15 U.S. Code § 80a–9 - Ineligibility of certain affiliated persons and underwriters

(a) Persons deemed ineligible for service with investment companies, etc.; investment adviser It shall be unlawful for any of the following persons to serve or act in the capacity of employee, officer, director, member of an advisory board, open-end company, registered unit investment trust, or registered face-amount certificate company:

any credit rating agency, or entity orCommodity Exchange Act [7 U.S.C. 1 et seq.], or as anCommodity Exchange Act, or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or (3)

a company any affiliated person of which is ineligible, by reason of paragraph (1) or (2) of this subsection, to serve or act in the foregoing capacities.

For the purposes of paragraphs (1) to (3) of this subsection, the term “ (b) Certain persons serving investment companies; administrative action of Commission The Commission may, after notice and opportunity for hearing, by order prohibit, conditionally or unconditionally, either permanently or for such period of time as it in its discretion shall deem appropriate in the public interest, any director, member of an advisory board, investment company or affiliated person of such person—

has willfully made or caused to be made in any registration statement, application or report filed with the Commission under this subchapter any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has omitted to state in any such registration statement, application, or report any material fact which was required to be stated therein;

has willfully violated any provision of the Securities Act of 1933 [15 U.S.C. 77a et seq.], or of the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or of subchapter II of this chapter, or of this subchapter, or of the Commodity Exchange Act [7 U.S.C. 1 et seq.], or of any rule or regulation under any of such statutes;

has willfully aided, abetted, counseled, commanded, induced, or procured the violation by any other Securities Act of 1933 [15 U.S.C. 77a et seq.], or of the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or of subchapter II of this chapter, or of this subchapter, or of the Commodity Exchange Act [7 U.S.C. 1 et seq.], or of any rule or regulation under any of such statutes;

made or caused to be made in any application for registration or report required to be filed with a foreign securities authority, or in any proceeding before a foreign securities authority with respect to registration, any statement that was at the time and in light of the circumstances under which it was made false or misleading with respect to any material fact, or has omitted to state in any application or report to a foreign securities authority any material fact that is required to be stated therein;

violated any foreign statute or regulation regarding transactions in securities or contracts of sale of a commodity for future delivery traded on or subject to the rules of a contract market or any board of trade; or

by reason of any misconduct, is temporarily or permanently enjoined by any foreign court of competent jurisdiction from acting in any of the capacities, set forth in paragraph (2) of subsection (a), or a substantially equivalent foreign capacity, or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security.

Any Commission an application for an exemption from the provisions of such subsection. The Commission shall by order grant such application, either unconditionally or on an appropriate temporary or other conditional basis, if it is established that the prohibitions of such subsection (a) as applied to such person, are unduly or disproportionately severe or that the conduct of such (d) Money penalties in administrative proceedings

(A) In general In any proceeding instituted pursuant to subsection (b) against any Commission may impose a civil penalty if it finds, on the record after notice and opportunity for hearing, that such penalty is in the public interest, and that such person—

has willfully violated any provision of the Securities Act of 1933 [15 U.S.C. 77a et seq.], the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], subchapter II of this chapter, or this subchapter, or the rules or regulations thereunder;

has willfully aided, abetted, counseled, commanded, induced, or procured such a violation by any other (iii)

has willfully made or caused to be made in any registration statement, application, or report required to be filed with the Commission under this subchapter, any statement which was, at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such registration statement, application, or report any material fact which was required to be stated therein; [1]

(B) Cease-and-desist proceedings In any proceeding instituted pursuant to subsection (f) against any Commission may impose a civil penalty if the Commission finds, on the record, after notice and opportunity for hearing, that such person—

is violating or has violated any provision of this subchapter, or any rule or regulation issued under this subchapter; or

is or was a cause of the violation of any provision of this subchapter, or any rule or regulation issued under this subchapter.

The maximum amount of penalty for each act or omission described in paragraph (1) shall be $5,000 for a natural (B) Second tier

the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and

such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the (3) Determination of public interest In considering under this section whether a penalty is in the public interest, the Commission may consider—

whether the act or omission for which such penalty is assessed involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement;

whether such Commission, another appropriate regulatory agency, or a self-regulatory organization to have violated the Federal securities laws, State securities laws, or the rules of a self-regulatory organization, has been enjoined by a court of competent jurisdiction from violations of such laws or rules, or has been convicted by a court of competent jurisdiction of violations of such laws or of any felony or misdemeanor described in section 80b–3(e)(2) of this title;

In any proceeding in which the Commission may impose a penalty under this section, a respondent may present evidence of the respondent’s ability to pay such penalty. The Commission 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 such States or third parties upon such (e) Authority to enter order requiring accounting and disgorgement

In any proceeding in which the Commission may impose a penalty under this section, the Commission may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.

If the Commission finds, after notice and opportunity for hearing, that anyCommission may publish its findings and enter an order requiring such person, and any otherCommission may specify in such order. Any such order may, as the Commission deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the Commission may specify, with such provision, rule, or regulation with respect to any security, any issuer, or any other person.

The notice instituting proceedings pursuant to paragraph (1) 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 with the consent of any respondent so served.

Whenever the Commission determines that the alleged violation or threatened violation specified in the notice instituting proceedings pursuant to paragraph (1), 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 Investor Protection Corporation, prior to the completion of the proceeding, the Commission may enter a temporary order requiring the respondent to cease and desist from the violation or threatened violation and to take such action to prevent the violation or threatened violation and to prevent dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest as the Commission deems appropriate pending completion of such proceedings. Such an order shall be entered only after notice and opportunity for a hearing, unless the Commission, notwithstanding section 80a–39(a) of this title, determines that notice and hearing prior to entry would be impracticable or contrary to the public interest. A temporary order shall become effective upon service upon the respondent and, unless set aside, limited, or suspended by the Commission or a court of competent jurisdiction, shall remain effective and enforceable pending the completion of the proceedings.

This paragraph shall apply only to a respondent that acts, or, at the time of the alleged misconduct acted, as a (4) Review of temporary orders

At any time after the respondent has been served with a temporary cease-and-desist order pursuant to paragraph (3), the respondent may apply to the Commission to have the order set aside, limited, or suspended. If the respondent has been served with a temporary cease-and-desist order entered without a prior Commission hearing, the respondent may, within 10 days after the date on which the order was served, request a hearing on such application and the Commission shall hold a hearing and render a decision on such application at the earliest possible time.

10 days after the date the respondent was served with a temporary cease-and-desist order entered with a prior Commission hearing, or

10 days after the Commission renders a decision on an application and hearing under subparagraph (A), with respect to any temporary cease-and-desist order entered without a prior Commission 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 setting aside, limiting, or suspending the effectiveness or enforcement of the order, and the court shall have jurisdiction to enter such an order. A respondent served with a temporary cease-and-desist order entered without a prior Commission hearing may not apply to the court except after hearing and decision by the Commission on the respondent’s application under subparagraph (A) of this paragraph.

The commencement of proceedings under subparagraph (B) of this paragraph shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order.

Section 80a–42 of this title shall not apply to a temporary order entered pursuant to this section.

In any cease-and-desist proceeding under subsection (f)(1), the Commission may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.

The Commodity Exchange Act, referred to in subsecs. (a)(1), (2) and (b)(2), (3), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables.

The Securities Act of 1933, referred to in subsecs. (b)(2), (3) and (d)(1)(A)(i), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.

The Securities Exchange Act of 1934, referred to in subsecs. (b)(2), (3) and (d)(1)(A)(i), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified generally to 2B (§ 78a et seq.) of this title. For complete classification of this Act to the Code, see section 78a of this title and Tables.

Subsec. (d)(1). Pub. L. 111–203, § 929P(a)(3), designated existing provisions as subpar. (A) and inserted heading, inserted “that such penalty is in the public interest, and” after “opportunity for hearing,” in introductory provisions, redesignated former subpars. (A) to (C) as cls. (i) to (iii), respectively, and realigned margins, struck out concluding provisions which read “and that such penalty is in the public interest.”, and added subpar. (B).

2006—Subsec. (a). Pub. L. 109–291 inserted Pub. L. 106–102 substituted “securitiesPub. L. 101–550 added pars. (4) to (6).

Subsecs. (d) to (f). Pub. L. 101–429, § 301(1), (2), added subsecs. (d) to (f) and redesignated former subsec. (d) as (g).

Subsec. (g). Pub. L. 101–429, § 301(3), which directed the striking out of “subsections (a) through (c) of” after “the purposes of”, was executed by striking out “subsection (a) through (c) of” as the probable intent of Congress .

1987—Subsec. (a)(1), (2). Pub. L. 100–181 amended pars. (1) and (2) generally. Prior to amendment, pars. (1) and (2) read as follows:

“(2) any Commodity Exchange Act, or as anCommodity Exchange Act, or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or1986—Subsec. (a)(1), (2). Pub. L. 99–571, § 102(l)(1), inserted pars. (1) and (2) and struck out former pars. (1) and (2) which read as follows:

1975—Subsec. (d). Pub. L. 94–29 added subsec. (d).

1970—Subsec. (a). Pub. L. 91–547, § 4(a), inserted “employee,” before “officer” in introductory text.

Subsecs. (b), (c). Pub. L. 91–547, § 4(b), added subsec. (b) and redesignated former subsec. (b) as (c).

Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010 , except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Effective Date of 1999 Amendment

Amendment by Pub. L. 106–102 effective 18 months after Nov. 12, 1999 , see section 225 of Pub. L. 106–102, set out as a note under section 77c of this title.

Amendment by Pub. L. 101–429 effective Oct. 15, 1990 , with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in a note under section 77g of this title.

Amendment by Pub. L. 99–571 effective 270 days after Oct. 28, 1986 , see section 401 of Pub. L. 99–571, set out as an Effective Date note under section 78o–5 of this title.

Amendment by Pub. L. 94–29 effective June 4, 1975 , see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.

Amendment by Pub. L. 91–547 effective Dec. 14, 1970 , see section 30 of Pub. L. 91–547, set out as a note under section 80a–52 of this title.

For transfer of functions of Securities and Exchange Commission , with certain exceptions, to Chairman of suchMay 24, 1950 , 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.