EXEMPTION OF CERTAIN SECURITIES FROM SECTION 15 (a)

§ 240.15a-1. Exemption of Individual Notes or Bonds Secured by Lien on Real Estate From Section 15 (a).

Evidences of indebtedness secured by mortgage, deed of trust, or other lien upon real estate or upon leasehold interests therein where the entire mortgage, deed of trust, or other lien is transferred with the entire evidence of indebtedness are hereby exempted from the operation of section 15 (a) of the Securities Exchange Act of 1934, as amended.

§ 240.15a-2. Exemption of Certain Securities of Cooperative Apartment Houses From Section 15 (a).

Shares of a corporation which represents ownership, or entitle the holders thereof to possession and occupancy, of specific apartment units in property owned by such corporations and organized and operated on a cooperative basis are hereby exempted from the operation of section 15 (a) of the Act, when such shares are sold by or through a real estate broker licensed under the laws of the political subdivision in which the property is located.

REGISTRATION OF BROKERS AND DEALERS

§ 240.15b-1. Application for Registration of Broker or Dealer.

An application for registration of a broker or dealer, pursuant to section 15 (b), shall be filed on Form BD in accordance with the instructions contained therein.

§ 240.15b-2. Supplements and Amendments to Applications.

(a) Every broker or dealer whose application for registration is effective on March 1, 1954, or is pending on that date, shall file a supplement to such application on Form BD not later than September 1, 1954; provided, however, that if any information in such application is or becomes inaccurate for any reason prior to September 1, 1954, such supplement shall be filed when such information is or becomes inaccurate.

(b) If the information contained in any application for registration of a broker or dealer, or in

any supplement or amendment thereto, is a comes inaccurate for any reason, such broker dealer shall promptly file an amendment on F BD correcting such information; provided, ever, that if the application for registration. filed on any form other than Form BD ard' supplement required by paragraph (a) of section has been filed, amendments need be only to keep current the information in supplement.

(c) Every supplement and amendment Epursuant to this rule shall constitute, within meaning of section 15 (b) of the Act, a "docu supplemental" to the application which it s ments or amends.

§ 240.15b-3. Adoption of Application Filed Predecessor.

"Registration of a broker or dealer pursua an application filed on behalf of such bror dealer by a predecessor shall terminate on the day after the effective date thereof unless the cessor shall adopt the application as its ow filing a statement adopting such application before such date. Any statement adopting s application shall constitute a representation e Commission that the information containe such application, and in the supplements amendments thereto, is true and correct."

§ 240.15b-4. Registration of Successor to Re tered Broker or Dealer.

(a) In the event that a broker or dealerst ceeds to and continues the business of a registered broker or dealer, the registrati the predecessor shall be deemed to remain tive as the registration of the successor for i riod of 60 days after such succession, pro that an application for registration on Fo is filed by such successor within 30 days after succession.

(b) A Form BD, filed by a broker or partnership which is not registered when form is filed and which succeeds to and co the business of a predecessor partnership tered as a broker or dealer, shall be deemed an application for registration, even thoug ignated as an amendment, if it is filed to r the changes in the partnership and to f required information concerning any partners.

40.15b-5. Registration of Fiduciaries.

The registration of a broker or dealer shall be emed to be the registration of any executor, ministrator, guardian, conservator, assignee the benefit of creditors, receiver, trustee in olvency or bankruptcy, or other fiduciary, apinted or qualified by order, judgment, or decree a court of competent jurisdiction to continue business of such registered broker or dealer: ovided, that such fiduciary files with the Comssion, within 30 days after entering upon the formance of his duties, a statement setting th as to such fiduciary substantially the infortion required by Form BD.

10.15b-6. Withdrawal From Registration.

f a notice to withdraw from registration is d by a broker or dealer pursuant to section 15 it shall become effective on the thirtieth day er the filing thereof with the Commission, un= prior to its effective date the Commission citutes a proceeding pursuant to section 15 (b) revoke or suspend the registration of such ker or dealer or to impose terms and condias upon such withdrawal. If the Commission citutes such a proceeding, or if a notice to withw from registration is filed with the Commis

at any time subsequent to the date of the ance of a Commission order instituting prolings pursuant to section 15 (b) to revoke or pend the registration of the broker or dealer ng such notice, and during the pendency of na proceeding, the notice to withdraw shall become effective except at such time and upon terms and conditions as the Commission ns necessary or appropriate in the public inst or for the protection of investors.

0.15b-7. Consent to Service of Process To Be Furnished by Non-resident Brokers or Dealers and By Non-resident General Partners or Managing Agents of Brokers or Dealers.

:) Each non-resident broker or dealer reged or applying for registration pursuant to on 15 (b) of the Securities Exchange Act 934, each non-resident general partner of a er or dealer partnership which is registered or ying for registration, and each non-resident iging agent of any other unincorporated

broker or dealer which is registered or applying for registration, shall furnish to the Commission, in a form prescribed by or acceptable to it, a written irrevocable consent and power of attorney which (1) designates the Securities and Exchange Commission as an agent upon whom may be served any process, pleadings, or other papers in any civil suit or action brought in any appropriate court in any place subject to the jurisdiction of the United States, where the cause of action (i) accrues on or after the effective date of this section, (ii) arises out of any activity, in any place subject to the jurisdiction of the United States, occurring in connection with the conduct of business of a broker or dealer, and (iii) is founded, directly or indirectly, upon the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, or any rule or regulation under any of said Acts; and (2) stipulates and agrees that any such civil suit or action may be commenced by the service of process upon the Commission and the forwarding of a copy thereof as provided in paragraph (c) of this section, and that the service as aforesaid of any such process, pleadings, or other papers upon the Commission shall be taken and held in all courts to be as valid and binding as if due personal service thereof had been made.

(b) The required consent and power of attorney shall be furnished to the Commission within the following period of time:

(1) Each non-resident broker or dealer registered at the time this rule becomes effective, and each non-resident general partner or managing agent of an unincorporated broker or dealer registered at the time this section becomes effective, shall furnish such consent and power of attorney within 60 days after such date;

(2) Each broker or dealer applying for registration after the effective date of this section shall furnish, at the time of filing such application, all the consents and powers of attorney required to be furnished by such broker or dealer and by each general partner or managing agent thereof; provided, however, that where an application for registration of a broker or dealer is pending at the time this section becomes effective such consents and powers of attorney shall be furnished within 30 days after this section becomes effective.

(3) Each broker or dealer registered or applying for registration who or which becomes a nonresident broker or dealer after the effective date of this section, and each general partner or managing agent, of an unincorporated broker or dealer registered or applying for registration, who becomes a non-resident after the effective date of this section, shall furnish such consent and power of attorney within 30 days thereafter.

(c) Service of any process, pleadings or other papers on the Commission under this section shall be made by delivering the requisite number of copies thereof to the Secretary of the Commission or to such other person as the Commission may authorize to act in its behalf. Whenever any process, pleadings or other papers as aforesaid are served upon the Commission, it shall promptly forward a copy thereof by registered mail to the appropriate defendants at their last address of record filed with the Commission. The Commission shall be furnished a sufficient number of copies for such purpose, and one copy for its file.

(d) For purposes of this section the following definitions shall apply:

(1) The term "broker" shall have the meaning set out in section 3 (a) (4) of the Securities Exchange Act of 1934.

(2) The term "dealer" shall have the meaning set out in section 3 (a) (5) of the Securities Exchange Act of 1934.

(3) The term "managing agent" shall mean any person, including a trustee, who directs or manages or who participates in the directing or managing of the affairs of any unincorporated organization or association which is not a partnership.

(4) The term "non-resident broker or dealer" shall mean (A) in the case of an individual, one who resides in or has his principal place of business in any place not subject to the jurisdiction of the United States; (B) in the case of a corporation, one incorporated in or having its principal place of business in any place not subject to the jurisdiction of the United States; (C) in the case of a partnership or other unincorporated organization or association, one having its principal place of business in any place not subject to the jurisdiction of the United States.

(5) A general partner or managing agent of a broker or dealer shall be deemed to be a nonresident if he resides in any place not subject to the jurisdiction of the United States.

§ 240.15b-8. Statement of Financial Condition to be Filed With Application for Registra tion as a Broker or Dealer.

(a) Every broker or dealer who files an appl cation for registration on Form BD shall file with such application, in duplicate original, a state- ! ment of financial condition in such detail as wil disclose the nature and amount of assets and liabilities and the net worth of such broker or dealer (securities of such broker or dealer or in which such broker or dealer has an interest shall be listed in a separate schedule and valued at the marketį as of a date within 30 days of the date on which such statement is filed; provided, however, that! this requirement shall not apply to a partnership i succeeding to and continuing the business of arother partnership registered as a broker or dealer at the time of such succession. Attached to such statement shall be an oath or affirmation that such statement is true and correct to the best knowledge and belief of the person making such oath or affirmation. The oath or affirmation shall be made before a person duly authorized to administer such oath or affirmation. If the broker or dealer is a sole proprietorship, the oath or affirmation shall be made by the proprietor; if a partnership. by a general partner; if a corporation, by a duly authorized officer.

(b) The schedule of securities furnished as a part of such statement of financial condition shall be deemed confidential if bound separately from ¦ the balance of such statement, except that it shall be available for official use by any official or em ployee of the United States or any state, by national securities exchanges and national securities associations of which the person filing such statement is a member, and by any other person të whom the Commission authorizes disclosure of such information as being in the public interest. Nothing contained in this paragraph shall be deemed to be in derogation of the rules of any national securities association or national securities exchange which give to customers of a mem ber, broker or dealer the right, upon request to such member, broker or dealer, to obtain infor mation relative to his financial condition.

(c) The statement of financial condition re quired by this rule shall constitute a "document supplemental" to such application for registration within the meaning of section 15 (b) of the Act.

240.15b-9. Proceedings under Sections 15 (b), 15A (1) (2) and 19 (a) (3) of the Act. (a) Where the Commission denies or revokes he registration of a broker or dealer pursuant o section 15 (b) of the Act or suspends or expels member of a national securities association or ational securities exchange pursuant to section 5A (1) (2) or section 19 (a) (3) of the Act, he Commission may determine and announce or purposes of section 15A (b) (4) of the Act whether any person associated with the member, roker or dealer was a cause of the imposition of uch sanction; such determination may be made whether or not the member, broker or dealer adnits the violation or consents to the imposition f the sanction. In such proceedings the Comission may also make such findings with respect o violation by associates of the member, broker r dealer, as may be relevant to the question of usation for purposes of section 15A (b) (4) or the issues under sections 15 (b), 15A (1) (2) – 19 (a) (3).

(b) In proceedings under sections 15 (b), 15A 7) (2) or 19 (a) (3) of the Act, the Commission ill give appropriate notice and opportunity for earing to the member, broker or dealer concerned ad to any person associated with him whose inrests may be affected by the proceedings. The ember, broker or dealer will be named in the ption of the proceeding and shall be deemed party of record. An associated person who may aggrieved will not ordinarily be named in the ption of the proceeding but shall be entitled to rticipate as a party. If he participates genally in the proceeding or files a notice of appearce, he shall be deemed a party of record and Il be given notices of intermediate developments the proceeding. In any event he may inform nself of such developments by attendance at the rings or examination of the record (whether › proceedings be public or private) or by argement with a party of record, so that he can ermine whether he desires to be heard at any e. § 201.17 of this chapter, other than paraph (a) thereof, shall not apply to proceedings ler this section.

c) The terms "associated person" and "person ociated" as used in this section shall mean a son associated with a member, broker or dealer any of the capacities specified in sections (b) and 15A (b) (4) of the Act.

394911-56-5

RULES RELATING TO OVER-THECOUNTER MARKETS

§ 240.15c1-1. Definitions.

As used in any section adopted pursuant to section 15 (c) (1) of the Act:

(a) The term "customer" shall not include a broker or dealer.

(b) The term "the completion of the transaction" means:

(1) In the case of a customer who purchases a security through or from a broker or dealer, except as provided in paragraph (2), the time when such customer pays the broker or dealer any part of the purchase price, or, if payment is effected by a bookkeeping entry, the time when such bookkeeping entry is made by the broker or dealer for any part of the purchase price.

(2) In the case of a customer who purchases a security through or from a broker or dealer and who makes payment therefor prior to the time when payment is requested or notification is given that payment is due, the time when such broker or dealer delivers the security to or into the account of such customer.

(3) In the case of a customer who sells a security through or to a broker or dealer, except as provided in paragraph (4), if the security is not in the custody of the broker or dealer at the time of sale, the time when the security is delivered to the broker or dealer, and if the security is in the custody of the broker or dealer at the time of sale, the time when the broker or dealer transfers the security from the account of such customer.

(4) In the case of a customer who sells a security through or to a broker or dealer and who delivers such security to such broker or dealer prior to the time when delivery is requested or notification is given that delivery is due, the time when such broker or dealer makes payment to or into the account of such customer.

§ 240.15c1-2. Fraud and Misrepresentation.

(a) The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

(b) The term "manipulative, deceptive, or other fraudulent device or contrivance," as used

in section 15 (c) (1) of the Act, is hereby defined to include any untrue statement of a material fact and any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, which statement or omission is made with knowledge or reasonable grounds to believe that it is untrue or misleading.

(c) The scope of this section shall not be limited by any specific definitions of the term "manipulative, deceptive, or other fraudulent device or contrivance" contained in other sections adopted pursuant to section 15 (c) (1) of the Act.

§ 240.15c1-3. Misrepresentation by Brokers and Dealers as to Registration.

The term "manipulative, deceptive or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any representation by a broker or dealer that the registration of a broker or dealer, pursuant to section 15 (b), or the failure of the Commission to deny or revoke such registration, indicates in any way that the Commission has passed upon or approved the financial standing, business, or conduct of such registered broker or dealer or the merits of any security or any transaction or transactions therein.

§ 240.15c1-4. Confirmation of Transactions.

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any act of any broker or dealer designed to effect with or for the account of a customer any transaction in, or to induce the purchase or sale by such customer of, any security (other than United States Tax Savings Notes, United States Defense Savings Stamps, or United States Defense Savings Bonds, Series E, F and G) unless such broker or dealer, at or before the completion of each such transaction, gives or sends to such customer written notification disclosing (1) whether he is acting as a broker for such customer, as a dealer for his own account, as a broker for some other person, or as a broker for both such customer and some other person; and (2) in any case in which he is acting as a broker for such customer or for both such customer and some other person, either the name of the person from whom the security was purchased or to whom it was sold for

such customer and the date and time when s! transaction took place or the fact that such infe mation will be furnished upon the request of customer, and the source and amount of any c mission or other remuneration received or to received by him in connection with the transact § 240.15c1-5. Disclosure of Control.

The term "manipulative, deceptive, or o fraudulent device or contrivance," as used in tion 15 (c) (1) of the Act, is hereby defined: include any act of any broker or dealer contre by, controlling, or under common control the issuer of any security, designed to effect ... or for the account of a customer any transact in, or to induce the purchase or sale by such tomer of, such security unless such broker? dealer, before entering into any contract with for such customer for the purchase or sale of security, discloses to such customer the existe of such control, and unless such disclosure, if made in writing, is supplemented by the giving sending of written disclosure at or before completion of the transaction.

§ 240.15c1-6. Disclosure of Interest in Distri tions.

The term "manipulative, deceptive, or t fraudulent device or contrivance," as used in tion 15 (c) (1) of the Act, is hereby defined include any act of any broker who is acting fr customer or for both such customer and some c person, or of any dealer who receives or has pra ise of receiving a fee from a customer for advis such customer with respect to securities, desp to effect with or for the account of such cust any transaction in, or to induce the purchas sale by such customer of, any security in the mary or secondary distribution of which s broker or dealer is participating or is other financially interested unless such broker or da at or before the completion of each such tra tion, gives or sends to such customer written fication of the existence of such participatic interest.

$240.15c1-7. Discretionary Accounts.

(a) The term “manipulative, deceptive or fraudulent device or contrivance," as used in tion 15 (c) (1) of the Act, is hereby defa include any act of any broker or dealer des