Title 15 — Commerce and TradeRelease 119-73
§78bb Effect on existing law
Title 15 › Chapter CHAPTER 2B— - SECURITIES EXCHANGES › § 78bb
Summary
Limits how much money a person can recover. A person who can sue under this law cannot get more than the actual harm they suffered. State securities regulators still have power over securities and people unless their rules conflict with this federal law. The rights in this law add to any other legal rights people have, except for the special rules about class actions in subsection (f). State laws that ban or regulate gambling or “bucket shops” do not make invalid certain securities, security-based swaps between eligible parties, or swaps done on a national exchange. State rules about offering or selling securities do not apply to security-based swaps or security futures products, except that general state anti-fraud laws still apply. Security-based swaps cannot be treated as insurance under state law. Actions by self-regulatory organizations (SROs) to settle member disputes remain binding. If an SRO sanction is stayed or changed, steps the SRO already took because of that sanction still stand unless they conflict with this law. States cannot tax changes in ownership or transfers of securities when those moves are done through a registered clearing agency or transfer agent, unless those moves would be taxable anyway if the clearing agency weren’t physically in that State. A person who manages investments and uses mail or interstate commerce will not be treated as acting illegally or breaching a duty just for paying a higher commission, as long as the person in good faith thinks the commission is reasonable compared to the brokerage and research services received (unless a law passed after June 4, 1975 says otherwise). That person must also disclose their commission policies as regulators require. Brokerage and research services include giving advice about securities, providing analyses or reports, and executing transactions plus related tasks like clearing, settlement, or custody. Finally, private class actions under state law for misrepresentation or manipulation in connection with covered securities are barred and can be moved to federal court, with limited exceptions (including certain issuer-only transactions, suits by States or State pension plans, enforcement by indenture trustees, and remand rules). A “covered class action” generally means cases seeking damages for more than 50 people where common issues outweigh individual ones.
Full Legal Text
Title 15, §78bb
Commerce and Trade — Source: USLM XML via OLRC
(a)(1)No person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in 1 or more actions, a total amount in excess of the actual damages to that person on account of the act complained of. Except as otherwise specifically provided in this chapter, nothing in this chapter shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this chapter or the rules and regulations under this chapter.
(2)Except as provided in subsection (f), the rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity.
(3)No State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of “bucket shops” or other similar or related activities, shall invalidate—
(A)any put, call, straddle, option, privilege, or other security subject to this chapter (except any security that has a pari-mutuel payout or otherwise is determined by the Commission, acting by rule, regulation, or order, to be appropriately subject to such laws), or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such security;
(B)any security-based swap between eligible contract participants; or
(C)any security-based swap effected on a national securities exchange registered pursuant to section 78f(b) of this title.
(4)No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security-based swap or a security futures product, except that this paragraph may not be construed as limiting any State antifraud law of general applicability. A security-based swap may not be regulated as an insurance contract under any provision of State law.
(b)Nothing in this chapter shall be construed to modify existing law with regard to the binding effect (1) on any member of or participant in any self-regulatory organization of any action taken by the authorities of such organization to settle disputes between its members or participants, (2) on any municipal securities dealer or municipal securities broker of any action taken pursuant to a procedure established by the Municipal Securities Rulemaking Board to settle disputes between municipal securities dealers and municipal securities brokers, or (3) of any action described in paragraph (1) or (2) on any person who has agreed to be bound thereby.
(c)The stay, setting aside, or modification pursuant to section 78s(e) of this title of any disciplinary sanction imposed by a self-regulatory organization on a member thereof, person associated with a member, or participant therein, shall not affect the validity or force of any action taken as a result of such sanction by the self-regulatory organization prior to such stay, setting aside, or modification: Provided, That such action is not inconsistent with the provisions of this chapter or the rules or regulations thereunder. The rights of any person acting in good faith which arise out of any such action shall not be affected in any way by such stay, setting aside, or modification.
(d)No State or political subdivision thereof shall impose any tax on any change in beneficial or record ownership of securities effected through the facilities of a registered clearing agency or registered transfer agent or any nominee thereof or custodian therefor or upon the delivery or transfer of securities to or through or receipt from such agency or agent or any nominee thereof or custodian therefor, unless such change in beneficial or record ownership or such transfer or delivery or receipt would otherwise be taxable by such State or political subdivision if the facilities of such registered clearing agency, registered transfer agent, or any nominee thereof or custodian therefor were not physically located in the taxing State or political subdivision. No State or political subdivision thereof shall impose any tax on securities which are deposited in or retained by a registered clearing agency, registered transfer agent, or any nominee thereof or custodian therefor, unless such securities would otherwise be taxable by such State or political subdivision if the facilities of such registered clearing agency, registered transfer agent, or any nominee thereof or custodian therefor were not physically located in the taxing State or political subdivision.
(e)(1)No person using the mails, or any means or instrumentality of interstate commerce, in the exercise of investment discretion with respect to an account shall be deemed to have acted unlawfully or to have breached a fiduciary duty under State or Federal law unless expressly provided to the contrary by a law enacted by the Congress or any State subsequent to June 4, 1975, solely by reason of his having caused the account to pay a member of an exchange, broker, or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of an exchange, broker, or dealer would have charged for effecting that transaction, if such person determined in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such member, broker, or dealer, viewed in terms of either that particular transaction or his overall responsibilities with respect to the accounts as to which he exercises investment discretion. This subsection is exclusive and plenary insofar as conduct is covered by the foregoing, unless otherwise expressly provided by contract: Provided, however, That nothing in this subsection shall be construed to impair or limit the power of the Commission under any other provision of this chapter or otherwise.
(2)A person exercising investment discretion with respect to an account shall make such disclosure of his policies and practices with respect to commissions that will be paid for effecting securities transactions, at such times and in such manner, as the appropriate regulatory agency, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(3)For purposes of this subsection a person provides brokerage and research services insofar as he—
(A)furnishes advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities;
(B)furnishes analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; or
(C)effects securities transactions and performs functions incidental thereto (such as clearance, settlement, and custody) or required in connection therewith by rules of the Commission or a self-regulatory organization of which such person is a member or person associated with a member or in which such person is a participant.
(4)The provisions of this subsection shall not apply with regard to securities that are security futures products.
(f)(1)No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
(A)a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security; or
(B)that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
(2)Any covered class action brought in any State court involving a covered security, as set forth in paragraph (1), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to paragraph (1).
(3)(A)(i)Notwithstanding paragraph (1) or (2), a covered class action described in clause (ii) of this subparagraph that is based upon the statutory or common law of the State in which the issuer is incorporated (in the case of a corporation) or organized (in the case of any other entity) may be maintained in a State or Federal court by a private party.
(ii)A covered class action is described in this clause if it involves—
(I)the purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer; or
(II)any recommendation, position, or other communication with respect to the sale of securities of an issuer that—
(aa)is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and
(bb)concerns decisions of such equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters’ or appraisal rights.
(B)(i)Notwithstanding any other provision of this subsection, nothing in this subsection may be construed to preclude a State or political subdivision thereof or a State pension plan from bringing an action involving a covered security on its own behalf, or as a member of a class comprised solely of other States, political subdivisions, or State pension plans that are named plaintiffs, and that have authorized participation, in such action.
(ii)For purposes of this subparagraph, the term “State pension plan” means a pension plan established and maintained for its employees by the government of a State or political subdivision thereof, or by any agency or instrumentality thereof.
(C)Notwithstanding paragraph (1) or (2), a covered class action that seeks to enforce a contractual agreement between an issuer and an indenture trustee may be maintained in a State or Federal court by a party to the agreement or a successor to such party.
(D)In an action that has been removed from a State court pursuant to paragraph (2), if the Federal court determines that the action may be maintained in State court pursuant to this subsection, the Federal court shall remand such action to such State court.
(4)The securities commission (or any agency or office performing like functions) of any State shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions.
(5)For purposes of this subsection, the following definitions shall apply:
(A)The term “affiliate of the issuer” means a person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, the issuer.
(B)The term “covered class action” means—
(i)any single lawsuit in which—
(I)damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
(II)one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members; or
(ii)any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which—
(I)damages are sought on behalf of more than 50 persons; and
(II)the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.
(C)Notwithstanding subparagraph (B), the term “covered class action” does not include an exclusively derivative action brought by one or more shareholders on behalf of a corporation.
(D)For purposes of this paragraph, a corporation, investment company, pension plan, partnership, or other entity, shall be treated as one person or prospective class member, but only if the entity is not established for the purpose of participating in the action.
(E)The term “covered security” means a security that satisfies the standards for a covered security specified in paragraph (1) or (2) of section 18(b) of the Securities Act of 1933 [15 U.S.C. 77r(b)], at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred, except that such term shall not include any debt security that is exempt from registration under the Securities Act of 1933 [15 U.S.C. 77a et seq.] pursuant to rules issued by the Commission under section 4(2) 11 See References in Text note below. of that Act [15 U.S.C. 77d(a)(2)].
(F)Nothing in this paragraph shall be construed to affect the discretion of a State court in determining whether actions filed in such court should be joined, consolidated, or otherwise allowed to proceed as a single action.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
This chapter, referred to in subsecs. (a) to (c) and (e), was in the original “this title”. See
References in Text
note set out under section 78a of this title. The Securities Act of 1933, referred to in subsec. (f)(5)(E), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. section 4(2) of the Act was redesignated section 4(a)(2) by Pub. L. 112–106, title II, § 201(b)(1), (c)(1), Apr. 5, 2012, 126 Stat. 314, and is classified to section 77d(a)(2) of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.
Amendments
2010—Subsec. (a). Pub. L. 111–203 amended subsec. (a) generally. Prior to amendment, subsec. (a) related to rights and remedies provided by this chapter and applicability of certain State securities laws. 2000—Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 210], inserted “subject to this chapter” after “privilege, or other security”, substituted “any such security” for “any such instrument, if such instrument is traded pursuant to
Rules and Regulations
of a self-regulatory organization that are filed with the Commission pursuant to section 78s(b) of this title”, and inserted at end “No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security futures product, except that this sentence shall not be construed as limiting any State antifraud law of general applicability.” Subsec. (e)(4). Pub. L. 106–554, § 1(a)(5) [title II, § 203(a)(2)], added par. (4). 1998—Subsec. (a). Pub. L. 105–353, § 101(b)(1)(A), substituted “Except as provided in subsection (f) of this section, the rights and remedies” for “The rights and remedies”. Subsec. (f). Pub. L. 105–353, § 101(b)(1)(B), added subsec. (f). 1996—Subsec. (a). Pub. L. 104–290 substituted “Except as otherwise specifically provided in this chapter, nothing” for “Nothing”. 1987—Subsec. (c). Pub. L. 100–181, § 327, substituted “on” for “or” after “self-regulatory organization”. Subsec. (d). Pub. L. 100–181, § 328, substituted “change in beneficial” for “change is beneficial”. Subsec. (e)(1). Pub. L. 100–181, § 329, substituted “subsequent to the date of enactment of the Securities Acts
Amendments
of 1975” for “subsequent to the date of enactment of the Securities Acts
Amendments
in 1975”, which for purposes of codification was translated as “subsequent to June 4, 1975,” thus requiring no change in text. 1982—Subsec. (a). Pub. L. 97–303 inserted provision that no State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of “bucket shops” or other similar or related activities, shall invalidate any put, call, straddle, option, privilege, or other security, or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such instrument, if such instrument is traded pursuant to
Rules and Regulations
of a self-regulatory organization that are filed with the Commission pursuant to section 78s(b) of this title. 1975—Subsec. (b). Pub. L. 94–29, § 21(1), struck out provisions that nothing in this chapter be construed to modify existing law with regard to the binding effect on any member of an exchange of any disciplinary action taken by the authorities of an exchange and made the remaining provisions applicable to all members of and participants in all self-regulatory organizations as well as municipal securities professionals. Subsecs. (c) to (e). Pub. L. 94–29, § 21(2), added subsecs. (c) to (e).
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date
of 1998 AmendmentAmendment by Pub. L. 105–353 not to affect or apply to any action commenced before and pending on Nov. 3, 1998, see section 101(c) of Pub. L. 105–353, set out as a note under section 77p of this title.
Effective Date
of 1975 AmendmentAmendment by Pub. L. 94–29 effective June 4, 1975, see section 31(a) of Pub. L. 94–29, set out as a note under section 78b of this title.
Executive Documents
Transfer of Functions
For
Transfer of Functions
of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.
Reference
Citations & Metadata
Citation
15 U.S.C. § 78bb
Title 15 — Commerce and Trade
Last Updated
Apr 6, 2026
Release point: 119-73