[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR200.2]

[Page 8-10]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND REQUESTS--Table of Contents
 
             Subpart A--Organization and Program Management
 
Sec. 200.2  Statutory functions.

    Following are brief descriptions of the Commission's functions under 
each of the statutes it administers:
    (a) Securities Act of 1933. (1) Issuers of securities making public 
offerings for sale in interstate commerce or through the mails, directly 
or by others on their behalf, are required to file with the Commission 
registration statements containing financial and other pertinent data 
about the issuer and the offering. A similar requirement is provided 
with respect to such public offerings on behalf of a controlling person 
of the issuer. Unless a registration statement is in effect with respect 
to such securities, it is unlawful to sell the securities in interstate 
commerce or through the mails. (There are certain limited exemptions, 
such as government securities, non-public offerings, and intrastate 
offerings.) The effectiveness of a registration statement may be refused 
or suspended after a hearing if the statement contains material 
misstatements or omissions, thus barring sale of the securities until it 
is appropriately amended. Registration is not a finding by the 
Commission as to the accuracy of the facts disclosed; and it is unlawful 
so to represent. Moreover, registration of securities does not imply 
approval of the issue by the Commission or insure investors against loss 
in their purchase, but serves rather to provide information upon which 
investors may make an informed and realistic evaluation of the worth of 
the securities.
    (2) Persons responsible for filing false information with the 
Commission subject themselves to the risk of fine or imprisonment or 
both; and the issuing company, its directors, officers, and the 
underwriters and dealers and others may be liable in damages to 
purchasers of registered securities if the disclosures in the 
registration statements and prospectus are materially defective. Also 
the statute contains antifraud provisions which apply generally to the 
sale of securities, whether or not registered.
    (b) Securities Exchange Act of 1934. This Act requires the filing of 
registration applications and annual and other reports with national 
securities exchanges and the Commission, by companies whose securities 
are listed on the exchanges. Annual and other reports must be filed also 
by certain companies whose securities are traded on the over-the-counter 
markets. These must contain financial and other data prescribed by the 
Commission for the information of investors. Material misstatements or 
omissions are grounds for suspension or withdrawal of the security from 
exchange trading. This Act makes unlawful any solicitation of proxies, 
authorizations, or consents in contravention of Commission rules. These 
rules require disclosure of

[[Page 9]]

information about the subject of the solicitation to security holders. 
The Act requires disclosure of the holdings and the transactions by an 
officer, director, or beneficial owner of over 10 percent of any class 
of equity security of certain companies. It also requires disclosure of 
the beneficial owners of more than five percent of any class of equity 
securities of a registered company. It provides substantive and 
procedural protection to security holders in third-party and issuer 
tender offers. The Act also provides for the registration with, and 
regulation by, the Commission of national securities exchanges, brokers 
or dealers engaged in an over-the-counter securities business, and 
national associations of such brokers or dealers. It gives the 
Commission rulemaking power with respect to short sales, stabilizing, 
floor trading activities of specialists and odd-lot dealers, and such 
matters as excessive trading by exchange members. The Act authorizes the 
Board of Governors of the Federal Reserve System to prescribe minimum 
margin requirements for listed securities.
    (c) Public Utility Holding Company Act of 1935. This Act authorizes 
the Commission to regulate gas and electric public-utility holding 
companies under standards prescribed for the protection of the public 
interest and the interest of investors and consumers. The Act generally 
limits a public-utility holding company to a single integrated public-
utility system, and requires simple corporate and capital structures. If 
not exempt, a public-utility holding company must register with the 
Commission. Generally, a registered holding company must obtain 
Commission approval before it can issue and sell securities, acquire 
utility securities or assets or any other interest in any business, or 
enter into transactions with its affiliates. It must also comply with 
extensive reporting and record-keeping requirements. Although largely 
free of these requirements, an exempt holding company remains subject to 
the geographic limitations of the Act. The Act permits the acquisition 
of interests in ``exempt wholesale generators'' and ``foreign utility 
companies'' unrelated to a system's utility operations.
    (d) Trust Indenture Act of 1939. This Act safeguards the interests 
of purchasers of publicly-offered debt securities issued under trust 
indentures by requiring the inclusion of certain protective provisions 
in, and the exclusion of certain types of exculpatory clauses from, 
trust indentures. The Act also requires that an independent indenture 
trustee represent the debtors by proscribing certain relationships that 
could conflict with proper exercise of duties.
    (e) Investment Company Act of 1940. This Act establishes a 
comprehensive regulatory framework for investment companies and subjects 
their activities to regulation under standards prescribed for the 
protection of investors. Among other things, the Act provides for the 
registration of investment companies with the Commission; requires them 
to disclose their financial condition and investment policies to their 
shareholders; prohibits them from substantially changing investment 
policies without shareholder approval; bars persons guilty of securities 
fraud from serving as officers or directors; prevents underwriters, 
investment bankers, or brokers from constituting more than a minority of 
the directors of an investment company; requires that management 
contracts be submitted to shareholders for their approval; prohibits 
transactions between investment companies and their directors, officers, 
or affiliated companies or persons, except when approved by the 
Commission; and prohibits investment companies from issuing senior 
securities except under specified terms and conditions. The Act also 
regulates advisory fees, sales and repurchases of securities, exchange 
offers, and other activities of investment companies. The Act authorizes 
the Commission to exempt any person or class of persons or securities 
from any provisions of, or rules under, the Act and to conduct any 
investigation it deems necessary to determine existing or potential 
violations of the Act. It also authorizes the Commission to prepare 
reports to security holders on the fairness of plans of reorganization, 
merger, or consolidation. The Commission may institute a court action to 
enjoin acts or practices of management involving, among other

[[Page 10]]

things, a breach of fiduciary duty and the consummation of plans of 
reorganization, merger, or consolidation that are grossly unfair to 
security holders.
    (f) Investment Advisers Act of 1940. Persons who, for compensation, 
engage in the business of advising others with respect to their security 
transactions must register with the Commission. Their activities in the 
conduct of such business are subject to standards of the act which make 
unlawful those practices which constitute fraud or deceit and which 
require, among other things, disclosure of any interests they may have 
in transactions executed for clients. The Act grants to the Commission 
rule-making power with respect to fraudulent and other activities of 
investment advisers.
    (g) Chapter 11 of the Bankruptcy Code. Chapter 11 of the Bankruptcy 
Code (11 U.S.C. 1101 et seq.) provides for Commission participation as a 
statutory party in reorganization cases. Under section 1109(a) of the 
Bankruptcy Code (11 U.S.C. 1109(a)), which also applies to Chapter 9 
cases regarding municipalities, the Commission ``may raise and may 
appear and be heard on any issue in the case.''

(11 U.S.C. 901, 1109(a))

[27 FR 12712, Dec. 22, 1962, as amended at 49 FR 12684, Mar. 30, 1984; 
60 FR 14624, Mar. 20, 1995]

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