---
kind: "range"
citation: "15 U.S.C. §§ 77a–77aa"
title: "15"
from: "77a"
to: "77aa"
count: 36
release: "119-102"
url: "https://uscodex.org/usc/15/77a..77aa"
---

# §77a. Short title


This subchapter may be cited as the “Securities Act of 1933”.


# §77b. Definitions; promotion of efficiency, competition, and capital formation

- (a) **Definitions—** When used in this subchapter, unless the context otherwise requires—
  - (1) The term “security” means any note, stock, treasury stock, [security future](#a-16), [security-based swap](#a-17), bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing [agreement](/usc/15/7a.md?p=2), collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a [national securities exchange](/usc/15/9009a.md?p=a-5) relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or [purchase](#a-18), any of the foregoing.
  - (2) The term “person” means an individual, a corporation, a partnership, an [association](/usc/15/657h.md?p=a-2), a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof. As used in this paragraph the term “trust” shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a [security](#a-1).
  - (3) The term “sale” or “sell” shall include every contract of sale or disposition of a [security](#a-1) or interest in a [security](#a-1), for value. The term “offer to sell”, “offer for sale”, or “offer” shall include every attempt or offer to dispose of, or solicitation of an offer to buy, a [security](#a-1) or interest in a [security](#a-1), for value. The terms defined in this paragraph and the term “offer to buy” as used in subsection (c) of [section 77e of this title](/usc/15/77e.md) shall not include preliminary negotiations or [agreements](/usc/15/7a.md?p=2) between an [issuer](#a-4) (or any [person](/usc/15/78m.md?p=h-8-E) directly or indirectly controlling or controlled by an [issuer](#a-4), or under direct or indirect common control with an [issuer](#a-4)) and any underwriter or among underwriters who are or are to be in privity of contract with an [issuer](#a-4) (or any [person](/usc/15/78m.md?p=h-8-E) directly or indirectly controlling or controlled by an [issuer](#a-4), or under direct or indirect common control with an [issuer](#a-4)). Any [security](#a-1) given or delivered with, or as a bonus on [account](/usc/15/1681a.md?p=r-4) of, any [purchase](#a-18) of [securities](#a-1) or any other thing, shall be conclusively presumed to constitute a part of the subject of such [purchase](#a-18) and to have been offered and sold for value. The issue or transfer of a right or privilege, when originally issued or transferred with a [security](#a-1), giving the holder of such [security](#a-1) the right to convert such [security](#a-1) into another [security](#a-1) of the same [issuer](#a-4) or of another [person](/usc/15/78m.md?p=h-8-E), or giving a right to subscribe to another [security](#a-1) of the same [issuer](#a-4) or of another [person](/usc/15/78m.md?p=h-8-E), which right cannot be exercised until some future date, shall not be deemed to be an offer or sale of such other [security](#a-1); but the issue or transfer of such other [security](#a-1) upon the exercise of such right of conversion or subscription shall be deemed a sale of such other [security](#a-1). Any offer or sale of a [security futures product](#a-16) by or on behalf of the [issuer](#a-4) of the [securities](#a-1) underlying the [security futures product](#a-16), an affiliate of the [issuer](#a-4), or an underwriter, shall constitute a contract for sale of, sale of, offer for sale, or offer to sell the underlying [securities](#a-1). Any offer or sale of a [security-based swap](#a-17) by or on behalf of the [issuer](#a-4) of the [securities](#a-1) upon which such [security-based swap](#a-17) is based or is referenced, an affiliate of the [issuer](#a-4), or an underwriter, shall constitute a contract for sale of, sale of, offer for sale, or offer to sell such [securities](#a-1). The publication or distribution by a [broker or dealer](/usc/15/78c.md?p=h-2) of a research report about an [emerging growth company](#a-19) that is the subject of a proposed public offering of the common [equity securities](/usc/15/9041.md?p=6) of such [emerging growth company](#a-19) pursuant to a [registration statement](#a-8) that the [issuer](#a-4) proposes to file, or has filed, or that is effective shall be deemed for purposes of paragraph (10) of this subsection and [section 77e(c) of this title](/usc/15/77e.md?p=c) not to constitute an offer for sale or offer to sell a [security](#a-1), even if the [broker or dealer](/usc/15/78c.md?p=h-2) is participating or will participate in the registered offering of the [securities](#a-1) of the [issuer](#a-4). As used in this paragraph, the term “research report” means a [written](#a-9), electronic, or oral communication that includes information, opinions, or recommendations with respect to [securities](#a-1) of an [issuer](#a-4) or an analysis of a [security](#a-1) or an [issuer](#a-4), whether or not it provides information reasonably sufficient upon which to base an investment decision.
  - (4) The term “issuer” means every [person](/usc/15/78m.md?p=h-8-E) who issues or proposes to issue any [security](#a-1); except that with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a [board](/usc/15/205c.md?p=1) of directors (or [persons](/usc/15/78m.md?p=h-8-E) performing similar functions) or of the fixed, restricted management, or unit type, the term “issuer” means the [person](/usc/15/78m.md?p=h-8-E) or [persons](/usc/15/78m.md?p=h-8-E) performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other [agreement](/usc/15/7a.md?p=2) or instrument under which such [securities](#a-1) are issued; except that in the case of an unincorporated [association](/usc/15/657h.md?p=a-2) which provides by its articles for limited liability of any or all of its members, or in the case of a trust, [committee](/usc/15/2921.md?p=1), or other legal entity, the trustees or members thereof shall not be individually liable as issuers of any [security](#a-1) issued by the [association](/usc/15/657h.md?p=a-2), trust, [committee](/usc/15/2921.md?p=1), or other legal entity; except that with respect to equipment-trust certificates or like [securities](#a-1), the term “issuer” means the [person](/usc/15/78m.md?p=h-8-E) by whom the equipment or property is or is to be used; and except that with respect to fractional undivided interests in oil, gas, or other mineral rights, the term “issuer” means the owner of any such right or of any interest in such right (whether whole or fractional) who creates fractional interests therein for the purpose of public offering.
  - (5) The term “Commission” means the [Securities](#a-1) and [Exchange](/usc/15/636.md?p=a-36-A-xvi) Commission.
  - (6) The term “Territory” means Puerto Rico, the Virgin Islands, and the insular possessions of the United States.
  - (7) The term “interstate commerce” means trade or commerce in [securities](#a-1) or any transportation or communication relating thereto among the several [States](/usc/15/15g.md?p=2) or between the District of Columbia or any [Territory](#a-6) of the United States and any [State](/usc/15/15g.md?p=2) or other [Territory](#a-6), or between any foreign country and any [State](/usc/15/15g.md?p=2), [Territory](#a-6), or the District of Columbia, or within the District of Columbia.
  - (8) The term “registration statement” means the statement provided for in [section 77f of this title](/usc/15/77f.md), and includes any amendment thereto and any report, document, or memorandum filed as part of such statement or incorporated therein by reference.
  - (9) The term “write” or “written” shall include printed, lithographed, or any means of graphic communication.
  - (10) The term “prospectus” means any prospectus, notice, circular, advertisement, letter, or communication, [written](#a-9) or by radio or television, which offers any [security](#a-1) for sale or confirms the sale of any [security](#a-1); except that (a) a communication sent or given after the effective date of the [registration statement](#a-8) (other than a prospectus permitted under subsection (b) of [section 77j of this title](/usc/15/77j.md)) shall not be deemed a prospectus if it is proved that prior to or at the same time with such communication a [written](#a-9) prospectus meeting the requirements of subsection (a) of [section 77j of this title](/usc/15/77j.md) at the time of[^1] such communication was sent or given to the [person](/usc/15/78m.md?p=h-8-E) to whom the communication was made, and (b) a notice, circular, advertisement, letter, or communication in respect of a [security](#a-1) shall not be deemed to be a prospectus if it [states](/usc/15/15g.md?p=2) from whom a [written](#a-9) prospectus meeting the requirements of [section 77j of this title](/usc/15/77j.md) may be obtained and, in addition, does no more than identify the [security](#a-1), [state](/usc/15/15g.md?p=2) the price thereof, [state](/usc/15/15g.md?p=2) by whom [orders](/usc/15/8702.md?p=14) will be executed, and contain such other information as the [Commission](#a-5), by rules or regulations deemed necessary or appropriate in the public interest and for the protection of investors, and subject to such terms and conditions as may be prescribed therein, may permit.
  - (11) The term “underwriter” means any [person](/usc/15/78m.md?p=h-8-E) who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any [security](#a-1), or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a [person](/usc/15/78m.md?p=h-8-E) whose interest is limited to a [commission](#a-5) from an underwriter or [dealer](#a-12) not in excess of the usual and customary [distributors](/usc/15/1278.md?p=c-1-D-i)’ or sellers’ [commission](#a-5). As used in this paragraph the term “issuer” shall include, in addition to an issuer, any [person](/usc/15/78m.md?p=h-8-E) directly or indirectly controlling or controlled by the issuer, or any [person](/usc/15/78m.md?p=h-8-E) under direct or indirect common control with the issuer.
  - (12) The term “dealer” means any [person](/usc/15/78m.md?p=h-8-E) who engages either for all or part of his time, directly or indirectly, as agent, [broker](/usc/15/6102.md?p=d-2-B-i), or principal, in the business of offering, buying, selling, or otherwise dealing or trading in [securities](#a-1) issued by another [person](/usc/15/78m.md?p=h-8-E).
  - (13) The term “insurance company” means a company which is organized as an insurance company, whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies, and which is subject to supervision by the insurance commissioner, or a similar official or agency, of a [State](/usc/15/15g.md?p=2) or [territory](#a-6) or the District of Columbia; or any receiver or similar official or any liquidating agent for such company, in his capacity as such.
  - (14) The term “separate account” means an [account](/usc/15/1681a.md?p=r-4) established and maintained by an [insurance company](#a-13) pursuant to the laws of any [State](/usc/15/15g.md?p=2) or [territory](#a-6) of the United States, the District of Columbia, or of Canada or any province thereof, under which income, gains and losses, whether or not realized, from assets allocated to such [account](/usc/15/1681a.md?p=r-4), are, in accordance with the applicable contract, credited to or charged against such [account](/usc/15/1681a.md?p=r-4) without regard to other income, gains, or losses of the [insurance company](#a-13).
  - (15) The term “accredited investor” shall mean—
    - (i) a bank as defined in [section 77c(a)(2) of this title](/usc/15/77c.md?p=a-2) whether acting in its individual or fiduciary capacity; an [insurance company](#a-13) as defined in paragraph (13) of this subsection; an [investment company](/usc/15/77z–2.md?p=i-2) registered under the Investment Company Act of 1940 [[15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.] or a [business development company](/usc/15/80b–2.md?p=a-22) as defined in [section 2(a)(48)](/usc/15/2.md) of that Act [[15 U.S.C. 80a–2(a)(48)](/usc/15/80a–2.md?p=a-48)]; a [Small Business](/usc/15/1691c–2.md?p=h-2) [Investment Company](/usc/15/77z–2.md?p=i-2) licensed by the [Small Business](/usc/15/1691c–2.md?p=h-2) [Administration](/usc/15/2203.md?p=2); or an employee benefit plan, including an individual retirement [account](/usc/15/1681a.md?p=r-4), which is subject to the provisions of the Employee Retirement Income Security Act of 1974 [[29 U.S.C. 1001](/usc/29/1001.md) et seq.], if the investment decision is made by a plan fiduciary, as defined in [section 3(21)](/usc/15/3.md) of such Act [[29 U.S.C. 1002(21)](/usc/29/1002.md?p=21)], which is either a bank, [insurance company](#a-13), or registered [investment adviser](/usc/15/6102.md?p=d-2-B-ii); or
    - (ii) any [person](/usc/15/78m.md?p=h-8-E) who, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial matters, or amount of assets under management qualifies as an [accredited investor](#a-15) under rules and regulations which the [Commission](#a-5) shall prescribe.
  - (16) The terms “security future”, “narrow-based security index”, and “security futures product” have the same meanings as provided in [section 78c(a)(55) of this title](/usc/15/78c.md?p=a-55).
  - (17) The terms “swap” and “security-based swap” have the same meanings as in [section 1a of title 7](/usc/7/1a.md).
  - (18) The terms “purchase” or “sale” of a [security-based swap](#a-17) shall be deemed to mean the execution, termination (prior to its scheduled maturity date), assignment, [exchange](/usc/15/636.md?p=a-36-A-xvi), or similar transfer or conveyance of, or extinguishing of rights or obligations under, a [security-based swap](#a-17), as the context may require.
  - (19) The term “emerging growth company” means an [issuer](#a-4) that had total annual gross revenues of less than $1,000,000,000 (as such amount is indexed for inflation every 5 years by the [Commission](#a-5) to reflect the change in the [Consumer](/usc/15/1615.md?p=d-2) Price Index for All Urban [Consumers](/usc/15/1615.md?p=d-2) published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) during its most recently completed fiscal year. An [issuer](#a-4) that is an emerging growth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of—
    - (A) the last day of the fiscal year of the [issuer](#a-4) during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the [Commission](#a-5) to reflect the change in the [Consumer](/usc/15/1615.md?p=d-2) Price Index for All Urban [Consumers](/usc/15/1615.md?p=d-2) published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
    - (B) the last day of the fiscal year of the [issuer](#a-4) following the fifth anniversary of the date of the first sale of common [equity securities](/usc/15/9041.md?p=6) of the [issuer](#a-4) pursuant to an effective [registration statement](#a-8) under this subchapter;
    - (C) the date on which such [issuer](#a-4) has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or
    - (D) the date on which such [issuer](#a-4) is deemed to be a “large accelerated filer”, as defined in [section 240.12b–2 of title 17, Code of Federal Regulations](/cfr/17/240.12b–2.md), or any successor thereto.
- (b) **Consideration of promotion of efficiency, competition, and capital formation—** Whenever pursuant to this subchapter the [Commission](#a-5) is engaged in rulemaking and is required to consider or determine whether an action is necessary or appropriate in the public interest, the [Commission](#a-5) shall also consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.

# §77b–1. Swap agreements

- (a) **Reserved—**
- (b) **Security-based swap agreements—**
  - (1) The definition of “[security](/usc/15/77b.md?p=a-1)” in [section 77b(a)(1) of this title](/usc/15/77b.md?p=a-1) does not include any [security-based swap agreement](/usc/15/78c.md?p=a-78-A) (as defined in [section 78c(a)(78) of this title](/usc/15/78c.md?p=a-78)).
  - (2) The [Commission](/usc/15/77b.md?p=a-5) is prohibited from registering, or requiring, recommending, or suggesting, the registration under this subchapter of any [security-based swap agreement](/usc/15/78c.md?p=a-78-A) (as defined in [section 78c(a)(78) of this title](/usc/15/78c.md?p=a-78)). If the [Commission](/usc/15/77b.md?p=a-5) becomes aware that a registrant has filed a [registration statement](/usc/15/77b.md?p=a-8) with respect to such a [swap](/usc/15/77b.md?p=a-17) [agreement](/usc/15/7a.md?p=2), the [Commission](/usc/15/77b.md?p=a-5) shall promptly so notify the registrant. Any such [registration statement](/usc/15/77b.md?p=a-8) with respect to such a [swap](/usc/15/77b.md?p=a-17) [agreement](/usc/15/7a.md?p=2) shall be void and of no force or effect.
  - (3) The [Commission](/usc/15/77b.md?p=a-5) is prohibited from—
    - (A) promulgating, interpreting, or enforcing rules; or
    - (B) issuing [orders](/usc/15/8702.md?p=14) of general applicability;

    under this subchapter in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any [security-based swap agreement](/usc/15/78c.md?p=a-78-A) (as defined in [section 78c(a)(78) of this title](/usc/15/78c.md?p=a-78)).

  - (4) References in this subchapter to the “[purchase](/usc/15/77b.md?p=a-18)” or “sale” of a [security-based swap agreement](/usc/15/78c.md?p=a-78-A) shall be deemed to mean the execution, termination (prior to its scheduled maturity date), assignment, [exchange](/usc/15/636.md?p=a-36-A-xvi), or similar transfer or conveyance of, or extinguishing of rights or obligations under, a [security-based swap agreement](/usc/15/78c.md?p=a-78-A) (as defined in [section 78c(a)(78) of this title](/usc/15/78c.md?p=a-78)), as the context may require.

# §77c. Classes of securities under this subchapter

- (a) **Exempted securities—** Except as hereinafter expressly provided, the provisions of this subchapter shall not apply to any of the following classes of [securities](/usc/15/77b.md?p=a-1):
  - (1) Reserved.
  - (2) Any [security](/usc/15/77b.md?p=a-1) issued or guaranteed by the United States or any [territory](/usc/15/77b.md?p=a-6) thereof, or by the District of Columbia, or by any [State](/usc/15/15g.md?p=2) of the United States, or by any political subdivision of a [State](/usc/15/15g.md?p=2) or [territory](/usc/15/77b.md?p=a-6), or by any public instrumentality of one or more [States](/usc/15/15g.md?p=2) or [territories](/usc/15/77b.md?p=a-6), or by any [person](/usc/15/78m.md?p=h-8-E) controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to [authority](/usc/15/3051.md?p=1) granted by the Congress of the United States; or any certificate of deposit for any of the foregoing; or any [security](/usc/15/77b.md?p=a-1) issued or guaranteed by any bank; or any [security](/usc/15/77b.md?p=a-1) issued by or representing an interest in or a direct obligation of a Federal Reserve bank; or any interest or participation in any common trust fund or similar fund that is excluded from the definition of the term “investment company” under section 3(c)(3) of the Investment Company Act of 1940 [[15 U.S.C. 80a–3(c)(3)](/usc/15/80a–3.md?p=c-3)]; or any [security](/usc/15/77b.md?p=a-1) which is an industrial development bond (as defined in section 103(c)(2)[^1] of [title 26](/usc/26.md)) the interest on which is excludable from gross income under section 103(a)(1)[^1] of [title 26](/usc/26.md) if, by reason of the [application](/usc/15/77ccc.md?p=8) of paragraph (4) or (6) of section 103(c)[^1] of [title 26](/usc/26.md) (determined as if paragraphs (4)(A), [(5)](#a-5), and [(7)](#a-7) were not included in such section 103(c)),[^1] [paragraph (1)](/usc/15/80a–3.md) of such section 103(c)[^1] does not apply to such [security](/usc/15/77b.md?p=a-1); or any interest or participation in a single trust fund, or in a collective trust fund maintained by a bank, or any [security](/usc/15/77b.md?p=a-1) arising out of a contract issued by an [insurance company](/usc/15/77b.md?p=a-13), which interest, participation, or [security](/usc/15/77b.md?p=a-1) is issued in connection with (A) a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under [section 401 of title 26](/usc/26/401.md), (B) an annuity plan which meets the requirements for the deduction of the employer’s contributions under [section 404(a)(2) of title 26](/usc/26/404.md?p=a-2), (C) a governmental plan as defined in [section 414(d) of title 26](/usc/26/414.md?p=d) which has been established by an employer for the exclusive benefit of its employees or their beneficiaries for the purpose of distributing to such employees or their beneficiaries the corpus and income of the funds accumulated under such plan, if under such plan it is impossible, prior to the satisfaction of all liabilities with respect to such employees and their beneficiaries, for any part of the corpus or income to be used for, or diverted to, purposes other than the exclusive benefit of such employees or their beneficiaries, or (D) a church plan, company, or [account](/usc/15/1681a.md?p=r-4) that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 [[15 U.S.C. 80a–3(c)(14)](/usc/15/80a–3.md?p=c-14)], other than any plan described in subparagraph (A), (B), (C), or (D) of this paragraph (i) the contributions under which are held in a single trust fund or in a [separate account](/usc/15/77b.md?p=a-14) maintained by an [insurance company](/usc/15/77b.md?p=a-13) for a single employer and under which an amount in excess of the employer’s contribution is allocated to the [purchase](/usc/15/77b.md?p=a-18) of [securities](/usc/15/77b.md?p=a-1) (other than interests or participations in the trust or [separate account](/usc/15/77b.md?p=a-14) itself) issued by the employer or any company directly or indirectly controlling, controlled by, or under common control with the employer, (ii) which covers employees some or all of whom are employees within the meaning of [section 401(c)(1) of title 26](/usc/26/401.md?p=c-1) (other than a [person](/usc/15/78m.md?p=h-8-E) participating in a church plan who is described in [section 414(e)(3)(B) of title 26](/usc/26/414.md?p=e-3-B)), or (iii) which is a plan funded by an annuity contract described in [section 403(b) of title 26](/usc/26/403.md?p=b) (other than a retirement income [account](/usc/15/1681a.md?p=r-4) described in [section 403(b)(9) of title 26](/usc/26/403.md?p=b-9), to the extent that the interest or participation in such single trust fund or collective trust fund is issued to a church, a convention or [association](/usc/15/657h.md?p=a-2) of churches, or an organization described in [section 414(e)(3)(A) of title 26](/usc/26/414.md?p=e-3-A) establishing or maintaining the retirement income [account](/usc/15/1681a.md?p=r-4) or to a trust established by any such entity in connection with the retirement income [account](/usc/15/1681a.md?p=r-4)). The [Commission](/usc/15/77b.md?p=a-5), by rules and regulations or [order](/usc/15/8702.md?p=14), shall exempt from the provisions of [section 77e of this title](/usc/15/77e.md) any interest or participation issued in connection with a stock bonus, pension, profit-sharing, or annuity plan which covers employees some or all of whom are employees within the meaning of [section 401(c)(1) of title 26](/usc/26/401.md?p=c-1), if and to the extent that the [Commission](/usc/15/77b.md?p=a-5) determines this to be necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this subchapter. For purposes of this paragraph, a [security](/usc/15/77b.md?p=a-1) issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank; and the term “bank” means any national bank, or banking institution organized under the laws of any [State](/usc/15/15g.md?p=2), [territory](/usc/15/77b.md?p=a-6), or the District of Columbia, the business of which is substantially confined to banking and is supervised by the [State](/usc/15/15g.md?p=2) or territorial banking [commission](/usc/15/77b.md?p=a-5) or similar official; except that in the case of a common trust fund or similar fund, or a collective trust fund, the term “bank” has the same meaning as in the Investment Company Act of 1940 [[15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.];
  - (3) Any note, draft, bill of [exchange](/usc/15/636.md?p=a-36-A-xvi), or banker’s acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited;
  - (4) Any [security](/usc/15/77b.md?p=a-1) issued by a [person](/usc/15/78m.md?p=h-8-E) organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any [person](/usc/15/78m.md?p=h-8-E), private stockholder, or individual, or any [security](/usc/15/77b.md?p=a-1) of a fund that is excluded from the definition of an [investment company](/usc/15/77z–2.md?p=i-2) under section 3(c)(10)(B) of the Investment Company Act of 1940 [[15 U.S.C. 80a–3(c)(10)(B)](/usc/15/80a–3.md?p=c-10-B)];
  - (5) Any [security](/usc/15/77b.md?p=a-1) issued (A) by a savings and loan [association](/usc/15/657h.md?p=a-2), building and loan [association](/usc/15/657h.md?p=a-2), cooperative bank, homestead [association](/usc/15/657h.md?p=a-2), or similar institution, which is supervised and examined by [State](/usc/15/15g.md?p=2) or Federal [authority](/usc/15/3051.md?p=1) having supervision over any such institution; or (B) by (i) a farmer’s cooperative organization exempt from tax under [section 521 of title 26](/usc/26/521.md), (ii) a corporation described in [section 501(c)(16) of title 26](/usc/26/501.md?p=c-16) and exempt from tax under [section 501(a) of title 26](/usc/26/501.md?p=a), or (iii) a corporation described in [section 501(c)(2) of title 26](/usc/26/501.md?p=c-2) which is exempt from tax under [section 501(a) of title 26](/usc/26/501.md?p=a) and is organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization or corporation described in clause (i) or (ii);
  - (6) Any interest in a railroad equipment trust. For purposes of this paragraph “interest in a railroad equipment trust” means any interest in an equipment trust, lease, conditional sales contract, or other similar arrangement entered into, issued, assumed, guaranteed by, or for the benefit of, a common carrier to finance the acquisition of rolling stock, including motive power;
  - (7) Certificates issued by a receiver or by a trustee or [debtor](/usc/15/78lll.md?p=5) in possession in a case under [title 11](/usc/11.md), with the approval of the court;
  - (8) Any insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions, of any [State](/usc/15/15g.md?p=2) or [Territory](/usc/15/77b.md?p=a-6) of the United States or the District of Columbia;
  - (9) Except with respect to a [security](/usc/15/77b.md?p=a-1) exchanged in a case under [title 11](/usc/11.md), any [security](/usc/15/77b.md?p=a-1) exchanged by the [issuer](/usc/15/77b.md?p=a-4) with its existing [security](/usc/15/77b.md?p=a-1) holders exclusively where no [commission](/usc/15/77b.md?p=a-5) or other remuneration is paid or given directly or indirectly for soliciting such [exchange](/usc/15/636.md?p=a-36-A-xvi);
  - (10) Except with respect to a [security](/usc/15/77b.md?p=a-1) exchanged in a case under [title 11](/usc/11.md), any [security](/usc/15/77b.md?p=a-1) which is issued in [exchange](/usc/15/636.md?p=a-36-A-xvi) for one or more bona fide outstanding [securities](/usc/15/77b.md?p=a-1), claims or property interests, or partly in such [exchange](/usc/15/636.md?p=a-36-A-xvi) and partly for cash, where the terms and conditions of such issuance and [exchange](/usc/15/636.md?p=a-36-A-xvi) are approved, after a hearing upon the fairness of such terms and conditions at which all [persons](/usc/15/78m.md?p=h-8-E) to whom it is proposed to issue [securities](/usc/15/77b.md?p=a-1) in such [exchange](/usc/15/636.md?p=a-36-A-xvi) shall have the right to appear, by any court, or by any official or agency of the United States, or by any [State](/usc/15/15g.md?p=2) or Territorial banking or insurance [commission](/usc/15/77b.md?p=a-5) or other governmental [authority](/usc/15/3051.md?p=1) expressly authorized by law to grant such approval;
  - (11) Any [security](/usc/15/77b.md?p=a-1) which is a part of an issue offered and sold only to [persons](/usc/15/78m.md?p=h-8-E) resident within a single [State](/usc/15/15g.md?p=2) or [Territory](/usc/15/77b.md?p=a-6), where the [issuer](/usc/15/77b.md?p=a-4) of such [security](/usc/15/77b.md?p=a-1) is a [person](/usc/15/78m.md?p=h-8-E) resident and doing business within or, if a corporation, incorporated by and doing business within, such [State](/usc/15/15g.md?p=2) or [Territory](/usc/15/77b.md?p=a-6).
  - (12) Any [equity security](/usc/15/9041.md?p=6) issued in connection with the acquisition by a holding company of a bank under [section 1842(a) of title 12](/usc/12/1842.md?p=a) or a savings association under [section 1467a(e) of title 12](/usc/12/1467a.md?p=e), if—
    - (A) the acquisition occurs solely as part of a reorganization in which [security](/usc/15/77b.md?p=a-1) holders [exchange](/usc/15/636.md?p=a-36-A-xvi) their shares of a bank or [savings association](#a-12) for shares of a newly formed holding company with no significant assets other than [securities](/usc/15/77b.md?p=a-1) of the bank or [savings association](#a-12) and the existing subsidiaries of the bank or [savings association](#a-12);
    - (B) the [security](/usc/15/77b.md?p=a-1) holders receive, after that reorganization, substantially the same proportional share interests in the holding company as they held in the bank or [savings association](#a-12), except for nominal changes in shareholders’ interests resulting from lawful elimination of fractional interests and the exercise of dissenting shareholders’ rights under [State](/usc/15/15g.md?p=2) or Federal law;
    - (C) the rights and interests of [security](/usc/15/77b.md?p=a-1) holders in the holding company are substantially the same as those in the bank or [savings association](#a-12) prior to the transaction, other than as may be required by law; and
    - (D) the holding company has substantially the same assets and liabilities, on a consolidated basis, as the bank or [savings association](#a-12) had prior to the transaction.

    For purposes of this paragraph, the term “savings association” means a savings association (as defined in [section 1813(b) of title 12](/usc/12/1813.md?p=b)) the deposits of which are insured by the Federal Deposit Insurance Corporation.

  - (13) Any [security](/usc/15/77b.md?p=a-1) issued by or any interest or participation in any church plan, company or [account](/usc/15/1681a.md?p=r-4) that is excluded from the definition of an [investment company](/usc/15/77z–2.md?p=i-2) under section 3(c)(14) of the Investment Company Act of 1940 [[15 U.S.C. 80a–3(c)(14)](/usc/15/80a–3.md?p=c-14)].
  - (14) Any [security futures product](/usc/15/77b.md?p=a-16) that is—
    - (A) cleared by a clearing agency registered under [section 78q–1 of this title](/usc/15/78q–1.md) or exempt from registration under [subsection (b)(7)](/usc/15/78q–1.md?p=b-7) of such section 78q–1; and
    - (B) traded on a [national securities exchange](/usc/15/9009a.md?p=a-5) or a national [securities](/usc/15/77b.md?p=a-1) [association](/usc/15/657h.md?p=a-2) registered pursuant to [section 78o–3(a)](/usc/15/78o–3.md?p=a) of this title.
- (b) **Additional exemptions—**
  - (1) **Small issues exemptive authority—** The [Commission](/usc/15/77b.md?p=a-5) may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of [securities](/usc/15/77b.md?p=a-1) to the [securities](/usc/15/77b.md?p=a-1) exempted as provided in this section, if it finds that the enforcement of this subchapter with respect to such [securities](/usc/15/77b.md?p=a-1) is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering; but no issue of [securities](/usc/15/77b.md?p=a-1) shall be exempted under this subsection where the aggregate amount at which such issue is offered to the public exceeds $5,000,000.
  - (2) **Additional issues—** The [Commission](/usc/15/77b.md?p=a-5) shall by rule or regulation add a class of [securities](/usc/15/77b.md?p=a-1) to the [securities](/usc/15/77b.md?p=a-1) exempted pursuant to this section in accordance with the following terms and conditions:
    - (A) The aggregate offering amount of all [securities](/usc/15/77b.md?p=a-1) offered and sold within the prior 12-month period in reliance on the exemption added in accordance with this paragraph shall not exceed $50,000,000.
    - (B) The [securities](/usc/15/77b.md?p=a-1) may be offered and sold publicly.
    - (C) The [securities](/usc/15/77b.md?p=a-1) shall not be restricted [securities](/usc/15/77b.md?p=a-1) within the meaning of the Federal [securities laws](/usc/15/77z–2.md?p=i-5) and the regulations promulgated thereunder.
    - (D) The civil liability provision in [section 77l(a)(2)](/usc/15/77l.md?p=a-2) of this title shall apply to any [person](/usc/15/78m.md?p=h-8-E) offering or selling such [securities](/usc/15/77b.md?p=a-1).
    - (E) The [issuer](/usc/15/77b.md?p=a-4) may solicit interest in the offering prior to filing any offering statement, on such terms and conditions as the [Commission](/usc/15/77b.md?p=a-5) may prescribe in the public interest or for the protection of investors.
    - (F) The [Commission](/usc/15/77b.md?p=a-5) shall require the [issuer](/usc/15/77b.md?p=a-4) to file audited financial statements with the [Commission](/usc/15/77b.md?p=a-5) annually.
    - (G) Such other terms, conditions, or requirements as the [Commission](/usc/15/77b.md?p=a-5) may determine necessary in the public interest and for the protection of investors, which may include—
      - (i) a requirement that the [issuer](/usc/15/77b.md?p=a-4) prepare and electronically file with the [Commission](/usc/15/77b.md?p=a-5) and distribute to prospective investors an offering statement, and any related documents, in such form and with such content as prescribed by the [Commission](/usc/15/77b.md?p=a-5), including audited financial statements, a description of the [issuer](/usc/15/77b.md?p=a-4)’s business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters; and
      - (ii) disqualification provisions under which the exemption shall not be available to the [issuer](/usc/15/77b.md?p=a-4) or its predecessors, affiliates, officers, directors, underwriters, or other related [persons](/usc/15/78m.md?p=h-8-E), which shall be substantially similar to the disqualification provisions contained in the regulations adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and [Consumer](/usc/15/1615.md?p=d-2) Protection Act ([15 U.S.C. 77d](/usc/15/77d.md) note).
  - (3) **Limitation—** Only the following types of [securities](/usc/15/77b.md?p=a-1) may be exempted under a rule or regulation adopted pursuant to [paragraph (2)](#b-2): [equity securities](/usc/15/9041.md?p=6), debt [securities](/usc/15/77b.md?p=a-1), and debt [securities](/usc/15/77b.md?p=a-1) convertible or exchangeable to equity interests, including any guarantees of such [securities](/usc/15/77b.md?p=a-1).
  - (4) **Periodic disclosures—** Upon such terms and conditions as the [Commission](/usc/15/77b.md?p=a-5) determines necessary in the public interest and for the protection of investors, the [Commission](/usc/15/77b.md?p=a-5) by rule or regulation may require an [issuer](/usc/15/77b.md?p=a-4) of a class of [securities](/usc/15/77b.md?p=a-1) exempted under [paragraph (2)](#b-2) to make available to investors and file with the [Commission](/usc/15/77b.md?p=a-5) periodic disclosures regarding the [issuer](/usc/15/77b.md?p=a-4), its business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters, and also may provide for the suspension and termination of such a requirement with respect to that [issuer](/usc/15/77b.md?p=a-4).
  - (5) **Adjustment—** Not later than 2 years after April 5, 2012,[^1] and every 2 years thereafter, the [Commission](/usc/15/77b.md?p=a-5) shall review the offering amount limitation described in [paragraph (2)(A)](#b-2-A) and shall increase such amount as the [Commission](/usc/15/77b.md?p=a-5) determines appropriate. If the [Commission](/usc/15/77b.md?p=a-5) determines not to increase such amount, it shall report to the [Committee](/usc/15/2921.md?p=1) on Financial Services of the House of Representatives and the [Committee](/usc/15/2921.md?p=1) on Banking, Housing, and Urban Affairs of the Senate on its reasons for not increasing the amount.
- (c) **Securities issued by small investment company—** The [Commission](/usc/15/77b.md?p=a-5) may from time to time by its rules and regulations and subject to such terms and conditions as may be prescribed therein, add to the [securities](/usc/15/77b.md?p=a-1) exempted as provided in this section any class of [securities](/usc/15/77b.md?p=a-1) issued by a [small business](/usc/15/1691c–2.md?p=h-2) [investment company](/usc/15/77z–2.md?p=i-2) under the [Small Business](/usc/15/1691c–2.md?p=h-2) Investment Act of 1958 [[15 U.S.C. 661](/usc/15/661.md) et seq.] if it finds, having regard to the purposes of that Act, that the enforcement of this subchapter with respect to such [securities](/usc/15/77b.md?p=a-1) is not necessary in the public interest and for the protection of investors.

# §77d. Exempted transactions

- (a) **In general—** The provisions of [section 77e of this title](/usc/15/77e.md) shall not apply to—
  - (1) transactions by any [person](/usc/15/78m.md?p=h-8-E) other than an [issuer](/usc/15/77b.md?p=a-4), underwriter, or [dealer](/usc/15/77b.md?p=a-12).
  - (2) transactions by an [issuer](/usc/15/77b.md?p=a-4) not involving any public offering.
  - (3) transactions by a [dealer](/usc/15/77b.md?p=a-12) (including an underwriter no longer acting as an underwriter in respect of the [security](/usc/15/77b.md?p=a-1) involved in such transaction), except—
    - (A) transactions taking place prior to the expiration of forty days after the first date upon which the [security](/usc/15/77b.md?p=a-1) was bona fide offered to the public by the [issuer](/usc/15/77b.md?p=a-4) or by or through an underwriter,
    - (B) transactions in a [security](/usc/15/77b.md?p=a-1) as to which a [registration statement](/usc/15/77b.md?p=a-8) has been filed taking place prior to the expiration of forty days after the effective date of such [registration statement](/usc/15/77b.md?p=a-8) or prior to the expiration of forty days after the first date upon which the [security](/usc/15/77b.md?p=a-1) was bona fide offered to the public by the [issuer](/usc/15/77b.md?p=a-4) or by or through an underwriter after such effective date, whichever is later (excluding in the computation of such forty days any time during which a stop [order](/usc/15/8702.md?p=14) issued under [section 77h of this title](/usc/15/77h.md) is in effect as to the [security](/usc/15/77b.md?p=a-1)), or such shorter period as the [Commission](/usc/15/77b.md?p=a-5) may specify by rules and regulations or [order](/usc/15/8702.md?p=14), and
    - (C) transactions as to [securities](/usc/15/77b.md?p=a-1) constituting the whole or a part of an unsold allotment to or subscription by such [dealer](/usc/15/77b.md?p=a-12) as a participant in the distribution of such [securities](/usc/15/77b.md?p=a-1) by the [issuer](/usc/15/77b.md?p=a-4) or by or through an underwriter.

    With respect to transactions referred to in [clause (B)](#a-3-B), if [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4) have not previously been sold pursuant to an earlier effective [registration statement](/usc/15/77b.md?p=a-8) the applicable period, instead of forty days, shall be ninety days, or such shorter period as the [Commission](/usc/15/77b.md?p=a-5) may specify by rules and regulations or [order](/usc/15/8702.md?p=14).

  - (4) [brokers](/usc/15/6102.md?p=d-2-B-i)’ transactions executed upon [customers](/usc/15/78c–5.md?p=g)’ [orders](/usc/15/8702.md?p=14) on any [exchange](/usc/15/636.md?p=a-36-A-xvi) or in the over-the-counter market but not the solicitation of such [orders](/usc/15/8702.md?p=14).
  - (5) transactions involving offers or sales by an [issuer](/usc/15/77b.md?p=a-4) solely to one or more [accredited investors](/usc/15/77b.md?p=a-15), if the aggregate offering price of an issue of [securities](/usc/15/77b.md?p=a-1) offered in reliance on this paragraph does not exceed the amount allowed under [section 77c(b)(1) of this title](/usc/15/77c.md?p=b-1), if there is no advertising or public solicitation in connection with the transaction by the [issuer](/usc/15/77b.md?p=a-4) or anyone acting on the [issuer](/usc/15/77b.md?p=a-4)’s behalf, and if the [issuer](/usc/15/77b.md?p=a-4) files such notice with the [Commission](/usc/15/77b.md?p=a-5) as the [Commission](/usc/15/77b.md?p=a-5) shall prescribe.
  - (6) transactions involving the offer or sale of [securities](/usc/15/77b.md?p=a-1) by an [issuer](/usc/15/77b.md?p=a-4) (including all entities controlled by or under common control with the [issuer](/usc/15/77b.md?p=a-4)), provided that—
    - (A) the aggregate amount sold to all investors by the [issuer](/usc/15/77b.md?p=a-4), including any amount sold in reliance on the exemption provided under this paragraph during the 12-month period preceding the date of such transaction, is not more than $1,000,000;
    - (B) the aggregate amount sold to any investor by an [issuer](/usc/15/77b.md?p=a-4), including any amount sold in reliance on the exemption provided under this paragraph during the 12-month period preceding the date of such transaction, does not exceed—
      - (i) the greater of $2,000 or 5 percent of the annual income or net worth of such investor, as applicable, if either the annual income or the net worth of the investor is less than $100,000; and
      - (ii) 10 percent of the annual income or net worth of such investor, as applicable, not to exceed a maximum aggregate amount sold of $100,000, if either the annual income or net worth of the investor is equal to or more than $100,000;
    - (C) the transaction is conducted through a [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal that complies with the requirements of [section 77d–1(a) of this title](/usc/15/77d–1.md?p=a); and
    - (D) the [issuer](/usc/15/77b.md?p=a-4) complies with the requirements of [section 77d–1(b) of this title](/usc/15/77d–1.md?p=b).
  - (7) transactions meeting the requirements of [subsection (d)](#d).
- (b) **Offers and sales exempt under 17 CFR 230.506—** Offers and sales exempt under [section 230.506 of title 17, Code of Federal Regulations](/cfr/17/230.506.md) (as revised pursuant to section 201 of the Jumpstart Our Business Startups Act) shall not be deemed public offerings under the Federal [securities laws](/usc/15/77z–2.md?p=i-5) as a result of general advertising or general solicitation.
- (c) **Securities offered and sold in compliance with Rule 506 of Regulation D—**
  - (1) With respect to [securities](/usc/15/77b.md?p=a-1) offered and sold in compliance with [Rule 506](/usc/15/506.md) of Regulation D under this subchapter, no [person](/usc/15/78m.md?p=h-8-E) who meets the conditions set forth in [paragraph (2)](#c-2) shall be subject to registration as a [broker or dealer](/usc/15/78c.md?p=h-2) pursuant to [section 78o(a)(1)](/usc/15/78o.md?p=a-1) of this title,[^1] solely because—
    - (A) that [person](/usc/15/78m.md?p=h-8-E) maintains a platform or mechanism that permits the offer, sale, [purchase](/usc/15/77b.md?p=a-18), or negotiation of or with respect to [securities](/usc/15/77b.md?p=a-1), or permits general solicitations, general advertisements, or similar or related activities by [issuers](/usc/15/77b.md?p=a-4) of such [securities](/usc/15/77b.md?p=a-1), whether online, in [person](/usc/15/78m.md?p=h-8-E), or through any other means;
    - (B) that [person](/usc/15/78m.md?p=h-8-E) or any [person](/usc/15/78m.md?p=h-8-E) associated with that [person](/usc/15/78m.md?p=h-8-E) co-invests in such [securities](/usc/15/77b.md?p=a-1); or
    - (C) that [person](/usc/15/78m.md?p=h-8-E) or any [person](/usc/15/78m.md?p=h-8-E) associated with that [person](/usc/15/78m.md?p=h-8-E) provides [ancillary services](#c-3) with respect to such [securities](/usc/15/77b.md?p=a-1).
  - (2) The exemption provided in [paragraph (1)](#c-1) shall apply to any [person](/usc/15/78m.md?p=h-8-E) described in such paragraph if—
    - (A) such [person](/usc/15/78m.md?p=h-8-E) and each [person](/usc/15/78m.md?p=h-8-E) associated with that [person](/usc/15/78m.md?p=h-8-E) receives no compensation in connection with the [purchase](/usc/15/77b.md?p=a-18) or sale of such [security](/usc/15/77b.md?p=a-1);
    - (B) such [person](/usc/15/78m.md?p=h-8-E) and each [person](/usc/15/78m.md?p=h-8-E) associated with that [person](/usc/15/78m.md?p=h-8-E) does not have possession of [customer](/usc/15/78c–5.md?p=g) funds or [securities](/usc/15/77b.md?p=a-1) in connection with the [purchase](/usc/15/77b.md?p=a-18) or sale of such [security](/usc/15/77b.md?p=a-1); and
    - (C) such [person](/usc/15/78m.md?p=h-8-E) is not subject to a statutory disqualification as defined in [section 78c(a)(39) of this title](/usc/15/78c.md?p=a-39)[^1] and does not have any [person](/usc/15/78m.md?p=h-8-E) associated with that [person](/usc/15/78m.md?p=h-8-E) subject to such a statutory disqualification.
  - (3) For the purposes of this subsection, the term “ancillary services” means—
    - (A) the provision of due diligence services, in connection with the offer, sale, [purchase](/usc/15/77b.md?p=a-18), or negotiation of such [security](/usc/15/77b.md?p=a-1), so long as such services do not include, for separate compensation, investment advice or recommendations to [issuers](/usc/15/77b.md?p=a-4) or investors; and
    - (B) the provision of standardized documents to the [issuers](/usc/15/77b.md?p=a-4) and investors, so long as such [person](/usc/15/78m.md?p=h-8-E) or entity does not negotiate the terms of the issuance for and on behalf of third parties and [issuers](/usc/15/77b.md?p=a-4) are not required to use the standardized documents as a condition of using the service.
- (d) **Certain accredited investor transactions—** The transactions referred to in [subsection (a)(7)](#a-7) are transactions meeting the following requirements:
  - (1) **Accredited investor requirement.—** Each purchaser is an [accredited investor](/usc/15/77b.md?p=a-15), as that term is defined in [section 230.501(a) of title 17, Code of Federal Regulations](/cfr/17/230.501.md?p=a) (or any successor regulation).
  - (2) **Prohibition on general solicitation or advertising.—** Neither the seller, nor any [person](/usc/15/78m.md?p=h-8-E) acting on the seller’s behalf, offers or sells [securities](/usc/15/77b.md?p=a-1) by any form of general solicitation or general advertising.
  - (3) **Information requirement.—** In the case of a transaction involving the [securities](/usc/15/77b.md?p=a-1) of an [issuer](/usc/15/77b.md?p=a-4) that is neither subject to section [78m](/usc/15/78m.md) or [78o(d)](/usc/15/78o.md?p=d) of this title, nor exempt from reporting pursuant to [section 240.12g3–2(b) of title 17, Code of Federal Regulations](/cfr/17/240.12g3–2.md?p=b), nor a foreign government (as defined in [section 230.405 of title 17, Code of Federal Regulations](/cfr/17/230.405.md)) eligible to register [securities](/usc/15/77b.md?p=a-1) under Schedule B, the seller and a prospective purchaser designated by the seller obtain from the [issuer](/usc/15/77b.md?p=a-4), upon request of the seller, and the seller in all cases makes available to a prospective purchaser, the following information (which shall be reasonably current in relation to the date of resale under this section):
    - (A) The exact name of the [issuer](/usc/15/77b.md?p=a-4) and the [issuer](/usc/15/77b.md?p=a-4)’s predecessor (if any).
    - (B) The address of the [issuer](/usc/15/77b.md?p=a-4)’s principal executive offices.
    - (C) The exact title and class of the [security](/usc/15/77b.md?p=a-1).
    - (D) The par or stated value of the [security](/usc/15/77b.md?p=a-1).
    - (E) The number of shares or total amount of the [securities](/usc/15/77b.md?p=a-1) outstanding as of the end of the [issuer](/usc/15/77b.md?p=a-4)’s most recent fiscal year.
    - (F) The name and address of the [transfer agent](/usc/15/6102.md?p=d-2-B-i), corporate secretary, or other [person](/usc/15/78m.md?p=h-8-E) responsible for transferring shares and stock certificates.
    - (G) A statement of the nature of the business of the [issuer](/usc/15/77b.md?p=a-4) and the products and services it offers, which shall be presumed reasonably current if the statement is as of 12 months before the transaction date.
    - (H) The names of the officers and directors of the [issuer](/usc/15/77b.md?p=a-4).
    - (I) The names of any [persons](/usc/15/78m.md?p=h-8-E) registered as a [broker](/usc/15/6102.md?p=d-2-B-i), [dealer](/usc/15/77b.md?p=a-12), or agent that shall be paid or given, directly or indirectly, any [commission](/usc/15/77b.md?p=a-5) or remuneration for such [person](/usc/15/78m.md?p=h-8-E)’s participation in the offer or sale of the [securities](/usc/15/77b.md?p=a-1).
    - (J) The [issuer](/usc/15/77b.md?p=a-4)’s most recent balance sheet and profit and loss statement and similar financial statements, which shall—
      - (i) be for such part of the 2 preceding fiscal years as the [issuer](/usc/15/77b.md?p=a-4) has been in operation;
      - (ii) be prepared in accordance with generally accepted accounting principles or, in the case of a foreign private [issuer](/usc/15/77b.md?p=a-4), be prepared in accordance with generally accepted accounting principles or the International Financial Reporting Standards issued by the International Accounting Standards [Board](/usc/15/205c.md?p=1);
      - (iii) be presumed reasonably current if—
        - (I) with respect to the balance sheet, the balance sheet is as of a date less than 16 months before the transaction date; and
        - (II) with respect to the profit and loss statement, such statement is for the 12 months preceding the date of the [issuer](/usc/15/77b.md?p=a-4)’s balance sheet; and
      - (iv) if the balance sheet is not as of a date less than 6 months before the transaction date, be accompanied by additional statements of profit and loss for the period from the date of such balance sheet to a date less than 6 months before the transaction date.
    - (K) To the extent that the seller is a control [person](/usc/15/78m.md?p=h-8-E) with respect to the [issuer](/usc/15/77b.md?p=a-4), a brief statement regarding the nature of the affiliation, and a statement certified by such seller that they have no reasonable grounds to believe that the [issuer](/usc/15/77b.md?p=a-4) is in [violation](/usc/15/57b–1.md?p=a-7) of the [securities laws](/usc/15/77z–2.md?p=i-5) or regulations.
  - (4) **Issuers disqualified.—** The transaction is not for the sale of a [security](/usc/15/77b.md?p=a-1) where the seller is an [issuer](/usc/15/77b.md?p=a-4) or a subsidiary, either directly or indirectly, of the [issuer](/usc/15/77b.md?p=a-4).
  - (5) **Bad actor prohibition.—** Neither the seller, nor any [person](/usc/15/78m.md?p=h-8-E) that has been or will be paid (directly or indirectly) remuneration or a [commission](/usc/15/77b.md?p=a-5) for their participation in the offer or sale of the [securities](/usc/15/77b.md?p=a-1), including solicitation of purchasers for the seller is subject to an event that would disqualify an [issuer](/usc/15/77b.md?p=a-4) or other covered [person](/usc/15/78m.md?p=h-8-E) under [Rule 506(d)(1)](/usc/15/506.md) of Regulation D ([17 CFR 230.506(d)(1)](/cfr/17/230.506.md?p=d-1)) or is subject to a statutory disqualification described under [section 78c(a)(39) of this title](/usc/15/78c.md?p=a-39).
  - (6) **Business requirement.—** The [issuer](/usc/15/77b.md?p=a-4) is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that the [issuer](/usc/15/77b.md?p=a-4)’s primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified [person](/usc/15/78m.md?p=h-8-E).
  - (7) **Underwriter prohibition.—** The transaction is not with respect to a [security](/usc/15/77b.md?p=a-1) that constitutes the whole or part of an unsold allotment to, or a subscription or participation by, a [broker or dealer](/usc/15/78c.md?p=h-2) as an underwriter of the [security](/usc/15/77b.md?p=a-1) or a redistribution.
  - (8) **Outstanding class requirement.—** The transaction is with respect to a [security](/usc/15/77b.md?p=a-1) of a class that has been authorized and outstanding for at least 90 days prior to the date of the transaction.
- (e) **Additional requirements—**
  - (1) **In general.—** With respect to an exempted transaction described under [subsection (a)(7)](#a-7):
    - (A) [Securities](/usc/15/77b.md?p=a-1) acquired in such transaction shall be deemed to have been acquired in a transaction not involving any public offering.
    - (B) Such transaction shall be deemed not to be a distribution for purposes of [section 77b(a)(11) of this title](/usc/15/77b.md?p=a-11).
    - (C) [Securities](/usc/15/77b.md?p=a-1) involved in such transaction shall be deemed to be restricted [securities](/usc/15/77b.md?p=a-1) within the meaning of [Rule 144](/usc/15/144.md) ([17 CFR 230.144](/cfr/17/230.144.md)).
  - (2) **Rule of construction.—** The exemption provided by [subsection (a)(7)](#a-7) shall not be the exclusive means for establishing an exemption from the registration requirements of [section 77e of this title](/usc/15/77e.md).

# §77d–1. Requirements with respect to certain small transactions

- (a) **Requirements on intermediaries—** A [person](/usc/15/78m.md?p=h-8-E) acting as an [intermediary](/usc/15/6901.md?p=7) in a transaction involving the offer or sale of [securities](/usc/15/77b.md?p=a-1) for the [account](/usc/15/1681a.md?p=r-4) of others pursuant to [section 77d(6)](/usc/15/77d.md)[^1] of this title shall—
  - (1) register with the [Commission](/usc/15/77b.md?p=a-5) as—
    - (A) a [broker](/usc/15/6102.md?p=d-2-B-i); or
    - (B) a funding portal (as defined in [section 78c(a)(80)](/usc/15/78c.md?p=a-80)[^2] of this title);
  - (2) register with any applicable [self-regulatory organization](/usc/15/78c.md?p=a-26) (as defined in [section 78c(a)(26) of this title](/usc/15/78c.md?p=a-26));
  - (3) provide such disclosures, including disclosures related to risks and other investor education materials, as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate;
  - (4) ensure that each investor—
    - (A) reviews investor-education information, in accordance with standards established by the [Commission](/usc/15/77b.md?p=a-5), by rule;
    - (B) positively affirms that the investor understands that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and
    - (C) answers questions demonstrating—
      - (i) an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small [issuers](/usc/15/77b.md?p=a-4);
      - (ii) an understanding of the risk of illiquidity; and
      - (iii) an understanding of such other matters as the [Commission](/usc/15/77b.md?p=a-5) determines appropriate, by rule;
  - (5) take such measures to reduce the risk of fraud with respect to such transactions, as established by the [Commission](/usc/15/77b.md?p=a-5), by rule, including obtaining a background and [securities](/usc/15/77b.md?p=a-1) enforcement regulatory history check on each officer, director, and [person](/usc/15/78m.md?p=h-8-E) holding more than 20 percent of the outstanding equity of every [issuer](/usc/15/77b.md?p=a-4) whose [securities](/usc/15/77b.md?p=a-1) are offered by such [person](/usc/15/78m.md?p=h-8-E);
  - (6) not later than 21 days prior to the first day on which [securities](/usc/15/77b.md?p=a-1) are sold to any investor (or such other period as the [Commission](/usc/15/77b.md?p=a-5) may establish), make available to the [Commission](/usc/15/77b.md?p=a-5) and to potential investors any information provided by the [issuer](/usc/15/77b.md?p=a-4) pursuant to [subsection (b)](#b);
  - (7) ensure that all offering proceeds are only provided to the [issuer](/usc/15/77b.md?p=a-4) when the aggregate capital raised from all investors is equal to or greater than a target offering amount, and allow all investors to cancel their commitments to invest, as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate;
  - (8) make such efforts as the [Commission](/usc/15/77b.md?p=a-5) determines appropriate, by rule, to ensure that no investor in a 12-month period has purchased [securities](/usc/15/77b.md?p=a-1) offered pursuant to [section 77d(6)](/usc/15/77d.md)[^1] of this title that, in the aggregate, from all [issuers](/usc/15/77b.md?p=a-4), exceed the investment limits set forth in [section 77d(6)(B)](/usc/15/77d.md)[^1] of this title;
  - (9) take such steps to protect the privacy of information collected from investors as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate;
  - (10) not compensate promoters, finders, or lead generators for providing the [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal with the personal identifying information of any potential investor;
  - (11) prohibit its directors, officers, or partners (or any [person](/usc/15/78m.md?p=h-8-E) occupying a similar status or performing a similar function) from having any financial interest in an [issuer](/usc/15/77b.md?p=a-4) using its services; and
  - (12) meet such other requirements as the [Commission](/usc/15/77b.md?p=a-5) may, by rule, prescribe, for the protection of investors and in the public interest.
- (b) **Requirements for issuers—** For purposes of [section 77d(6)](/usc/15/77d.md)[^1] of this title, an [issuer](/usc/15/77b.md?p=a-4) who offers or sells [securities](/usc/15/77b.md?p=a-1) shall—
  - (1) file with the [Commission](/usc/15/77b.md?p=a-5) and provide to investors and the relevant [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal, and make available to potential investors—
    - (A) the name, legal status, physical address, and website address of the [issuer](/usc/15/77b.md?p=a-4);
    - (B) the names of the directors and officers (and any [persons](/usc/15/78m.md?p=h-8-E) occupying a similar status or performing a similar function), and each [person](/usc/15/78m.md?p=h-8-E) holding more than 20 percent of the shares of the [issuer](/usc/15/77b.md?p=a-4);
    - (C) a description of the business of the [issuer](/usc/15/77b.md?p=a-4) and the anticipated business plan of the [issuer](/usc/15/77b.md?p=a-4);
    - (D) a description of the financial condition of the [issuer](/usc/15/77b.md?p=a-4), including, for offerings that, together with all other offerings of the [issuer](/usc/15/77b.md?p=a-4) under [section 77d(6)](/usc/15/77d.md)[^1] of this title within the preceding 12-month period, have, in the aggregate, target offering amounts of—
      - (i) $100,000 or less—
        - (I) the income tax returns filed by the [issuer](/usc/15/77b.md?p=a-4) for the most recently completed year (if any); and
        - (II) financial statements of the [issuer](/usc/15/77b.md?p=a-4), which shall be certified by the principal executive officer of the [issuer](/usc/15/77b.md?p=a-4) to be true and complete in all material respects;
      - (ii) more than $100,000, but not more than $500,000, financial statements reviewed by a public accountant who is independent of the [issuer](/usc/15/77b.md?p=a-4), using professional standards and procedures for such review or standards and procedures established by the [Commission](/usc/15/77b.md?p=a-5), by rule, for such purpose; and
      - (iii) more than $500,000 (or such other amount as the [Commission](/usc/15/77b.md?p=a-5) may establish, by rule), audited financial statements;
    - (E) a description of the stated purpose and intended use of the proceeds of the offering sought by the [issuer](/usc/15/77b.md?p=a-4) with respect to the target offering amount;
    - (F) the target offering amount, the deadline to reach the target offering amount, and regular updates regarding the progress of the [issuer](/usc/15/77b.md?p=a-4) in meeting the target offering amount;
    - (G) the price to the public of the [securities](/usc/15/77b.md?p=a-1) or the method for determining the price, provided that, prior to sale, each investor shall be provided in writing the final price and all required disclosures, with a reasonable opportunity to rescind the commitment to [purchase](/usc/15/77b.md?p=a-18) the [securities](/usc/15/77b.md?p=a-1);
    - (H) a description of the ownership and capital structure of the [issuer](/usc/15/77b.md?p=a-4), including—
      - (i) terms of the [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4) being offered and each other class of [security](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4), including how such terms may be modified, and a summary of the differences between such [securities](/usc/15/77b.md?p=a-1), including how the rights of the [securities](/usc/15/77b.md?p=a-1) being offered may be materially limited, diluted, or qualified by the rights of any other class of [security](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4);
      - (ii) a description of how the exercise of the rights held by the principal shareholders of the [issuer](/usc/15/77b.md?p=a-4) could negatively impact the purchasers of the [securities](/usc/15/77b.md?p=a-1) being offered;
      - (iii) the name and ownership level of each existing shareholder who owns more than 20 percent of any class of the [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4);
      - (iv) how the [securities](/usc/15/77b.md?p=a-1) being offered are being valued, and examples of methods for how such [securities](/usc/15/77b.md?p=a-1) may be valued by the [issuer](/usc/15/77b.md?p=a-4) in the future, including during subsequent corporate actions; and
      - (v) the risks to purchasers of the [securities](/usc/15/77b.md?p=a-1) relating to minority ownership in the [issuer](/usc/15/77b.md?p=a-4), the risks associated with corporate actions, including additional issuances of shares, a sale of the [issuer](/usc/15/77b.md?p=a-4) or of assets of the [issuer](/usc/15/77b.md?p=a-4), or transactions with related parties; and
    - (I) such other information as the [Commission](/usc/15/77b.md?p=a-5) may, by rule, prescribe, for the protection of investors and in the public interest;
  - (2) not advertise the terms of the offering, except for notices which direct investors to the funding portal or [broker](/usc/15/6102.md?p=d-2-B-i);
  - (3) not compensate or commit to compensate, directly or indirectly, any [person](/usc/15/78m.md?p=h-8-E) to promote its offerings through communication channels provided by a [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal, without taking such steps as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, require to ensure that such [person](/usc/15/78m.md?p=h-8-E) clearly discloses the receipt, past or prospective, of such compensation, upon each instance of such promotional communication;
  - (4) not less than annually, file with the [Commission](/usc/15/77b.md?p=a-5) and provide to investors reports of the results of operations and financial statements of the [issuer](/usc/15/77b.md?p=a-4), as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, determine appropriate, subject to such exceptions and termination dates as the [Commission](/usc/15/77b.md?p=a-5) may establish, by rule; and
  - (5) comply with such other requirements as the [Commission](/usc/15/77b.md?p=a-5) may, by rule, prescribe, for the protection of investors and in the public interest.
- (c) **Liability for material misstatements and omissions—**
  - (1) **Actions authorized—**
    - (A) **In general—** Subject to [paragraph (2)](#c-2), a [person](/usc/15/78m.md?p=h-8-E) who [purchases](/usc/15/77b.md?p=a-18) a [security](/usc/15/77b.md?p=a-1) in a transaction exempted by the provisions of [section 77d(6)](/usc/15/77d.md)[^1] of this title may bring an action against an [issuer](#c-3) described in [paragraph (2)](#c-2), either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such [security](/usc/15/77b.md?p=a-1) with interest thereon, less the amount of any income received thereon, upon the tender of such [security](/usc/15/77b.md?p=a-1), or for damages if such [person](/usc/15/78m.md?p=h-8-E) no longer owns the [security](/usc/15/77b.md?p=a-1).
    - (B) **Liability—** An action brought under this paragraph shall be subject to the provisions of [section 77l(b)](/usc/15/77l.md?p=b) of this title and [section 77m of this title](/usc/15/77m.md), as if the liability were created under [section 77l(a)(2)](/usc/15/77l.md?p=a-2) of this title.
  - (2) **Applicability—** An [issuer](#c-3) shall be liable in an action under [paragraph (1)](#c-1), if the [issuer](#c-3)—
    - (A) by the use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails, by any means of any [written](/usc/15/77b.md?p=a-9) or oral communication, in the offering or sale of a [security](/usc/15/77b.md?p=a-1) in a transaction exempted by the provisions of [section 77d(6)](/usc/15/77d.md)[^1] of this title, makes an untrue statement of a material fact or omits to [state](/usc/15/15g.md?p=2) a material fact required to be stated or necessary in [order](/usc/15/8702.md?p=14) to make the statements, in the light of the circumstances under which they were made, not misleading, provided that the purchaser did not know of such untruth or omission; and
    - (B) does not sustain the burden of proof that such [issuer](#c-3) did not know, and in the exercise of reasonable care could not have known, of such untruth or omission.
  - (3) **Definition—** As used in this subsection, the term “issuer” includes any [person](/usc/15/78m.md?p=h-8-E) who is a director or partner of the issuer, and the principal executive officer or officers, principal financial officer, and controller or principal accounting officer of the issuer (and any [person](/usc/15/78m.md?p=h-8-E) occupying a similar status or performing a similar function) that offers or sells a [security](/usc/15/77b.md?p=a-1) in a transaction exempted by the provisions of [section 77d(6)](/usc/15/77d.md)[^1] of this title, and any [person](/usc/15/78m.md?p=h-8-E) who offers or sells the [security](/usc/15/77b.md?p=a-1) in such offering.
- (d) **Information available to States—** The [Commission](/usc/15/77b.md?p=a-5) shall make, or shall cause to be made by the relevant [broker](/usc/15/6102.md?p=d-2-B-i) or funding portal, the information described in [subsection (b)](#b) and such other information as the [Commission](/usc/15/77b.md?p=a-5), by rule, determines appropriate, available to the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of each [State](/usc/15/15g.md?p=2) and [territory](/usc/15/77b.md?p=a-6) of the United States and the District of Columbia.
- (e) **Restrictions on sales—** [Securities](/usc/15/77b.md?p=a-1) issued pursuant to a transaction described in [section 77d(6)](/usc/15/77d.md)[^1] of this title—
  - (1) may not be transferred by the purchaser of such [securities](/usc/15/77b.md?p=a-1) during the 1-year period beginning on the date of [purchase](/usc/15/77b.md?p=a-18), unless such [securities](/usc/15/77b.md?p=a-1) are transferred—
    - (A) to the [issuer](/usc/15/77b.md?p=a-4) of the [securities](/usc/15/77b.md?p=a-1);
    - (B) to an [accredited investor](/usc/15/77b.md?p=a-15);
    - (C) as part of an offering registered with the [Commission](/usc/15/77b.md?p=a-5); or
    - (D) to a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance, in the discretion of the [Commission](/usc/15/77b.md?p=a-5); and
  - (2) shall be subject to such other limitations as the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, establish.
- (f) **Applicability—** [Section 77d(6)](/usc/15/77d.md)[^1] of this title shall not apply to transactions involving the offer or sale of [securities](/usc/15/77b.md?p=a-1) by any [issuer](/usc/15/77b.md?p=a-4) that—
  - (1) is not organized under and subject to the laws of a [State](/usc/15/15g.md?p=2) or [territory](/usc/15/77b.md?p=a-6) of the United States or the District of Columbia;
  - (2) is subject to the requirement to file reports pursuant to [section 78m of this title](/usc/15/78m.md) or [section 78o(d)](/usc/15/78o.md?p=d) of this title;
  - (3) is an [investment company](/usc/15/77z–2.md?p=i-2), as defined in [section 80a–3 of this title](/usc/15/80a–3.md), or is excluded from the definition of [investment company](/usc/15/77z–2.md?p=i-2) by [section 80a–3(b) of this title](/usc/15/80a–3.md?p=b) or [section 80a–3(c) of this title](/usc/15/80a–3.md?p=c); or
  - (4) the [Commission](/usc/15/77b.md?p=a-5), by rule or regulation, determines appropriate.
- (g) **Rule of construction—** Nothing in this section or [section 77d(6)](/usc/15/77d.md)[^1] of this title shall be construed as preventing an [issuer](/usc/15/77b.md?p=a-4) from raising capital through methods not described under [section 77d(6)](/usc/15/77d.md)[^1] of this title.
- (h) **Certain calculations—**
  - (1) **Dollar amounts—** Dollar amounts in [section 77d(6)](/usc/15/77d.md)[^1] of this title and [subsection (b)](#b) of this section shall be adjusted by the [Commission](/usc/15/77b.md?p=a-5) not less frequently than once every 5 years, by notice published in the Federal Register to reflect any change in the [Consumer](/usc/15/1615.md?p=d-2) Price Index for All Urban [Consumers](/usc/15/1615.md?p=d-2) published by the Bureau of Labor Statistics.
  - (2) **Income and net worth—** The income and net worth of a natural [person](/usc/15/78m.md?p=h-8-E) under [section 77d(6)(B)](/usc/15/77d.md)[^1] of this title shall be calculated in accordance with any rules of the [Commission](/usc/15/77b.md?p=a-5) under this subchapter regarding the calculation of the income and net worth, respectively, of an [accredited investor](/usc/15/77b.md?p=a-15).

# §77e. Prohibitions relating to interstate commerce and the mails

- (a) **Sale or delivery after sale of unregistered securities—** Unless a [registration statement](/usc/15/77b.md?p=a-8) is in effect as to a [security](/usc/15/77b.md?p=a-1), it shall be unlawful for any [person](/usc/15/78m.md?p=h-8-E), directly or indirectly—
  - (1) to make use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails to sell such [security](/usc/15/77b.md?p=a-1) through the use or medium of any [prospectus](/usc/15/77b.md?p=a-10) or otherwise; or
  - (2) to carry or cause to be carried through the mails or in [interstate commerce](/usc/15/77b.md?p=a-7), by any means or instruments of transportation, any such [security](/usc/15/77b.md?p=a-1) for the purpose of sale or for delivery after sale.
- (b) **Necessity of prospectus meeting requirements of section 77j of this title—** It shall be unlawful for any [person](/usc/15/78m.md?p=h-8-E), directly or indirectly—
  - (1) to make use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails to carry or transmit any [prospectus](/usc/15/77b.md?p=a-10) relating to any [security](/usc/15/77b.md?p=a-1) with respect to which a [registration statement](/usc/15/77b.md?p=a-8) has been filed under this subchapter, unless such [prospectus](/usc/15/77b.md?p=a-10) meets the requirements of [section 77j of this title](/usc/15/77j.md); or
  - (2) to carry or cause to be carried through the mails or in [interstate commerce](/usc/15/77b.md?p=a-7) any such [security](/usc/15/77b.md?p=a-1) for the purpose of sale or for delivery after sale, unless accompanied or preceded by a [prospectus](/usc/15/77b.md?p=a-10) that meets the requirements of subsection (a) of [section 77j of this title](/usc/15/77j.md).
- (c) **Necessity of filing registration statement—** It shall be unlawful for any [person](/usc/15/78m.md?p=h-8-E), directly or indirectly, to make use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails to offer to sell or offer to buy through the use or medium of any [prospectus](/usc/15/77b.md?p=a-10) or otherwise any [security](/usc/15/77b.md?p=a-1), unless a [registration statement](/usc/15/77b.md?p=a-8) has been filed as to such [security](/usc/15/77b.md?p=a-1), or while the [registration statement](/usc/15/77b.md?p=a-8) is the subject of a refusal [order](/usc/15/8702.md?p=14) or stop [order](/usc/15/8702.md?p=14) or (prior to the effective date of the [registration statement](/usc/15/77b.md?p=a-8)) any public proceeding or examination under [section 77h of this title](/usc/15/77h.md).
- (d) **Limitation—** Notwithstanding any other provision of this section, an [emerging growth company](/usc/15/77b.md?p=a-19) or any [person](/usc/15/78m.md?p=h-8-E) authorized to act on behalf of an [emerging growth company](/usc/15/77b.md?p=a-19) may engage in oral or [written](/usc/15/77b.md?p=a-9) communications with potential investors that are qualified institutional buyers or institutions that are [accredited investors](/usc/15/77b.md?p=a-15), as such terms are respectively defined in section 230.144A and [section 230.501(a) of title 17, Code of Federal Regulations](/cfr/17/230.501.md?p=a), or any successor thereto, to determine whether such investors might have an interest in a contemplated [securities](/usc/15/77b.md?p=a-1) offering, either prior to or following the date of filing of a [registration statement](/usc/15/77b.md?p=a-8) with respect to such [securities](/usc/15/77b.md?p=a-1) with the [Commission](/usc/15/77b.md?p=a-5), subject to the requirement of [subsection (b)(2)](#b-2).
- (e) **Security-based swaps—** Notwithstanding the provisions of section [77c](/usc/15/77c.md) or [77d](/usc/15/77d.md) of this title, unless a [registration statement](/usc/15/77b.md?p=a-8) meeting the requirements of [section 77j(a) of this title](/usc/15/77j.md?p=a) is in effect as to a [security-based swap](/usc/15/77b.md?p=a-17), it shall be unlawful for any [person](/usc/15/78m.md?p=h-8-E), directly or indirectly, to make use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails to offer to sell, offer to buy or [purchase](/usc/15/77b.md?p=a-18) or sell a [security-based swap](/usc/15/77b.md?p=a-17) to any [person](/usc/15/78m.md?p=h-8-E) who is not an [eligible contract participant](/usc/15/8302.md?p=d-1) as defined in [section 1a(18) of title 7](/usc/7/1a.md?p=18).

# §77f. Registration of securities

- (a) **Method of registration—** Any [security](/usc/15/77b.md?p=a-1) may be registered with the [Commission](/usc/15/77b.md?p=a-5) under the terms and conditions hereinafter provided, by filing a [registration statement](/usc/15/77b.md?p=a-8) in triplicate, at least one of which shall be signed by each [issuer](/usc/15/77b.md?p=a-4), its principal executive officer or officers, its principal financial officer, its comptroller or principal accounting officer, and the majority of its [board](/usc/15/205c.md?p=1) of directors or [persons](/usc/15/78m.md?p=h-8-E) performing similar functions (or, if there is no [board](/usc/15/205c.md?p=1) of directors or [persons](/usc/15/78m.md?p=h-8-E) performing similar functions, by the majority of the [persons](/usc/15/78m.md?p=h-8-E) or [board](/usc/15/205c.md?p=1) having the power of management of the [issuer](/usc/15/77b.md?p=a-4)), and in case the [issuer](/usc/15/77b.md?p=a-4) is a foreign or Territorial [person](/usc/15/78m.md?p=h-8-E) by its duly authorized representative in the United States; except that when such [registration statement](/usc/15/77b.md?p=a-8) relates to a [security](/usc/15/77b.md?p=a-1) issued by a foreign government, or political subdivision thereof, it need be signed only by the underwriter of such [security](/usc/15/77b.md?p=a-1). Signatures of all such [persons](/usc/15/78m.md?p=h-8-E) when [written](/usc/15/77b.md?p=a-9) on the said [registration statements](/usc/15/77b.md?p=a-8) shall be presumed to have been so [written](/usc/15/77b.md?p=a-9) by [authority](/usc/15/3051.md?p=1) of the [person](/usc/15/78m.md?p=h-8-E) whose signature is so affixed and the burden of proof, in the event such [authority](/usc/15/3051.md?p=1) shall be denied, shall be upon the party denying the same. The affixing of any signature without the [authority](/usc/15/3051.md?p=1) of the purported signer shall constitute a [violation](/usc/15/57b–1.md?p=a-7) of this subchapter. A [registration statement](/usc/15/77b.md?p=a-8) shall be deemed effective only as to the [securities](/usc/15/77b.md?p=a-1) specified therein as proposed to be offered.
- (b) **Registration fee—**
  - (1) **Fee payment required—** At the time of filing a [registration statement](/usc/15/77b.md?p=a-8), the [applicant](/usc/15/7a.md?p=3) shall pay to the [Commission](/usc/15/77b.md?p=a-5) a fee at a rate that shall be equal to $92[^1] per $1,000,000 of the maximum aggregate price at which such [securities](/usc/15/77b.md?p=a-1) are proposed to be offered, except that during fiscal year 2003 and any succeeding fiscal year such fee shall be adjusted pursuant to [paragraph (2)](#b-2).
  - (2) **Annual adjustment—** For each fiscal year, the [Commission](/usc/15/77b.md?p=a-5) shall by [order](/usc/15/8702.md?p=14) adjust the rate required by [paragraph (1)](#b-1) for such fiscal year to a rate that, when applied to the baseline estimate of the aggregate maximum offering prices for such fiscal year, is reasonably likely to produce aggregate fee collections under this subsection that are equal to the target fee collection amount for such fiscal year.
  - (3) **Pro rata application—** The rates per $1,000,000 required by this subsection shall be applied pro rata to amounts and balances of less than $1,000,000.
  - (4) **Review and effective date—** In exercising its [authority](/usc/15/3051.md?p=1) under this subsection, the [Commission](/usc/15/77b.md?p=a-5) shall not be required to comply with the provisions of [section 553 of title 5](/usc/5/553.md). An adjusted rate prescribed under [paragraph (2)](#b-2) and published under [paragraph (5)](#b-5) shall not be subject to judicial review. An adjusted rate prescribed under [paragraph (2)](#b-2) shall take effect on the first day of the fiscal year to which such rate applies.
  - (5) **Publication—** The [Commission](/usc/15/77b.md?p=a-5) shall publish in the Federal Register notices of the rate applicable under this subsection and under sections [78m(e)](/usc/15/78m.md?p=e) and [78n(g)](/usc/15/78n.md?p=g)[^2] of this title for each fiscal year not later than August 31 of the fiscal year preceding the fiscal year to which such rate applies, together with any estimates or projections on which such rate is based.
  - (6) **Definitions—** For purposes of this subsection:
    - (A) **Target fee collection amount—** The target fee collection amount for each fiscal year is determined according to the following table:

      | Fiscal year: | Target fee collection amount |
      | --- | --- |
      | 2002 | $377,000,000 |
      | 2003 | $435,000,000 |
      | 2004 | $467,000,000 |
      | 2005 | $570,000,000 |
      | 2006 | $689,000,000 |
      | 2007 | $214,000,000 |
      | 2008 | $234,000,000 |
      | 2009 | $284,000,000 |
      | 2010 | $334,000,000 |
      | 2011 | $394,000,000 |
      | 2012 | $425,000,000 |
      | 2013 | $455,000,000 |
      | 2014 | $485,000,000 |
      | 2015 | $515,000,000 |
      | 2016 | $550,000,000 |
      | 2017 | $585,000,000 |
      | 2018 | $620,000,000 |
      | 2019 | $660,000,000 |
      | 2020 | $705,000,000 |
      | 2021 and each fiscal year thereafter | An amount that is equal to the target fee collection amount for the prior fiscal year, adjusted by the rate of inflation. |

    - (B) **Baseline estimate of the aggregate maximum offering prices—** The baseline estimate of the aggregate maximum offering prices for any fiscal year is the baseline estimate of the aggregate maximum offering price at which [securities](/usc/15/77b.md?p=a-1) are proposed to be offered pursuant to [registration statements](/usc/15/77b.md?p=a-8) filed with the [Commission](/usc/15/77b.md?p=a-5) during such fiscal year as determined by the [Commission](/usc/15/77b.md?p=a-5), after consultation with the Congressional Budget Office and the Office of Management and Budget, using the methodology required for projections pursuant to [section 907 of title 2](/usc/2/907.md).
- (c) **Time registration effective—** The filing with the [Commission](/usc/15/77b.md?p=a-5) of a [registration statement](/usc/15/77b.md?p=a-8), or of an amendment to a [registration statement](/usc/15/77b.md?p=a-8), shall be deemed to have taken place upon the receipt thereof, but the filing of a [registration statement](/usc/15/77b.md?p=a-8) shall not be deemed to have taken place unless it is accompanied by a United States postal money [order](/usc/15/8702.md?p=14) or a certified bank check or cash for the amount of the fee required under [subsection (b)](#b).
- (d) **Information available to public—** The information contained in or filed with any [registration statement](/usc/15/77b.md?p=a-8) shall be made available to the public under such regulations as the [Commission](/usc/15/77b.md?p=a-5) may prescribe, and copies thereof, photostatic or otherwise, shall be furnished to every [applicant](/usc/15/7a.md?p=3) at such reasonable charge as the [Commission](/usc/15/77b.md?p=a-5) may prescribe.
- (e) **Emerging growth companies—**
  - (1) **In general—** Any [emerging growth company](/usc/15/77b.md?p=a-19), prior to its initial public offering date, may confidentially submit to the [Commission](/usc/15/77b.md?p=a-5) a draft [registration statement](/usc/15/77b.md?p=a-8), for confidential nonpublic review by the staff of the [Commission](/usc/15/77b.md?p=a-5) prior to public filing, provided that the initial confidential submission and all amendments thereto shall be publicly filed with the [Commission](/usc/15/77b.md?p=a-5) not later than 15 days before the date on which the [issuer](/usc/15/77b.md?p=a-4) conducts a road show, as such term is defined in [section 230.433(h)(4) of title 17, Code of Federal Regulations](/cfr/17/230.433.md?p=h-4), or any successor thereto. An [issuer](/usc/15/77b.md?p=a-4) that was an [emerging growth company](/usc/15/77b.md?p=a-19) at the time it submitted a confidential [registration statement](/usc/15/77b.md?p=a-8) or, in lieu thereof, a publicly filed [registration statement](/usc/15/77b.md?p=a-8) for review under this subsection but ceases to be an [emerging growth company](/usc/15/77b.md?p=a-19) thereafter shall continue to be treated as an emerging market growth company for the purposes of this subsection through the earlier of the date on which the [issuer](/usc/15/77b.md?p=a-4) consummates its initial public offering pursuant to such registrations statement or the end of the 1-year period beginning on the date the company ceases to be an [emerging growth company](/usc/15/77b.md?p=a-19).
  - (2) **Confidentiality—** Notwithstanding any other provision of this subchapter, the [Commission](/usc/15/77b.md?p=a-5) shall not be compelled to disclose any information provided to or obtained by the [Commission](/usc/15/77b.md?p=a-5) pursuant to this subsection. For purposes of [section 552 of title 5](/usc/5/552.md), this subsection shall be considered a statute described in [subsection (b)(3)(B)](/usc/5/552.md?p=b-3-B) of such section 552. Information described in or obtained pursuant to this subsection shall be deemed to constitute confidential information for purposes of [section 78x(b)(2) of this title](/usc/15/78x.md).

# §77g. Information required in registration statement

- (a) **Information required in registration statement—**
  - (1) **In general—** The [registration statement](/usc/15/77b.md?p=a-8), when relating to a [security](/usc/15/77b.md?p=a-1) other than a [security](/usc/15/77b.md?p=a-1) issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in Schedule A of [section 77aa of this title](/usc/15/77aa.md), and when relating to a [security](/usc/15/77b.md?p=a-1) issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in Schedule B of [section 77aa of this title](/usc/15/77aa.md); except that the [Commission](/usc/15/77b.md?p=a-5) may by rules or regulations provide that any such information or document need not be included in respect of any class of [issuers](/usc/15/77b.md?p=a-4) or [securities](/usc/15/77b.md?p=a-1) if it finds that the requirement of such information or document is inapplicable to such class and that disclosure fully adequate for the protection of investors is otherwise required to be included within the [registration statement](/usc/15/77b.md?p=a-8). If any accountant, engineer, or appraiser, or any [person](/usc/15/78m.md?p=h-8-E) whose profession gives [authority](/usc/15/3051.md?p=1) to a statement made by him, is named as having prepared or certified any part of the [registration statement](/usc/15/77b.md?p=a-8), or is named as having prepared or certified a report or valuation for use in connection with the [registration statement](/usc/15/77b.md?p=a-8), the [written](/usc/15/77b.md?p=a-9) consent of such [person](/usc/15/78m.md?p=h-8-E) shall be filed with the [registration statement](/usc/15/77b.md?p=a-8). If any such [person](/usc/15/78m.md?p=h-8-E) is named as having prepared or certified a report or valuation (other than a public official document or statement) which is used in connection with the [registration statement](/usc/15/77b.md?p=a-8), but is not named as having prepared or certified such report or valuation for use in connection with the [registration statement](/usc/15/77b.md?p=a-8), the [written](/usc/15/77b.md?p=a-9) consent of such [person](/usc/15/78m.md?p=h-8-E) shall be filed with the [registration statement](/usc/15/77b.md?p=a-8) unless the [Commission](/usc/15/77b.md?p=a-5) dispenses with such filing as impracticable or as involving undue hardship on the [person](/usc/15/78m.md?p=h-8-E) filing the [registration statement](/usc/15/77b.md?p=a-8). Any such [registration statement](/usc/15/77b.md?p=a-8) shall contain such other information, and be accompanied by such other documents, as the [Commission](/usc/15/77b.md?p=a-5) may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors.
  - (2) **Treatment of emerging growth companies—** An [emerging growth company](/usc/15/77b.md?p=a-19)—
    - (A) need not present more than 2 years of audited financial statements in [order](/usc/15/8702.md?p=14) for the [registration statement](/usc/15/77b.md?p=a-8) of such [emerging growth company](/usc/15/77b.md?p=a-19) with respect to an initial public offering of its common [equity securities](/usc/15/9041.md?p=6) to be effective, and in any other [registration statement](/usc/15/77b.md?p=a-8) to be filed with the [Commission](/usc/15/77b.md?p=a-5), an [emerging growth company](/usc/15/77b.md?p=a-19) need not present selected financial data in accordance with [section 229.301 of title 17, Code of Federal Regulations](/cfr/17/229.301.md), for any period prior to the earliest audited period presented in connection with its initial public offering; and
    - (B) may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an [issuer](/usc/15/77b.md?p=a-4) (as defined under [section 7201 of this title](/usc/15/7201.md)) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not [issuers](/usc/15/77b.md?p=a-4).
- (b) **Registration statement for blank check companies—**
  - (1) The [Commission](/usc/15/77b.md?p=a-5) shall prescribe special rules with respect to [registration statements](/usc/15/77b.md?p=a-8) filed by any [issuer](/usc/15/77b.md?p=a-4) that is a [blank check company](#b-3). Such rules may, as the [Commission](/usc/15/77b.md?p=a-5) determines necessary or appropriate in the public interest or for the protection of investors—
    - (A) require such [issuers](/usc/15/77b.md?p=a-4) to provide timely disclosure, prior to or after such statement becomes effective under [section 77h of this title](/usc/15/77h.md), of (i) information regarding the company to be acquired and the specific [application](/usc/15/77ccc.md?p=8) of the proceeds of the offering, or (ii) additional information necessary to prevent such statement from being misleading;
    - (B) place limitations on the use of such proceeds and the distribution of [securities](/usc/15/77b.md?p=a-1) by such [issuer](/usc/15/77b.md?p=a-4) until the disclosures required under [subparagraph (A)](#b-1-A) have been made; and
    - (C) provide a right of rescission to shareholders of such [securities](/usc/15/77b.md?p=a-1).
  - (2) The [Commission](/usc/15/77b.md?p=a-5) may, as it determines consistent with the public interest and the protection of investors, by rule or [order](/usc/15/8702.md?p=14) exempt any [issuer](/usc/15/77b.md?p=a-4) or class of [issuers](/usc/15/77b.md?p=a-4) from the rules prescribed under [paragraph (1)](#b-1).
  - (3) For purposes of paragraph (1) of this subsection, the term “blank check company” means any development stage company that is issuing a [penny stock](/usc/15/77z–2.md?p=i-3) (within the meaning of [section 78c(a)(51) of this title](/usc/15/78c.md?p=a-51)) and that—
    - (A) has no specific business plan or purpose; or
    - (B) has indicated that its business plan is to merge with an unidentified company or companies.
- (c) **Disclosure requirements—**
  - (1) **In general—** The [Commission](/usc/15/77b.md?p=a-5) shall adopt regulations under this subsection requiring each [issuer](/usc/15/77b.md?p=a-4) of an asset-backed [security](/usc/15/77b.md?p=a-1) to disclose, for each tranche or class of [security](/usc/15/77b.md?p=a-1), information regarding the assets backing that [security](/usc/15/77b.md?p=a-1).
  - (2) **Content of regulations—** In adopting regulations under this subsection, the [Commission](/usc/15/77b.md?p=a-5) shall—
    - (A) set standards for the format of the data provided by [issuers](/usc/15/77b.md?p=a-4) of an asset-backed [security](/usc/15/77b.md?p=a-1), which shall, to the extent feasible, facilitate comparison of such data across [securities](/usc/15/77b.md?p=a-1) in similar types of asset classes; and
    - (B) require [issuers](/usc/15/77b.md?p=a-4) of asset-backed [securities](/usc/15/77b.md?p=a-1), at a minimum, to disclose asset-level or loan-level data, if such data are necessary for investors to independently perform due diligence, including—
      - (i) data having unique identifiers relating to loan [brokers](/usc/15/6102.md?p=d-2-B-i) or originators;
      - (ii) the nature and extent of the compensation of the [broker](/usc/15/6102.md?p=d-2-B-i) or originator of the assets backing the [security](/usc/15/77b.md?p=a-1); and
      - (iii) the amount of risk retention by the originator and the securitizer of such assets.
  - (3) **Data standards for asset-backed securities disclosures—**
    - (A) **Requirement—** The [Commission](/usc/15/77b.md?p=a-5) shall, by rule, adopt data standards for all disclosures required under this subsection.
    - (B) **Consistency—** The data standards required under [subparagraph (A)](#c-3-A) shall incorporate, and ensure compatibility with (to the extent feasible), all applicable data standards established in the rules promulgated under [section 5334 of title 12](/usc/12/5334.md), including, to the extent practicable, by having the characteristics described in [clauses (i) through (vi)](#c-1-B-i..c-1-B-vi) of subsection (c)(1)(B) of such [section 5334](/usc/12/5334.md).
- (d) **Registration statement for asset-backed securities—** Not later than 180 days after July 21, 2010, the [Commission](/usc/15/77b.md?p=a-5) shall issue rules relating to the [registration statement](/usc/15/77b.md?p=a-8) required to be filed by any [issuer](/usc/15/77b.md?p=a-4) of an asset-backed [security](/usc/15/77b.md?p=a-1) (as that term is defined in [section 78c(a)(77)](/usc/15/78c.md?p=a-77)[^1] of this title) that require any [issuer](/usc/15/77b.md?p=a-4) of an asset-backed [security](/usc/15/77b.md?p=a-1)—
  - (1) to perform a review of the assets underlying the asset-backed [security](/usc/15/77b.md?p=a-1); and
  - (2) to disclose the nature of the review under [paragraph (1)](#d-1).

# §77h. Taking effect of registration statements and amendments thereto

- (a) **Effective date of registration statement—** Except as hereinafter provided, the effective date of a [registration statement](/usc/15/77b.md?p=a-8) shall be the twentieth day after the filing thereof or such earlier date as the [Commission](/usc/15/77b.md?p=a-5) may determine, having due regard to the adequacy of the information respecting the [issuer](/usc/15/77b.md?p=a-4) theretofore available to the public, to the facility with which the nature of the [securities](/usc/15/77b.md?p=a-1) to be registered, their relationship to the capital structure of the [issuer](/usc/15/77b.md?p=a-4) and the rights of holders thereof can be understood, and to the public interest and the protection of investors. If any amendment to any such statement is filed prior to the effective date of such statement, the [registration statement](/usc/15/77b.md?p=a-8) shall be deemed to have been filed when such amendment was filed; except that an amendment filed with the consent of the [Commission](/usc/15/77b.md?p=a-5), prior to the effective date of the [registration statement](/usc/15/77b.md?p=a-8), or filed pursuant to an [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5), shall be treated as a part of the [registration statement](/usc/15/77b.md?p=a-8).
- (b) **Incomplete or inaccurate registration statement—** If it appears to the [Commission](/usc/15/77b.md?p=a-5) that a [registration statement](/usc/15/77b.md?p=a-8) is on its face incomplete or inaccurate in any material respect, the [Commission](/usc/15/77b.md?p=a-5) may, after notice by personal service or the sending of confirmed telegraphic notice not later than ten days after the filing of the [registration statement](/usc/15/77b.md?p=a-8), and opportunity for hearing (at a time fixed by the [Commission](/usc/15/77b.md?p=a-5)) within ten days after such notice by personal service or the sending of such telegraphic notice, issue an [order](/usc/15/8702.md?p=14) prior to the effective date of registration refusing to permit such statement to become effective until it has been amended in accordance with such [order](/usc/15/8702.md?p=14). When such statement has been amended in accordance with such [order](/usc/15/8702.md?p=14) the [Commission](/usc/15/77b.md?p=a-5) shall so declare and the registration shall become effective at the time provided in [subsection (a)](#a) or upon the date of such declaration, whichever date is the later.
- (c) **Effective date of amendment to registration statement—** An amendment filed after the effective date of the [registration statement](/usc/15/77b.md?p=a-8), if such amendment, upon its face, appears to the [Commission](/usc/15/77b.md?p=a-5) not to be incomplete or inaccurate in any material respect, shall become effective on such date as the [Commission](/usc/15/77b.md?p=a-5) may determine, having due regard to the public interest and the protection of investors.
- (d) **Untrue statements or omissions in registration statement—** If it appears to the [Commission](/usc/15/77b.md?p=a-5) at any time that the [registration statement](/usc/15/77b.md?p=a-8) includes any untrue statement of a material fact or omits to [state](/usc/15/15g.md?p=2) any material fact required to be stated therein or necessary to make the statements therein not misleading, the [Commission](/usc/15/77b.md?p=a-5) may, after notice by personal service or the sending of confirmed telegraphic notice, and after opportunity for hearing (at a time fixed by the [Commission](/usc/15/77b.md?p=a-5)) within fifteen days after such notice by personal service or the sending of such telegraphic notice, issue a stop [order](/usc/15/8702.md?p=14) suspending the effectiveness of the [registration statement](/usc/15/77b.md?p=a-8). When such statement has been amended in accordance with such stop [order](/usc/15/8702.md?p=14), the [Commission](/usc/15/77b.md?p=a-5) shall so declare and thereupon the stop [order](/usc/15/8702.md?p=14) shall cease to be effective.
- (e) **Examination for issuance of stop order—** The [Commission](/usc/15/77b.md?p=a-5) is empowered to make an examination in any case in [order](/usc/15/8702.md?p=14) to determine whether a stop [order](/usc/15/8702.md?p=14) should issue under [subsection (d)](#d). In making such examination the [Commission](/usc/15/77b.md?p=a-5) or any officer or officers designated by it shall have access to and may demand the production of any books and papers of, and may administer oaths and affirmations to and examine, the [issuer](/usc/15/77b.md?p=a-4), underwriter, or any other [person](/usc/15/78m.md?p=h-8-E), in respect of any matter relevant to the examination, and may, in its discretion, require the production of a balance sheet exhibiting the assets and liabilities of the [issuer](/usc/15/77b.md?p=a-4), or its income statement, or both, to be certified to by a public or certified accountant approved by the [Commission](/usc/15/77b.md?p=a-5). If the [issuer](/usc/15/77b.md?p=a-4) or underwriter shall fail to cooperate, or shall obstruct or refuse to permit the making of an examination, such conduct shall be proper ground for the issuance of a stop [order](/usc/15/8702.md?p=14).
- (f) **Notice requirements—** Any notice required under this section shall be sent to or served on the [issuer](/usc/15/77b.md?p=a-4), or, in case of a foreign government or political subdivision thereof, to or on the underwriter, or, in the case of a foreign or Territorial [person](/usc/15/78m.md?p=h-8-E), to or on its duly authorized representative in the United States named in the [registration statement](/usc/15/77b.md?p=a-8), properly directed in each case of telegraphic notice to the address given in such statement.

# §77h–1. Cease-and-desist proceedings

- (a) **Authority of Commission—** If the [Commission](/usc/15/77b.md?p=a-5) finds, after notice and opportunity for hearing, that any [person](/usc/15/78m.md?p=h-8-E) is violating, has violated, or is about to violate any provision of this subchapter, or any rule or regulation thereunder, the [Commission](/usc/15/77b.md?p=a-5) may publish its findings and enter an [order](/usc/15/8702.md?p=14) requiring such [person](/usc/15/78m.md?p=h-8-E), and any other [person](/usc/15/78m.md?p=h-8-E) that is, was, or would be a cause of the [violation](/usc/15/57b–1.md?p=a-7), due to an act or omission the [person](/usc/15/78m.md?p=h-8-E) knew or should have known would contribute to such [violation](/usc/15/57b–1.md?p=a-7), to cease and desist from committing or causing such [violation](/usc/15/57b–1.md?p=a-7) and any future [violation](/usc/15/57b–1.md?p=a-7) of the same provision, rule, or regulation. Such [order](/usc/15/8702.md?p=14) may, in addition to requiring a [person](/usc/15/78m.md?p=h-8-E) to cease and desist from committing or causing a [violation](/usc/15/57b–1.md?p=a-7), require such [person](/usc/15/78m.md?p=h-8-E) to comply, or to take steps to effect compliance, with such provision, rule, or regulation, upon such terms and conditions and within such time as the [Commission](/usc/15/77b.md?p=a-5) may specify in such [order](/usc/15/8702.md?p=14). Any such [order](/usc/15/8702.md?p=14) may, as the [Commission](/usc/15/77b.md?p=a-5) deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the [Commission](/usc/15/77b.md?p=a-5) may specify, with such provision, rule, or regulation with respect to any [security](/usc/15/77b.md?p=a-1), any [issuer](/usc/15/77b.md?p=a-4), or any other [person](/usc/15/78m.md?p=h-8-E).
- (b) **Hearing—** The notice instituting proceedings pursuant to [subsection (a)](#a) shall fix a hearing date not earlier than 30 days nor later than 60 days after service of the notice unless an earlier or a later date is set by the [Commission](/usc/15/77b.md?p=a-5) with the consent of any respondent so served.
- (c) **Temporary order—**
  - (1) **In general—** Whenever the [Commission](/usc/15/77b.md?p=a-5) determines that the alleged [violation](/usc/15/57b–1.md?p=a-7) or threatened [violation](/usc/15/57b–1.md?p=a-7) specified in the notice instituting proceedings pursuant to [subsection (a)](#a), or the continuation thereof, is likely to result in significant dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest, including, but not limited to, losses to the [Securities](/usc/15/77b.md?p=a-1) Investor Protection Corporation, prior to the completion of the proceedings, the [Commission](/usc/15/77b.md?p=a-5) may enter a temporary [order](/usc/15/8702.md?p=14) requiring the respondent to cease and desist from the [violation](/usc/15/57b–1.md?p=a-7) or threatened [violation](/usc/15/57b–1.md?p=a-7) and to take such action to prevent the [violation](/usc/15/57b–1.md?p=a-7) or threatened [violation](/usc/15/57b–1.md?p=a-7) and to prevent dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest as the [Commission](/usc/15/77b.md?p=a-5) deems appropriate pending completion of such proceeding. Such an [order](/usc/15/8702.md?p=14) shall be entered only after notice and opportunity for a hearing, unless the [Commission](/usc/15/77b.md?p=a-5) determines that notice and hearing prior to entry would be impracticable or contrary to the public interest. A temporary [order](/usc/15/8702.md?p=14) shall become effective upon service upon the respondent and, unless set aside, limited, or suspended by the [Commission](/usc/15/77b.md?p=a-5) or a court of competent jurisdiction, shall remain effective and enforceable pending the completion of the proceedings.
  - (2) **Applicability—** This subsection shall apply only to a respondent that acts, or, at the time of the alleged misconduct acted, as a [broker](/usc/15/6102.md?p=d-2-B-i), [dealer](/usc/15/77b.md?p=a-12), [investment adviser](/usc/15/6102.md?p=d-2-B-ii), [investment company](/usc/15/77z–2.md?p=i-2), [municipal securities dealer](/usc/15/6102.md?p=d-2-B-i), [government securities broker](/usc/15/6102.md?p=d-2-B-i), [government securities dealer](/usc/15/6102.md?p=d-2-B-i), or [transfer agent](/usc/15/6102.md?p=d-2-B-i), or is, or was at the time of the alleged misconduct, an associated [person](/usc/15/78m.md?p=h-8-E) of, or a [person](/usc/15/78m.md?p=h-8-E) seeking to become associated with, any of the foregoing.
- (d) **Review of temporary orders—**
  - (1) **Commission review—** At any time after the respondent has been served with a temporary cease-and-desist [order](/usc/15/8702.md?p=14) pursuant to [subsection (c)](#c), the respondent may apply to the [Commission](/usc/15/77b.md?p=a-5) to have the [order](/usc/15/8702.md?p=14) set aside, limited, or suspended. If the respondent has been served with a temporary cease-and-desist [order](/usc/15/8702.md?p=14) entered without a prior [Commission](/usc/15/77b.md?p=a-5) hearing, the respondent may, within 10 days after the date on which the [order](/usc/15/8702.md?p=14) was served, request a hearing on such [application](/usc/15/77ccc.md?p=8) and the [Commission](/usc/15/77b.md?p=a-5) shall hold a hearing and render a decision on such [application](/usc/15/77ccc.md?p=8) at the earliest possible time.
  - (2) **Judicial review—** Within—
    - (A) 10 days after the date the respondent was served with a temporary cease-and-desist [order](/usc/15/8702.md?p=14) entered with a prior [Commission](/usc/15/77b.md?p=a-5) hearing, or
    - (B) 10 days after the [Commission](/usc/15/77b.md?p=a-5) renders a decision on an [application](/usc/15/77ccc.md?p=8) and hearing under [paragraph (1)](#d-1), with respect to any temporary cease-and-desist [order](/usc/15/8702.md?p=14) entered without a prior [Commission](/usc/15/77b.md?p=a-5) hearing,

    the respondent may apply to the United States district court for the district in which the respondent resides or has its principal place of business, or for the District of Columbia, for an [order](/usc/15/8702.md?p=14) setting aside, limiting, or suspending the effectiveness or enforcement of the [order](/usc/15/8702.md?p=14), and the court shall have jurisdiction to enter such an [order](/usc/15/8702.md?p=14). A respondent served with a temporary cease-and-desist [order](/usc/15/8702.md?p=14) entered without a prior [Commission](/usc/15/77b.md?p=a-5) hearing may not apply to the court except after hearing and decision by the [Commission](/usc/15/77b.md?p=a-5) on the respondent’s [application](/usc/15/77ccc.md?p=8) under paragraph (1) of this subsection.

  - (3) **No automatic stay of temporary order—** The commencement of proceedings under paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of the [Commission](/usc/15/77b.md?p=a-5)’s [order](/usc/15/8702.md?p=14).
  - (4) **Exclusive review—** [Section 77i(a) of this title](/usc/15/77i.md?p=a) shall not apply to a temporary [order](/usc/15/8702.md?p=14) entered pursuant to this section.
- (e) **Authority to enter order requiring accounting and disgorgement—** In any cease-and-desist proceeding under [subsection (a)](#a), the [Commission](/usc/15/77b.md?p=a-5) may enter an [order](/usc/15/8702.md?p=14) requiring accounting and disgorgement, including reasonable interest. The [Commission](/usc/15/77b.md?p=a-5) is authorized to adopt rules, regulations, and [orders](/usc/15/8702.md?p=14) concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.
- (f) **Authority of the Commission to prohibit persons from serving as officers or directors—** In any cease-and-desist proceeding under [subsection (a)](#a), the [Commission](/usc/15/77b.md?p=a-5) may issue an [order](/usc/15/8702.md?p=14) to prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any [person](/usc/15/78m.md?p=h-8-E) who has violated [section 77q(a)(1) of this title](/usc/15/77q.md?p=a-1) or the rules or regulations thereunder, from acting as an officer or director of any [issuer](/usc/15/77b.md?p=a-4) that has a class of [securities](/usc/15/77b.md?p=a-1) registered pursuant to [section 78l](/usc/15/78l.md) of this title, or that is required to file reports pursuant to [section 78o(d)](/usc/15/78o.md?p=d) of this title, if the conduct of that [person](/usc/15/78m.md?p=h-8-E) demonstrates unfitness to serve as an officer or director of any such [issuer](/usc/15/77b.md?p=a-4).
- (g) **Authority to impose money penalties—**
  - (1) **Grounds—** In any cease-and-desist proceeding under [subsection (a)](#a), the [Commission](/usc/15/77b.md?p=a-5) may impose a civil penalty on a [person](/usc/15/78m.md?p=h-8-E) if the [Commission](/usc/15/77b.md?p=a-5) finds, on the record, after notice and opportunity for hearing, that—
    - (A) such [person](/usc/15/78m.md?p=h-8-E)—
      - (i) is violating or has violated any provision of this subchapter, or any rule or regulation issued under this subchapter; or
      - (ii) is or was a cause of the [violation](/usc/15/57b–1.md?p=a-7) of any provision of this subchapter, or any rule or regulation thereunder; and
    - (B) such penalty is in the public interest.
  - (2) **Maximum amount of penalty—**
    - (A) **First tier—** The maximum amount of a penalty for each act or omission described in [paragraph (1)](#g-1) shall be $7,500 for a natural [person](/usc/15/78m.md?p=h-8-E) or $75,000 for any other [person](/usc/15/78m.md?p=h-8-E).
    - (B) **Second tier—** Notwithstanding [subparagraph (A)](#g-2-A), the maximum amount of penalty for each such act or omission shall be $75,000 for a natural [person](/usc/15/78m.md?p=h-8-E) or $375,000 for any other [person](/usc/15/78m.md?p=h-8-E), if the act or omission described in [paragraph (1)](#g-1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.
    - (C) **Third tier—** Notwithstanding subparagraphs [(A)](#g-2-A) and [(B)](#g-2-B), the maximum amount of penalty for each such act or omission shall be $150,000 for a natural [person](/usc/15/78m.md?p=h-8-E) or $725,000 for any other [person](/usc/15/78m.md?p=h-8-E), if—
      - (i) the act or omission described in [paragraph (1)](#g-1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
      - (ii) such act or omission directly or indirectly resulted in—
        - (I) substantial losses or created a significant risk of substantial losses to other [persons](/usc/15/78m.md?p=h-8-E); or
        - (II) substantial pecuniary gain to the [person](/usc/15/78m.md?p=h-8-E) who committed the act or omission.
  - (3) **Evidence concerning ability to pay—** In any proceeding in which the [Commission](/usc/15/77b.md?p=a-5) may impose a penalty under this section, a respondent may present evidence of the ability of the respondent to pay such penalty. The [Commission](/usc/15/77b.md?p=a-5) may, in its discretion, consider such evidence in determining whether such penalty is in the public interest. Such evidence may relate to the extent of the ability of the respondent to continue in business and the collectability of a penalty, taking into [account](/usc/15/1681a.md?p=r-4) any other claims of the United States or third parties upon the assets of the respondent and the amount of the assets of the respondent.

# §77i. Court review of orders

- (a) Any [person](/usc/15/78m.md?p=h-8-E) aggrieved by an [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5) may obtain a review of such [order](/usc/15/8702.md?p=14) in the court of appeals of the United States, within any circuit wherein such [person](/usc/15/78m.md?p=h-8-E) resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such Court, within sixty days after the entry of such [order](/usc/15/8702.md?p=14), a [written](/usc/15/77b.md?p=a-9) petition praying that the [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5) be modified or be set aside in whole or in part. A copy of such petition shall be forthwith transmitted by the clerk of the court to the [Commission](/usc/15/77b.md?p=a-5), and thereupon the [Commission](/usc/15/77b.md?p=a-5) shall file in the court the record upon which the [order](/usc/15/8702.md?p=14) complained of was entered, as provided in [section 2112 of title 28](/usc/28/2112.md). No objection to the [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5) shall be considered by the court unless such objection shall have been urged before the [Commission](/usc/15/77b.md?p=a-5). The finding of the [Commission](/usc/15/77b.md?p=a-5) as to the facts, if supported by evidence, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the hearing before the [Commission](/usc/15/77b.md?p=a-5), the court may [order](/usc/15/8702.md?p=14) such additional evidence to be taken before the [Commission](/usc/15/77b.md?p=a-5) and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The [Commission](/usc/15/77b.md?p=a-5) may modify its findings as to the facts, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original [order](/usc/15/8702.md?p=14). The jurisdiction of the court shall be exclusive and its judgment and decree, affirming, modifying, or setting aside, in whole or in part, any [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5), shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in [section 1254 of title 28](/usc/28/1254.md).
- (b) The commencement of proceedings under [subsection (a)](#a) shall not, unless specifically ordered by the court, operate as a stay of the [Commission](/usc/15/77b.md?p=a-5)’s [order](/usc/15/8702.md?p=14).

# §77j. Information required in prospectus

- (a) **Information in registration statement; documents not required—** Except to the extent otherwise permitted or required pursuant to this subsection or subsections [(c)](#c), [(d)](#d), or [(e)](#e)—
  - (1) a [prospectus](/usc/15/77b.md?p=a-10) relating to a [security](/usc/15/77b.md?p=a-1) other than a [security](/usc/15/77b.md?p=a-1) issued by a foreign government or political subdivision thereof, shall contain the information contained in the [registration statement](/usc/15/77b.md?p=a-8), but it need not include the documents referred to in [paragraphs (28) to (32)](#a-28..a-32), inclusive, of schedule A of [section 77aa of this title](/usc/15/77aa.md);
  - (2) a [prospectus](/usc/15/77b.md?p=a-10) relating to a [security](/usc/15/77b.md?p=a-1) issued by a foreign government or political subdivision thereof shall contain the information contained in the [registration statement](/usc/15/77b.md?p=a-8), but it need not include the documents referred to in paragraphs (13) and (14) of schedule B of [section 77aa of this title](/usc/15/77aa.md);
  - (3) notwithstanding the provisions of paragraphs (1) and (2) of this subsection when a [prospectus](/usc/15/77b.md?p=a-10) is used more than nine months after the effective date of the [registration statement](/usc/15/77b.md?p=a-8), the information contained therein shall be as of a date not more than sixteen months prior to such use, so far as such information is known to the user of such [prospectus](/usc/15/77b.md?p=a-10) or can be furnished by such user without unreasonable effort or expense;
  - (4) there may be omitted from any [prospectus](/usc/15/77b.md?p=a-10) any of the information required under this subsection which the [Commission](/usc/15/77b.md?p=a-5) may by rules or regulations designate as not being necessary or appropriate in the public interest or for the protection of investors.
- (b) **Summarizations and omissions allowed by rules and regulations—** In addition to the [prospectus](/usc/15/77b.md?p=a-10) permitted or required in [subsection (a)](#a), the [Commission](/usc/15/77b.md?p=a-5) shall by rules or regulations deemed necessary or appropriate in the public interest or for the protection of investors permit the use of a [prospectus](/usc/15/77b.md?p=a-10) for the purposes of subsection (b)(1) of [section 77e of this title](/usc/15/77e.md) which omits in part or summarizes information in the [prospectus](/usc/15/77b.md?p=a-10) specified in [subsection (a)](#a). A [prospectus](/usc/15/77b.md?p=a-10) permitted under this subsection shall, except to the extent the [Commission](/usc/15/77b.md?p=a-5) by rules or regulations deemed necessary or appropriate in the public interest or for the protection of investors otherwise provides, be filed as part of the [registration statement](/usc/15/77b.md?p=a-8) but shall not be deemed a part of such [registration statement](/usc/15/77b.md?p=a-8) for the purposes of [section 77k of this title](/usc/15/77k.md). The [Commission](/usc/15/77b.md?p=a-5) may at any time issue an [order](/usc/15/8702.md?p=14) preventing or suspending the use of a [prospectus](/usc/15/77b.md?p=a-10) permitted under this subsection, if it has reason to believe that such [prospectus](/usc/15/77b.md?p=a-10) has not been filed (if required to be filed as part of the [registration statement](/usc/15/77b.md?p=a-8)) or includes any untrue statement of a material fact or omits to [state](/usc/15/15g.md?p=2) any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which such [prospectus](/usc/15/77b.md?p=a-10) is or is to be used, not misleading. Upon issuance of an [order](/usc/15/8702.md?p=14) under this subsection, the [Commission](/usc/15/77b.md?p=a-5) shall give notice of the issuance of such [order](/usc/15/8702.md?p=14) and opportunity for hearing by personal service or the sending of confirmed telegraphic notice. The [Commission](/usc/15/77b.md?p=a-5) shall vacate or modify the [order](/usc/15/8702.md?p=14) at any time for good cause or if such [prospectus](/usc/15/77b.md?p=a-10) has been filed or amended in accordance with such [order](/usc/15/8702.md?p=14).
- (c) **Additional information required by rules and regulations—** Any [prospectus](/usc/15/77b.md?p=a-10) shall contain such other information as the [Commission](/usc/15/77b.md?p=a-5) may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors.
- (d) **Classification of prospectuses—** In the exercise of its powers under subsections [(a)](#a), [(b)](#b), or [(c)](#c), the [Commission](/usc/15/77b.md?p=a-5) shall have [authority](/usc/15/3051.md?p=1) to classify [prospectuses](/usc/15/77b.md?p=a-10) according to the nature and circumstances of their use or the nature of the [security](/usc/15/77b.md?p=a-1), issue, [issuer](/usc/15/77b.md?p=a-4), or otherwise, and, by rules and regulations and subject to such terms and conditions as it shall specify therein, to prescribe as to each class the form and contents which it may find appropriate and consistent with the public interest and the protection of investors.
- (e) **Information in conspicuous part of prospectus—** The statements or information required to be included in a [prospectus](/usc/15/77b.md?p=a-10) by or under [authority](/usc/15/3051.md?p=1) of subsections [(a)](#a), [(b)](#b), [(c)](#c), or [(d)](#d), when [written](/usc/15/77b.md?p=a-9), shall be placed in a conspicuous part of the [prospectus](/usc/15/77b.md?p=a-10) and, except as otherwise permitted by rules or regulations, in type as large as that used generally in the body of the [prospectus](/usc/15/77b.md?p=a-10).
- (f) **Prospectus consisting of radio or television broadcast—** In any case where a [prospectus](/usc/15/77b.md?p=a-10) consists of a radio or television broadcast, copies thereof shall be filed with the [Commission](/usc/15/77b.md?p=a-5) under such rules and regulations as it shall prescribe. The [Commission](/usc/15/77b.md?p=a-5) may by rules and regulations require the filing with it of forms and [prospectuses](/usc/15/77b.md?p=a-10) used in connection with the offer or sale of [securities](/usc/15/77b.md?p=a-1) registered under this subchapter.

# §77k. Civil liabilities on account of false registration statement

- (a) **Persons possessing cause of action; persons liable—** In case any part of the [registration statement](/usc/15/77b.md?p=a-8), when such part became effective, contained an untrue statement of a material fact or omitted to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statements therein not misleading, any [person](/usc/15/78m.md?p=h-8-E) acquiring such [security](/usc/15/77b.md?p=a-1) (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue—
  - (1) every [person](/usc/15/78m.md?p=h-8-E) who signed the [registration statement](/usc/15/77b.md?p=a-8);
  - (2) every [person](/usc/15/78m.md?p=h-8-E) who was a director of (or [person](/usc/15/78m.md?p=h-8-E) performing similar functions) or partner in the [issuer](/usc/15/77b.md?p=a-4) at the time of the filing of the part of the [registration statement](/usc/15/77b.md?p=a-8) with respect to which his liability is asserted;
  - (3) every [person](/usc/15/78m.md?p=h-8-E) who, with his consent, is named in the [registration statement](/usc/15/77b.md?p=a-8) as being or about to become a director, [person](/usc/15/78m.md?p=h-8-E) performing similar functions, or partner;
  - (4) every accountant, engineer, or appraiser, or any [person](/usc/15/78m.md?p=h-8-E) whose profession gives [authority](/usc/15/3051.md?p=1) to a statement made by him, who has with his consent been named as having prepared or certified any part of the [registration statement](/usc/15/77b.md?p=a-8), or as having prepared or certified any report or valuation which is used in connection with the [registration statement](/usc/15/77b.md?p=a-8), with respect to the statement in such [registration statement](/usc/15/77b.md?p=a-8), report, or valuation, which purports to have been prepared or certified by him;
  - (5) every underwriter with respect to such [security](/usc/15/77b.md?p=a-1).

  If such [person](/usc/15/78m.md?p=h-8-E) acquired the [security](/usc/15/77b.md?p=a-1) after the [issuer](/usc/15/77b.md?p=a-4) has made generally available to its [security](/usc/15/77b.md?p=a-1) holders an earning statement covering a period of at least twelve months beginning after the effective date of the [registration statement](/usc/15/77b.md?p=a-8), then the right of recovery under this subsection shall be conditioned on proof that such [person](/usc/15/78m.md?p=h-8-E) acquired the [security](/usc/15/77b.md?p=a-1) relying upon such untrue statement in the [registration statement](/usc/15/77b.md?p=a-8) or relying upon the [registration statement](/usc/15/77b.md?p=a-8) and not knowing of such omission, but such reliance may be established without proof of the reading of the [registration statement](/usc/15/77b.md?p=a-8) by such [person](/usc/15/78m.md?p=h-8-E).

- (b) **Persons exempt from liability upon proof of issues—** Notwithstanding the provisions of [subsection (a)](#a) no [person](/usc/15/78m.md?p=h-8-E), other than the [issuer](/usc/15/77b.md?p=a-4), shall be liable as provided therein who shall sustain the burden of proof—
  - (1) that before the effective date of the part of the [registration statement](/usc/15/77b.md?p=a-8) with respect to which his liability is asserted (A) he had resigned from or had taken such steps as are permitted by law to resign from, or ceased or refused to act in, every office, capacity, or relationship in which he was described in the [registration statement](/usc/15/77b.md?p=a-8) as acting or agreeing to act, and (B) he had advised the [Commission](/usc/15/77b.md?p=a-5) and the [issuer](/usc/15/77b.md?p=a-4) in writing that he had taken such action and that he would not be responsible for such part of the [registration statement](/usc/15/77b.md?p=a-8); or
  - (2) that if such part of the [registration statement](/usc/15/77b.md?p=a-8) became effective without his knowledge, upon becoming aware of such fact he forthwith acted and advised the [Commission](/usc/15/77b.md?p=a-5), in accordance with paragraph (1) of this subsection, and, in addition, gave reasonable public notice that such part of the [registration statement](/usc/15/77b.md?p=a-8) had become effective without his knowledge; or
  - (3) that (A) as regards any part of the [registration statement](/usc/15/77b.md?p=a-8) not purporting to be made on the [authority](/usc/15/3051.md?p=1) of an expert, and not purporting to be a copy of or extract from a report or valuation of an expert, and not purporting to be made on the [authority](/usc/15/3051.md?p=1) of a public official document or statement, he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the [registration statement](/usc/15/77b.md?p=a-8) became effective, that the statements therein were true and that there was no omission to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statements therein not misleading; and (B) as regards any part of the [registration statement](/usc/15/77b.md?p=a-8) purporting to be made upon his [authority](/usc/15/3051.md?p=1) as an expert or purporting to be a copy of or extract from a report or valuation of himself as an expert, (i) he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the [registration statement](/usc/15/77b.md?p=a-8) became effective, that the statements therein were true and that there was no omission to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) such part of the [registration statement](/usc/15/77b.md?p=a-8) did not fairly represent his statement as an expert or was not a fair copy of or extract from his report or valuation as an expert; and (C) as regards any part of the [registration statement](/usc/15/77b.md?p=a-8) purporting to be made on the [authority](/usc/15/3051.md?p=1) of an expert (other than himself) or purporting to be a copy of or extract from a report or valuation of an expert (other than himself), he had no reasonable ground to believe and did not believe, at the time such part of the [registration statement](/usc/15/77b.md?p=a-8) became effective, that the statements therein were untrue or that there was an omission to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the [registration statement](/usc/15/77b.md?p=a-8) did not fairly represent the statement of the expert or was not a fair copy of or extract from the report or valuation of the expert; and (D) as regards any part of the [registration statement](/usc/15/77b.md?p=a-8) purporting to be a statement made by an official [person](/usc/15/78m.md?p=h-8-E) or purporting to be a copy of or extract from a public official document, he had no reasonable ground to believe and did not believe, at the time such part of the [registration statement](/usc/15/77b.md?p=a-8) became effective, that the statements therein were untrue, or that there was an omission to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the [registration statement](/usc/15/77b.md?p=a-8) did not fairly represent the statement made by the official [person](/usc/15/78m.md?p=h-8-E) or was not a fair copy of or extract from the public official document.
- (c) **Standard of reasonableness—** In determining, for the purpose of [paragraph (3)](#b-3) of subsection (b) of this section, what constitutes reasonable investigation and reasonable ground for belief, the standard of reasonableness shall be that required of a prudent man in the management of his own property.
- (d) **Effective date of registration statement with regard to underwriters—** If any [person](/usc/15/78m.md?p=h-8-E) becomes an underwriter with respect to the [security](/usc/15/77b.md?p=a-1) after the part of the [registration statement](/usc/15/77b.md?p=a-8) with respect to which his liability is asserted has become effective, then for the purposes of [paragraph (3)](#b-3) of subsection (b) of this section such part of the [registration statement](/usc/15/77b.md?p=a-8) shall be considered as having become effective with respect to such [person](/usc/15/78m.md?p=h-8-E) as of the time when he became an underwriter.
- (e) **Measure of damages; undertaking for payment of costs—** The suit authorized under [subsection (a)](#a) may be to recover such damages as shall represent the difference between the amount paid for the [security](/usc/15/77b.md?p=a-1) (not exceeding the price at which the [security](/usc/15/77b.md?p=a-1) was offered to the public) and (1) the value thereof as of the time such suit was brought, or (2) the price at which such [security](/usc/15/77b.md?p=a-1) shall have been disposed of in the market before suit, or (3) the price at which such [security](/usc/15/77b.md?p=a-1) shall have been disposed of after suit but before judgment if such damages shall be less than the damages representing the difference between the amount paid for the [security](/usc/15/77b.md?p=a-1) (not exceeding the price at which the [security](/usc/15/77b.md?p=a-1) was offered to the public) and the value thereof as of the time such suit was brought: Provided, That if the defendant proves that any portion or all of such damages represents other than the depreciation in value of such [security](/usc/15/77b.md?p=a-1) resulting from such part of the [registration statement](/usc/15/77b.md?p=a-8), with respect to which his liability is asserted, not being true or omitting to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statements therein not misleading, such portion of or all such damages shall not be recoverable. In no event shall any underwriter (unless such underwriter shall have knowingly received from the [issuer](/usc/15/77b.md?p=a-4) for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interests in the underwriting) be liable in any suit or as a consequence of suits authorized under [subsection (a)](#a) for damages in excess of the total price at which the [securities](/usc/15/77b.md?p=a-1) underwritten by him and distributed to the public were offered to the public. In any suit under this or any other section of this subchapter the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney’s fees, and if judgment shall be rendered against a party litigant, upon the motion of the other party litigant, such costs may be assessed in favor of such party litigant (whether or not such undertaking has been required) if the court believes the suit or the defense to have been without merit, in an amount sufficient to reimburse him for the reasonable expenses incurred by him, in connection with such suit, such costs to be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard.
- (f) **Joint and several liability; liability of outside director—**
  - (1) Except as provided in [paragraph (2)](#f-2), all or any one or more of the [persons](/usc/15/78m.md?p=h-8-E) specified in [subsection (a)](#a) shall be jointly and severally liable, and every [person](/usc/15/78m.md?p=h-8-E) who becomes liable to make any payment under this section may recover contribution as in cases of contract from any [person](/usc/15/78m.md?p=h-8-E) who, if sued separately, would have been liable to make the same payment, unless the [person](/usc/15/78m.md?p=h-8-E) who has become liable was, and the other was not, guilty of fraudulent misrepresentation.
  - (2)
    - (A) The liability of an [outside director](#f-2-B) under [subsection (e)](#e) shall be determined in accordance with [section 78u–4(f) of this title](/usc/15/78u–4.md?p=f).
    - (B) For purposes of this paragraph, the term “outside director” shall have the meaning given such term by rule or regulation of the [Commission](/usc/15/77b.md?p=a-5).
- (g) **Offering price to public as maximum amount recoverable—** In no case shall the amount recoverable under this section exceed the price at which the [security](/usc/15/77b.md?p=a-1) was offered to the public.

# §77l. Civil liabilities arising in connection with prospectuses and communications

- (a) **In general—** Any [person](/usc/15/78m.md?p=h-8-E) who—
  - (1) offers or sells a [security](/usc/15/77b.md?p=a-1) in [violation](/usc/15/57b–1.md?p=a-7) of [section 77e of this title](/usc/15/77e.md), or
  - (2) offers or sells a [security](/usc/15/77b.md?p=a-1) (whether or not exempted by the provisions of [section 77c of this title](/usc/15/77c.md), other than paragraphs [(2)](#a-2) and (14) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or of the mails, by means of a [prospectus](/usc/15/77b.md?p=a-10) or oral communication, which includes an untrue statement of a material fact or omits to [state](/usc/15/15g.md?p=2) a material fact necessary in [order](/usc/15/8702.md?p=14) to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission,

  shall be liable, subject to [subsection (b)](#b), to the [person](/usc/15/78m.md?p=h-8-E) purchasing such [security](/usc/15/77b.md?p=a-1) from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such [security](/usc/15/77b.md?p=a-1) with interest thereon, less the amount of any income received thereon, upon the tender of such [security](/usc/15/77b.md?p=a-1), or for damages if he no longer owns the [security](/usc/15/77b.md?p=a-1).

- (b) **Loss causation—** In an action described in [subsection (a)(2)](#a-2), if the [person](/usc/15/78m.md?p=h-8-E) who offered or sold such [security](/usc/15/77b.md?p=a-1) proves that any portion or all of the amount recoverable under [subsection (a)(2)](#a-2) represents other than the depreciation in value of the subject [security](/usc/15/77b.md?p=a-1) resulting from such part of the [prospectus](/usc/15/77b.md?p=a-10) or oral communication, with respect to which the liability of that [person](/usc/15/78m.md?p=h-8-E) is asserted, not being true or omitting to [state](/usc/15/15g.md?p=2) a material fact required to be stated therein or necessary to make the statement not misleading, then such portion or amount, as the case may be, shall not be recoverable.

# §77m. Limitation of actions


No action shall be maintained to enforce any liability created under section [77k](/usc/15/77k.md) or [77l(a)(2)](/usc/15/77l.md?p=a-2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under [section 77l(a)(1)](/usc/15/77l.md?p=a-1) of this title, unless brought within one year after the [violation](/usc/15/57b–1.md?p=a-7) upon which it is based. In no event shall any such action be brought to enforce a liability created under section [77k](/usc/15/77k.md) or [77l(a)(1)](/usc/15/77l.md?p=a-1) of this title more than three years after the [security](/usc/15/77b.md?p=a-1) was bona fide offered to the public, or under [section 77l(a)(2)](/usc/15/77l.md?p=a-2) of this title more than three years after the sale.


# §77n. Contrary stipulations void


Any condition, stipulation, or provision binding any [person](/usc/15/78m.md?p=h-8-E) acquiring any [security](/usc/15/77b.md?p=a-1) to waive compliance with any provision of this subchapter or of the rules and regulations of the [Commission](/usc/15/77b.md?p=a-5) shall be void.


# §77o. Liability of controlling persons

- (a) **Controlling persons—** Every [person](/usc/15/78m.md?p=h-8-E) who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an [agreement](/usc/15/7a.md?p=2) or understanding with one or more other [persons](/usc/15/78m.md?p=h-8-E) by or through stock ownership, agency, or otherwise, controls any [person](/usc/15/78m.md?p=h-8-E) liable under sections [77k](/usc/15/77k.md) or [77l](/usc/15/77l.md) of this title, shall also be liable jointly and severally with and to the same extent as such controlled [person](/usc/15/78m.md?p=h-8-E) to any [person](/usc/15/78m.md?p=h-8-E) to whom such controlled [person](/usc/15/78m.md?p=h-8-E) is liable, unless the controlling [person](/usc/15/78m.md?p=h-8-E) had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled [person](/usc/15/78m.md?p=h-8-E) is alleged to exist.
- (b) **Prosecution of persons who aid and abet violations—** For purposes of any action brought by the [Commission](/usc/15/77b.md?p=a-5) under subparagraph (b) or (d) of [section 77t of this title](/usc/15/77t.md), any [person](/usc/15/78m.md?p=h-8-E) that knowingly or recklessly provides substantial assistance to another [person](/usc/15/78m.md?p=h-8-E) in [violation](/usc/15/57b–1.md?p=a-7) of a provision of this subchapter, or of any rule or regulation issued under this subchapter, shall be deemed to be in [violation](/usc/15/57b–1.md?p=a-7) of such provision to the same extent as the [person](/usc/15/78m.md?p=h-8-E) to whom such assistance is provided.

# §77p. Additional remedies; limitation on remedies

- (a) **Remedies additional—** Except as provided in [subsection (b)](#b), the rights and remedies provided by this subchapter shall be in addition to any and all other rights and remedies that may exist at law or in equity.
- (b) **Class action limitations—** No [covered class action](#f-2-A) based upon the statutory or common law of any [State](/usc/15/15g.md?p=2) or subdivision thereof may be maintained in any [State](/usc/15/15g.md?p=2) or Federal court by any private party alleging—
  - (1) an untrue statement or omission of a material fact in connection with the [purchase](/usc/15/77b.md?p=a-18) or sale of a [covered security](#f-3); or
  - (2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the [purchase](/usc/15/77b.md?p=a-18) or sale of a [covered security](#f-3).
- (c) **Removal of covered class actions—** Any [covered class action](#f-2-A) brought in any [State](/usc/15/15g.md?p=2) court involving a [covered security](#f-3), as set forth in [subsection (b)](#b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to [subsection (b)](#b).
- (d) **Preservation of certain actions—**
  - (1) **Actions under State law of State of incorporation—**
    - (A) **Actions preserved—** Notwithstanding subsection [(b)](#b) or [(c)](#c), a [covered class action](#f-2-A) described in subparagraph (B) of this paragraph that is based upon the statutory or common law of the [State](/usc/15/15g.md?p=2) in which the [issuer](/usc/15/77b.md?p=a-4) is incorporated (in the case of a corporation) or organized (in the case of any other entity) may be maintained in a [State](/usc/15/15g.md?p=2) or Federal court by a private party.
    - (B) **Permissible actions—** A [covered class action](#f-2-A) is described in this subparagraph if it involves—
      - (i) the [purchase](/usc/15/77b.md?p=a-18) or sale of [securities](/usc/15/77b.md?p=a-1) by the [issuer](/usc/15/77b.md?p=a-4) or an [affiliate of the issuer](#f-1) exclusively from or to holders of [equity securities](/usc/15/9041.md?p=6) of the [issuer](/usc/15/77b.md?p=a-4); or
      - (ii) any recommendation, position, or other communication with respect to the sale of [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4) that—
        - (I) is made by or on behalf of the [issuer](/usc/15/77b.md?p=a-4) or an [affiliate of the issuer](#f-1) to holders of [equity securities](/usc/15/9041.md?p=6) of the [issuer](/usc/15/77b.md?p=a-4); and
        - (II) concerns decisions of those equity holders with respect to voting their [securities](/usc/15/77b.md?p=a-1), acting in response to a tender or [exchange](/usc/15/636.md?p=a-36-A-xvi) offer, or exercising dissenters’ or appraisal rights.
  - (2) **State actions—**
    - (A) **In general—** Notwithstanding any other provision of this section, nothing in this section may be construed to preclude a [State](/usc/15/15g.md?p=2) or political subdivision thereof or a [State pension plan](#d-2-B) from bringing an action involving a [covered security](#f-3) on its own behalf, or as a member of a class comprised solely of other [States](/usc/15/15g.md?p=2), political subdivisions, or [State pension plans](#d-2-B) that are named plaintiffs, and that have authorized participation, in such action.
    - (B) **“State pension plan” defined—** For purposes of this paragraph, the term “State pension plan” means a pension plan established and maintained for its employees by the government of the [State](/usc/15/15g.md?p=2) or political subdivision thereof, or by any agency or instrumentality thereof.
  - (3) **Actions under contractual agreements between issuers and indenture trustees—** Notwithstanding subsection [(b)](#b) or [(c)](#c), a [covered class action](#f-2-A) that seeks to enforce a contractual [agreement](/usc/15/7a.md?p=2) between an [issuer](/usc/15/77b.md?p=a-4) and an indenture trustee may be maintained in a [State](/usc/15/15g.md?p=2) or Federal court by a party to the [agreement](/usc/15/7a.md?p=2) or a successor to such party.
  - (4) **Remand of removed actions—** In an action that has been removed from a [State](/usc/15/15g.md?p=2) court pursuant to [subsection (c)](#c), if the Federal court determines that the action may be maintained in [State](/usc/15/15g.md?p=2) court pursuant to this subsection, the Federal court shall remand such action to such [State](/usc/15/15g.md?p=2) court.
- (e) **Preservation of State jurisdiction—** The [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of any [State](/usc/15/15g.md?p=2) shall retain jurisdiction under the laws of such [State](/usc/15/15g.md?p=2) to investigate and bring enforcement actions.
- (f) **Definitions—** For purposes of this section, the following definitions shall apply:
  - (1) **Affiliate of the issuer—** The term “affiliate of the issuer” means a [person](/usc/15/78m.md?p=h-8-E) that directly or indirectly, through one or more [intermediaries](/usc/15/6901.md?p=7), controls or is controlled by or is under common control with, the [issuer](/usc/15/77b.md?p=a-4).
  - (2) **Covered class action—**
    - (A) **In general—** The term “covered class action” means—
      - (i) any single lawsuit in which—
        - (I) damages are sought on behalf of more than 50 [persons](/usc/15/78m.md?p=h-8-E) or prospective class members, and questions of law or fact common to those [persons](/usc/15/78m.md?p=h-8-E) or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual [persons](/usc/15/78m.md?p=h-8-E) or members; or
        - (II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those [persons](/usc/15/78m.md?p=h-8-E) or members of the prospective class predominate over any questions affecting only individual [persons](/usc/15/78m.md?p=h-8-E) or members; or
      - (ii) any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which—
        - (I) damages are sought on behalf of more than 50 [persons](/usc/15/78m.md?p=h-8-E); and
        - (II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.
    - (B) **Exception for derivative actions—** Notwithstanding [subparagraph (A)](#f-2-A), the term “[covered class action](#f-2-A)” does not include an exclusively derivative action brought by one or more shareholders on behalf of a corporation.
    - (C) **Counting of certain class members—** For purposes of this paragraph, a corporation, [investment company](/usc/15/77z–2.md?p=i-2), pension plan, partnership, or other entity, shall be treated as one [person](/usc/15/78m.md?p=h-8-E) or prospective class member, but only if the entity is not established for the purpose of participating in the action.
    - (D) **Rule of construction—** Nothing in this paragraph shall be construed to affect the discretion of a [State](/usc/15/15g.md?p=2) court in determining whether actions filed in such court should be joined, consolidated, or otherwise allowed to proceed as a single action.
  - (3) **Covered security—** The term “covered security” means a [security](/usc/15/77b.md?p=a-1) that satisfies the standards for a covered security specified in paragraph (1) or (2) of [section 77r(b) of this title](/usc/15/77r.md?p=b) at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred, except that such term shall not include any debt [security](/usc/15/77b.md?p=a-1) that is exempt from registration under this subchapter pursuant to rules issued by the [Commission](/usc/15/77b.md?p=a-5) under [section 77d(2)](/usc/15/77d.md)[^1] of this title.

# §77q. Fraudulent interstate transactions

- (a) **Use of interstate commerce for purpose of fraud or deceit—** It shall be unlawful for any [person](/usc/15/78m.md?p=h-8-E) in the offer or sale of any [securities](/usc/15/77b.md?p=a-1) (including [security-based swaps](/usc/15/77b.md?p=a-17)) or any [security-based swap agreement](/usc/15/78c.md?p=a-78-A) (as defined in [section 78c(a)(78)](/usc/15/78c.md?p=a-78)[^1] of this title) by the use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or by use of the mails, directly or indirectly—
  - (1) to employ any device, scheme, or artifice to defraud, or
  - (2) to obtain money or property by means of any untrue statement of a material fact or any omission to [state](/usc/15/15g.md?p=2) a material fact necessary in [order](/usc/15/8702.md?p=14) to make the statements made, in light of the circumstances under which they were made, not misleading; or
  - (3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
- (b) **Use of interstate commerce for purpose of offering for sale—** It shall be unlawful for any [person](/usc/15/78m.md?p=h-8-E), by the use of any means or instruments of transportation or communication in [interstate commerce](/usc/15/77b.md?p=a-7) or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a [security](/usc/15/77b.md?p=a-1) for sale, describes such [security](/usc/15/77b.md?p=a-1) for a consideration received or to be received, directly or indirectly, from an [issuer](/usc/15/77b.md?p=a-4), underwriter, or [dealer](/usc/15/77b.md?p=a-12), without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.
- (c) **Exemptions of section 77c not applicable to this section—** The exemptions provided in [section 77c of this title](/usc/15/77c.md) shall not apply to the provisions of this section.
- (d) **Authority with respect to security-based swap agreements—** The [authority](/usc/15/3051.md?p=1) of the [Commission](/usc/15/77b.md?p=a-5) under this section with respect to [security-based swap agreements](/usc/15/78c.md?p=a-78-A) (as defined in [section 78c(a)(78) of this title](/usc/15/78c.md?p=a-78)) shall be subject to the restrictions and limitations of [section 77b–1(b) of this title](/usc/15/77b–1.md?p=b).

# §77r. Exemption from State regulation of securities offerings

- (a) **Scope of exemption—** Except as otherwise provided in this section, no law, rule, regulation, or [order](/usc/15/8702.md?p=14), or other administrative action of any [State](/usc/15/15g.md?p=2) or any political subdivision thereof—
  - (1) requiring, or with respect to, registration or qualification of [securities](/usc/15/77b.md?p=a-1), or registration or qualification of [securities](/usc/15/77b.md?p=a-1) transactions, shall directly or indirectly apply to a [security](/usc/15/77b.md?p=a-1) that—
    - (A) is a [covered security](/usc/15/77p.md?p=f-3); or
    - (B) will be a [covered security](/usc/15/77p.md?p=f-3) upon completion of the transaction;
  - (2) shall directly or indirectly prohibit, limit, or impose any conditions upon the use of—
    - (A) with respect to a [covered security](/usc/15/77p.md?p=f-3) described in [subsection (b)](#b), any [offering document](#d-1) that is [prepared by or on behalf of the issuer](#d-2); or
    - (B) any proxy statement, report to shareholders, or other disclosure document relating to a [covered security](/usc/15/77p.md?p=f-3) or the [issuer](/usc/15/77b.md?p=a-4) thereof that is required to be and is filed with the [Commission](/usc/15/77b.md?p=a-5) or any national [securities](/usc/15/77b.md?p=a-1) organization registered under [section 78o–3](/usc/15/78o–3.md) of this title, except that this subparagraph does not apply to the laws, rules, regulations, or [orders](/usc/15/8702.md?p=14), or other administrative actions of the [State](/usc/15/15g.md?p=2) of incorporation of the [issuer](/usc/15/77b.md?p=a-4); or
  - (3) shall directly or indirectly prohibit, limit, or impose conditions, based on the merits of such offering or [issuer](/usc/15/77b.md?p=a-4), upon the offer or sale of any [security](/usc/15/77b.md?p=a-1) described in [paragraph (1)](#a-1).
- (b) **Covered securities—** For purposes of this section, the following are [covered securities](/usc/15/77p.md?p=f-3):
  - (1) **Exclusive Federal registration of nationally traded securities—** A [security](/usc/15/77b.md?p=a-1) is a [covered security](/usc/15/77p.md?p=f-3) if such [security](/usc/15/77b.md?p=a-1) is—
    - (A) a [security](/usc/15/77b.md?p=a-1) designated as qualified for trading in the national market system pursuant to [section 78k–1(a)(2) of this title](/usc/15/78k–1.md?p=a-2) that is listed, or authorized for listing, on a [national securities exchange](/usc/15/9009a.md?p=a-5) (or tier or segment thereof); or
    - (B) a [security](/usc/15/77b.md?p=a-1) of the same [issuer](/usc/15/77b.md?p=a-4) that is equal in seniority or that is a [senior security](#d-4) to a [security](/usc/15/77b.md?p=a-1) described in [subparagraph (A)](#b-1-A).
  - (2) **Exclusive Federal registration of investment companies—** A [security](/usc/15/77b.md?p=a-1) is a [covered security](/usc/15/77p.md?p=f-3) if such [security](/usc/15/77b.md?p=a-1) is a [security](/usc/15/77b.md?p=a-1) issued by an [investment company](/usc/15/77z–2.md?p=i-2) that is registered, or that has filed a [registration statement](/usc/15/77b.md?p=a-8), under the Investment Company Act of 1940 [[15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.].
  - (3) **Sales to qualified purchasers—** A [security](/usc/15/77b.md?p=a-1) is a [covered security](/usc/15/77p.md?p=f-3) with respect to the offer or sale of the [security](/usc/15/77b.md?p=a-1) to qualified purchasers, as defined by the [Commission](/usc/15/77b.md?p=a-5) by rule. In prescribing such rule, the [Commission](/usc/15/77b.md?p=a-5) may define the term “qualified purchaser” differently with respect to different categories of [securities](/usc/15/77b.md?p=a-1), consistent with the public interest and the protection of investors.
  - (4) **Exemption in connection with certain exempt offerings—** A [security](/usc/15/77b.md?p=a-1) is a [covered security](/usc/15/77p.md?p=f-3) with respect to a transaction that is exempt from registration under this subchapter pursuant to—
    - (A) paragraph [(1)](/usc/15/77d.md) or [(3)](/usc/15/77d.md) of section 77d[^1] of this title, and the [issuer](/usc/15/77b.md?p=a-4) of such [security](/usc/15/77b.md?p=a-1) files reports with the [Commission](/usc/15/77b.md?p=a-5) pursuant to section [78m](/usc/15/78m.md) or [78o(d)](/usc/15/78o.md?p=d) of this title;
    - (B) [section 77d(4)](/usc/15/77d.md)[^1] of this title;
    - (C) [section 77d(6)](/usc/15/77d.md)[^1] of this title;
    - (D) a rule or regulation adopted pursuant to [section 77c(b)(2) of this title](/usc/15/77c.md?p=b-2) and such [security](/usc/15/77b.md?p=a-1) is—
      - (i) offered or sold on a [national securities exchange](/usc/15/9009a.md?p=a-5); or
      - (ii) offered or sold to a [qualified purchaser](#b-3), as defined by the [Commission](/usc/15/77b.md?p=a-5) pursuant to [paragraph (3)](#b-3) with respect to that [purchase](/usc/15/77b.md?p=a-18) or sale;
    - (E) [section 77c(a) of this title](/usc/15/77c.md?p=a), other than the offer or sale of a [security](/usc/15/77b.md?p=a-1) that is exempt from such registration pursuant to paragraph [(4)](/usc/15/77c.md?p=a-4), [(10)](/usc/15/77c.md?p=a-10), or [(11)](/usc/15/77c.md?p=a-11) of such section, except that a municipal [security](/usc/15/77b.md?p=a-1) that is exempt from such registration pursuant to [paragraph (2)](/usc/15/77c.md?p=a-2) of such section is not a [covered security](/usc/15/77p.md?p=f-3) with respect to the offer or sale of such [security](/usc/15/77b.md?p=a-1) in the [State](/usc/15/15g.md?p=2) in which the [issuer](/usc/15/77b.md?p=a-4) of such [security](/usc/15/77b.md?p=a-1) is located;
    - (F) [Commission](/usc/15/77b.md?p=a-5) rules or regulations issued under [section 77d(2)](/usc/15/77d.md)[^1] of this title, except that this subparagraph does not prohibit a [State](/usc/15/15g.md?p=2) from imposing notice filing requirements that are substantially similar to those required by rule or regulation under [section 77d(2)](/usc/15/77d.md)[^1] of this title that are in effect on September 1, 1996; or
    - (G) [section 77d(a)(7) of this title](/usc/15/77d.md?p=a-7).
- (c) **Preservation of authority—**
  - (1) **Fraud authority—** Consistent with this section, the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of any [State](/usc/15/15g.md?p=2) shall retain jurisdiction under the laws of such [State](/usc/15/15g.md?p=2) to investigate and bring enforcement actions, in connection with [securities](/usc/15/77b.md?p=a-1) or [securities](/usc/15/77b.md?p=a-1) transactions[^2]
    - (A) with respect to—
      - (i) fraud or deceit; or
      - (ii) unlawful conduct by a [broker](/usc/15/6102.md?p=d-2-B-i), [dealer](/usc/15/77b.md?p=a-12), or funding portal; and
    - (B) in connection to[^3] a transaction described under [section 77d(6)](/usc/15/77d.md)[^1] of this title, with respect to—
      - (i) fraud or deceit; or
      - (ii) unlawful conduct by a [broker](/usc/15/6102.md?p=d-2-B-i), [dealer](/usc/15/77b.md?p=a-12), funding portal, or [issuer](/usc/15/77b.md?p=a-4).
  - (2) **Preservation of filing requirements—**
    - (A) **Notice filings permitted—** Nothing in this section prohibits the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of any [State](/usc/15/15g.md?p=2) from requiring the filing of any document filed with the [Commission](/usc/15/77b.md?p=a-5) pursuant to this subchapter, together with annual or periodic reports of the value of [securities](/usc/15/77b.md?p=a-1) sold or offered to be sold to [persons](/usc/15/78m.md?p=h-8-E) located in the [State](/usc/15/15g.md?p=2) (if such sales data is not included in documents filed with the [Commission](/usc/15/77b.md?p=a-5)), solely for notice purposes and the assessment of any fee, together with a consent to service of process and any required fee.
    - (B) **Preservation of fees—**
      - (i) **In general—** Until otherwise provided by law, rule, regulation, or [order](/usc/15/8702.md?p=14), or other administrative action of any [State](/usc/15/15g.md?p=2) or any political subdivision thereof, adopted after October 11, 1996, filing or registration fees with respect to [securities](/usc/15/77b.md?p=a-1) or [securities](/usc/15/77b.md?p=a-1) transactions shall continue to be collected in amounts determined pursuant to [State](/usc/15/15g.md?p=2) law as in effect on the day before October 11, 1996.
      - (ii) **Schedule—** The fees required by this subparagraph shall be paid, and all necessary supporting data on sales or offers for sales required under [subparagraph (A)](#c-2-A), shall be reported on the same schedule as would have been applicable had the [issuer](/usc/15/77b.md?p=a-4) not relied on the exemption provided in [subsection (a)](#a).
    - (C) **Availability of preemption contingent on payment of fees—**
      - (i) **In general—** During the period beginning on October 11, 1996, and ending 3 years after October 11, 1996, the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of any [State](/usc/15/15g.md?p=2) may require the registration of [securities](/usc/15/77b.md?p=a-1) issued by any [issuer](/usc/15/77b.md?p=a-4) who refuses to pay the fees required by [subparagraph (B)](#c-2-B).
      - (ii) **Delays—** For purposes of this subparagraph, delays in payment of fees or underpayments of fees that are promptly remedied shall not constitute a refusal to pay fees.
    - (D) **Fees not permitted on listed securities—** Notwithstanding subparagraphs [(A)](#c-2-A), [(B)](#c-2-B), and [(C)](#c-2-C), no filing or fee may be required with respect to any [security](/usc/15/77b.md?p=a-1) that is a [covered security](/usc/15/77p.md?p=f-3) pursuant to [subsection (b)(1)](#b-1), or will be such a [covered security](/usc/15/77p.md?p=f-3) upon completion of the transaction, or is a [security](/usc/15/77b.md?p=a-1) of the same [issuer](/usc/15/77b.md?p=a-4) that is equal in seniority or that is a [senior security](#d-4) to a [security](/usc/15/77b.md?p=a-1) that is a [covered security](/usc/15/77p.md?p=f-3) pursuant to [subsection (b)(1)](#b-1).
    - (F) **[^4] Fees not permitted on crowdfunded securities—** Notwithstanding subparagraphs [(A)](#c-2-A), [(B)](#c-2-B), and [(C)](#c-2-C), no filing or fee may be required with respect to any [security](/usc/15/77b.md?p=a-1) that is a [covered security](/usc/15/77p.md?p=f-3) pursuant to [subsection (b)(4)(B)](#b-4-B), or will be such a [covered security](/usc/15/77p.md?p=f-3) upon completion of the transaction, except for the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of the State of the principal place of business of the [issuer](/usc/15/77b.md?p=a-4), or any State in which purchasers of 50 percent or greater of the aggregate amount of the issue are residents, provided that for purposes of this subparagraph, the term “State” includes the District of Columbia and the [territories](/usc/15/77b.md?p=a-6) of the United States.
  - (3) **Enforcement of requirements—** Nothing in this section shall prohibit the [securities](/usc/15/77b.md?p=a-1) [commission](/usc/15/77b.md?p=a-5) (or any agency or office performing like functions) of any [State](/usc/15/15g.md?p=2) from suspending the offer or sale of [securities](/usc/15/77b.md?p=a-1) within such [State](/usc/15/15g.md?p=2) as a result of the failure to submit any filing or fee required under law and permitted under this section.
- (d) **Definitions—** For purposes of this section, the following definitions shall apply:
  - (1) **Offering document—** The term “offering document”—
    - (A) has the meaning given the term “[prospectus](/usc/15/77b.md?p=a-10)” in [section 77b(a)(10) of this title](/usc/15/77b.md?p=a-10), but without regard to the provisions of subparagraphs [(a)](/usc/15/77b.md) and [(b)](/usc/15/77b.md) of that section; and
    - (B) includes a communication that is not deemed to offer a [security](/usc/15/77b.md?p=a-1) pursuant to a rule of the [Commission](/usc/15/77b.md?p=a-5).
  - (2) **Prepared by or on behalf of the issuer—** Not later than 6 months after October 11, 1996, the [Commission](/usc/15/77b.md?p=a-5) shall, by rule, define the term “prepared by or on behalf of the issuer” for purposes of this section.
  - (3) **State—** The term “[State](/usc/15/15g.md?p=2)” has the same meaning as in [section 78c of this title](/usc/15/78c.md).
  - (4) **Senior security—** The term “senior security” means any bond, debenture, note, or similar obligation or instrument constituting a [security](/usc/15/77b.md?p=a-1) and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets or payment of dividends.

# §77r–1. Preemption of State law

- (a) **Authority to purchase, hold, and invest in securities; securities considered as obligations of United States—**
  - (1) Any [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity created pursuant to or existing under the laws of the United States or any [State](/usc/15/15g.md?p=2) shall be authorized to [purchase](/usc/15/77b.md?p=a-18), hold, and invest in [securities](/usc/15/77b.md?p=a-1) that are—
    - (A) offered and sold pursuant to [section 77d(5)](/usc/15/77d.md)[^1] of this title,
    - (B) mortgage related [securities](/usc/15/77b.md?p=a-1) (as that term is defined in [section 78c(a)(41) of this title](/usc/15/78c.md?p=a-41)),
    - (C) [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) (as defined in [section 78c(a)(53) of this title](/usc/15/78c.md?p=a-53)), or
    - (D) [securities](/usc/15/77b.md?p=a-1) issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage [Association](/usc/15/657h.md?p=a-2),

    to the same extent that such [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity is authorized under any applicable law to [purchase](/usc/15/77b.md?p=a-18), hold or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.

  - (2) Where [State](/usc/15/15g.md?p=2) law limits the [purchase](/usc/15/77b.md?p=a-18), holding, or investment in obligations issued by the United States by such a [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity, such [securities](/usc/15/77b.md?p=a-1) that are—
    - (A) offered and sold pursuant to [section 77d(5)](/usc/15/77d.md)[^1] of this title,
    - (B) mortgage related [securities](/usc/15/77b.md?p=a-1) (as that term is defined in [section 78c(a)(41) of this title](/usc/15/78c.md?p=a-41)),
    - (C) [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) (as defined in [section 78c(a)(53) of this title](/usc/15/78c.md?p=a-53)), or
    - (D) [securities](/usc/15/77b.md?p=a-1) issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage [Association](/usc/15/657h.md?p=a-2),

    shall be considered to be obligations issued by the United States for purposes of the limitation.

- (b) **Exception; validity of contracts under prior law—** The provisions of [subsection (a)](#a) shall not apply with respect to a particular [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity or class thereof in any [State](/usc/15/15g.md?p=2) that, prior to the expiration of seven years after October 3, 1984, enacts a statute that specifically refers to this section and either prohibits or provides for a more limited [authority](/usc/15/3051.md?p=1) to [purchase](/usc/15/77b.md?p=a-18), hold, or invest in such [securities](/usc/15/77b.md?p=a-1) by any [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity or class thereof than is provided in [subsection (a)](#a). The enactment by any [State](/usc/15/15g.md?p=2) of any statute of the type described in the preceding sentence shall not affect the validity of any contractual commitment to [purchase](/usc/15/77b.md?p=a-18), hold, or invest that was made prior thereto and shall not require the sale or other disposition of any [securities](/usc/15/77b.md?p=a-1) acquired prior thereto.
- (c) **Registration and qualification requirements; exemption; subsequent enactment by State—** Any [securities](/usc/15/77b.md?p=a-1) that are offered and sold pursuant to [section 77d(5)](/usc/15/77d.md)[^1] of this title, that are mortgage related [securities](/usc/15/77b.md?p=a-1) (as that term is defined in [section 78c(a)(41) of this title](/usc/15/78c.md?p=a-41)), or that are [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) (as defined in [section 78c(a)(53) of this title](/usc/15/78c.md?p=a-53)) shall be exempt from any law of any [State](/usc/15/15g.md?p=2) with respect to or requiring registration or qualification of [securities](/usc/15/77b.md?p=a-1) or real estate to the same extent as any obligation issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof. Any [State](/usc/15/15g.md?p=2) may, prior to the expiration of seven years after October 3, 1984, enact a statute that specifically refers to this section and requires registration or qualification of any such [security](/usc/15/77b.md?p=a-1) on terms that differ from those applicable to any obligation issued by the United States.
- (d) **Implementation—**
  - (1) **Limitation—** The provisions of subsections [(a)](#a) and [(b)](#b) concerning [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) shall not apply with respect to a particular [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity or class thereof in any [State](/usc/15/15g.md?p=2) that, prior to the expiration of 7 years after September 23, 1994, enacts a statute that specifically refers to this section and either prohibits or provides for a more limited [authority](/usc/15/3051.md?p=1) to [purchase](/usc/15/77b.md?p=a-18), hold, or invest in such [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) by any [person](/usc/15/78m.md?p=h-8-E), trust, corporation, partnership, [association](/usc/15/657h.md?p=a-2), business trust, or business entity or class thereof than is provided in this section. The enactment by any [State](/usc/15/15g.md?p=2) of any statute of the type described in the preceding sentence shall not affect the validity of any contractual commitment to [purchase](/usc/15/77b.md?p=a-18), hold, or invest that was made prior to such enactment, and shall not require the sale or other disposition of any [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) acquired prior to the date of such enactment.
  - (2) **State registration or qualification requirements—** Any [State](/usc/15/15g.md?p=2) may, not later than 7 years after September 23, 1994, enact a statute that specifically refers to this section and requires registration or qualification of any [small business](/usc/15/1691c–2.md?p=h-2) related [securities](/usc/15/77b.md?p=a-1) on terms that differ from those applicable to any obligation issued by the United States.

# §77s. Special powers of Commission

- (a) **Rules and regulations—** The [Commission](/usc/15/77b.md?p=a-5) shall have [authority](/usc/15/3051.md?p=1) from time to time to make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this subchapter, including rules and regulations governing [registration statements](/usc/15/77b.md?p=a-8) and [prospectuses](/usc/15/77b.md?p=a-10) for various classes of [securities](/usc/15/77b.md?p=a-1) and [issuers](/usc/15/77b.md?p=a-4), and defining accounting, technical, and trade terms used in this subchapter. Among other things, the [Commission](/usc/15/77b.md?p=a-5) shall have [authority](/usc/15/3051.md?p=1), for the purposes of this subchapter, to prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and earning statement, and the methods to be followed in the preparation of [accounts](/usc/15/1681a.md?p=r-4), in the appraisal or valuation of assets and liabilities, in the determination of depreciation and depletion, in the differentiation of recurring and nonrecurring income, in the differentiation of investment and operating income, and in the preparation, where the [Commission](/usc/15/77b.md?p=a-5) deems it necessary or desirable, of consolidated balance sheets or income [accounts](/usc/15/1681a.md?p=r-4) of any [person](/usc/15/78m.md?p=h-8-E) directly or indirectly controlling or controlled by the [issuer](/usc/15/77b.md?p=a-4), or any [person](/usc/15/78m.md?p=h-8-E) under direct or indirect common control with the [issuer](/usc/15/77b.md?p=a-4). The rules and regulations of the [Commission](/usc/15/77b.md?p=a-5) shall be effective upon publication in the manner which the [Commission](/usc/15/77b.md?p=a-5) shall prescribe. No provision of this subchapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the [Commission](/usc/15/77b.md?p=a-5), notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or be determined by judicial or other [authority](/usc/15/3051.md?p=1) to be invalid for any reason.
- (b) **Recognition of accounting standards—**
  - (1) **In general—** In carrying out its [authority](/usc/15/3051.md?p=1) under [subsection (a)](#a) and under section 13(b) of the [Securities](/usc/15/77b.md?p=a-1) Exchange Act of 1934 [[15 U.S.C. 78m(b)](/usc/15/78m.md?p=b)], the [Commission](/usc/15/77b.md?p=a-5) may recognize, as “generally accepted” for purposes of the [securities laws](/usc/15/77z–2.md?p=i-5), any accounting principles established by a standard setting body—
    - (A) that—
      - (i) is organized as a private entity;
      - (ii) has, for administrative and operational purposes, a [board](/usc/15/205c.md?p=1) of trustees (or equivalent body) serving in the public interest, the majority of whom are not, concurrent with their service on such [board](/usc/15/205c.md?p=1), and have not been during the 2-year period preceding such service, associated [persons](/usc/15/78m.md?p=h-8-E) of any registered public accounting firm;
      - (iii) is funded as provided in [section 7219 of this title](/usc/15/7219.md);
      - (iv) has adopted procedures to ensure prompt consideration, by majority vote of its members, of changes to accounting principles necessary to reflect emerging accounting issues and changing business practices; and
      - (v) considers, in adopting accounting principles, the need to keep standards current in [order](/usc/15/8702.md?p=14) to reflect changes in the business environment, the extent to which international convergence on high quality accounting standards is necessary or appropriate in the public interest and for the protection of investors; and
    - (B) that the [Commission](/usc/15/77b.md?p=a-5) determines has the capacity to assist the [Commission](/usc/15/77b.md?p=a-5) in fulfilling the requirements of [subsection (a)](#a) and section 13(b) of the [Securities](/usc/15/77b.md?p=a-1) Exchange Act of 1934 [[15 U.S.C. 78m(b)](/usc/15/78m.md?p=b)], because, at a minimum, the standard setting body is capable of improving the accuracy and effectiveness of financial reporting and the protection of investors under the [securities laws](/usc/15/77z–2.md?p=i-5).
  - (2) **Annual report—** A standard setting body described in [paragraph (1)](#b-1) shall submit an annual report to the [Commission](/usc/15/77b.md?p=a-5) and the public, containing audited financial statements of that standard setting body.
- (c) **Production of evidence—** For the purpose of all investigations which, in the opinion of the [Commission](/usc/15/77b.md?p=a-5), are necessary and proper for the enforcement of this subchapter, any member of the [Commission](/usc/15/77b.md?p=a-5) or any officer or officers designated by it are empowered to administer oaths and affirmations, subpena witnesses, take evidence, and require the production of any books, papers, or other documents which the [Commission](/usc/15/77b.md?p=a-5) deems relevant or material to the inquiry. Such attendance of witnesses and the production of such documentary evidence may be required from any place in the United States or any [Territory](/usc/15/77b.md?p=a-6) at any designated place of hearing.
- (d) **Federal and State cooperation—**
  - (1) The [Commission](/usc/15/77b.md?p=a-5) is authorized to cooperate with any [association](#d-6) composed of duly constituted representatives of [State](/usc/15/15g.md?p=2) governments whose primary assignment is the regulation of the [securities](/usc/15/77b.md?p=a-1) business within those [States](/usc/15/15g.md?p=2), and which, in the judgment of the [Commission](/usc/15/77b.md?p=a-5), could assist in effectuating greater uniformity in Federal-[State](/usc/15/15g.md?p=2) [securities](/usc/15/77b.md?p=a-1) matters. The [Commission](/usc/15/77b.md?p=a-5) shall, at its discretion, cooperate, coordinate, and share information with such an [association](#d-6) for the purposes of carrying out the policies and [projects](/usc/15/2502.md?p=6) set forth in paragraphs [(2)](#d-2) and [(3)](#d-3).
  - (2) It is the declared policy of this subsection that there should be greater Federal and [State](/usc/15/15g.md?p=2) cooperation in [securities](/usc/15/77b.md?p=a-1) matters, including—
    - (A) maximum effectiveness of regulation,
    - (B) maximum uniformity in Federal and [State](/usc/15/15g.md?p=2) regulatory standards,
    - (C) minimum interference with the business of capital formation, and
    - (D) a substantial reduction in costs and paperwork to diminish the burdens of raising investment capital (particularly by [small business](/usc/15/1691c–2.md?p=h-2)) and to diminish the costs of the [administration](/usc/15/2203.md?p=2) of the Government [programs](/usc/15/2921.md?p=6) involved.
  - (3) The purpose of this subsection is to engender cooperation between the [Commission](/usc/15/77b.md?p=a-5), any such [association](#d-6) of [State](/usc/15/15g.md?p=2) [securities](/usc/15/77b.md?p=a-1) officials, and other duly constituted [securities](/usc/15/77b.md?p=a-1) [associations](#d-6) in the following areas:
    - (A) the sharing of information regarding the registration or exemption of [securities](/usc/15/77b.md?p=a-1) issues applied for in the various [States](/usc/15/15g.md?p=2);
    - (B) the development and maintenance of uniform [securities](/usc/15/77b.md?p=a-1) forms and procedures; and
    - (C) the development of a uniform exemption from registration for small [issuers](/usc/15/77b.md?p=a-4) which can be agreed upon among several [States](/usc/15/15g.md?p=2) or between the [States](/usc/15/15g.md?p=2) and the Federal Government. The [Commission](/usc/15/77b.md?p=a-5) shall have the [authority](/usc/15/3051.md?p=1) to adopt such an exemption as agreed upon for Federal purposes. Nothing in this chapter shall be construed as authorizing preemption of [State](/usc/15/15g.md?p=2) law.
  - (4) In [order](/usc/15/8702.md?p=14) to carry out these policies and purposes, the [Commission](/usc/15/77b.md?p=a-5) shall conduct an annual [conference](#d-6) as well as such other [meetings](#d-6) as are deemed necessary, to which representatives from such [securities](/usc/15/77b.md?p=a-1) [associations](#d-6), [securities](/usc/15/77b.md?p=a-1) [self-regulatory organizations](/usc/15/78c.md?p=a-26), [agencies](#d-6), and private [organizations](#d-6) involved in capital formation shall be invited to participate.
  - (5) For fiscal year 1982, and for each of the three succeeding fiscal years, there are authorized to be appropriated such amounts as may be necessary and appropriate to carry out the policies, provisions, and purposes of this subsection. Any sums so appropriated shall remain available until expended.
  - (6) Notwithstanding any other provision of law, neither the [Commission](/usc/15/77b.md?p=a-5) nor any other [person](/usc/15/78m.md?p=h-8-E) shall be required to establish any procedures not specifically required by the [securities laws](/usc/15/77z–2.md?p=i-5), as that term is defined in section 3(a)(47) of the [Securities](/usc/15/77b.md?p=a-1) Exchange Act of 1934 [[15 U.S.C. 78c(a)(47)](/usc/15/78c.md?p=a-47)], or by [chapter 5](/usc/5/chptI-ch5.md) of title 5, in connection with cooperation, coordination, or consultation with—
    - (A) any [association](#d-6) referred to in paragraph [(1)](#d-1) or [(3)](#d-3) or any [conference](#d-6) or [meeting](#d-6) referred to in [paragraph (4)](#d-4), while such [association](#d-6), [conference](#d-6), or [meeting](#d-6) is carrying out activities in furtherance of the provisions of this subsection; or
    - (B) any [forum](#d-6), [agency](#d-6), or [organization](#d-6), or [group](#d-6) referred to in [section 80c–1 of this title](/usc/15/80c–1.md), while such [forum](#d-6), [agency](#d-6), [organization](#d-6), or [group](#d-6) is carrying out activities in furtherance of the provisions of such [section 80c–1](/usc/15/80c–1.md).

    As used in this paragraph, the terms “association”, “conference”, “meeting”, “forum”, “agency”, “organization”, and “group” include any [committee](/usc/15/2921.md?p=1), subgroup, or representative of such entities.

- (e) **Evaluation of rules or programs—** For the purpose of evaluating any rule or [program](/usc/15/2921.md?p=6) of the [Commission](/usc/15/77b.md?p=a-5) issued or carried out under any provision of the [securities laws](/usc/15/77z–2.md?p=i-5), as defined in section 3 of the [Securities](/usc/15/77b.md?p=a-1) Exchange Act of 1934 ([15 U.S.C. 78c](/usc/15/78c.md)), and the purposes of considering, proposing, adopting, or engaging in any such rule or [program](/usc/15/2921.md?p=6) or developing new rules or [programs](/usc/15/2921.md?p=6), the [Commission](/usc/15/77b.md?p=a-5) may—
  - (1) gather information from and communicate with investors or other members of the public;
  - (2) engage in such temporary investor testing [programs](/usc/15/2921.md?p=6) as the [Commission](/usc/15/77b.md?p=a-5) determines are in the public interest or would protect investors; and
  - (3) consult with academics and consultants, as necessary to carry out this subsection.
- (f) **Rule of construction—** For purposes of the Paperwork Reduction Act ([44 U.S.C. 3501](/usc/44/3501.md) et seq.), any action taken under [subsection (e)](#e) shall not be construed to be a collection of information.
- (g) **Funding for the GASB—**
  - (1) **In general—** The [Commission](/usc/15/77b.md?p=a-5) may, subject to the limitations imposed by section 15B of the [Securities](/usc/15/77b.md?p=a-1) Exchange Act of 1934 ([15 U.S.C. 78o](/usc/15/78o.md)–4), require a national [securities](/usc/15/77b.md?p=a-1) [association](#d-6) registered under the [Securities](/usc/15/77b.md?p=a-1) Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.] to establish—
    - (A) a reasonable annual accounting support fee to adequately fund the annual budget of the Governmental Accounting Standards [Board](/usc/15/205c.md?p=1) (referred to in this subsection as the “GASB”); and
    - (B) rules and procedures, in consultation with the principal [organizations](#d-6) representing [State](/usc/15/15g.md?p=2) governors, legislators, local elected officials, and [State](/usc/15/15g.md?p=2) and local finance officers, to provide for the equitable allocation, assessment, and collection of the accounting support fee established under [subparagraph (A)](#g-1-A) from the members of the [association](#d-6), and the remittance of all such accounting support fees to the Financial Accounting Foundation.
  - (2) **Annual budget—** For purposes of this subsection, the annual budget of the GASB is the annual budget reviewed and approved according to the internal procedures of the Financial Accounting Foundation.
  - (3) **Use of funds—** Any fees or funds collected under this subsection shall be used to support the efforts of the GASB to establish standards of financial accounting and reporting recognized as generally accepted accounting principles applicable to [State](/usc/15/15g.md?p=2) and [local governments](/usc/15/34.md?p=1) of the United States.
  - (4) **Limitation on fee—** The annual accounting support fees collected under this subsection for a fiscal year shall not exceed the recoverable annual budgeted expenses of the GASB (which may include operating expenses, capital, and accrued items).
  - (5) **Rules of construction—**
    - (A) **Fees not public monies—** Accounting support fees collected under this subsection and other receipts of the GASB shall not be considered public monies of the United States.
    - (B) **Limitation on authority of the Commission—** Nothing in this subsection shall be construed to—
      - (i) provide the [Commission](/usc/15/77b.md?p=a-5) or any national [securities](/usc/15/77b.md?p=a-1) [association](#d-6) direct or indirect oversight of the budget or technical agenda of the GASB; or
      - (ii) affect the setting of generally accepted accounting principles by the GASB.
    - (C) **Noninterference with States—** Nothing in this subsection shall be construed to impair or limit the [authority](/usc/15/3051.md?p=1) of a [State](/usc/15/15g.md?p=2) or [local government](/usc/15/34.md?p=1) to establish accounting and financial reporting standards.

# §77t. Injunctions and prosecution of offenses

- (a) **Investigation of violations—** Whenever it shall appear to the [Commission](/usc/15/77b.md?p=a-5), either upon complaint or otherwise, that the provisions of this subchapter, or of any rule or regulation prescribed under [authority](/usc/15/3051.md?p=1) thereof, have been or are about to be violated, it may, in its discretion, either require or permit such [person](/usc/15/78m.md?p=h-8-E) to file with it a statement in writing, under oath, or otherwise, as to all the facts and circumstances concerning the subject matter which it believes to be in the public interest to investigate, and may investigate such facts.
- (b) **Action for injunction or criminal prosecution in district court—** Whenever it shall appear to the [Commission](/usc/15/77b.md?p=a-5) that any [person](/usc/15/78m.md?p=h-8-E) is engaged or about to engage in any acts or practices which constitute or will constitute a [violation](/usc/15/57b–1.md?p=a-7) of the provisions of this subchapter, or of any rule or regulation prescribed under [authority](/usc/15/3051.md?p=1) thereof, the [Commission](/usc/15/77b.md?p=a-5) may, in its discretion, bring an action in any district court of the United States, or United States court of any [Territory](/usc/15/77b.md?p=a-6), to enjoin such acts or practices, and upon a proper showing, a permanent or temporary injunction or restraining [order](/usc/15/8702.md?p=14) shall be granted without bond. The [Commission](/usc/15/77b.md?p=a-5) may transmit such evidence as may be available concerning such acts or practices to the Attorney General who may, in his discretion, [institute](/usc/15/9401.md?p=7) the necessary criminal proceedings under this subchapter. Any such criminal proceeding may be brought either in the district wherein the transmittal of the [prospectus](/usc/15/77b.md?p=a-10) or [security](/usc/15/77b.md?p=a-1) complained of begins, or in the district wherein such [prospectus](/usc/15/77b.md?p=a-10) or [security](/usc/15/77b.md?p=a-1) is received.
- (c) **Writ of mandamus—** Upon [application](/usc/15/77ccc.md?p=8) of the [Commission](/usc/15/77b.md?p=a-5), the district courts of the United States and the United States courts of any [Territory](/usc/15/77b.md?p=a-6) shall have jurisdiction to issue writs of mandamus commanding any [person](/usc/15/78m.md?p=h-8-E) to comply with the provisions of this subchapter or any [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5) made in pursuance thereof.
- (d) **Money penalties in civil actions—**
  - (1) **Authority of Commission—** Whenever it shall appear to the [Commission](/usc/15/77b.md?p=a-5) that any [person](/usc/15/78m.md?p=h-8-E) has violated any provision of this subchapter, the rules or regulations thereunder, or a cease-and-desist [order](/usc/15/8702.md?p=14) entered by the [Commission](/usc/15/77b.md?p=a-5) pursuant to [section 77h–1 of this title](/usc/15/77h–1.md), other than by committing a [violation](/usc/15/57b–1.md?p=a-7) subject to a penalty pursuant to [section 78u–1 of this title](/usc/15/78u–1.md), the [Commission](/usc/15/77b.md?p=a-5) may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, upon a proper showing, a civil penalty to be paid by the [person](/usc/15/78m.md?p=h-8-E) who committed such [violation](/usc/15/57b–1.md?p=a-7).
  - (2) **Amount of penalty—**
    - (A) **First tier—** The amount of the penalty shall be determined by the court in light of the facts and circumstances. For each [violation](/usc/15/57b–1.md?p=a-7), the amount of the penalty shall not exceed the greater of (i) $5,000 for a natural [person](/usc/15/78m.md?p=h-8-E) or $50,000 for any other [person](/usc/15/78m.md?p=h-8-E), or (ii) the gross amount of pecuniary gain to such defendant as a result of the [violation](/usc/15/57b–1.md?p=a-7).
    - (B) **Second tier—** Notwithstanding [subparagraph (A)](#d-2-A), the amount of penalty for each such [violation](/usc/15/57b–1.md?p=a-7) shall not exceed the greater of (i) $50,000 for a natural [person](/usc/15/78m.md?p=h-8-E) or $250,000 for any other [person](/usc/15/78m.md?p=h-8-E), or (ii) the gross amount of pecuniary gain to such defendant as a result of the [violation](/usc/15/57b–1.md?p=a-7), if the [violation](/usc/15/57b–1.md?p=a-7) described in [paragraph (1)](#d-1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.
    - (C) **Third tier—** Notwithstanding subparagraphs [(A)](#d-2-A) and [(B)](#d-2-B), the amount of penalty for each such [violation](/usc/15/57b–1.md?p=a-7) shall not exceed the greater of (i) $100,000 for a natural [person](/usc/15/78m.md?p=h-8-E) or $500,000 for any other [person](/usc/15/78m.md?p=h-8-E), or (ii) the gross amount of pecuniary gain to such defendant as a result of the [violation](/usc/15/57b–1.md?p=a-7), if—
      - (I) the [violation](/usc/15/57b–1.md?p=a-7) described in [paragraph (1)](#d-1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
      - (II) such [violation](/usc/15/57b–1.md?p=a-7) directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other [persons](/usc/15/78m.md?p=h-8-E).
  - (3) **Procedures for collection—**
    - (A) **Payment of penalty to Treasury—** A penalty imposed under this section shall be payable into the Treasury of the United States, except as otherwise provided in [section 7246 of this title](/usc/15/7246.md) and [section 78u–6 of this title](/usc/15/78u–6.md).
    - (B) **Collection of penalties—** If a [person](/usc/15/78m.md?p=h-8-E) upon whom such a penalty is imposed shall fail to pay such penalty within the time prescribed in the court’s [order](/usc/15/8702.md?p=14), the [Commission](/usc/15/77b.md?p=a-5) may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court.
    - (C) **Remedy not exclusive—** The actions authorized by this subsection may be brought in addition to any other action that the [Commission](/usc/15/77b.md?p=a-5) or the Attorney General is entitled to bring.
    - (D) **Jurisdiction and venue—** For purposes of [section 77v of this title](/usc/15/77v.md), actions under this section shall be actions to enforce a liability or a duty created by this subchapter.
  - (4) **Special provisions relating to a violation of a cease-and-desist order—** In an action to enforce a cease-and-desist [order](/usc/15/8702.md?p=14) entered by the [Commission](/usc/15/77b.md?p=a-5) pursuant to [section 77h–1 of this title](/usc/15/77h–1.md), each separate [violation](/usc/15/57b–1.md?p=a-7) of such [order](/usc/15/8702.md?p=14) shall be a separate offense, except that in the case of a [violation](/usc/15/57b–1.md?p=a-7) through a continuing failure to comply with such an [order](/usc/15/8702.md?p=14), each day of the failure to comply with the [order](/usc/15/8702.md?p=14) shall be deemed a separate offense.
- (e) **Authority of court to prohibit persons from serving as officers and directors—** In any proceeding under [subsection (b)](#b), the court may prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any [person](/usc/15/78m.md?p=h-8-E) who violated [section 77q(a)(1) of this title](/usc/15/77q.md?p=a-1) from acting as an officer or director of any [issuer](/usc/15/77b.md?p=a-4) that has a class of [securities](/usc/15/77b.md?p=a-1) registered pursuant to [section 78l](/usc/15/78l.md) of this title or that is required to file reports pursuant to [section 78o(d)](/usc/15/78o.md?p=d) of this title if the [person](/usc/15/78m.md?p=h-8-E)’s conduct demonstrates unfitness to serve as an officer or director of any such [issuer](/usc/15/77b.md?p=a-4).
- (f) **Prohibition of attorneys’ fees paid from Commission disgorgement funds—** Except as otherwise ordered by the court upon motion by the [Commission](/usc/15/77b.md?p=a-5), or, in the case of an administrative action, as otherwise ordered by the [Commission](/usc/15/77b.md?p=a-5), funds disgorged as the result of an action brought by the [Commission](/usc/15/77b.md?p=a-5) in Federal court, or as a result of any [Commission](/usc/15/77b.md?p=a-5) administrative action, shall not be distributed as payment for attorneys’ fees or expenses incurred by private parties seeking distribution of the disgorged funds.
- (g) **Authority of a court to prohibit persons from participating in an offering of penny stock—**
  - (1) **In general—** In any proceeding under [subsection (a)](#a) against any [person](/usc/15/78m.md?p=h-8-E) participating in, or, at the time of the alleged misconduct, who was participating in, an offering of [penny stock](/usc/15/77z–2.md?p=i-3), the court may prohibit that [person](/usc/15/78m.md?p=h-8-E) from participating in an offering of [penny stock](/usc/15/77z–2.md?p=i-3), conditionally or unconditionally, and permanently or for such period of time as the court shall determine.
  - (2) **Definition—** For purposes of this subsection, the term “person participating in an offering of penny stock” includes any [person](/usc/15/78m.md?p=h-8-E) engaging in activities with a [broker](/usc/15/6102.md?p=d-2-B-i), [dealer](/usc/15/77b.md?p=a-12), or [issuer](/usc/15/77b.md?p=a-4) for purposes of issuing, trading, or inducing or attempting to induce the [purchase](/usc/15/77b.md?p=a-18) or sale of, any [penny stock](/usc/15/77z–2.md?p=i-3). The [Commission](/usc/15/77b.md?p=a-5) may, by rule or regulation, define such term to include other activities, and may, by rule, regulation, or [order](/usc/15/8702.md?p=14), exempt any [person](/usc/15/78m.md?p=h-8-E) or class of [persons](/usc/15/78m.md?p=h-8-E), in whole or in part, conditionally or unconditionally, from inclusion in such term.

# §77u. Hearings by Commission


All hearings shall be public and may be held before the [Commission](/usc/15/77b.md?p=a-5) or an officer or officers of the [Commission](/usc/15/77b.md?p=a-5) designated by it, and appropriate records thereof shall be kept.


# §77v. Jurisdiction of offenses and suits

- (a) **Federal and State courts; venue; service of process; review; removal; costs—** The district courts of the United States and the United States courts of any [Territory](/usc/15/77b.md?p=a-6) shall have jurisdiction of offenses and [violations](/usc/15/57b–1.md?p=a-7) under this subchapter and under the rules and regulations promulgated by the [Commission](/usc/15/77b.md?p=a-5) in respect thereto, and, concurrent with [State](/usc/15/15g.md?p=2) and Territorial courts, except as provided in [section 77p of this title](/usc/15/77p.md) with respect to covered class actions, of all suits in equity and actions at law brought to enforce any liability or duty created by this subchapter. Any such suit or action may be brought in the district wherein the defendant is found or is an inhabitant or transacts business, or in the district where the offer or sale took place, if the defendant participated therein, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. In any action or proceeding instituted by the [Commission](/usc/15/77b.md?p=a-5) under this subchapter in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. [Rule 45(c)(3)(A)(ii)](/usc/28a/civil-45.md) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence. Judgments and decrees so rendered shall be subject to review as provided in sections [1254](/usc/28/1254.md), [1291](/usc/28/1291.md), [1292](/usc/28/1292.md), and [1294](/usc/28/1294.md) of title 28. Except as provided in [section 77p(c) of this title](/usc/15/77p.md?p=c), no case arising under this subchapter and brought in any [State](/usc/15/15g.md?p=2) court of competent jurisdiction shall be removed to any court of the United States. No costs shall be assessed for or against the [Commission](/usc/15/77b.md?p=a-5) in any proceeding under this subchapter brought by or against it in the Supreme Court or such other courts.
- (b) **Contumacy or refusal to obey subpena; contempt—** In case of contumacy or refusal to obey a subpena issued to any [person](/usc/15/78m.md?p=h-8-E), any of the said United States courts, within the jurisdiction of which said [person](/usc/15/78m.md?p=h-8-E) guilty of contumacy or refusal to obey is found or resides, upon [application](/usc/15/77ccc.md?p=8) by the [Commission](/usc/15/77b.md?p=a-5) may issue to such [person](/usc/15/78m.md?p=h-8-E) an [order](/usc/15/8702.md?p=14) requiring such [person](/usc/15/78m.md?p=h-8-E) to appear before the [Commission](/usc/15/77b.md?p=a-5), or one of its examiners designated by it, there to produce documentary evidence if so ordered, or there to give evidence touching the matter in question; and any failure to obey such [order](/usc/15/8702.md?p=14) of the court may be punished by said court as a contempt thereof.
- (c) **Extraterritorial jurisdiction—** The district courts of the United States and the United States courts of any [Territory](/usc/15/77b.md?p=a-6) shall have jurisdiction of an action or proceeding brought or instituted by the [Commission](/usc/15/77b.md?p=a-5) or the United States alleging a [violation](/usc/15/57b–1.md?p=a-7) of [section 77q(a) of this title](/usc/15/77q.md?p=a) involving—
  - (1) conduct within the United States that constitutes significant steps in furtherance of the [violation](/usc/15/57b–1.md?p=a-7), even if the [securities](/usc/15/77b.md?p=a-1) transaction occurs outside the United States and involves only foreign investors; or
  - (2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.

# §77w. Unlawful representations


Neither the fact that the [registration statement](/usc/15/77b.md?p=a-8) for a [security](/usc/15/77b.md?p=a-1) has been filed or is in effect nor the fact that a stop [order](/usc/15/8702.md?p=14) is not in effect with respect thereto shall be deemed a finding by the [Commission](/usc/15/77b.md?p=a-5) that the [registration statement](/usc/15/77b.md?p=a-8) is true and accurate on its face or that it does not contain an untrue statement of fact or omit to [state](/usc/15/15g.md?p=2) a material fact, or be held to mean that the [Commission](/usc/15/77b.md?p=a-5) has in any way passed upon the merits of, or given approval to, such [security](/usc/15/77b.md?p=a-1). It shall be unlawful to make, or cause to be made to any prospective purchaser any representation contrary to the foregoing provisions of this section.


# §77x. Penalties


Any [person](/usc/15/78m.md?p=h-8-E) who willfully violates any of the provisions of this subchapter, or the rules and regulations promulgated by the [Commission](/usc/15/77b.md?p=a-5) under [authority](/usc/15/3051.md?p=1) thereof, or any [person](/usc/15/78m.md?p=h-8-E) who willfully, in a [registration statement](/usc/15/77b.md?p=a-8) filed under this subchapter, makes any untrue statement of a material fact or omits to [state](/usc/15/15g.md?p=2) any material fact required to be stated therein or necessary to make the statements therein not misleading, shall upon conviction be fined not more than $10,000 or imprisoned not more than five years, or both.


# §77y. Jurisdiction of other Government agencies over securities


Nothing in this subchapter shall relieve any [person](/usc/15/78m.md?p=h-8-E) from submitting to the respective supervisory units of the Government of the United States information, reports, or other documents that may be required by any provision of law.


# §77z. Separability


If any provision of this chapter, or the [application](/usc/15/77ccc.md?p=8) of such provision to any [person](/usc/15/78m.md?p=h-8-E) or circumstance, shall be held invalid, the remainder of this chapter, or the [application](/usc/15/77ccc.md?p=8) of such provision to [persons](/usc/15/78m.md?p=h-8-E) or circumstances other than those as to which it is held invalid, shall not be affected thereby.


# §77z–1. Private securities litigation

- (a) **Private class actions—**
  - (1) **In general—** The provisions of this subsection shall apply to each private action arising under this subchapter that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.
  - (2) **Certification filed with complaint—**
    - (A) **In general—** Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that—
      - (i) [states](/usc/15/15g.md?p=2) that the plaintiff has reviewed the complaint and authorized its filing;
      - (ii) [states](/usc/15/15g.md?p=2) that the plaintiff did not [purchase](/usc/15/77b.md?p=a-18) the [security](/usc/15/77b.md?p=a-1) that is the subject of the complaint at the direction of plaintiff’s counsel or in [order](/usc/15/8702.md?p=14) to participate in any private action arising under this subchapter;
      - (iii) [states](/usc/15/15g.md?p=2) that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;
      - (iv) sets forth all of the transactions of the plaintiff in the [security](/usc/15/77b.md?p=a-1) that is the subject of the complaint during the class period specified in the complaint;
      - (v) identifies any other action under this subchapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve, or served, as a representative party on behalf of a class; and
      - (vi) [states](/usc/15/15g.md?p=2) that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff’s pro rata share of any recovery, except as ordered or approved by the court in accordance with [paragraph (4)](#a-4).
    - (B) **Nonwaiver of attorney-client privilege—** The certification filed pursuant to [subparagraph (A)](#a-2-A) shall not be construed to be a waiver of the attorney-client privilege.
  - (3) **Appointment of lead plaintiff—**
    - (A) **Early notice to class members—**
      - (i) **In general—** Not later than 20 days after the date on which the complaint is filed, the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class—
        - (I) of the pendency of the action, the claims asserted therein, and the purported class period; and
        - (II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.
      - (ii) **Multiple actions—** If more than one action on behalf of a class asserting substantially the same claim or claims arising under this subchapter is filed, only the plaintiff or plaintiffs in the first filed action shall be required to cause notice to be published in accordance with [clause (i)](#a-3-A-i).
      - (iii) **Additional notices may be required under Federal rules—** Notice required under [clause (i)](#a-3-A-i) shall be in addition to any notice required pursuant to the Federal Rules of Civil Procedure.
    - (B) **Appointment of lead plaintiff—**
      - (i) **In general—** Not later than 90 days after the date on which a notice is published under [subparagraph (A)(i)](#a-3-A-i), the court shall consider any motion made by a purported class member in response to the notice, including any motion by a class member who is not individually named as a plaintiff in the complaint or complaints, and shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereafter in this paragraph referred to as the “most adequate plaintiff”) in accordance with this subparagraph.
      - (ii) **Consolidated actions—** If more than one action on behalf of a class asserting substantially the same claim or claims arising under this subchapter has been filed, and any party has sought to consolidate those actions for pretrial purposes or for trial, the court shall not make the determination required by [clause (i)](#a-3-B-i) until after the decision on the motion to consolidate is rendered. As soon as practicable after such decision is rendered, the court shall appoint the most adequate plaintiff as lead plaintiff for the consolidated actions in accordance with this subparagraph.
      - (iii) **Rebuttable presumption—**
        - (I) **In general—** Subject to [subclause (II)](#a-3-B-iii-II), for purposes of [clause (i)](#a-3-B-i), the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this subchapter is the [person](/usc/15/78m.md?p=h-8-E) or group of [persons](/usc/15/78m.md?p=h-8-E) that—
          - (aa) has either filed the complaint or made a motion in response to a notice under [subparagraph (A)(i)](#a-3-A-i);
          - (bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and
          - (cc) otherwise satisfies the requirements of [Rule 23](/usc/28a/civil-23.md) of the Federal Rules of Civil Procedure.
        - (II) **Rebuttal evidence—** The presumption described in [subclause (I)](#a-3-B-iii-I) may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff—
          - (aa) will not fairly and adequately protect the interests of the class; or
          - (bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class.
      - (iv) **Discovery—** For purposes of this subparagraph, discovery relating to whether a member or members of the purported plaintiff class is the most adequate plaintiff may be conducted by a plaintiff only if the plaintiff first demonstrates a reasonable basis for a finding that the presumptively most adequate plaintiff is incapable of adequately representing the class.
      - (v) **Selection of lead counsel—** The most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class.
      - (vi) **Restrictions on professional plaintiffs—** Except as the court may otherwise permit, consistent with the purposes of this section, a [person](/usc/15/78m.md?p=h-8-E) may be a lead plaintiff, or an officer, director, or fiduciary of a lead plaintiff, in no more than 5 [securities](/usc/15/77b.md?p=a-1) class actions brought as plaintiff class actions pursuant to the Federal Rules of Civil Procedure during any 3-year period.
  - (4) **Recovery by plaintiffs—** The share of any final judgment or of any settlement that is awarded to a representative party serving on behalf of a class shall be equal, on a per share basis, to the portion of the final judgment or settlement awarded to all other members of the class. Nothing in this paragraph shall be construed to limit the award of reasonable costs and expenses (including lost wages) directly relating to the representation of the class to any representative party serving on behalf of the class.
  - (5) **Restrictions on settlements under seal—** The terms and provisions of any settlement [agreement](/usc/15/7a.md?p=2) of a class action shall not be filed under seal, except that on motion of any party to the settlement, the court may [order](/usc/15/8702.md?p=14) filing under seal for those portions of a settlement [agreement](/usc/15/7a.md?p=2) as to which good cause is shown for such filing under seal. For purposes of this paragraph, good cause shall exist only if publication of a term or provision of a settlement [agreement](/usc/15/7a.md?p=2) would cause direct and substantial harm to any party.
  - (6) **Restrictions on payment of attorneys’ fees and expenses—** Total attorneys’ fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class.
  - (7) **Disclosure of settlement terms to class members—** Any proposed or final settlement [agreement](/usc/15/7a.md?p=2) that is published or otherwise disseminated to the class shall include each of the following statements, along with a cover page summarizing the information contained in such statements:
    - (A) **Statement of plaintiff recovery—** The amount of the settlement proposed to be distributed to the parties to the action, determined in the aggregate and on an average per share basis.
    - (B) **Statement of potential outcome of case—**
      - (i) **Agreement on amount of damages—** If the settling parties agree on the average amount of damages per share that would be recoverable if the plaintiff prevailed on each claim alleged under this subchapter, a statement concerning the average amount of such potential damages per share.
      - (ii) **Disagreement on amount of damages—** If the parties do not agree on the average amount of damages per share that would be recoverable if the plaintiff prevailed on each claim alleged under this subchapter, a statement from each settling party concerning the issue or issues on which the parties disagree.
      - (iii) **Inadmissibility for certain purposes—** A statement made in accordance with clause [(i)](#a-7-B-i) or [(ii)](#a-7-B-ii) concerning the amount of damages shall not be admissible in any Federal or [State](/usc/15/15g.md?p=2) judicial action or administrative proceeding, other than an action or proceeding arising out of such statement.
    - (C) **Statement of attorneys’ fees or costs sought—** If any of the settling parties or their counsel intend to apply to the court for an award of attorneys’ fees or costs from any fund established as part of the settlement, a statement indicating which parties or counsel intend to make such an [application](/usc/15/77ccc.md?p=8), the amount of fees and costs that will be sought (including the amount of such fees and costs determined on an average per share basis), and a brief explanation supporting the fees and costs sought.
    - (D) **Identification of lawyers’ representatives—** The name, telephone number, and address of one or more representatives of counsel for the plaintiff class who will be reasonably available to answer questions from class members concerning any matter contained in any notice of settlement published or otherwise disseminated to the class.
    - (E) **Reasons for settlement—** A brief statement explaining the reasons why the parties are proposing the settlement.
    - (F) **Other information—** Such other information as may be required by the court.
  - (8) **Attorney conflict of interest—** If a plaintiff class is represented by an attorney who directly owns or otherwise has a beneficial interest in the [securities](/usc/15/77b.md?p=a-1) that are the subject of the litigation, the court shall make a determination of whether such ownership or other interest constitutes a conflict of interest sufficient to disqualify the attorney from representing the plaintiff class.
- (b) **Stay of discovery; preservation of evidence—**
  - (1) **In general—** In any private action arising under this subchapter, all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss, unless the court finds, upon the motion of any party, that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party.
  - (2) **Preservation of evidence—** During the pendency of any stay of discovery pursuant to this subsection, unless otherwise ordered by the court, any party to the action with actual notice of the allegations contained in the complaint shall treat all documents, data compilations (including electronically recorded or stored data), and tangible objects that are in the custody or control of such [person](/usc/15/78m.md?p=h-8-E) and that are relevant to the allegations, as if they were the subject of a continuing request for production of documents from an opposing party under the Federal Rules of Civil Procedure.
  - (3) **Sanction for willful violation—** A party aggrieved by the willful failure of an opposing party to comply with [paragraph (2)](#b-2) may apply to the court for an [order](/usc/15/8702.md?p=14) awarding appropriate sanctions.
  - (4) **Circumvention of stay of discovery—** Upon a proper showing, a court may stay discovery proceedings in any private action in a [State](/usc/15/15g.md?p=2) court as necessary in aid of its jurisdiction, or to protect or effectuate its judgments, in an action subject to a stay of discovery pursuant to this subsection.
- (c) **Sanctions for abusive litigation—**
  - (1) **Mandatory review by court—** In any private action arising under this subchapter, upon final adjudication of the action, the court shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of [Rule 11(b)](/usc/28a/civil-11.md?p=b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion.
  - (2) **Mandatory sanctions—** If the court makes a finding under [paragraph (1)](#c-1) that a party or attorney violated any requirement of [Rule 11(b)](/usc/28a/civil-11.md?p=b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion, the court shall impose sanctions on such party or attorney in accordance with [Rule 11](/usc/28a/civil-11.md) of the Federal Rules of Civil Procedure. Prior to making a finding that any party or attorney has violated [Rule 11](/usc/28a/civil-11.md) of the Federal Rules of Civil Procedure, the court shall give such party or attorney notice and an opportunity to respond.
  - (3) **Presumption in favor of attorneys’ fees and costs—**
    - (A) **In general—** Subject to subparagraphs [(B)](#c-3-B) and [(C)](#c-3-C), for purposes of [paragraph (2)](#c-2), the court shall adopt a presumption that the appropriate sanction—
      - (i) for failure of any responsive pleading or dispositive motion to comply with any requirement of [Rule 11(b)](/usc/28a/civil-11.md?p=b) of the Federal Rules of Civil Procedure is an award to the opposing party of the reasonable attorneys’ fees and other expenses incurred as a direct result of the [violation](/usc/15/57b–1.md?p=a-7); and
      - (ii) for substantial failure of any complaint to comply with any requirement of [Rule 11(b)](/usc/28a/civil-11.md?p=b) of the Federal Rules of Civil Procedure is an award to the opposing party of the reasonable attorneys’ fees and other expenses incurred in the action.
    - (B) **Rebuttal evidence—** The presumption described in [subparagraph (A)](#c-3-A) may be rebutted only upon proof by the party or attorney against whom sanctions are to be imposed that—
      - (i) the award of attorneys’ fees and other expenses will impose an unreasonable burden on that party or attorney and would be unjust, and the failure to make such an award would not impose a greater burden on the party in whose favor sanctions are to be imposed; or
      - (ii) the [violation](/usc/15/57b–1.md?p=a-7) of [Rule 11(b)](/usc/28a/civil-11.md?p=b) of the Federal Rules of Civil Procedure was de minimis.
    - (C) **Sanctions—** If the party or attorney against whom sanctions are to be imposed meets its burden under [subparagraph (B)](#c-3-B), the court shall award the sanctions that the court deems appropriate pursuant to [Rule 11](/usc/28a/civil-11.md) of the Federal Rules of Civil Procedure.
- (d) **Defendant’s right to written interrogatories—** In any private action arising under this subchapter in which the plaintiff may recover money damages only on proof that a defendant acted with a particular [state](/usc/15/15g.md?p=2) of mind, the court shall, when requested by a defendant, submit to the jury a [written](/usc/15/77b.md?p=a-9) interrogatory on the issue of each such defendant’s [state](/usc/15/15g.md?p=2) of mind at the time the alleged [violation](/usc/15/57b–1.md?p=a-7) occurred.

# §77z–2. Application of safe harbor for forward-looking statements

- (a) **Applicability—** This section shall apply only to a [forward-looking statement](#i-1) made by—
  - (1) an [issuer](/usc/15/77b.md?p=a-4) that, at the time that the statement is made, is subject to the reporting requirements of [section 78m(a)](/usc/15/78m.md?p=a) or [section 78o(d)](/usc/15/78o.md?p=d) of this title;
  - (2) a [person](/usc/15/78m.md?p=h-8-E) acting on behalf of such [issuer](/usc/15/77b.md?p=a-4);
  - (3) an outside reviewer retained by such [issuer](/usc/15/77b.md?p=a-4) making a statement on behalf of such [issuer](/usc/15/77b.md?p=a-4); or
  - (4) an underwriter, with respect to information provided by such [issuer](/usc/15/77b.md?p=a-4) or information derived from information provided by the [issuer](/usc/15/77b.md?p=a-4).
- (b) **Exclusions—** Except to the extent otherwise specifically provided by rule, regulation, or [order](/usc/15/8702.md?p=14) of the [Commission](/usc/15/77b.md?p=a-5), this section shall not apply to a [forward-looking statement](#i-1)—
  - (1) that is made with respect to the business or operations of the [issuer](/usc/15/77b.md?p=a-4), if the [issuer](/usc/15/77b.md?p=a-4)—
    - (A) during the 3-year period preceding the date on which the statement was first made—
      - (i) was convicted of any felony or misdemeanor described in [clauses (i) through (iv)](/usc/15/78o.md?p=b-4-B-i..b-4-B-iv) of section 78o(b)(4)(B) of this title; or
      - (ii) has been made the subject of a judicial or administrative decree or [order](/usc/15/8702.md?p=14) arising out of a governmental action that—
        - (I) prohibits future [violations](/usc/15/57b–1.md?p=a-7) of the antifraud provisions of the [securities laws](#i-5);
        - (II) requires that the [issuer](/usc/15/77b.md?p=a-4) cease and desist from violating the antifraud provisions of the [securities laws](#i-5); or
        - (III) determines that the [issuer](/usc/15/77b.md?p=a-4) violated the antifraud provisions of the [securities laws](#i-5);
    - (B) makes the [forward-looking statement](#i-1) in connection with an offering of [securities](/usc/15/77b.md?p=a-1) by a [blank check company](#i-7);
    - (C) issues [penny stock](#i-3);
    - (D) makes the [forward-looking statement](#i-1) in connection with a [rollup transaction](#i-7); or
    - (E) makes the [forward-looking statement](#i-1) in connection with a [going private transaction](#i-4); or
  - (2) that is—
    - (A) included in a financial statement prepared in accordance with generally accepted accounting principles;
    - (B) contained in a [registration statement](/usc/15/77b.md?p=a-8) of, or otherwise issued by, an [investment company](#i-2);
    - (C) made in connection with a tender offer;
    - (D) made in connection with an initial public offering;
    - (E) made in connection with an offering by, or relating to the operations of, a [partnership](#i-7), [limited liability company](#i-7), or a [direct participation investment program](#i-7); or
    - (F) made in a disclosure of beneficial ownership in a report required to be filed with the [Commission](/usc/15/77b.md?p=a-5) pursuant to [section 78m(d) of this title](/usc/15/78m.md?p=d).
- (c) **Safe harbor—**
  - (1) **In general—** Except as provided in [subsection (b)](#b), in any private action arising under this subchapter that is based on an untrue statement of a material fact or omission of a material fact necessary to make the statement not misleading, a [person](/usc/15/78m.md?p=h-8-E) referred to in [subsection (a)](#a) shall not be liable with respect to any [forward-looking statement](#i-1), whether [written](/usc/15/77b.md?p=a-9) or oral, if and to the extent that—
    - (A) the [forward-looking statement](#i-1) is—
      - (i) identified as a [forward-looking statement](#i-1), and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the [forward-looking statement](#i-1); or
      - (ii) immaterial; or
    - (B) the plaintiff fails to prove that the [forward-looking statement](#i-1)—
      - (i) if made by a natural [person](/usc/15/78m.md?p=h-8-E), was made with actual knowledge by that [person](/usc/15/78m.md?p=h-8-E) that the statement was false or misleading; or
      - (ii) if made by a business entity, was—
        - (I) made by or with the approval of an executive officer of that entity, and
        - (II) made or approved by such officer with actual knowledge by that officer that the statement was false or misleading.
  - (2) **Oral forward-looking statements—** In the case of an oral [forward-looking statement](#i-1) made by an [issuer](/usc/15/77b.md?p=a-4) that is subject to the reporting requirements of [section 78m(a)](/usc/15/78m.md?p=a) or [section 78o(d)](/usc/15/78o.md?p=d) of this title, or by a [person](/usc/15/78m.md?p=h-8-E) acting on behalf of such [issuer](/usc/15/77b.md?p=a-4), the requirement set forth in [paragraph (1)(A)](#c-1-A) shall be deemed to be satisfied—
    - (A) if the oral [forward-looking statement](#i-1) is accompanied by a cautionary statement—
      - (i) that the particular oral statement is a [forward-looking statement](#i-1); and
      - (ii) that the actual results could differ materially from those projected in the [forward-looking statement](#i-1); and
    - (B) if—
      - (i) the oral [forward-looking statement](#i-1) is accompanied by an oral statement that additional information concerning factors that could cause actual results to differ materially from those in the [forward-looking statement](#i-1) is contained in a readily available [written](/usc/15/77b.md?p=a-9) document, or portion thereof;
      - (ii) the accompanying oral statement referred to in [clause (i)](#c-2-B-i) identifies the document, or portion thereof, that contains the additional information about those factors relating to the [forward-looking statement](#i-1); and
      - (iii) the information contained in that [written](/usc/15/77b.md?p=a-9) document is a cautionary statement that satisfies the standard established in [paragraph (1)(A)](#c-1-A).
  - (3) **Availability—** Any document filed with the [Commission](/usc/15/77b.md?p=a-5) or generally disseminated shall be deemed to be readily available for purposes of [paragraph (2)](#c-2).
  - (4) **Effect on other safe harbors—** The exemption provided for in [paragraph (1)](#c-1) shall be in addition to any exemption that the [Commission](/usc/15/77b.md?p=a-5) may establish by rule or regulation under [subsection (g)](#g).
- (d) **Duty to update—** Nothing in this section shall impose upon any [person](/usc/15/78m.md?p=h-8-E) a duty to update a [forward-looking statement](#i-1).
- (e) **Dispositive motion—** On any motion to dismiss based upon [subsection (c)(1)](#c-1), the court shall consider any statement cited in the complaint and cautionary statement accompanying the [forward-looking statement](#i-1), which are not subject to material dispute, cited by the defendant.
- (f) **Stay pending decision on motion—** In any private action arising under this subchapter, the court shall stay discovery (other than discovery that is specifically directed to the applicability of the exemption provided for in this section) during the pendency of any motion by a defendant for summary judgment that is based on the grounds that—
  - (1) the statement or omission upon which the complaint is based is a [forward-looking statement](#i-1) within the meaning of this section; and
  - (2) the exemption provided for in this section precludes a claim for relief.
- (g) **Exemption authority—** In addition to the exemptions provided for in this section, the [Commission](/usc/15/77b.md?p=a-5) may, by rule or regulation, provide exemptions from or under any provision of this subchapter, including with respect to liability that is based on a statement or that is based on projections or other forward-looking information, if and to the extent that any such exemption is consistent with the public interest and the protection of investors, as determined by the [Commission](/usc/15/77b.md?p=a-5).
- (h) **Effect on other authority of Commission—** Nothing in this section limits, either expressly or by implication, the [authority](/usc/15/3051.md?p=1) of the [Commission](/usc/15/77b.md?p=a-5) to exercise similar [authority](/usc/15/3051.md?p=1) or to adopt similar rules and regulations with respect to [forward-looking statements](#i-1) under any other statute under which the [Commission](/usc/15/77b.md?p=a-5) exercises rulemaking [authority](/usc/15/3051.md?p=1).
- (i) **Definitions—** For purposes of this section, the following definitions shall apply:
  - (1) **Forward-looking statement—** The term “forward-looking statement” means—
    - (A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items;
    - (B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the [issuer](/usc/15/77b.md?p=a-4);
    - (C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the [Commission](/usc/15/77b.md?p=a-5);
    - (D) any statement of the assumptions underlying or relating to any statement described in subparagraph [(A)](#i-1-A), [(B)](#i-1-B), or [(C)](#i-1-C);
    - (E) any report issued by an outside reviewer retained by an [issuer](/usc/15/77b.md?p=a-4), to the extent that the report assesses a [forward-looking statement](#i-1) made by the [issuer](/usc/15/77b.md?p=a-4); or
    - (F) a statement containing a projection or estimate of such other items as may be specified by rule or regulation of the [Commission](/usc/15/77b.md?p=a-5).
  - (2) **Investment company—** The term “investment company” has the same meaning as in [section 80a–3(a) of this title](/usc/15/80a–3.md?p=a).
  - (3) **Penny stock—** The term “penny stock” has the same meaning as in [section 78c(a)(51) of this title](/usc/15/78c.md?p=a-51), and the rules and regulations, or [orders](/usc/15/8702.md?p=14) issued pursuant to that section.
  - (4) **Going private transaction—** The term “going private transaction” has the meaning given that term under the rules or regulations of the [Commission](/usc/15/77b.md?p=a-5) issued pursuant to [section 78m(e) of this title](/usc/15/78m.md?p=e).
  - (5) **Securities laws—** The term “securities laws” has the same meaning as in [section 78c of this title](/usc/15/78c.md).
  - (6) **Person acting on behalf of an issuer—** The term “person acting on behalf of an issuer” means an officer, director, or employee of the [issuer](/usc/15/77b.md?p=a-4).
  - (7) **Other terms—** The terms “blank check company”, “rollup transaction”, “partnership”, “limited liability company”, “executive officer of an entity” and “direct participation investment program”, have the meanings given those terms by rule or regulation of the [Commission](/usc/15/77b.md?p=a-5).

# §77z–2a. Conflicts of interest relating to certain securitizations

- (a) **In general—** An underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity, of an asset-backed [security](/usc/15/77b.md?p=a-1) (as such term is defined in [section 78c of this title](/usc/15/78c.md), which for the purposes of this section shall include a synthetic asset-backed [security](/usc/15/77b.md?p=a-1)), shall not, at any time for a period ending on the date that is one year after the date of the first closing of the sale of the asset-backed [security](/usc/15/77b.md?p=a-1), engage in any transaction that would involve or result in any material conflict of interest with respect to any investor in a transaction arising out of such activity.
- (b) **Rulemaking—** Not later than 270 days after July 21, 2010, the [Commission](/usc/15/77b.md?p=a-5) shall issue rules for the purpose of implementing [subsection (a)](#a).
- (c) **Exception—** The prohibitions of [subsection (a)](#a) shall not apply to—
  - (1) risk-mitigating hedging activities in connection with positions or holdings arising out of the underwriting, placement, initial [purchase](/usc/15/77b.md?p=a-18), or sponsorship of an asset-backed [security](/usc/15/77b.md?p=a-1), provided that such activities are designed to reduce the specific risks to the underwriter, placement agent, initial purchaser, or sponsor associated with positions or holdings arising out of such underwriting, placement, initial [purchase](/usc/15/77b.md?p=a-18), or sponsorship; or
  - (2) [purchases](/usc/15/77b.md?p=a-18) or sales of asset-backed [securities](/usc/15/77b.md?p=a-1) made pursuant to and consistent with—
    - (A) commitments of the underwriter, placement agent, initial purchaser, or sponsor, or any affiliate or subsidiary of any such entity, to provide liquidity for the asset-backed [security](/usc/15/77b.md?p=a-1), or
    - (B) bona fide market-making in the asset backed [security](/usc/15/77b.md?p=a-1).
- (d) **Rule of construction—** This subsection[^1] shall not otherwise limit the [application](/usc/15/77ccc.md?p=8) of [section 78o–11](/usc/15/78o–11.md) of this title.

# §77z–3. General exemptive authority


The [Commission](/usc/15/77b.md?p=a-5), by rule or regulation, may conditionally or unconditionally exempt any [person](/usc/15/78m.md?p=h-8-E), [security](/usc/15/77b.md?p=a-1), or transaction, or any class or classes of [persons](/usc/15/78m.md?p=h-8-E), [securities](/usc/15/77b.md?p=a-1), or transactions, from any provision or provisions of this subchapter or of any rule or regulation issued under this subchapter, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.


# §77z–4. Data standards

- (a) **Requirement—** The [Commission](/usc/15/77b.md?p=a-5) shall, by rule, adopt data standards for all [registration statements](/usc/15/77b.md?p=a-8), and for all [prospectuses](/usc/15/77b.md?p=a-10) included in [registration statements](/usc/15/77b.md?p=a-8), required to be filed with the [Commission](/usc/15/77b.md?p=a-5) under this subchapter, except that the [Commission](/usc/15/77b.md?p=a-5) may exempt exhibits, signatures, and certifications from those data standards.
- (b) **Consistency—** The data standards required under [subsection (a)](#a) shall incorporate, and ensure compatibility with (to the extent feasible), all applicable data standards established in the rules promulgated under [section 5334 of title 12](/usc/12/5334.md), including, to the extent practicable, by having the characteristics described in [clauses (i) through (vi)](#c-1-B-i..c-1-B-vi) of subsection (c)(1)(B) of such [section 5334](/usc/12/5334.md).

# §77aa. Schedule of information required in registration statement


schedule a

- (1) The name under which the [issuer](/usc/15/77b.md?p=a-4) is doing or intends to do business;
- (2) the name of the [State](/usc/15/15g.md?p=2) or other sovereign power under which the [issuer](/usc/15/77b.md?p=a-4) is organized;
- (3) the location of the [issuer](/usc/15/77b.md?p=a-4)’s principal business office, and if the [issuer](/usc/15/77b.md?p=a-4) is a foreign or territorial [person](/usc/15/78m.md?p=h-8-E), the name and address of its agent in the United States authorized to receive notice;
- (4) the names and addresses of the directors or [persons](/usc/15/78m.md?p=h-8-E) performing similar functions, and the chief executive, financial and accounting officers, chosen or to be chosen if the [issuer](/usc/15/77b.md?p=a-4) be a corporation, [association](/usc/15/657h.md?p=a-2), trust, or other entity; of all partners, if the [issuer](/usc/15/77b.md?p=a-4) be a partnership; and of the [issuer](/usc/15/77b.md?p=a-4), if the [issuer](/usc/15/77b.md?p=a-4) be an individual; and of the promoters in the case of a business to be formed, or formed within two years prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8);
- (5) the names and addresses of the underwriters;
- (6) the names and addresses of all [persons](/usc/15/78m.md?p=h-8-E), if any, owning of record or beneficially, if known, more than 10 per centum of any class of stock of the [issuer](/usc/15/77b.md?p=a-4), or more than 10 per centum in the aggregate of the outstanding stock of the [issuer](/usc/15/77b.md?p=a-4) as of a date within twenty days prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8);
- (7) the amount of [securities](/usc/15/77b.md?p=a-1) of the [issuer](/usc/15/77b.md?p=a-4) held by any [person](/usc/15/78m.md?p=h-8-E) specified in paragraphs [(4)](#4), [(5)](#5), and [(6)](#6) of this schedule, as of a date within twenty days prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8), and, if possible, as of one year prior thereto, and the amount of the [securities](/usc/15/77b.md?p=a-1), for which the [registration statement](/usc/15/77b.md?p=a-8) is filed, to which such [persons](/usc/15/78m.md?p=h-8-E) have indicated their intention to subscribe;
- (8) the general character of the business actually transacted or to be transacted by the [issuer](/usc/15/77b.md?p=a-4);
- (9) a statement of the capitalization of the [issuer](/usc/15/77b.md?p=a-4), including the authorized and outstanding amounts of its capital stock and the proportion thereof paid up, the number and classes of shares in which such capital stock is divided, par value thereof, or if it has no par value, the stated or assigned value thereof, a description of the respective voting rights, preferences, conversion and [exchange](/usc/15/636.md?p=a-36-A-xvi) rights, rights to dividends, profits, or capital of each class, with respect to each other class, including the retirement and liquidation rights or values thereof;
- (10) a statement of the [securities](/usc/15/77b.md?p=a-1), if any, covered by options outstanding or to be created in connection with the [security](/usc/15/77b.md?p=a-1) to be offered, together with the names and addresses of all [persons](/usc/15/78m.md?p=h-8-E), if any, to be allotted more than 10 per centum in the aggregate of such options;
- (11) the amount of capital stock of each class issued or included in the shares of stock to be offered;
- (12) the amount of the funded debt outstanding and to be created by the [security](/usc/15/77b.md?p=a-1) to be offered, with a brief description of the date, maturity, and character of such debt, rate of interest, character of amortization provisions, and the [security](/usc/15/77b.md?p=a-1), if any, therefor. If substitution of any [security](/usc/15/77b.md?p=a-1) is permissible, a summarized statement of the conditions under which such substitution is permitted. If substitution is permissible without notice, a specific statement to that effect;
- (13) the specific purposes in detail and the approximate amounts to be devoted to such purposes, so far as determinable, for which the [security](/usc/15/77b.md?p=a-1) to be offered is to supply funds, and if the funds are to be raised in part from other sources, the amounts thereof and the sources thereof, shall be stated;
- (14) the remuneration, paid or estimated to be paid, by the [issuer](/usc/15/77b.md?p=a-4) or its predecessor, directly or indirectly, during the past year and ensuing year to (a) the directors or [persons](/usc/15/78m.md?p=h-8-E) performing similar functions, and (b) its officers and other [persons](/usc/15/78m.md?p=h-8-E), naming them wherever such remuneration exceeded $25,000 during any such year;
- (15) the estimated net proceeds to be derived from the [security](/usc/15/77b.md?p=a-1) to be offered;
- (16) the price at which it is proposed that the [security](/usc/15/77b.md?p=a-1) shall be offered to the public or the method by which such price is computed and any variation therefrom at which any portion of such [security](/usc/15/77b.md?p=a-1) is proposed to be offered to any [persons](/usc/15/78m.md?p=h-8-E) or classes of [persons](/usc/15/78m.md?p=h-8-E), other than the underwriters, naming them or specifying the class. A variation in price may be proposed prior to the date of the public offering of the [security](/usc/15/77b.md?p=a-1), but the [Commission](/usc/15/77b.md?p=a-5) shall immediately be notified of such variation;
- (17) all [commissions](/usc/15/77b.md?p=a-5) or [discounts](/usc/15/1602.md?p=q) paid or to be paid, directly or indirectly, by the [issuer](/usc/15/77b.md?p=a-4) to the underwriters in respect of the sale of the [security](/usc/15/77b.md?p=a-1) to be offered. [Commissions](/usc/15/77b.md?p=a-5) shall include all cash, [securities](/usc/15/77b.md?p=a-1), contracts, or anything else of value, paid, to be set aside, disposed of, or understandings with or for the benefit of any other [persons](/usc/15/78m.md?p=h-8-E) in which any underwriter is interested, made, in connection with the sale of such [security](/usc/15/77b.md?p=a-1). A [commission](/usc/15/77b.md?p=a-5) paid or to be paid in connection with the sale of such [security](/usc/15/77b.md?p=a-1) by a [person](/usc/15/78m.md?p=h-8-E) in which the [issuer](/usc/15/77b.md?p=a-4) has an interest or which is controlled or directed by, or under common control with, the [issuer](/usc/15/77b.md?p=a-4) shall be deemed to have been paid by the [issuer](/usc/15/77b.md?p=a-4). Where any such [commission](/usc/15/77b.md?p=a-5) is paid the amount of such [commission](/usc/15/77b.md?p=a-5) paid to each underwriter shall be stated;
- (18) the amount or estimated amounts, itemized in reasonable detail, of expenses, other than [commissions](/usc/15/77b.md?p=a-5) specified in [paragraph (17)](#17) of this schedule, incurred or borne by or for the [account](/usc/15/1681a.md?p=r-4) of the [issuer](/usc/15/77b.md?p=a-4) in connection with the sale of the [security](/usc/15/77b.md?p=a-1) to be offered or properly chargeable thereto, including legal, engineering, certification, authentication, and other charges;
- (19) the net proceeds derived from any [security](/usc/15/77b.md?p=a-1) sold by the [issuer](/usc/15/77b.md?p=a-4) during the two years preceding the filing of the [registration statement](/usc/15/77b.md?p=a-8), the price at which such [security](/usc/15/77b.md?p=a-1) was offered to the public, and the names of the principal underwriters of such [security](/usc/15/77b.md?p=a-1);
- (20) any amount paid within two years preceding the filing of the [registration statement](/usc/15/77b.md?p=a-8) or intended to be paid to any promoter and the consideration for any such payment;
- (21) the names and addresses of the vendors and the [purchase](/usc/15/77b.md?p=a-18) price of any property, or good will, acquired or to be acquired, not in the ordinary course of business, which is to be defrayed in whole or in part from the proceeds of the [security](/usc/15/77b.md?p=a-1) to be offered, the amount of any [commission](/usc/15/77b.md?p=a-5) payable to any [person](/usc/15/78m.md?p=h-8-E) in connection with such acquisition, and the name or names of such [person](/usc/15/78m.md?p=h-8-E) or [persons](/usc/15/78m.md?p=h-8-E), together with any expense incurred or to be incurred in connection with such acquisition, including the cost of borrowing money to finance such acquisition;
- (22) full particulars of the nature and extent of the interest, if any, of every director, principal executive officer, and of every stockholder holding more than 10 per centum of any class of stock or more than 10 per centum in the aggregate of the stock of the [issuer](/usc/15/77b.md?p=a-4), in any property acquired, not in the ordinary course of business of the [issuer](/usc/15/77b.md?p=a-4), within two years preceding the filing of the [registration statement](/usc/15/77b.md?p=a-8) or proposed to be acquired at such date;
- (23) the names and addresses of counsel who have passed on the legality of the issue;
- (24) dates of and parties to, and the general effect concisely stated of every material contract made, not in the ordinary course of business, which contract is to be executed in whole or in part at or after the filing of the [registration statement](/usc/15/77b.md?p=a-8) or which contract has been made not more than two years before such filing. Any management contract or contract providing for special bonuses or profit-sharing arrangements, and every material patent or contract for a material patent right, and every contract by or with a public utility company or an affiliate thereof, providing for the giving or receiving of technical or financial advice or service (if such contract may involve a charge to any party thereto at a rate in excess of $2,500 per year in cash or [securities](/usc/15/77b.md?p=a-1) or anything else of value), shall be deemed a material contract;
- (25) a balance sheet as of a date not more than ninety days prior to the date of the filing of the [registration statement](/usc/15/77b.md?p=a-8) showing all of the assets of the [issuer](/usc/15/77b.md?p=a-4), the nature and cost thereof, whenever determinable, in such detail and in such form as the [Commission](/usc/15/77b.md?p=a-5) shall prescribe (with intangible items segregated), including any loan in excess of $20,000 to any officer, director, stockholder or [person](/usc/15/78m.md?p=h-8-E) directly or indirectly controlling or controlled by the [issuer](/usc/15/77b.md?p=a-4), or [person](/usc/15/78m.md?p=h-8-E) under direct or indirect common control with the [issuer](/usc/15/77b.md?p=a-4). All the liabilities of the [issuer](/usc/15/77b.md?p=a-4) in such detail and such form as the [Commission](/usc/15/77b.md?p=a-5) shall prescribe, including surplus of the [issuer](/usc/15/77b.md?p=a-4) showing how and from what sources such surplus was created, all as of a date not more than ninety days prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8). If such statement be not certified by an independent public or certified accountant, in addition to the balance sheet required to be submitted under this schedule, a similar detailed balance sheet of the assets and liabilities of the [issuer](/usc/15/77b.md?p=a-4), certified by an independent public or certified accountant, of a date not more than one year prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8), shall be submitted;
- (26) a profit and loss statement of the [issuer](/usc/15/77b.md?p=a-4) showing earnings and income, the nature and source thereof, and the expenses and fixed charges in such detail and such form as the [Commission](/usc/15/77b.md?p=a-5) shall prescribe for the latest fiscal year for which such statement is available and for the two preceding fiscal years, year by year, or, if such [issuer](/usc/15/77b.md?p=a-4) has been in actual business for less than three years, then for such time as the [issuer](/usc/15/77b.md?p=a-4) has been in actual business, year by year. If the date of the filing of the [registration statement](/usc/15/77b.md?p=a-8) is more than six months after the close of the last fiscal year, a statement from such closing date to the latest practicable date. Such statement shall show what the practice of the [issuer](/usc/15/77b.md?p=a-4) has been during the three years or lesser period as to the character of the charges, dividends or other distributions made against its various surplus [accounts](/usc/15/1681a.md?p=r-4), and as to depreciation, depletion, and maintenance charges, in such detail and form as the [Commission](/usc/15/77b.md?p=a-5) shall prescribe, and if stock dividends or avails from the sale of rights have been credited to income, they shall be shown separately with a statement of the basis upon which the [credit](/usc/15/1679a.md?p=4) is computed. Such statement shall also differentiate between any recurring and nonrecurring income and between any investment and operating income. Such statement shall be certified by an independent public or certified accountant;
- (27) if the proceeds, or any part of the proceeds, of the [security](/usc/15/77b.md?p=a-1) to be issued is to be applied directly or indirectly to the [purchase](/usc/15/77b.md?p=a-18) of any business, a profit and loss statement of such business certified by an independent public or certified accountant, meeting the requirements of [paragraph (26)](#26) of this schedule, for the three preceding fiscal years, together with a balance sheet, similarly certified, of such business, meeting the requirements of [paragraph (25)](#25) of this schedule of a date not more than ninety days prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8) or at the date such business was acquired by the [issuer](/usc/15/77b.md?p=a-4) if the business was acquired by the [issuer](/usc/15/77b.md?p=a-4) more than ninety days prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8);
- (28) a copy of any [agreement](/usc/15/7a.md?p=2) or [agreements](/usc/15/7a.md?p=2) (or, if identical [agreements](/usc/15/7a.md?p=2) are used, the forms thereof) made with any underwriter, including all contracts and [agreements](/usc/15/7a.md?p=2) referred to in [paragraph (17)](#17) of this schedule;
- (29) a copy of the opinion or opinions of counsel in respect to the legality of the issue, with a translation of such opinion, when necessary, into the English language;
- (30) a copy of all material contracts referred to in [paragraph (24)](#24) of this schedule, but no disclosure shall be required of any portion of any such contract if the [Commission](/usc/15/77b.md?p=a-5) determines that disclosure of such portion would impair the value of the contract and would not be necessary for the protection of the investors;
- (31) unless previously filed and registered under the provisions of this subchapter, and brought up to date, (a) a copy of its articles of incorporation, with all amendments thereof and of its existing bylaws or instruments corresponding thereto, whatever the name, if the [issuer](/usc/15/77b.md?p=a-4) be a corporation; (b) copy of all instruments by which the trust is created or declared, if the [issuer](/usc/15/77b.md?p=a-4) is a trust; (c) a copy of its articles of partnership or [association](/usc/15/657h.md?p=a-2) and all other papers pertaining to its organization, if the [issuer](/usc/15/77b.md?p=a-4) is a partnership, unincorporated [association](/usc/15/657h.md?p=a-2), joint-stock company, or any other form of organization; and
- (32) a copy of the underlying [agreements](/usc/15/7a.md?p=2) or indentures affecting any stock, bonds, or debentures offered or to be offered.

  In case of certificates of deposit, voting trust certificates, collateral trust certificates, certificates of interest or shares in unincorporated investment trusts, equipment trust certificates, interim or other receipts for certificates, and like [securities](/usc/15/77b.md?p=a-1), the [Commission](/usc/15/77b.md?p=a-5) shall establish rules and regulations requiring the submission of information of a like character applicable to such cases, together with such other information as it may deem appropriate and necessary regarding the character, financial or otherwise, of the actual [issuer](/usc/15/77b.md?p=a-4) of the [securities](/usc/15/77b.md?p=a-1) and/or the [person](/usc/15/78m.md?p=h-8-E) performing the acts and assuming the duties of depositor or manager.

schedule b

- (1) Name of borrowing government or subdivision thereof;
- (2) specific purposes in detail and the approximate amounts to be devoted to such purposes, so far as determinable, for which the [security](/usc/15/77b.md?p=a-1) to be offered is to supply funds, and if the funds are to be raised in part from other sources, the amounts thereof and the sources thereof, shall be stated;
- (3) the amount of the funded debt and the estimated amount of the floating debt outstanding and to be created by the [security](/usc/15/77b.md?p=a-1) to be offered, excluding intergovernmental debt, and a brief description of the date, maturity, character of such debt, rate of interest, character of amortization provisions, and the [security](/usc/15/77b.md?p=a-1), if any, therefor. If substitution of any [security](/usc/15/77b.md?p=a-1) is permissible, a statement of the conditions under which such substitution is permitted. If substitution is permissible without notice, a specific statement to that effect;
- (4) whether or not the [issuer](/usc/15/77b.md?p=a-4) or its predecessor has, within a period of twenty years prior to the filing of the [registration statement](/usc/15/77b.md?p=a-8), defaulted on the principal or interest of any external [security](/usc/15/77b.md?p=a-1), excluding intergovernmental debt, and, if so, the date, amount, and circumstances of such default, and the terms of the succeeding arrangement, if any;
- (5) the receipts, classified by source, and the expenditures, classified by purpose, in such detail and form as the [Commission](/usc/15/77b.md?p=a-5) shall prescribe for the latest fiscal year for which such information is available and the two preceding fiscal years, year by year;
- (6) the names and addresses of the underwriters;
- (7) the name and address of its authorized agent, if any, in the United States;
- (8) the estimated net proceeds to be derived from the sale in the United States of the [security](/usc/15/77b.md?p=a-1) to be offered;
- (9) the price at which it is proposed that the [security](/usc/15/77b.md?p=a-1) shall be offered in the United States to the public or the method by which such price is computed. A variation in price may be proposed prior to the date of the public offering of the [security](/usc/15/77b.md?p=a-1), but the [Commission](/usc/15/77b.md?p=a-5) shall immediately be notified of such variation;
- (10) all [commissions](/usc/15/77b.md?p=a-5) paid or to be paid, directly or indirectly, by the [issuer](/usc/15/77b.md?p=a-4) to the underwriters in respect of the sale of the [security](/usc/15/77b.md?p=a-1) to be offered. [Commissions](/usc/15/77b.md?p=a-5) shall include all cash, [securities](/usc/15/77b.md?p=a-1), contracts, or anything else of value, paid, to be set aside, disposed of, or understandings with or for the benefit of any other [persons](/usc/15/78m.md?p=h-8-E) in which the underwriter is interested, made, in connection with the sale of such [security](/usc/15/77b.md?p=a-1). Where any such [commission](/usc/15/77b.md?p=a-5) is paid, the amount of such [commission](/usc/15/77b.md?p=a-5) paid to each underwriter shall be stated;
- (11) the amount or estimated amounts, itemized in reasonable detail, of expenses, other than the [commissions](/usc/15/77b.md?p=a-5) specified in [paragraph (10)](#10) of this schedule, incurred or borne by or for the [account](/usc/15/1681a.md?p=r-4) of the [issuer](/usc/15/77b.md?p=a-4) in connection with the sale of the [security](/usc/15/77b.md?p=a-1) to be offered or properly chargeable thereto, including legal, engineering, certification, and other charges;
- (12) the names and addresses of counsel who have passed upon the legality of the issue;
- (13) a copy of any [agreement](/usc/15/7a.md?p=2) or [agreements](/usc/15/7a.md?p=2) made with any underwriter governing the sale of the [security](/usc/15/77b.md?p=a-1) within the United States; and
- (14) an [agreement](/usc/15/7a.md?p=2) of the [issuer](/usc/15/77b.md?p=a-4) to furnish a copy of the opinion or opinions of counsel in respect to the legality of the issue, with a translation, where necessary, into the English language. Such opinion shall set out in full all laws, decrees, ordinances, or other acts of Government under which the issue of such [security](/usc/15/77b.md?p=a-1) has been authorized.