15 U.S.C. § 78cc — Validity of contracts
submitted 92 years ago by ch. 404 to r/title-15-COMMERCE-AND-TRADE · 592 words · no verdicts yet
This law voids contract terms that make someone waive their rights under securities law. It also voids contracts whose making or performance violates this chapter, with narrow exceptions. Loans, credit, and liens made without actual knowledge of a violation stay valid.
(a) Waiver provisions: No contract can force someone to give up their rights under this law, its rules, or the rules of a self-regulatory organization* like a stock exchange*. Any contract clause that tries to do this is void — it has no legal effect.
(b) Contract provisions in violation of chapter: A contract is void if making it broke a rule under this chapter, or if carrying it out means continuing to break a rule. This includes contracts to list a security* on an exchange. The contract is void in two situations: first, for the person* who broke the rule by making or carrying out the contract; second, for someone who wasn't part of the contract but later got rights under it, if that person actually knew the facts that made the contract illegal.
Two exceptions apply. (A) A contract is not void just because it broke a rule issued under paragraph (3) of subsection (c) of section 78o. (B) If a broker or dealer* breaks a rule issued under paragraph (1) or (2) of subsection (c) of section 78o while buying or selling a security for someone, the contract is not treated as void in a lawsuit relying on this section — unless the customer sues within one year of discovering the violation and within three years after it happened. The Commission* can also declare, in a rule it issues under that paragraph (2), that breaking a specific rule (or part of one) will not make a contract void under this subsection.
(c) Validity of loans, extensions of credit, and creation of liens; actual knowledge of violation: This chapter does not change the validity of a loan, a credit extension, its renewal, or a lien — whether made before or after this chapter's enactment — unless the lender or lienholder actually knew, at the time they made the loan or created the lien, that doing so broke this chapter or its rules. And someone who acquires a debt, obligation, or lien in good faith, for value, and without actual knowledge of a violation affecting its legality, is not blocked from collecting that debt or enforcing that lien. This chapter gives no one a defense against paying such a debt or against having such a lien enforced.
Any condition, stipulation, or provision binding any person* to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of a self-regulatory organization*, shall be void.
Every contract made in violation of any provision of this chapter or of any rule or regulation thereunder, and every contract (including any contract for listing a security* on an exchange*) heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this chapter or any rule or regulation thereunder, shall be void (1) as regards the rights of any person who, in violation of any such provision, rule, or regulation, shall have made or engaged in the performance of any such contract, and (2) as regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule, or regulation: Provided, (A) That no contract shall be void by reason of this subsection because of any violation of any rule or regulation prescribed pursuant to paragraph (3) of subsection (c) of section 78o of this title, and (B) that no contract shall be deemed to be void by reason of this subsection in any action maintained in reliance upon this subsection, by any person to or for whom any broker or dealer* sells, or from or for whom any broker* or dealer* purchases, a security in violation of any rule or regulation prescribed pursuant to paragraph (1) or (2) of subsection (c) of section 78o of this title, unless such action is brought within one year after the discovery that such sale or purchase involves such violation and within three years after such violation. The Commission* may, in a rule or regulation prescribed pursuant to such paragraph (2) of such section 78o(c) of this title, designate such rule or regulation, or portion thereof, as a rule or regulation, or portion thereof, a contract in violation of which shall not be void by reason of this subsection.
Nothing in this chapter shall be construed (1) to affect the validity of any loan or extension of credit (or any extension or renewal thereof) made or of any lien created prior or subsequent to the enactment of this chapter, unless at the time of the making of such loan or extension of credit (or extension or renewal thereof) or the creating of such lien, the person making such loan or extension of credit (or extension or renewal thereof) or acquiring such lien shall have actual knowledge of facts by reason of which the making of such loan or extension of credit (or extension or renewal thereof) or the acquisition of such lien is a violation of the provisions of this chapter or any rule or regulation thereunder, or (2) to afford a defense to the collection of any debt or obligation or the enforcement of any lien by any person who shall have acquired such debt, obligation, or lien in good faith for value and without actual knowledge of the violation of any provision of this chapter or any rule or regulation thereunder affecting the legality of such debt, obligation, or lien.
Source credit: (June 6, 1934, ch. 404, title I, § 29, 48 Stat. 903; June 25, 1938, ch. 677, § 3, 52 Stat. 1076; Pub. L. 101–429, title V, § 507, Oct. 15, 1990, 104 Stat. 956; Pub. L. 111–203, title IX, §§ 927, 929T, July 21, 2010, 124 Stat. 1852, 1867.)
- 1934Enacted · Act of June 6, 1934, ch. 404 · 48 Stat. 903
- 1938Amended · Act of June 25, 1938, ch. 677 · 52 Stat. 1076
- 1990Amended · Pub. L. 101-429 · 104 Stat. 956
- 2010Amended · Pub. L. 111-203 · 124 Stat. 1852, 1867
A history note hasn’t been published yet. The record shows enactment by ch. 404 on 1934-06-06.
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