CITE

    15 USC Sec. 78i                                             01/08/2008

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2B - SECURITIES EXCHANGES

HEAD

    Sec. 78i. Manipulation of security prices

STATUTE

    (a) Transactions relating to purchase or sale of security
      It shall be unlawful for any person, directly or indirectly, by
    the use of the mails or any means or instrumentality of interstate
    commerce, or of any facility of any national securities exchange,
    or for any member of a national securities exchange -
        (1) For the purpose of creating a false or misleading
      appearance of active trading in any security registered on a
      national securities exchange, or a false or misleading appearance
      with respect to the market for any such security, (A) to effect
      any transaction in such security which involves no change in the
      beneficial ownership thereof, or (B) to enter an order or orders
      for the purchase of such security with the knowledge that an
      order or orders of substantially the same size, at substantially
      the same time, and at substantially the same price, for the sale
      of any such security, has been or will be entered by or for the
      same or different parties, or (C) to enter any order or orders
      for the sale of any such security with the knowledge that an
      order or orders of substantially the same size, at substantially
      the same time, and at substantially the same price, for the
      purchase of such security, has been or will be entered by or for
      the same or different parties.
        (2) To effect, alone or with one or more other persons, a
      series of transactions in any security registered on a national
      securities exchange or in connection with any security-based swap
      agreement (as defined in section 206B of the Gramm-Leach-Bliley
      Act) with respect to such security creating actual or apparent
      active trading in such security, or raising or depressing the
      price of such security, for the purpose of inducing the purchase
      or sale of such security by others.
        (3) If a dealer or broker, or other person selling or offering
      for sale or purchasing or offering to purchase the security or a
      security-based swap agreement (as defined in section 206B of the
      Gramm-Leach-Bliley Act) with respect to such security, to induce
      the purchase or sale of any security registered on a national
      securities exchange or any security-based swap agreement (as
      defined in section 206B of the Gramm-Leach-Bliley Act) with
      respect to such security by the circulation or dissemination in
      the ordinary course of business of information to the effect that
      the price of any such security will or is likely to rise or fall
      because of market operations of any one or more persons conducted
      for the purpose of raising or depressing the price of such
      security.
        (4) If a dealer or broker, or the person selling or offering
      for sale or purchasing or offering to purchase the security or a
      security-based swap agreement (as defined in section 206B of the
      Gramm-Leach-Bliley Act) with respect to such security, to make,
      regarding any security registered on a national securities
      exchange or any security-based swap agreement (as defined in
      section 206B of the Gramm-Leach-Bliley Act) with respect to such
      security, for the purpose of inducing the purchase or sale of
      such security or such security-based swap agreement, 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, and which he knew or had reasonable
      ground to believe was so false or misleading.
        (5) For a consideration, received directly or indirectly from a
      dealer or broker, or other person selling or offering for sale or
      purchasing or offering to purchase the security or a security-
      based swap agreement (as defined in section 206B of the Gramm-
      Leach-Bliley Act) with respect to such security, to induce the
      purchase of any security registered on a national securities
      exchange or any security-based swap agreement (as defined in
      section 206B of the Gramm-Leach-Bliley Act) with respect to such
      security by the circulation or dissemination of information to
      the effect that the price of any such security will or is likely
      to rise or fall because of the market operations of any one or
      more persons conducted for the purpose of raising or depressing
      the price of such security.
        (6) To effect either alone or with one or more other persons
      any series of transactions for the purchase and/or sale of any
      security registered on a national securities exchange for the
      purpose of pegging, fixing, or stabilizing the price of such
      security in contravention of such rules and regulations as the
      Commission may prescribe as necessary or appropriate in the
      public interest or for the protection of investors.
    (b) Transactions relating to puts, calls, straddles, or options
      It shall be unlawful for any person to effect, by use of any
    facility of a national securities exchange, in contravention of
    such rules and regulations as the Commission may prescribe as
    necessary or appropriate in the public interest or for the
    protection of investors -
        (1) any transaction in connection with any security whereby any
      party to such transaction acquires (A) any put, call, straddle,
      or other option or privilege of buying the security from or
      selling the security to another without being bound to do so; or
      (B) any security futures product on the security; or
        (2) any transaction in connection with any security with
      relation to which he has, directly or indirectly, any interest in
      any (A) such put, call, straddle, option, or privilege; or (B)
      such security futures product; or
        (3) any transaction in any security for the account of any
      person who he has reason to believe has, and who actually has,
      directly or indirectly, any interest in any (A) such put, call,
      straddle, option, or privilege; or (B) such security futures
      product with relation to such security.
    (c) Endorsement or guarantee of puts, calls, straddles, or options
      It shall be unlawful for any member of a national securities
    exchange directly or indirectly to endorse or guarantee the
    performance of any put, call, straddle, option, or privilege in
    relation to any security registered on a national securities
    exchange, in contravention of such rules and regulations as the
    Commission may prescribe as necessary or appropriate in the public
    interest or for the protection of investors.
    (d) Registered warrant, right, or convertible security not included
      in "put", "call", "straddle", or "option"
      The terms "put", "call", "straddle", "option", or "privilege" as
    used in this section shall not include any registered warrant,
    right, or convertible security.
    (e) Persons liable; suits at law or in equity
      Any person who willfully participates in any act or transaction
    in violation of subsections (a), (b), or (c) of this section, shall
    be liable to any person who shall purchase or sell any security at
    a price which was affected by such act or transaction, and the
    person so injured may sue in law or in equity in any court of
    competent jurisdiction to recover the damages sustained as a result
    of any such act or transaction. In any such suit the court may, in
    its discretion, require an undertaking for the payment of the costs
    of such suit, and assess reasonable costs, including reasonable
    attorneys' fees, against either party litigant. Every person who
    becomes liable to make any payment under this subsection may
    recover contribution as in cases of contract from any person who,
    if joined in the original suit, would have been liable to make the
    same payment. No action shall be maintained to enforce any
    liability created under this section, unless brought within one
    year after the discovery of the facts constituting the violation
    and within three years after such violation.
    (f) Subsection (a) not applicable to exempted securities
      The provisions of subsection (a) of this section shall not apply
    to an exempted security.
    (g) Foreign currencies and security futures products
      (1) Notwithstanding any other provision of law, the Commission
    shall have the authority to regulate the trading of any put, call,
    straddle, option, or privilege on any security, certificate of
    deposit, or group or index of securities (including any interest
    therein or based on the value thereof), or any put, call, straddle,
    option, or privilege entered into on a national securities exchange
    relating to foreign currency (but not, with respect to any of the
    foregoing, an option on a contract for future delivery other than a
    security futures product).
      (2) Notwithstanding the Commodity Exchange Act [7 U.S.C. 1 et
    seq.], the Commission shall have the authority to regulate the
    trading of any security futures product to the extent provided in
    the securities laws.
    (h) Limitations on practices that affect market volatility
      It shall be unlawful for any person, by the use of the mails or
    any means or instrumentality of interstate commerce or of any
    facility of any national securities exchange, to use or employ any
    act or practice in connection with the purchase or sale of any
    equity security in contravention of such rules or regulations as
    the Commission may adopt, consistent with the public interest, the
    protection of investors, and the maintenance of fair and orderly
    markets -
        (1) to prescribe means reasonably designed to prevent
      manipulation of price levels of the equity securities market or a
      substantial segment thereof; and
        (2) to prohibit or constrain, during periods of extraordinary
      market volatility, any trading practice in connection with the
      purchase or sale of equity securities that the Commission
      determines (A) has previously contributed significantly to
      extraordinary levels of volatility that have threatened the
      maintenance of fair and orderly markets; and (B) is reasonably
      certain to engender such levels of volatility if not prohibited
      or constrained.
    In adopting rules under paragraph (2), the Commission shall,
    consistent with the purposes of this subsection, minimize the
    impact on the normal operations of the market and a natural
    person's freedom to buy or sell any equity security.
    (i) Limitation on Commission authority
      The authority of the Commission under this section with respect
    to security-based swap agreements (as defined in section 206B of
    the Gramm-Leach-Bliley Act) shall be subject to the restrictions
    and limitations of section 78c-1(b) of this title.

SOURCE

    (June 6, 1934, ch. 404, title I, Sec. 9, 48 Stat. 889; Pub. L. 97-
    303, Sec. 3, Oct. 13, 1982, 96 Stat. 1409; Pub. L. 101-432, Sec.
    6(a), Oct. 16, 1990, 104 Stat. 975; Pub. L. 106-554, Sec. 1(a)(5)
    [title II, Sec. 205(a)(1), (2), title III, Sec. 303(b), (c)], Dec.
    21, 2000, 114 Stat. 2763, 2763A-425, 2763A-426, 2763A-453, 2763A-
    454.)

REFERENCES IN TEXT

      Section 206B of the Gramm-Leach-Bliley Act, referred to in
    subsecs. (a)(2) to (5) and (i), is section 206B of Pub. L. 106-102,
    which is set out in a note under section 78c of this title.
      The Commodity Exchange Act, referred to in subsec. (g)(2), is act
    Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which is
    classified generally to chapter 1 (Sec. 1 et seq.) of Title 7,
    Agriculture. For complete classification of this Act to the Code,
    see section 1 of Title 7 and Tables.

AMENDMENTS

      2000 - Subsec. (a)(2) to (5). Pub. L. 106-554, Sec. 1(a)(5)
    [title III, Sec. 303(b)], amended pars. (2) to (5) generally. Prior
    to amendment, pars. (2) to (5) read as follows:
      "(2) To effect, alone or with one or more other persons, a series
    of transactions in any security registered on a national securities
    exchange creating actual or apparent active trading in such
    security or raising or depressing the price of such security, for
    the purpose of inducing the purchase or sale of such security by
    others.
      "(3) If a dealer or broker, or other person selling or offering
    for sale or purchasing or offering to purchase the security, to
    induce the purchase or sale of any security registered on a
    national securities exchange by the circulation or dissemination in
    the ordinary course of business of information to the effect that
    the price of any such security will or is likely to rise or fall
    because of market operations of any one or more persons conducted
    for the purpose of raising or depressing the prices of such
    security.
      "(4) If a dealer or broker, or other person selling or offering
    for sale or purchasing or offering to purchase the security, to
    make, regarding any security registered on a national securities
    exchange, for the purpose of inducing the purchase or sale of such
    security, 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, and which he knew or had reasonable
    ground to believe was so false or misleading.
      "(5) For a consideration, received directly or indirectly from a
    dealer or broker, or other person selling or offering for sale or
    purchasing or offering to purchase the security, to induce the
    purchase or sale of any security registered on a national
    securities exchange by the circulation or dissemination of
    information to the effect that the price of any such security will
    or is likely to rise or fall because of the market operations of
    any one or more persons conducted for the purpose of raising or
    depressing the price of such security."
      Subsec. (b)(1). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec.
    205(a)(1)(A)], inserted "(A)" after "acquires" and substituted ";
    or (B) any security futures product on the security; or" for ";
    or".
      Subsec. (b)(2). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec.
    205(a)(1)(B)], inserted "(A)" after "interest in any" and
    substituted "; or (B) such security futures product; or" for ";
    or".
      Subsec. (b)(3). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec.
    205(a)(1)(C)], inserted "(A)" after "interest in any" and "; or (B)
    such security futures product" after "privilege".
      Subsec. (g). Pub. L. 106-554, Sec. 1(a)(5) [title II, Sec.
    205(a)(2)], designated existing provisions as par. (1), inserted
    "other than a security futures product" after "future delivery",
    and added par. (2).
      Subsec. (i). Pub. L. 106-554, Sec. 1(a)(5) [title III, Sec.
    303(c)], added subsec. (i).
      1990 - Subsec. (h). Pub. L. 101-432 added subsec. (h).
      1982 - Subsec. (f). Pub. L. 97-303, Sec. 3(1), substituted "The
    provisions of subsection (a) of this section shall not apply" for
    "The provisions of this section shall not apply".
      Subsec. (g). Pub. L. 97-303, Sec. 3(2), added subsec. (g).

TRANSFER OF FUNCTIONS

      For transfer of functions of Securities and Exchange Commission,
    with certain exceptions, to Chairman of such Commission, see Reorg.
    Plan No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175,
    64 Stat. 1265, set out under section 78d of this title.