15 U.S.C. § 78h — Restrictions on borrowing and lending by members, brokers, and dealers

submitted 92 years ago by ch. 404 to r/title-15-COMMERCE-AND-TRADE · 198 words · no verdicts yet

in plain englishAI-generated · not legal advice

Brokers and dealers can't pledge a customer's securities in ways that mix them improperly with other people's securities, or borrow against them for more than the customer actually owes. They also can't lend out a customer's securities without written permission. Both rules are enforced through SEC regulations.

It is illegal for any registered broker or dealer, exchange member, or a broker or dealer who does business through an exchange member, to do the following, directly or indirectly: (a) In violation of SEC rules meant to protect investors, pledge (or arrange to pledge) a customer's securities under circumstances that: (1) let the firm mix those securities with another customer's securities without that customer's written consent; (2) let the firm mix those securities with a non-customer's securities; or (3) let those securities be pledged, or subjected to a lien, for more money than all the firm's customers together actually owe on those securities. (b) Lend out, or arrange to lend out, a customer's securities without that customer's written consent, or otherwise in violation of SEC rules meant to protect investors.

the actual law source: uscode.house.gov ↗public domain

It shall be unlawful for any registered broker or dealer, member of a national securities exchange, or broker or dealer who transacts a business in securities through the medium of any member of a national securities exchange, directly or indirectly—

(a)

In contravention of such rules and regulations as the Commission shall prescribe for the protection of investors to hypothecate or arrange for the hypothecation of any securities carried for the account of any customer under circumstances (1) that will permit the commingling of his securities without his written consent with the securities of any other customer, (2) that will permit such securities to be commingled with the securities of any person other than a bona fide customer, or (3) that will permit such securities to be hypothecated, or subjected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities.

(b)

To lend or arrange for the lending of any securities carried for the account of any customer without the written consent of such customer or in contravention of such rules and regulations as the Commission shall prescribe for the protection of investors.

Source credit: (June 6, 1934, ch. 404, title I, § 8, 48 Stat. 888; Aug. 23, 1935, ch. 614, § 203(a), 49 Stat. 704; Pub. L. 94–29, § 5, June 4, 1975, 89 Stat. 109; Pub. L. 98–440, title I, § 103, Oct. 3, 1984, 98 Stat. 1690; Pub. L. 103–325, title II, § 204, Sept. 23, 1994, 108 Stat. 2199; Pub. L. 104–290, title I, § 104(b), Oct. 11, 1996, 110 Stat. 3423.)

history & why it existsrecord from the source credit

1934Enacted · Act of June 6, 1934, ch. 404 · 48 Stat. 888
1935Amended · Act of Aug. 23, 1935, ch. 614 · 49 Stat. 704
1975Amended · Pub. L. 94-29 · 89 Stat. 109
1984Amended · Pub. L. 98-440 · 98 Stat. 1690
1994Amended · Pub. L. 103-325 · 108 Stat. 2199
1996Amended · Pub. L. 104-290 · 110 Stat. 3423

A history note hasn’t been published yet. The record shows enactment by ch. 404 on 1934-06-06.

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