Sec. 5453. Prohibition on trading ahead by market makers
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Section 15 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78o ) is amended by adding at the end the following: With respect to a person acting in the capacity of a market maker, if the person accepts an order with respect to a security from a customer, including a broker or dealer— the market maker has a duty of trust and loyalty to the customer arising from the receipt of such order; and the information in such order is material, non-public information that may be used only in furtherance of executing such customer’s order.
The Chief Executive Officer of each person that acts in the capacity of a market maker shall issue an annual certification to the Commission, in such form and manner as the Commission may prescribe by rule, that certifies that— the person has performed reasonable due diligence during the reporting period to ensure that the person has not violated the duty of trust and loyalty described under paragraph (1)(A) or used the information described under paragraph (1)(B) in a prohibited fashion; and the person has not violated the duty of trust and loyalty described under paragraph (1)(A) or used the information described under paragraph (1)(B) in a prohibited fashion during the reporting period.
Any associated person of a market maker who knowingly and willfully causes the market maker to violate paragraph
(1)(or who directs another agent or associated person of the market maker to commit such a violation or engage in such acts that result in the associated person being personally unjustly enriched) shall be fined in an amount equal to the greater of— two times the amount of profit realized by reason of such violation; or $50,000. Any associated person of a market maker who knowingly and willfully causes the market maker to engage in a course of conduct of knowingly and willfully violating paragraph
(1)(or who directs another agent or associated person of the market maker to commit such a violation or engage in such acts that result in the associated person being personally unjustly enriched) shall be— fined in an amount not to exceed 200 percent of the compensation (including stock options awarded as compensation) received by such associated person from the market maker— during the time period in which the violations occurred; or in the one- to three-year time period preceding the date on which the violations were discovered; and imprisoned for not more than 5 years. The term associated person means an associated person of a broker or dealer. Not later than the end of the 90-day period beginning on the date of enactment of this subsection, the Commission— shall issue rules to carry out this subsection; and may provide exemptions from the requirements of this subsection, by rule, if the Commission determines that such exemptions would promote market integrity and are necessary or appropriate in the public interest or for the protection of investors. . It is the sense of the Congress that the prohibitions added by this section should complement, and not replace, existing rules of self-regulatory organizations applicable to their members, including brokers and dealers. Section 15(p) of the Securities Exchange Act of 1934, as added by subsection (a), shall take effect after the end of the 180-day period beginning on the date of enactment of this Act.
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Sec. 5453
Prohibition on trading ahead by market makers
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