SECTION
11(a) OF THE SECURITIES EXCHANGE ACT OF 1934
15
U.S.C. § 78k(a) (1988)
(1) It
shall be unlawful for any member of a national securities exchange to effect
any transaction on such exchange for its own account, the account of an
associated person, or an account with respect to which it or an associated
person thereof exercises investment discretion: Provided, however, That this
paragraph shall not make unlawful
(A) any
transaction by a dealer acting in the capacity of market maker;
(B) any
transaction for the account of an odd‑lot dealer in a security in which
he is so registered;
(C) any
stabilizing transaction effected in compliance with rules under section 78j(b)
of this title to facilitate a distribution of a security in which the member
effecting such transaction is participating;
(D) any
bona fide arbitrage transaction, any bona fide hedge transaction involving a
long or short position in an equity security and a long or short position in a
security entitling the holder to acquire or sell such equity security, or any
risk arbitrage transaction in connection with a merger, acquisition, tender
offer, or similar transaction involving a recapitalization;
(E) any
transaction for the account of a natural person, the estate of a natural
person, or a trust (other than an investment company) created by a natural
person for himself or another natural person;
(F) any
transaction to offset a transaction made in error;
(G) any
other transaction for a member's own account provided that (i) such member is
primarily engaged in the business of underwriting and distributing securities
issued by other persons, selling securities to customers, and acting as broker,
or any one or more of such activities, and whose gross income normally is
derived principally from such business and related activities and (ii) such
transaction is effected in compliance with rules of the Commission which, as a
minimum, assure that the transaction is not inconsistent with the maintenance
of fair and orderly markets and yields priority, parity, and precedence in
execution to orders for the account of persons who are not members or
associated with members of the exchange; and
(H) any
other transaction of a kind which the Commission, by rule, determines is
consistent with the purposes of this paragraph, the protection of investors,
and the maintenance of fair and orderly markets.
(2) The
Commission, by rule, as it deems necessary or appropriate in the public
interest and for the protection of investors, to maintain fair and orderly markets,
or to assure equal regulation of exchange markets and markets occurring
otherwise than on an exchange, may regulate or prohibit:
(A)
transactions on a national securities exchange not unlawful under paragraph (1)
of this subsection effected by any member thereof for its own account (unless
such member is acting in the capacity of market maker or odd-lot dealer), the
account of an associated person, or an account with respect to which such
member or an associated person thereof exercises investment discretion;
(B)
transactions otherwise than on a national securities exchange effected by use
of the mails or any means or instrumentality of interstate commerce by any
member of a national securities exchange, broker, or dealer for the account of
such member, broker, or dealer (unless such member, broker, or dealer is acting
in the capacity of a market maker) the account of an associated person, or an
account with respect to which such member, broker, or dealer or associated
person thereof exercises investment discretion; and
(C)
transactions on a national securities exchange effected by any broker or dealer
not a member thereof for the account of such broker or dealer (unless such
broker or dealer is acting in the capacity of market maker), the account of an
associated person, or an account with respect to which such broker or dealer or
associated person thereof exercises investment discretion.
(3) The
provisions of paragraph (1) of this subsection insofar as they apply to
transactions on a national securities exchange effected by a member thereof who
was a member on February 1, 1978 shall not become effective until February 1,
1979. Nothing in this paragraph shall
be construed to impair or limit the authority of the Commission to regulate or
prohibit such transactions prior to February 1, 1979, pursuant to paragraph (2)
of this subsection.
SECTION
28(e) OF THE SECURITIES EXCHANGE ACT OF 1934
15
U.S.C. § 78bb(e) (1988)
(1) No
person using the mails, or any means or instrumentality of interstate commerce,
in the exercise of investment discretion with respect to an account shall be
deemed to have acted unlawfully or to have breached a fiduciary duty under
State or Federal law unless expressly provided to the contrary by a law enacted
by the Congress or any State subsequent to June 4, 1975, solely by reason of
his having caused the account to pay a member of an exchange, broker, or dealer
an amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker, or dealer would
have charged for effecting that transaction, if such person determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker, or dealer,
viewed in terms of either that particular transaction or his overall
responsibilities with respect to the accounts as to which he exercises
investment discretion. This subsection
is exclusive and plenary insofar as conduct is covered by the foregoing, unless
otherwise expressly provided by contract: Provided, however, That nothing in
this subsection shall be construed to impair or limit the power of the
Commission under any other provision of this chapter or otherwise.
(2) A
person exercising investment discretion with respect to an account shall make
such disclosure of his policies and practices with respect to commissions that
will be paid for effecting securities transactions, at such times and in such
manner, as the appropriate regulatory agency, by rule, may prescribe as
necessary or appropriate in the public interest or for the protection of
investors.
(3) For
purposes of this subsection a person provides brokerage and research services
insofar as he-
(A)
furnishes advice, either directly or through publications or writings, as to
the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities;
(B)
furnishes analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; or
(C)
effects securities transactions and performs functions incidental thereto (such
as clearance, settlement, and custody) or required in connection therewith by
rules of the Commission or a self-regulatory organization of which such person
is a member or person associated with a member or in which such person is a
participant.