Segregation and limitation of functions of members, brokers, and dealers.
Section 31
SEC. 31. Segregation and limitation of functions of members, brokers, and dealers. — (a) The Commission shall prescribe such rules and regulations as it deems necessary or appropriate in the public interest or for the protection of investors (1) to regulate floor trading by members of securities exchanges, directly or indirectly, for their own account or for discretionary accounts, (2) to prevent such excessive trading on the exchange but off the floor by members, directly or indirectly, for their own account, as the Commission may deem detrimental to the maintenance of a fair and orderly market, and (3) to restrict a broker from directly or indirectly dealing in securities or otherwise segregate and limit the function of a broker and dealer. It shall be unlawful for a member to effect any transaction in a security in contravention of such rules and regulations, but such rules and regulations may make such exemptions for arbitrage transactions, for transactions in exempted securities, and, within the limitations subsection (b) of this Section, for transactions by odd-lot dealers and specialists, as the Commission may deem necessary or appropriate in the public interest or for the protection of investors. (b) Unless otherwise prohibited by such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, the rules of a securities exchange may permit — a member to be registered as an odd-lot dealer and as such to buy and sell for his own account so far as may be reasonably necessary to carry on such odd-lot transactions, or a member to be registered as a specialist. If under the rules and regulations of the Commission, a specialist is permitted to act as a dealer, or is limited to acting as a dealer, such rules and regulations shall restrict his dealing so far as practicable to those, reasonably necessary to permit him to maintain a fair and orderly market, and/or to those necessary to permit him to act as an odd-lot dealer. It shall be unlawful for a specialist or an official of the exchange to disclose information in regard to orders placed with such specialist which is not available to all members of the exchange, to any person other than an official of the exchange, a representative of the Commission or a specialist who may be acting for such specialist; but the Commission shall have power to require disclosure to all members of the exchange of all orders placed with specialists, under such rules and regulations as the Commission may prescribe as necessary or appropriate m the public interest or for the protection of investors. It shall also be unlawful for a specialist acting as a broker to effect on the exchange any transaction except upon a market or limited price order. (c) If because of the limited volume of transactions effected on an exchange, it is impracticable and not necessary or appropriate in the public interest or for the protection of investors to apply any of the foregoing provisions of this Section or to the rules and regulations thereunder, the Commission shall have the power, upon application of the exchange and on a showing that the rules of such exchange are otherwise adequate for the protection of investors, to exempt such exchange and its members from any such provision or rules and regulations. (d) It shall be unlawful for a member of a securities exchange who is both a dealer and a broker, or for any person who both as a broker and a dealer transacts a business in securities through the medium of a member or otherwise, to effect through the use of any facility of a securities exchange, or otherwise in the case of a member — Any transaction in connection with which, directly or indirectly, he extends or maintains or arranges for the extension or maintenance of credit to or for a customer on any security other than an exempted security which was a part of a new issue in the distribution of which he participated as a member of a selling syndicate or group within six months prior to such transaction: Provided, That credit shall not be deemed extended by reason of a bona fide delayed delivery of any such security against full payment of the entire purchase price thereof upon such delivery within thirty-five days after such purchase, or Any transaction with respect to any security other than exempted security unless, if the transaction is with a customer, he discloses to such customer in writing at or before the completion of the transaction whether he is acting as a dealer for his own account as a broker for such customer, or as a broker for some other person. (22a)