|
CHAPTER X
Registration, Responsibilities and Oversight of Self-Regulatory Organizations
SEC. 39. Associations of Securities Brokers, and
Dealers, and Other Securities Related Organizations.
39.1. The Commission
shall have the power to register as a self-regulatory organization, or
otherwise grant licenses, and to regulate, supervise, examine, suspend or
otherwise discontinue, as a condition for the operation of organizations whose
operations are related to or connected with the securities market such as but
not limited to associations of brokers and dealers, transfer agents, custodians,
fiscal and paying agents, computer services, news disseminating services, proxy
solicitors, statistical agencies, securities rating agencies, and securities
information processors which are engaged in the business of: (a) 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; or
(b) 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 Commission may
prescribe rules and regulations which are necessary or appropriate in the
public interest or for the protection of investors to govern self-regulatory
organizations and other organizations licensed or regulated pursuant to the
authority granted in Subsection 39.1 including the requirement of cooperation
within and among, and electronic integration of the records of, all
participants in the securities market to ensure transparency and facilitate
exchange of information.
39.2. An association
of brokers and dealers may be registered as a securities association pursuant
to Subsection 39.3 by filing with the Commission an application for
registration in such form as the Commission, by rule, may prescribe containing
the rules of the association and such other information and documents as the
Commission, by rule, may prescribe as necessary or appropriate in the public
interest or for the protection of investors.
39.3.
An association
of brokers and dealers shall not be registered as a securities association
unless the Commission determines that:
a)
The association is
so organized and has the capacity to be able to carry out the purposes of this
Code and to comply with, and to enforce compliance by its members and persons
associated with its members, with the provisions of this Code, the rules and
regulations thereunder, and the rules of the association.
b)
The rules of the
association, notwithstanding anything in the Corporation Code to the contrary,
provide that:
(i)
Any registered
broker or dealer may become a member of the association;
(ii)
There exist a
fair representation of its members to serve on the Board of Directors of the
association and in the administration of its affairs, and that any natural
person associated with a juridical entity that is a member shall himself be
deemed to be a member for this purpose;
(iii)
The Board of
Directors of the association includes in its composition: (a) The president of
the association and (b) Persons who represent the interests of issuers and
public investors and are not associated with any broker or dealer or member of
the association; that the president and other management of the association not
be a member or associated with any broker, dealer or member of the association;
(iv)
For the equitable
allocation of reasonable dues, fees, and other charges among members and issuers
and other persons using any facility or system which the association operates
or controls;
(v)
For the prevention
of fraudulent and manipulative acts and practices, the promotion of just and
equitable principles of trade, and, in general, the protection of investors and
the public interest;
(vi)
That its members
and persons associated with its members shall be appropriately disciplined for
violation of any provision of this Code, the rules or regulations thereunder,
or the rules of the association;
(vii)
That a fair
procedure for the disciplining of members and persons associated with members,
the denial of membership to any person seeking membership therein, the barring
of any person from becoming associated with a member thereof, and the
prohibition or limitation by the association of any person with respect to
access to services offered by the association or a member thereof.
39.4. a)
A registered securities association shall
deny membership to any person who is not a registered broker or dealer.
b)
A registered
securities association may deny membership to, or condition the membership of,
a registered broker or dealer if such broker or dealer:
(i)
Does not meet the
standards of financial responsibility, operational capability, training,
experience, or competence that are prescribed by the rules of the association;
or
(ii)
Has engaged, and
there is a reasonable likelihood it will again engage, in acts or practices
inconsistent with just and equitable principles of fair trade.
c)
A registered securities
association may deny membership to a registered broker or dealer not engaged in
a type of business in which the rules of the association require members to be
engaged: Provided, however, That no
registered securities association may deny membership to a registered broker or
dealer by reason of the amount of business done by the broker or dealer.
A registered
securities association may examine and verify the qualifications of an
applicant to become a member in accordance with procedures established by the
rules of the association.
d)
A registered
securities association may bar a salesman or person associated with a broker or
dealer from being employed by a member or set conditions for the employment of
a salesman or associated if such person:
(i)
Does not meet the
standards of training, experience, or competence that are prescribed by the
rules of the association; or
(ii)
Has engaged, and
there is a reasonable likelihood he will again engage, in acts or practices
inconsistent with just and equitable principles of fair trade.
A registered
securities association may examine and verify the qualifications of an
applicant to become a salesman or associated person employed by a member in
accordance with procedures established by the rules of the association. A registered association also may require a
salesman or associated person employed by a member to be registered with the
association in accordance with procedures prescribed in the rules of the
association.
39.5.
In any
proceeding by a registered securities association to determine whether a person
shall be denied membership, or barred from association with a member, the
association shall provide notice to the person under review of the specific
grounds being considered for denial, afford him an opportunity to defend
against the allegations, and keep a record of the proceedings. A determination by the association to deny
membership shall be supported by a statement setting forth the specific grounds
on which the denial is based.
SEC. 40. Powers with Respect to Self-Regulatory
Organizations.
40.1. Upon the filing of an application for
registration as an Exchange under Section 33, a registered securities
association under Section 39, a registered clearing agency under Section 42, or
other self-regulatory organization under this Section, the Commission shall
have ninety (90) days within which to either grant registration or institute a
proceeding to determine whether registration should be denied. In the event
proceedings are instituted, the Commission shall have two hundred seventy (270)
days within which to conclude such proceedings at which time it shall, by
order, grant or deny such registration.
40.2. Every
self-regulatory organization shall comply with the provisions of this Code, the
rules and regulations thereunder, and its own rules, and enforce compliance
therewith, notwithstanding any provision of the Corporation Code to the
contrary, by its members, persons associated with its members or its
participants.
40.3. a)
Each self-regulatory organization shall
submit to the Commission for prior approval any proposed rule or amendment
thereto, together with a concise statement of the reason and effect of the
proposed amendment.
b)
Within sixty (60)
days after submission of a proposed amendment, the Commission shall, by order,
approve the proposed amendment. Otherwise, the same may be made effective by
the self-regulatory organization.
c)
In the event of an
emergency requiring action for the protection of investors, the maintenance of
fair and orderly markets, or the safeguarding of securities and funds, a
self-regulatory organization may put a proposed amendment into effect
summarily: Provided, however, That a
copy of the same shall be immediately submitted to the Commission.
40.4.
The Commission
is further authorized, if after making appropriate request in writing to a
self-regulatory organization that such organization effect on its own behalf
specified changes in its rules and practices and, after due notice and hearing
it determines that such changes have not been effected, and that such changes
are necessary, by rule or regulation or by order, may alter, abrogate or
supplement the rules of such self-regulatory organization in so far as
necessary or appropriate to effect such changes in respect of such matters as:
a)
Safeguards in
respect of the financial responsibility of members and adequate provision
against the evasion of financial responsibility through the use of corporate
forms or special partnerships;
b)
The supervision of
trading practices;
c)
The listing or
striking from listing of any security;
d)
Hours of trading;
e)
The manner, method,
and place of soliciting business;
f)
Fictitious
accounts;
g)
The time and method
of making settlements, payments, and deliveries, and of closing accounts;
h)
The transparency of
securities transactions and prices;
i)
The fixing of
reasonable rates of fees, interest, listing and other charges, but not rates of
commission;
j)
Minimum units of
trading;
k)
Odd-lot purchases
and sales;
l)
Minimum deposits on
margin accounts; and
m)
The supervision,
auditing and disciplining of members or participants
40.5. The Commission,
after due notice and hearing, is authorized, in the public interest and to
protect investors:
a)
To suspend for a
period not exceeding twelve (12) months or to revoke the registration of a
self-regulatory organization, or to censure or impose limitations on the
activities, functions, and operations of such self-regulatory organization, if
the Commission finds that such a self-regulatory organization has willfully
violated or is unable to comply with any provision of this Code or of the rules
and regulations thereunder, or its own rules, or has failed to enforce
compliance therewith by a member of, person associated with a member, or a
participant in such self-regulatory organization;
b)
To expel from a
self-regulatory organization any member thereof or any participant therein who
is subject to an order of the Commission under Section 29 of this Code or is
found to have willfully violated any provision of this Code or suspend for a
period not exceeding twelve (12) months for violation of any provision of this
Code or any other laws administered by the Commission, or the rules and
regulations thereunder, or effected, directly or indirectly, any transaction
for any person who, such member or participant had reason to believe, was
violating in respect of such transaction any of such provisions; and
c)
To remove from
office or censure any officer or director of a self-regulatory organization if
it finds that such officer or director has violated any provision of this Code,
any other law administered by the Commission, the rules or regulations
thereunder, or the rules of such self-regulatory organization, abused his
authority, or without reasonable justification or excuse has failed to enforce
compliance with any of such provisions.
40.6.
a) A
self-regulatory organization is authorized to discipline a member of or
participant in such self-regulatory organization, or any person associated with
a member, including the suspension or expulsion of such member or participant,
and the suspension or bar from being associated with a member, if such person
has engaged in acts or practices inconsistent with just and equitable
principles of fair trade or in willful violation of any provision of the Code,
any other law administered by the Commission, the rules or regulations
thereunder, or the rules of the self-regulatory organization. In any disciplinary proceeding by a
self-regulatory organization (other than a summary proceeding pursuant to
paragraph (b) of this subsection) the self-regulatory organization shall bring
specific charges, provide notice to the person charged, afford the person
charged with an opportunity to defend against the charges, and keep a record of
the proceedings. A determination to
impose a disciplinary sanction shall be supported by a written statement of the
offense, a summary of the evidence presented and a statement of the sanction imposed.
b)
A self-regulatory
organization may summarily: (i) Suspend a member, participant or person
associated with a member who has been or is expelled or suspended from any
other self-regulatory organization; or (ii) Suspend a member who the
self-regulatory organization finds to be in such financial or operating
difficulty that the member or participant cannot be permitted to continue to do
business as a member with safety to investors, creditors, other members,
participants or the self-regulatory organization: Provided, That the self-regulatory organization immediately
notifies the Commission of the action taken. Any person aggrieved by a summary action pursuant to this paragraph
shall be promptly afforded an opportunity for a hearing by the association in
accordance with the provisions of paragraph a) of this subsection. The Commission, by order, may stay a summary
action on its own motion or upon application by any person aggrieved thereby,
if the Commission determines summarily or after due notice and hearing (which
hearing may consist solely of the submission of affidavits or presentation of
oral arguments) that a stay is consistent with the public interest and the
protection of investors.
40.7. A self-regulatory organization shall
promptly notify the Commission of any disciplinary sanction on any member
thereof or participant therein, any denial of membership or participation in
such organization, or the imposition of any disciplinary sanction on a person
associated with a member or a bar of such person from becoming so associated. Within thirty (30) days after such notice,
any aggrieved person may appeal to the Commission from, or the Commission on
its own motion within such period, may institute review of, the decision of the
self-regulatory organization, at the conclusion of which, after due notice and
hearing (which may consist solely of review of the record before the
self-regulatory organization), the Commission shall affirm, modify or set aside
the sanction. In such proceeding the
Commission shall determine whether the aggrieved person has engaged or omitted
to engage in the acts and practices as found by the self-regulatory
organization, whether such acts and practices constitute willful violations of
this Code, any other law administered by the Commission, the rules or regulations
thereunder, or the rules of the self-regulatory organization as specified by
such organization, whether such provisions were applied in a manner consistent
with the purposes of this Code, and whether, with due regard for the public
interest and the protection of investors the sanction is excessive or
oppressive.
40.8. The powers of the Commission under this
section shall apply to organized exchanges and registered clearing agencies.
<<Previous
Top Next>>
|
