15 U.S.C. § 78p — Directors, officers, and principal stockholders

submitted 92 years ago by ch. 404 to r/title-15-COMMERCE-AND-TRADE · 1,271 words · no verdicts yet

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Big shareholders, directors, and officers must report their stock holdings to the SEC. If they profit by buying and selling company stock within six months, the company can claim that profit. They also can't sell stock they don't actually own.

(a) Disclosures required. Anyone who directly or indirectly owns more than 10% of a registered class of a company's stock (other than an exempt security), or who is a director or officer of that company — including a director or officer of a foreign private issuer — must file ownership statements with the SEC. These must be filed: when the stock is first registered on an exchange, or by the effective date of certain registration statements; within 10 days of becoming such an owner, director, or officer (or sooner, if the SEC sets a shorter deadline); by the end of the second business day after any change in ownership or after buying or selling a security-based swap tied to that stock, unless the SEC decides that 2-day window isn't workable and sets a different one; and, for a foreign private issuer already registered as of December 18, 2025, by 90 days after that date. The first statement filed must show the filer's total beneficial ownership of the company's stock. A statement filed after a change in ownership must show the filer's current ownership, what changed, and any swap purchases or sales made since the last such filing. Since one year after July 30, 2002, statements reporting an ownership change must be filed electronically in English; the SEC must post each one on a public website by the end of the next business day; and the company itself (if it has a corporate website) must also post it there by the end of the next business day. The SEC can exempt any person, security, or transaction from these requirements if it decides that a foreign country's laws already impose substantially similar requirements. (b) Short-swing profits. To stop insiders from unfairly using information they get from their position, if a beneficial owner, director, or officer buys and later sells — or sells and later buys — the company's stock (or a related security-based swap) within less than six months, and profits from it, that profit belongs to the company, no matter what the insider intended when trading. The one exception is stock acquired in good faith to satisfy a debt owed to the insider. The company can sue to recover the profit, or if it refuses to sue within 60 days of being asked, any other stockholder can sue on the company's behalf — but no such suit can be filed more than two years after the profit was made. This rule doesn't apply to someone who wasn't a beneficial owner at both the time of the purchase and the time of the sale, or to transactions the SEC exempts by rule as outside the point of this rule. (c) Short selling. It is illegal for such a beneficial owner, director, or officer to sell company stock they don't own, or that they own but fail to deliver within 20 days of the sale (or fail to deposit for delivery within 5 days) — unless they can show that, despite acting in good faith, they genuinely couldn't deliver or deposit it in time, or that doing so would cause serious inconvenience or expense. (d) Market-maker exception. The profit-recovery rule in (b) and the short-selling ban in (c) don't apply to a dealer's ordinary-course buying and selling of stock not already held in an investment account, when the dealer is doing it to create or maintain a market in that stock (other than on a national securities exchange, or an exchange exempt from registration). The SEC can define these terms and set conditions by rule. (e) Arbitrage. This section doesn't apply to foreign or domestic arbitrage transactions, unless the SEC's own rules say it should. (f) Security futures. This section also covers owning and trading security futures products, the same as it covers regular stock. (g) Limitation. The SEC's authority under this section over security-based swap agreements is limited by the restrictions set out in a related section (§ 78c-1(b)).

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

(a) Disclosures required

(1) Directors, officers, and principal stockholders required to file

Every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security (other than an exempted security) which is registered pursuant to section 78l of this title, or who is a director or an officer of the issuer of such security (including, solely for the purposes of this subsection, every person who is a director or an officer of a foreign private issuer, as that term is defined in section 240.3b–4 of title 17, Code of Federal Regulations, or any successor regulation), shall file the statements required by this subsection with the Commission.

(2) Time of filing

The statements required by this subsection shall be filed—

(A)

at the time of the registration of such security on a national securities exchange or by the effective date of a registration statement filed pursuant to section 78l(g) of this title;

(B)

within 10 days after he or she becomes such beneficial owner, director, or officer, or within such shorter time as the Commission may establish by rule;

(C)

if there has been a change in such ownership, or if such person shall have purchased or sold a security-based swap agreement involving such equity security, before the end of the second business day following the day on which the subject transaction has been executed, or at such other time as the Commission shall establish, by rule, in any case in which the Commission determines that such 2-day period is not feasible; or

(D)

with respect to a foreign private issuer, the securities of which are, as of December 18, 2025, registered pursuant to subsection (b) or (g) of section 78l of this title, on the date that is 90 days after December 18, 2025.

(3) Contents of statements

A statement filed—

(A)

under subparagraph (A) or (B) of paragraph (2) shall contain a statement of the amount of all equity securities of such issuer of which the filing person is the beneficial owner; and

(B)

under subparagraph (C) of such paragraph shall indicate ownership by the filing person at the date of filing, any such changes in such ownership, and such purchases and sales of the security-based swap agreements or security-based swaps as have occurred since the most recent such filing under such subparagraph.

(4) Electronic filing and availability

Beginning not later than 1 year after July 30, 2002—

(A)

a statement filed under subparagraph (C) of paragraph (2) shall be filed electronically and in English;

(B)

the Commission shall provide each such statement on a publicly accessible Internet site not later than the end of the business day following that filing; and

(C)

the issuer (if the issuer maintains a corporate website) shall provide that statement on that corporate website, not later than the end of the business day following that filing.

(5) Authority to exempt

The Commission by rule, regulation, or order, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from the requirements of this section if the Commission determines that the laws of a foreign jurisdiction apply substantially similar requirements to such person, security, or transaction.

(b) Profits from purchase and sale of security within six months

For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) or a security-based swap agreement involving any such equity security within any period of less than six months, unless such security or security-based swap agreement was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention on the part of such beneficial owner, director, or officer in entering into such transaction of holding the security or security-based swap agreement purchased or of not repurchasing the security or security-based swap agreement sold for a period exceeding six months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than two years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security or security-based swap agreement or a security-based swap involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.

It shall be unlawful for any such beneficial owner, director, or officer, directly or indirectly, to sell any equity security of such issuer (other than an exempted security), if the person selling the security or his principal (1) does not own the security sold, or (2) if owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this subsection if he proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

(d) Securities held in investment account, transactions in ordinary course of business, and establishment of primary or secondary market

The provisions of subsection (b) of this section shall not apply to any purchase and sale, or sale and purchase, and the provisions of subsection (c) of this section shall not apply to any sale, of an equity security not then or theretofore held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market (otherwise than on a national securities exchange or an exchange exempted from registration under section 78e of this title) for such security. The Commission may, by such rules and regulations as it deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

(e) Application of section to foreign or domestic arbitrage transactions

The provisions of this section shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the Commission may adopt in order to carry out the purposes of this section.

(f) Treatment of transactions in security futures products

The provisions of this section shall apply to ownership of and transactions in security futures products.

(g) Limitation on Commission authority

The authority of the Commission under this section with respect to security-based swap agreements shall be subject to the restrictions and limitations of section 78c–1(b) of this title.

Source credit: (June 6, 1934, ch. 404, title I, § 16, 48 Stat. 896; Pub. L. 88–467, § 8, Aug. 20, 1964, 78 Stat. 579; Pub. L. 106–554, § 1(a)(5) [title II, § 208(b)(3), title III, § 303(g), (h)], Dec. 21, 2000, 114 Stat. 2763, 2763A–435, 2763A–455, 2763A–456; Pub. L. 107–204, title IV, § 403(a), July 30, 2002, 116 Stat. 788; Pub. L. 111–203, title VII, § 762(d)(5), title IX, § 929R(b), July 21, 2010, 124 Stat. 1761, 1867; Pub. L. 119–60, div. H, title LXXXI, § 8103(b)(1), Dec. 18, 2025, 139 Stat. 1838.)

history & why it existsrecord from the source credit

1934Enacted · Act of June 6, 1934, ch. 404 · 48 Stat. 896
1964Amended · Pub. L. 88-467 · 78 Stat. 579
2000Amended · Pub. L. 106-554 · 114 Stat. 2763, 2763
2002Amended · Pub. L. 107-204 · 116 Stat. 788
2010Amended · Pub. L. 111-203 · 124 Stat. 1761, 1867
2025Amended · Pub. L. 119-60 · 139 Stat. 1838

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

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