to his account to a stated associated person or persons of the broker or dealer and the prompt written approval of each discretionary order entered on behalf of that account; and

(5) The prompt review and written approval of the handling of all customer complaints.

(d) Every nonmember broker or dealer who has designated more than one supervisor pursuant to paragraph (b) of this rule shall designate from among his partners, officers or other qualified associated persons, a person or group of persons who shall:

(1) Supervise and periodically review the activities of the supervisors designated pursuant to paragraph (b) of this rule; and

(2) Periodically inspect each business office of the broker or dealer to insure that the written procedures are enforced.

(Adopted July 27, 1967, Release 34-8135, eff. Oct. 2, 1967.)

Rule 15b10-5. Discretionary Authority

(a) No nonmember broker or dealer, or any associated person, shall exercise any discretionary power or authority for any customer unless such customer has given prior written authorization to exercise such power or authority to a stated associated person or persons, and has indicated the reasons for such authorization.

(b) This rule shall not apply to transactions in which the broker-dealer's discretion is limited to the price at which or the time when an order given by a customer for the purchase or sale of a definite amount of a specified security shall be executed.

(Adopted July 27, Release 34-8135, eff. Oct. 2, 1967.) Rule 15b10-6. Record Keeping

(a) Every nonmember broker or dealer shall make and keep current a record for each person who becomes a customer after the effective date of this rule, which record shall state:

(1) (A) The customer's name, date of birth, address, nationality or citizenship, tax identification or social security number, and the signatures of the customer, the associated person regularly handling the account and a supervisor designated pursuant to paragraph (b) of Rule 15b10-4.

(B) If the broker or dealer, or any associated person, has made any recommendation to the cus

tomer to purchase, sell or exchange any security, the record for such customer shall also state the customer's occupation, marital status, investment objectives, other information concerning the customer's financial situation and needs which the broker or dealer or the associated person considered in making the recommendation, and the signature of the broker or dealer or associated person who made the recommendation to the customer.

(b) If, after the effective date of this rule, a nonmember broker or dealer, or any associated person, has made any recommendation to a person who became a customer prior to the effective date of this rule, the broker or dealer shall make and keep current a record for such customer which shall state the information required by paragraphs (a) (1) (A) and (a) (1) (B) of this rule.

(c) Any item of information required by paragraph (a)(1)(A) or (a) (1) (B) of this rule need not be contained in the customer's record if, after reasonable inquiry, the customer declines to furnish such item of information and a statement to that effect is placed in such record: Provided, however, That the customer's record must state the customer's name, address and social security or tax identification number.

(d) Every nonmember broker or dealer shall make and keep current:

(1) A record or records with respect to each discretionary account which shall include:

(A) The customer's written authorization to exercise discretionary power or authority with respect to such account.

(B) The reasons given by the customer for granting discretionary authority in his account.

(C) The written approval of a supervisor designated pursuant to paragraph (b) of Rule 15b10-4 and, if appropriate, the written approval of the person or persons designated pursuant to paragraph (d) of Rule 15b10-4, of the delegation of discretionary authority.

(D) The written approval of a supervisor designated pursuant to paragraph (b) of Rule 15b104 of each transaction in such account indicating the exact time and date of such approval.

(2) A separate file for all complaints by customers and persons acting on behalf of customers. Such complaints shall be filed alphabetically by customer's name and shall include copies of all material relating to the complaint, and a record of

what action, if any, has been taken by the broker or dealer. Copies of such material and record of action taken shall be kept in the office through which the customer account is handled.

(e) Every nonmember broker or dealer shall preserve all records required by the rule for a period of not less than 6 years, the first 2 years in an easily accessible place. After the first 2 years, a photograph on film may be substituted for the records for the balance of the required time. (Adopted July 27, release 34-8135, eff. Oct. 2, 1967.)

Rule 15b10-7. Exemption for Certain Exchange Members

Any nonmember broker or dealer who is a member of a national securities exchange shall be exempt from Rule 15b10-1 through 15b10-6 if (1) he carries no accounts of customers, and (2) his annual gross income derived from purchases and sales of securities otherwise than on a national securities exchange is in an amount no greater than $1,000.

(Adopted July 27, release 34-8135, eff. Oct. 2, 1967.)

Rule 15c1-1 Definitions

As used in any rule adopted pursuant to section 15(c)(1) of the Act:

(a) The term "customer" shall not include a broker or dealer.

(b) The term "the completion of the transaction" means:

(1) In the case of a customer who purchases a security through or from a broker or dealer, except as provided in paragraph (2), the time when such customer pays the broker or dealer any part of the purchase price, or if payment is effected by a bookkeeping entry, the time when such bookkeeping entry is made by the broker or dealer for any part of the purchase price.

(2) In the case of a customer who purchases a security through or from a broker or dealer and who makes payment therefor prior to the time when payment is requested or notification is given that payment is due, the time when such broker or dealer delivers the security to or into the account of such customer.

(3) In the case of a customer who sells a security through or to a broker or dealer, except as provided in paragraph (4), if the security is not in the custody of the broker or dealer at the time of sale, the time when the security is delivered to the broker or dealer, and if the security is in the custody of the broker or dealer at the time of sale, the time when the broker or dealer transfers the security from the account of such customer.

(4) In the case of a customer who sells a security through or to a broker or dealer and who delivers such security to such broker or dealer prior to the time when delivery is requested or notification is given that delivery is due, the time when such broker or dealer makes payment to or into the account of such customer. Rule 15c1-2. Fraud and Misrepresentation

(a) The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c)(1) of the Act, is hereby defined to include any act, practice, or course of business which

operates or would operate as a fraud or deceit upon any person.

(b) The term "manipulative, deceptive or other fraudulent device or contrivance," as used in section 15(c)(1) of the Act, is hereby defined to include any untrue statement of a material fact and any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, which statement or omission is made with knowledge or reasonable grounds to believe that it is untrue or misleading.

(c) The scope of this rule shall not be limited by any specific definitions of the term "manipulative, deceptive, or other fraudulent device or contrivance" contained in other rules adopted pursuant to section 15 (c) (1) of the Act.

Rule 15c1-3. Misrepresentation by Brokers and Dealers as to Registration

The term "manipulative, deceptive or other fraudulent device or contrivance," as used in section 15(c) (1) of the Act, is hereby defined to include any representation by a broker or dealer that the registration of a broker or dealer, pursuant to section 15 (b), or the failure of the Commission to deny or revoke such registration, indicates in any way that the Commission has passed upon or approved the financial standing, business, or conduct of such registered broker or dealer or the merits of any security or any transaction or transactions therein.

Rule 15c1-4. Confirmation of Transactions

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any act of any broker or dealer designed to effect with or for the account of a customer any transaction in, or to induce the purchase or sale by such customer of, any security (other than U.S. Tax Savings Notes, U.S. Defense Savings Stamps, or U.S. Defense Savings Bonds, Series E, F and G) unless such broker or dealer, at or before the completion of each such transaction, gives or sends to such customer written notification

disclosing (1) whether he is acting as a broker for such customer, as a dealer for his own account, as a broker for some other person, or as a broker for both such customer and some other persons; and (2) in any case in which he is acting as a broker for such customer or for both such customer and some other person, either the name of the person from whom the security was purchased or to whom it was sold for such customer and the date and time when such transaction took place or the fact that such information will be furnished upon the request of such customer, and the source and amount of any commission or other remuneration received or to be received by him in connection with the transaction.

Rule 15c1-5. Disclosure of Control

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c)(1) of the Act, is hereby defined to include any act of any broker or dealer controlled by, controlling, or under common control with, the issuer of any security, designed to effect with or for the account of a customer any transaction in, or to induce the purchase or sale by such customer of, such security unless such broker or dealer, before entering into any contract with or for such customer for the purchase or sale of such security, discloses to such customer the existence of such control, and unless such disclosure, if not made in writing, is supplemented by the giving or sending of written disclosure at or before the completion of the transaction.

Rule 15c1-6. Disclosure of Interest in Distributions

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c)(1) of the Act, is hereby defined to include any act of any broker who is acting for a customer or for both such customer and some other person, or of any dealer who receives or has promise of receiving a fee from a customer for advising such customer with respect to securities, designed to effect with or for the account of such customer any transaction in, or to induce the purchase or sale by such customer of, any security in the primary or secondary distribution of which such broker or dealer is participating or is otherwise financially interested unless such broker or dealer at or before the completion of each such transaction, gives or sends to such customer written noti

fication of the existence of such participation or interest.

Rule 15c1-7. Discretionary Accounts

(a) The term "manipulative, deceptive or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any act of any broker or dealer designed to effect with or for any customer's account in respect to which such broker or dealer or his agent or employee is vested with any discretionary power any transactions of purchase or sale which are excessive in size or frequency in view of the financial resources and character of such account.

(b) The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any act of any broker or dealer designed to effect with or for any customer's account in respect to which such broker or dealer or his agent or employee is vested with any discretionary power any transaction of purchase or sale unless immediately after effecting such transaction such broker or dealer makes a record of such transaction which record includes the name of such customer, the name, amount, and price of the security, and the date and time when such transaction took place. Rule 15c1-8. Sales at the Market

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to include any representation made to a customer by a broker or dealer who is participating or otherwise financially interested in the primary or secondary distribution of any security which is not admitted to trading on a national securities exchange that such security is being offered to such customer "at the market" or at a price related to the market price unless such broker or dealer knows or has reasonable grounds to believe that a market for such security exists other than that made, created, or controlled by him, or by any person for whom he is acting or with whom he is associated in such distribution, or by any person controlled by, controlling or under common control with him.

Rule 15c1-9. Use of Pro Forma Balance Sheets

The term "manipulative, deceptive, or other fraudulent device or contrivance," as used in section 15 (c) (1) of the Act, is hereby defined to

include the use of financial statements purporting to give effect to the receipt and application of any part of the proceeds from the sale or exchange of securities, unless the assumptions upon which each such financial statement is based are clearly set forth as part of the caption to each such statement in type at least as large as that used generally in the body of the statement.

Rule 15c2-1. Hypothecation of Customer's Securities

(a) General provisions. The term "fraudulent, deceptive, or manipulative act or practice," as used in section 15 (c) (2) of the Act, is hereby defined to include the direct or indirect hypothecation by a broker or dealer, or his arranging for or permitting, directly, or indirectly, the continued hypothecation of any securities carried for the account of any customer under circumstances

(1) That will permit the commingling of securities carried for the account of any such customer with securities carried for the account of any other customer, without first obtaining the written consent of each such customer to such hypothecation;

(2) That will permit such securities to be commingled with securities carried for the account of any person other than a bona fide customer of such broker or dealer under a lien for a loan made to such broker or dealer; or

(3) That will permit securities carried for the account of customers to be hypothecated, or subjected to any lien or liens or claim or claims of the pledgee or pledgees, for a sum which exceeds the aggregate indebtedness of all customers in respect of securities carried for their accounts; except that this clause shall not be deemed to be violated by reason of an excess arising on any day through the reduction of the aggregate indebtedness of customers on such day: Provided, That funds or securities in an amount sufficient to eliminate such excess are paid or placed in transfer to pledgee for the purpose of reducing the sum of the liens or claims to which securities carried for the account of customers are subject as promptly as practicable after such reduction occurs, but before the lapse of one-half hour after the commencement of banking hours on the next banking day at the place where the largest principal amount of loans of such broker or dealer are payable and, in any event, before such broker or dealer on such day has obtained or increased any bank

loan collateralized by securities carried for the account of customers.

(b) Definitions. For the purposes of this rule(1) The term "customer" shall not be deemed to include any general or special partner or any director or officer of such broker or dealer, or any participant, as such, in any joint, group or syndicate account with such broker or dealer or with any partner, officer, or director thereof;

(2) The term "securities carried for the account of any customer" shall be deemed to mean:

(i) Securities received by or on behalf of such broker or dealer for the account of any customer;

(ii) Securities sold and appropriated by such broker or dealer to a customer, except that if such securities were subject to a lien when appropriated to a customer they shall not be deemed to be "securities carried for the account of any customer" pending their release from such lien as promptly as practicable;

(iii) Securities sold, but not appropriated, by such broker or dealer to a customer who has made any payment therefor, to the extent that such broker or dealer owns and has received delivery of securities of like kind, except that if such securities were subject to a lien when such payment was made they shall not be deemed to be "securities carried for the account of any customer" pending their release from such lien as promptly as practicable;

(3) "Aggregate indebtedness" shall not be deemed to be reduced by reason of uncollected items. In computing aggregate indebtedness, related guaranteed and guarantor accounts shall be treated as a single account and considered on a consolidated basis, and balances in accounts carrying both long and short positions shall be adjusted by treating the market value of the securities required to cover such short positions as though such market value were a debit; and

(4) In computing the sum of the liens or claims to which securities carried for the account of customers of a broker or dealer are subject, any rehypothecation of such securities by another broker or dealer who is subject to this rule or to Rule 8c-1 shall be disregarded.

(c) Exemption for Cash Accounts. The provisions of paragraph (a) (1) hereof shall not apply to any hypothecation of securities carried for the account of a customer in a special cash account within the meaning of section 4(c) of Regulation T of the Board of Governors of the