C.F.R. » Title 17 » CHAPTER II—SECURITIES AND EXCHANGE COMMISSION › PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934

17 C.F.R. § 240.15c2-4

Transmission or maintenance of payments received in connection with underwritings

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It shall constitute a “fraudulent, deceptive, or manipulative act or practice” as used in section 15(c)(2) of the Act, for any broker, dealer or municipal securities dealer participating in any distribution of securities, other than a firm-commitment underwriting, to accept any part of the sale price of any security being distributed unless:

(a) The money or other consideration received is promptly transmitted to the persons entitled thereto; or

(b) If the distribution is being made on an “all-or-none” basis, or on any other basis which contemplates that payment is not to be made to the person on whose behalf the distribution is being made until some further event or contingency occurs, (1) the money or other consideration received is promptly deposited in a separate bank account, as agent or trustee for the persons who have the beneficial interests therein, until the appropriate event or contingency has occurred, and then the funds are promptly transmitted or returned to the persons entitled thereto, or (2) all such funds are promptly transmitted to a bank which has agreed in writing to hold all such funds in escrow for the persons who have the beneficial interests therein and to transmit or return such funds directly to the persons entitled thereto when the appropriate event or contingency has occurred.

[41 FR 22826, June 7, 1976]
Notes of Decisions
Cited in 4 cases, 1975–1997 · leading case: Coleman v. Choisnard (In Re Choisnard), 98 B.R. 37 (Bankr. N.D. Okla 1989).
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Coleman v. Choisnard (In Re Choisnard), 98 B.R. 37 (Bankr. N.D. Okla 1989). “Firstly, 17 CFR 240.15c2-4, governing payments received in connection with un-derwritings, only requires a securities broker to segregate funds received for the purchase price of securities, not funds for preparing the offering itself.”
Fed. Sec. L. Rep. P 94,872 United States of Am. v. Theodore Koss, 506 F.2d 1103 (2d Cir. 1975). “17 C.F.R. 240.15c2-4(b). 2 . Koss was sentenced to imprisonment for one year for conspiracy.”
Cohen v. Stratosphere Corp., 115 F.3d 695 (9th Cir. 1997). “See Rule 15e2-4,17 C.F.R. 240.15c2-4. Stratosphere’s Prospectus clearly distinguished between receiving subscriptions and accepting or filling subscriptions.”
Fed. Sec. L. Rep. P 99,471, 97 Cal. Daily Op. Serv. 4281, 97 Daily Journal D.A.R. 7165 Harvey Cohen Dawn Ennis Robert Buckler Jeffrey Wexler Union Equity Partners v. Stratosphere Corp., & Yaeger Sec., Inc. Grand Casino Resorts, Inc. Lyle Berman Bob Stupak Bob Stupak Enter., Inc. Andrew S. Blumen, 115 F.3d 695 (9th Cir. 1997). “See Rule 15c2-4, 17 C.F.R. 240.15c2-4. Stratosphere's Prospectus clearly distinguished between receiving subscriptions and accepting or filling subscriptions.”
— 17 C.F.R. § 240.15c2-4(b) — 1 case
Fed. Sec. L. Rep. P 94,872 United States of Am. v. Theodore Koss, 506 F.2d 1103 (2d Cir. 1975). “17 C.F.R. 240.15c2-4(b). 2 . Koss was sentenced to imprisonment for one year for conspiracy.”
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