15 U.S. Code § 78h - Restrictions on borrowing and lending by members, brokers, and dealers
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.
Source(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.)
1996—Pub. L. 104–290redesignated subsecs. (b) and (c) as (a) and (b), respectively, and struck out former subsec. (a) which related to borrowing in ordinary course of business as broker or dealer on any security, except exempted security, registered on national securities exchange.
1994—Subsec. (a). Pub. L. 103–325inserted “or a small business related security” after “mortgage related security” in last sentence.
1984—Subsec. (a). Pub. L. 98–440inserted provision that no person shall be deemed to have borrowed within the ordinary course of business, within the meaning of this subsection, by reason of a bona fide agreement for delayed delivery of a mortgage related security under certain conditions.
1975—Pub. L. 94–29, § 5(1), substituted “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” for “any member of a national securities exchange, or any broker or dealer who transacts a business in securities through the medium of any such member” in provisions preceding subsec. (a).
Subsecs. (b) to (d). Pub. L. 94–29, § 5(2), redesignatedsubsecs. (c) and (d) as (b) and (c), respectively, and in subsec. (c) as so redesignated inserted “or in contravention of such rules and regulations as the Commissioner shall prescribe for the protection of investors” after “written consent of such customer”. Former subsec. (b), which covered the maximum allowable aggregate indebtedness of brokers, was struck out.
Change of Name
Act Aug. 23, 1935, substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Effective Date of 1975 Amendment
Amendment by Pub. L. 94–29effective June 4, 1975, see section 31(a) ofPub. L. 94–29, set out as a note under section 78b of this title.
Transfer of Functions