15 U.S.C. § 78j — Manipulative and deceptive devices

Page 269 TITLE 15—COMMERCE AND TRADE § 78j 1 So in original. Probably should be followed by a comma. Subsec. (b)(1) to (3). Pub. L. 111–203, § 763(f), added pars. (1) to (3) and struck out former pars. (1) to (3) which read as follows: ‘‘(1) any transaction in connection with any security whereby any party to such transaction acquires (A) any put, call, straddle, or other option or privilege of buy- ing the security from or selling the security to another without being bound to do so; or (B) any security fu- tures product on the security; or ‘‘(2) any transaction in connection with any security with relation to which he has, directly or indirectly, any interest in any (A) such put, call, straddle, option, or privilege; or (B) such security futures product; or ‘‘(3) any transaction in any security for the account of any person who he has reason to believe has, and who actually has, directly or indirectly, any interest in any (A) such put, call, straddle, option, or privilege; or (B) such security futures product with relation to such se- curity.’’ Subsec. (c). Pub. L. 111–203, § 929L(1)(C), inserted ‘‘broker, dealer, or’’ after ‘‘unlawful for any’’. Pub. L. 111–203, § 929L(1)(A), substituted ‘‘other than a government security’’ for ‘‘registered on a national se- curities exchange’’. Subsecs. (d) to (i). Pub. L. 111–203, § 929X(b), added subsec. (d) and redesignated former subsecs. (d) to (h) as (e) to (i), respectively. Former subsec. (i), relating to limitation on Commission authority, redesignated (j). Subsec. (j). Pub. L. 111–203, § 929X(b)(1), redesignated subsec. (i), relating to limitation on Commission au- thority, as (j). Pub. L. 111–203, § 763(g), added subsec. (j) relating to regulations relating to security-based swaps. Pub. L. 111–203, § 762(d)(2)(B), which directed amend- ment of subsec. (i) by striking out ‘‘(as defined in sec- tion 206B of the Gramm-Leach-Bliley Act)’’, was exe- cuted by making the strike out after ‘‘security-based swap agreements’’ in subsec. (j) relating to limitation on Commission authority, to reflect the probable in- tent of Congress and the redesignation of subsec. (i) as (j) by Pub. L. 111–203, § 929X(b)(1). See above and Effec- tive Date of 2010 Amendment notes below. 2000—Subsec. (a)(2) to (5). Pub. L. 106–554, § 1(a)(5) [title III, § 303(b)], amended pars. (2) to (5) generally. Prior to amendment, pars. (2) to (5) read as follows: ‘‘(2) To effect, alone or with one or more other per- sons, a series of transactions in any security registered on a national securities exchange creating actual or ap- parent active trading in such security or raising or de- pressing the price of such security, for the purpose of inducing the purchase or sale of such security by oth- ers. ‘‘(3) If a dealer or broker, or other person selling or offering for sale or purchasing or offering to purchase the security, to induce the purchase or sale of any secu- rity registered on a national securities exchange by the circulation or dissemination in the ordinary course of business of information to the effect that the price of any such security will or is likely to rise or fall because of market operations of any one or more persons con- ducted for the purpose of raising or depressing the prices of such security. ‘‘(4) If a dealer or broker, or other person selling or offering for sale or purchasing or offering to purchase the security, to make, regarding any security reg- istered on a national securities exchange, for the pur- pose of inducing the purchase or sale of such security, 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, and which he knew or had reasonable ground to believe was so false or misleading. ‘‘(5) For a consideration, received directly or indi- rectly from a dealer or broker, or other person selling or offering for sale or purchasing or offering to pur- chase the security, to induce the purchase or sale of any security registered on a national securities ex- change by the circulation or dissemination of informa- tion to the effect that the price of any such security will or is likely to rise or fall because of the market op- erations of any one or more persons conducted for the purpose of raising or depressing the price of such secu- rity.’’ Subsec. (b)(1). Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(1)(A)], inserted ‘‘(A)’’ after ‘‘acquires’’ and sub- stituted ‘‘; or (B) any security futures product on the security; or’’ for ‘‘; or’’. Subsec. (b)(2). Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(1)(B)], inserted ‘‘(A)’’ after ‘‘interest in any’’ and substituted ‘‘; or (B) such security futures product; or’’ for ‘‘; or’’. Subsec. (b)(3). Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(1)(C)], inserted ‘‘(A)’’ after ‘‘interest in any’’ and ‘‘; or (B) such security futures product’’ after ‘‘privilege’’. Subsec. (g). Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(2)], designated existing provisions as par. (1), in- serted ‘‘other than a security futures product’’ after ‘‘future delivery’’, and added par. (2). Subsec. (i). Pub. L. 106–554, § 1(a)(5) [title III, § 303(c)], added subsec. (i). 1990—Subsec. (h). Pub. L. 101–432 added subsec. (h). 1982—Subsec. (f). Pub. L. 97–303, § 3(1), substituted ‘‘The provisions of subsection (a) shall not apply’’ for ‘‘The provisions of this section shall not apply’’. Subsec. (g). Pub. L. 97–303, § 3(2), added subsec. (g). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by sections 929L(1) and 929X(b) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as oth- erwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 Title 12, Banks and Banking. Amendment by sections 762(d)(2) and 763(f), (g) of Pub. L. 111–203 effective 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 rule- making, not less than 60 days after publication of the final rule or regulation 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. 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. § 78j. Manipulative and deceptive devices It shall be unlawful for any person, directly or indirectly, by the use of any means or instru- mentality of interstate commerce or of the mails, or of any facility of any national securi- ties exchange— (a)(1) To effect a short sale, or to use or em- ploy any stop-loss order in connection with the purchase or sale, of any security other than a government security, in contravention of such rules and regulations as the Commis- sion may prescribe as necessary or appropriate in the public interest or for the protection of investors. (2) Paragraph (1) of this subsection shall not apply to security futures products. (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement 1 any manipulative or deceptive de- Page 270 TITLE 15—COMMERCE AND TRADE § 78j–1 vice or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of inves- tors. (c)(1) To effect, accept, or facilitate a trans- action involving the loan or borrowing of secu- rities in contravention of such rules and regu- lations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. (2) Nothing in paragraph (1) may be con- strued to limit the authority of the appro- priate Federal banking agency (as defined in section 1813(q) of title 12), the National Credit Union Administration, or any other Federal department or agency having a responsibility under Federal law to prescribe rules or regula- tions restricting transactions involving the loan or borrowing of securities in order to pro- tect the safety and soundness of a financial in- stitution or to protect the financial system from systemic risk. Rules promulgated under subsection (b) that prohibit fraud, manipulation, or insider trading (but not rules imposing or specifying reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading), and ju- dicial precedents decided under subsection (b) and rules promulgated thereunder that prohibit fraud, manipulation, or insider trading, shall apply to security-based swap agreements to the same extent as they apply to securities. Judicial precedents decided under section 77q(a) of this title and sections 78i, 78o, 78p, 78t, and 78u–1 of this title, and judicial precedents decided under applicable rules promulgated under such sec- tions, shall apply to security-based swap agree- ments to the same extent as they apply to secu- rities. (June 6, 1934, ch. 404, title I, § 10, 48 Stat. 891; Pub. L. 106–554, § 1(a)(5) [title II, § 206(g), title III, § 303(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–432, 2763A–454; Pub. L. 111–203, title VII, § 762(d)(3), title IX, §§ 929L(2), 984(a), July 21, 2010, 124 Stat. 1761, 1861, 1932.) Editorial Notes AMENDMENTS 2010—Pub. L. 111–203, § 762(d)(3)(B), which directed amendment of the matter following subsection (b) ‘‘by striking ‘(as defined in section 206B of the Gramm- Leach-Bliley Act), in each place that such terms ap- pear’ ’’, was executed by striking out ‘‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’’ after ‘‘security-based swap agreements’’ in two places in con- cluding provisions following subsec. (c) to reflect the probable intent of Congress. Subsec. (a)(1). Pub. L. 111–203, § 929L(2), substituted ‘‘other than a government security’’ for ‘‘registered on a national securities exchange’’. Subsec. (b). Pub. L. 111–203, § 762(d)(3)(A), struck out ‘‘(as defined in section 206B of the Gramm-Leach-Bliley Act),’’ after ‘‘securities-based swap agreement’’. Subsec. (c). Pub. L. 111–203, § 984(a), which directed amendment of this section by adding subsec. (c) at the end, was executed by adding subsec. (c) after subsec. (b) to reflect the probable intent of Congress. 2000—Pub. L. 106–554, § 1(a)(5) [title III, § 303(d)(2)], in- serted concluding provisions at end. Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 206(g)], designated existing provisions as par. (1) and added par. (2). Subsec. (b). Pub. L. 106–554, § 1(a)(5) [title III, § 303(d)(1)], inserted ‘‘or any securities-based swap agreement (as defined in section 206B of the Gramm- Leach-Bliley Act),’’ before ‘‘any manipulative or decep- tive device’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by sections 929L(2) and 984(a) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as oth- erwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 Title 12, Banks and Banking. Amendment by section 762(d)(3) of Pub. L. 111–203 ef- fective 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 regulation 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. REGULATIONS Pub. L. 111–203, title IX, § 984(b), July 21, 2010, 124 Stat. 1933, provided that: ‘‘Not later than 2 years after the date of enactment of this Act [July 21, 2010], the Commission shall promulgate rules that are designed to increase the transparency of information available to brokers, dealers, and investors, with respect to the loan or borrowing of securities.’’ [For definitions of terms used in section 984(b) of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.] PROHIBITION OF INSIDER TRADING Pub. L. 112–105, § 4(a), Apr. 4, 2012, 126 Stat. 292, pro- vided that: ‘‘Members of Congress and employees of Congress are not exempt from the insider trading pro- hibitions arising under the securities laws, including section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. 78j(b)] and Rule 10b–5 thereunder.’’ [For definitions of ‘‘Member of Congress’’ and ‘‘em- ployee of Congress’’, see section 2 of Pub. L. 112–105, set out as a Definitions note under section 13101 of Title 5, Government Organization and Employees.] APPLICATION OF INSIDER TRADING LAWS Pub. L. 112–105, § 9(b)(1), Apr. 4, 2012, 126 Stat. 297, pro- vided that: ‘‘Executive branch employees, judicial offi- cers, and judicial employees are not exempt from the insider trading prohibitions arising under the securities laws, including section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. 78j(b)] and Rule 10b–5 thereunder.’’ [For definitions of ‘‘executive branch employees’’, ‘‘judicial officers’’, and ‘‘judicial employees’’, see sec- tion 2 of Pub. L. 112–105, set out as a Definitions note under section 13101 of Title 5, Government Organization and Employees.] 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. § 78j–1. Audit requirements (a) In general Each audit required pursuant to this chapter of the financial statements of an issuer by a reg- istered public accounting firm shall include, in