Securities Lawyer's Deskbook
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The

Sarbanes-Oxley Act of 2002





Section 603 -- Federal Court Authority to Impose Penny Stock Bars


  1. Securities Exchange Act of 1934. Section 21(d) of the Securities Exchange Act of 1934, as amended by this Act, is amended by adding at the end the following:


    "(6) Authority of a court to prohibit persons from participating in an offering of penny stock.----
      "(A) In general.--In any proceeding under paragraph (1) against any person participating in, or, at the time of the alleged misconduct who was participating in, an offering of penny stock, the court may prohibit that person from participating in an offering of penny stock, conditionally or unconditionally, and permanently or for such period of time as the court shall determine.
      "(B) Definition.--For purposes of this paragraph, the term 'person participating in an offering of penny stock' includes any person engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of, any penny stock. The Commission may, by rule or regulation, define such term to include other activities, and may, by rule, regulation, or order, exempt any person or class of persons, in whole or in part, conditionally or unconditionally, from inclusion in such term.".


  2. Securities Act of 1933. Section 20 of the Securities Act of 1933 is amended by adding at the end the following:


    "(g) Authority of a Court To Prohibit Persons From Participating in an Offering of Penny Stock.--
      "(1) In general.-- In any proceeding under subsection (a) against any person participating in, or, at the time of the alleged misconduct, who was participating in, an offering of penny stock, the court may prohibit that person from participating in an offering of penny stock, conditionally or unconditionally, and permanently or for such period of time as the court shall determine.
      "(2) Definition.-- For purposes of this subsection, the term 'person participating in an offering of penny stock' includes any person engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of, any penny stock. The Commission may, by rule or regulation, define such term to include other activities, and may, by rule, regulation, or order, exempt any person or class of persons, in whole or in part, conditionally or unconditionally, from inclusion in such term.".





Legislative History


July 30, 2002, 107 P.L. 204, Title VI, § 603, 116 Stat. 745.

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