
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 15USC77b]

 
                      TITLE 15--COMMERCE AND TRADE
 
               CHAPTER 2A--SECURITIES AND TRUST INDENTURES
 
                    SUBCHAPTER I--DOMESTIC SECURITIES
 
Sec. 77b. Definitions; promotion of efficiency, competition, and 
        capital formation
        

(a) Definitions

    When used in this subchapter, unless the context otherwise 
requires--
        (1) The term ``security'' means any note, stock, treasury stock, 
    security future, bond, debenture, evidence of indebtedness, 
    certificate of interest or participation in any profit-sharing 
    agreement, collateral-trust certificate, preorganization certificate 
    or subscription, transferable share, investment contract, voting-
    trust certificate, certificate of deposit for a security, fractional 
    undivided interest in oil, gas, or other mineral rights, 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, or, in general, any interest or 
    instrument commonly known as a ``security'', or any certificate of 
    interest or participation in, temporary or interim certificate for, 
    receipt for, guarantee of, or warrant or right to subscribe to or 
    purchase, any of the foregoing.
        (2) The term ``person'' means an individual, a corporation, a 
    partnership, an association, a joint-stock company, a trust, any 
    unincorporated organization, or a government or political 
    subdivision thereof. As used in this paragraph the term ``trust'' 
    shall include only a trust where the interest or interests of the 
    beneficiary or beneficiaries are evidenced by a security.
        (3) The term ``sale'' or ``sell'' shall include every contract 
    of sale or disposition of a security or interest in a security, for 
    value. The term ``offer to sell'', ``offer for sale'', or ``offer'' 
    shall include every attempt or offer to dispose of, or solicitation 
    of an offer to buy, a security or interest in a security, for value. 
    The terms defined in this paragraph and the term ``offer to buy'' as 
    used in subsection (c) of section 77e of this title shall not 
    include preliminary negotiations or agreements between an issuer (or 
    any person directly or indirectly controlling or controlled by an 
    issuer, or under direct or indirect common control with an issuer) 
    and any underwriter or among underwriters who are or are to be in 
    privity of contract with an issuer (or any person directly or 
    indirectly controlling or controlled by an issuer, or under direct 
    or indirect common control with an issuer). Any security given or 
    delivered with, or as a bonus on account of, any purchase of 
    securities or any other thing, shall be conclusively presumed to 
    constitute a part of the subject of such purchase and to have been 
    offered and sold for value. The issue or transfer of a right or 
    privilege, when originally issued or transferred with a security, 
    giving the holder of such security the right to convert such 
    security into another security of the same issuer or of another 
    person, or giving a right to subscribe to another security of the 
    same issuer or of another person, which right cannot be exercised 
    until some future date, shall not be deemed to be an offer or sale 
    of such other security; but the issue or transfer of such other 
    security upon the exercise of such right of conversion or 
    subscription shall be deemed a sale of such other security. Any 
    offer or sale of a security futures product by or on behalf of the 
    issuer of the securities underlying the security futures product, an 
    affiliate of the issuer, or an underwriter, shall constitute a 
    contract for sale of, sale of, offer for sale, or offer to sell the 
    underlying securities.
        (4) The term ``issuer'' means every person who issues or 
    proposes to issue any security; except that with respect to 
    certificates of deposit, voting-trust certificates, or collateral-
    trust certificates, or with respect to certificates of interest or 
    shares in an unincorporated investment trust not having a board of 
    directors (or persons performing similar functions) or of the fixed, 
    restricted management, or unit type, the term ``issuer'' means the 
    person or persons performing the acts and assuming the duties of 
    depositor or manager pursuant to the provisions of the trust or 
    other agreement or instrument under which such securities are 
    issued; except that in the case of an unincorporated association 
    which provides by its articles for limited liability of any or all 
    of its members, or in the case of a trust, committee, or other legal 
    entity, the trustees or members thereof shall not be individually 
    liable as issuers of any security issued by the association, trust, 
    committee, or other legal entity; except that with respect to 
    equipment-trust certificates or like securities, the term ``issuer'' 
    means the person by whom the equipment or property is or is to be 
    used; and except that with respect to fractional undivided interests 
    in oil, gas, or other mineral rights, the term ``issuer'' means the 
    owner of any such right or of any interest in such right (whether 
    whole or fractional) who creates fractional interests therein for 
    the purpose of public offering.
        (5) The term ``Commission'' means the Securities and Exchange 
    Commission.
        (6) The term ``Territory'' means Puerto Rico, the Virgin 
    Islands, and the insular possessions of the United States.
        (7) The term ``interstate commerce'' means trade or commerce in 
    securities or any transportation or communication relating thereto 
    among the several States or between the District of Columbia or any 
    Territory of the United States and any State or other Territory, or 
    between any foreign country and any State, Territory, or the 
    District of Columbia, or within the District of Columbia.
        (8) The term ``registration statement'' means the statement 
    provided for in section 77f of this title, and includes any 
    amendment thereto and any report, document, or memorandum filed as 
    part of such statement or incorporated therein by reference.
        (9) The term ``write'' or ``written'' shall include printed, 
    lithographed, or any means of graphic communication.
        (10) The term ``prospectus'' means any prospectus, notice, 
    circular, advertisement, letter, or communication, written or by 
    radio or television, which offers any security for sale or confirms 
    the sale of any security; except that (a) a communication sent or 
    given after the effective date of the registration statement (other 
    than a prospectus permitted under subsection (b) of section 77j of 
    this title) shall not be deemed a prospectus if it is proved that 
    prior to or at the same time with such communication a written 
    prospectus meeting the requirements of subsection (a) of section 77j 
    of this title at the time of \1\ such communication was sent or 
    given to the person to whom the communication was made, and (b) a 
    notice, circular, advertisement, letter, or communication in respect 
    of a security shall not be deemed to be a prospectus if it states 
    from whom a written prospectus meeting the requirements of section 
    77j of this title may be obtained and, in addition, does no more 
    than identify the security, state the price thereof, state by whom 
    orders will be executed, and contain such other information as the 
    Commission, by rules or regulations deemed necessary or appropriate 
    in the public interest and for the protection of investors, and 
    subject to such terms and conditions as may be prescribed therein, 
    may permit.
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    \1\ So in original.
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        (11) The term ``underwriter'' means any person who has purchased 
    from an issuer with a view to, or offers or sells for an issuer in 
    connection with, the distribution of any security, or participates 
    or has a direct or indirect participation in any such undertaking, 
    or participates or has a participation in the direct or indirect 
    underwriting of any such undertaking; but such term shall not 
    include a person whose interest is limited to a commission from an 
    underwriter or dealer not in excess of the usual and customary 
    distributors' or sellers' commission. As used in this paragraph the 
    term ``issuer'' shall include, in addition to an issuer, any person 
    directly or indirectly controlling or controlled by the issuer, or 
    any person under direct or indirect common control with the issuer.
        (12) The term ``dealer'' means any person who engages either for 
    all or part of his time, directly or indirectly, as agent, broker, 
    or principal, in the business of offering, buying, selling, or 
    otherwise dealing or trading in securities issued by another person.
        (13) The term ``insurance company'' means a company which is 
    organized as an insurance company, whose primary and predominant 
    business activity is the writing of insurance or the reinsuring of 
    risks underwritten by insurance companies, and which is subject to 
    supervision by the insurance commissioner, or a similar official or 
    agency, of a State or territory or the District of Columbia; or any 
    receiver or similar official or any liquidating agent for such 
    company, in his capacity as such.
        (14) The term ``separate account'' means an account established 
    and maintained by an insurance company pursuant to the laws of any 
    State or territory of the United States, the District of Columbia, 
    or of Canada or any province thereof, under which income, gains and 
    losses, whether or not realized, from assets allocated to such 
    account, are, in accordance with the applicable contract, credited 
    to or charged against such account without regard to other income, 
    gains, or losses of the insurance company.
        (15) The term ``accredited investor'' shall mean--
            (i) a bank as defined in section 77c(a)(2) of this title 
        whether acting in its individual or fiduciary capacity; an 
        insurance company as defined in paragraph (13) of this 
        subsection; an investment company registered under the 
        Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] or a 
        business development company as defined in section 2(a)(48) of 
        that Act [15 U.S.C. 80a-2(a)(48)]; a Small Business Investment 
        Company licensed by the Small Business Administration; or an 
        employee benefit plan, including an individual retirement 
        account, which is subject to the provisions of the Employee 
        Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.], 
        if the investment decision is made by a plan fiduciary, as 
        defined in section 3(21) of such Act [29 U.S.C. 1002(21)], which 
        is either a bank, insurance company, or registered investment 
        adviser; or
            (ii) any person who, on the basis of such factors as 
        financial sophistication, net worth, knowledge, and experience 
        in financial matters, or amount of assets under management 
        qualifies as an accredited investor under rules and regulations 
        which the Commission shall prescribe.

        (16) The terms ``security future'', ``narrow-based security 
    index'', and ``security futures product'' have the same meanings as 
    provided in section 78c(a)(55) of this title.

(b) Consideration of promotion of efficiency, competition, and capital 
        formation

    Whenever pursuant to this subchapter the Commission is engaged in 
rulemaking and is required to consider or determine whether an action is 
necessary or appropriate in the public interest, the Commission shall 
also consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition, and capital formation.

(May 27, 1933, ch. 38, title I, Sec. 2, 48 Stat. 74; June 6, 1934, ch. 
404, title II, Sec. 201, 48 Stat. 905; Aug. 10, 1954, ch. 667, title I, 
Secs. 1-4, 68 Stat. 683, 684; Pub. L. 86-70, Sec. 12(a), June 25, 1959, 
73 Stat. 143; Pub. L. 86-624, Sec. 7(a), July 12, 1960, 74 Stat. 412; 
Pub. L. 91-547, Sec. 27(a), Dec. 14, 1970, 84 Stat. 1433; Pub. L. 96-
477, title VI, Sec. 603, Oct. 21, 1980, 94 Stat. 2294; Pub. L. 97-303, 
Sec. 1, Oct. 13, 1982, 96 Stat. 1409; Pub. L. 100-181, title II, 
Secs. 201, 202, Dec. 4, 1987, 101 Stat. 1252; Pub. L. 104-290, title I, 
Sec. 106(a), Oct. 11, 1996, 110 Stat. 3424; Pub. L. 105-353, title III, 
Sec. 301(a)(1), Nov. 3, 1998, 112 Stat. 3235; Pub. L. 106-554, 
Sec. 1(a)(5) [title II, Sec. 208(a)(1)], Dec. 21, 2000, 114 Stat. 2763, 
2763A-434.)

                       References in Text

    The Investment Company Act of 1940, referred to in subsec. 
(a)(15)(i), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as 
amended, which is classified generally to subchapter I (Sec. 80a-1 et 
seq.) of chapter 2D of this title. For complete classification of this 
Act to the Code, see section 80a-51 of this title and Tables.
    The Employee Retirement Income Security Act of 1974, referred to in 
subsec. (a)(15)(i), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as 
amended, which is classified principally to chapter 18 (Sec. 1001 et 
seq.) of Title 29, Labor. For complete classification of this Act to the 
Code, see Short Title note set out under section 1001 of Title 29 and 
Tables.

                          Codification

    Words ``Philippine Islands'' deleted from definition of term 
``Territory'' under authority of Proc. No. 2695, eff. July 4, 1946, 11 
F.R. 7517, 60 Stat. 1352, which granted independence to the Philippine 
Islands. Proc. No. 2695 was issued pursuant to section 1394 of Title 22, 
Foreign Relations and Intercourse, and is set out as a note under that 
section.


                               Amendments

    2000--Subsec. (a)(1). Pub. L. 106-554, Sec. 1(a)(5) [title II, 
Sec. 208(a)(1)(A)], inserted ``security future,'' after ``treasury 
stock,''.
    Subsec. (a)(3). Pub. L. 106-554, Sec. 1(a)(5) [title II, 
Sec. 208(a)(1)(B)], inserted at end ``Any offer or sale of a security 
futures product by or on behalf of the issuer of the securities 
underlying the security futures product, an affiliate of the issuer, or 
an underwriter, shall constitute a contract for sale of, sale of, offer 
for sale, or offer to sell the underlying securities.''
    Subsec. (a)(16). Pub. L. 106-554, Sec. 1(a)(5) [title II, 
Sec. 208(a)(1)(C)], added par. (16).
    1998--Subsec. (a)(15)(i). Pub. L. 105-353 made technical amendment 
to reference in original act which appears in text as reference to 
section 77c(a)(2) of this title and inserted ``of this subsection'' 
after ``paragraph (13)''.
    1996--Pub. L. 104-290 designated existing provisions as subsec. (a), 
inserted heading, and added subsec. (b).
    1987--Par. (5). Pub. L. 100-181, Sec. 201, substituted ``Securities 
and Exchange Commission'' for ``Federal Trade Commission''.
    Par. (6). Pub. L. 100-181, Sec. 202, struck out reference to Canal 
Zone.
    1982--Par. (1). Pub. L. 97-303 inserted ``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,'' 
after ``mineral rights,''.
    1980--Par. (15). Pub. L. 96-477 added par. (15).
    1970--Pars. (13), (14). Pub. L. 91-547 added pars. (13) and (14).
    1960--Par. (6). Pub. L. 86-624 struck out reference to Hawaii.
    1959--Par. (6). Pub. L. 86-70 struck out reference to Alaska.
    1954--Act Aug. 10, 1954, in pars. (3), (8), (10), and (11), 
redefined term ``sale'' so as to distinguish between ``offers'' and 
``sales'', clarified definition of ``registration statement'', and 
conformed definition of ``prospectus'' to changes made by act Aug. 10, 
1954, to sections 77e and 77j of this title.
    1934--Act June 6, 1934, amended pars. (1), (4), and (10).


                    Effective Date of 1970 Amendment

    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.


                    Effective Date of 1954 Amendment

    Section 501 of act Aug. 10, 1954, provided that: ``This Act 
[amending this section and sections 77c to 77e, 77j, 77l, 77q, 77v, 
77ccc to 77fff, 77xxx, 78k, 78l, 80a-2 and 80a-24 of this title] shall 
take effect sixty days after the date of its enactment [Aug. 10, 
1954].''

                          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.

                  Section Referred to in Other Sections

    This section is referred to in sections 77b-1, 77r, 77ccc, 77ddd, 
78c, 80a-6, 7004 of this title; title 7 sections 1a, 2; title 11 section 
1145; title 12 section 1451; title 29 section 1002; title 42 section 
12704.
