15 U.S.C. § 78h — Restrictions on borrowing and lending by

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-