52 STAT.] 75TH CONG., 3 D SESS.-CH. 677-JUNE 25, 1938 so to approve or direct, no broker or dealer shall be admitted to or continued in membership in such association, if (1) such broker or dealer, whether prior or subsequent to becoming such, or (2) any partner, officer, director, or branch manager of such broker or dealer (or any person occupying a similar status or performing similar functions), or any person directly or indi- rectly controlling or controlled by such broker or dealer, whether prior or subsequent to becoming such, (A) has been and is suspended or expelled from a registered securities association (whether national or affiliated) or from a national securities exchange, for violation of any rule of such association or exchange which prohibits any act or transaction constituting conduct inconsistent with just and equitable principles of trade, or requires any act the omission of which constitutes conduct inconsistent with just and equitable principles of trade, or (B) is subject to an order of the Commission denying or revoking his registration pursuant to section 15 of this title, or expelling or suspending him from membership in a registered securities association or a national securities exchange, or (C) by his con- duct while employed by, acting for, or directly or indirectly controlling or controlled by, a broker or dealer, was a cause of any suspension, expulsion, or order of the character described in clause (A) or (B) which is in effect with respect to such broker or dealer; "(5) the rules of the association assure a fair representation of its members in the adoption of any rule of the association or amendment thereto, the selection of its officers and directors, and in all other phases of the administration of its affairs; "(6) the rules of the association provide for the equitable allocation of dues among its members, to defray reasonable expenses of administration; "(7) the rules of the association are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to provide safeguards against unreasonable profits or unreasonable rates of commissions or other charges, and, in general, to protect investors and the public interest, and to remove impediments to and perfect the mecha- nism of a free and open market; and are not designed to permit unfair discrimination between customers or issuers, or brokers or dealers, to fix minilmum profits, to impose any schedule of prices, or to impose any sched(ule or fix mlnimuni rates of com- missions, allowances, discounts, or other charges; "(8) the rules of the association provide that its members shall be appropriately discil)ined, by expulsion, suspension, fine, censure, or any other fitting penalty, for any violation of its rules; "(9) the rules of the association provide a fair and orderly procedure with respect to the disciplining of members and the denial of membership to any broker or dealer seeking member- ship therein. In any proceeding to determine whether any member shall be disciplined, such rules shall require that specific charges be brought; that such member shall be notified of, and be given an opportunity to defend against, such charges; that a record shall be kept; and that the determination shall include (A) a statement setting forth any act or practice in which such member may be found to have engaged, or which such member may be found to have omitted, (B) a statement setting forth the specific rule or rules of the association of which any such act or practice, or omission to act. is deemed to be in violation, (C) a 1071 Improper conduct. Order denying or revoking registration, etc. 48 Stat. 895. 15U..(.§78o; Supp. III, § 78o. Suspension, etc., be- cause of conduct while employed. Fair representation of members in admin- istration. Dues. Purpose of rules. Disclpline. Fair and orderly procedure in disci- plining members, etc.
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