12 U.S.C. § 378: Dealers in securities…

Summary

After one year from June 16, 1933, companies that issue, underwrite, sell, or distribute stocks, bonds, or other securities must not at the same time take deposits that are payable on demand (like checking accounts, passbooks, or certificates of deposit). That rule does not stop national or State banks, trust companies, other financial institutions, or private bankers from buying, selling, or issuing securities as the law already allows. It also does not change any bank’s right to sell real estate loan obligations without agreeing to buy them back. Anyone that takes deposits from the public must be either properly chartered and regulated by the United States or a State/Territory/District, or officially allowed and regulated, or agree to regular state banking exams and to publish reports about its condition like a bank does. Willful violators can be fined up to $5,000, imprisoned up to five years, or both. Officers, directors, employees, or agents who knowingly help can get the same penalties.

Title 12, §378

Banks and Banking, Source: USLM XML via OLRC

(a)After the expiration of one year after June 16, 1933, it shall be unlawful—

(1)For any person, firm, corporation, association, business trust, or other similar organization, engaged in the business of issuing, underwriting, selling, or distributing, at wholesale or retail, or through syndicate participation, stocks, bonds, debentures, notes, or other securities, to engage at the same time to any extent whatever in the business of receiving deposits subject to check or to repayment upon presentation of a passbook, certificate of deposit, or other evidence of debt, or upon request of the depositor: Provided, That the provisions of this paragraph shall not prohibit national banks or State banks or trust companies (whether or not members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing, and selling investment securities, or issuing securities, to the extent permitted to national banking associations by the provisions of section 24 of this title: Provided further, That nothing in this paragraph shall be construed as affecting in any way such right as any bank, banking association, savings bank, trust company, or other banking institution, may otherwise possess to sell, without recourse or agreement to repurchase, obligations evidencing loans on real estate; or

(2)For any person, firm, corporation, association, business trust, or other similar organization to engage, to any extent whatever with others than his or its officers, agents or employees, in the business of receiving deposits subject to check or to repayment upon presentation of a pass book, certificate of deposit, or other evidence of debt, or upon request of the depositor, unless such person, firm, corporation, association, business trust, or other similar organization (A) shall be incorporated under, and authorized to engage in such business by, the laws of the United States or of any State, Territory, or District, and subjected, by the laws of the United States, or of the State, Territory, or District wherein located, to examination and regulation, or (B) shall be permitted by the United States, any State, territory, or district to engage in such business and shall be subjected by the laws of the United States, or such State, territory, or district to examination and regulations or, (C) shall submit to periodic examination by the banking authority of the State, Territory, or District where such business is carried on and shall make and publish periodic reports of its condition, exhibiting in detail its resources and liabilities, such examination and reports to be made and published at the same times and in the same manner and under the same conditions as required by the law of such State, Territory, or District in the case of incorporated banking institutions engaged in such business in the same locality.

(b)Whoever shall willfully violate any of the provisions of this section shall upon conviction be fined not more than $5,000 or imprisoned not more than five years, or both, and any officer, director, employee, or agent of any person, firm, corporation, association, business trust, or other similar organization who knowingly participates in any such violation shall be punished by a like fine or imprisonment or both.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1978—Subsec. (a)(2)(B). Pub. L. 95–369 inserted reference to permission by the United States to engage in such business and subjection by the laws of the United States to examination and regulation. 1968—Subsec. (a)(1). Pub. L. 90–448 inserted “, or issuing securities” in first proviso. 1959—Subsec. (a). Pub. L. 86–230 inserted “and subjected, by the laws of the United States, or of the State, Territory, or District wherein located, to examination and regulation,” after “District,” in cl. (2)(A). 1935—Subsec. (a). Act Aug. 23, 1935, added two provisos to end of par. (1) and amended par. (2) generally.

Statutory Notes and Related Subsidiaries

Effective Date

of 1968 AmendmentFor

Effective Date

of amendment by Pub. L. 90–448, see section 808 of Pub. L. 90–448, set out as a note under section 1716b of this title.

§378 Dealers in Securities Engaging in Banking Business; Individuals or Associations Engaging in Banking Business; Examinations and Reports; Penalties

Summary

Title 12, §378

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

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