Liability Limitations of Stock Exchange Maintenance Rules

The Securities Exchange Act of 1934 obligates individual exchanges and dealer associations to exercise a limited duty of self-regulation. The exchanges and associations have met their responsibility by promulgating rules governing the conduct of their members, including the exchange margin maintenance rules. For many years, enforcement of the rules was left to the exchanges and to the Securities Exchange Commission. Recently, however, courts and commentators have discussed and undertaken judicial enforcement of exchange rules by implying an investor's cause of action against a broker or dealer from the power of the federal courts to effectuate the purposes of the Securities Exchange Act. Present law in the area of implied civil liability for exchange rule violations is inconclusive, suggesting that only those rules which recapitulate a provision of the federal regulations are actionable. This Comment considers whether a broker should be civilly liable for violation of the exchange margin rules in the context of the governmental policy behind the rules and their function in the federal regulatory scheme.