium, required for any comparable option contract traded on any exchange registered pursuant to sec- tion 78f(a) of this title, other than an op- tion on a security future; except that nothing in this subparagraph shall be construed to prevent a national securities exchange or national securities association from requiring higher margin levels for a security future product when it deems such action to be necessary or ap- propriate; and (iv) to ensure that the margin require- ments (other than levels of margin), in- cluding the type, form, and use of collat- eral for security futures products, are and remain consistent with the requirements established by the Board, pursuant to sub- paragraphs (A) and (B) of paragraph (1). (3) Exception This subsection and the rules and regula- tions issued under this subsection shall not Page 264 TITLE 15—COMMERCE AND TRADE § 78g apply to any credit extended, maintained, or arranged by a member of a national securities exchange or a broker or dealer to or for a member of a national securities exchange or a registered broker or dealer— (A) a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or (B) to finance its activities as a market maker or an underwriter; except that the Board may impose such rules and regulations, in whole or in part, on any credit otherwise exempted by this paragraph if the Board determines that such action is nec- essary or appropriate in the public interest or for the protection of investors. (d) Unlawful credit extension in violation of rules and regulations; exceptions to applica- tion of rules, etc. (1) Prohibition It shall be unlawful for any person not sub- ject to subsection (c) to extend or maintain credit or to arrange for the extension or main- tenance of credit for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Board shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provi- sions of this section. Such rules and regula- tions may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) and the rules and regulations thereunder. (2) Exceptions This subsection and the rules and regula- tions issued under this subsection shall not apply to any credit extended, maintained, or arranged— (A) by a person not in the ordinary course of business; (B) on an exempted security; (C) to or for a member of a national securi- ties exchange or a registered broker or deal- er— (i) a substantial portion of whose busi- ness consists of transactions with persons other than brokers or dealers; or (ii) to finance its activities as a market maker or an underwriter; (D) by a bank on a security other than an equity security; or (E) as the Board shall, by such rules, regu- lations, or orders as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the op- eration of this subsection and the rules and regulations thereunder. (3) Board authority The Board may impose such rules and regu- lations, in whole or in part, on any credit oth- erwise exempted by subparagraph (C) if it de- termines that such action is necessary or ap- propriate in the public interest or for the pro- tection of investors. (e) Effective date of this section and rules and regulations The provisions of this section or the rules and regulations thereunder shall not apply on or be- fore July 1, 1937, to any loan or extension of credit made prior to June 6, 1934, or to the main- tenance, renewal, or extension of any such loan or credit, except to the extent that the Board of Governors of the Federal Reserve System may by rules and regulations prescribe as necessary to prevent the circumvention of the provisions of this section or the rules and regulations thereunder by means of withdrawals of funds or securities, substitutions of securities, or addi- tional purchases or by any other device. (f) Unlawful receipt of credit; exemptions (1) It is unlawful for any United States person, or any foreign person controlled by a United States person or acting on behalf of or in con- junction with such person, to obtain, receive, or enjoy the beneficial use of a loan or other exten- sion of credit from any lender (without regard to whether the lender’s office or place of business is in a State or the transaction occurred in whole or in part within a State) for the purpose of (A) purchasing or carrying United States se- curities, or (B) purchasing or carrying within the United States of any other securities, if, under this section or rules and regulations pre- scribed thereunder, the loan or other credit transaction is prohibited or would be prohibited if it had been made or the transaction had oth- erwise occurred in a lender’s office or other place of business in a State. (2) For the purposes of this subsection— (A) The term ‘‘United States person’’ in- cludes a person which is organized or exists under the laws of any State or, in the case of a natural person, a citizen or resident of the United States; a domestic estate; or a trust in which one or more of the foregoing persons has a cumulative direct or indirect beneficial in- terest in excess of 50 per centum of the value of the trust. (B) The term ‘‘United States security’’ means a security (other than an exempted se- curity) issued by a person incorporated under the laws of any State, or whose principal place of business is within a State. (C) The term ‘‘foreign person controlled by a United States person’’ includes any noncor- porate entity in which United States persons directly or indirectly have more than a 50 per centum beneficial interest, and any corpora- tion in which one or more United States per- sons, directly or indirectly, own stock pos- sessing more than 50 per centum of the total combined voting power of all classes of stock entitled to vote, or more than 50 per centum of the total value of shares of all classes of stock. (3) The Board of Governors of the Federal Re- serve System may, in its discretion and with due regard for the purposes of this section, by rule or regulation exempt any class of United States persons or foreign persons controlled by a United States person from the application of this subsection. Page 265 TITLE 15—COMMERCE AND TRADE § 78g (g) Effect of bona fide agreement for delayed de- livery of mortgage related security Subject to such rules and regulations as the Board of Governors of the Federal Reserve Sys- tem may adopt in the public interest and for the protection of investors, no member of a national securities exchange or broker or dealer shall be deemed to have extended or maintained credit or arranged for the extension or maintenance of credit for the purpose of purchasing a security, within the meaning of this section, by reason of a bona fide agreement for delayed delivery of a mortgage related security or a small business related security against full payment of the pur- chase price thereof upon such delivery within one hundred and eighty days after the purchase, or within such shorter period as the Board of Governors of the Federal Reserve System may prescribe by rule or regulation. (June 6, 1934, ch. 404, title I, § 7, 48 Stat. 886; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; Pub. L. 90–437, July 29, 1968, 82 Stat. 452; Pub. L. 91–508, title III, § 301(a), Oct. 26, 1970, 84 Stat. 1124; Pub. L. 98–440, title I, § 102, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103–325, title II, § 203, Sept. 23, 1994, 108 Stat. 2199; Pub. L. 104–290, title I, § 104(a), Oct. 11, 1996, 110 Stat. 3422; Pub. L. 105–353, title III, § 301(b)(5), (6), Nov. 3, 1998, 112 Stat. 3236; Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–429; Pub. L. 111–203, title IX, § 929, July 21, 2010, 124 Stat. 1852.) Editorial Notes AMENDMENTS 2010—Subsec. (c)(1)(A). Pub. L. 111–203 substituted ‘‘; or’’ for ‘‘; and’’ at end. 2000—Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(1)], inserted ‘‘or a security futures product’’ after ‘‘exempted security’’ in introductory provisions. Subsec. (c)(1)(A). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(2)], inserted ‘‘except as provided in paragraph (2),’’ after ‘‘security),’’. Subsec. (c)(2), (3). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(3), (4)], added par. (2) and redesignated former par. (2) as (3). 1998—Subsecs. (a), (b). Pub. L. 105–353, § 301(b)(5), sub- stituted ‘‘Board of Governors of the Federal Reserve System’’ for ‘‘Federal Reserve Board’’. Subsec. (d). Pub. L. 105–353, § 301(b)(6), substituted ‘‘exceptions’’ for ‘‘exception’’ in heading. 1996—Subsec. (c). Pub. L. 104–290, § 104(a)(1), amended heading and text of subsec. (c) generally. Prior to amendment, text read as follows: ‘‘It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer— ‘‘(1) on any security (other than an exempted secu- rity), in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System shall prescribe under subsections (a) and (b) of this section; ‘‘(2) without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board of Governors of the Fed- eral Reserve System may prescribe (A) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the rules and regulations of the Board of Governors of the Fed- eral Reserve System, and (B) to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of pur- chasing or carrying securities or of evading or cir- cumventing the provisions of paragraph (1) of this subsection.’’ Subsec. (d). Pub. L. 104–290, § 104(a)(2), amended head- ing and text of subsec. (d) generally. Prior to amend- ment, text read as follows: ‘‘It shall be unlawful for any person not subject to subsection (c) of this section to extend or maintain credit or to arrange for the exten- sion or maintenance of credit for the purpose of pur- chasing or carrying any security, in contravention of such rules and regulations as the Board of Governors of the Federal Reserve System shall prescribe to prevent the excessive use of credit for the purchasing or car- rying of or trading in securities in circumvention of the other provisions of this section. Such rules and regula- tions may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) of this section and the rules and regula- tions thereunder. This subsection and the rules and regulations thereunder shall not apply (A) to a loan made by a person not in the ordinary course of his busi- ness, (B) to a loan on an exempted security, (C) to a loan to a dealer to aid in the financing of the distribu- tion of securities to customers not through the medium of a national securities exchange, (D) to a loan by a bank on a security other than an equity security, or (E) to such other loans as the Board of Governors of the Federal Reserve System shall, by such rules and regu- lations as it may deem necessary or appropriate in the public interest or for the protection of investors, ex- empt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations there- under.’’ 1994—Subsec. (g). Pub. L. 103–325 inserted ‘‘or a small business related security’’ after ‘‘mortgage related se- curity’’. 1984—Subsec. (g). Pub. L. 98–440 added subsec. (g). 1970—Subsec. (f). Pub. L. 91–508 added subsec. (f). 1968—Subsec. (a). Pub. L. 90–437, § 1(1), struck out ‘‘registered on a national securities exchange’’ after ‘‘(other than an exempted security)’’. Subsec. (c). Pub. L. 90–437, § 1(2), struck out ‘‘who transacts a business in securities through the medium of any such member’’ after ‘‘any broker or dealer’’, in par. (1) struck out ‘‘registered on a national securities exchange’’ after ‘‘(other than an exempted security)’’, and in par. (2) substituted ‘‘other than securities’’ for ‘‘other than exempted securities and/or securities reg- istered upon a national securities exchange’’. Subsec. (d). Pub. L. 90–437, § 1(3), struck out ‘‘reg- istered on a national securities exchange’’ after ‘‘the purpose of purchasing or carrying any security’’, and ‘‘registered on national securities exchanges’’ after ‘‘the purpose of purchasing or carrying securities’’. Statutory Notes and Related Subsidiaries CHANGE OF NAME Act Aug. 23, 1935, in subsec. (e), substituted ‘‘Board of Governors of the Federal Reserve System’’ for ‘‘Federal Reserve Board’’. EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. EFFECTIVE DATE OF 1970 AMENDMENT Amendment by Pub. L. 91–508 effective on first day of seventh calendar month which begins after Oct. 26, 1970, except as otherwise provided in section 401(c) of Pub. L. 91–508, see section 401(a) of Pub. L. 91–508, set out as a note under section 1951 of Title 12, Banks and Banking. Pub. L. 91–508, title IV, § 401(c), Oct. 26, 1970, 84 Stat. 1125, provided that: ‘‘The Board of Governors of the Federal Reserve System may by regulation provide Page 266 TITLE 15—COMMERCE AND TRADE § 78h that the amendment made by title III [amending this section] shall be effective on any date not earlier than the publication of the regulation in the Federal Reg- ister and not later than the first day of the thirteenth calendar month which begins after the date of enact- ment [Oct. 26, 1970].’’ VALIDITY OF RULES AND REGULATIONS Pub. L. 91–508, title III, § 301(b), Oct. 26, 1970, 84 Stat. 1125, provided that: ‘‘The amendment made by sub- section (a) of this section [amending this section] does not affect the continuing validity of any rule or regula- tion under section 7 of the Securities Exchange Act of 1934 [this section] in effect prior to the effective date of the amendment.’’ § 78h. Restrictions on borrowing and lending by members, brokers, and dealers It shall be unlawful for any registered broker or dealer, member of a national securities ex- change, or broker or dealer who transacts a business in securities through the medium of any member of a national securities exchange, directly or indirectly— (a) In contravention of such rules and regula- tions as the Commission shall prescribe for the protection of investors to hypothecate or ar- range for the hypothecation of any securities carried for the account of any customer under circumstances (1) that will permit the commin- gling of his securities without his written con- sent with the securities of any other customer, (2) that will permit such securities to be com- mingled with the securities of any person other than a bona fide customer, or (3) that will per- mit such securities to be hypothecated, or sub- jected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities. (b) To lend or arrange for the lending of any securities carried for the account of any cus- tomer without the written consent of such cus- tomer or in contravention of such rules and reg- ulations as the Commission shall prescribe for the protection of investors. (June 6, 1934, ch. 404, title I, § 8, 48 Stat. 888; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; Pub. L. 94–29, § 5, June 4, 1975, 89 Stat. 109; Pub. L. 98–440, title I, § 103, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103–325, title II, § 204, Sept. 23, 1994, 108 Stat. 2199; Pub. L. 104–290, title I, § 104(b), Oct. 11, 1996, 110 Stat. 3423.) Editorial Notes AMENDMENTS 1996—Pub. L. 104–290 redesignated subsecs. (b) and (c) as (a) and (b), respectively, and struck out former sub- sec. (a) which related to borrowing in ordinary course of business as broker or dealer on any security, except exempted security, registered on national securities ex- change. 1994—Subsec. (a). Pub. L. 103–325 inserted ‘‘or a small business related security’’ after ‘‘mortgage related se- curity’’ in last sentence. 1984—Subsec. (a). Pub. L. 98–440 inserted provision that no person shall be deemed to have borrowed within the ordinary course of business, within the meaning of this subsection, by reason of a bona fide agreement for delayed delivery of a mortgage related security under certain conditions. 1975—Pub. L. 94–29, § 5(1), substituted ‘‘any registered broker or dealer, member of a national securities ex- change, or broker or dealer who transacts a business in securities through the medium of any member of a na- tional securities exchange’’ for ‘‘any member of a na- tional securities exchange, or any broker or dealer who transacts a business in securities through the medium of any such member’’ in provisions preceding subsec. (a). Subsecs. (b) to (d). Pub. L. 94–29, § 5(2), redesignated subsecs. (c) and (d) as (b) and (c), respectively, and in subsec. (c) as so redesignated inserted ‘‘or in contraven- tion of such rules and regulations as the Commissioner shall prescribe for the protection of investors’’ after ‘‘written consent of such customer’’. Former subsec. (b), which covered the maximum allowable aggregate indebtedness of brokers, was struck out. Statutory Notes and Related Subsidiaries CHANGE OF NAME Act Aug. 23, 1935, substituted ‘‘Board of Governors of the Federal Reserve System’’ for ‘‘Federal Reserve Board’’. EFFECTIVE DATE OF 1975 AMENDMENT Amendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title. Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 78i. Manipulation of security prices (a) Transactions relating to purchase or sale of security It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities ex- change— (1) For the purpose of creating a false or misleading appearance of active trading in any security other than a government security, or a false or misleading appearance with respect to the market for any such security, (A) to ef- fect any transaction in such security which in- volves no change in the beneficial ownership thereof, or (B) to enter an order or orders for the purchase of such security with the knowl- edge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or (C) to enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties. (2) To effect, alone or with 1 or more other persons, a series of transactions in any secu- rity registered on a national securities ex- change, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent ac-