Table of Contents

Chairman's Transmittal Letter ........................•................................................... v

Commission Members and Principal Staff Officers x

Biographies of Commission Members xiii

Richard C. Breeden. Edward H. Fleischman. Mary L.Schapiro.

Richard Y. Roberts. J. Carter Beese, Jr.

Regional and Branch Offices and Administrators xviii

Enforcement 1

Key 1992 Results 1

Enforcement Authority. Enforcement Activities. International

Enforcement. Violations Relating to the Government Securities

Markets. Violations Relating to Financial Institutions. Insider

Trading. Financial Disclosure. Securities Offering Cases. Market

Manipulation. Corporate Control. Broker-Dealer Violations

Investment Adviser and Investment Company Violations. Sources for

Further Inquiry

International Affairs .......................•.................................................................... 20

Key 1992 Results 20

Arrangements for Mutual Assistance and Exchanges of Information

Enforcement Matters. International Organizations and Multilateral

Initiatives International Requests for Assistance

Regulation of the Securities Markets 26

Key 1992 Results 26

Securities Markets, Facilities, and Trading. Regulation of Brokers,

Dealers, Municipal Securities Dealers, and Transfer Agents. Lost and

Stolen Securities. Oversight of Self-Regulatory Organizations

Investment Companies and Advisers ........................•.........................•............. 40

Key 1992 Results 40

Program Overview. Regulatory Policy. Significant Interpretations

and Applications

•

•

•
Full Disclosure ...........................................................................••...........•............ 52

Key 1992 Results 52

Review of Filings .. Rulemaking, Interpretive, and Legislative Matters ..

Conferences

Accounting and Auditing Matters 62

Key 1992 Results 62

Mark-to-Market Accounting" Accounting Related Rules and

Interpretations" Oversight of Private Sector Standard Setting ..

Oversight of the Accounting Profession's Initiatives .. International

Accounting and Auditing Standards

Other Litigation and Legal Activities 67

Key 1992 Results 67

Significant Litigation Developments" Significant Adjudication

Developments .. Significant Legislative Developments" Corporate

Reorganizations

Economic Research and Analysis ........................•.............................................. 79

Key 1992 Results 79

Economic Analysis and Technical Assistance

Policy Management and Administrative Support 81

Key 1992Results 81

Policy Management .. Administrative Support

Endnotes 89

Appendix ................................................................................................•.............. 102

Types of Proceedings" Enforcement Cases Initiated by the Commission

During Fiscal Year 1992 in Various Program Areas .. Investigations of

Possible Violations of the Acts Administered by the Commission ..

Administrative Proceedings Instituted During Fiscal Year Ending

September 30,1992" Injunctive Actions" Fiscal 1992 Enforcement

Cases Listed by Program Area .. Right to Financial Privacy .. Foreign

Kestricted List .. Self-Regulatory Organizations: Expenses, Pre-tax

Income and Balance Sheet Structure" Consolidated Financial

Information of Self-Regulatory Organizations" Self-Regulatory

Organizations-Clearing Corporations, 1991 Revenues and Expenses ..

Self-Regulatory Organizations-Depositories, 1991 Revenues and

Expenses" Certificate Immobilization" Exemptions" Corporate

Reorganizations" Other Legislative Developments" The Securities

ii
Industry: Revenues, Expenses, and Selected Balance Sheet Items.

Unconsolidated Financial Information for Broker-Dealers.

Unconsolidated Annual Revenues and Expenses for Broker-Dealers

Doing a Public Business, 1987-1991. Unconsolidated Balance Sheet for

Broker-Dealers Doing a Public Business Year-end, 1987-1991. Carrying

and Clearing Firms. Securities Industry Dollar in 1991 for Carrying/

Clearing Firms Unconsolidated Revenues and Expenses for

Carrying/ Clearing Broker-Dealers. Unconsolidated Balance Sheet for

Carrying/ Clearing Broker-Dealers. Securities on Exchanges: Market

Value and Share Volume. NASDAQ (Share Volume and Dollar

Volume) Share and Dollar Volume by Exchange. Market Value of

Equity/Options Sales on U.S. Exchanges. Volume of Equity/Options

Sales on U.S. Securities Exchanges. Share Volume by Exchanges.

Dollar Volume by Exchanges. Securities Listed on Exchanges. Value

of Stocks Listed on Exchanges. Appropriated Funds vs. Fees Collected

Budget Estimates and Appropriations. Securities and Exchange

Commission Organizational Chart

iii

•

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•

THE CHAIRMAN

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

The Honorable Albert Gore, Jr.

President of the Senate

Washington, D.C. 20510

Gentlemen:

The Honorable Thomas S. Foley

Speaker of the House

Washington, D.C. 20515

I am honored to transmit the Securities and Exchange Commission's

annual report for fiscal year 1992. During the past year, the Commission:

presided over by far the largest volume of securities registrations

in history, and the largest volume of securities offerings of all types;

substantially expanded the rights of shareholders to communicate

without unnecessary restrictions under the federal proxy rules;

expanded the disclosure requirements of proxy rules concerning

executive compensation to provide comprehensive information in

clear presentations using charts and graphs, together with mandated

descriptions of performance factors relied on by a company's

compensation committee in making compensation awards;

simplified the process of raising capital and reduced the cost of

complying with federal regulations for small businesses, leading

to a substantially increased rate of offerings by small businesses;

modified regulations to permit offerings of securities backed by

pools of non-mortgage financial assets such as small business loans

to facilitate growth of new liquidity for small business loans;

obtained court orders requiring defendants to pay a total of

approximately $558 million, including disgorgement of $51 million

to reimburse injured parties and civil penalties of $221 million to

the U.S. Treasury;

reached a settlement with Salomon Brothers requiring that firm to

pay $290 million in monetary sanctions;

released the report Protecting Investors: A Half Century of Investment

Company Regulation, the first comprehensive review of the Investment

Company Act in its 52 years of existence;

v

•

•

•

•

•

•

•

•
entered into new agreements with four countries providing for

exchange of investigative information, technical assistance and

other matters; and

collected $406 million in fee revenue, almost twice as much as its

annual funding level of $226 million.

Enforcement

The strength of the Commission's enforcement program has been its

diversity and its capacity to deal with the most current and pressing

problems of the marketplace. While the traditional program areas--

accounting, financial disclosure / financial fraud, regulated entity cases,

market manipulation and insider trading cases--remain a core component

of the program, the Commission has taken a much more visible role in

cases involving the government securities markets, fraud by investment

advisers, and affinity fraud.

In fiscal year 1992, the Commission instituted a record 394 enforcement

actions involving insider trading, fraud, market manipulation, securities

offerings, broker-dealer and investment company violations, and other

matters.

The Commission obtained court orders requiring defendants to pay

approximately $558 million. This included court orders in insider trading

cases requiring defendants to contribute approximately $51 million to

funds created to reimburse injured parties. Civil penalties authorized by

the Securities Enforcement Remedies and Penny Stock Reform Act of 1990,

the Insider Trading Sanctions Act of 1984 and the Insider Trading and

Securities Fraud Enforcement Act of 1988 totalled over $221 million.

The Securities Enforcement Remedies and Penny Stock Reform Act

of 1990, which empowered the Commission to seek and impose fines and

to issue cease and desist orders, added considerably to the strength and

flexibility of the Commission's enforcement arsenal. The new cease and

desist powers have become a key component of the Commission's

enforcement program.

In SEC v. Salomon Inc, the Commission settled one of the largest fraud

cases in history. The SEC charged Salomon with committing multiple

violations of the antifraud and recordkeeping provisions of the federal

securities laws through false bids in Treasury auctions and other activities.

Under the settlement agreement, Salomon paid a monetary sanction of $290

million. Of this amount, $100 million was placed in a "claims fund" to

provide compensatory damages to persons with claims resulting from

Salomon's conduct. In addition, Salomon paid $122 million in civil fines

under the securities laws and $68 million in fines and forfeitures in

settlement of claims by the Department of Justice. The settlement included

a permanent injunction against violations by Salomon of the antifraud and

recordkeeping provisions of the federal securities laws. The settlement

also required Salomon to maintain appropriate procedures to prevent

similar violations in the future.

vi

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International Affairs

In june 1992/the SECjoined with other securities regulatory authorities

of North, South, and Central America and the Caribbean to create the

Council of Securities Regulators of the Americas. COSRA will provide

a forum for mutual cooperation and communication among regulatory

authorities throughout the Americas. In addition, COSRA will enhance

the efforts of each country in the region to develop and foster the growth

of fair and open securities markets.

During 1992/ the Commission signed comprehensive Memoranda of

Understanding for consultation and cooperation with Argentina and Spain.

The Argentina MOU also contains provisions for technical assistance. The

SECalso signed more limited understandings, involving technical assistance

and mutual cooperation, with securities authorities in Costa Rica and

Indonesia. In addition, the SEC now has a senior staff person working

as a full-time resident advisor to the Polish Securities Commission. The

costs of our assistance in Warsaw have been fully paid by a grant from

the Agency for International Development.

In addition, the Commission continued to provide technical assistance

to many emerging market countries and worked closely with international

regulatory bodies to strengthen market inter-relationships, capital adequacy

and other regulatory standards.

Regulation of the Securities Markets

In 1992/ the Division of Market Regulation undertook the Market 2000

Study. The study is intended to provide an understanding of how the

equity markets have changed over the past 20 years. The Division will

study the overall structure of equity market regulation, including its

impact on the primary and regional exchanges, exempt exchanges, the

over-the-counter market and proprietary trading systems. Among the

issues the report will explore are the allocation ofregulatory responsibilities,

the need for enhanced transparency, and transaction costs and market

fragmentation.

The Commission continued in its efforts toward implementing major

legislative initiatives enacted by Congress in 1990. The Commission

approved a large trader reporting system, which will monitor material

financial exposures of holding company systems with broker-dealer

affiliates. In addition, the SEC promulgated seven investor disclosure

rules designed to address abuses in the penny stock market. The Commission

also reviewed a substantial number of new securities and derivative

products introduced by the industry.

Investment Companies and Advisers

The SEC's Division of Investment Management completed its twoyear study of the Investment Company Act--the first comprehensive review

of the Act in its 52 years of existence. Protecting Investors: A Halj Century

vii
of Investment Company Regulation examined the regulation of investment

companies to see where the law could be more flexible and where regulatory

costs could be reduced without sacrificing the quality of investor protection.

The Commission has already begun to implement some of the report's

recommendations.

The Commission also proposed amendments to Regulation E under

the Securities Act that are intended to enhance the ability of small business

investment companies to raise capital and to increase the liquidity of

investments in small business investment companies and in business

development companies.

Full Disclosure System

The Commission adopted major initiatives to streamline regulations

and reduce the cost of compliance for small businesses. The small business

initiatives reflect the Commission's recognition that traditional sources of

funding for small companies have decreased substantially. The actions

taken include tripling the limit for simplified stock offerings not required

to be filed with the SEC and creating simpler forms for small offerings

and financial reports.

The Commission adopted significant revisions of the proxy rules to

facilitate effective communications among shareholders and between

shareholders and their corporations. The reforms will encourage greater

participation by shareholders in corporate governance by removing

unnecessary regulatory barriers, reducing the costs of complying with the

proxy rules and improving disclosure.

In addition, the Commission revised its rules to ensure that

shareholders receive better information about executive compensation.

Among other things, the new executive compensation disclosure rules

require new tables that will disclose clearly and concisely the compensation

received by a corporation's highest paid executives.

Accounting and Auditing Matters

The Commission continued to provide policy direction to the

accounting profession to move toward using appropriate market-based

measures in accounting for financial instruments. Through the review and

comment process, the accounting staff ensured compliance with existing

rules during the interval. The Commission also continued to devote

significant resources to initiatives involving international accounting and

auditing independence requirements.

Other Litigation and Legal Activities

The Office of the General Counsel continued both to advise the

Commission on all pending legal questions and to handle the Commission's

appellate and certain other litigation. The staff opened 264 litigation

viii
matters and received 56 adjudication cases. In addition, the General

Counsel's Office worked extensively on legislative proposals concerning

financial services, litigation reform and other issues.

Economic Research and Analysis

The economics staff reviewed proposals encompassing the full range

of the Commission's regulatory program. Notably, the staff directed its

attention towards a number of issues including executive compensation,

the impact of banking reforms on the securities markets, market value

accounting, and bond market efficiency. Analysis and technical assistance

provided to the agency included a quarterly report on the financial health

of the securities industry, reports on trends in the composition of bank

asset portfolios, assessments of materiality and monetary penalties in

matters of securities violations, and analysis of trading events as a result

of the Securities Enforcement Remedies and Penny Stock Reform Act of

1990.

Management and Program Support

The SEC collected $406 million in fees. The agency received budget

authority of $271 million but had spending authority of $226 million. The

fee collections less budgeted funds created a net gain of $135 million to

the United States Treasury.

The Commission held 60 meetings and considered 323 matters on a

wide-range of securities issues.

A variety of changes occurred in the administrative support functions

of the agency. They included the reorganization of the Office of Equal

Employment Opportunity and the creation of the Office of Information

Technology to consolidate and manage the agency's increasingly complex

information systems.

The past year's accomplishments are a result of the ability and

dedication of the staff and Commissioners. Our success in enhancing our

system of corporate governance, dealing with internationalization,

facilitating access to capital for small businesses, as well as the ongoing

battle against market manipulation and fraud was also the result of the

excellent cooperation and support from the business and financial

community, the investing public, the Administration and the Congress.

Richard C. Breeden

Chairman

ix

Commission Members and Principal Staff Officers

(:\'ol\1 Nl\\l'mbL'r-l, Il)l)2)

Commissioners

Richard C. Breeden, Chairman

Edward H. Fleischman 11

Mary L. Schapiro

Richard Y. Roberts

J. Carter Beese, Jr.

Principal Staff Officers

Term Expires

1993

1992

1994

1995

1996

Barbara Green, Executive Assistant and Senior Advisor to the Chairman

Mary Ann Gadziala, Counselor to the Chairman

Linda C. Quinn, Director, Division of Corporation Finance

Elisse B. Walter, Deputy Director

Mary E.T. Beach, Senior Associate Director

Abigail Arms, Associate Director

Robert Bayless, Associate Director

Teresa Iannaconi, Associate Director

Howard Morin, Associate Director

William Morley, Associate Director Ch .

Mauri Osheroff, Associate Director airman

William R. McLucas, Director, Division of Enforcement

C. Gladwyn Goins, Associate Director

Joseph I. Goldstein, Associate Director

Bruce A. Hiler, Associate Director

Harry J. Weiss, Associate Director

Colleen P. Mahoney, Chief Counsel

Thomas C. Newkirk, Chief Litigation Counsel

George Diacont, Chief Accountant

Marianne K. Smythe, Director, Division of Investment Management

Matthew Chambers, Associate Director

Gene A. Gohlke, Associate Director

Thomas S. Harman, Associate Director

William C. Weeden, Associate Director

Vacant, Associate Director

1/ Edward H. Fleischman resigned from the Commission on March 31,1992.

xi
William H. Heyman, Director, Division of Market Regulation

Brandon Becker, Deputy Director

Larry Bergmann, Associate Director

Robert Colby, Associate Director

Mark D. Fitterman, Associate Director

Jonathan Kallman, Associate Director

Michael Macchiaroli, Associate Director

Catherine McGuire, Special Assistant to the Director

James R. Doty, General Counsel, Office of the General Counsel

Paul Gonson, Solicitor and Deputy General Counsel

Phillip D. Parker, Deputy General Counsel

Anne E. Chafer, Associate General Counsel

Richard Humes, Associate General Counsel

Diane Sanger, Associate General Counsel

Jacob H. Stillman, Associate General Counsel

William S. Stem, Counselor for Adjudication

Walter P. Schuetze, Chief Accountant, Office of the Chief Accountant

Warren E.Blair, ChiefAdministrative Law Judge, Office of theAdministrative Law Judges

Susan Woodward, Chief Economist, Office of Economic Analysis

Faith D. Ruderfer, Director, Office of Equal Employment Opportunity

James M. McConnell, Executive Director, Office of the Executive Director

Kenneth A. Fogash, Deputy Executive Director

James A. Clarkson, III, Director of Regional Office Operations

Lawrence H. Haynes, Associate Executive Directorfor Financial Management

Wilson A. Butler, Jr., Associate Executive Directorfor Filings, Information and

Consumer Services

John Innocenti, Associate Executive Directorfor Human Resources Management

John J. Lane, Associate Executive Director for Information Technology

Fernando L.Alegria, Jr., Assistant Executive Director for Administrative and

Management Support

Michael D. Mann, Director, Office of International Affairs

Kathryn Fulton, Director, Office of Legislative Affairs

Peter M. Robinson, Director, Office of Public Affairs, Policy Evaluation and Research

Jonathan G. Katz, Secretary, Office of the Secretary

xii
Biographies of COlnmission Members

Chairman

Following his confirmation by

the Senate, Richard C. Breeden was

sworn in as the 24th Chairman of the

Securities and Exchange Commission

on October 11, 1989. The SEC

oversees trading markets in stocks,

options, bonds and other securities

with more than $10 trillion in

aggregate value. Itis also responsible

for overseeing the activities of more

than 10,000 registered broker-dealers

and investment companies, and

approximately 18,000 investment

advisors. The SEC also is responsible for establishing disclosure and

accounting policies for the nation's 13,500 publicly-owned companies. The

SEC also enforces U.S. laws against insider trading and other market

abuses.

As Chairman, Mr. Breeden directs a staff of more than 2,600 persons

operating in offices throughout the United States. During his tenure, Mr.

Breeden has emphasized improvements to the capital raising process for

small and large businesses, increased market stability, control of unlawful

practices and fundamental reform of the corporate governance system in

America. Mr. Breeden has testified before Congress on more than 40

occasions, and he regularly appears on news and investment programs

in the U.S. and foreign countries to discuss capital market issues.

In addition to his domestic responsibilities, Mr. Breeden is actively

involved in international financial regulation. During his tenure as

Chairman, he has signed more than 15 international agreements to promote

cooperation in law enforcement and to provide technical assistance to

emerging securities markets around the world. Mr. Breeden has held

several leadership positions in the International Organization of Securities

Commissions, and he is the first President of the Council of Securities

Regulators of the Americas, a group linking securities regulators of North,

South and Central America and the Caribbean.

Prior to assuming the Chairmanship, Mr. Breeden served in several

governmental assignments, including serving in the White House under

President Bush as Assistant to the President for Issues Analysis. From

1982-1985,Mr. Breeden also served as Deputy Counsel to then-Vice President

Bush and Staff Director of the President's Task Group on Regulation of

Financial Services, a cabinet-level group established to recommend

improvements in federal financial regulatory programs.

xiii
Mr. Breeden is a lawyer by training. His legal practice has included

corporate and financial transactions of all types. In his most recent period

of private practice, he was a corporate finance partner with the Washington,

D.C. office of one of the nation's largest law firms. Prior to his original

government service, Mr. Breeden practiced law in New York City from

1976-1981. This followed completion of an appointment to teach

constitutional law and federal jurisdiction at the University of Miami

School of Law.

Educated at Stanford University (B.A. with honors in international

relations, 1972) and Harvard Law School (1975), Mr. Breeden is the author

of articles in both legal and financial publications. Mr. Breeden resides

in Virginia with his wife, Holly, and their three sons. The family is active

in local church, school, athletic and civic affairs.

Commissioner

Edward H. Fleischman was sworn in

as the 66th Member of the Securities and

Exchange Commission on January 6, 1986.

He resigned from the Commission on

March 31, 1992 to return to private

practice.

Mr. Fleischman was admitted to the

New York Bar in 1959 and to the bar of

the U.S. Supreme Court in 1980. He

formerly practiced law with Beekman &

Bogue, where he specialized in securities

and corporate law and related areas.

During his career, Mr. Fleischman has been elected a member of the

American Law Institute, the American College of Investment Counsel (of

which he was President in 1990-1991) and the American Society of Corporate

Secretaries, and he serves as an Adjunct Professor of Law teaching securities

regulation at the New York University Law School.

Mr. Fleischman was born in Cambridge, Massachusetts on June 25,

1932. He received his undergraduate education at Harvard College, served

in the U.S. Army from 1952 to 1955, and obtained his LL.B degree from

Columbia Law School.

Mr. Fleischman is a member of the Council of the American Bar

Association Section of Business Law. He serves on that Section's Commi ttee

on Counsel Responsibility and in 1987-1991 he chaired the Committee on

Developments in Business Financing, for which he co-drafted that

Committee's 1979 paper on resale of institutional privately-placed debt

and chaired its Subcommittees on Simplified Indenture and on Annual

Review of Developments. He also serves on the Committee on Federal

Regulation of Securities, for which he chaired Subcommittees on Rule 144

and on Broker-Dealer Matters and co-drafted the Committee's 1973 letter

on utilization and dissemination of "inside" information. In addition, he

xiv
serves on the Committee on Futures Regulation and the Committee on

Developments in Investment Services, and has been active in the Section

on Administrative Law.

Mr. Fleischman is also a member of Committee E--Banking Law and

of Committee Q--Issues and Trading in Securities of the International Bar

Association Section on Business Law. In the International Law Association

(American Branch), he has been appointed to membership on the Committee

on International Regulation of Securities.

Commissioner

Mary L. Schapiro was sworn in as the

67th member of the Securities and Exchange

Commission on December 19, 1989 by the

Honorable Sandra Day O'Connor, Associate

Justice of the United States Supreme Court.

Ms. Schapiro was nominated to the

Commission on November 8, 1989 by

President George Bush and confirmed by the

United States Senate on November 18, 1989.

Her term expires in June 1994. Ms. Schapiro

had previously been appointed by President

Ronald Reagan for a one year term.

Ms. Schapiro was named chairman of the SEC Task Force on

Administrative Process in 1990, with responsibility for comprehensive

review and revision of the agency's rules for administrative proceedings.

Ms. Schapiro also serves on the Developing Markets Committee of the

International Organization of Securities Commissions.

Before being appointed to the Commission, Ms. Schapiro was General

Counsel and Senior Vice President for the Futures Industry Association.

While at the PIA her work included regulatory, tax and international

issues, including extensive liaison with foreign government officials and

analysis of state and Federal legislation.

Ms. Schapiro came to the FIA from the Commodity Futures Trading

Commission, where she spent four years. She joined the CFTC in 1980

as a Trial Attorney in the Manipulation and Trade Practice Investigations

Unit of the Division of Enforcement, and from 1981 to 1984 served as

Counsel and Executive Assistant to the Chairman of the agency. In the

latter position, Ms. Schapiro advised on all regulatory and adjudicatory

matters pending before the Commission and on legislation. She also

represented the Chairman with Federal and state officials, Congress, and

the futures industry, in addition to other duties.

A 1977 honors graduate of Franklin and Marshall College (Lancaster,

Pennsylvania), Ms. Schapiro earned a Juris Doctor degree (with honors)

from The National Law Center of George Washington University in 1980.

xv
Commissioner

Richard Roberts was nominated to

the Commission by President Bush and

confirmed by the Senate on September 27,

1990. He was sworn in as a Commissioner

on October 1, 1990by the Honorable Stanley

Sporkin, Judge for the United States District

Court of the District of Columbia. His

term expires in June 1995.

Before being nominated to the

Commission, Mr. Roberts was in the private

practice of law with the Washington office

of Miller, Hamilton, Snider & Odom.

Before joining the law firm in April 1990, Mr. Roberts was administrative

assistant and legislative director for Senator Richard Shelby (D., Ala.),

a position he assumed in 1987. Prior to that, Mr. Roberts was, for four

years, in the private practice of law in Alabama. From 1979 to 1982,

Mr. Roberts was administrative assistant and legislative director for

then-Congressman Shelby.

Mr. Roberts is a 1973 graduate of Auburn University and a 1976

graduate of the University of Alabama School of Law. He also received

a Master of Laws in taxation from the George Washington University

National Law Center in 1981. He is admitted to the bar in the District

of Columbia and Alabama. Mr. Roberts is a member of the Alabama

State Bar Association and the District of Columbia Bar Association.

He and his wife, the former Peggy Frew, make their home in Fairfax,

Virginia with their son and two daughters.

Mr. Roberts was born in Birmingham, Alabama on July 3, 1951.

Commissioner

J. Carter Beese, Jr. was nominated to

the U.S. Securities and Exchange

Commission in October 1991 by President

George Bush. He was recommended for

confirmation by the Senate Committee on

Banking, Housing, and Urban Affairs by

a vote of 21-0, and confirmed by the U.S.

Senate by unanimous voice vote on

February 27, 1992. In a private ceremony

held on March 10, 1992, Mr. Beese was

sworn in as the 71st member of the

Commission by the Honorable Stanley

Sporkin, Judge for the U.S. District Court for the District of Columbia.

On April 20, 1992, Mr. Beese was formally sworn in at the White House

by Vice President Dan Quayle. Mr. Beese's term expires in June of 1996.

Before being appointed to the Commission, Mr. Beese was a partner

of Baltimore-based Alex Brown & Sons, the oldest investment banking

firm in the U.S. Mr. Beese's corporate responsibilities included business

xvi
development in the areas of corporate finance, investment management,

and institutional brokerage. Mr. Beese joined Alex Brown in 1978, became

an officer of the firm in 1984 and was named partner in 1987. Mr. Beese

was also active in the founding of the Carlyle Group, a Washington based

merchant bank, and served as an advisory director from 1986 to 1989. In

1990, in a poll of 250 senior financial industry executives conducted by

Institutional Investor magazine, Mr. Beese was named as one of the next

generation's financial leaders.

Before becoming a Commissioner, Mr. Beese was appointed by

President Bush to serve as a Director of the Overseas Private Investment

Corporation (OPIC), a U.S. Government agency that assists American

private business investment in over 120 countries by financing direct loans

and loan guarantees and by insuring investments against a broad range

of political risks. Mr. Beese was appointed to this position in April 1990,

recommended for confirmation without dissent by the Senate Foreign

Relations Committee, and unanimously confirmed by the U.S. Senate.

In addition, Mr. Beese also served on the Securities and Exchange

Commission's Emerging Markets Advisory Committee and was a member

of the SECdelegation to Hungary and Mexico. As part of his responsibilities,

Mr. Beese provided technical assistance on the formation and regulatory

oversight of financial markets. Further during 1991, Mr. Beese served as

a member of the Committee on Financing Technology in the U.S., a joint

project between the Treasury and Commerce Departments initiated to

study the adequacy of investment in technology needed by U.S. companies

to meet global competition.

Mr. Beese is active in a number of civic organizations, including the

American Center for International Leadership (ACIL) of which he is a

director. ACIL brings young American leaders together with their

counterparts in various foreign countries. Mr. Beese participated in ACIL

missions to the Peoples Republic of China in 1988 and to the former USSR

in 1990. He is a committee member of CHILDHELP USA and serves on

the boards of Preservation Maryland, The Palm Beach Maritime Museum

and Ocean Engineering Institute, and the Advisory Board of National

Rehabilitation Hospital. Mr. Beese resides in Baltimore, Maryland with

his wife, Natalie, and two children, Courtney and John Carter.

xvii
Regional and Branch Offices and Administrators

(i\.., (11 Nm L'l1lber u IlJlJ2)

REGION 1

REGION 2

REGION 3

REGION 4

xviii

Richard Walker

NEW YORK REGIONAL OFFICE

75 Park Place, 14th Floor

New York, NY 10007

212/264-1636

Region: New York and New Jersey

Douglas Scarff

BOSTON REGIONAL OFFICE

John W. McCormack Post Office

and Courthouse Building, Suite 700

Boston, MA 02109

617/223-9900

Region: Maine, New Hampshire, Vermont,

Massachusetts, Rhode Island, and Connecticut

Richard P. Wessel

ATLANTA REGIONAL OFFICE

3475 Lenox Road, N.E., Suite 1000

Atlanta, GA 30326-1232

404/842-7600

Region: Tennessee, Virgin Islands, Puerto Rico,

North Carolina, South Carolina, Georgia, Alabama,

Mississippi, Florida, and Louisiana east of the

Atchafalaya River

Charles C Harper

MIAMI BRANCH OFFICE

Dupont Plaza Center

300 Biscayne Boulevard Way, Suite 500

Miami, FL 33131

305/536-5765

William D. Goldsberry

CHICAGO REGIONAL OFFICE

Northwestern Atrium Center

500 W. Madison Street, Suite 1400

Chicago, IL 60661

312/353-7390

Region: Michigan, Ohio, Kentucky, Wisconsin,

Indiana, Iowa, lllinois, Minnesota, and Missouri
REGION 5

REGION 6

REGION 7

REGION 8

T. Christopher Browne

FORT WORTH REGIONAL OFFICE

411 West Seventh Street, 8th Floor

Fort Worth, TX 76102

817/334-3821

Region: Oklahoma, Arkansas, Texas, Louisiana

west of the Atchafalaya River, and Kansas

Robert H. Davenport

DENVER REGIONAL OFFICE

1801 California Street, Suite 4800

Denver, CO 80202-2648

303/391-6800

Region: North Dakota, South Dakota,

Wyoming, Nebraska, Colorado,

New Mexico, and Utah

Donald M. Hoed

SALT LAKE CITY BRANCH OFFICE

500 Key Bank Tower

50 South Main Street, Suite 500

Salt Lake City, UT 84144-0402

801/524-5796

Elaine Cacheris

LOS ANGELES REGIONAL OFFICE

5670 Wilshire Boulevard, 11th Floor

Los Angeles, CA 90036-3648

213/965-3900

Region: Nevada, Arizona, California, Hawaii, and

Guam

Vacant

SAN FRANCISCO BRANCH OFFICE

901 Market Street, Suite 470

San Francisco, CA 94103

415/744-3140

Jack H. Bookey

SEATTLE REGIONAL OFFICE

3040 Jackson Federal Building

915 Second Avenue

Seattle, WA 98174

206/553-7990

Region: Montana, Idaho, Washington, Oregon,

and Alaska

xix
REGION 9

xx

Vacant

PHILADELPIDA REGIONAL OFFICE

The Curtis Center, Suite 1005 E.

601 Walnut Street

Philadelphia, PA 19106-3322

215/597-3100

Region: Pennsylvania, Delaware, Maryland,

Virginia, West Virginia, and District of Columbia
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Enforcement

The Commission's enforcement program is designed to protect investors

and foster investor confidence by preserving the integrity and efficiency of the

securities markets. Last year, as in prior years, the Commission maintained

a strong presence in all areas within itsjurisdiction. The deterrent impact of

the program was enhanced, by, among other things, the Commission's

extensive use of important new remedies during the year.

Key 1992 Results

In 1992, the Commission instituted a record number of enforcement

actions, responding to a wide range of securities law violations. Remedies

and procedures authorized by the Securities Enforcement Remedies and

Penny Stock Reform Act of 1990 (Remedies Act) strengthened the

Commission's enforcement arsenal.

The Commission obtained court orders requiring defendants to

disgorge illicit profits of approximately $558 million. This included

disgorgement orders in insider trading cases requiring the payment of

approximately $51 million. Civil penalties authorized by the Remedies

Act and the Insider Trading Sanctions Act of 1984 (ITSA) and the Insider

Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA) totalled

over $221 million.

Ninety criminal indictments or informations and 86 convictions were

obtained by criminal authorities during 1992 in Commission-related cases.

The Commission granted access to its files to domestic and foreign

prosecutorial authorities in 280 cases.

Total Enforcement Actions Initiated

1988 1989 1990 1991 1992

Civil Injunctive Actions 125 140 186 172 156

Administrative Proceedings 109 155 111 138 226

Civil and Criminal Contempt

Proceedings 17 15 7 9 11

Reports of Investigation J .Jl -..0. J J

Total 252 310 304 320 394

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Enforcement Authority

The Commission has broad authority to investigate possible violations

of the federal securities laws. Informal investigations are conducted on

a voluntary basis, with the Commission requesting persons with relevant

information to cooperate by providing documents and testifying before

the staff. The federal securities laws also empower the Commission to

conduct formal investigations, in which the Commission has the authority

to issue subpoenas that compel the production of books and records and

the appearance of witnesses to testify. Both types of investigations generally

are conducted on a confidential, nonpublic basis.

Traditionally, the Commission's primary enforcement mechanism for

addressing violative conduct has been the federal court injunction. In civil

actions for injunctive relief, the Commission is authorized to seek temporary

restraining orders and preliminary injunctions as well as permanent

injunctions against any person who is violating or about to violate any

provision of the federal securities laws. A federal court injunction prohibits

future violations. Once an injunction has been imposed, conduct that

violates the injunction will be punishable by either civil or criminal contempt,

and violators are subject to fines or imprisonment. In addition to seeking

such orders, the Commission often seeks other equitable relief such as an

accounting and disgorgement of illegal profits. When seeking temporary

restraining orders, the Commission often requests a freeze order to prevent

concealment of assets or dissipation of the proceeds of illegal conduct.

The Remedies Act authorized the Commission to seek, and the courts to

impose, civil penalties for any violation of the federal securities laws (with

the exception of insider trading violations for which penalties are available

under ITSA). The Remedies Act also affirmed the existing equitable

authority of the federal courts to bar or suspend individuals from serving

as corporate officers or directors.

In addition to civil injunctive actions, the Commission has the authority

to institute several types of administrative proceedings. The Commission

may institute administrative proceedings against regulated entities, in

which the sanctions that may be imposed include a censure, limitation on

activities, and suspension or revocation of registration. The Commission

may impose similar sanctions on persons associated with such entities and

persons affiliated with investment companies. For example, the Commission

may bar or suspend individuals associated with a broker or dealer from

participating in an offering of penny stock. In these proceedings, the

Remedies Act authorizes the Commission to impose penalties and order

disgorgement against regulated entities and persons associated with such

entities.

The Remedies Act authorizes the Commission to institute

administrative proceedings in which it can issue cease-and-desist orders.

A permanent cease-and-desist order can be entered against any person

violating the federal securities laws, and the order can require disgorgement

of illegal profits. The Commission also is authorized to issue temporary

cease-and-desist orders, if necessary on an ex parte basis, against regulated

entities and persons associated with regulated entities, if the Commission

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determines that the violation or threatened violation is likely to result in

'l significant dissipation or conversion of assets, significant harm to investors,

or substantial harm to the public interest prior to completion of proceedings.

Section 8(d) of the Securities Act of 1933 (Securities Act) enables the

Commission to institute proceedings to suspend the effectiveness of a

,; registration statement that contains false and misleading statements.

Administrative proceedings pursuant to Section 15(c)(4) of the Securities

Exchange Act of 1934 (Exchange Act) can be instituted against any person

who fails to comply, and any person who is a cause of failure to comply,

with reporting, beneficial ownership, proxy, and tender offer requirements.

Respondents can be ordered to comply or to take steps to effect compliance

with the relevant provisions. Pursuant to Rule 2(e) of the Commission's

Rules of Practice, administrative proceedings can be instituted against

persons who appear or practice before the Commission, such as accountants

and attorneys. The sanctions that can be imposed in these proceedings

include suspensions and bars from practicing before the agency.

The Commission is authorized to refer matters to other federal, state,

or local authorities or self-regulatory organizations such as the New York

Stock Exchange or the National Association of Securities Dealers (NASD).

The staff often provides substantial assistance to criminal authorities, such

as the Department of Justice, for the criminal prosecution of securities

violations.

Enforcement Activities

Set forth below are summaries of Significant enforcement actions

initiated in various program areas during 1992. Defendants or respondents

who consented to settlements of actions did so without admitting or

denying the factual allegations contained in the complaint or order

instituting proceedings. See Table 6 for a listing of all enforcement actions

instituted in 1992.

International Enforcement

A substantial number of investigations have international aspects,

and the staff took depositions in and obtained information from a number

of foreign countries. In conjunction with the Office of International Affairs,

the staff prepared more than 180 requests to obtain information from

foreign authorities, pursuant to formal or informal agreements and

understandings, and worked on a substantial number of requests for

assistance from agencies of foreign nations.

As part of its increasing emphasis on international coordination and

cooperation, the staff participated in a number of training and education

opportunities. Representatives from 38 foreign securities agencies attended

the 1992 Enforcement Training Program at the invitation of the Division

of Enforcement.

3

~
Violations Relating To The Government Securities Markets

During the year, the Commission focused increased attention on

violative activities affecting the conduct and fairness of the market for

securities issued by the U.S. Treasury and various government-sponsored

entities.

The Commission instituted proceedings, jointly with the Comptroller

of the Currency and the Board of Directors of the Federal Reserve System,

against 98 registered broker-dealers, registered government securities

brokers and/ or dealers and banks (In the Matter of the Distribution of Certain

Debt Securities Issued by Government Sponsored Enterprises's, The

administrative proceedings arose from the respondents' alleged violations

of record-keeping provisions in connection with their participation in

certain primary distributions of unsecured debt securities issued by one

or more of the following government-sponsored enterprises: the Federal

Home Loan Banks, the Federal Home Loan Mortgage Corporation, the

Federal National Mortgage Association, and the Student Loan Marketing

Association. The sanctions imposed in the proceedings included cease and

desist orders, and orders requiring the payment of civil penalties totalling

$5.2 million. In addition, the Commission issued a report regarding this

matter pursuant to Section 21(a) of the Exchange Act.

In an action against Salomon Inc. and Salomon Brothers Inc., the

Commission alleged that between August 1989 and May 1991, Salomon

repeatedly submitted false bids in auctions for U.S. Treasury securities

(SEC v. Salomon Inc.2). These activities allowed Salomon to circumvent

the limitations imposed by the Treasury Department on the amount of

securities anyone person or entity may obtain from auctions of U.S.

Treasury securities. Salomon also created numerous false books and

records in connection with these bids. Salomon consented to the entry

of an order by which it was enjoined, and also entered into settlement

agreements with respect to civil claims of the Department of Justice. In

addition, Salomon consented to the entry of an order requiring the payment

of $290 million, of which $122 million represents the payment of civil

penalties under the Remedies Act, $50 million represents a forfeiture to

the Department ofJustice Asset Forfeiture Fund, and $18 million represents

payment to the United States in respect of potential claims under the False

Claims Act and common law. The remaining $100 million was paid into

the registry of the court for the satisfaction of private civil claims against

Salomon.

Related administrative proceedings also were instituted against

Salomon Brothers Inc. (In the Matter of Salomon Brothers Inc.3). In addition

to finding that Salomon Brothers had been enjoined, the order instituting

proceedings alleged that senior management of Salomon Brothers had

learned in late April 1991 that a managing director of the firm had

submitted a false bid in an auction of U.S. Treasury securities in February

1991. Despite this information, Salomon Brothers took no action over the

next several months to investigate the matter or to discipline the managing

director. The Commission thus alleged that Salomon Brothers failed

4
reasonably to supervise the managing director with a view toward

preventing his violations. Salomon consented to the entry of an order by

which it was censured and ordered to comply with its undertaking to

maintain policies reasonably designed to prevent a recurrence of its

violations.

The Commission brought an action against Stotler and Company,

formerly a registered broker-dealer engaged in the government securities

business, and four individuals associated with Stotler, its parent or affiliates,

alleging that they participated in a scheme to defraud public investors and

to deceive the Commission and other regulatory agencies concerning the

financial condition of Stotler and its parent and affiliates (SEC v. Thomas

M. Egan4). Among other things, the defendants engaged in a series of

unlawful transactions to conceal self-dealing and create the false appearance

of regulatory capital compliance and profitability. At the end of 1992,

this action was pending.

Violations Relating To Financial Institutions

The Commission has focused increased attention on possible securities

law violations by financial institutions and persons associated with them.

A special unit within the Division of Enforcement is dedicated to

investigating, among other things, financial fraud encompassing false

financial statements and misleading disclosures in filings by publicl y-held

financial institutions and holding companies, and insider trading by persons

associated with financial institutions.

The Commission brought an enforcement action against Charles

Keating, Jr., and eight other former officers, directors, and high-ranking

employees of American Continental Corporation (ACe) and its former

subsidiary, Lincoln Savings and Loan Association, and against the former

chairman and chief executive officer of CenTrust Savings Bank, alleging

violations of the federal securities laws arising from the operations of ACC

and Lincoln (SEC v. Charles H. Keating, Ir.5). The charges involve: ACC's

improper recognition of over $120 million in income between 1985 and

1988 from nine real estate and securities transactions that were structured

to create the false appearance that gain recognition was appropriate; the

fraudulent sale of approximately $275 million worth of ACC's subordinated

debentures in the branches of Lincoln; false and misleading disclosures

about ACC's liquidity, cash flow, related party transactions and due

diligence procedures; the issuance of a false press release to bolster the

price of ACC's stock; insider trading by Keating; and violation of the

broker-dealer registration requirements. In addition to seeking permanent

injunctions against the defendants, the Commission is seeking to bar

Keating and another defendant from serving as officers or directors of any

publicly-traded company, and is seeking disgorgement of losses avoided

by Keating through his insider trading activities, along with ITSA penalties

of up to three times that amount. Four of the defendants consented to

the entry of injunctions. At the end of the year, this action was pending

as to Keating and the other defendants.

5
The Commission instituted cease and desist proceedings against

Abington Bancorp, Inc., a savings bank holding company (In the Matter

of Abington Bancorp, Inc.6). During 1989 and 1990, Abington allegedly failed

to classify as If other than temporary" the declines in market values below

cost bases of certain noncurrent marketable equity securities of various

issuers. The order instituting proceedings concluded that Abington should

have written down these securities to their realizable values and recognized

the corresponding losses in the appropriate periods as required by generally

accepted accounting principles (GAAP). It further concluded that

Abington's financial statements for the reporting periods in which it failed

to recognize such losses were materially inaccurate with respect to net

after-tax income. Abington consented to the entry of a cease and desist

order.

In SEC v. Donald Coleman,' the Commission alleged violations by

Donald J. Coleman, the former chief financial officer of Washington

Bancorporation (WBC); W. Thomas Fleming III, the former president of

National Bank of Washington (NBW), a WBC subsidiary; and a former

NBW salesperson. The complaint alleged that prior to WBC's default on

$37 million in commercial paper sold through NBW, Coleman and Fleming

failed to disclose material information relating to WBC's inability to repay

its commercial paper obligations. The complaint further alleged that

Coleman aided and abetted the filing of a false and misleading Form 10-

K for fiscal year 1989, and that he allowed continued sales of unregistered

commercial paper. The complaint further alleged that the former NBW

salesperson invested customers' funds in WBC commercial paper (since

repaid) without the customers' knowledge, authorization or consent.

Coleman and the former NBW salesperson consented to the entry of orders

enjoining them. At the end of the year, the action against Fleming was

pending.

The Commission filed an action against seven defendants, alleging

a scheme to defraud in the offer and sale of approximately $10 million

of uninsured subordinated capital notes issued by Germania Bank, a

federal savings institution subsequently placed in receivership by the

Resolution Trust Corporation (SEC v. Edward MorrisS). The alleged violations

included Germania's issuance of false financial statements in a quarterly

report that understated loan loss reserves by at least $4.1 million; Germania's

false statement in its offering circular that no commissions would be paid

to salespeople when in fact such commissions were paid for sales of the

notes; and misrepresentations concerning whether the notes were insured,

the risk associated with an investment in the notes, and the liquidity of

an investment in the notes. At the end of 1992, this action was pending.

The Commission instituted administrative proceedings pursuant to

Rule 2(e) against Robert J. Iommazzo, a former partner in the accounting

firm of Coopers & Lybrand, alleging improper professional conduct in that

he failed to maintain his independence during audits of Citizens First

Bancorp, Inc., for fiscal years 1986, 1988 and 1989 (In the Matter of Robert

[. Iommazzo, CPA9). Iommazzo, the concurring partner on the audits, was

responsible, among other things, for performing a review of the audits

6
and ensuring that the audits were conducted in accordance with the rules

of professional conduct. During the years at issue, Iommazzo directly or

indirectly obtained numerous loans from Citizens, many of which were

unsecured. Despite the lack of independence allegedly arising from his

receipt of the loans, Iommazzo concurred in Coopers' unqualified reports

on Citizens financial statements, and did not cause Coopers' reports to

contain a disclaimer of opinion or to reference the lack of independence.

At the end of the year, this matter was pending.

Insider Trading

Insider trading occurs when a person in possession of material

nonpublic information engages in securities transactions or communicates

such information to others who trade. Insider trading encompasses more

than trading and tipping by traditional insiders, such as officers and

directors who are subject to a duty to disclose any material nonpublic

information or abstain from trading in the securities of their own company.

Violations may also arise from the transmission or use of material nonpublic

information by persons in a variety of other posi tions of trust and confidence,

or by those who misappropriate such information.

The Commission ordinarily seeks permanent injunctions and ancillary

relief, including disgorgement of any profits gained or losses avoided,

against alleged violators. In addition, the ITSA penalty provisions authorize

the Commission to seek a civil penalty, payable to the United States, of

up to three times the profit gained or loss avoided, against persons who

unlawfully trade in securities while in possession of material nonpublic

information, or who unlawfully communicate material nonpublic

information to others who trade. Civil penalties also can be imposed upon

persons who control insider traders. During 1992, the Commission brought

41 civil and administrative actions alleging insider trading violations.

In an action against Edward R. Downe, [r., a member of the board

of directors of both Kidde, Inc., and Bear, Stearns Companies, Inc., six

other individual defendants and a corporate defendant, the Commission

alleged a scheme involving numerous instances of insider trading occurring

between 1987 and 1989 (SEC v. Edward R. Downe, Jr.10). The Commission

alleged that Downe learned material nonpublic information concerning

mergers, leveraged buyouts, tender offers, and other extraordinary

corporate events, through his employment or tips from other defendants.

Downe traded while in possession of such information and also provided

information to other defendants who traded. The complaint seeks

disgorgement of more than $23 million plus prejudgment interest, ITSA

penalties, and an order prohibiting Downe from acting as an officer or

director of a publicly-held company. One of the defendants consented

to the entry of an order enjoining him and requiring him to pay an ITSA

penalty of $58,000. At the end of 1992, this case was pending as to Downe

and all other defendants.

A number of cases were brought involving violative conduct by

traditional corporate insiders. In SEC v. Hugh Thrasher," the Commission

alleged violations by eighteen individuals and a broker-dealer firm in

7
connection with transactions in the stock of Motel 6, L.P. According to

the complaint, Hugh Thrasher, the executive vice president in charge of

corporate communications at Motel 6, tipped material nonpublic information

regarding a proposed tender offer for Motel 6 stock to a friend who in

turn tipped numerous relatives and acquaintances. The complaint seeks

disgorgement of $4.5 million plus prejudgment interest, ITSA penalties,

and an order prohibiting Thrasher from acting as an officer or director

of a publicly-held company. Four of the defendants consented to the entry

of injunctions and agreed to disgorge a total of $467,685 plus prejudgment

interest, and to pay ITSA penalties totalling $426,603. At the end of the

year, this action was pending as to Thrasher and the other defendants.

Two actions involved allegations that government officials had engaged

in illegal trading while in possession of material nonpublic information

obtained in the course of their employment. In SEC v. John Acree,12 the

Commission alleged that two employees of the Office of the Comptroller

of the Currency (OCC) and a former OCC employee who was then working

for a private consulting firm, misappropriated information from their

employers, including information concerning a planned bank examination

and two proposed mergers of financial institutions. Trades were in some

instances concealed by being executed through the account of a fourth

defendant, the manager of a diner, who subsequently consented to the

entry of an order enjoining him and requiring him to disgorge $26,336,

plus prejudgment interest, and to pay an ITSA penalty equal to the

disgorgement amount. This action was pending at the end of the year

against the other defendants.

In SEC v. N. Donald Morse, 11,13the Commission for the first time

brought charges of insider trading in the municipal bond market. The

defendant, the secretary / treasurer of the Kentucky Infrastructure Authority,

was responsible for selecting certain bonds for redemption by the agency,

and for soliciting tenders from bondholders. In its complaint, the

Commission alleged that the defendant, while in possession of material

nonpublic information regarding the quantity of bonds that the agency

needed to repurchase, obtained bonds selling at 94 which he then tendered,

through a local bank to conceal his identity, at 99 7/8, the highest amount

paid to any tendering bondholder. When his bonds were purchased by

the agency, the defendant failed to disclose either his ownership or the

fact that bonds were available at a lower price. The defendant consented

to the entry of an order enjoining him, and requiring him to disgorge

$6,462, plus pre-judgment interest.

With the Commission's assistance, Eddie Antar, a fugitive from justice

since 1989, was located and arrested in Israel. The Commission obtained

access to extensive banking records related to Antar's financial transactions,

leading to the entry of freeze orders affecting more than $50 million subject

to Antar's control in six foreign countries. In addition to federal criminal

actions against him, Antar was named as a defendant in a Commission

civil action filed in 1989. According to the complaint, Antar, the founder

and chairman of Crazy Eddie, Inc., and others engaged in a fraud involving

the falsification of financial records and the overstatement of the company's

8
financial condition by tens of millions of dollars. Antar made more than

$60 million by selling his Crazy Eddie stock at artificially high prices

caused by the company's falsified financial performance. An order was

entered in 1990 that required Antar to disgorge $73 million.

In an action against a Swiss attorney, related to the Commission's

prior action against Finacor Anstalt and Christian Norgren involving

insider trading in the common stock and options for the common stock

of Combustion Engineering, Inc., the Commission alleged that the defendant,

who acted as counsel to Norgren and as a business agent for Norgren and

Finacor, recommended that Norgren proceed with the insider trading

scheme and that the purchases be made through Finacor (SEC v. Kurt

Naegeli14). The Commission also alleged that the defendant received an

explicit warning from another associate of Norgren's that the planned

activities would be illegal in the United States. The defendant opened

an account for Finacor at a Liechtenstein bank, transferred approximately

$1.8 million from his own bank account in Switzerland to the new account,

and placed orders which caused the new account to purchase a total of

55,000 shares of Combustion Engineering common stock and 1,700 call

option contracts for Combustion Engineering common stock, prior to the

public announcement of the tender offer. At the end of the year, this case

was pending.

Financial Disclosure

Actions involving false and misleading disclosures concerning matters

that affect the financial condition of companies or involving the issuance

of false financial statements often are complex, and, in general, demand

more resources than other types of cases. Effective prosecution in this

area is essential to preserving the integrity of the full disclosure system.

The Commission brought 54 cases containing significant allegations of

financial disclosure violations against issuers, regulated entities, or their

employees. Many of these cases included alleged violations of the books

and records and internal accounting control provisions of the Foreign

Corrupt Practices Act. The Commission also brought 15 cases alleging

misconduct by accounting firms or their partners or employees.

In SEC v. College Bound, Inc.,15 the Commission brought an emergency

action alleging, among other things, that the defendants engaged in conduct

resulting in the material overstatement of College Bound's earnings. The

annual pre-tax income of $8.7 million reported by College Bound for fiscal

year 1991 was overstated by at least $5.2 million. The case involved, in

part, transfers to an off-the-books bank account of millions of dollars of

funds derived primarily from the proceeds of various offerings of College

Bound's convertible notes in Europe. Those funds were transferred to

College Bound centers around the country and then retransmitted to

College Bound headquarters and improperly recognized as revenues. The

Commission obtained a temporary restraining order, preliminary

injunctions, and asset freezes as to College Bound and the two individual

defendants. The Commission also secured the appointment of a receiver

for the company. The company consented to the entry of an injunction.

9

Cease and desist proceedings also were instituted against Presidential

Life Corporation, a holding company engaged primarily in the annuity

contracts business through a life insurance subsidiary (In the Matter of

Presidential Life CorpP). The Commission alleged that Presidential

improperly accounted for its investments in high yield bonds and other

securities, which resulted in a material overstatement of its pre-tax income

for the year ended December 31, 1989. The overstatement allegedly was

caused by the company's failure to account properly for securities that

had declined in market value by approximately $25 million, roughly 37

percent of the company's reported pre-tax income. Of this amount, $20.7

million was attributable to "other than temporary" declines in the market

value of Presidential's high yield bond portfolio, declines which, under

generally accepted accounting principles, require a write-down of securities

to their realizable values. Among other things, the Commission also

alleged that the management discussion and analysis portion of

Presidential's Form 10-K for fiscal year 1989 contained materially false and

misleading statements regarding the effects of its high yield bond portfolio.

At the end of the year, this proceeding was pending.

Securities Offering Cases

Securities offering cases involve the offer and sale of securities in

violation of the registration provisions of the Securities Act. In some cases,

the issuers attempt to rely on exemptions from the registration requirements

that are not available under the circumstances. Offering cases frequently

involve material misrepresentations concerning, among other things, use

of proceeds, risks associated with investments, disciplinary history of

promoters or control persons, business prospects, promised returns, success

of prior offerings, and the financial condition of issuers.

A number of offering cases involved the operation of "Ponzi" schemes,

in which funds obtained from new investors are used to meet obligations

to earlier investors, thereby creating the illusion of profitability. In SEC

v. Metro Display Advertising, Inc.,22 the Commission alleged that Metro

Display Advertising, Inc., doing business as Bustop Shelters, Inc., Jean

Claude LeRoyer, Metro Display's founder and chief executive officer,

Karen LeRoyer, and two related companies raised more than $45 million

in a fraudulent scheme. Investors were told that for an investment of

$10,000, they would each become the owner of a bus stop shelter that could

be leased back to Metro Display for a period of five years, with the company

repurchasing the shelter at the investor's option at the end of the lease

term. Lease payments were to be made out of advertising revenues

generated by the shelters. The complaint alleged however, that the lease

payments were made from other investor funds as part of a Ponzi scheme.

The complaint further alleges that the LeRoyers misappropriated company

and investor funds for personal uses. This case was pending at the end

of the year.

Other cases involving alleged Ponzi schemes included SEC v. Deepak

Gulati,23 a settled case involving the sale of $4 million in unregistered

securities and limited partnership interests in Indian and Pakistani

11
communities in the U.S. Northeast; In the Matter of Stephen]. Klos,24a settled

case involving the sale of more than $3 million in unregistered promissory

notes and investor bonds; and SEC v. Custom Trading International Corp.,25

a pending action involving the sale of $10 million in unregistered securities

in the form of joint venture interests in an investment pool.

In SEC v. Current Financial Services, Inc.,26 the Commission filed a

complaint against Current Financial Services, Inc., ten individuals and six

other corporate defendants. Current Financial offered and sold unregistered

debt securities to the other corporate defendants who financed their

purchases by selling their own unregistered debt securities to the public.

The Commission alleged that investors were told, falsely, that they would

receive extraordinary annual rates of return, typically between 12 and 60

percent annually. Defendants also failed to disclose the risks of the

investments, representing in some instances that the debt securities were

as risk-free as certificates of deposit, treasury notes or blue chip stocks.

At the end of the year, this action was pending.

The Commission filed an action against AMI Securities, Inc., a registered

broker-dealer, and seven present or former AMI officers (SEC v. AMI

Securities, Inc.27). The complaint alleged that AMI fraudulently offered and

sold in excess of $250 million in church and non-profit corporation bonds.

Offering documents and sales presentations misrepresented, among other

things, the financial condition of the issuers, the value of underlying

collateral, the misapplication of certain proceeds, and the relationship

between AMI and one of the issuers. At the end of 1992, this action was

pending.

The Commission instituted cease and desist proceedings against the

State Bank of Pakistan, alleging that it violated Section 5(c) of the Securities

Act by participating in and directing the offer in the United States of bearer

certificates issued by the Government of Pakistan (In the Matter of State

Bank of Pakistan28). The order instituting proceedings alleged that the

unregistered certificates were not subject to any exemption from registration.

In addition, the bank was alleged to have arranged for United States

newspapers to run advertisements for the certificates claiming, among

other things, that there would be no questions asked about the source of

purchasers' funds, and that the certificates were not subject to taxation.

The bank consented to the entry of a cease and desist order.

The Commission's action against Westdon Holding & Investment,

Inc., was the first enforcement action involving purported reliance on

Regulation S, adopted by the Commission in 1990 to clarify the

extraterritorial application of the registration provisions of the Securities

Act (SEC v. Westdon Holding & Investment, Inc.29). The safe harbors of

Regulation 5 apply to offers and sales of securities abroad, and are not

available for transactions within the United States. The complaint alleged,

among other things, that the defendants sought to distribute unregistered

shares of Work Recovery, Inc., which they had purchased abroad

purportedly in reliance on Regulation 5, within the United States and

12
without the benefit of any valid exemption from registration. One of the

individual defendants consented to the entry of an injunction. At the end

of the year, this matter was pending as to the other defendants.

Market Manipulation

The Commission is charged with ensuring the integrity of trading on

the national securities exchanges and in the over-the-counter markets. The

Commission staff, the exchanges, and the NASD engage in surveillance

of these markets.

In an action against Paul Kutik, an international investor residing in

London, the Commission alleged a scheme to support artificially the price

of the common stock of Columbia Laboratories, Inc., by placing purchase

orders for millions of dollars worth of Columbia common stock without

the intent or ability to pay on a timely basis, and by effecting wash sales

and matched orders (SEC v. Paul Kutik30). Kutik's scheme allegedly was

intended to maintain Columbia's stock at or above $9 per share, in order

to avoid the sale of stock pledged as collateral or the need for additional

collateral, under the terms of certain loan agreements. Kutik's broker's

incurred losses totalling nearly $1.3 million on the sale of stock that Kutik

ordered but for which he did not pay. At the end of the year, this case

was pending. Related administrative proceedings were instituted and

settled with respect to registered representatives who facilitated the scheme,

In the Matter of Jeffrey R. Leach;" In the Matter of Matthew L. Wager,32 and

a branch manager who failed to supervise one of the registered

representatives, In the Matter of Buddy S. Cohen,»

The Commission alleged that Edward A. Accomando, a registered

representative employed by a broker-dealer, aided and abetted by one of

his customers, Charles C. Patsos, manipulated the stock of Central CoOperative Bank by executing sixty-four wash sales and matched orders

in customer accounts under his control (SEC v. Edward A. Accomandows.

During a three week period in March and April, 1989, the reported volume

of cross trades alone represented approximately 63 percent of the total

trading volume in Central's shares. Patsos held Central stock in ten

accounts, including eight nominee accounts, that were either the purchaser

or seller, or both, in fifty-three of the sixty-four cross trades. The complaint

also alleged that Accomando converted $129,500 from the margin account

of another customer. Pats as consented to the entry of an order enjoining

him. At the end of 1992, this action was pending as to Accomando.

In SEC v. Maurice A. Halperin," the Commission alleged a manipulation

of the price of the common stock of HMG Courtland Properties, Inc., a

Florida real estate investment trust. Halperin effected a series of purchases

of HMG common stock, which allegedly caused the price of the stock to

increase from $9.625 to $12.25 per share. Halperin, his son and a corporation

controlled by his son also allegedly violated beneficial ownership provisions

of the Exchange Act by, among other things, falsely reporting a divestment

of HMG stock in which the defendants retained a beneficial interest. The

defendants consented to the entry of an order enjoining them and requiring

them to pay total civil penalties of $200,000.

13
In SEC v. Joseph Dandolfino, Jr.,% the Commission alleged that 

defendant, between January and April 1991, engaged in a scheme 

manipulate the market price of two NASDAQ securities. The defend

effected a mass mailing of anonymous letters urging purchase of 

securities based upon false and misleading information, including 

claim that one of the companies would be the subject of a tender of

The defendant purchased stock in both companies prior to the maili

and liquidated his positions at a profit thereafter. He consented to 

entry of an order enjoining him, and requiring him to disgorge $23,9

plus prejudgment interest, and to pay a civil penalty in an amount eq

to the disgorgement sum. 

Corporate Control 

The Commission's enforcement program scrutinizes corporate merg

takeovers and other corporate control transactions, and the adequacy 

disclosure made by acquiring persons and entities and their targets. 

Commission brought cases involving Sections 13 and 14 of the Excha

Act, which govern securities acquisition, proxy, and tender offer disclosu

The Commission on a number of occasions exercised its cease and de

authority under the Remedies Act to respond to violations in this a

Two separate cease and desist proceedings were instituted aga

The Lionel Corporation and against RIT Acquisition Corporation and 

parent, Robert I. ToussieLimited Partnership, allegingviolations occurr

during a tender offer by RIT for Lionel (In the Matter of The Lionel C~r

In the Matter of RIT Acquisition C~rp.~~). The Commission alleged in 

Lionel proceedings that the company failed to amend its Schedule 1

9 to disclose as negotiations certain telephone conversations with 

bidder, a board resolution in response to the tender offer, or that the 

of half the bidder's position in connection with the termination of 

tender offer had been made to a third party identified by Lionel. In 

proceedings against RIT and Toussie, the Commission alleged a fail

to disclose the discussions with the target. Respondents in both proceedi

consented to the entry of cease and desist orders. 

The Commission's cease and desist proceedings against the gen

partners of four limited partnerships that were the subject of a "roll-

transaction (i.e., a restructuring from a partnership to a corporate fo

involved allegations of various delaying tactics during the solicitation 

proxies to avoid responding to requests by limited partners for list

the names and addresses of other limited partners (In the Matter of 

Krupp C~rp.'~). Under Rule 14a-7, a registrant must respond promptly 

such requests either by providing the requested list of investors or 

offering to do a mailing to all investors on behalf of the requestor. 

Commission alleged that the respondents failed promptly to comply w

the rule's requirements. The respondents consented to the entry of a ce

and desist order. 

The Commission also instituted and r settled cease and de

proceedings alleging. failure to make adequate or timely disclosure 

changes in beneficial ownership of securities as required by Section 1
of the Exchange Act. These included In the ~atter of Douglas A. Kass,"' 

which involved deficient and untimely disclosure on Schedules 13D and 

amendments thereto regarding holdings of H.H. Robertson Company; and 

In the Matter of BGC Special Equity Ltd. P~rtnership,~' which involved 

inaccurate disclosure with respect to the acquisition of shares issued by 

Kentucky Medical Insurance Company. 

Broker-Dealer Violations 

Each year, the Commission files a significant number of enforcement 

actions against broker-dealer firms and persons associated with them. The 

Commission's actions against broker-dealers often focus on violations of 

the net capital and customer protection rules, as well as violations of books 

and records provisions. 

The Commissioninstituted administrative proceedings against Michael 

S. Shapiro, the chief financial officer of Thomson McKinnon Securities, Inc., 

and a member of its executive committee (In the Matter of Michael S. 

Shapiro"). Shapiro allegedly caused Thomson McKinnon to violate net 

capital and other provisions of the securities laws by engaging in 

transactions by which checks drawn on a bank account with ins fficient Y
 funds to cover them were routinely used to obtain funds from another 

bank. The funds so obtained were then used to cover overdrafts from 

the previous day. A series of such transactions continued on a daily basis 

until approximately the end of September 1989, with the size of the daily 

checks reaching over $126.5 million. The purpose of the scheme was 

ultimately to inflate Thomson McKinnon's net capital, which permitted 

the firm to operate in violation of net capital requirements from December 

1988 until June 1989. Shapiro consented to the entry of the cease and desist 

order and an order that barred him from association with any regulated 

entity. 

The Commission instituted administrative proceedings against Kevin 

Upton, the former chief financial officer of Financial Clearing and Services 

Corporation, a now defunct clearingbroker-dealer, and JohnDolcemaschio, 

Financial Clearing's former money manager (In the Matter of Kevin Upton"). 

The order instituting proceedings alleged that Financial Clearing routinely 

paid-down a bank loan collateralized by customer securities at the end 

of each business week with substitute financing, and reinstated the loan 

at the beginning of the following business week. This practice enabled 

Financial Clearing to avoid including the loan in its reserve formula 

computation and resulted in a deficient reserve bank account averaging 

$20 million per week. Dolcemaschio allegedly aided and abetted the firm's 

violations, and Uptonallegedly failedreasonably to superviseDolcemaschio. 

At the end of the year, this case was pending. 

The Commission instituted cease and desist proceedings against 

Shearson Lehman Brothers, Inc., in which violations of Regulation T were 

alleged, arising from Shearson's borrowing of securities to take advantage 

of reduced stock prices available under dividend reinvestment plans, 

commonly referred to as DRIPS, offered by various issuers (In the Matter 

of Shearson Lehman Brothers, Inc."). Pursuant to DRIPS, shareholders may 
receive dividends in the form of additional stock from the issuer at a

discount to market price. The Board of Governors of the Federal Reserve

System issued two opinions in 1984interpreting Regulation Tas proscribing

the borrowing of securities solely for the purpose of taking advantage of

reduced stock prices available under DRIPS. Between January 1986 and

October 1988, Shearson and Princeton Newport Partners, L.P., a Shearson

customer, engaged in a series of transactions designed to create the

appearance that certain borrowing by Shearson was for purposes permitted

by the Federal Reserve Board when in fact the transactions were intended

solely to take advantage of DRIPS. Shearson consented to the entry of

the cease and desist order and agreed to adopt procedures reasonably

designed to assure, among other things, that the firm complied with

Regulation T.

The Commission filed an action against Donald W. Wright, chairman

of Nevatech Industries, Inc., and Kenneth Y.Kimura, Nevatech's president,

alleging that the defendants attempted to close Nevatech's mini-max initial

public offering by entering into an arrangement whereby a Swiss Bank

would purchase the required minimum number of shares in exchange for

a guaranty against any loss incurred in reselling the shares (SEC v. Donald

W. Wright45). Nevatech's initial public offering failed to close when the

Swiss Bank failed to pay for the Nevatech shares by the last day of the

offering. Wright and Kimura consented to the entry of injunctions.

Other Commission actions addressed various abusive sales practices,

particularly with respect to penny stocks. For example, in SEC v. Stratton

Oakmont, Inc.,46 the Commission filed a complaint against a broker-dealer

firm and five individual defendants. The complaint alleged that Stratton

Oakmont, Inc., operated a boiler room selling speculative over-the-counter

securities issued by unseasoned companies. The defendants were charged,

variously, with making misrepresentations or omitting to state material

facts, engaging in unlawful sales practices such as the making of price

predictions without a reasonable basis, and manipulation of the price of

certain securities. At the end of the year, this case was pending. Other

penny stock related cases included In the Matter of Wells hire Securities, Inc.;47

In the Matter of Patrick Raymond Comerford;" In the Matter of Martin Herer

Engelman'? (pending proceedings); In the Matter of Linda K. Rees.50

The Commission also took action in several cases in which it was

alleged that supervisory and compliance personnel failed reasonably to

supervise broker-dealer employees with a view to preventing the employees'

securities law violations. The Commission instituted proceedings against

First Albany Corporation, a registered broker-dealer, and against two

individuals, a First Albany branch manager, and First Albany's chief

compliance officer (In the Matter of First Albany Corp. 51). Allegedly, a

registered representative associated with First Albany had engaged in a

manipulation of securities issued by Central Co-Operative Bank, and had

misappropriated funds from a customer's account. The order instituting

proceedings alleged that First Albany and the individual respondents had

failed reasonably to supervise the registered representative. The

respondents consented to the entry of an order by which First Albany was

16
censured and ordered to comply with certain undertakings, the branch

manager and the compliance officer were censured and suspended from

association with any regulated entity for thirty days and one year,

respectively, and the branch manager was barred from association with

any regulated entity in a supervisory capacity.

Investment Adviser and Investment Company Violations

The Commission instituted several significant cases involving

investment advisers and investment companies.

The Commission sought emergency relief in an action against

Institutional Treasury Management, Inc. (ITM), its corporate predecessor,

Denman & Company, and their principal and sole owner, Steven Wymer

(SEC v. Institutional Treasury Management, Inc. 52). ITM was an investment

adviser, primarily to small municipalities and counties and certain financial

institutions. The alleged fraudulent activity involved more than $100

million in client funds. Among other things, Wymer allegedly defrauded

two advisory clients by selling U.S. Treasury Notes to them at inflated

prices, thereby obtaining $10 million to cover funds missing from another

client's account. Wymer also sold U.S. Treasury Notes from a client's

account, without the client's consent, thereby obtaining $65 million, part

of which was funnelled to other advisory clients' accounts. The defendants

consented to the entry of injunctions. In addition, in a global settlement

of civil and criminal charges against him, Wymer agreed to plead guilty

to a nine count felony information and to an order requiring the payment

of approximately $209 million in restitution to his defrauded advisory

clients. In related administrative proceedings, Wymer consented to a bar

from association with any regulated entity, and ITM's registration as an

investment adviser was revoked.

In SEC v. First Investors COrp.,S3the Commission alleged that First

Investors authorized and permitted some of its sales representatives to

sell certain high yield funds by making material oral misrepresentations

and omissions concerning the risk and performance of the funds. The

complaint also alleged that First Investors recommended and sold the

Funds to some investors for whom they were unsuitable. First Investors

consented to the entry of an injunction and an order requiring the

disgorgement of $24.7 million.

In the action against Cheshire Hall Advisors, Inc., an investment

adviser, John T. Hall, the president and sole officer and director of Cheshire,

and Treasury First, Inc., a mutual fund managed by Cheshire and Hall,

the Commission alleged that Hall, through Cheshire, misappropriated

approximately $2.1 million of Treasury's assets (SEC v. Treasury First,

Inc.54). Hall allegedly accomplished the misappropriation by creating

bogus securities that Treasury then purportedly purchased. The complaint

further alleges that Hall intended to use $2 million of the misappropriated

funds to purchase the management contracts of other mutual funds, the

Strategic Funds. This use was not disclosed to Treasury's shareholders.

The defendants consented to the entry of injunctions and to orders requiring

the disgorgement of Illegal profits and the payment of civil penalties to

17
be determined by the court. In a related action that was pending at the 

end of the year, the adviser for the Strategic Funds and its two principals 

consented to the entry of injunctions based on their failure to disclose to 

shareholders the $2 million payment from Hall (SEC v. Leroy S. Brenna"). 

The Commission filed an action against G. Albert Griggs, a former 

analyst /assistant portfolio manager with a registered investment adviser, 

and John D. Collins 11, a friend of Griggs (SEC v. G. Albert Griggs, Jr.56

The complaint alleged that Griggs and Collins engaged in a fraudulent 

kickback scheme with a senior officer of The Cooper Companies, Inc

Griggs allegedly told the Cooper officer which high yield bonds he was 

recommending for the funds. The Cooper officer caused accounts under 

the control of Cooper and members of his immediate family to purchase 

such bonds, which then were sold to the funds at inflated prices. In 

addition, the Cooper officer diverted Cooper corporate funds, representing 

a portion of the bonds' trading profits, to Griggs and Collins. The scheme 

generated illicit profits for members of the Cooper officer's family and 

Cooper in excess of $3 million; Cooper paid in excess of $700,000 in 

corporate funds to Griggs and Collins. Griggs and Collins consented to 

the entry of injunctions and orders requiring Collins to disgorge $224,904 

plus any tax refunds received on tax returns for 1992. In related 

administrative proceedings, Griggs and Collins consented to the entry of 

orders barring them from association with any registered entity. 

In an action against Public Funding Group, Inc., aregistered investment 

adviser, V. Thayne Whipple 11, its president and sole shareholder, and two 

registered investment companies, Public Funding Portfolios, Inc., and 

American Vision Funds, Inc., the Commission alleged that Public Funding 

and Whipplesold the investment companies' shares inexchange transactions 

with shareholders at grossly inflated net asset values and in violation of 

the investment companies' policies (SEC v. Public Funding Group, Inc."). 

Shareholders then used the shares, at their inflated values, as collateral 

for margin loans from broker-dealers. The defendants consented to the 

entry of injunctions. In related administrative proceedings, Public Funding's 

investment adviser registration was revoked, and Whipple was barred 

from association with any regulated entity. 

The Commission instituted administrative proceedings against William 

H. Pike, a former employee of Fidelity Management &Research Company, 

an investment adviser to the Fidelity group of mutual funds (In the Matter 

of William H. Pikes8). On three occasions during 1985 and 1986, Pike 

engaged in securities transactions pursuant to an undisclosed arrangement 

with the High Yield and Convertible Bond Department of Drexel Burnham 

Lambert Incorporated. Pursuant to the arrangement, Pike purchased high 

yield bonds for a Fidelity high yield fund and, at the time of purchase, 

agreed to sell the bonds back to Drexel on a specified date and at an 

understood price. Pike did not record the terms of the arrangement on 

the fund's books and records but instead caused the subject transactions 

to be recorded as unrelated purchases and sales of the underlying securities. 

Pike consented to the entry of a cease and desist order and a suspension 

from association with any regulated entity for a period of three months. 
Sources For Further Inquiry 

The Commission publishes the SEC Docket, which includes 

announcements regarding enforcement actions. The Commission's litigation 

releases describe civil injunctive actions and also report certain criminal 

proceedings involving securities-related violations. These releases typically 

report the identity of the defendants, the nature of the alleged violative 

conduct, and the disposition or status of the case, as well as other 

information. The SEC Docket also contains Commission orders instituting 

administrative proceedings, making findings and imposing sanctions in 

those proceedings, and initial decisions and significant procedural rulings 

issued by Administrative Law Judges. 
International Affairs

The Office of International Affairs (OIA) has primary responsibility for

the negotiation and implementation of information-sharing arrangements

and for developing legislative and other initiatives tofacilitate international

cooperation. OIA coordinates and assists in making requests for assistance

to, and responding to requests for assistance from, foreign authorities. OIA

also addresses other international issues that arise in litigated matters, such

as effecting service of process abroad and gathering foreign-based evidence

using various international conventions, freezing assets located abroad, and

enforcingjudgments obtained by the SEC in the United States against foreign

parties. In addition, OIA operates in a consultative role regarding the

significant ongoing international programs and initiatives of the SEC's other

divisions and offices.

Key 1992 Results

In June 1992, the SEC and other securities regulatory authorities of

North, South and Central America, and the Caribbean announced the

creation of a new organization, the Council of Securities Regulators of the

Americas (COSRA), to provide a forum for mutual cooperation and

communication in the Americas and to enhance efforts of each country

in the region to develop and foster the growth of fair and open securities

markets.

The SECsigned comprehensive Memoranda of Understanding (MOUs)

for consultation and cooperation with the Comision Nacional de Valores

of Argentina and the Comision Nacional del Mercado de Valores of Spain.

The Argentine MOU also contains provisions for technical assistance.

In addition, the SEC signed more limited communiques and

understandings involving technical assistance and mutual cooperation

with securities authorities in Costa Rica and Indonesia.

Arrangements for Mutual Assistance and Exchanges of Information

The increasing internationalization of the world's securities markets

has raised many new and complex issues that affect the SEC's ability to

enforce the United States federal securities laws. For example, a central

problem the SEC faces is collecting information located abroad. The SEC

has attempted to resolve this problem by developing information-sharing

arrangements on a bilateral basis with various foreign authorities.

The information-sharing arrangements allow the SEC to obtain

information located abroad while avoiding the conflicts that may result

from differences in legal systems. In recent years, the SEC has entered

into various arrangements with foreign authorities from over 15 nations.

These relationships are an effective means for obtaining information and

20
developing cooperative relationships between regulators. In addition, the

staff coordinates closely with the regulators with whom it has informationsharing arrangements to develop ways to implement and improve the

arrangements. The SEC also cooperates on an informal basis with foreign

authorities with whom it does not have explicit information-sharing

arrangements.

On December 9, 1991, the SEC signed an MOU with the Comision

Nacional de Valores of Argentina. On July 8, 1992, the SEC signed an

MOU with the Comision Nacional del Mercado de Valores of Spain. Those

MOUs contain comprehensive provisions for consultation and the provision

of mutual assistance in the administration and enforcement of United

States and Argentine and Spanish securities laws, respectively. The MOUs

also provide for consultations between the parties on all matters relating

to the operation of the securities markets of their respective countries, and

for consultation on questions related to the operation of the MOUs. The

enforcement aspects of the MOUs follow closely the SEC's previous MOUs.

The MOUs express each signatory's intent to gather information when

requested on all matters relating to possible violations of the requesting

authority's securities laws or regulations, and when voluntary measures

fail, to use compulsory (subpoena) powers, if necessary. The comprehensive

scope of the MOUs assures that the fullest measure of assistance will be

available to administer and enforce the respective countries' securities

laws or regulations. The Argentine MOU includes provisions for technical

assistance. Such provisions are intended to assist authorities responsible

for emerging markets. Areas of assistance in the Argentine MOU include

training and advice relating to development of securities markets and

procedures and practices to protect investors.

On October 10, 1991, the SEC signed a Communique on technical

assistance and international cooperation with the Costa Rican Comision

Nacional de Valores (CNV). The Communique creates a framework for

the provision of technical assistance, exchange of information, and

consultation involving the operation of the securities markets in the United

States and Costa Rica.

On March 24, 1992, the SEC entered into an Understanding with the

Capital Market Supervisory Agency of Indonesia (the BAPEPAM) regarding

mutual cooperation and the provision of technical assistance for the

development of the Indonesian securities markets. The Understanding

also recognizes that the SEC and the BAPEPAM intend to use their best

efforts to provide each other assistance to facilitate the effective

administration and enforcement of their respective laws and the regulations

relating to securities matters.

21


government officials, the OECD Codes of Liberalization relating to securities

matters, and accounting issues.

The General Agreement on Tariffs and Trade (GATT). The SECis an active

participant in the effort, through the Uruguay Round of the GAIT, to

establish a multilateral framework of principles and rules for trade in

financial services. Throughout 1992,the SEChas consulted and coordinated

with the Office of the United States Trade Representative, the Department

of Treasury, and other United States government agencies, in connection

with the GATT negotiations and other international trade and investment

initiatives, such as the North American Free Trade Agreement (NAFTA)

negotiations.

NAFTA. On August 12, 1992, President Bush announced that the

United States, Canada and Mexico reached a "handshake" agreement on

the North American Free Trade Agreement (NAFTA), which was signed

by President Bush, President Salinas and Prime Minister Mulroney on

December 17, 1992. The agreement contains a Financial Services Chapter,

which will encompass activities of financial service providers, such as

broker-dealers and investment advisors, within NAFTA countries. The

Financial Services Chapter allows a strong "prudential carve-out," which

enables the SECto adopt or modify measures for the protection of investors

or the securities markets. The SEC staff provided technical assistance and

advice to the Department of Treasury, the lead negotiator in the Financial

Services Chapter, during the negotiation process.

The Wilton Park Group. The United Kingdom Department of Trade

and Industry sponsors this informal meeting which includes regulators

from 12 countries. During this year's meeting, the SECtabled for discussion

the regulatory concerns posed by the use of bearer share corporations to

conceal the identities of participants in fraudulent schemes.

The European Community. The SEC has been involved with other

United States government agencies in reviewing the plans and directives

of the European Economic Community. The SEC has been involved in

several different studies, and provided assistance to other United States

government agencies, including the Department of the Treasury, in

connection with the impact of EC 92 on the United States financial services

markets.

International Requests for Assistance

The following table summarizes the international requests for assistance

made and received by the Commission.

24
Fiscal Year

Type of Request 19881 19891 1990 1991 1992

SEC Requests to

Foreign Governments 84 101

Enforcement Assistance 173 145 191

Enforcement Referrals 2 6 7

Technical Assistance 2 0 2

Total 84 101 1n 151 200

Foreign Requests to

the SEC 81 150

Enforcement Assistance 98 160 184

Enforcement Referrals 2 7 11

Technical Assistance 30 44 58

Total 81 150 130 211 253

Figures are approximate.

lSeparate totals for enforcement referrals and technical assistance

requests were not maintained.

participants, industry associations, self-regulatory organizations (SROs), 

and information processors, in order to identify alternatives that would 

minimize the burdens of the proposed system. 

On July 16, 1992, the Commission adopted Rules 17h-1T and 17h-2T 

which, together with new Form 17-H, establish a risk assessment 

recordkeeping and reporting system for registered broker-dealers 

concerning certain of their associated persons in accordance with provisions 

of the Market Reform Act.S9 Rule 17h-IT sets forth the records and other 

information broker-dealers are required to maintain with respect to their 

material associated persons. Rule 17h-2T requires broker-dealers to file 

with the SEC on Form 17-H a quarterly summary of the information 

required to be kept by Rule 17h-IT. 

Market 2000 Study 

In 1992, the division began a study of the United States equity markets 

entitled, Market 2000. The study will explore the role that the SEC and 

SRO rules play in maintaining the fairness, efficiency and competitiveness 

of our equity markets. In conducting the study, the division will examine 

equity market issues such as market fragmentation, fair competitionbetween 

markets, payment for order flow, market transparency, and proprietary 

trading systems, among others. The study also will focus on the equitable 

allocation of regulatory costs.60 

Penny Stock Disclosure Rules 

On April 10, 1992, the Commission adopted Rules 3a.51-1 and 15g-1 

through 15g-6 pursuant to the Securities Enforcement Remedies and Penny 

Stock Reform Act of 1990, as part of a comprehensive effort to reduce fraud 

and manipulation in the penny stockmarket and to provideinvestors with 

important information concerning that market.61 Penny stocks are generally 

defined under Rule 3a51-1 as equity securities below $5 that are not listed 

and traded on an exchange or quoted on NASDAQ.62 Rules 15g-2 through 

15g-5 require a broker-dealer effecting a penny stock transaction to make 

disclosures to its customers of bid and ask quotations as well as brokerdealer and associated person compensation. Rule 15g-6 requires a brokerdealer to provide monthly account statements to its customers giving the 

market value of the penny stocks held in the customer's account. Rule 

15g-2 further requires a broker-dealer, prior to effecting a penny stock 

transaction, to distribute to its customers a risk disclosure document that 

describes the risks of investing in the penny stock market and other 

relevant information. 
Options and Other Derivative Products

During 1992, the Commission approved several significant SRO

proposals to strengthen market stability and integrity, including the

following:

extension of the American Stock Exchange (AMEX), Boston Stock

Exchange (BSE), Midwest Stock Exchange (MSE), New York Stock

Exchange (NYSE), Philadelphia Stock Exchange (Phlx), and NASD

pilot programs for circuit breaker provisions during volatile

markets."

permanent approval of NYSE Rule BOA, which imposes certain

conditions on the execution of index arbitrage orders during

unusually volatile markets."

requirements that Chicago Board Options Exchange (CBOE)

members who clear market maker trades provide the CBOE prior

written notice of a significant business transaction and, in some

instances, obtain prior approval by the CBOE before engaging in

such transactions."

establishment of CBOE procedures for the intraday trade match

system;" and

expedited opening procedures for certain equity and index option

series on the Phlx."

The Commission also approved several other significant rule changes

submitted by options SROs, including the following that:

raise CBOE position and exercise limits for European-style S&P 500

Index Options that settle based on the opening prices of the

underlying securities, and gradually phase out all closing-price

settled S&P 500 Index Options on the CBOEi68

create a CBOE minor rule violation fine planr" and

institute pilot programs on AMEX and CBOE that allow investors

to effect in cash accounts debit put spreads in broad-based stock

index options with European-style exercise."

In addition, the Commission approved several proposals by the SROs

to trade new financial instruments, including the following:

capped-style index options on the S&P 100 and 500 Indexes to trade

on the CBOE, and on the Major Market Index, the Institutional

Index, and the MidCap 400 Index to trade on the AMEX;71

warrants based on the Nikkei Stock Price Average to trade on the

NYSE, MSE, PSE, and Phlx; warrants based on the Tokyo Stock

Price Index to trade on the Phi Xi and warrants based on the Japan

Index to trade on the AMEXi72

equity long term options (LEAPS) and LEAPS on reduced value

indexes to trade on the NYSE;73and

warrants based on foreign and domestic stock market indexes to

trade on NASDAQ.74

28

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a

1

The SEC also acted on several futures-related matters, including the

following:

amendments to Rule 3a12-8 under the Exchange Act that expanded

the list of countries included in the rule whose debt obligations

are exempted securities for purposes of futures trading to include

the Republics of Ireland and Italy;"

division letters to the Commodity Futures Trading Commission

(CFTC) not objecting to the designation of the following

boards of trade as contract markets for futures and stock index

futures options on the following indexes: Chicago Mercantile

Exchange, MidCap 400 Stock Price Index and Financial Times-Stock

Exchange 100 Index;" and Commodity Exchange, Eurotop 100

Stock Index;" and

division letters to the CFTC not objecting to the offer and

sale to U.S. persons on the following markets of the following

foreign stock index products: Sydney Futures Exchange, All

Ordinaries Share Price Index Futures Option;" Marche a Terme

International de France, CAC-40 Index Futures:" Singapore

International Monetary Exchange, Nikkei Price Average Futures

Options:" Osaka Stock Exchange, Nikkei Index Futures." and Tokyo

Stock Exchange, TOPIX Index Futures."

Automation Review

In response to the Commission's second Automation Review Policy

Statement," the SROs commenced independent reviews of the controls in

place for their automated trading and information dissemination systems

and risk analyses of those controls. To facilitate Commission oversight

of this area, the division formed the Branch of Electronic Data Processing

Review and instituted an on-site inspection program of SRO automation

review procedures.

National Clearance and Settlement System

The staff continued to work to enhance all components of the national

clearance and settlement system. In July 1991, a task force was formed

by John Bachmann, a prominent securities industry leader, to evaluate the

clearance and settlement system and to make recommendations for

improvements. In May 1992, this task force issued its report recommending,

among other things, that the settlement cycle for securities transactions

be reduced from the current five days to three days after the trades." The

Commission published the report for public comment and has received

over 1,000 comment letters in response."

The Market Transactions Advisory Committee (MTAC), formed by

the Commission pursuant to Section 17A(f) of the Exchange Act86 to assist

the SEC in assessing the need for greater uniformity in existing state and

federal laws regarding the transfer and pledge of securities, held its

inaugural meeting on October 29, 1991, and has met regularly since then.

MTAC established three working subgroups (the broker-dealer/futures

29

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commission merchant bankruptcy/liquidation subgroup, the financial

gridlock subgroup, and the crisis financing subgroup) to explore issues

in particular areas.

Government Securities Mflrkets

In January 1992, the SEC, the U.S. Department of the Treasury, and

the Board of Governors of the Federal Reserve System issued the Joint

Report on the Government Securities Market. H.R. 3927, the Government

Securities Reform Act, which was reported by the House Energy and

Commerce Committee in June 1992, incorporated in different respects

certain recommendations made by the SEC. Specifically, among other

provisions, the bill: (1) would grant the SEC authority to promulgate

uniform recordkeeping rules for all government securities firms and to

require non-routine trade reports for investigatory purposes; (2) would

remove existing limitations on application of NASD sales practice rules

to government securities transactions; and (3) called for two-tiered backup authority to the SEC to assure that information reported through broker

screens was made publicly available on a fair, reasonable, and

nondiscriminatory basis and allowed investors to determine the prevailing

market price of securities quoted on the screens."

In response to a congressional inquiry, the staff issued a letter discussing

the effects of price competition among government securities brokers on

the liquidity and efficiency of the market for government securities." The

response suggested that commission-free trading does not unfairly

disadvantage smaller dealers and is not a main component of manipulative

trading strategy.

Internationalization

During 1992, the SEC provided information and technical assistance

to several emerging market countries, including Costa Rica and Thailand.

As a member of the International Organization of Securities Commissions

(lOSCO), the agency participated in the Working Party on the Regulation

of Secondary Markets, which discussed issues concerning measures to

minimize market disruption, contract design of derivative products on

stock indices, regulation of screen-based trading systems, and transparency

of markets.

The SEC also participated actively in the Working Party on the

Regulation of Market Intermediaries, which focused its efforts on issues

relating to development of common capital adequacy standards for securities

firms and banks, and on principles for the supervision of financial

conglomerates. In the area of capi tal adequacy, this working party addressed

issues relating to (1) the appropriate level of capital requirements for

positions in equity and debt securities and (2) the appropriate definition

of capital. In the area of supervision of conglomerates, the working party

produced a paper setting forth principles for the supervision of financial

conglomerates. The paper was approved by the IOSCO Technical Committee

and endorsed by IOSCO at its 1992 annual meeting.

30
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!

I

Regulation of Brokers, Dealers, Municipal Securities Dealers, and Transfer

Agents

Broker-Dealer Examination

The primary purpose of the broker-dealer examination program is

to provide oversight of the SROs responsible for the routine examination

of those broker-dealers conducting a public securities business. This

oversight is accomplished primarily through the examination of brokerdealer firms recently examined by a SRO. Additionally, cause examinations

are conducted when the agency becomes aware of circumstances that

warrant direct SEC inquiry rather than SRO review.

In 1992, the agency completed a total of 550 examinations. Specifically,

the staff completed 419 oversight examinations, a 5 percent decrease from

1991, and 131 cause examinations, an 8 percent increase from 1991. Findings

from 73 examinations were referred to regional office enforcement staff,

representing 13 percent of all completed examinations. Referrals to SROs

were made in 45 examinations.

During 1992, oversight examinations were conducted at 10 of the

largest NYSE member firms, which included comprehensive financial and

operational reviews at each firm. In addition to these large firm

examinations, 71 other self-clearing NYSE member firms were examined.

Finally, in conjunction with the Division of Enforcement, hiring, retention

and supervisory practices at large NYSE member firms were reviewed.

Broker-Dealer Regulation

The Commission published for comment a release proposing adoption

of a rule that would permit passive market making during distributions

of certain NASDAQ securities designated as National Market System

(NASDAQ/NMS) securities, where application of Rule 10b-6 would result

in significant market degradation." In general, the proposed rule would

limit a passive market maker's bids by the level of bids of market makers

who are not participating in the distribution.

Exchange Act Rule 10b-2, subject to certain exceptions, prohibits any

person participating in, or financially interested in, a distribution of a

security from paying compensation to induce the purchase on a national

securities exchange of any security of the issuer whose security is the

subject of a distribution. In view of other antifraud and anti-manipulation

provisions of the securities laws that provide coverage of the types of

abuses that Rule 10b-2 addresses, and the significant changes that have

taken place in the securities markets since the rule's adoption, the

Commission issued a release soliciting public comment on a proposal to

rescind Rule 10b-2.90

The Commission published for comment proposed amendments to

Rule 10a':1, the short sale rule, which would: (1) provide an exception

for a short sale that equalizes the opening price of a foreign security on

a U.S. exchange with its price in the principal foreign market for the

31
security; (2) exclude from application of Rule 10a-1 transactions in corporate

bonds and debentures effected on an exchange; and (3) codify a staff noaction position related to certain liquidations of index arbitrage positions."

Exchange Act Rule 15c2-11, with certain exceptions, prohibits a broker

or dealer from publishing a quotation for a covered security in a quotation

medium unless it has in its records and reviews specified information

concerning the security and the issuer. The Commission granted an

exemption under Rule 15c2-11to permit broker-dealers to publish quotations

immediately in another quotation medium for NASDAQ securities that

were no longer authorized for quotation in NASDAQ, as a result of the

implementation of revised maintenance standards for NASDAQ securities

approved by the Commission."

In 1992, the staff issued a series of no-action letters concerning the

term "ready market" under Exchange Act Rule 15c3-1 regarding certain

commercial paper, money market instruments, debt securities, preferred

stock, and equities listed on the Mexican Stock Exchange.?" When an

instrument is deemed to have a "ready market," it becomes subject to lower

regulatory capital requirements under the Commission's net capital rule.

Broker-Dealer Registration

The SEC implemented several initiatives in 1992 designed to reduce

the costs associated with broker-dealer registration. Specifically, in July

1992, the Commission adopted amendments to Form BD, the uniform

registration form for broker-dealers under the Exchange Act.94 These

amendments, which were developed in consultation with the North

American Securities Administrators Association, Inc., the NASD, and

members of the securities industry, updated the disciplinary history

provisions and narrowed the scope of disclosure required by the schedules

to the form. The Commission also proposed amendments to the brokerdealer registration rules and filing instructions under the Exchange Act

in order to facilitate SECparticipation in the Central Registration Depository

(CRD) system." CRD is a computer system operated by the NASD that

maintains registration information regarding NASD member firms and

their registered personnel and is used for licensing broker-dealers and

their agents with SROs and the states. The agency's primary objective

in joining the CRD system is to provide "one-stop filing" for brokerdealers.

Transfer Agent Examinations and Regulation

The regional office staff completed 210 transfer agent examinations,

including 58 examinations of federally regulated banks. Thirty-six of the

58bank examinations were cause examinations prompted by the incomplete

cancellation and destruction of redeemed certificates circulating in the

financial industry. The program resulted in 134 deficiency letters, 7

registration cancellations or withdrawals, 8 referrals to the Division of

Enforcement, 2 staff conferences with delinquent registrants, and one

referral to federal bank examiners.

32
The Commission adopted Rule 17Ad-1596 under the Exchange Act

governing transfer agent acceptances of signature guarantees." The

Commission also published for comment Rule 17Ad-16 under the Exchange

Act.98 The proposed rule, if adopted, would address problems of transfer

delays resulting from unannounced changes in the transfer agent's services

or its name or address.

Application of Rules lOb-6 and 1Ob-7 to International Distributions

The SEC granted relief under anti-manipulation Rules 10b-6 and 10b7 for multinational offerings. This action was taken to permit non-United

States persons to continue customary market activities in foreign

jurisdictions until nine business days prior to the commencement of offerings

in the United States by issuers in Mexico;" Venezuela,'?" and Portugal,'?'

subject to certain conditions designed to prevent a manipulative impact

on the U.S. market. In other multinational offerings, based on the issuers'

total market capitalization, public float, and the trading volume of the

securities in the offering, distribution participants and their affiliated

purchasers were permitted to continue customary market activities in the

securities until two business days prior to the commencement of the

offerings.t'"

Certain market makers on the London Stock Exchange that were

affiliated with underwriters in a global offering of ordinary shares and

American Depositary Shares of a British company by the United Kingdom

government were permitted to continue normal market making on the

London Stock Exchange's SEAQ system, based on the magnitude of the

offering, the volume of trading by the affiliated market makers, and the

process of setting the offering price through a tendering process rather

than based on the secondary market price.!" Similarly, equity market

makers on the London Stock Exchange and options market makers on the

London International Financial Futures and Options Exchange or the Paris

Options Market that were affiliated with distribution participants were

permitted to continue making a market during certain multinational

distributions, subject to certain conditions.P'

Lost and Stolen Securities

Rule 17f-1 under the Exchange Act sets forth participation, reporting,

and inquiry requirements for the SEC Lost and Stolen Securities Program

(programj.l" Statistics for calendar year 1991 (the most recent data

available) reflect the program's continuing effectiveness. As of December

31, 1991,23,403 institutions were registered in the program. The number

of securities certificates reported as lost, stolen, missing, or counterfeit

increased from 651,305 in 1990 to 876,519 in 1991, a 35 percent increase.

The dollar value of these securities decreased 12 percent, from $2.6 billion

to $2.3 billion. The aggregate dollar value of the securities contained in

the program's database increased from $18.4 billion in 1990 to $20.1 billion

in 1991, a 9 percent increase. Program participants (e.g., banks and brokerdealers) made inquiries concerning 3.9 million certificates, an increase of

33
44 percent over 1990. Inquiries concerning 11,378 certificates valued at

$192 million matched reports of lost, stolen, missing, or counterfei t securities

on file in the database.

Oversight ot Self-Regulatory Organizations

National Securities Exchanges

As of September 30,1992, there were eight active securities exchanges

registered with the SEC as national securities exchanges: AMEX, BSE,

CBOE, Cincinnati Stock Exchange (CSE), MSE, NYSE, Phlx and Pacific

Stock Exchange (PSE).l06 During 1992, the agency granted exchange

applications to delist 104 debt and equity issues, and granted applications

by issuers requesting withdrawal from listing and registration for 56

issues. In addition, the SEC granted 1,713 exchange applications for

unlisted trading privileges.

The exchanges submitted 249 proposed rule changes to the SEC

during 1992. Many of these filings are described in the section above

entitled "Securities Markets, Facilities, and Trading." Other notable rule

filings approved by the Commission included proposals to:

establish listing criteria for the new AMEX Emerging Company

Marketplace (ECM);l07

adopt listing standards for new hybrid securities on the

Phlx;108

modify the procedures by which the NYSE reviews subsequent

listing applicationsr!"

extend for one year NYSE Rule 103A relating to specialist stock

reallocattonsr"? and

amend the NYSE basic Floor Member (Series 15) Examination to

revise the content outline and specifications for the examination."!

National Association of Securities Dealers, Inc.

The NASD, with over 5,200 member firms, is the only national securities

association registered with the SEC. It is the operator of NASDAQ, the

second largest stock market in the United States, and the third largest in

the world (after the NYSE and the Tokyo Stock Exchange). In 1992, the

NASD reported a total of 1,126 final disciplinary actions, which consisted

of 966 formal and summary disciplinary actions by its district committees

and 160 formal and summary actions by its market surveillance committee.

A total of 63 proposed rule changes were submitted to the Commission

by the NASD in 1992. The Commission approved 66 proposed rule

changes, which includes many of the submissions received during the year

and in several received prior years. Among the significant changes approved

by the Commission were:

codification of the practices and policies of the NASD's Corporate

Financing Department for review of underwriting compensation

arrangements of NASD members participating in a public offering; 112

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extension of the hours of operation for the NASD's screen-based

trading system, SelectNet, to include a one-half hour pre-opening

session from 9:00 a.m. to 9:30 a.m. eastern timejl13

the NASD's Investor Inquiry Program proposal, which implements

the newly-enacted provisions of Section 15A(i) of the Exchange

Actj114

requirements that the NASD review, prior to granting NASDAQ/

NMS designation, an issuer's past corporate governance activities

when the issuer's securities were traded on, or after withdrawal

from, the NASDAQ/NMS or a securities exchange that imposes

corporate governance requirements.'"

requirements that NASD member firms forward proxy material to

beneficial owners at the request of persons other than the issuer,

i.e., shareholdersj!"

requirements for real-time last sale trade reporting for NASDAQ

Small Cap securities."? and

offering, on a pilot basis, the NASDAQ International service, which

will support an early trading session in London to be available from

3:30 a.m. to 9:00 a.m. eastern time on each business day that

coincides with the business hours of the London financial markets.':"

Arbitration

Each SRO that administers an arbitration program has been asked

by the SEC to initiate refinements to procedures for selecting and training

arbitrators, in response to a report by the General Accounting Office (GAO)

entitled Securities Arbitration: How Investors Fare.1l9 In its report, which

found no indication of a pro-industry bias in decisions at the SRO forums,

the GAO accepted the approaches for improving arbitrator selection and

training recommended by the SEC in its comments on a draft of the

report.P"

The SEC approved proposed rule changes by the NASD and national

securities exchanges that strengthen the arbitration rules for disputes

between investors and broker-dealers, and among broker-dealers. The

arbitration rules of the NYSE and the NASD were amended to exclude

class action claims from arbitration, and to enable investors to pursue class

actions through the courts.P' The NYSE and NASD amended their rules

to clarify the authority of arbitrators to take appropriate action to enforce

their own interim orders during an arbitration proceeding.P' The Phi x

amended its rules to Simplify its procedures for composing the arbitration

panel in cases among its members.r"

Clearing Agencies

Sixteen clearing agencies were registered with the SEC at the end of

1992, 12 of which were active. During 1992, these registered clearing

agencies submitted 127 proposed rule changes and withdrew one. The

SEC approved 81 proposed rule changes, including the following:

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•

•

•
implementation by the Depository Trust Company (DTC) of a

commercial paper program to permit participants to settle

commercial paper trades through DTe' s same-day funds settlement

system.'"

enhancements to the Government Securities Clearing Corporation's

(GSCC) clearance and settlement system to allow GSCC to net, prior

to the U.S. Treasury auction, trades in Treasury securities submitted

by participating membersj?"

expansion of the Options Clearing Corporation (OCC) and the

Intermarket Clearing Corporation (ICC) cross-margining program 126

to include non-proprietary, market maker positions; expansion of

the OCC / Chicago Mercantile Exchange cross-margining program 127

to include non-proprietary, market maker positions; establishment

of the OCC/Board of Trade Clearing Corporation proprietary crossmargining prograrru!" and establishment of the OCC/Kansas City

Board of Trade Clearing Corporation proprietary cross-margining

program; 129 and

extension of temporary clearing agency registration of the

Participants Trust Company.!" the International Securities Clearing

Corporation.P' and ICC.132

Municipal Securities Rulemaking Board

The SEC received seven proposed rule changes from the MSRB and

approved eight. Of particular note, on April 6, 1992, the Commission

approved an 18-month continuing disclosure information pilot system.

The system creates a central repository for timely dissemination of

continuing disclosure information under which customers who buy and

sell municipal securities in the secondary market are expected to have

greater access to information regarding the financial health of an issuer.!"

Securities Investor Protection Corporation (SIPC)

The SIPC Fund amounted to $713.5 million on September 3D, 1992,

an increase of $51 million from September 3D, 1991. Further financial

support for the SIPC program is available through a $1 billion confirmed

line of credit established by SIPC with a consortium of banks. In addition,

SIPC may borrow up to $1 billion from the U.S. Department of the Treasury,

through the SEC.

Inspections of SRO Surveillance and Regulatory Compliance Programs

The staff conducted two inspections of the NYSE' s Division of Member

Firm Regulation, including an evaluation of the NYSE's program for

investigating customer complaints against NYSE member firms and

associated persons. That inspection revealed that most investigations

reviewed were conducted in a satisfactory manner, but also recommended

improvements in procedures to ensure full and timely investigation of all

relevant issues. The staff also conducted an inspection of the NYSE's

financial surveillance program. A substantial part of that program involves

the use by NYSE personnel of information produced by an automated

36

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financial system developed by the NYSE to detect abnormal fluctuations

in the financial condition of NYSE member firms. This system provides

the NYSE with a mechanism to detect member firms experiencing financial

difficulty and to take remedial action when appropriate. The staff found

that the NYSE financial surveillance program is functioning in a very

satisfactory manner.

The staff conducted an inspection of the NASD's program for

monitoring transfers of customer accounts between member firms for

compliance with requirements contained in the NASD's Uniform Practice

Code. While no major deficiencies were found in the NASD's program,

the inspection revealed minor delays which could be addressed by closer

monitoring by NASD personnel.

The regional office staff conducted routine oversight inspections of

regulatory programs administered by 10 of the NASD's 14 district offices.

These inspections included evaluations of the districts' broker-dealer

examination, financial surveillance and formal disciplinary action programs

as well as investigations of customer complaints, terminations of registered

representatives for cause and members' notices of disciplinary action

against their own employees. Although these inspections disclosed several

deficiencies involving a variety of issues, most were characterized as less

serious in degree and magnitude. Overall, these inspections revealed that

the NASD was meeting its regulatory responsibilities in an effecti ve manner.

The staff undertook comprehensive inspections of the arbitration

programs administered at the MSE, AMEX, NASD and Phi x arbitration

programs. These inspections were designed to evaluate the effectiveness

of these SRO programs in the processing and resolution of disputes

between SRO members and their customers. In particular, the staff reviewed

the adequacy and thoroughness of case documentation, the efficiency of

the case management systems, and the role each department played in

processing its cases. In addition, consideration was given to whether major

rule changes, adopted by the AMEX and the NASD in 1989, and by the

Phlx in 1991 in response to Commission concerns regarding the rules and

procedures governing SRO-sponsored arbitration, were successful in

improving the documentation and fairness of cases administered by these

SROs.

The MSE arbitration inspection revealed a minor inconsistency between

MSE published rules and administrative practice relating to the handling

of customer related claims. The staff recommended that the MSE file with

the SEC a proposed rule change so that the MSE's practices are consistent

with its rules. The AMEX arbitration inspection revealed that the AMEX

generally administers its arbitration program satisfactorily. Nevertheless,

the staff discovered certain deficiencies involving arbitrator disclosure and

case processing. The staff made several recommendations to remedy the

weaknesses. The inspections of the NASD and Phlx arbitration programs

were still in progress at the end of the year.

The staff continued its inspections of SRO securities listing

departments. These inspections focused on SRO determination of securities

qualifying for initial listing and continued trading. The staff conducted

37
inspections of the AMEX and the BSE. In the AMEX inspection, which

focused on AMEX listing of securities issued in roll-up transactions, the

staff found that the AMEXgenerally implemented adequately its quantitative

listing standards. The BSE inspection found that while the program for

the initial listing of securities was acceptable, deficiencies existed in the

program to assure that companies with listed securities comply with BSE

maintenance standards.

In December 1991, the staff conducted an inspection of the NASD

Corporate Finance Department. The staff found that the department

reviewed offerings filed with the NASD in a diligent, timely and efficient

manner. An inspection of AMEX surveillance and investigatory programs

for monitoring options and equities trading conducted in April and May

1992 found these programs to be functioning adequately. With respect

to the AMEX's Enforcement Department. The inspection revealed some

deficiencies in the timeliness of cases, and the staff found that a deterioration

in the overall quality of its program. In addition, the Financial Regulatory

Services Department had failed to implement several recommendations

from the staff's 1988 inspection.

The SECpublished a staff overview of the market decline on November

15,1991, analyzing the effects of hedging activities related to OTC derivative

products and unwinding activities related to expirations of options and

futures. Finally, at the staff's request, the NYSE, CBOE, AMEX, and NASD

formed a task force to study the scope of member firms' activities in OTC

derivatives in general, and OTC options on U.S. stock indexes in particular.

During 1992,the staff also expanded access to data concerning Treasury

securities, including programs to access and compile Treasury market

data.

Applications for Re-entry

As a result of the expanded definition of statutory disqualification

contained in the International Securities Enforcement Cooperation Act, the

number of SRO filings under Rule 19h-l under the Exchange Act processed

by the staff increased 68 percent, from 47 in 1991 to 79 in 1992. The

distribution of filings among the SROs was: NASD, 57; NYSE, 19; and

AMEX, 3. No applications were denied, but two were withdrawn and

the staff declined to take a no-action position for three other applications.

SRO Final Disciplinary Actions

Section 19(d)(1) of the Exchange Act and Rule 19d-l thereunder

require all SROs to file reports with the SEC of all final disciplinary actions.

A Rule 19d-1 filing reports the facts about a completed action that may

have been initiated at any time during the previous years. The time needed

to complete a SRO disciplinary action frequently reflects the severity of

the violations charged, the number of respondents involved, and the

complexity of the underlying facts. SROs generally conclude cases involving

minor or technical violations by a single respondent in less than a year.

Cases involving serious trading violations (e.g., price manipulation, insider

trading, frontrunning, etc.) often require more time to complete because

38
of the necessity of demonstrating specific intent to the disciplinary panel

that acts as trier of fact. Consequently, the absolute volume ofRule 19d-1notices

submitted by a SRO in a given year is not a precise measure of its proficiency

in market surveillance and compliance. Nevertheless, the number of

actions reported can be useful in assessing the regulatory effectiveness

of different SROs over similar time periods, and this information has

proven useful in focusing inspections of SRO regulatory programs.

In 1992, the AMEX filed 26 Rule 19d-1 reports; the CBOE filed 173;

the NYSE filed 202; the Phlx filed 66; the PSE filed 31; the registered

clearing agencies and the Boston, Cincinnati and Midwest Stock Exchanges

filed none; and the NASD filed 1,126.

39
Inveshnent Companies and Advisers

The Division of Investment Management oversees the regulation of

investment companiesand investment advisers under two companion statutes,

the Investment Company Act of 1940 (Investment Company Act) and the

Investment Advisers Act of1940 (Investment Advisers Act), andadministers

the Public Utility Holding Company Act of 1935 (Holding Company Act).

Key 1992 Results

In 1992, the Division of Investment Management released a report

on the regulation of investment companies, Protecting Investors: A Half

Century of Investment Company Regulation. The Commission and the staff

implemented some of the report's recommendations during the year. The

Commission proposed amendments to Regulation E under the Securities

Act of 1933 (Securities Act) that are intended to enhance the ability of small

business investment companies to raise capital for small business and to

increase the liquidity of investments in small business investment companies

and in business development companies. In connection with the SEC's

efforts to remove unnecessary barriers to capital formation and to facilitate

access to the capital markets by small business, the SEC announced that

mutual funds generally would be permitted to increase the amount of

illiquid assets they may hold from 10 percent to 15 percent of their net

assets. The staff also responded to the growing globalization of investment

and securities markets.

Program Overview

The tables below show the number of registered investment companies

and investment advisers and the amounts of assets under management.

All figures are reported for year end.

Number of Active Registrants

% Change

1988 1989 1990 1991 1992 1988-92

Investment

Companies 3,499 3.544 3.535 3,660 3.850 10.0%

Investment

Company

Portfolios NA NA NA 16,000* 18.700 NA

Investment

Advisers 14.120 16,239 17,386 17,500 18,000 27.5%

* Estimate

40
Assets Under Management

($ in billions)

1988 1989 1990

% Change

1991 1992 1988-92

Investment

Companies $1,125 $1,200 $1,350 $1,400 $1,800 60.0%

Investment

Advisers $3,400 $4,400 $4,900 $5,400 $8,100 138.2%

The number of registered investment companies increased by over

5 percent during 1992. Many investment companies combine several

separate portfolios or investment series in one investment company

registration statement. The number of portfolios generally ranges from

three to ten. However, some unit investment trusts group as many as

900 separate portfolios under one Investment Company Act registration.

The number of portfolios increased by nearly 17 percent during 1992. In

addition, the agency was responsible for regulating 18,000 investment

advisers at the end of 1992, over a 27 percent increase since 1988.

Investment Company and Adviser Inspection Program

During 1992, program resources were focused on inspections of funds

in the largest 100 investment company complexes, all money market

mutual funds, and investment advisers with assets under management in

excess of $1 billion. The 100 largest investment company complexes

managed $1.4 trillion in assets, which represented 77 percent of total

investment company industry assets of $1.8 trillion. The total assets under

management of the over 1,000 money market portfolios were $580 billion,

which represented 32 percent of all investment company assets.

Although the Investment Advisers Act establishes a system of

registration and regulation designed to disclose to clients basic facts about

an adviser and to hold the adviser to the highest standards of honesty

and loyalty expected of a fiduciary, the primary means by which the SEC

enforces the Investment Advisers Act is through a program of periodic

inspections.

Results Achieved by the Program

The division and regional office staff conducted inspections of funds

within each of the 100 largest investment company complexes as well as

125 other complexes. These inspections focused on portfolio management

activities. Each of the 1,048 money market funds were reviewed for

compliance with Rule 2a-7, which specifies the quality and maturity of

permissible instruments that may be held by money market funds and

requirements for portfolio diversification. The staff inspected 614

investment advisers, of which 210 managed more than $1 billion. These

41
inspections focused on the portfolio management and trading activities

of advisers. As a result of all inspections conducted during 1992, the staff

sent 782 deficiency letters to registrants requiring that they eliminate

violative activities. In 49 inspections, where the registrant appeared to

be engaged in serious misconduct, the staff referred the inspection results

to the enforcement program for further investigation.

Regulatory Policy

Significant Investment Company Developments

In May 1992, the Division of Investment Management released its

report, Protecting Investors: A Half Century of Investment Company Regulation

(Protecting Investors),l34 culminating a two-year special study of the

regulation of investment companies. The report, while concluding that

the basic investment company regulatory structure remains sound,

contained many recommendations to modernize the regulatory structure,

increase investor protection, and promote increased competition in the

industry. In many instances, the regulatory structure has not kept pace

with the tremendous changes that have occurred in the financial markets.

The report contained a number of proposals for regulatory and legislative

reform in three major areas: the scope of the Investment Company Act;

barriers to cross-border sales of investment management services; and

regulation of investment companies. Some of the report's recommendations

can be accomplished by rulemaking while others require legislative changes.

Many of the rulemaking initiatives to implement report recommendations

are discussed in the material that follows.

In November 1992, the Commission adopted Rule 3a-7 under the

Investment Company Act to exempt from the definition of investment

company, and hence from regulation under the Investment Company Act,

structured financings that meet certain conditions.l" In structured

financings, income-producing, often illiquid assets--such as credit card

receivables, automobile loans, and corporate bonds--are pooled and

converted into capital market instruments. Although structured financings

fall within the Investment Company Act definition of investment company,

they cannot, as a practical matter, register as investment companies because

they cannot operate under the statutory provisions. Some structured

financings have not been regulated under the Investment Company Act

based on statutory exceptions that were intended for very different

businesses. Other financings, primarily involving mortgage products,

have received exemptions by Commission order. Financings that were

unable to rely on an exception or obtain an exemptive order were sold

offshore or in private placements to not more than 100 investors.

In August 1992, the Commission proposed a rule to permit closedend management investment companies to repurchase their shares

periodically at net asset value. At the same time, the Commission proposed

a rule to permit open-end management investment companies to operate

either as extended payment companies, which would redeem shares

continuously but take longer to make payments than the seven days

42
currently mandated for open-end companies, or as interval companies,

whose shareholders could redeem at fixed, regular intervals, such as

monthly.P' These proposed rules were among the recommendations made

in the Protecting Investors report. Funds operating under the proposed

rules would provide alternatives to the traditional open-end and closedend companies. To prevent investor confusion, the new rule for openend companies would require prominent disclosure of a fund's limits on

redeemability and prohibit the use of the label "mutual fund:'

In March 1992, the Commission proposed for public comment

amendments to Regulation E under the Securities Act,137which exempts

from registration under the Securities Act certain securities offerings by

small business investment companies (SBICs) registered under the

Investment Company Act and business development companies (BDCs).138

The amendments would increase, from $5 million to $15 million, the

aggregate offering price of SBIC securities that may be sold annually

without registration under the Securities Act. The amount of SBIC or BDC

securities that may be sold annually by any person other than the issuer

would increase from $100,000 to $1,500,000. In addition, certain other

revisions were proposed to modify procedural requirements under

Regulation E. The proposed amendments are intended to enhance the

ability of small business investment companies to raise capital for small

businesses and to increase the liquidity of investments in SBICs and BDCs.

Significant Disclosure Program Developments

In March 1992, the Commission published reVISIOns to the staff

guidelines to Form N-IA, the registration form used by open-end

management investment companies to register under the Investment

Company Act and to register their securities under the Securities Act. The

revised guidelines generally permit mutual funds, other than money market

funds, to increase, from 10 percent to 15 percent of net assets, the amount

of illiquid assets they may hold!" and thereby permit mutual funds more

flexibility to make investments in illiquid securities of small businesses,

resulting in better access to capital markets for small businesses.

In November 1992, the Commission adopted amendments to Form

N-2, the registration form used by closed-end management investment

companies under the Investment Company Act and the Securities Act, and

related rules.>" The amendments shorten and simplify the prospectus

provided to investors by adopting the two-part disclosure format used

by mutual funds and update disclosure standards for closed-end funds

including companies electing to be regulated as BDCs. Amendments to

Rule 8b-16 under the Investment Company Act exempt closed-end funds

from the requirement to update their Investment Company Act registration

statements annually, provided certain disclosures are made to fund

shareholders annually. The Commission also published staff guidelines

for the preparation of Form N-2.

During the year, the staff devoted considerable attention to the

increased use of "hub and spoke" arrangements in which several openend investment companies, or "spokes," invest in one large investment

43
company, or "hub." The structure permits a spoke fund to tailor its

distribution and shareholder services to a particular group, while it takes

advantage of professional advisory services and economies of scale that

might not otherwise be available to smaller investment companies. These

structures were scrutinized to ensure that they do not result in undue

duplication of fees or deprive the ultimate investors--the spoke

shareholders--of any rights otherwise provided by the federal securities

laws.

During 1992, the staff reviewed new registration statements or

amendments to existing registration statements for: 991 new open-end

fund portfolios; 6,962 existing open-end fund portfolios; 184 new closedend fund portfolios; 347 existing closed-end fund portfolios; 964 new unit

investment trust portfolios; and 9,099 existing unit investment trust

portfolios.

Section 13(f)(1) of the Securities Exchange Act of 1934 (Exchange Act)

and Rule 13f-1 require "institutional investment managers" exercising

investment discretion over accounts holding certain equity securities with

a fair market value of at least $100 million to file quarterly reports on

Form 13F. For the quarter ended September 30, 1992, 1,048 managers filed

Form 13F reports, for total holdings of nearly $2 trillion. Under Rule 13f2T, these managers may elect to file the report on magnetic tape submitted

to the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR)

system.

Form 13F reports are available to the public at the agency's Public

Reference Room promptly after filing. Two tabulations of the information

contained in these reports are available for inspection: an alphabetical

list of the individual securities showing the number held by the managers

reporting the holding, and an alphabetical list of all reporting managers

showing the total number of shares of securities held. These tabulations

are generally available two weeks after the date on which the reports must

be filed.

Significant Insurance Products Developments

On October 23, 1992, the staff issued a letter to insurance company

sponsors/ depositors of separate accounts registered as investment

companies to assist the sponsors/ depositors in preparing post-effective

amendments and other disclosure documents. The letter included comments

about recent substantive and procedural developments. For example,

several insurance companies issuing variable life insurance contracts have

sought to advertise fund performance based on certain assumptions about

contract charges. The letter described staff concerns about the use of these

assumptions because of the difficulty of reflecting in any standardized

form the cost of insurance charge, which varies depending on the age,

gender (in some states), health and smoking/non-smoking status of the

individual purchaser.

44
Significant Public Utility Holding Company Act Developments

Title VII of the Energy Policy Act of 1992 (Energy Policy Act), enacted

on October 24, 1992, amends the Holding Company Act by creating new

classes of exempt entities, exempt wholesale generators (EWGs) and foreign

utility companies.!" The legislation also permits registered holding

companies to acquire small power production facilities, in addition to

cogeneration facilities, anywhere in the United States.t? Although

acquisitions of EWGs and foreign utility companies no longer require SEC

approval, related financings and guarantees by a registered holding

company or its subsidiaries remain subject to SEC jurisdiction. Further,

the legislation directs the SEC, within six months of the date of enactment

of the legislation, to adopt rules for the protection of consumers of the

registered holding-company systems.

The Commission amended Rule 52 of the Holding Company Act to

broaden the current exemption for certain financings by public utility

subsidiary companies, and proposed for comment amendments that would

further expand the scope of exemption under the rule.'? The Commission

also proposed for public comment amendments to various rules and forms

under the Holding Company Act.!" The proposed amendments would

generally reduce the regulatory burdens for companies in a registered

holding-company system by expanding existing exemptions for, inter alia,

certain acquisitions and sales, financings, investments in non-utility

enterprises, and the provision of services to foreign associate companies.

In addition, the Commission proposed rescission of a rule that requires

competitive bidding for the issue and sale of securities by companies in

a registered holding-company system.>"

As of September 3D, 1992, 14 public utility holding company systems

were registered with the SEC. The 14 registered systems were comprised

of 91 public utility subsidiaries, 125 non-utility subsidiaries, and 30 inactive

companies, for a total of 246 companies operating in 26 states. These

registered systems had aggregate assets of approximately $99.1 billion as

of September 3D, 1992, an increase of $4.9 billion over September 3D, 1991-

Total operating revenues for the 12 months ending September 3D, 1992 were

approximately $38.1 billion, a $1.2 billion increase from the 12 months

ending September 3D, 1991.

During 1992, the agency authorized registered holding-company

systems to issue $6.7 billion in short-term debt, $8.3 billion in long-term

debt, and $1.3 billion in common and preferred stock. Long-term debt

increased by 232 percent in 1992, primarily as a result of an increase in

the sale of medium-term notes and debentures, and short-term debt

increased by 22 percent. The SECalso approved pollution control financings

of $267 million, nuclear fuel and oil procurement financings of $245 million,

and investments in qualified cogeneration facilities of $488 million, an

increase of $325 million over 1991. Total financing authorizations of

approximately $17.4 billion represented an approximate 63 percent increase

over such authorizations in 1991.

45
The SEC audits service companies and special purpose corporations.

In the future, this audit program also will be used to audit EWGs and

foreign utility companies. In addition, the agency reviews the fuel

procurement activities, accounting policies, annual reports of service

company subsidiaries and fuel procurement subsidiaries of registered

holding companies, and quarterly reports filed by non-utility subsidiaries

of registered holding companies. By uncovering misapplied expenses and

inefficiencies, the agency's activities during 1992 resulted in savings to

consumers of approximately $10.2 million.

Significant Interpretations and Applications

Investment Company Act Matters

The staff stated that Section 11(a) of the Investment Company Act

prohibits a mutual fund from offering to waive its front-end sales load

to attract shareholders of unaffiliated funds that charge contingent deferred

sales loads, absent a Commission order. The purpose of Section ll(a) is

to protect mutual fund shareholders from paying multiple sales loads

through the churning of their investments. Since salespersons may receive

compensation for moving shareholders from fund to fund, they may have

an incentive to switch shareholders even when no front-end load is imposed

by the new fund. The staff concluded that inducements to shareholders

to switch their investments should continue to require a Commission order

where the exchange is not made at net asset value.!"

In two no-action letters under Section 17(f) of the Investment Company

Act and Rule 17f-5 thereunder, the staff stated that it would not recommend

enforcement action if various entities acted as eligible foreign custodians

for registered investment companies. These positions were based in part

on representations that each entity operated the central system in its

country for the handling of certain types of securities, i.e., Commonwealth

Government securities issued in Australia and securities listed on the Stock

Exchange of Hong Kong Limited. The staff also considered whether, and

to what extent, a foreign government operated or regulated the entities.!"

The staff declined to take a no-action position where a fund proposed

to treat an affiliate of a foreign broker-dealer as a disinterested person

of the fund for the purposes of Section 10(a) of the Investment Company

Act. Section 10(a) provides that no more than 60 percent of the members

of a registered investment company's board of directors may be interested

persons of the registered investment company. The individual in question

was a director of a major foreign broker-dealer in a country in which the

fund made investments. Section 2(a)(19)(v) of the Investment Company

Act provides that a person is an interested person of an investment

company if the person is a broker or dealer registered under the Exchange

Act or an affiliate of such a broker or dealer. While the foreign brokerdealer was not registered under the Exchange Act, the staff took the

position that the individual's position as a director of the broker-dealer

4S
posed the same conflicts of interest that Section 2(a)(19)(v) was designed

to address. The staff, therefore, refused to provide no-action assurance

to the fund. us

The Commission issued a conditional order under Section 10(f) of the

Investment Company Act to permit the First Philippine Fund, Inc. (First

Philippine) to purchase foreign securities in public offerings in which an

affiliate of First Philippine's investment adviser participates in the

underwriting syndicate.r" First Philippine agreed to comply with all of

the conditions in Rule 10f-3, except the requirement that the securities be

registered under the Securities Act. Prior orders had required that the

foreign securities be registered under the laws of the foreign country,

which were" substantially equivalent" to the Securities Act. The Commission

granted the order to First Philippine notwithstanding the fact that the

securities laws of the Philippines may not be "substantially equivalent"

to the Securities Act. Instead, the order requires that any securities

purchased by First Philippine be sold in public offerings conducted in

accordance with Philippine law, the securities be listed on the Philippine

exchanges, and financial statements of the issuers of the securities be

available.

The Commission issued a conditional order exempting SPDR Trust,

Series 1 (Trust) and its sponsor, a wholly-owned subsidiary of the AMEX,

from numerous provisions of the Investment Company Act and the rules

thereunder.!" The Trust invests in a portfolio of securities designed to

mirror the Standard & Poor's 500 Index. The Trust's securities, known

as SPDRs, can be purchased from and tendered for redemption to the Trust

only in lots of 50,000. Transactions involving fewer than 50,000 SPDRs

must be effected in the secondary market. To facilitate secondary market

trading, SPDRs will be listed on the AMEX. Among other things, the order

provides an exemption from Section 24(d), enabling dealers effecting

certain secondary market transactions in SPDRs to do so without delivering

a prospectus, and from Section 26(a)(2)(C), to permit the Trust to pay

certain expenses associated with the creation and maintenance of the Trust.

In response to an application filed by Merrill Lynch Ready Assets

Trust and other taxable money market funds whose investment advisers

are direct or indirect wholly-owned subsidiaries of Merrill Lynch & Co.,

Inc. (Merrill), the Commission issued an order under Sections 6(c) and

17(b) of the Investment Company Act that permits those funds to engage

in principal transactions in money market securities with dealers in money

market securities that are directly or indirectly wholly-owned by Merrill,

subject to conditions with respect to pricing, quality, volume, and

recordkeeping.v"

The Commission issued an order on an application filed by Paine Webber

T.C, Inc. (PaineWebber), the investment adviser to a limited partnership

(the Partnership), to invest primarily in other limited partnerships owning

low-income and moderate-income housi ng.v" The order exempts

PaineWebber from Section 205(a)(l) of the Investment Advisers Act to

permit it to receive a portion of the proceeds that the Partnership receives

from the sale, refinancing, or disposition of apartment complexes. Because

47
Paine Webber is a registered investment adviser, it is prohibited from

receiving compensation based on a share of the capital gains upon or

capital appreciation of any portion of a client's funds. Prior Commission

orders granting relief from Section 205(a)(I) to advisers of real estate

limited partnerships have required the investors in those partnerships to

meet stringent net worth standards, a requirement that the investors in

the Partnership did not meet. In granting relief, the Commission considered

the following factors: (1) Section 205(a)(1)was nei ther designed nor intended

to apply to long-term investments in real estate; (2) compensation based

on capital appreciation is common among entities investing in real estate;

and (3) the Partnership was promoted and its investments selected primarily

as a means for providing tax benefits to the limited partners over several

years.

The Commission issued a conditional order on an application filed

by the Drexel Burnham Lambert Group Inc. (DBL Group).153 DBL Group

and certain of its subsidiaries, including Drexel Burnham Lambert

Incorporated, were engaged in a broad range ofsecurities related businesses.

In 1990, DBL Group and certain companies controlled by DBL Group filed

petitions for reorganization under Chapter 11 of the Bankruptcy Code. The

order under Sections 6(c) and 6(e) of the Investment Company Act and

Section 206A of the Investment Advisers Act exempts companies, escrows,

and reserves that were created pursuant to the reorganization of DBL

Group and of certain controlled companies from many, and in some cases

all, provisions of the Investment Company Act and exempts New Street

Capital Corporation, the successor to DBL Group, from Section 203 of the

Investment Advisers Act for limited purposes.

The Commission issued a temporary order under Section 9(c) of the

Investment Company Act on an application filed by First Investors

Corporation (FIC), a registered broker-dealer and the co-underwriter of

several open-end investment cornpanies.P' FIC consented to the entry of

a final judgment by the United States District Court for the Southern

District of New York enjoining and restraining FIC from further violations

of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and

Section 17(a) of the Securities Act in connection with the sale of the

securities of two investment companies. Section 9(a) of the Investment

Company Act prohibits persons who are subject to a securities related

injunction, or affiliates of such persons, from engaging in investment

company related activities. The Commission order exempts FIC and

certain affiliated entities from Section 9(a). The Commission required FIC

to agree to a number of conditions, including the submission of reports

relating to FIC's investment company operations.

On an application filed by Salomon Brothers Asset Management Inc.

(Salomon) and Salomon Brothers Inc. (SBI), the Commission issued an

order under Section 9(c) of the Investment Company Act that exempts

Salomon, SBI,and their affiliated persons from Section 9(a) of the Investment

Company Act.IsS Salomon, SBI, and their affiliates became subject to the

provisions of Section 9(a) as a result of an injunction entered against

Salomon and SBI in connection with the May 1991 auction of two-year

48
United States Treasury notes. The Commission required the Salomon

entities to agree to a number of conditions, including the submission of

reports relating to Salomon's and SBl's procedures.

Investment Advisers Act Matters

The staff stated that it would not recommend enforcement action if

a foreign bank shared personnel and research with a wholly-owned

subsidiary, a United States registered adviser located abroad, without

registering itself under the Investment Advisers Act. The staff further

stated that it would not recommend enforcement action if the registered

advisory subsidiary provided investment advisory services to non-United

States clients solely in accordance with foreign law. The staff granted the

no-action request on the general conditions that (1) the bank provide the

SEC with access to trading and other records and to all of its employees

to the extent necessary for the SEC to monitor and police conduct that

might harm United States clients or markets, and (2)the registered subsidiary

agree to keep records in accordance with Investment Advisers Act

requirements and to provide the SEC with access to its employees. The

no-action response is the first to implement the proposal in the Protecting

Investors report regarding the jurisdictional reach of the Investment Advisers

Act. This approach should make it easier for foreign advisers to offer

advisory services to United States investors.!"

Insurance Company Matters

On February 26, 1992, the staff issued an order pursuant to delegated

authority to permit a separate account and other affiliated and unaffiliated

insurance company separate accounts to invest in shares of an underlying

fund whose shares also would be sold directly to qualified pension and

retirement plans. The order was based on representations by applicants

that the applicable tax regulations allow shares in an investment company

to be held by the trustee of a qualified pension or retirement plan and

by the separate accounts of insurance companies in connection with their

variable contracts. Applicants also made representations that provisions

had been made to avoid potential conflicts of interest between the plans

and the separate accounts.!"

On December 4, 1992, the staff issued a notice of an application,

pursuant to delegated authority, for an order granting an exemption from

certain provisions of the Investment Company Act to permit an insurance

company to deduct a mortality and expense risk charge from the assets

of the separate account at a rate higher than permitted in the past. The

higher charge is attributable to the payment of an enhanced death benefit. ISS

The staff stated that it would not recommend enforcement action

against an insurance company offering variable life insurance policies to

a law firm partnership without registering the separate account that

funded the policies under the Investment Company Act. The insurance

company asserted that the law firm rather than its individual partners

should be considered the beneficial owner of the policies. The separate

49
account's securities would then be owned by less than 100 persons and

come within the exclusion from the definition of investment company in

Section 3(c)(1) of the Investment Company Act. In addition, the insurance

company stated that the policies should not be deemed voting securities

because of the law firm's limited rights with respect to the separate

account.!"

Holding Company Act Matters

Prior to enactment of the Energy Policy Act, the SEC issued orders

permitting exempt and registered holding companies to acquire foreign

utility operations.l'" The Energy Policy Act added Sections 32 and 33 to

the Holding Company Act, which provides that prior SEC approval is no

longer required for the acquisition of exempt wholesale generators and

foreign utility companies.>' However, certain other related transactions,

including financings and guarantees by a registered holding company

remain jurisdictional, as do transactions between companies in a registered

holding-company system.l"

In its first orders under new Section 33 of the Holding Company Act,

the Commission authorized certain transactions related to the acquisitions

by Entergy Corporation (Entergy), a registered holding company, of interests

in Argentine electric generation and transmission operations.r" State and

local regulators initially had intervened in the matter in opposition to SEC

authorization of the transaction, arguing that they would be unable to

protect domestic consumers if there were any adverse effects from the

foreign activities. They subsequently withdrew their interventions pursuant

to a settlement agreement with Entergy. The Commission denied the joint

request for a hearing by the Environmental Action Foundation and Alliance

for Affordable Energy on the grounds that new Section 33 had mooted

the challenge to the legality of the acquisition and, further, that concerns

about consumer protection were met by the settlement agreement between

state and local regulators and Entergy.

In 1990, the Commission had authorized Entergy to organize and

capitalize Entergy Power, Inc. (EPI), a wholly-owned public utility subsidiary

company, for the purpose of participating as a supplier in bulk power

markets. 1M The Commission also had authorized Arkansas Power & Light

Company (AP&L), an associated public utility company, to sell two of its

generating units (Units) to EPI for use in its business. The United States

Court of Appeals for the District of Columbia Circuit recently held that

the Commission properly had determined that the Holding Company Act

did not prohibit Entergy's proposed transaction, but remanded the case

to the SEC to develop further the administrative record regarding certain

capacity and energy costs to the system associated with AP&L's transfer

of the Units to EPI.165

The Commission approved a corporate reorganization which resulted

in the formation of a new public utility holding company over Kentucky

Utilities Company, and exempted the new holding company, KU Energy

Corporation, under Section 3(a)(1) of the Holding Company Act.166 The

reorganization involved the dual incorporation of a public utility subsidiary

50
company in Kentucky and Virginia. The Commission found that the

corporate reorganization was consistent with the economical and efficient

development of an integrated holding-company system and that the

exemption was not detrimental to the interests protected by the Holding

Company Act.

The Commission authorized UNITIL Corporation (UNITIL), an electric

public utility company, and Charles H. Tenney II to acquire Fitchburg Gas

and Electric Light Company, a combination electric and gas public utility

company.!" Following the acquisition, UNITIL became the first company

in more than a quarter of a century to register as a holding company under

Section 5 of the Holding Company Act. The Commission also determined

that UNITIL could retain the Fitchburg gas properties as an additional

integrated system.

The Commission authorized Northeast Utilities (Northeast), a

registered holding company, to form a new wholly-owned subsidiary

company, North Atlantic Energy Service Corporation (NAESCO), that will

assume operating responsibility for the Seabrook Nuclear Power Project

(Seabrook) in Seabrook, New Hampshire.!" The formation of NAESCO

was part of the reorganization of the Public Service Company of New

Hampshire (PSNH), a New Hampshire electric utility company.v" The

Commission's decision regarding Northeast's acquisition of PSNH was

recently upheld on appeal by the United States Court of Appeals for the

District of Columbia Circuit.F"

The United States Court of Appeals for the District of Columbia

Circuit, on remand from the Supreme Court, found that Section 13(b) of

the Holding Company Act empowered the Commission to approve the

price of affiliate sales of goods, such as coal, and that the Federal Energy

Regulatory Commission (FERC) was constrained from altering that price

under its "just and reasonable" rate-setting authority."! The case involved

the cost of coal charged by Southern Ohio Coal Company (SOCCO), to

its parent Ohio Power Company (Ohio Power), a public utility subsidiary

company of American Electric Power Company, a registered holding

company. In a series of orders, the Commission had authorized SOCCO

to sell its coal to Ohio Power at cost."> Certain industrial and municipal

customers of Ohio Power intervened in a rate proceeding before FERC,

asserting that the cost of coal charged to Ohio Power exceeded the market

price for such coal. FERC initially had agreed with the intervenors and

excluded the excess costs from rates. The Court of Appeals remanded

the matter to FERC for further findings consistent with its opinion. On

November 9, 1992, the United States Supreme Court denied a petition for

certiorari filed by FERC.

51
OTHEREQ

16.6

3%

Full Disclosure System

Thefull disclosure system isadministered by the Division of Corporation

Finance (Division). The system is designed to provide investors with material

information, foster investor confidence, contribute to the maintenance offair

and orderly markets, facilitate capital formation, and inhibit fraud in the

public offering, trading, voting, and tendering of securities.

Key 1992 Results

Despite general economic conditions, the total dollar amount of

securities filed for registration with the SEC during 1992 reached a record

of over $700 billion, a 40 percent increase from the approximately $500

billion registered last year. The number of issuers accessing the public

markets for the first time soared, with initial public offering (IPO) filings

of equity or debt reaching $66.5 billion, an increase of about 53 percent

from the $43.6 billion filed in 1991.

REGISTRATION STATEMENTS FILED

DOLLAR VALUE ($BIWONS)

OTHEREQ

35.6

5%

1991

TOTAL - $495.7

1992

TOTAL - $702.1

Foreign issuers' participation in the U.S. markets continued to show

strong growth. More than $34.6 billion of securities of foreign issuers filed

for registration under the Securities Act of 1933 (Securities Act). In 1992,

87 new foreign companies from 21 countries, including the United Kingdom,

France, Italy, Australia, Brazil, Korea, and Singapore, entered the U.S.

public market. At the end of 1992, there were 496 foreign companies from

35 countries filing reports with the SEC.

52
The Division's rulemaking program was extraordinarily active in

1992. During the year, the Commission proposed and adopted a set of

major initiatives to streamline regulations affecting small businesses. The

Commission expanded the small offerings exemptions under the Securities

Act and provided a simplified, integrated disclosure system for small

businesses (companies with less than $25 million revenues and a public

float of less than $25 million). As part of its Small Business Initiatives,

the Commission also proposed legislation to increase its small offering

exemptive authority to $10 million.

The Commission adopted important amendments to its executive

compensation disclosure requirements. The amendments are designed to

(1) ensure that shareholders receive comprehensible, relevant, and complete

information about compensation paid to executives upon which to base

their voting and investment decisions; and (2) foster accountability of

directors to shareholders by permitting shareholders to vote on the proposals

of other shareholders with regard to executive and director compensation,

and thereby advise the board of directors of the shareholders' assessment

of the compensation policies and practices applied by the board.

After three years of study, two releases for public comment, a twoday public conference, and more than 1,700 public comment letters, the

Commission substantially revised its rules governing proxy solicitations.

The revisions were adopted to (1) facilitate effective communications

among shareholders and between shareholders and their corporations, as

well as participation by shareholders in corporate governance, by removing

unnecessary regulatory barriers, (2) reduce the costs of complying with

the proxy rules, (3) improve disclosures to shareholders, and (4) restore

a balance between the free speech rights of shareholders and Congress'

concern that solicitation of proxy voting authority be conducted on a fair,

honest and informed basis.

To facilitate capital raising and the securitization of financial assets,

such as small business loans, the Commission adopted amendments to

Form S-3 under the Securities Act to (1) expand the classes of issuers

eligible to use these short-form registration statements, (2) increase the

availability of shelf registration under Securities Act Rule 415, and (3)

provide increased flexibility in the raising of equity capital by permitting

eligible companies to file one shelf registration covering all types of

securities without requiring a specific allocation of offering amounts

among the securities. It is estimated that approximately 450 additional

issuers with an aggregate public float of about $88 billion became eligible

to use short-form registration as a result of the changes.

The Commission adopted amendments to the Rule 144A safe harbor

from registration requirements for institutional resales that expanded the

definition of qualified institutional buyer. The amendments are estimated

to qualify additional institutions with $1 trillion of assets. Since the

adoption of the rule in April 1990,there have been 212Rule 144Aplacements,

totaling approximately $25 billion, involving the securities of 210 issuers

(including 130 foreign issuers).

53
Review of Filings

During 1992, the staff conducted 3,058 reporting issuer reviews. The

reporting issuer reviews were accomplished through the full review of

1,180 registration statements and post-effective amendments to registration

statements filed under the Securities Act; 1,450 annual and subsequent

periodic reports; 141merger and going private proxy statements; and 1,126

full financial reviews of annual reports. The number of documents reviewed

exceeded the number of reporting issuer reviews because in many cases

more than one document filed by the same issuer received a full review

during the year.

The following table summarizes filings reviewed during the last five

years. The decline in reviews of IPOs, tender offers, contested solid tations,

and going private transactions, all of which are subject to review, reflects

the reduction in the transactional filings received.

54
FULL DISCLOSURE REVIEWS

1988 1989 1990 1991 1992

Reporting Issuer

Reviews gJ 3,097 2,734 1,907 2,660 3,058

Major Filing Reviews

Securities Act

Registrations

Home Office

New Issuers 777 684 568 465 831

Repeat Issuers 599 564 635 758 970

PIE Amdts. 'QJ 409 320 203 308 210

Regions

Registrations 708 533 327 183 158

PIE Amdts. 'QJ 486 609 505 275 137

Annual Reports

Full Reviews 2,166 1,949 1,129 1,557 1,450

Full Financial

Reviews 567 388 292 712 1,126

Tender Offers

(140-1)Q/ 254 188 95 37 27

Going Private

Schedules 276 176 108 68 61

Contested Proxy

Solicitations 93 84 75 65 58

Proxy Statements

Merger/Going

Private 314 291 240 188 141

Other eJ 790 428 351 374 395

!I Includes reporting Securities Exchange Act of 1934 (Exchange Act) issuers

whose financial statements and Management Discussion and Analysis

disclosures were reviewed in Securities Act and Exchange Act registration

statements, annual reports, merger and going private proxy statements,

and post-effective amendments (PIE) to Securities Act registration

statements.

QI Includes PIE amendment filings that contain new financial statements

only.

£1 Includes reports reviewed in connection with other filings.

Q./ Reflects limited partnership roll-up transactions as single filings

regardless of the number of Schedules 14D-1 filed or the number

of issuers involved in the roll-up.

gj Excludes reviews of revised and additional preliminary proxy material.

55

~
Rulemaklng, Interpretive, and Legislative Matters

Small Business Initiatives

The Commission adopted revisions to the rules and forms under the

Securities Act, Exchange Act, and Trust Indenture Act of 1939 (Trust

Indenture Act) intended to reduce compliance burdens for small businesses

and assist capital raising."? To facilitate the raising of seed capital, the

Small Business Initiatives included revisions to small offering exemptive

Rule 504 of Regulation D, which permits nonpublic companies to raise up

to $1 million from any number or type of investors subject only to antifraud

prohibitions. The revisions allow such offerings to use general advertising

and offering activity and permit investors to freely resell such securities.

The amendments also foreclosed the exemption to blank check companies,

i.e., companies with no business plan.

In addition, to make it easier for nonpublic developing small businesses

to raise greater amounts of capital without incurring the substantial legal

and accounting expenses of a registered offering, the Commission revised

its small public offering registration exemption, Regulation A. The revisions:

(1) increase the amount that may be raised under the exemption from $1.5

million to $5 million; (2) permit the use of a simple and easily comprehended

question-and-answer form developed by state securities regulators; and

(3) permit companies to "test the waters" for potential interest in the

company before preparing and filing the offering circular with the SEC.

In the first four months of the revised rules, approximately $65 million

of Regulation A offerings were filed with the SEC, as compared to $15.4

million in the comparable period of the prior year.

An integrated disclosure system--consisting of simplified disclosure

requirements, reduced financial statement requirements and a new series

of rules and forms--also was adopted for small business issuers. Small

business issuers are defined as those companies with revenues of less than

$25 million, provided that their public float does not exceed $25 million.

Conforming changes were made to the rules under the Trust Indenture

Act, increasing the dollar amount of debt securities that may be offered

without full compliance with that act. In the first four months of the new

system, approximately $350 million of offerings were filed on the new

form.

In response to favorable comment on the Small Business Initiatives,

the Commission published for comment, rule and form proposals that

would permi t small businesses to transition from non-reporting to reporting

status using the Regulation A disclosure format, with the added requirement

that the requisite financial statements be audited for both reporting and

registration of small offerings ($5 millionl.!" Changes to the financial

statement requirements applicable to small business issuers also were

proposed. The Commission proposed to exclude a "test the waters"

document that complies with applicable requirements from the definition

of a prospectus. Finally, the Commission proposed that the informational

and financial statement requirements of Regulation D be revised to

substantially parallel those in Regulation A.

56
Executive Compensation

The amendments to the executive compensation disclosure

requirements of Item 402 of Regulation S-K are designed to make

compensation disclosure clearer and more concise, and of greater utility

to shareholders.l" Specific provisions were made for small businesses to

minimize costs of compliance with the compensation disclosures where

consistent with shareholder interests.!"

Previous narrative disclosure regarding executive compensation has

been replaced with a series of tables. Specifically, the rules provide for

a new, comprehensive table disclosing the annual salaries, bonuses and

other compensation awards and payouts to the five highest paid executives,

including the chief executive officer (CEO), for each of the last three fiscal

years. The other tables require more detailed disclosure for the last fiscal

year with respect to, among other things, information bearing on the

potential values of stock options and stock appreciation rights (SARs)

granted to and exercised by the named executives, the repricing of executive

options and SARs, long-term incentive compensation awards, and defined

benefit and actuarial plans.

In addition to these tables, the annual meeting proxy statement is

required to include a report on the registrant's compensation policies with

respect to executive officers, the basis for the decisions made with respect

to the CEO's compensation for the last fiscal year, and the relationship

between executive compensation and the registrant's performance. The

report must be made over the individual names of the Compensation

Committee members. To complement this discussion of the relationship

of executive compensation to performance, companies are required to

include with the report a line graph presentation comparing the registrant's

cumulative total shareholder return over the prior five years with a

performance indicator of overall stock market return, and either a published

industry index, or registrant-determined peer comparison. Disclosure also

is required of specific interlocking relationships of directors involved in

compensation decisions and potential conflicts of interest.

In February 1992, the Commission announced that precatory

shareholder proposals concerning executive and director compensation

would no longer be considered matters relating to the ordinary business

operations of the issuer for purposes of determining whether the proposals

must be included in a company's proxy statement under the Commission's

shareholder proposal rule, Rule 14a-8. As a result, such shareholder

proposals, not otherwise excludable under Rule 14a-8, would have to be

included in the company's proxy statement and submitted to shareholders

for a vote. During the 1992 proxy season, 10 shareholder proposals with

respect to executive and director compensation were included under the

new policy and subject to a shareholder vote. Reported results on

compensation proposals were as follows.

57
For Against Abstain

Aetna Life & Casualty Co. 7.5% 80.3% 12.2%

Baltimore Gas & Electric Co. 12.2 83.6 4.2

Bell Atlantic Corp. 10.9 74.6 14.5

Black Hills Corp. 36.9 47.6 15.5

Chrysler Corp. 5.6 79.5 14.9

Eastman Kodak Co. 15.9 67.8 16.3

Equimark Corp. 16.5 81.4 2.1

Int'I Business Machines Corp. 16.7 83.3 Not Avail.

Reebok Inc. 19.2 51.9 28.9

Gerber Products Company 4.8 86.4 11.8

Proxy Reform

The amendments, initially proposed in June 1991,177were reproposed

in June 1992,178and adopted in October 1992.179 The amendments (1)

provide an exemption from the filing and disclosure requirements for

solicitations by persons not seeking proxy authorization and who do not

have a disqualifying interest; (2) provide a safe harbor to allow shareholders

to announce how they intend to vote without having to comply with the

proxy rules; (3) eliminate preliminary filing requirements for all soliciting

materials other than proxy statements and proxy cards; (4) eliminate the

non public treatment of virtually all preliminary materials; (5) require a

separate vote on each matter to be approved by shareholders; and (6)

improve the shareholder list or mailing rule.

Simplification of Registration Procedures for Primary Securities Offerings

The Commission adopted amendments to Form 5-3 to expand the

classes of companies eligible to use short-form registration and primary

delayed shelf offerings pursuant to Rule 415.180 The amendments shortened

the minimum issuer reporting requirement from 36 to 12 months for

offerings of non-asset-backed securities, reduced the public float

requirement for primary offerings of non-investment grade securities from

$150 million to $75 million, and eliminated the trading volume test.

Investment grade asset-backed securities, such as small business loans,

are now eligible for shelf registration on Form 5-3 without any reporting

history requirement. The amendments also: (1) provide for same-day,

automatic effectiveness of dividend or interest reinvestment plan

registration statements; (2) permit the registration of debt, equity and other

securities on a single shelf registration statement, without having to specify

the amount of each class of securities to be offered; and (3) permit changes

in the offering price and decreases in the amount of the securities to be

reflected after effectiveness without the need to file a post-effective

amendment if the changes would not materially change the disclosure in

the registration statement at effectiveness.

58
Private Resales of Securities to Institutions

The Commission adopted amendments to Rule 144A, expanding the

definition of qualified institutional buyer to include collective and master

trusts, and legal forms commonly used for the collective investment of

the funds of employee benefit plans.?" The amendments also recognize

purchases by an insurance company for separate accounts not required

to be registered under the Investment Company Act of 1940 as purchases

for the account of the insurance company. Finally, the amendments allow

the inclusion of U.S. Government and similar securities in calculating the

amount of securities owned or invested by a particular institutional investor

for purposes of determining qualified institutional buyer status.

Blank Check Offerings

Pursuant to the Securities Enforcement Remedies and Penny Stock

Reform Act of 1990, the Commission adopted new rules to provide special

registration procedures for offerings by blank check cornpanies.i"

Specifically, the rules require that the proceeds received and securities

issued in a blank check offering be deposited (with permissible

disbursements to underwriters and the issuer) into an escrow account

maintained by an insured depository institution or trust account maintained

at a bank. Funds and securities must be held for the sole benefit of

purchasers in the offering and deposited funds can only be invested in

insured deposits as defined under the Federal Deposit Insurance Act,

obligations of or guaranteed by the United States, or money market funds.

Upon execution of a business acquisition agreement accounting for at least

80 percent of the maximum offering proceeds, the blank check company

must furnish to each purchaser a copy of the prospectus describing the

acquisition. The purchaser would have no fewer than 20 business days

to either confirm an intent to invest or request a refund of funds held in

the escrow account.

Roll-Up Transactions

The Commission adopted rules designed to enhance the quality of

information provided to investors in connection with roll-up transactions

and to establish a minimum solicitation period for such offerings.!" A

roll-Up is defined as any transaction or series of transactions that directly

or indirectly, through acquisition or otherwise, involves the combination

or reorganization of one or more fini te-life partners hips, provided securities

of a successor issuer will be issued in the transaction. The rules require

distribution of disclosure documents to investors at least 60 calendar days

in advance of a meeting, unless under applicable state law the maximum

period permitted for giving notice is less than 60 calendar days. The rules

also require inclusion of (1) separate disclosure supplements for each

partnership involved in the transaction; (2) a clear, concise and

comprehensible summary of the roll-Up transaction; (3) disclosures

concerning the risks and effects of the transaction; (4) a brief description

59
of the background of each partnership involved in the transaction; (5)

disclosure regarding the reasons for the transaction and alternatives

considered by the general partner; (6) information about the possibilities

of liquidating or continuing the partnerships; (7) information regarding

the fairness of the roll-up transaction; (8) information that reveals any

possible II opinion shopping"; (9) a clear and concise summary description

of each material federal income tax consequence; and (10) specified new

financial information. The Commission also amended its proxy rules to

require that investors subject to roll-up transactions have a right to a list

of investors pursuant to Rule 14a-7.

Electronic Data Gathering Analysis and Retrieval System (EDGAR)

The Commission issued for public comment proposed amendments

to its rules, forms, schedules and procedures to implement the agency's

EDGAR system. Under EDGAR, registrants and others will be required

to submit most filings and related correspondence processed by the Division

of Corporation Finance to the SEC electronically.t'" In addition, comment

was solicited on proposed phase-in schedules indicating when companies

would be brought onto the EDGAR system.

Earlier in the year, the Commission adopted amendments to the

temporary rules and forms applicable to the Pilot electronic disclosure

program of EDGAR.18s These amendments permitted the transition to the

operational phase of EDGAR by Pilot participants who elect to convert

to the operational system in advance of their mandated phase-in date. The

rules became effective upon closure of the Pilot and opening of the

operational EDGAR system on July 15, 1992.

Conferences

Corporate Governance Conference

In March 1992, the Commission held a two-day public forum on the

interplay between the United States corporate governance system and the

competitiveness of United States issuers in a rapidly globalizing economy.

The conference on IICorporate Governance and American Economic

Competitiveness: The Role of Shareholders, Directors and Management"

brought together a variety of distinguished speakers from the corporate,

shareholder, academic and governmental sectors. The fundamental question

addressed was whether the board-centered model of corporate governance

that predominates in this country provides a sound foundation for the

continued international competitiveness of domestic companies. Topics

discussed included the nature and scope of the relationship between

corporate governance and corporate performance, executive compensation

and competitiveness, the role of management, directors and shareholders

in our governance system, the relative merits of foreign corporate

governance systems, and the implications of the increasing

institutionalization of the United States equity markets.

60
SEC/NASAA Conference Under Section 19(c) of the Securities Act

On March 30, 1992, approximately 60 SEC senior officials met with

approximately 80 representatives of the North American Securities

Administrators Association in Washington, D.C. to discuss methods of

effecting greater uniformity in federal and state securities matters. After

the conference, a final report summarizing the discussions was prepared

and distributed to interested persons.

SEC Government-Business Forum on Small Business Capital Formation

The eleventh annual SEC Government-Business Forum on Small

Business Capital Formation was held in Scottsdale, Arizona on September

10 and 11, 1992. Approximately 250 small business representatives,

accountants, attorneys, and government officials attended the forum.

Numerous recommendations were formulated with a view to eliminating

unnecessary governmental impediments to small businesses' ability to

raise capital. A final report setting forth a list of recommendations for

legislative and regulatory changes approved by the forum participants was

prepared and provided to interested persons, including Congress and

regulatory agencies.

61
Accounting and Auditing Matters

The Chief Accountant is the principal advisor to the Commission on

accounting and auditing matters arising from the administration of the

various securities laws. The primary Commission activities designed to

achieve compliance with the accounting andfinancial disclosure requirements

of thefederal securities laws include:

rulemaking that supplements private sector accounting standards,

implements financial disclosure requirements, and establishes independence

criteria for accountants;

review and comment processfor agency filings directed to improving

disclosures in filings, identifying emerging accounting issues (which may

result in rulemaking or private sector standard-setting), and identifying

problems that may warrant enforcement actions;

enforcement actions that impose sanctions and serve to deter improper

financial reporting by enhancing the care with which registrants and their

accountants analyze accounting issues; and

oversight of private sector efforts, principally by the Financial Accounting

Standards Board (FASB) and the American Institute of Certified Public

Accountants (AICPA), which establish accounting and auditing standards

designed to improve financial accounting and reporting and the quality

of audit practice.

Key 1992 Results

The Commission oversaw a number of significant public and private

sector initiatives intended to enhance the reliability of financial reporting

and to ensure that the accounting profession meets its responsibilities

under the federal securities laws. Notably, the Commission continued to

provide policy direction to the accounting profession to move toward

using appropriate market-based measures in accounting for financial

instruments. Through the review and comment process, the staff endeavored

to ensure compliance with existing rules during the interval. The

Commission also continued to devote significant resources to initiatives

involving international accounting and auditing independence requirements.

Mark-to-Market Accounting

In previous annual reports, the agency has emphasized the importance

of initiatives directed toward improving the accounting guidance for

investments in financial instruments. The importance of considering

market value accounting for investment securities was demonstrated during

the savings and loan crisis, when historical cost accounting, among other

factors, led to the delayed recognition of the deteriorating condition of

loan and corporate bond portfolios.!"

62

•

•

•

•
The FASBissued an exposure draft of a proposed accounting standard

to address the accounting and reporting for investments in equity securities

that have determinable fair values and for all investments in debt

securities.J" The proposed standard represents a limited scope project

since it does not address the comprehensive use of market value accounting

for all securities and other financial instruments and related liabilities.

The question of the appropriate accounting for investment securi ties

was a pervasive issue in the context of the staff's review of registrants'

filings. Where the volume of a particular registrant's trading activity

demonstrated that its accounting practices did not conform to existing

authoritative literature, the staff sought the correction of that entity's

financial statements. In this regard, the staff required several registrants

in the banking, thrift, and insurance industries to reclassify portions of

their debt security portfolios as "trading" or as "available for sale" to be

accounted for at market value or lower of cost or market, respectively.

Accounting-Related Rules and Interpretations

The agency's accounting-related rules and interpretations supplement

private sector accounting standards, implement financial disclosure

requirements, and establish independence criteria for accountants. The

agency's principal accounting requirements are embodied in Regulation

S-X,which governs the form and content of financial statements filed with

the SEC.

Technical Amendments. During 1992, the staff reviewed each rule in

Regulation S-X to identify rules that are obsolete or in conflict with

professional standards. Consistent with this review, the Commission

adopted technical amendments to its accounting-related rules for purposes

of eliminating duplicative and obsolete disclosures and conforming these

rules with recent changes in generally accepted accounting principles

(GAAP).188The amendments should reduce confusion and costs associated

with registrants' compliance with Regulation S-X.

Oversight of Private Sector Standard Setting

The SEC monitors the structure, activity, and decisions of the private

sector standard-setting organizations. These organizations include the

FASB and the Financial Accounting Foundation (FAF). The Commission

and its staff worked closely with the FASB and the FAF in an ongoing

effort to improve the standard-setting process, including the need to

respond to various regulatory, legislative, and business changes in a timely

and appropriate manner. A description of FASB activities in which the

staff was involved is provided below.

In light of the North American Free Trade Agreement, the FASB

undertook a joint project with standard setters in Canada and Mexico to

compare accounting standards in the three countries. The goal of this

project is to develop recommendations for consideration by standard

63
setters in the U.S., Canada, Mexico, and the International Accounting

Standards Committee on what action can and should be taken to move

towards greater comparability.

The recent FASB standard on employer's accounting for health care

and other forms of post retirement benefits other than pensions will result

in a dramatic change in the manner in which many public companies

account for other post employment benefits. The standard generally is

effective for the fiscal years beginning after December 15, 1992.

The FASB completed work on a revised standard on accounting for

income taxes.!" Under the revised standard, entities may recognize and

measure a deferred tax asset for an entity's deductible temporary differences

and operating loss and tax credit carry forward. A valuation allowance

is recognized if it is more likely than not that some portion or all of the

deferred tax asset will not be realized. Although application of the

standard is not mandatory until fiscal years beginning after December 15,

1992, the staff encountered circumstances involving early adoption where

it was not apparent that a particular registrant's existing level of operations

would be sufficient for the registrant to realize the deferred tax assets

recorded pursuant to the revised standard. In circumstances where it was

reasonably likely that realization of a material deferred tax asset would

require significant improvements in profitability, changes in trends, changes

in relationship between pretax accounting and taxable income, or asset

sales, the staff requested that registrants disclose the assumptions relied

upon by management in concluding that realization of the asset was "more

likely than not."

On January 31, 1992, the SEC's Chief Accountant testified before the

Subcommittee on Oversight of Government Management of the Senate

Committee on Governmental Affairs concerning the existing accounting

rules for employee stock compensation. The Chief Accountant testified

that the existing accounting requirements for stock and option awards can

be improved to provide more consistent accounting treatment for different

plans with similar economic effects and more realistically and appropriately

measure the value of benefits provided by employers to employees, and

expense to the employer.?" He also emphasized that the most effective

way to seek these improvements is through the existing process for setting

accounting standards by the FASB, rather than by SEC rule or through

proposed legislation.

The FASB resumed work on its stock compensation project. During

1992, the FASB reached tentative agreement that compensation expenses

arising from awards of stock or options under both fixed and performance

stock compensation plans should be measured as the fair value of the

award at the date it is granted. The estimated value at the grant date

would be subsequently adjusted, if necessary, to reflect the outcome of

performance conditions and service-related factors such as forfeitures

before vesting.

The FASB also issued an exposure draft (ED) on accounting for loan

impairment by creditors.!" Under the ED's provisions, a loss on impairment

of a loan would be recognized when it is probable that a creditor will be

64
unable to collect all principal and interest due under the terms of the loan

agreement.

Oversight of the Accounting Profession's Initiatives

The Commission and its staff continued to be active in overseeing

the audit standard-setting process and other activities of the accounting

profession. A discussion of the activities in which the SEC staff was

involved follows.

A/CPA. The SEC oversaw various activities of the accounting

profession conducted primarily through the AICPA. These included (1)

the Auditing Standards Board (ASB), which establishes generally accepted

auditing standards; (2) the Accounting Standards Executive Committee

(AcSEC), which provides guidance on specific industry practices through

its issuance of statements of position and practice bulletins and prepares

issue papers on accounting topics for consideration by the FASB; and (3)

the SEC Practice Section (SECPS), which seeks to improve the quality of

audit practice by member accounting firms that audit the financial statements

of public companies through various requirements, including peer review.

ASB. The staff continued to work closely with the ASB to enhance

the effectiveness of the audit process. During 1992, the staff met with

ASBrepresentatives concerning a proposed auditing standard that, among

other things, would govern the availability of comfort letters, which are

provided to underwriters in relation to the underwriters' due diligence

reviews pertaining to securities offerings.!" The staff's primary concern

has been that such letters continue to be available in private securities'

offerings. The ASB also (1) adopted a new auditing standard on changes

in the GAAP hierarchy.!" (2) continued its work on an ongoing project

on examination and reporting on management's assertions about the

effectiveness of an entity's internal control structure, and (3)issued a series

of annual Audit Risk Alerts to provide auditors with an overview of recent

economic, professional, and regulatory developments that may affect 1992

year-end audits.

SECPS. Two programs administered by the SECPS are designed to

ensure that the financial statements of SEC registrants are audited by

accounting firms with adequate quality control systems. A peer review

of member firms by other accountants is required every three years and

the Quality Control Inquiry Committee (QCIC) reviews on a timely basis

the quality control implications of litigation against member firms that

involves public clients. The most recent report shows 1,203 SECPS member

firms that audit the financial statements of over 14,000 SEC clients.!" An

estimated 300 accounting firms that are not SECPS members audit the

financial statements of approximately 500 SEC registrants.

The SECPS peer review and QCIC programs are closely monitored

by the Public Oversight Board (POB), which is independent of the AICPA

(except for funding). The SEC oversaw the activities of the SECPS through

frequent contact with the POB and members of the executive, peer review,

and quality control inquiry committees of the SECPS. The staff reviewed

POB files and selected working papers of the peer reviewers. This oversight

65
has shown that the peer review process contributes significantly to

maintaining the quality control systems of member firms and, therefore,

enhances the consistency and quality of practice before the Commission.

AcSEC. During 1992, the AcSEC issued statements of position on

revenue recognition in the computer software industry!" and the

appropriate balance sheet treatment of foreclosed assets.!" The AcSEC

also began working on a statement of position on the appropriate treatment

of operating results relating to foreclosed assets.!"

AcSEC also made significant progress during 1992 on statements of

position which would (1) establish appropriate accounting for advertising

costs!" and (2) revise the existing guidance on accounting for employee

stock ownership plans. Also, the AcSEC proposed three separate statements

of position on accounting issues unique to investment companiest" and

initiated a project to enhance disclosures about risks and uncertainties by

entities generally.

International Accounting and Auditing Standards

Significant differences in accounting and auditing standards currently

exist between countries. These differences are an impediment to

multinational offerings of securities. The SEC, in cooperation with other

members of the International Organization of Securities Commissions

(IOSCO), actively participated in initiatives by international bodies of

professional accountants to establish appropriate international standards

that might be considered for use in multinational offerings. For example,

the staff worked with the IASC to reduce accounting alternatives as an

initial movement toward appropriate international accounting standards.

The SEC staff also monitored the IASC's projects to address issues relating

to the extent of implementation guidance, adequacy of disclosure

requirements, and the completeness of international accounting standards.

In 1992, the IASC issued seven exposure drafts related to projects concerning

revenue recognition, construction contracts, property, plant, and equipment,

the effects of changes in foreign exchange rates, business combinations,

extraordinary items, fundamental errors and changes in accounting policies,

and retirement benefit costs.P" Four final standards were approved

concerning cash flow statements, research and development activities,

inventories, and capitalization of borrowing costs.s"

The staff also continued working with the International Federation

of Accountants (IFAC) to revise international auditing guidelines. Auditors

in different countries are subject to different independence standards,

perform different procedures, gather varying amounts of evidence to

support their conclusions, and report the results of their work differently.

The staff, as part of an IOSCO working group, worked closely with IFAC

to expand and revise international auditing guidelines to narrow these

differences, and significant progress was made.

66
Other Litigation and Legal Activities

The General Counsel represents the SEC in all litigation in the United

States Supreme Court and the courts ofappeals. The General Counsel defends

the Commission and its employees when sued in district courts, prosecutes

administrative disciplinary proceedings against securities professionals,

appears amicus curiae in significant private litigation involving the federal

securities laws, and oversees the regional offices' participation in corporate

reorganization cases. The General Counsel analyzes legislation that would

amend the federal securities laws, drafts congressional testimony, prepares

legislative comments, and advises the Commission on all regulatory and

enforcement actions under thefederal securities laws. In addition, the General

Counsel advises the Commission in administrative proceedings under various

statutes.

Key 1992 Results

Much of the General Counsel's Office continued to experience

substantial increases in workload while the litigation workload continued

to maintain the high level experienced in 1991.

Increase in Selected Workload

%

1991 1992 Change

Litigation Matters Opened 263 264 0%

Litigation Matters Closed 247 267 8%

AdjUdication

Cases Received 30 56 87%

Cases Completed 39 52 33%

Legislation

Testimony 29 16 -45%

Comments to Congress and Others 29 64 120%

Ethics Matters 249 247 -1%

Significant Litigation Developments

Insider Trading

In SEC v. Peiers.i" a case involving the validity of the Securities

Exchange Act (Exchange Act) Rule 14e-3, the U.S. Court of Appeals for

the Tenth Circuit, agreeing with U.S. v. Chestman,203upheld the Commission's

authority to proscribe insider trading in Rule 14e-3 without including

breach of fiduciary duty as an element of the offense. The court of appeals

67
reversed a jury verdict for the defendant, holding that the jury was

improperly instructed that it had to find a breach of fiduciary duty to find

a Rule 14-3 violation.

Definition of a Security

In SEC v. International Loan Network, Inc.,2M the U.S. Court of Appeals

for the D.C. Circuit agreed with the Commission that investment programs

offered by International Loan Network, Inc. in a nationwide pyramid

scheme were securities under the Supreme Court's "investment contract"

test set forth in SEC v. W.j. Howey CO.20STypically, the company induced

investors to invest money in it and then become sponsors of others placing

money with the company. The sponsors were paid a percentage of the

money brought in by the new members. The company never had a

significant source of income other than money from new members or

members buying into new programs.

Likewise, in Gomez v. Leonzo.i" a private action related to the

Commission's action in SEC v. Latin Investment Corp. pending before the

same judge, the U.S. District Court for the District of Columbia agreed

with the Commission, which filed an amicus curiae brief at the court's

request, arguing that" savings passbooks" issued in exchange for" deposits"

by Latin Investment Corporation, a company that held itself out as a bank

but in fact was neither chartered nor regulated as a bank, were securities.

The Commission argued that the savings passbooks were securities under

both the "note" test enunciated by the Supreme Court in Reves v. Ernst

& Young,207 and the Howey II investment contract" test.

On the other hand, in Banco Espanol de Credito v. Security Pacific

National Bank,2oBa divided U.S. Court of Appeals for the Second Circuit

held, contrary to the position urged by the Commission, that certain debt

instruments sold by Security Pacific National Bank which Security Pacific

called "loan notes" are not securities under the Securities Act of 1933

(Securities Act). Dissenting, Chief}udge Oakes agreed with the Commission,

which had filed an amicus curiae brief at the court's request, that these

loan notes are securities. In its loan note program, Security Pacific makes

short-term unsecured loans to corporations, takes back a note from the

corporation, and then immediately sells all or part of the note to mostly

non-financial entities such as corporations, pension funds, and mutual

funds, as well as some financial institutions. The Commission filed a brief

in support of rehearing that prompted the court to amend its decision to

clarify that its ruling applies only to the specific instruments II as marketed

in this case," thus reducing the adverse precedential impact.

In re NBW Commercial Paper Litigation,209 a private civil action alleging

registration and antifraud violations through sales of commercial paper,

the Commission filed an amicus curiae brief to address two issues of

significance to the Commission's parallel enforcement action, SEC v.

Coleman.P" which is currently pending before the same judge. The

Commission's brief argued first, that the commercial paper was a security

under the Reves test, and second, that it did not qualify for a registration

exemption because it was not "prime quality," and was sold to customers

68
without regard to their investment expertise or financial situation. On

December 11, 1992 the district court agreed with the Commission's legal

analysis and held that the commercial paper was a security.

Statutes of Limitations

The Commission as amicus curiae defended newly-enacted Section 27A

of the Exchange Act against constitutional attack in numerous cases.

Section 27A eliminates retroactive application of the new statute of

limitations for Section lO(b) private damages claims announced by the

Supreme Court in Lampf, Pleva, Lipkind, Prupis & Pettigrow v. Gilbertsonr"

by preserving the pre-Lampf statute in cases that were filed before Lamp].

In Anixter v. Home-Stake Production Co.212 and Henderson v. Scientific

Atlanta,213 the U.S. Courts of Appeals for the Tenth and Eleventh Circuits

sustained Section 27A as applied to Section 10(b) claims that were pending

when Section 27A was enacted. The courts rejected defendants' arguments

that Congress had violated the separation of powers and encroached on

the judicial function by directing a particular outcome in certain cases,

holding that Section 27A was an exercise of the legislative function to

change the governing law. The Tenth Circuit also rejected the argument

that Section 27A contravenes James B. Beam Distilling Co. v. Georgiar"

wherein the Supreme Court rejected selective prospectivity, the practice

of applying a new rule of law to the parties before the court but not to

other pending cases, holding that Beam was not a constitutional decision

and thus placed no constraint on Congress' enactment of Section 27A. Both

courts also ruled that Section 27A did not violate due process or equal

protection. Constitutional challenges to Section 27A remain pending in

the Second, Fifth, Sixth, Seventh, and Ninth Circuits.

In SEC v. Rind215 and SEC v. Hayes,216 appeals pending in the U.S.

Courts of Appeals for the Ninth and Fifth Circuits respectively, defendants

asserted that the Commission's actions were time-barred by the one and

three year statute of limitations held applicable in Lampf. The Commission

filed briefs in both cases arguing that the limitations period enunciated

in Lampf applies only to implied private rights of action for damages

brought under Section lO(b), and not to Commission cases, which are

brought to vindicate public rights pursuant to an express right of action

that contains no limitations period.

Disgorgement and Related Issues

In SEC v. AMX International, Inc.217and SEC v. Maxwell C. Huffman,218

the U.S. District Court for the Northern District of Texas applied the

Federal Debt Collection Procedures Act of 1990219 to disgorgement orders

in Commission enforcement actions. The decision permitted defendants

to invoke certain state law property exemptions to debt collection, thereby

sheltering assets otherwise available to pay disgorgement. The Commission

has appealed both cases to the U.S. Court of Appeals for the Fifth Circuit,

arguing that a disgorgement order in a Commission action is not a "debt"

as defined in the Act.

69
Market Manipulation

The Supreme Court declined to review the U.S. Court of Appeals for

the Second Circuit's decision in U.S. v. Regan220 addressing an important

aspect of market manipulation under Section 10(b) of the Exchange Act

and Rule 10b-5. Petitioner Zarzecki was convicted for engaging in short

sales as part of a scheme with the Drexel Burnham Lambert Group, Inc.

to drive down the price of a Drexel client's stock in order to influence

the pricing of the client's upcoming offering of convertible notes. In his

petition, Zarzecki argued that because his short sales were actual

transactions and not fictitious, they were lawful, and that any violation

caused by his trading would have to be based on a fiduciary duty to the

persons with whom he traded. The government's brief responded that

Congress intended to outlaw trades made to artificially alter the price of

a security, and that their illegality does not depend on the existence of

a fiduciary duty because such transactions are affirmative acts of deception

designed to rig securities prices, rather than mere silence about a trader's

subjective intent.

Liability in Private Actions

The Commission filed an amicus curiae brief in Musick, Peeler & Garrett

v. Employers Insurance ofWausau,221 urging the Supreme Court to recognize

the existence of a right to contribution in private civil actions brought

under Section 10(b) of the Exchange Act and Rule 10b-5. The Commission's

brief argues that the implied right of action under Section 10(b) and Rule

10b-5 should be interpreted consistently with the analogous express private

rights of action in the Exchange Act, which contain explicit rights to

contribution, in order to conform the implied right of action as closely

as possible to the congressional policy expressed in the statute.

Inclusion of Shareholder Proposal in Proxy Materials

In Roosevelt v. E.I. Du Pont de Nemours & CO.,222the U.S. Court of

Appeals for the D.C. Circuit agreed with the Commission, as amicus curiae

in a brief filed at the request of the court, that a Du Pont shareholder had

an implied right of action under Exchange Act Section 14(a) and Rule 14a8 against Du Pont for its refusal to include her shareholder proposal in

its proxy materials. However, the court ruled that the proposal, which

would have instructed Du Pont to accelerate its target date for the phaseout of the production of chlorofluorocarbons, did not have to be included

in the proxy materials because it fell within the exception in the proxy

rules for" ordinary business."

Motions to Vacate Permanent Injunctions

In SEC v. American Bancshares P" James Sullivan, a former officer of

American Bancshares, moved in the United States District Court for the

Eastern District of Wisconsin to vacate an injunction entered against him

in 1978. The injunction enjoins Sullivan from violating antifraud and

reporting provisions of the federal securities laws. Sullivan based his

70
motion on his claims that he was a minor participant in the fraudulent

scheme, the injunction was entered against him by default, and he has not

violated any laws since that time. The Commission opposed Sullivan's

motion asserting that he failed to meet his substantial burden to demonstrate

that the injunction is working a "grievous wrong" (United States v. Swift224).

A decision is pending.

Actions Against the Commission and Staff

In Yeaman v. SEC,225plaintiff David Yeaman and others sued the SEC

and several staff members, charging violations of their constitutional and

statutory rights. Plaintiffs alleged that the staff had illegally harassed them

during an SEC investigation of plaintiffs' activities in the penny stock

market. The lawsuit also alleged that the plaintiffs' attempts to register

the stock of certain "shell" corporations were illegally "stonewalled" by

the staff. The Commission moved to dismiss the lawsuit primarily on the

grounds that it was barred by sovereign and official immunity. Agreeing

with the Commission that plaintiffs had failed to state a claim, the United

States District Court for the District of Utah dismissed the lawsuit in its

entirety.

Requests for Access to Commission Records

The SEC received approximately 80 subpoenas for documents and/

or testimony in 1992. In some of these cases, the SEC declined to produce

the requested documents or testimony because the information was

privileged. The SEC's assertions of privilege were upheld in every case

when the party issuing the subpoena challenged the assertion in court.

For example, in In re United Telecommunications, Inc., Securities Litigation,226

the SEC asserted the law enforcement privilege in response to a subpoena

for documents from an on-going SEC investigation. In response to a

subsequent motion to compel their production, the Commission argued

that release of the documents could impair the investigation and that most

of the documents could be obtained from other parties in the litigation

or from third party witnesses. The court denied the motion, finding that

the movants had made no showing of need sufficient to overcome the SEC's

privilege, particularly since the documents were available from other

sources.

In Scholes v. Stone, McGuire & Benjamin F' the defendants subpoenaed

internal staff notes and memoranda concerning a recently concluded SEC

investigation. The SEC declined to produce these documents on the

grounds that they were protected from disclosure by the deliberative

process, attorney-client and attorney work product privileges. The

defendants argued that because the SEC was not a party to the proceeding,

it was precluded from asserting these privileges. The court ruled that

the SEC was not required to be a party to assert a claim of privilege and

that the SEC properly withheld the requested documents.

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The SEC received 1,724 requests under the Freedom of Information

Act (FOIA) for access to agency records and 5,390 confidential treatment

requests from persons who submitted information. There were 55 appeals

to the SEC's General Counsel from initial denials by the FOIA office. One

such appeal resulted in litigation.

In Alexander & Alexander Services, Inc. v. SEC,22s plaintiff brought an

action against the SEC under the Administrative Procedure Act, 5 V.S.c.

701-06, seeking to enjoin the SEC from disclosing certain documents to

a law firm under the FOIA, 5 V.S.c. 552. Alexander claims that the

documents are exempt from disclosure by 5 V.S.c. 552(b)(4) because the

documents contain confidential commercial information, the disclosure of

which would allegedly harm its competitive position. Alexander alleges

that the SEC did not afford it an adequate opportunity to substantiate its

claim for confidential treatment. The SEChas moved for summary judgment

on the grounds that plaintiff failed to substantiate its claim that disclosure

of these documents would harm its competitive position.

Actions Under the Right to FinancialPrivacy Act

Three actions were filed under the Right to Financial Privacy Act to

block SECsubpoenas for customer information from financial institutions.P"

All three challenges were dismissed after the courts found, in each case,

that the records were relevant to legitimate law enforcement inquiries.

Actions Against ProfessionalsUnder Commission Rule 2(e)

During 1992, the SEC issued an important ruling under Rule 2(e) of

the SEC's Rules of Practice, in In re Checkosky and Aldrich P" In that case

the Commission affirmed the decision of an Administrative Law Judge

that two partners of the accounting firm of Coopers & Lybrand had

engaged in improper professional conduct during five audits of Savin

Corporation. The Commission found that respondents had failed to

employ an "appropriate degree of skepticism" in testing whether Savin

had improperly deferred costs of research and development associated

with the company' s ul tima tely unsuccessful efforts to manufacture a copier.

The Commission accordingly suspended each respondent from appearing

or practicing before the SEC for two years. The Commission also affirmed

prior SEC precedent that proof of bad faith or wiIIful misconduct is not

a prerequisite for the imposition of sanctions pursuant to Rule 2(e)(1)(ii).

The respondents have appealed the ruling to the Court of Appeals for the

District of Columbia.

The staff also prosecuted successfully certain other Rule 2(e)

disciplinary proceedings. In In re Kagan231 and In re Lamoreauxr" the

Commission "forthwith" suspended from practice before the Commission

an attorney and an accountant, respectively, based on prior felony

convictions. In In re Domingues and Brimhallr" two accountants consented

to a Commission order under Rule 2(e) finding that they engaged in

improper professional conduct during the 1985 audit of Fluid Companies,

a small-business investment company. The Commission censured both

accountants and suspended Domingues from appearing or practicing before

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the Commission for ten months. In In re Denkensohn and Schoemer2J4 the

Commission censured two accountants who consented to the issuance of

an order finding that they engaged in improper professional conduct

during the 1983 audit of Marsh & McLennan.

Significant Adjudication Developments

The backlog of older appeals awaiting staff review was essentially

eliminated. This development occurred while the number of appeals

entering the staff's inventory rose from 30 to 56, an increase of 87 percent.

The number of cases reviewed by the staff on the merits increased

from 39 to 52, and the post-briefing age of the staff's case inventory was

cut in half. As a result of such recent improvements, the Commission

decided nearly twice the number of appeals on the merits as it had 1991.

Although the staff's increased production was a factor in offsetting the

upsurge in new cases, the year-end inventory grew by about 11 percent.

Significant Adjudicatory Decisions Involving Broker-Dealers and Market Professionals

A number of the most significant opinions issued by the Commission

have involved the setting of prices for securities:

In Kevin B. Wade,235 the Commission articulated for the first time

special restrictions on a dealer's percentage markup in riskless retail sales.

The basis for the percentage may not exceed the firm's wholesale cost,

even if the wholesale market price is higher. The Commission nevertheless

reversed National Association of Securities Dealers Inc. (NASD) action

against Wade and others because published industry guidelines had made

it appear that market price would control.

Other cases explored the means of establishing the wholesale market

price, which is the proper basis of markups when dealers maintain an

inventory and hence are at risk. For example, in Meyer Blinder P' the

Commission re-affirmed its view that, where a dealer controls trading in

a security, "market" price is best reflected by the dealer's recent cost. That

measure prevails over asked quotations, and even over prices the dealer

has actually charged other firms. The Commission accordingly sustained

the NASD's imposition of substantial suspensions and fines upon several

brokerage firm officials. Also, in Century Capital Corp. of South Carolinar"

the Commission elaborated on its previous statements to the effect that

a marketmaker's quotations may constitute reliable evidence of the market

price. The Commission explained that a firm does not constitute a

marketmaker for that purpose even if it is a "marketmaker" as defined

in Section 3(a)(38) of the Exchange Act.

In Lake Securities, Inc.,238the Commission sustained the NASD'sfinding

that a firm and its president committed fraud by charging a 7.4 percent

markdown in buying an interest-only mortgage-backed security from a

customer. Fraudulent intent was found because the firm did not try to

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discern the market at the time of the transaction and because the president

later refused to revise the price despite being warned that the markdown

was excessive.

In Michael David Sweeney,239 the Commission elaborated on the

appropriate standards for finding an excessive trading violation under

NASD rules and for assessing disgorgement. The Commission explained

that, even assuming that investors wanted their accounts traded

aggressively, it would still be possible to find excessive trading. Because

transaction costs were so frequently incurred, customers in this case

needed to earn rates of return ranging from 22 to 44 percent just to break

even. On disgorgement, the Commission urged that in future cases the

NASD: 1) assess prejudgment interest or explain why such need not be

done; 2) ensure that the total wrongful gain is properly computed; and

3) remit the disgorged amounts to customers who have been harmed, and

not to the NASD. In this case, the Commission directed the NASD to order

the distribution of specific amounts to four customers.

Shortly after the end of the 1992, the Commission addressed a number

of serious violations in Donald T. Sheldon P" The Commission barred

Sheldon, former president of former municipal and government securities

firms and Bruce Reid, the manager of the firms' Houston branch office.

It also suspended Gregory Pattison, a salesman in the Houston office. The

Commission found that the respondents defrauded municipal securities

customers (and government securities customers, in the case of Sheldon

and Reid). In addition, Sheldon and Reid failed to exercise proper

supervision and charged, or aided and abetted the charging of, excessive

markups. Sheldon was further found to have aided and abetted the firms'

misuse of customers' fully-paid securities and a violation of the net capital

rule.

Significant Legislative Developments

The second session of the 102nd Congress adjourned in October 1992

without enactment of significant securities legislation. Although the major

securities bills considered by the 102nd Congress relating to regulation

of the government securities market and investment advisers did not pass

in 1992, Congress did pass other legislation that affects the Commission

and its work. For example, Congress amended the Public Utility Holding

Company Act of 1935 (PUHCA) in the context of broader energy legislation

(P.L. 102-486). Although the PUHCA amendments will eliminate the

Commission's authority to approve: (i) the acquisitions of independent

power producers by registered holding companies; and (ii) the ownership

of foreign utility companies by registered holding companies, the

Commission will retain its authority to approve financing arrangements

with respect to such acquisitions and also is directed to promulgate rules

with respect to such acquisitions.

In the commodities area, the "Futures Trading Practices Act of 1992,"

was passed by both Houses in early October, and signed into law by the

President on October 28, 1992 (P.L. 102-546). Included in the law is Title

V, a compromise on various jurisdictional proposals considered by Congress

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earlier in the 102nd Congress. The Title V compromise includes: (1)

Federal Reserve Board oversight authority with respect to margin levels

on stock index futures (a proposal strongly advocated by the Commission

since the 1987 Market Break); (2) broad Commodity Futures Trading

Commission (CFTC) exemptive authority, including authority with respect

to certain hybrid and derivative products; and (3) a comprehensive study

of the markets for swaps and other off-exchange derivative products to

be conducted by the CFTC, in cooperation with the Commission and the

Federal Reserve Board.

Additionally, Congress actively considered securities legislation in

a number of other areas, including executive compensation, limited

partnership "roll-ups," accounting reforms, and the Commission's small

business initiative. Efforts to legislate in these areas ultimately were not

successful.

Details regarding legislative developments during the year are

discussed in the appendix.

Corporate Reorganizations

The Commission acts as a statutory advisor in reorganization cases

under Chapter 11 of the Bankruptcy Code to see that the interests of public

investors are adequately protected. During a reorganization, the debtor

generally is allowed to continue business operations under court protection

while negotiating a plan to rehabilitate the business and to pay the company's

debts. Although Chapter 11 relief is available to businesses of all sizes,

the Commission typically limits its participation to cases involving debtors

that have publicly traded securities registered under the Exchange Act.

In 1990, the Commission authorized a review of its role in reorganization

cases and of the adequacy of public investor protection under Chapter

11. During 1991, the staff completed its review of the bankruptcy program.

Commission consideration of the staff's recommendations was deferred.

Committees

Official committees are empowered to negotiate with a debtor on the

administration of a case and to participate in all aspects of the case,

including formulation of a reorganization plan. In addition to a committee

representing unsecured creditors, which must be appointed in all Chapter

11 cases, the Bankruptcy Code allows the court or a United States Trustee

to appoint additional committees for stockholders and others where

necessary to assure adequate representation of their interests. During

1992, the Commission moved for, and the court approved, the appointment

of a committee to represent investors in two Chapter 11 cases.!" In a case

having practical significance for the representation of both equi ty securityholders and public debt-holders by official committees, In re El Paso Electric

CO.,242 the bankruptcy court adopted the position advocated by the

Commission. The court held that an institutional member of an official

committee did not violate its fiduciary duties as a committee member by

trading in the debtor's securities if the committee member is engaged in

the trading of securities as a regular part of its business and the entity

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has implemented an appropriate information blocking device (commonly

known as a Chinese Wall). The Chinese Wall is designed to prevent misuse

of nonpublic information obtained through participation on the committee.

Estate Administration

The Commission protects the interests of public investors in

reorganization cases by participating in selected matters involving

administration of the debtor's estate.

In a matter still pending from 1991,In reAmdura Corp.,243the Commission

had filed a brief in an appeal to the district court expressing its view that

class claims are permissible in bankruptcy.r" The bankruptcy court had

rejected a class proof of claim on the ground that the decision of the Tenth

Circuit in In re Standard Metals, 817 F.2d 625 (10th Cir. 1987), concluding

that a class claim is not permissible in bankruptcy, was controlling authority.

The Commission argued that that decision is dictum and the issue remains

open in the Tenth Circuit. The Commission also pointed out that the better

reasoned view, represented by several subsequent circuit and district court

decisions.>" is to permit class proofs of claim in bankruptcy cases.

In SIPC v. Blinder, Robinson & Co., Inc.,246 the United States Court of

Appeals for the Tenth Circuit, agreeing with the position urged jointly

by the Commission and the Securities Investor Protection Corporation

(SIPC), held that under the bankruptcy laws and the Securities Investor

Protection Act (SIPA), Blinder, a broker-dealer, was not eligible to utilize

Chapter 11 of the Bankruptcy Code and was properly placed in a SIPC

liquidation. The Court of Appeals agreed with the findings of the district

court that, as a matter of law, Blinder was a stockbroker and therefore

expressly prohibited from reorganizing under Chapter 11. Moreover, the

Court found that a trustee had been properly appointed pursuant to the

provisions of SIPA because Blinder, by placing itself in Chapter 11, became

"unable to meet its obligations as they mature," a statutory ground for

liquidation pursuant to SIPA.

Disclosure Statements/Plans of Reorganization

A disclosure statement is a combination proxy and offering statement

used to solicit acceptances of a plan of reorganization. Such plans often

provide for the issuance of new securities to creditors and shareholders

in exchange for part or all of their claims or interests in the debtor, pursuant

to an exemption in Section 1145 of the Bankruptcy Code from registration

under the Securities Act. Under the Code, the adequacy of disclosure is

to be determined without regard to whether the information provided

would otherwise comply with the disclosure requirements of the federal

securities laws. However, in recognition of its special expertise on disclosure

questions, the Code gives the Commission the right to be heard on the

adequacy of disclosure. The staff limits its review to disclosure statements

of publicly-held companies or companies likely to be traded publicly after

reorganization. During 1992, the staff reviewed 146 disclosure statements

and commented on 104. Most of the Commission's comments were adopted

by debtors without the need to file a formal objection.

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In In re I.M. T. Inc.,247 the Commission filed a formal objection to a

disclosure statement for a plan that sought to discharge claims of creditors

of a substantially assetless publicly-held shell corporation. The debtor

sought through the plan to emerge from Chapter 11 as a publicly-traded

company without assets or liabilities and to merge with operating businesses

at some unspecified time in the future. The Commission contended that

this would contravene Section 1141(d)(3) of the Bankruptcy Code, which

precludes a debtor from obtaining a discharge if it has liquidated all or

substantially all of its assets and does not engage in business after

consummation of the reorganization plan. The Commission also pointed

out that the disclosure statement was deficient in numerous areas. Following

the filing of the Commission's objection, the debtor withdrew its

reorganization plan.

In In re Prime Motor Inc.,248 In re Servico Corp.,249 In re Washington

Corp.,250 and In re Lomas Financial Corp.,251 the Commission filed objections

to the confirmation of proposed plans, arguing, as it has on several other

occasions.i" that plan provisions purporting to release non-debtor third

parties from liability were beyond the discharge of liability provided for

debtors in the Bankruptcy Code. The Commission argued that under

Section 524(e) of the Code, a bankruptcy court can affect only the

relationships of debtors and creditors, and cannot discharge the liabilities

of a non-debtor, unless separate consideration is supplied by the third

parties or unless the releases are voluntary. In Prime Motor Inc., the

bankruptcy court approved the releases following a finding that the

consideration provided by third parties was fair and that the settlements

also would be subject to approval by the District Court supervising two

class action proceedings pending against the third parties. In Servico Corp.,

the court overruled the Commission's objections, noting that 99 percent

of creditors holding 92 percent of the company's debt had voted in favor

of the plan and releases and that the debtor had agreed to permit creditors

to opt out of the releases in a post-confirmation solicitation. In Washington

Corp., the court held the releases invalid as to claimants and interestholders who did not vote or who voted against the plan, except for claims

subject to indemnification or contribution rights against the debtor or

for which the debtor may be jointly liable. In Lomas Financial Corp, the

debtor agreed voluntarily to delete the third-party releases from the

reorganization plan.

Ethics Matters

The agency's ethical conduct program is administered by the Ethics

Counsel under the oversight and supervision of the General Counsel.

Three major new government-wide ethics regulations, upon which the

Ethics Counsel had previously filed comments, were issued by the Office

of Government Ethics in the past year. Implementation of these regulations

is in progress. Specifically, the new Standards of Ethical Conduct for

Employees of the Executive Branch become effective February 3, 1993, and

will supersede most of the Commission's existing Conduct Regulation. In

connection with implementation of the new Standards, substantial revisions

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are underway with respect to Rule 5 of the Commission's Conduct Regulation

which restricts the securities transactions of Commission members,

employees, and their families; to Rule 4 which relates to conflicts of interest

associated with outside employment and activities of employees; and to

Rule 3 which prohibits disclosure of nonpublic information.

Implementation of the new government-wide confidential financial

disclosure system, which parallels the public disclosure system, is

proceeding. Under the new system, the number of confidential filers at

the agency has increased from 235 filers to approximately 900 filers.

In anticipation of these developments, a field system, consisting of

an ethics liaison officer and one or more deputies in each division or office,

was established during the past year, to handle the overflow of requests

for counseling and to ensure a smooth transition under the new regulations.

The Ethics Counsel and staff conducted a series of intensive training

sessions for these ethics officers, and prepared and distributed ethics

manuals and binders to all employees. During 1992, the Ethics Counsel

and staff alone handled 247 matters. This total does not reflect the

additional matters handled by the individual Ethics Liaison Officers and

deputies throughout the Commission's Divisions, Offices and Regions, all

of whom depend on the Ethics Counsel and staff for guidance and support

on novel, unique, and difficult issues.

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Econonlic Research and Analysis

The Office ofEconom icAna lysis provides technical support and analysis

to assist in evaluating the economic aspects of the Commission's regulatory

program. The economics staff provides the Commission with research and

advice on rule proposals, policy initiatives, and enforcement actions. The staff

also monitors developments in capital markets around the world and major

program initiatives affecting the United States financial services industry,

markets, and investors.

Key 1992 Results

The staff reviewed rule proposals encompassing the full range of the

Commission's regulatory program. The staff also provided advice, technical

assistance, and empirical analyses of issues of concern to the Commission

and its operating divisions. In addition, monitoring programs were

maintained to study the implementation of major rules, new trading

facilities, and developments in the domestic and international securities

markets.

Economic Analysis and Technical Assistance

The staff directed its attention towards a number of issues including

executive compensation, the impact of banking reforms on the securities

markets, market value accounting, and bond market efficiency. Analysis

and technical assistance provided to the agency included:

a quarterly report on the financial health of the securities industry

and reports on trends in the composition of bank asset portfolios;

advice to the Commission on the impact of banking reforms on the

securities and financial industries;

assessments of materiality and monetary penalties in matters of

securities violations, such as insider trading, market manipulation,

and disclosure violations;

analysis of trading events as a result of the Securities Enforcement

Remedies and Penny Stock Reform Act of 1990;

work on regulatory reform initiatives that helped to provide

estimated cost savings from the reform initiatives;

assistance on projects related to limited partnership roll-ups and

option market trade-throughs;

capital markets briefing reports that assessed the economic,

institutional, and regulatory developments outside the United States;

and

support to the Office of International Affairs concerning international

securities regulation and enforcement matters.

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The staff also assisted the U.S. Attorney's Office in its successful

prosecution of a bribery case involving an investment manager, and worked

with the Department of the Treasury's interagency planning group on

international portfolio investment.

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Policy Managenlent and Adlninistrative Support

Policy management and administrative support provide the Commission

and operating divisions with the necessary services toaccomplish the agency's

mission. Policy management is provided by the executive staff (including the

Office of Legislative Affairs); the Office of the Secretary; the Office of Public

Affairs, Policy Evaluation and Research; and the Office of the Executive

Director. The responsibilities and activities of policy management include

developing and executing management policies, formulating and

communicating program policy, overseeing the allocation and expenditure of

agency funds, maintaining liaison with the Congress, disseminating

information to the press, and facilitating Commission meetings.

Administrative support includes services such as accounting, financial

management, fee collection, technology management, data processing, staffing,

space and facilities management, and consumer affairs. Under the direction

of the Office of the Executive Director, these support services are provided by

the Offices of the Comptroller; Information Technology; Human Resources

Management; and Filings, Information and Consumer Services.

Key 1992 Results

The Commission held 60 meetings and considered 323 matters. Major

activities of the Commission included proposing comprehensive revisions

to the Commission's shareholder communications rules, proposing

regulations on disclosure of executive compensation, and adopting a wideranging initiative to facilitate small business access to capital markets.

For the tenth consecutive year, the agency collected fees for the United

States Treasury in excess of its appropriation. Further, an interagency

agreement was signed with the U.S. Agency for International Development

(AID) that provides the Commission up to $2.8 million over three years

to support technical assistance programs related to the development and

regulation of capital markets in Central and Eastern European countries.

An agency representative was sent to Poland on a one-year technical

assistance assignment.

Policy Management

Commission Activities. The Commission held 60 meetings in 1992,

during which it considered 323matters, including the proposal and adoption

of Commission rules, enforcement actions, and other items that affect the

stability of the nation's capital markets and the economy. Significant

regulatory actions taken by the Commission included:

revising its rules governing proxy solicitations,

adopting amendments to the Commission's executive compensation

disclosure requirements,

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adopting a wide-ranging initiative to facilitate small business access

to the capital markets, and

proposing the exclusion of certain structured financings from

coverage under the Investment Company Act of 1940.

During 1992, the Congress actively considered a number of important

issues under the Commission's jurisdiction. These were most notably:

proposed amendments to the Investment Advisers Act of 1940,

including fee provisions to fund more frequent Commission

inspections of investment advisers;

the government securities market, coupled with the agency's inquiry

into the activities of Salomon Brothers and other participants in

the government securities market;

limited partnership "roll-ups" and their impact on limited partner

investors;

explicit statute of limitations for implied rights of private action

in violations of the Securities Exchange Act of 1934 (an issue raised

by the decision of the Supreme Court in Lampl, Pleva, Lipkind, Prupis

and Petigrow v. Gilbertson, 111 S.Ct. 2773);

reforms relating to accountants' responsibilities and shareholders'

rights including issues pertaining to executive compensation levels;

the treatment of hybrid instruments, swaps, off-exchange derivative

markets, and margin requirements as part of the budget

reauthorization of the Commodity Futures Trading Commission;

and

omnibus energy legislation which would amend the Public Utility

Holding Company Act to make it easier for utilities and independent

producers to compete in the wholesale electric power market and

enable domestic utilities to purchase foreign utility interests.

Congressional interest in the agency's activities and initiatives

remained at a high level. The Commission and staff members testified

at 17 congressional hearings during the year.

Public Affairs. The Office of Public Affairs, Policy Evaluation and

Research (OPAPER) communicated information on agency activities to

those interested in or affected by Commission actions, including the press,

the general public, regulated entities, and employees of the agency, through

ongoing programs and special projects. The office published daily the SEC

News Digest which provided information on rule changes, enforcement

actions against individuals or corporate entities, registration statements,

acquisition filings, interim reports, releases, decisions on requests for

exemptions, Commission meetings, upcoming testimony by Commission

members and staff, lists of Section 16 letters, and other events of interest.

Information on Commission activities also was disseminated through

notices of administrative actions, litigation releases, and other materials.

Many of the agency's actions are of national and, increasingly,

international interest. When appropriate, these actions are brought to the

attention of regional, national, and international press. During the year,

a total of 52 news releases on upcoming events, agency programs, and

special projects were issued. Additionally, congressional testimony and

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speeches presented by Commissioners and senior staff were maintained

on file and disseminated in response to requests from the public. The

staff responded to over 86,000 requests for specific information on the

agency or its activities. Programs for 295 foreign visitors were coordinated

during the year.

OPAPER also provided support for activities related to the International

Organization of Securi ties Commissions (IOSCO) and the SEC's International

Institute for Securities Markets Development and meetings of the Emerging

Markets Advisory Committee, the Market Transactions Advisory

Committee, and the Market Oversight and Financial Services Advisory

Committee.

Management Activities. The Office of the Executive Director coordinated

special projects such as the development of the automation systems

mandated by the Market Reform Act and the implementation of a

comprehensive audit follow-up program and tracking system. The staff

worked closely with the Chairman and other senior officials in formulating

the agency's budget submissions for the Office of Management and Budget

and the Congress.

Equal Employment Opportunity (EEO). The Office of Equal Employment

Opportunity was reorganized, an attorney experienced in EEO matters was

appointed director, and additional resources were allocated to expand the

office's complaint processing and affirmative employment capabilities. In

addition, the EEO office accomplished the following in 1992:

issued a comprehensive set of internal regulations detailing the

complaint process and the equal employment opportunity rights/

responsibilities of all employees,

completed an analysis of the agency's EEO program (1988 to 1992)

for the Civil Rights Commission,

implemented an agencywide mandatory training course in sexual

harassment awareness and issued a sexual harassment policy

statement detailing expectations for appropriate workplace behavior,

held town meetings of two special emphasis programs (the Hispanic

and Black Employment Programs), and

improved the ability to conduct in-house investigations.

The agency continued actively to recruit minorities and women. At

the end of the year, women accounted for 48.7 percent of the total agency

work force, blacks accounted for 26.2 percent, Hispanics accounted for

approximately 3 percent, and Asians made up 2.7 percent.

Freedom of Information Act (FOIA) and Privacy Act. The Office of

Freedom of Information Act and Privacy Act Operations responded to

requests for access to information pursuant to FOIA, the Privacy Act, and

the Government in the Sunshine Act and processed requests under the

agency's confidential treatment rules. Confidential treatment requests

were generally made in connection with proprietary corporate information

and evaluated in conjunction with access requests to prevent the

unwarranted disclosure of information exempt under the FOIA.

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In 1992, the agency received 1,779 FOIA requests and appeals, 4

Privacy Act requests, 36 Government in the Sunshine Act requests, 13

government referrals, and 5,394 requests and appeals for confidential

treatment. All FOIA/Privacy Act requests were responded to within the

statutory timeframe.

Administrative Support

Financial Management and Operations. For the tenth consecutive year,

the agency collected fees for the United States Treasury in excess of its

appropriation. In 1992, the SEC's total fee collections were $406 million,

180 percent of the agency's spending authority of $226 million (which

consisted of $158 million in appropriations and $68 million in offsetting

Section 6(b) filing fees). The $406 million in total fee collections, minus

the SEC's spending authority and $45 million in offsetting fee collections,

resulted in a net gain of $135 million to the United States Treasury.

In 1992, offsetting fee collections were generated as a result of a fee

rate increase under Section 6(b) of the Securities Act of 1933 to one-thirtysecond of one percent from one-fiftieth of one percent.

Fee revenue was collected from four basic sources: registrations under

Section 6(b) of the Securities Act (comprising 79 percent of total 1992 fee

collections), transactions on securities exchanges (17 percent), tender offer

and merger filings (2 percent), and miscellaneous filings (2 percent).

The agency completed its fourth year of operating the Federal Financial

System which allowed for direct entry of voucher and payment data,

creation of travel authorization and procurement documents, decentralized

data throughout the agency, on-line voucher research, and readily available

management data.

The staff continued work on the development of an automated fee

tracking, reporting, and accounts receivable system. In addition, the

agency continued to improve its automated collection and processing of

annual fees through electronic funds transfer and the implementation of

an account system and a lockbox depository system. In 1992, the agency

received over 41,000 separate fee payments of differing amounts for

transactions by regulated and registered entities. The Comptroller's staff

processed a 15 percent increase in payroll actions (12,289), a 9 percent

increase in electronic fund transfers (89,674), a 10 percent increase in travel

vouchers (9,628), and a 17 percent increase in miscellaneous invoices

(14,585).

The Office of the Comptroller completed a five-year plan to strengthen

the agency's financial management system and published a new Travel

Handbook. Direct on-line access to the agency's core financial accounting

system was made available throughout headquarters in 1992 and regional

office access is planned for next year. The development of improved

payroll, personnel, disgorgement, and property systems began in 1992.

Information Resources Management. In order to manage more effectively

the SEC's rapidly growing information systems, a Chief Information Officer

was appointed and the Office ofInformation Technology (OIT) was created

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in 1992 through the merger of the Office of EDGAR (Electronic Data

Gathering, Analysis, and Retrieval) Management and the Office of

Information Systems Management.

During 1992, the Office of Information Technology continued to assist

SEC staff by providing technical assistance to personal computer users

and by managing local area networks. OIT completed installation of the

agency's integrated office automation network in the headquarters building

and several regional offices and established data communication links

between the SEC and the Securities Industry Automation Corporation.

Additionally, OIT initiated several major system development or

enhancement projects during 1992 which included:

completing the requirements for the first phases of both the large

trader reporting system and the risk assessment system,

implementing the Entity Filing Fee System (EFF) and the EDGAR/

EFF interface that enhances the automatic fee acceptance functions

in EDGAR,

developing an insurance products tracking system, and

modifying the payroll system to conform with new regulations.

In November 1991, the SEC's primary computer facilities and

operational staff were relocated to the new SEC Operations Center in

Alexandria, Virginia. In conjunction with this move, OIT initiated work

on a contingency plan to use headquarters as a backup site in the event

of a failure at the Operations Center.

On July 14, 1992, the EDGAR pilot project was closed after operating

for nearly eight years. During this period, the pilot demonstrated the

feasibility of electronic filing by successfully receiving, processing, and

storing more than 100,000 electronic filings submitted voluntarily by more

than 1,500 pilot filers.

The operational EDGAR system was opened on July 15, 1992 for live

filing by the pilot participants on a voluntary basis. The new system

performed well with the exception of initial difficulties with the electronic

fee payment process and a temporary failure of the EDGAR disk storage

system.

Significant progress was made on the design and development of an

updated release of EDGAR during 1992. This release of EDGAR is scheduled

for completion in April 1993, and mandatory electronic filing by the pilot

filers will commence shortly thereafter.

Following the 1991 review of EDGAR by the National Institute of

Standards and Technology, the SEC asked the General Services

Administration (GSA) to conduct an information resources management/

security review of the EDGAR project. OIT also had previously requested

a risk assessment of EDGAR by GSA. Both reviews (which were contracted

out by GSA) were completed in 1992 and produced several recommendations

which the SEC plans to implement in 1993.

The General Accounting Office (GAO) also conducted an audit of the

EDGAR project during 1992. The final report, entitled Securities and

Exchange Commission: Effective Development of the EDGAR System Requires

Top Management Attention (GAO/IMTEC-92-85), noted that EDGAR

85

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requirements and costs have increased since the contract was awarded

in January 1989. As a result of this audit, the SEC's Executive Director

modified the EDGAR Change Control Board and established the EDGAR

Executive Steering Committee to set policy for system development and

review and approve all changes that impact the cost, schedule, or

functionality of the EDGAR system.

The SEC continued to keep the filing and investment communities

informed of EDGAR developments by holding conferences in January and

August 1992 to review the system status, the development schedule, and

the EDGAR rule proposal.

In addition, SEC staff reviewed plans for implementing one-stop filing

with representatives from the North American Securities Administrators

Association and the self-regulatory organizations.

Human Resources Management. The Office of Human Resources

Management managed recruitment and staffing, position management and

classification, employee compensation and benefits, training, labor relations,

counseling, disciplinary actions, personnel action processing, and

maintenance of official employee records. The staff monitored turnover

to assist in formulating hiring strategies and developed and administered

programs to meet a broad range of employee and management needs as

well as federal regulatory requirements.

During 1992, fifteen new or revised policies were published in the

Personnel Operating Policies and Procedures Manual, which provided managers

and employees with updated human resources program guidance. To

implement new authorities under the Federal Employee Pay Comparability

Act of 1990 (FEPCA), new policies were issued on relocation bonuses,

retention allowances, advances in pay, and time-off awards. New policies

were written to establish a structured approach for assuring position

description accuracy, establish consistent procedures for proposing and

processing reorganizations, document and clarify compensatory time policy,

establish formal procedures for handling requests for representation before

the Commission by former Commission members and SEC employees, and

establish a formal Personnel Management Evaluation program.

The agency undertook an effort to revamp the performance appraisal

systems for general schedule, wage grade, Performance Management and

Recognition System, and Senior Executive Service employees. In

conjunction, a review of the agency's incentive awards program policy was

initiated with the intent of incorporating regulatory changes and

streamlining documentation requirements. Policy revisions for the appraisal

systems and incentive awards program should be issued in 1993 following

OPM review and approval. In 1992, more than $1.54 million in incentive

and performance awards was paid and eight time-off awards were granted

to employees.

86
Major occupational studies of securities compliance examiners (SCEs),

attorneys, accountants, investigators, and administrative program support

personnel were completed. As a result:

the SEC received Office of Personnel Management (OPM) approval

for special pay rates for attorneys and accountants with securities

industry expertise,

investigator positions were reclassified as criminal investigators

and OPM subsequently approved the positions for coverage under

the law enforcement officer retirement and FEPCA special pay

provisions, and

a modified career ladder and a crossover path to accountant posi tions

were established for SCEs.

The recruitment program, particularly for attorneys, accountants,

SCEs, computer specialists, and administrative/ clerical support personnel,

continued to be emphasized through active participation in job fairs; oncampus interviews at law schools; advertising; and the use of merit

promotion, the outstanding scholars program, delegated examining

authorities, and OPM certification authorities.

Under the SEC's reactivated Upward Mobility Program, 26 participants

were selected from 620 applicants in 1992. In June 1992, the 26 participants

began their career advancement training programs which will lead to

paraprofessional and professional positions.

Approximately 1,800 agency employees attended 3,100 training courses

during the year. The training areas emphasized were litigation skills,

international securities regulation, computer applications, the EDGAR

system, EEO, and cultural diversity.

Facilities Management. The Office of Administrative and Management

Support managed the agency's facilities and provided a wide range of

logistical and office support services including lease administration,

procurement and contracting, space management, printing, mail services,

and property management.

The agency continued to exercise its independent leasing authority

and obtained new space and improved working conditions for several field

offices such as Los Angeles, Fort Worth, and New York. In 1992, the agency

administered 23 leases including the headquarters' leases for an approximate

total of 750,000 square feet of office and related space.

The agency awarded contracts and purchase orders in excess of $31

million during 1992. Also, printing production increased from 61 million

units to 67 million units, incoming mail increased by approximately 9

percent, and outgoing mail increased by approximately 2 percent.

Consumer Affairs. The Office of Filings, Information and Consumer

Services (OFICS) was responsible for:

responding to investor complaints and inquiries;

screening information received for referrals to SEC program

divisions, self-regulatory agencies, states, or other federal agencies;

preparing educational materials to assist investors in protecting

their interests; and

87

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developing and implementing the agency's consumer protection

program.

In 1992, the staff received 35,490 contacts (i.e., letters, telephone calls,

or walk-in visits). Of those contacts, 17,541 were complaints and 17,949

were inquiries. Approximately 36 percent of the complaints involved

broker-dealers, while the remainder involved issuers, mutual funds, banks,

transfer agents, clearing agents, and investment advisers. The two most

frequent complaints against broker-dealers involved allegations of

unauthorized transactions executed in customer accounts and

recommendations by the broker-dealers of unsuitable investments. Over

800 complaints were referred to SEC program divisions, self-regulatory

agencies, or other regulatory entities for review and/ or action.

Public Reference. OFICS also was responsible for making available

to the public all company filings and Commission rules, orders, studies,

reports, and speeches. These documents (dating from 1933 through the

present) were available in the public reference room and could be obtained

by writing the agency or contacting the agency's dissemination contractor.

In 1992, the staff provided assistance to 45,370 visitors to the public

reference room, answered 4,467 written requests for documents, and

responded to 114,252 telephone inquiries. A total of 322,856 paper

documents and 397,122 microfiche records were added to the existing

library of publicly available information. In addition, the staff processed

559 formal requests for certifications of filings and records.

88

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Endnotes

'In the Matter of the Distribution of Certain Debt Securities Issued by

Government Sponsored Enterprises, Exchange Act Release No. 30255 (Jan. 16,

1992), 50 SEC Docket 1308; In the Matter of the Distribution of Certain Debt

Securities Issued by Government Sponsored Enterprises, Exchange Act Release

No. 30191 (Jan. 16, 1992), 50 SEC Docket 1174.

2SEC v. Salomon Inc., Litigation Release No. 13246 (May 20, 1992), 51

SEC Docket 1133.

3In the Matter of Salomon Brothers Inc., Exchange Act Release No. 30721

(May 20, 1992), SEC Docket 1025.

'SEC v. Thomas M. Egan, Accounting and Auditing Enforcement Release

No. 387 (May 27, 1992), 51 SEC Docket 1213.

5SEC v. Charles H. Keating, tr.. Litigation Release No. 13118 (Dec. 12,

1991), 50 SEC Docket 776.

6In the Matter of Abington Bancorp, lnc., Accounting and Auditing

Enforcement Release No. 370 (Apr. 22, 1992), 51 SEC Docket 0599.

7SEC v. Donald Coleman, Accounting and Auditing Enforcement Release

No. 330 (Oct. 9, 1991), 49 SEC Docket 1887.

8SEC v. Edward Morris, Accounting and Auditing Enforcement Release

No. 352 (Jan. 27, 1992), 50 SEC Docket 1543.

9In the Matter of Robert J. lommazzo, CPA, Accounting and Auditing

Enforcement Release No. 385 (May 22, 1992), 51 SEC Docket 1157.

JOSECv. Edward R. Downe, [r., Litigation Release No. 13260 (June 4,

1992), 51 SEC Docket 1354.

uSEC v. Hugh Thrasher, Litigation Release No. 13381 (Sept. 24, 1992),

52 SEC Docket 2393.

12SEC v. John Acree, Litigation Release No. 13219 (Apr. 9, 1992), 51

SEC Docket 0376.

13SEC v. N. Donald Morse, II, Litigation Release No. 13280 (June 24,

1992), 51 SEC Docket 1680.

I'SEC v. Kurt Naegeli, Litigation Release No. 13227 (June 23, 1992),

51 SEC Docket 1677.

15SEC v. College Bound, Inc., Accounting and Auditing Enforcement

Release No. 371 (Apr. 24, 1992), 51 SEC Docket 0670.

16SECv. Albert Barette, Accounting and Auditing Enforcement Release

No. 389 (June 17, 1992), 51 SEC Docket 1561.

17SECv. George R. Thompson, Accounting and Auditing Enforcement

Release No. 366 (Apr. 6, 1992), 51 SEC Docket.

18Inthe Matter ofAgnes E. Jenkins, Accounting and Auditing Enforcement

Release No. 421 (Sept. 29, 1992), 52 SEC Docket 2424.

19SECv. James N. Von Germeien, Accounting and Auditing Enforcement

Release No. 426 (Sept. 3D, 1992), 52 SEC Docket 2655.

2°Inthe Matter of Caterpillar Inc., Accounting and Auditing Enforcement

Release No. 363 (Mar. 31, 1992), 51 SEC Docket 300.

89
21In the Matter of Presidential Life Corp., Accounting and Auditing

Enforcement Release No. 416 (Sept. 22, 1992), 52 SEC Docket 2441.

22SEC v. Metro Display Advertising, lnc., Litigation Release No. 13162

(Feb. 7, 1992), 50 SEC Docket 1735.

23SEC v. Deepak Gulati, Litigation Release No. 13171 (Feb. 20, 1992),

50 SEC Docket 1806.

24Inthe Matter of Stephen f. Klos, Exchange Act Release No. 30723 (May

21, 1992), 51 SEC Docket 1030.

25SEC v. Custom Trading International Corp., Litigation Release No.

13229 (Apr. 24, 1992), 51 SEC Docket 0829.

26SEC v. Current Financial Services, Inc., Litigation Release No. 13112

(Dec. 9, 1991), 50 SEC Docket 770.

27SEC v. AMI Securities, lnc., Litigation Release No. 13258 (June 2,

1992), 51 SEC Docket 1352.

28Inthe Matter of State Bank of Pakistan, Securities Act Release No. 6937

(May 6, 1992), 51 SEC Docket 0834.

29SEC v. Westdon Holding & Investment, Inc., Litigation Release No.

13085 (Nov. 7, 1991), 50 SEC Docket 270.

30SEC v. Paul Kutik, Litigation Release No. 13240 (May 14, 1992), 51

SEC Docket 0997.

31Inthe Matter of Jeffrey R. Leach, Exchange Act Release No. 31007 (Aug.

6, 1992), 52 SEC Docket 838.

32In the Matter of Matthew 1. Wager, Exchange Act Release No. 31009

(Aug. 6, 1992), 52 SEC Docket 848.

33Inthe Matter of Buddy S. Cohen, Exchange Act Release No. 31008 (Aug.

6, 1992), 52 SEC Docket 845.

34SEC v. Edward A. Accomando, Litigation Release No. 13222 (Apr. 9,

1992), 51 SEC Docket 0379.

35SEC v. Maurice A. Halperin, Litigation Release No. 13052 (Oct. 21,

1991), 49 SEC Docket 2116.

36SEC v. Joseph Pandolfino, lr-, Litigation Release No. 13250 (May 26,

1992), 51 SEC Docket 1211.

37In the Matter of The Lionel Corp., Exchange Act Release No. 30121

(Dec. 30, 1991), 50 SEC Docket 990.

38Inthe Matter of RIT Acquisition Corp., Exchange Act Release No. 30732

(May 22, 1992), 51 SEC Docket 1152.

39In the Matter of The Krupp Corp., Exchange Act Release No. 30566

(Apr. 8, 1992), 51 SEC Docket 0334.

4°In the Matter of Douglas A. Kass, Exchange Act Release No. 31046

(Aug. 17, 1992), 52 SEC Docket 1119.

41In the Matter of BGC Special Equity Ltd. Partnership, Exchange Act

Release No. 30875 (June 30, 1992), 51 SEC Docket 1730.

42In the Matter of Michael S. Shapiro, Accounting and Auditing

Enforcement Release No. 358 (Mar. 4, 1992), 50 SEC Docket 2036.

43In the Matter of Kevin Upton, Exchange Act Release No. 29842 (Oct.

21, 1991), 47 SEC Docket 2061.

44Inthe Matter of Shearson Lehman Brothers, Inc., Exchange Act Release

No. 31196 (Sept. 17, 1992), 52 SEC Docket 1995.

90
45SECv. Donald W. Wright, Litigation Release No. 13110 (Dec. 5, 1991),

50 SEC Docket 680.

46SECv. Stratton Oakmont, Inc., litigation Release No. 13195 (Mar. 20,

1992), 51 SEC Docket 176.

47In the Matter of Wellshire Securities, Inc., Exchange Act Release No.

30544 (Apr. 1, 1992), 51 SEC Docket 0242.

48In the Matter of Patrick Raymond Comerford, Exchange Act Release

No. 30820 (June 17, 1992), 51 SEC Docket 1494.

49In the Matter of Martin Herer Engelman, Exchange Act Release No.

30635 (Apr. 27, 1992), 51 SEC Docket 0743.

50In the Matter of Linda K. Rees, Exchange Act Release No. 30612 (Apr.

22, 1992), 51 SEC Docket 0595.

51In the Matter of First Albany Corp., Exchange Act Release No. 30515

(Mar. 25, 1992), 51 SEC Docket 106.

52SECv. Institutional Treasury Management, Inc., Litigation Release No.

13121 (Dec. 12, 1991), 50 SEC Docket 0783.

53SEC v. First Investors Corp., Litigation Release No. 13267 (June 11,

1992), 51 SEC Docket 1448.

54SEC v. Treasury First, Inc., Litigation Release No. 13094 (Nov. 19,

1991), 50 SEC Docket 485.

55SEC v. Leroy S. Brenna, et al., Litigation Release No. 13116 (Dec. 10,

1991), 50 SEC Docket 774.

56SEC v. G. Albert Griggs, lr.. Litigation Release No. 13247 (May 21,

1992), 51 SEC Docket 1136.

57SECv. Public Funding Group, Inc., Litigation Release No. 13192 (Mar.

18, 1992), 51 SEC Docket 76.

58In the Matter of William H. Pike, Investment Company Release No.

18601 (Mar. 5, 1992), 50 SEC Docket 2023.

59Exchange Act Release No. 30929 (July 16, 1992), 57 FR 32159 (July

21, 1992).

6°Exchange Act Release No. 30920 (July 14, 1992), 57 FR 32587 (July

22, 1992).

61Exchange Act Release No. 30608 (Apr. 20, 1992), 57 FR 18004 (Apr.

28, 1992).

62Exchange Act Release No. 30610 (Apr. 28, 1992),57 FR 18046 (Apr.

28, 1992).

63Exchange Act Release Nos. 29868 (Oct. 28, 1991),56 FR 56535 (Nov.

5, 1991) and 30304 (Jan. 29, 1992), 57 FR 4658 (Feb. 6, 1992).

64Exchange Act Release No. 29854 (Oct. 24, 1991), 56 FR 55963 (Oct.

30, 1991).

65Exchange Act Release No. 29797 (Oct. 8, 1991), 56 FR 51945 (Oct.

16, 1991).

66Exchange Act Release No. 30000 (Nov. 26, 1991),56 FR 63531 (Dec.

4, 1991).

67Exchange Act Release No. 29869 (Oct. 28, 1991),56 FR 56537 (Nov.

5, 1991).

68Exchange Act Release No. 30944 (July 21, 1992), 57 FR 33376 (July

28, 1992).

91
69Exchange Act Release No. 30369 (Feb. 13, 1992), 57 FR 6148 (Feb.

20, 1992).

7°Exchange Act Release No. 29992 (Nov. 26, 1991),56 FR 63526 (Dec.

4, 1991).

71Exchange Act Release Nos. 29865 (Oct. 28, 1991), 56 FR 56255 (Nov.

1, 1991) (CBOE); 29934 (Nov. 13, 1991), 56 FR 58593 (Nov. 20, 1991)

(AMEX), and 29876 (Oct. 28, 1991), 56 FR 56435 (Nov. 4, 1991).

72Exchange Act Release No. 30256 (Jan. 16, 1992),57 FR 2797 (Jan. 23,

1992) (Nikkei and TOPIX); Exchange Act Release No. 31016 (Aug. 11, 1992),

57 FR 37012 (Aug. 17, 1992) (Japan Index).

73Exchange Act Release No. 30159 (Jan. 7, 1992), 57 FR 1506 (Jan. 14,

1992).

74Exchange Act Release No. 30773 (June 3, 1992), 57 FR 24835 (June

11, 1992).

75Exchange Act Release No. 30166 (Jan. 8, 1992),57 FR 1375 (Jan. 14,

1992); International Series Release No. 357 (Jan. 8, 1992).

76Letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Joanne T. Medero, General Counsel, CFTC, dated Jan.

23, 1992 (Midcap 400 Letter) and letter from William H. Heyman to Brian

Folkerts, Director, Office of Congressional and Government Affairs, CFTC,

dated Mar. 27, 1992 (FT-SE 100 Letter).

nLetter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Brian Folkerts, Director, Office of Congressional and

Governmental Affairs, CFTC, dated May 27, 1992.

78Letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Joanne T. Medero, General Counsel, CFTC, dated Oct.

7, 1991.

79Letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Joanne T. Medero, General Counsel, CFTC, dated Oct.

16, 1991.

8°Letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Joanne T. Medero, General Counsel, CFTC, dated Jan.

16, 1992.

81Letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Joanne T. Medero, General Counsel, CFTC, dated Jan.

16, 1991.

82Id.

83Exchange Act Release No. 29185 (May 9, 1991), 56 FR 22490 (May

15, 1991).

84Report of the Bachmann Task Force on Clearance and Settlement

Reform in U.S. Securities Markets (May 1992).

85Exchange Act Release No. 30802 (June 15, 1992), 57 FR 27812 (June

22, 1992).

8615U.S.C.A. S 78q-1 (f) (West Supp. 1992).

87Testimony of Richard C. Breeden, Chairman, SEC, before the

Subcommittee on Domestic Monetary Policy of the House Committee on

Banking, Finance, and Urban Affairs, Apr. 28, 1992. Chairman Breeden

restated the Commission's position in a June 1, 1992 letter to Chairman

92
Dingell of the House Committee on Energy and Commerce. The Commission

also strongly supported a provision of the type contained in S. 1699, the

Government Securities Offering Enforcement Act, which had been passed

by the Senate in September 1992, making it explicitly unlawful to knowingly

or wilfully make a false or misleading written statement to an issuer of

government securities in a primary offering.

88Letter from Edward J. Markey, Chairman, Subcommittee on

Telecommunications and Finance, Committee on Energy and Commerce,

U.S. House of Representatives, to Richard C. Breeden, Chairman, SEC,

dated Oct. 23, 1991; letter from Richard C. Breeden, Chairman, SEC, to

Edward J. Markey, Chairman, Subcommittee on Telecommunications and

Finance, Committee on Energy and Commerce, U.S. House of

Representatives, dated Dec. 23, 1991.

89Exchange Act Release No. 31347 (Oct. 22, 1992), 57 FR 49039 (Oct.

29, 1992).

"Exchange Act Release No. 31520 (Nov. 25, 1992),57 FR 57397 (Dec.

4, 1992).

91Exchange Act Release No. 30772 (June 3, 1992), 57 FR 24415 (June

9, 1992).

92Letter regarding Rule 15c2-11: NASDAQ Initial Listing and

Maintenance Standards (Feb. 28, 1992).

93Lettersfrom Michael A. Macchiaroli, Assistant Director of the Division

of Market Regulation to Mr. Guillermo T. Prieto, Vice-Chairman of Market

Development, Commission Nacional de Valores, dated Aug. 28, 1992;

Douglas G. Preston, Attorney, SIA, dated Aug. 21, 1992; Dominic A.

Carone, Chairman, SIA's Capital Committee, dated June 12, 1992; Douglas

G. Preston, Attorney, SIA, dated Mar. 10, 1992.

94Exchange Act Release No. 30958 (July 27, 1992), 57 FR 34028 (July

31, 1992). The Commission also adopted clarifying amendments to Form

BD in Securities Exchange Act Release No. 31398 (Nov. 4, 1992), 57 FR

53261 (Nov. 9, 1992).

95Exchange Act Release No. 30959 (July 27, 1992), 57 FR 34048 (July

31, 1992).

9617C.F.R. S 240.17 Ad-15 (1992).

97Exchange Act Release No. 30146 (Jan. 9, 1992),57 FR 1082 (Jan. 10,

1992). Rule 17Ad-IS prohibits inequitable treatment of eligible guarantor

institutions, requires transfer agents to establish written standards for the

acceptance of signature guarantees, and allows transfer agents to reject

a request for transfer because the guarantor is neither a member of nor

a participant in a signature guarantee program.

98Exchange Act Release No. 30148 (Jan. 6, 1992),57 FR 1128 (Jan. 10,

1992). Rule 17Ad-16 would require a registered transfer agent to send

notice to the appropriate qualified securities depository when assuming

or terminating transfer agent services on behalf of an issuer or when

changing its name or address.

99Letter regarding Transportacion Maritima Mexicana, S.A. de C.V.,

dated June 8, 1992.

93
1°OLetterregarding C.A. Venezolana de Pulpa y Papel S.A.C.A., dated

Jan. 3, 1992.

101Letterregarding Banco Comercial Portugues, S.A., dated June 11,

1992.

l02Letter regarding Vitro, Sociedad Anonima, dated Nov. 19, 1991;

Letter regarding Orbital Engine Corporation Limited, dated Nov. 21,1991;

Letter regarding CEMEX, Sociedad Anonima, dated Mar. 12, 1992; Letter

regarding China Steel Corporation, dated May IS, 1992; Letter regarding

Grupo Financiero Banamex Accival, S.A. de C.V., dated June 23, 1992. See

also Letter regarding Istituto per la Ricostruzione Industrialel Credito

Italiano S.p.A., dated Oct. 17, 1992; Letter regarding Telefonos de Mexico,

S.A. de C.V., dated May 7, 1992.

l03Letter regarding British Telecommunications plc, dated Dec. 3,

1991).

104Letterregarding Wellcome pIc, dated July 21,1992; Letter regarding

Total, dated June 23, 1992; Letter regarding AIcatel Alsthom Compagnie

Generale d'Electricite, dated May 15, 1992.

10517C.P.R. 9 240.17f-1 (1992).

l06TheSpokane Stock Exchange withdrew its registration as a national

securities exchange and ceased operations on May 24, 1991.

l07Exchange Act Release No. 30445 (Mar. 5, 1992), 57 FR 8693 (Mar.

11, 1992). This new marketplace was designed to accommodate the listing

of companies currently too small to meet the regular AMEX listing

requirements.

lOBExchangeAct Release No. 30466 (Mar. 11, 1992),57 FR 9301 (Mar.

17, 1992). The proposal revised Phlx listing standards to incorporate

criteria for certain new products not easily categorized under existing Phlx

rules for common or preferred stock, bonds or warrants.

109ExchangeAct Release No. 30662 (May 1, 1992), 57 FR 19655 (May

7, 1992). Among other things, these procedures enable the NYSE to review

formally increases in the amount of securities listed, changes in a listed

security or issuer requests to list another class or series of securities.

l1°Exchange Act Release No. 30676 (May 7, 1992), 57 FR 20544 (May

13, 1992).

1l1Exchange Act Release No. 30464 (Mar. 11, 1992),57 FR 9300 (Mar.

17, 1992).

112ExchangeAct Release No. 30587 (Apr. 15, 1992),57 FR 14597 (Apr.

21, 1992).

113ExchangeAct Release No. 30581 (Apr. 14, 1992),57 FR 14596 (Apr.

21, 1992). The rule change also implemented real-time trade reporting

within 90 seconds of execution of the trade for off-hours trading sessions

on SelectNet.

114ExchangeAct Release No. 30629 (Apr. 23, 1992),57 PR 18535 (Apr.

30, 1992). The program makes available to the public on request certain

information contained in the Central Registration Depository System

regarding the employment and disciplinary history of N ASD members and

their associated persons. The public can obtain this information by calling

a toll-free number established by the NASD for this purpose. Information

94
available to the public includes final disciplinary actions taken by federal

or state securities agencies and self-regulatory organizations which relate

to securities or commodities transactions.

115Exchange Act Release No. 30840 (June 19, 1992), 57 FR 29109 (June

30, 1992). This review is designed to determine whether an issuer's

withdrawal from NASDAQ / NMS or a securities exchange and a subsequent

application to NASDAQ/NMS was for the purpose of evading corporate

governance criteria.

116Exchange Act Release No. 30478 (Mar. 16, 1992),57 FR 10051 (Mar.

23, 1992). Previously, NASD members were required only to forward

proxy material to beneficial owners upon the request of the issuer.

1l7Exchange Act Release No. 30569 (Apr. 10, 1992),57 FR 13396 (Apr.

16, 1992).

118Exchange Act Release No. 29812 (Oct. 11, 1991),56 FR 52082 (Apr.

17, 1991). NASDAQ International consists of the basic automation services

currently provided during the domestic session to support market making

by NASD members in NASDAQ/NMS, non-Canadian, foreign equity

securities or ADRs included in NASDAQ but not designated as NASDAQ/

NMS, and exchange-listed securities.

119See i.e., letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Richard A. Grasso, Executive Vice Chairman, President

and Chief Operating Officer, NYSE, dated July 6, 1992.

120Letter from William H. Heyman, Director, Division of Market

Regulation, SEC, to Richard L. Fogel, Assistant Comptroller General, GAO,

dated Mar. 12, 1992.

121ExchangeAct Release Nos. 31097 (Aug. 21,1992),57 FR 40235 (Sept.

2, 1992), and 31371 (Oct. 28, 1992), 57 FR 52659 (Nov. 4, 1992).

122ExchangeAct Release Nos. 31097 (Aug. 21,1992),57 FR 40235 (Sept.

2, 1992) and 31464 (Nov. 16, 1992), 57 FR 55011 (Nov. 23, 1992).

123Exchange Act Release No. 30400 (Feb. 24, 1992), 57 FR 7420 (Mar.

2, 1992).

124Exchange Act Release No. 30986 (July 31, 1992),57 FR 35856 (Aug.

11, 1992).

125Exchange Act Release No. 30170 (Jan. 8, 1992),57 FR 1774 (Jan. 15,

1992).

126Exchange Act Release No. 30041 (Dec. 5, 1991), 56 FR 64824 (Dec.

12, 1991).

127Exchange Act Release No. 29991 (Nov. 26, 1991),56 FR 61458 (Dec.

3, 1991).

128Exchange Act Release No. 29888 (Oct. 31, 1991),56 FR 56680 (Nov.

6, 1991).

129Exchange Act Release No. 30413 (Feb. 16, 1992), 57 FR 7830 (Mar.

4, 1992).

130Exchange Act Release No. 30537 (Mar. 31, 1992),57 FR 17947 (Apr.

28, 1992).

131Exchange Act Release No. 30005, International Series Release No.

347 (Nov. 27, 1991), 56 FR 63747 (Dec. 5, 1991).
132Exchange Act Release No. 29781 (Oct. 3, 1991), 56 FR 50959 (Oct.

9, 1991).

133Exchange Act Release No. 30556 (Apr. 6, 1992), 57 FR 12534 (Apr.

10, 1992).

134Division of Investment Management, SEC, Protecting Investors: A

Half Century of Investment Company Regulation (May 1992).

135Investment Company Act Release No. 19105 (Nov. 19, 1992),57 FR

56248, 52 SEC Docket 17.

136Investment Company Act Release No. 18869 (July 28, 1992),51 SEC

Docket 2587.

13717CFR 230.601 et seq.

138Investment Company Act Release No. 18611 (Mar. 12, 1991), 50 SEC

Docket 2116.

139Investment Company Act Release No. 18612 (Mar. 12, 1992), 50 SEC

Docket 2119.

14°Investment Company Act Release No. 19115 (Nov. 20, 1992),52 SEC

Docket 4079.

l4lSection 711 of the legislation designates Sections 32 and 33 of the

Holding Company Act as Sections 34 and 35, and adds a new Section 32,

"Exempt Wholesale Generators." Section 715 of the legislation adds a new

Section 33, "Treatment of Foreign Utilities."

142Section 713 of the Energy Policy Act.

143Holding Company Act Release No. 25573 (July 7, 1992), 51 SEC

Docket 2004.

144Holding Company Act Release No. 25668 (Nov. 4, 1992), 52 SEC

Docket 3545.

145Id.

146Investment Company Institute (pub. avail. Aug. 7, 1992).

147Reserve Bank of Australia (pub. avail. Sept. 2, 1992) and Hong Kong

Securities Clearing Co. Ltd. (pub. avail. Sept. 8, 1992).

148Founders Funds, Inc. (pub. avail. Aug. 4, 1992).

149Investment Company Act Release Nos. 19034 (Oct. 16, 1992), 52

SEC Docket 3195 (Notice) and 19096 (Nov. 12, 1992),52 SEC Docket 3745

(Order); International Series Release No. 475 (Oct. 16, 1992),52 SEC Docket

3195 (Notice).

150Investment Company Act Release Nos. 18959 (Sept. 17, 1992), 52

SEC Docket 2107 (Notice) and 19055 (Oct. 26, 1992), 52 SEC Docket 3380

(Order).

151Investment Company Act Release Nos. 18693 (May 6,1992),51 SEC

Docket 900 (Notice) and 18748 (June 2, 1992),51 SEC Docket 1331 (Order).

152Investment Advisers Act Release Nos. 1310 (May 18, 1992),51 SEC

Docket 1094 (Notice) and 1317 (June IS, 1992),51 SEC Docket 1523 (Order).

153Investment Company Act Release Nos. 18643 (Apr. 1, 1992),51 SEC

Docket 290 (Notice) and 18675 (Apr. 24, 1992),51 SEC Docket 798 (Order).

154Investment Company Act Release No. 18778 (June 12, 1992),52 SEC

Docket 1524 (Notice and Temporary Order).

96
155Investment Company Act Release Nos. 18717 (May 20,1992),51 SEC

Docket 1112 (Notice and Temporary Order) and 19051 (Oct. 21, 1992), 52

SEC Docket 3365 (Order).

156Uniao de Bancos de Brasileiros S.A. (pub. avail. July 28, 1992).

157Neuberger& Berman Advisers Management Trust, Investment Company

Act Release Nos. 18506 (Jan. 29, 1992), 50 SEC Docket 1528 (Notice) and

18573 (Feb. 26, 1992), 50 SEC Docket 1917 (Order).

158Anchor National Life Insurance Company, Investment Company Act

Release No. 19147 (Dec. 4, 1992), 52 SEC Docket 20.

159MML Bay State Life Insurance Company (pub. avail. Sept. 9, 1992).

160See, e.g., SCEcorp, Holding Company Act Release No. 25564,

International Series Release No. 405 (June 29, 1992), 51 SEC Docket 1763

(acquisition by an exempt holding company of Australian public-utility

operations); Southern Co., Holding Company Act Release No. 25639,

International Series Release No. 460 (Sept. 23, 1992), 52 SEC Docket 2300

(acquisition by registered holding company of Australian operations).

161SeeSections 711 and 715 of the Energy Policy Act.

162Id.

163EntergyCorp., Holding Company Act Release No. 25673, International

Series Release No. 487 (Nov. 10, 1992), 52 SEC Docket 16; Entergy Corp.,

Holding Company Act Release No. 25706, International Series Release No.

510 (Dec. 14, 1992), 53 SEC Docket 1; Entergy Corp., Holding Company

Act Release No. 25705, International Series Release No. 511 (Dec. 14, 1992),

53 SEC Docket 1.

164Entergy Corp., Holding Company Act Release No. 25136 (Aug. 27,

1990), 46 SEC Docket 1911.

165New Orleans v. S.E.C., 969 F.2d 1163 (D.C. Cir. 1992).

166KUEnerg!l Corp., Holding Company Act Release No. 25409 (Nov.

13, 1991), 50 SEC Docket 349.

167UNITIL Corp., Holding Company Act Release No. 25524 (Apr. 24,

1992), 51 SEC Docket 764.

168Northeast Utils., Holding Company Act Release No. 25565 (June 29,

1992), 51 SEC Docket 1775.

169Northeast Utils., Holding Company Act Release No. 25221 (Dec. 21,

1990), 47 SEC Docket 1887, supplemented, Holding Company Act Release

No. 25273, (Mar. 15, 1991), 48 SEC Docket 776.

17°City of Holyoke Gas & Elec. Dept. v. SEC, Nos. 91-1001 et al., (D.C.

Cir. July 24, 1992).

1710hio Power Co. v. FERC, No. 88-1293 (D.C. Cir. Feb. 4, 1992), cert.

denied, No. 92-280 (Nov. 9, 1992).

1720hio Power Co., Holding Company Act Release No. 17383 (Dec. 2,

1971); Holding Company Act Release No. 20515 (Apr. 24, 1978), 14 SEC

Docket 928; Southern Ohio Coal Co., Holding Company Act Release No.

21008 (Apr. 17, 1979), 17 SEC Docket 310; Holding Company Act Release

No. 21537 (Apr. 25, 1980), 19 SEC Docket 1309.

173Securities Act Release No. 33-6949 (July 30, 1992), 51 SEC Docket

2613.

97
174Securities Act Release No. 33-6950 (July 30, 1992), 51 SEC Docket

2673.

17sSecurities Act Release No. 6962 (Oct. 15, 1992),52 SEC Docket 2980.

176Securities Act Release No. 6940 (June 23,1992),51 SEC Docket 1570,

as modified; Securities Act Release No. 6941 (July 10,1992),51 SEC Docket

2046.

177Exchange Act Release No. 29315 (June 17,1991),49 SEC Docket 0139.

17BExchange Act Release No. 30849 (June 23,1992),51 SEC Docket 1619.

179Exchange Act Release No. 34-31326 (Oct. 16, 1992), 52 SEC Docket

3022.

IBoSecurities Act Release No. 33-6964 (Oct. 22, 1992), 52 SEC Docket

3014.

IBISecurities Act Release No. 33-6963 (Oct. 22, 1992), 52 SEC Docket

3013.

IB2Securities Act Release No. 6932 (Apr. 13, 1992),51 SEC Docket 382.

IB3Securities Act Release No. 6922 (Oct. 30, 1991), 50 SEC Docket 12.

IB4Securities Act Release No. 33-6944 (July 23, 1992), 51 SEC Docket

2163.

IBsSecurities Act Release No. 33-6933 (Apr. 20, 1992), 51 SEC Docket

503.

IB6See Testimony of Richard C. Breeden, Chairman, SEC, Concerning

Issues Involving Financial Institutions and Accounting Principles, before

the Senate Committee on Banking, Housing and Urban Affairs, Sept. 10,

1990 at 32.

IB7Proposed Statement of Financial Accounting Standards, Accounting

for Certain Investments in Debt and Equity Securities (Sept. 9, 1992).

IBBFinancial Reporting Release No. 40 (Oct. 6, 1992), 52 SEC Docket

1914.

189Statement of Financial Accounting Standards No. 109, Accounting

for Income Taxes (Feb. 1992).

190Testimony of Walter P. Schuetze, Chief Accountant, SEC, Concerning

Accounting for Employee Stock Compensation, before the Senate Committee

on Governmental Affairs, Jan. 31, 1992 at 15.

191Proposed Statement of Financial Accounting Standards, Accounting

for Creditors for Impairment of a Loan, An Amendment of FASB Statements

No.5 and 15 (June 30, 1992).

192Proposed Statement on Auditing Standards, Letters to Underwriters

in Conjunction with Filings Under the Securities Act of 1933 and Letters

Issued to a Requesting Party in Conjunction with Other Financing

Transactions (May 1991).

1935tatement of Auditing Standards No. 69, The Meaning of Present

Fairly in Conformity with Generally Accepted Accounting Principles in

the Independent Auditor's Report (Feb. 1992).

194Annual Report/1991-1992, Public Oversight Board, SEC Practice

Section, American Institute of Certified Public Accountants.

19S5tatement of Position 91-1, Software Revenue Recognition (Dec. 12,

1991).

98
1965tatement of Position 92-3, Accounting for Foreclosed Assets (Apr.

28, 1992).

197proposed Statement of Position, Accounting for the Results of

Operations of Foreclosed Assets Held for Sale (Nov. 10, 1992).

198Proposed Statement of Position, Reporting on Advertising Costs

(June 22, 1992).

199ProposedStatements of Position titled Foreign Currency Accounting

and Financial Statement Presentation for Investment Companies (June 5,

1992); Determination, Disclosure, and Financial Statement Presentation of

Income, Capital Gain, and Return of Capital by Investment Companies

(Feb. 10, 1992); and Financial Accounting and Reporting for High Yield

Securities by Investment Companies (Mar. 4, 1992).

200IASCE41, Revenue Recognition (May 1992); E42, Construction

Contracts (May 1992); E43, Property, Plant and Equipment (May 1992);

E44, The Effects of Changes in Foreign Exchange Rates (May 1992); E45,

Business Combinations (June 1992);E46, Extraordinary Items, Fundamental

Errors and Changes in Accounting Policies (July 1992); and E47, Retirement

Benefit Costs (Dec. 1992).

201IAS7 (revised 1992), Cash Flow Statements (Dec. 1992). Final

standards for research and development activities, inventories, and

capitalization of borrowing costs will not be formally adopted until late

in 1993 as a package with seven other standards consti tu ting the

improvements project, although approved in 1992.

202SECv. Peters, No. 90-3346 (10th Cir. Oct. 26, 1992).

203U.S. v. Chestman, 947 F.2d 551 (2d Cir. 1991) (en bane), cert. denied,

112 S.Ct. 1759.

204SECv. International Loan Network, Inc., Fed. Sec. L. Rep. (CCH) '\I

96,886 (D.C. Cir. 1992).

205SEC v. W,J. Howey Co., 328 U.S. 293 (1946).

206Gomez v. Leonzo, 788 F. Supp. 604 (D.D.C. 1992).

207Reves v. Ernst & Young, 110 S. Ct. 945 (1990).

208BancoEspanol de Credito v. Security Pacific National Bank, 973 F.2d

51 (2d Cir. 1992), petition for cert. filed Nov 25, 1992.

209Inre NBW Commercial Paper Litigation, Fed. Sec. L. Rep (CCH), No.

97,278 (D.D.C.1992).

210SECv. Coleman, No. 91-2526 (D.D.C.).

2llLampf, Pleva, Lipkind, Prupis & Pettigrow v. Gilbertson, 111 S.Ct. 2773

(1991).

212Anixter v. Home-Stake Production Co., 977 F.2d 1533 (10th Cir. 1992),

petition for cert. filed, Jan. 6, 1993.

213Henderson v. Scientific Atlanta, 971 F.2d 1567 (11th Cir. 1992).

214JamesB. Beam Distilling Co. v. Georgia, 111 S.Ct. 2439 (1991).

215SECv. Rind, No. 91-55972 (9th Cir.).

216SECv. Hayes, No. 92-1027 (5th Cir.).

217SECv. AMX International, Inc., No. 92-1376 (5th Cir.).

218SEC v. Maxwell C. Huffman, No. 92-1363 (5th Cir.).

219Federal Debt Collection Procedures Act of 1990, 28 U.S.c. 93001

et. seq.

99
220U.S. v. Regan, 937 F.2d 823 (2d Cir. 1991), cert. denied sub nom.

Zarzecki v. United States, 112 S.Ct. 2773 (1992).

221Musick, Peeler & Garrett v. Employers Insurance of Wausau, No. 92-

34 (U.S. S.Ct.).

222Roosevelt v. E.I. Du Pont de Nemours & Co., 958 F.2d 416 (D.C. Cir.

1992).

223SEC v. American Bancshares, No. 77-C-750.

224United States v. Swift, 286 U.S. 106, 119 (1932).

22SYeaman v. SEC, No. 91-C-805-J (D. Utah 1991).

226In re United Telecommunications, Inc., Securities Litigation, Misc. No.

92-105 (D.D.C.).

227Scholes v. Stone, McGuire & Benjamin, 90 C 7201 (N.D. 111.).

228Alexander & Alexander Services, Inc. v. SEC, No. 92-1112 (D. D.C.

1992).

229Bachv. SEC, Case No. CV-92-1288 (ADS) (E.D.N.Y. May 9, 1992);

Donald v. SEC, No. MC 92-32-PHX-SMM (D. Ariz. June 16, 1992); Whitten

v. SEC, No. MC 92-33-PHX-SMM (D. Ariz. June 16, 1992).

230Inre Checkosky and Aldrich, Exchange Act Release No. 31094 (Aug.

16, 1992), 52 SEC Docket 1389.

231Inre Kagan, Exchange Act Release, No. 34-31205 (Sept. 18, 1992),

52 SEC Docket 1548.

232Inre Lamoreaux, Exchange Act Release, No. 429 (Oct. 14, 1992), 52

SEC Docket 2845.

233Inre Domingues and Brimhall, Exchange Act Release No. 30978 (July

30, 1992), 51 SEC Docket, 2771.

234Inre Denkensohn and Schoemer, Exchange Act Release No. 3656 (Mar.

31), 1992, 51 SEC Docket 0221.

23sKevin B. Wade, Exchange Act Release No. 30561 (Apr. 7, 1992), 51

SEC Docket 323.

236Meyer Blinder, Exchange Act Release No. 31095 (Aug. 26, 1992), 52

SEC Docket 1436.

237Century Capital Corp. of South Carolina, Exchange Act Release No.

31206 (Sep. 21, 1992), 52 SEC Docket 2023.

238LakeSecurities, lnc., Exchange Act Release No. 31283 (Oct. 2, 1992),

52 SEC Docket 2662.

239Michael David Sweeney, Exchange Act Release No. 29884 (Oct. 30,

1991), 50 SEC Docket 59.

24°Donald T. Sheldon, Exchange Act Release No. 31475 (Nov. 18, 1992)

52 SEC Docket 3826.

241In re EI Paso Electric Co., Case No. 92-10148-FM (W.O. Tex.) and

In re Orion Pictures lnc., 91B15635 (BRL) (S.D.N.Y.).

242In re EI Paso Electric Co., Case No. 92-10148-FM (W.O. Tex.).

243Inre Amdura Corp., Case No. 90-3811-E et. seq. (Bankr. D. Colo.).

244In re Amdura Corp., No. 91 N 1521 (D. Colo.).

24sIn re American Reserve Corp., 840 F.2d 487 (7th Cir. 1988); In re The

Charter c«, 876 F.2d 866 (11th Cir. 1989), petition for cert. dismissed, 110

S.Ct. 3232 (1990); and Reid v. White Motor Corp., 886 F.2d 1462 (6th Cir.

1989), cert. denied, 110 S.Ct. 1809 (1990). See also In re Chateaugay Corp.,

100
104 Bankr. 626 (S.D.N.Y. 1989); and In re Zenith Laboratories, Inc., 104 Bankr.

659 (D.N.J. 1989). Cf. In re Mortgage & Realty Trust, 125 Bankr. 575 (Bankr.

C.D. Cal. 1991).

2.46SIPCv. Blinder, Robinson & Co., Inc., 962 F. 2d 960 (10th Cir. 1992).

2.47Inre I.M. T. lnc., 89-4-0746 PM (Bankr. D. Md.).

2.48Inre Prime Motor lnc., 90-16604-BKC-AJC (Bankr. S.D. Pla.),

2.49Inre Servico Corp., 90-36655 BKC-AJC (Bankr. S.D. Pla.),

2.50Inre Washington Corp., 90-00597 (Bankr. D. D.C.).

2.51Inre Lomas Financial Corp., 89B12471-89B 12478 (Bankr. S.D.N.Y.).

2.52.Seee.g., , In re Southmark Corp. and In re SIS Corp., 56th Annual Report

at 91 (objection to confirmation of reorganization plan); In re Custom

Laboratories, lnc., 53rd Annual Report at 74 (objection to disclosure

statement); In re Energy Exchange Corp. and Vulcan Energy Corp. and In re

Storage Technology Corp., 53rd Annual Report at 74-75 (objection to

confirmation of reorganization plan).

101

-
Table 1

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons SUbject to, Acts Constituting, and

Basis for, Enforcement Action

Any person

Violation of the federal securities laws

Broker-dealer, municipal securities dealer,

government securities dealer, transfer

agent, Investment adviser or associated

person

Willful VIolation of securmes laws or rules;

aiding or abetting such VIolation; failure

reasonably to supervise others; willful

misstatement or omission In filing with the

Commission, conviction of or injunction

aqamst certain cnmes or conduct.

Registered securities assocIation

Violation of or inability to comply with the 1934

Act, rules thereunder, or its own rules,

unjustified failure to enforce compliance with

the foregOing or WIth rules of the MUnicipal

Securities Rulemaklng Board by a member or

person associated WIth a member.

102

Sanction

Cease-and-desist order, which may also

require a person to comply or take steps to

effect compliance WIthfederal securities laws;

accounting & disgorgement of illegal profits.

(1933 Act Section 8A; 1934 Section 21C(a);

Investment Company Act Section 9(f);

Advisers Act Section 203(k».

Censure or Iimrtation on activities; revocation,

suspension or denial of registration; bar or

suspension from association (1934 Act,

Sections 15(b)(4)-(6), 15B(c)(2)-(5),

15(C)(c)(1)-(2), 17A(c)(3)-(4), Advisers Act,

Section 203(e)-(f».

CIVIlpenalty up to $100,000 for a natural

person or $500,000 for any other person;

accounting and dlsgorgement of Illegal profits.

Penalties are subject to other limitations

depending on the nature of the violation.

(1934 Act Section 21B; Investment Company

Act Section 9; Advisers Act Section (203).

Temporary cease-and-desist order, which

may, In appropriate cases, be Issued iUS.

(1934 Act. Section 21C).

Suspension or revocation of registration;

censure or IimrtatlOn of activities, functions, or

operations (1934 Act, Section 19(h)(1».

~
Member of registered securities

association, or associated person

Entry of Commission order against person

pursuant to 1934 Act, Section 15(b); willful

violation of secuntles laws or rules thereunder

or rules of Municipal Securities Rulemaklng

Board; effecting transaction for other person

with reason to believe that person was

committing violations of secuntles laws.

National securities exchange

Violation of or Inability to comply with 1934

Act, rules thereunder or its own rules;

unjustified failure to enforce compliance WIth

the foregOing by a member or person

associated with a member

Member of national securities exchange, or

associated person

Entry of Commission order against person

pursuant to 1934 Act, Section 15(b); Willful

violation of securmes laws or rules thereunder,

effecting transaction for other person with

reason to believe that person was committing

violation of eecurmes laws.

Registered clearing agency

Violation of or Inability to comply with 1934

Act, rules thereunder, or its own rules; failure

to enforce compliance with its own rules by

participants.

Participant In registered clearing agency

Entry of Commission order against participant

pursuant to 1934 Act, Section 15(b)(4); willful

violation of cleanng agency rules; effecting

transaction for other person with reason to

believe that person was committing violations

of securities laws.

Securities Information processor

Violation of or inability to comply WIth

provisions of 1934 Act or rules thereunder.

Suspension or expulsion from the assocrauon;

bar or suspension from association with

member of assocranon (1934 Act, Section

19(h)(2)-(3)).

Suspension or revocation of registration;

censure or limitation of activmes, functions, or

operations (1934 Act, Section 19(h) (1)).

Suspension or expulsion from exchange, bar

or suspension from association with member

(1934 Act, SectIOn 19(h)(2)-(3))

Suspension or revocation of reqrstranon;

censure or limitation of acnvmes, functions, or

operations (1934 Act, Section 19(h)(1)).

Sanction

Suspension or expulsion from c1eanng agency

(1924 Act, Section 19(h)(2)).

Censure or limitation of activities; suspension

or revocation of registration (1934 Act, secnon

11A(b)(6))

103
Any person

Willful VIolation of 1933 Act, 1934 Act,

Investment Company Ad or rules thereunder;

aiding or abetting such violation; willful

misstatement in filing with Commission.

OffIcer or director of self-regulatory

organization

Willful violation of 1934 Ad, rules thereunder

or the organization's own rules; WIllful abuse of

authority or unjustified failure to enforce

compliance.

Principal of broker-deaJer

Officer, diredor, general partner, ten-percent

owner or controlling person of a broker-dealer

for which a SIPC trustee has been appointed.

1933 Act registration statement

Statement materially inaccurate or incomplete.

Person subject to Sections 12, 13, 14 or

15(d) of the 1934 Act or associated person

Failure to comply with such provisions or

having caused such failure by an ad or

omission that person knew or should have

known would contribute thereto.

Securities registered pursuant to Section

12 of the 1934 Act

Noncompliance by issuer with 1934 Act or

rules thereunder.

Public interest requires trading suspension.

Registered Investment company

Failure to file Investment Company Act

registration statement or required report; filing

materially incomplete or misleading statement

or report.

Company has not attained $100,000 net worth

90 days after 1933 Act registration statement

became effedrve.

104

Temporary or permanent prohibition against

serving in certain capacities with registered

investment company (Investment Company

Ad, Section 9(b».

Removal from office or censure (1934 Ad,

Sedlon 19(h)(4».

Bar or suspension from being or becoming

assooated with a broker-dealer (SIPA,

Sedion 14(b».

Stop order refusing to permit or suspending

effectiveness (1933 Ad, secnon 8(d».

Order directing compliance or steps effecting

compliance (1934 Act, Section 15(c)(4».

Denial, suspension of effective date,

suspension or revocation of registration (1934

Ad, Section 120».

Summary suspension of over-the-counter or

exchange trading (1934 Ad, Sedion 12(k».

Suspension or revocation of registration

(Investment Company Act, Sadion 8(e».

Stop order under 1933 Act; suspension or

revocation of registration (Investment

Company Act, Section 14(a».
Attorney, accountant, or other professional

or expert

Lack of requisite qualifications to represent

others; lacking in character or integrity;

unethical or improper professional conduct;

willful violation of securities laws or rules; or

aiding and abetting such violation.

Attorney suspended or disbarred by court;

expert's license revoked or suspended;

conviction of a felony or of a misdemeanor

involving moral turpitude.

Permanent injunction against or finding of

securities VIolation in Commission-instituted

action; finding of securities violation by

Commission in administrative proceedings.

Member or employee of Municipal

Securities Rulemeklng Board

Willful violation of 1934 Act, rules thereunder,

or rules of the Board; abuse of authonty.

Permanent or temporary denial of privilege of

appearing or practiCIng before the Commission

(17 CFR Section 201.2(e)(1».

Automatic suspension from appearance or

practice before the Commission (17 CFR

Section 201.2(e)(2».

Temporary suspension from practicing before

the Commission; censure; permanent or

temporary disqualification from practiCing

before the Commission (17 CFR Section

201.2(e)(3».

Censure or removal from office (1934 Act,

Section 15B(c)(8».

CML PROCEEDINGS IN FEDERAL DISTRICT COURTS

Persons SUbject to, Acts Constituting, and

BasIs for, Enforcement Action

Any person

Engaging in or about to engage In acts or

practices violating securities laws, rules or

orders thereunder (including rules of a

registered self-regulatory organization).

Noncompliance with provisions of the laws,

rules, or regulations under 1933, 1934, or

Holding Company Act, orders issued by

Commission, rules of a registered selfregulatory organization, or undertaking in a

registration statement.

Sanction

Injunction against acts or practices

constituting violations (plus other equitable

rehef under court's general equity powers)

(1933 Act, Section 20(b); 1934 Act, Section

21 (d); Holding Company Act, Section 18(e);

Investment Company Act, Section 42(d);

Advisers Act, Section 209(d); Trust Indenture

Act, Section 321).

Writ of mandamus, injunction, or order

directing compliance (1933 Act, Section 20(c);

1934 Act, Section 21 (e); Holding Company

Act, Section 18(f».

105
Violating the secunties laws or a cease-anddesist order (other than through Insider

trading).

Trading while In possession of material nonpublic Information in a transaction on an

exchange or from or through a broker-dealer

(and transaction not part of a public offering),

aiding and abetting or dIrectly or Indirectly

controlling tr.e person who engages In such

trading.

Violating 1933 Act Section 17(a)(1) or 1934

Act section 1O(b), when conduct demonstrates

substantial unfitness to serve as an officer or

director.

Issuer subject to Section 12 or 15(d) of the

1934 Act, officer, director, employee or

agent of Issuer; stockholder acting on

behalf of issuer

Payment to foreign official, foreign political

party or OffiCial, or candidate for foreign

political office, for purposes of seeking the use

of Influence in order to assist Issuer in

obtaining or retaining business for or with, or

directing busmess to, any person.

Securities Investor Protection Corporation

Refusal to commit funds or act for the

protection of customers

National securities exchange or registered

securities association

Failure to enforce compliance by members or

persons associated with its members with the

1934 Act, rules or orders thereunder, or rules

of the exchange or assoclauon,

Registered clearing agency

Failure to enforce compliance by its

parucipants with its own rules.

106

Civil penalty up to $100,000 for a natural

person or $500,000 for any other person .QI, if

greater, the gross gain to the defendant.

Penalties are subject to other limitations

dependent on nature of violation. (1933 Act,

Section 20(d); 1934 Act, Section 21 (d) (3);

Investment Company Act, Section 42(e);

AdVIsers Act, secnon 209(e».

Maximum civil penalty. three times profit

gaIned or loss avoided as a result of

transaction (1934 Act, Section 21A(a)-(b».

Prohibition from acting as an officer or director

of any public company (1933 Act, Section

20(e); 1934 Act, Section 21 (d)(2».

Maximum civil penalty. $10,000 (1934 Act,

Section 32(c».

Order directing discharqe of obligations and

other appropriate relief (SIPA, Section 11 (b».

Writ of mandamus, injunction or order directing

such exchange or association to enforce

compliance (1934 Act, Section 21 (e».

Writ of mandamus, injunction or order directing

clearing agency to enforce compliance (1934

Act, Section 21 (e».
Issuer subject to Section 15(d) of 1934 Act

Failure to file required information, documents

or reports.

Registered Investment company

Name of company or of security issued by it

deceptive or misleading.

Officer, director, member of advisory

board, adviser, depositor, or underwriter of

Investment company

Engage in act or practice constituting breach

of fiduciary duty InvolVing personal

misconduct.

Forfeiture of $1 00 per day (1934 Act, Section

32(b».

injunction against use of name (Investment

Company Act, Section 35(d».

Injunction against acting In certain capacmes

for Investment company and other appropriate

relief (Investment Company Act, Section

36(a».

CRIMINAL PROSECUTION BY DEPARTMENT OF JUSTICE

Persons Subject to, Acts Constituting, and

Basis for, Enforcement Action

Any person

Willful Violation of securities laws or rules

thereunder; willful misstatement In any

document reqinrsd to be filed by securities

laws or rules; Willful misstatement In any

document required to be filed by selfregulatory organization in connection with an

application for membership or association With

member

Issuer subject to Section 12 or 15(d) of the

1934 Act; officer or director of Issuer;

stockholder acting on behalf of Issuer;

employee or agent sUbj"'ct to the

jurisdiction of the United States

Payment to foreign official, foreign political

party or official, or candidate for foreign

political office for purposes of seeking the use

of Influence in order to assist issuer In

obtaining or retaining business for or with, or

directing business to, any person.

Sanction

Maximum penalties' $1,000,000 fine and ten

years irnpnsonrnent for lndividuals, $2,500,000

fine for non-natural persons (1934 Act,

Sections 21 (d), 32(a»; $10,000 fine and five

years impnsonment (or $200,000 if a public

utility holding company for VIolations of the

Holding Company Act) (1933 Act, Sections

20(b), 24; Investment Company Act, Sections

42(e), 49, Advisers Act, Sections 209(e), 217,

Trust Indenture Act, Sections 321, 325;

Holding Company Act, Sections 18(f), 29)

Issuer $2,000,000; officer, director,

employee, agent or stockholder $100,000

and five years imprisonment (issuer may not

pay fine for others) (1934 Act, Section 32(C»

* Statutory references are as follows: "1933 Act, • the Securities Act of 1933; "1934 Act, • the

Secunties Exchange Act of 1934; "Investment Company Act," the Investment Company Act of 1940,

"AdVIsers Act," the Investment Advisers Act of 1940, "Holding Company Act," the Public Utility Holding

Company Act of 1935; "Trust Indenture Act," the Trust Indenture Act of 1939, and .SIPA,. the Secuntles

Investor Protection Act of 1970.

107

-

-
Table 2

ENFORCEMENT CASES INITIATED BY THE COMMISSION

DURING FISCAL YEAR 1992 IN VARIOUS PROGRAM AREAS

(Each case initiated has been included in only one category listed below

even though many cases involve multiple allegations and may fall under

more than one category)

Program Area in which a % of

Civil Action or Administrative Civil AdministratIVe 21(a) Total

Proceedmg was lnmated Actions v Proceedmgs Reports Total Gases

Securities Offering Gases

(a) Non-regulated EntIty 31 (130) 10 ( 12) 0(0) 41 (142)

(b) Regulated EntIty 14 ( 77) 35 ( 43) o (0) 49 (120)

Total Securities Offermg Gases 45 (207) 45 ( 55) 0(0) 90 (262) 23%

Broker-Dealer Gases

(a) Back Office 4 ( 12) 6 ( 8) 0(0) 10 ( 20)

(b) Fraud Agamst Customer 14 ( 22) 27 ( 31) 0(0) 41 ( 53)

(c) Failure to Supervise o ( 0) 6 ( 9) 0(0) 6 ( 9)

(d) Government Securities 1( 2) 1 ( 2) 0(0) 2 ( 4)

(e) Other 3( 3) 11 ( 71) 1 (5) 15 ( 79)

Total Broker-Dealer Gases 22 ( 39) 51 (121) 1 (5) 74 (165) 19%

Issuer Financial Statement

and Reporting Gases

(a) Issuer Fmanclal

Disclosure 24 ( 54) 34( 38) 0(0) 58 ( 92)

(b) Issuer Reportmg Other 5 ( 11) 4 ( 4) 0(0) 9 ( 15)

(c) Issuer Related Party

Transactions 2 ( 3) 1 ( 2) 0(0) 3 ( 5)

Total Issuer Financial Statement 31 ( 68) 39 ( 44) 0(0) 70 (112) 18%

Other Regulated Entity Gases

(a) Investment Advisers 15 ( 43) 24 ( 32) 0(0) 39 ( 75)

(b) Investment Companies 1 ( 1) 4 ( 5) 0(0) 5 ( 6)

(c) Transfer Agent O( 0) 8 ( 10) 0(0) 8 ( 10)

Total Other Regulated Entity Gases 16 ( 44) 36 ( 47) 0(0) 52 ( 92) 13%

Market Manipulation Gases 10 ( 25) 31 ( 33) 0(0) 41 ( 58) 10%

insider Trading Gases 27 ( 94) 5( 5) 0(0) 32( 99) 8%

Contempt Proceedings 11 ( 35) O( 0) 0(0) 11 ( 35) 2%

Corporate Control Gases O( 0) 9 ( 17) 0(0) 9 ( 17) 2%

Fraud Against Regulated Entities 3( 8) 1 ( 1) 0(0) 4( 9) 1%

Delinquent Fllmgs

(a) Issuer Reporting 2 ( 2) 2( 2) 0(0) 4 ( 4)

(b) Forms 3 & 4 o ( 0) 7( 7) 0(0) 7 ( 7)

Total Delinquent Filings Gases 2 ( 2) 9( 9) 0(0) 11 ( 11) 3%

GRAND TOTAL 167 (522) 226 (332) 1 (5) 394 (859) 101%21

v This category includes injunctIVe actions and civil and criminal contempt proceedings The number of

defendants and respondents IS noted parenthetically.

21 Percentage totals more than 100% due to roundmg of figures.

108
Table 3

INVESTIGATIONS OF POSSIBLE VIOLATIONS OF THE ACTS

ADMINISTERED BY THE COMMISSION

Pending as of October 1, 1991 1,259

Opened in Fiscal Year 1992 334

Total 1,593

Closed in Fiscal Year 1992 323

Pending as of September 30, 1992 1,270

Formal Orders of Investigation

Issued in Fiscal Year 1992 133

Table 4

ADMINISTRATIVE PROCEEDINGS INSTITUTED

DURING FISCAL YEAR ENDING SEPTEMBER 30, 1992

Broker-Dealer Proceedings 115

Investment Adviser, Investment Company and Transfer Agent Proceedings 51

Stop Order Proceedings 6

Rule 2(e) Proceedings 31

Suspensions of Trading in Securities in Fiscal Year 1992 7

109
Fiscal Year

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

110

iable e

INJUNCTIVE ACTIONS

Actions Initiated

151

179

143

163

144

125

140

186

171

156

Defendants Named

416

508

385

488

373

401

422

557

503

487
Table 6

FISCAL 1992 ENFORCEMENT CASES

LISTED BY PROGRAM AREA

Name of Case Release No. Dated Filed

Broker-Dealer: Back Office

In the Matter of Kevin Upton, et al. 34-29842 10/21/91

In the Matter of Frederick S. Todman & Co., et al. AAER 339 11/04/91

In the Matter of Andrew L. Epstein AAER 340 11/04/91

SEC v. H.K Freeland & Co., lnc., et al. LR-13103 11/26/91

In the Matter of H.K Freeland & Co., Inc. 34-30308 01/30/92

SEC v. The Riverview Corp., et al. LR.13166 02/14/92

In the Matter of Michael S. Shapiro AAER 358 03/04/92

SEC v. Peter G. Schwartz NONE 04/01/92

In the Matter of Walter Alfred Heyman 34-30775 06/04/92

SEC v. John T. Moran, et al. LR-13312 07/14/92

Broker-Dealer: Failure to Supervise

In the Matter of Richard A. Kahn 34-30108 12/20/91

In the Matter of Michael Hume 34-30335 02/04/92

In the Matter of First Albany Corp., et al. 34-30515 03/25/92

In the Matter of Graig & Associates Inc., et al. 34-30847 06/22/92

In the. Matter of James Oberweis 34-30866 06/29/92

In the Matter of Buddy S. Cohen 34-31008 08/06/92

Broker-Dealer: Fraud Against Customer

In the Matter of Carl V. May, Jr. 34-29830 10/17/91

In the Matter of Jay Kenneth Cox 34-29918 11/07/91

In the Matter of Ernest E. Michuad, et al. 34-29968 11/20/91

In the Matter of Gwendolyn Biggs 34-30042 12/06/91

In the Matter of Jerry M. Thomson 34-30133 12/31/91

In the Matter of Lynn F. Dickinson 34-30175 01/10/92

In the Matter of Molly C. Wilson 34-30300 01/29/92

In the Matter of Conrad B. Topacio 34-30533 03/31/92

In the Matter of Martin Herer Engelman, et al. 34-30635 04/27/92

In the Matter of David W. Schamens 34-30691 05/12/92

In the Matter of Carolina First Securities 34-30690 05/12/92

Group, Inc.

SEC v. Clement W. McLaughlin, Jr. LR-13262 06/01/92

In the Matter of Thomas M. Waller 34-30777 06/04/92

In the Matter of John R. Frye, Jr. 34-30776 06/04/92

In the Matter of Joseph L. Gaither 34-30786 06/08/92

SEC v. First Investors Corp. LR-13267 06/11/92

111
Release No. Date Filed

In the Matter of First Investors Corp. 34-30799 06/12/92

In the Matter of Patrick R. Comerford 34-30820 06/17/92

In the Matter of Clement W. McLaughlin, Jr. 34-30827 06/18/92

In the Matter of Carlos Fontecilla 34-30828 06/18/92

In the Matter of Michael J. Liskiewicz 34-30831 06/19/92

In the Matter of John M. Mickner 34-30853 06/24/92

SEC v. M. W. Campbell & Co., Ltd., et al. LR-13290 06/30/92

SEC v. Nicholas Zahareas, et al. LR-13293 07/01/92

SEC v. Paul Anthony Graver LR-13292 07/01/92

SEC v. William Joseph Caltabiano, Jr., et al. LR-13298 07/02/92

SEC v. Karen L. Scherm, et al. LR-13313 07/14/92

In the Matter of John Mark Hancock 34-30937 07/17/92

In the Matter of Andrew E. Cafferky, Jr. 34-30938 07/17/92

In the Matter of Paul Anthony Graver, et al. 34-30939 07/20/92

SEC v. John L. Morgan, et al. NONE 08/06/92

In the Matter of Gary J. Todryk 34-31017 08/11/92

SEC v. John E. Arnold LR-13356 08/31/92

In the Matter of Karen L. Scherm 34-31132 09/01/92

SEC v. Mark L. Rosenberg LR-13369 09/17/92

SEC v. Jerry M. Thompson LR-13387 09/29/92

In the Matter of Dennis Easter 34-31260 09/29/92

SEC v. Neeraj Bery LR-13391 09/29/92

SEC v. Jeffrey E. Bonham LR-13394 09/30/92

In the Matter of Jeffrey E. Bonham 34-31270 09/30/92

Broker-Dealer: Other

In the Matter of Certain Government 34-30255 01/16/92

Sponsored Enterprises

In the Matter of Certain Government 4-30191 01/16/92

Sponsored Enterprises

SEC v. Linda K. Rees LR-13183 03/09/92

In the Matter of Linda K. Rees 34-30612 04/22/92

In the Matter of Printon, Kane Group, Inc. 34-30641 04/28/92

In the Matter of National Investment Fund 34-30586 04/15/92

Inc., et al.

SEC v. Richard Dale Radcliffe LR-13230 05/01/92

In the Matter of Salomon Brothers Inc. 34-30721 OS/20/92

SEC v. Salomon lnc., et aI. LR-13246 OS/20/92

In the Matter of Kochcapitallnc., et al. 34-30741 OS/27/92

In the Matter of Richard Dale Radcliffe 34-31033 08/13/92

SEC v. James Gordon Rogers LR-13344 08/20/92

In the Matter of G. Wesley Sodorff, Jr. 34-31193 09/16/92

In the Matter of Ronald Sunshine 34-31199 09/17/92

In the Matter of Shearson Lehman Brothers, Inc. 34-31196 09/17/92

112
Release No. Date Filed

In the Matter of Donaldson, Lufkin & 34-31207 09/22/92

Jenrette Securities Corp. I

In the Matter of Richard H. Rutherford 34-31246 09/29/92

Contempt-Civil

SEC v. Money Systems Inc., et al. LR-13062 10/24/91

SEC v. Arthur F. Nugent 1/1, et al. LR-13102 11/26/91

SEC v. Current Financial Services, et al. LR-13377 12/09/91

SEC v. Vincent Filippazzo Sr. NONE 01/03/92

SEC v. Joseph A. DiBruno NONE 03/03/92

SEC v. Harry Hone NONE 07/15/92

SEC v. Sam J. Recile NONE 09/23/92

SEC v. John Allen Chalk LR-13377 09/23/92

SEC v. Walter H. Cushman, 1/1 LR-13405 10/08/92

Contempt-Criminal

U.S. ex rei SEC v. Arden R. Brown NONE 04/23/92

U.S. ex rei SEC v. John A. Meatte NONE 08/07/92

Corporate Control:

In the Matter of The Uonel Corp. 34-30121 12/30/91

In the Matter of Milo L. Pike 34-31261 09/29/92

In the Matter of Leslie T. Uvingston, et al. 34-31269 09/30/92

In the Matter of Douglas A. Kass 34-31046 08/17/92

In the Matter of In vesco MIM, PLC 34-30878 07/01/92

In the Matter of Leonard P. Bogdan, Jr. 34-30874 06/30/92

In the Matter of BGC Special Equity 34-30875 06/30/92

Ltd. Partnership, et al.

In the Matter of RIT Acquisition Corp., et aI. 34-30732 OS/22/92

In the Matter of The Krupp Corp., et al. 34-30566 04/08/92

Delinquent Filings: Forms 3 & 4

In the Matter of Genesis Investment Corp. 34-30633 04/27/92

In the Matter of Maximiliam DeClara 34-30666 05/06/92

In the Matter of Warren C. Cook 34-30715 05/19/92

In the Matter of Herbert L. Luxenburg 34-31186 09/16/92

In the Matter of R. Taylor Matthews, Jr. 34-31198 09/17/92

In the Matter of Ralph R. Shaw 34-31250 09/29/92

In the Matter of Jacob Y. Temer 34-31263 09/30/92

113

~

~
Release No. Date Filed

Delinquent Filings: Issuer Reporting

SEC v. Kenilworth Systems Corp. LR-13079 11/06/91

SEC v. Physicians Pharmaceutical Services Inc. LR-13120 12/12/91

In the Matter of Hughes Homes Inc. 34-31036 08/13/92

In the Matter of U.S. Mint Inc. 34-31265 09/30/92

Fraud Against Regulated Entities

In the Matter of Peter S. Adler 34-30332 02/03/92

SEC v. Paul Kutik LR-13240 05/14/92

SEC v. Edward L. Scherer, et el. LR-13340 08/20/92

SEC v. Brown & Mueller Investments, Ltd., et al. LR-13342 08/20/92

Insider Trading

SEC v. Rushton Leigh Ardney, Jr. LR-13041 10/10/91

In the Matter of Rushton Leigh Ardrey, Jr. 34-29836 10/18/91

SEC v. Shared Medical Systems Corp., et al. LR-13053 10/21/91

SEC v. Thomas Roberts, et al. LR-13129 12/23/91

SEC v. Ernest W. Swanson, et al. LR-13135 01/02/92

SEC v. Benalder Bayse, Jr. LR-13145 01/24/92

In the Matter of Brian J. Callahan 34-30321 01/31/92

SEC v. Robert Toomey, et al. LR-13178 03/02/92

SEC v. Keith Baity LR-13181 03/09/92

SEC v. Dilip Shah LR-13191 03/18/92

In the Matter of Keith Baity 34-30504 03/20/92

SEC v. Frank Wagner, et aI. LR-13196 03/20/92

SEC v. Barry H. Glandt, et al. LR-13213 04/06/92

SEC v. John Acree, et al. LR-13219 04/09/92

In the Matter of Charles H. Howard, 34-30674 05/07/92

SEC v. Robert W. Navarre /I, et al. LR-13248 OS/21/92

In the Matter of John D. Collins, /I 34-30746 OS/28/92

SEC v. Edward R. Downe, Jr., et aI. LR-13260 06/04/92

SEC v. Barbara C. Jarvis, et aI. LR-13274 06/18/92

SEC v. Robert A. Hess LR-13273 06/18/92

SEC v. Kurt Naegeli LR-132n 06/23/92

SEC v. N. Donald Morse /I LR-13280 06/24/92

SEC v. John G. Decker, et al. LR-13288 06/29/92

SEC v. Albert Laboz, et al. LR-13309 07/10/92

SEC v. Michael N. Graham, et al. LR-13321 07/23/92

SEC v. Andrew M. Coden LR-13335 08/11/92

SEC v. Robert T. Ricketts, et al. LR-13335 08/11/92

SEC v. Robert Falbo, et aI. LR-13364 09/16/92

SEC v. Melvin J. Gardner LR-13372 09/17/92

SEC v. Armondo Felicetti, et al. LR-13376 09/22/92

SEC v. Hugh Thrasher, et aI. LR-13381 09/24/92

SEC v. T. B. Strickland, Jr; et al. LR-13407 10/13/92

114

'"
Release No. Date Filed

Investment Adviser

IA-1315

IA-1316

LR-13247

IA-1311

IA-1312

NONE

LR-13044

IA 1291

LR-13094

LR-13116

IA 1300

LR-13192

A-1309

OS/21/92

OS/28/92

06/04/92

11/19/91

12/10/91

02/24/92

03/18/92

04/27/92

12/09/91

10/15/91

10/22/91

06/09/92

06/12/92

06/30/92

06/30/92

07/15/92

07/20/92

08/10/92

08/18/92

08/25/92

08/25/92

08/25/92

09/01/92

09/15/92

09/16/92

09/17/92

09/21/92

09/21/92

09/21/92

09/21/92

09/23/92

09/24/92

09/29/92

09/29/92

09/30/92

09/30/92

10/02/92

10/06/92

SEC v. Denman & Co., et al.

SEC v. G&H Capital Partners Ltd., et al.

In the Matter of Wesley Allen Douglas

Campbell, et al.

SEC v. Treasury First Inc., et al.

SEC v. Leroy S. Brenna, et al.

In the Matter of Frank Rollins Maxwell

SEC v. Public Funding Group, Inc., et al.

In the Matter of Institutional Treasury

Management Inc., et al.

SEC v. G. Albert Griggs, Jr., et al.

In the Matter of G. Albert Griggs, Jr.

In the Matter of Summit Financial

Advisory, Inc., et al.

In the Matter of Steven D. Wymer

In the Matter of First Investors

Management Co., Inc.

In the Matter of M&llnvestment Management Corp. IA-1318

In the Matter of William Gumerman IA-1319

SEC v. David T. Le Vaughn, et al. LR-13316

In the Matter of Specialty Advisors Corp. IA-1321

SEC v. Harrah Associates Ltd., et al. LR-13334

In the Matter of Dimitri Balatsos IA-1324

In the Matter of John T. Hall IA-1327

In the Matter of Cheshire Hall Advisors, Inc. IA-1326

SEC v. Bonnie Mae White NONE

In the Matter of James Douglas Donahue IA-1331

SEC v. Shield Group Inc., et al. NONE

SEC v. Ashland Capital Management, Inc., et al. LR-13367

In the Matter of Earl Fallen IA-1337

In the Matter of Alisandro Aponte IA-1341

In the Matter of Stephen C. Schulmerich, et al. IA-1338

In the Matter of Lynn Elgert, Inc., et al. IA-1339

In the Matter of Ashland Capital Management, Inc. IA-1340

In the Matter of Douglas W. Polite, Jr., et al. IA-1342

In the Matter of Walter L. Harrah, 1/1 IA-1344

In the Matter of J. H. Ayres & Co., Inc., et al. IA-1348

SEC v. Khalsa Financial Services, Inc., et al. NONE

In the Matter of American Foresight, Inc. IA-1350

In the Matter of Thomas F. Heffernan IA-1351

SEC v. Carona & Hodges Management, Inc., et al. LR-13395

SEC v. Michael A. Whelchel, et al. LR-13399

115
Release No. Date Filed

Investment Company

SEC v. Alpine Mutual Fund Trust LR-13101 11/21/91

In the Matter of Benalder Bayse, Jr. IC 18570 02/26/92

In the Matter of William H. Pike IC 18601 03/05/92

In the Matter of Thomas G. Cummings IC 18624 03/23/92

In the Matter of Public Funding Group tnc., et al. JA-1346 09/25/92

Issuer Financial Disclosure

SEC v. Walter F. Buce AAER 334 10/24/91

SEC v. Richard B. Hayes AAER 336 10/28/91

SEC v. NECO Enterprises Inc., et al. AAER335 10/28/91

In the Matter of Walter F. Buce AAER 337 10/31/91

SEC v. Specialty Retail Concepts Inc., et al. AAER 350 11/15/91

In the Matter of Steven C. Wolfe, Sr. AAER344 12/10/91

In the Matter of Ernest C. Garcia 34.30069 12/12/91

SEC v. Charles H. Keating Jr., et al. AAER346 12/12/91

SEC v. Ernest Garcia 11/ AAER347 12/12/91

In the Matter of Kenneth A. Huff AAER 353 01/31/92

In the Matter of William P. Lorea AAER354 01/31/92

In the Matter of Amre, lnc., et al. AAER 356 03/02/92

SEC v. Byron Woody Conradt LR-13179 03/03/92

SEC v. Robert Levin, et al. AAER357 03/03/92

SEC v. Ashok Patel LR-13191 03/18/92

SEC v. Pharmaceutical Resources, Inc. LR-13191 03/18/92

In the Matter of Caterpillar Inc. AAER363 03/31/92

In the Matter of D. Spencer Nilson AAER364 03/31/92

In the Matter of John R. Schoemer, et al. AAER 365 03/31/92

SEC v. George R. Thompson AAER 366 04/06/92

In the Matter Artie S. Hope, CPA AAER368 04/14/92

In the Matter of Kenneth E. Hassebroek AAER369 04/16/92

In the Matter of Abington Bancorp, Inc. AAER370 04/22/92

SEC v. College Bound Inc., et aI. AAER371 04/24/92

In the Matter of James Dougan, CPA AAER380 05/06/92

In the Matter of Michael Briggs, CPA AAER 381 05/06/92

SEC v. Thomas M. Egan, et al. AAER387 OS/27/92

SEC v. Albert Barette, et al. AAER389 06/17/92

In the Matter of Jerry Bernstein, CPA AAER 391 06/22/92

In the Matter of Mac M. Martirossian AAER394 06/30/92

SEC v. Programming & Systems, Inc. AAER395 07/01/92

In the Matter of Leroy P. Studer, CPA AAER398 07/13/92

SEC v. G. William Theriault, et al. AAER433 07/16/92

In the Matter of Robert A. Dominques, et al. AAER400 07/30/92

In the Matter of Mark Sauter AAER 401 08/04/92

In the Matter of JUdy Wischer AAER402 08/04/92

SEC v. Southeast First Capital Corp., et al. LR-13333 08/06/92

In the Matter of Denis Lustig, CPA AAER404 08/11/92

116
Release No. Date Filed

In the Matter of Wayne F. Sloop, CPA AAER 406 08/13/92

In the Matter of Andrew Ugget, CPA AAER 408 08/18/92

SEC v. NRG International, Inc., et aI. AAER407 08/20/92

In the Matter of Matthew Grant, et al. AAER 410 08/24/92

SEC v. Harold Fischman AAER411 08/25/92

In the Matter of Harold Fischman AAER413 09/03/92

In the Matter of Mark Baker AAER414 09/03/92

In the Matter of Larry G. Baker, CPA AAER415 09/16/92

In the Matter of Philip Kagan 34-31205 09/18/92

SEC v. Barry J. Kaplan NONE 09/21/92

In the Matter of Presidential Life Corp. AAER 416 09/22/92

SEC v. William Menyhert, et al. AAER417 09/22/92

SEC v. Raymond Goulet, et al. LR-13468 09/25/92

In the Matter of Thomas Page Taylor, CPA AAER420 09/28/92

In the Matter of Agnes E. Jenkins AAER421 09/29/92

In the Matter of Lexington Precision Corp. AAER 422 09/29/92

In the Matter of James C. Andrus, CPA AAER424 09/30/92

SEC v. Joseph F. Murphy AAER425 09/30/92

SEC v. James N. Von Germeten AAER 426 09/30/92

In the Matter of Milton M. Trujillo, CPA AAER 423 09/30/92

SEC v. Information Management AAER 427 10/06/92

Technologies, et al

SEC v. Burton A. Waisbren, Jr. AAER434 12/04/92

Issuer Related Party Transactions Disclosure

SEC v. Richard Grassgreen, et al. LR-13100 11/21/91

In the Matter of Richard Grassgreen NONE 12/02/91

SEC v. International Communications Specialists NONE 02/24/92

Issuer Reporting: Other

SEC v. ICN Pharmaceuticals, Inc., et al. LR-13028 10/07/91

In the Matter of Robert J. lommazzo, CPA AAER 385 OS/22/92

SEC v. Gary C. Hughes, et aI. AAER 390 06/15/92

In the Matter of Michael P. Neary 34-31257 09/29/92

In the Matter of Robert F. Conley 34-31259 09/29/92

SEC v. Philip H. Talbert, et aI. LR-13390 09/29/92

In the Matter of James F. Ferguson 34-31258 09/30/92

Market Manipulation

In the Matter of Mildred Faye Breuer 34-29829 10/17/91

SEC v. Maurice A. Halperin, et aI. LR-13052 10/21/91

In the Matter of Roth Securities Co., Inc. 34-29942 11/14/91

In the Matter of Martin Hirsh 34-30059 12/10/91

In the Matter of Raymond Morris 34-30061 12/10/91

In the Matter of Patrick Moore 34-30060 12/10/91

In the Matter of Charles M. Zsrzecki 34-30302 01/29/92

117
In the Matter of Bruce L. Newberg

In the Matter of Raphael Bloom, et al.

SEC v. Eldon Weber

SEC v. Harold L. Fisher

In the Matter of Harold L. Fisher

SEC v. Edward A. Accomando, et al.

SEC v. Victor M. Wexler, et al.

In the Matter of Peter G. Schwartz

In the Matter of Alan M. Stern

In the Matter of David S. Borsak

SEC v. Joseph Pandolfino, Jr.

In the Matter of Gary Ira Tucker

In the Matter of Randal C. Forman

In the Matter of Peter E. Butler

In the Matter of Alan Diamond

In the Matter of Dennis Denoble

In the Matter of Richard Arale, et al.

In the Matter of Securities Settlement Corp.

In the Matter of Paul L. Miano

In the Matter of Barry W Fortner

In the Matter of Matthew L. Wager

In the Matter of Jeffrey R. Leach

In the Matter of Mark P. Malenfant

In the Matter of Myron S. Levin

In the Matter of Scott Segal

In the Matter of Robert Schlien

In the Matter of Rene Philippart

SEC v. Robert C. Valerius

In the Matter of Robert C. Valerius

In the Matter of Victor Goldman

SEC v. Randal C. Forman

SEC v. Troy C. Burninshaw

In the Matter of Robert Gary Lewis

SEC v. James H. Fors, et al.

Offering Violations (By Non-Regulated Entities)

SEC v. Donald Coleman, et al.

SEC v. Westdon Holding & Investment, Inc., et al.

SEC v. Ray H. Kobayashi, et aI.

SEC v. Donald W Wright

In the Matter of Norman Nouskajian

SEC v. Caribbean Select, Inc., et al.

SEC v. Edward Morris, et al.

SEC v. Great Southwest Energy Inc., et al.

SEC v. Oxford Capital Securities tnc., et aI.

SEC v. Metro Display Advertising, Inc., et aI.

In the Matter of Howard K Schwartz

118

Release No.

34-30301

34-30373

LR-13177

LR-13184

34-30546

LR-13222

LR-13225

34-30631

34-30707

34-30708

LR-13250

34-30745

34-30742

34-30788

34-30791

34-30846

34-30869

34-30868

34-30915

34-30931

34-31009

34-31007

34-31035

34-31124

34-31144

34-31147

34-31158

LR-13363

34-31180

34-31210

NONE

NONE

34-31224

NONE

AAER330

LR-13085

LR-13111

LR-13110

33-6923

LR-13139

AAER352

LR-13158

LR-13160

LR-13162

NONE

Date Filed

01/29/92

02/14/92

02/28/92

03/09/92

04/01/92

04/09/92

04/22/92

04/23/92

05/18/92

05/18/92

OS/26/92

OS/27/92

OS/27/92

06/08/92

06/10/92

06/22/92

06/30/92

06/30/92

07/13/92

07/16/92

08/06/92

08/06/92

08/13/92

09/01/92

09/03/92

09/03/92

09/04/92

09/09/92

09/14/92

09/22/92

09/22/92

09/23/92

09/23/92

09/30/92

10/09/91

11/07/91

12/05/91

12/05/91

01/16/92

01/16/92

01/27/92

02/05/92

02/06/92

02/07/92

02/26/92
Release No. Date Filed

In the Matter of DG Bank (Schweiz) AG 34-30446 03/05/92

SEC v. Jimmie F. Straw, et al. LR-13189 03/13/92

In the Matter of Irving Technology Inc. 33-6930 03/20/92

In the Matter of Cross Research Corp. 33-6929 03/20/92

SEC v. Gary L. Blatter LR-13207 03/27/92

SEC v. Jedi Group Umited, et al. LR-13206 03/27/92

SEC v. Lexco Operating Co., et al. LR-13208 04/06/92

SEC v. Custom Trading International Corp., et al. LR-13229 04/24/92

In the Matter of Michael A. Clark 33-6936 04/27/92

In the Matter of State Bank of Pakistan 33-6937 05/06/92

In the Matter of Daniel C. Montano, et al. 33-6938 05/13/92

SEC v. Silver Bow Resources & LR-13257 06/01/92

Chemical Corp., et al.

In the Matter of David R. Yeaman, et al. 34-30845 06/22/92

SEC v. Thomas C. Hollenshead LR-13284 06/29/92

SEC v. Bach Energy Corp., et al. LR-13328 07/16/92

SEC v. Harry E. Fleischhauer, et al. LR-13324 07/26/92

SEC v. Jan W. Olson NONE 07/29/92

In the Matter of Benjamin G. Sprecher 34-30985 07/31/92

SEC v. William J. Fritz, et al. LR-13338 08/13/92

SEC v. Q Consulting Inc., et al. NONE 08/17/92

SEC v. Interactive Medical Technologies, LR-13354 08/26/92

Ltd., et al.

SEC v. Marvin H. Katz LR-13365 09/16/92

SEC v. Donald M. Greth NONE 09/21/92

SEC v. Herbert M. Schneider, et al. LR-13381 09/29/92

SEC v. Michael D. Wozniak, et al. LR-13383 09/29/92

SEC v. Chaparral Mining Corp., et aI. AAER428 10/06/92

SEC v. Anthony J. Anello LR-13402 10/07/92

SEC v. Richard H. Wright, Sr., et al. LR-13419 10/28/92

SEC v. Karl L. Dahlstrom, et al. LR-13429 11/10/92

SEC v. Electronic Medical Management Inc., et al. LR-13437 11/18/92

Offering Violations (By Regulated Entities)

In the Matter of PDS Securities International, 34-30165 01/08/91

Inc., et al.

In the Matter of Cardinal Financial Planning, 34-29838 10/18/91

Inc., et al.

In the Matter of Paulson Investment Co., et al. 34-29943 11/14/91

SEC v. Rebecca M. Mendenhall, et aI. LR-13104 11/26/91

In the Matter of John J. Marston 34-29999 11/26/91

In the Matter of Baskin Planning Consultants, Ltd., IA 1297 12/19/91

etal.

SEC v. Condrin Oil Corp., et al. LR-13131 12/20/91

In the Matter of Hovhanness K. Freeland 34-30307 01/30/92

SEC v. Deepak Gulati, et al. LR-13171 02/20/92

SEC v. Guy S. Cohen, et al. LR-13172 02/20/92

119
Release No. Date Filed

In the Matter of Joseph A. Hurton 34-30397 02/24/92

In the Matter of Thomas D. Kienlen Corp., et al. IA 1302 03/04/92

In the Matter of Joseph-Sep Salduk Graham 34-30483 03/17/92

SEC v. Stratton Oakmont Inc., et al. LR-13195 03/20/92

In the Matter of Robert E. Cohen 34-30543 04/01/92

In the Matter of Carol Catherine Martino 34-30545 04/01/92

In the Matter of Wellshire Securities Inc. 34-30544 04/01/92

In the Matter of Robert I. Dowd 34-30567 04/08/92

In the Matter of Guy S. Cohen 34-30578 04/13/92

In the Matter of Gregory Christian 34-30632 04/27/92

In the Matter of Herbert M. Schneider 34-30713 05/18/92

In the Matter of Stephen J. Klos 34-30723 OS/21/92

SEC v. AMI Securities Inc., et al. LR-13258 06/02/92

In the Matter of Louis Soqui 34-30790 06/10/92

SEC v. Bassam Haje, et al. LR-13272 06/17/92

SEC v. James Douglas Donahue, et al. LR-13276 06/18/92

SEC v. Wiliam E. Tully, et al. LR-13275 06/18/92

SEC v. Omni Capital Group, Ltd., et al. LR-13295 07/01/92

SEC v. Randall Craig Hutchens LR-13331 08/05/92

SEC v. Sunaco Energy Inc., et al. LR-13352 08/20/92

In the Matter of Paul A. Wilbur 34-31067 08/24/92

In the Matter of Rosemary Grady 34-31073 08/24/92

In the Matter of David w: Williams 34-31068 08/24/92

In the Matter of DTI Financial, Inc. 34-31109 08/27/92

In the Matter of D. Gulati & Associates, Inc. IA-1328 08/27/92

In the Matter of Deepak Gulati JA-1329 08/27/92

In the Matter of Broker Services, Inc. JA-1330 09/01/92

In the Matter of David T. Marantette, //I 34-31136 09/02/92

In the Matter of Philip R. Gratz 34-31192 09/16/92

In the Matter of Peter C. Calcutta 34-31200 09/17/92

In the Matter of Roger L. Main 34-31231 09/24/92

In the Matter of Glenn A. Main, //I 34-31230 09/24/92

In the Matter of Robert Elderkin 34-31239 09/24/92

In the Matter of Gregory Maxcy 34-31232 09/24/92

In the Matter of Managed Advisory Services, 34-31229 09/24/92

tnc., et al.

In the Matter of Barry Alan Larson 34-31256 09/29/92

In the Matter of Foster Brawner Financial IA-1349 09/30/92

Services inc., et al.

SEC v. Dana L. Anderson, et al. LR-13406 10/08/92

Transfer Agent

In the Matter of James F. Morphew 34-29902 11/05/91

In the Matter of Linda James Marriott 34-30601 04/20/92

In the Matter of Gena Marie Laiacona 34-30600 04/20/92

In the Matter of James A. Laiacona 34-30599 04/20/92

120
34-31214

Release No.

In the Matter of American Registrar and 34-30765

Transfer Company

In the Matter of Kent Knigge 34-30764

In the Matter of General Securities TransferAgency 34-31185

Inc, et al.

In the Matter of Over the Counter Stock

Transfer, Inc.

Date Filed

06/01/92

06/01/92

09/16/92

09/22/92

121
Right to Financial Privacy

Section 21(h) of the Securities Exchange Act of 1934 [15U.S.c. 78u(h)(6)]

requires that the Commission "compile an annual tabulation of the occasions

on which the Commission used each separate subparagraph or clause of

[Section 21(h)(2)] or the provisions of the Right to Financial Privacy Act

of 1978 [12 U.S.c. 3401-22 (the RFPA)] to obtain access to financial records

of a customer and include it in its annual report to the Congress." During

the fiscal year, the Commission made two applications to a court for an

order pursuant to the subparagraphs and clauses of Section 21(h)(2) to

obtain access to financial records of a customer. Set forth below are the

number of occasions on which the Commission obtained customer records

pursuant to the provisions of the RFPA:

Section 1104 (Customer Authorizations) 2

Section 1105 (Administrative Subpoenas) 288

Section 1107 (Judicial Subpoenas) 33

122
Foreign Restricted List

The Securities and Exchange Commission maintains and publishes

a Foreign Restricted List which is designed to put broker-dealers, financial

institutions, investors and others on notice of possible unlawful distributions

of foreign securities in the United States. The list consists of names of

foreign companies whose securities the Commission has reason to believe

have been, or are being offered for public sale in the United States in

possible violation of the registration requirement of Section 5 of the

5ecuri ties Act of 1933. The offer and sale of unregistered securi ties depri ves

investors of all the protections afforded by the Securities Act of 1933,

including the right to receive a prospectus containing the information

required by the Act for the purpose of enabling the investor to determine

whether the investment is suitable. While most broker-dealers refuse to

effect transactions in securities issued by companies on the Foreign

Restricted List, this does not necessarily prevent promoters from illegally

offering such securities directly to investors in the United States by mail,

by telephone, and sometimes by personal solicitation. The following foreign

corporations and other foreign entities comprise the Foreign Restricted

List.

1. Aguacate Consolidated Mines, Incorporated (Costa Rica)

2. Alan MacTavish, Ltd. (England)

3. Allegheny Mining and Exploration Company, Ltd. (Canada)

4. Allied Fund for Capital Appreciation (AFCA, S.A.) (Panama)

5. Amalgamated Rare Earth Mines, Ltd. (Canada)

6. American Industrial Research S.A., also known as

Investigation Industrial Americana, 5.A. (Mexico)

7. American International Mining (Bahamas)

8. American Mobile Telephone and Tape Co., Ltd. (Canada)

9. Antel International Corporation, Ltd. (Canada)

10. Antoine Silver Mines, Ltd. (Canada)

11. ASCA Enterprisers Limited (Hong Kong)

12. Atholl Brose (Exports) Ltd. (England)

13. Atholl Brose Ltd. (England)

14. Atlantic and Pacific Bank and Trust Co., Ltd. (Bahamas)

15. Bank of Sark (Sark, Channel Islands, U.K.)

16. Briar Court Mines, Ltd. (Canada)

17. British Overseas Mutual Fund Corporation Ltd. (Canada)

18. California & Caracas Mining Corp., Ltd. (Canada)

19. Caprimex, Inc. (Grand Cayman, British West Indies)

20. Canterra Development Corporation, Ltd. (Canada)

21. Cardwell Oil Corporation, Ltd. (Canada)

22. Caribbean Empire Company, Ltd. (British Honduras)

23. Caye Chapel Club, Ltd. (British Honduras)

24. Central and Southern Industries Corp. (Panama)

25. Cerro Azul Coffee Plantation (Panama)

26. Cia. Rio Banano, S.A. (Costa Rica)

123
27. City Bank A.5. (Denmark)

28. Claw Lake Molybdenum Mines, Ltd. (Canada)

29. Claravella Corporation (Costa Rica)

30. Compressed Air Corporation, Limited (Bahamas)

31. Continental and Southern Industries, S.A. (Panama)

32. Crossroads Corporation, 5.A. (Panama)

33. Darien Exploration Company, S.A. (Panama)

34. Derkglen, Ltd. (England)

35. De Veers Consolidated Mining Corporation, S.A. (Panama)

36. Doncannon Spirits, Ltd. (Bahamas)

37. Durman, Ltd. Formerly known as Bankers International

Investment Corporation (Bahamas)

38. Empresia Minera Caudalosa de-Panama, S.A. (Panama)

39. Ethel Copper Mines, Ltd. (Canada)

40. Euroforeign Banking Corporation, Ltd. (Panama)

41. Finansbanker a/ s (Denmark)

42. First Liberty Fund, Ltd. (Bahamas)

43. General Mining S.A. (Canada)

44. Global Explorations, Inc. (Panama)

45. Global Insurance, Company, Limited (British West Indies)

46. Globus Anlage-Vermittlungsgesell-schaft MBH (Germany)

47. Golden Age Mines, Ltd. (Canada)

48. Hebilla Mining Corporation (Costa Rica)

49. Hemisphere Land Corporation Limited (Bahamas)

50. Henry Ost & Son, Ltd. (England)

51. Hotelera Playa Flamingo, S.A.

52. Intercontinental Technologies Corp. (Canada)

53. International Communications Corporation (British West Indies)

54. International Monetary Exchange (Panama)

55. International Trade Development of Costa Rica, S.A.

56. Ironco Mining & Smelting Company, Ltd. (Canada)

57. James G. Allan & Sons (Scotland)

58. [ojoba Oil & Seed Industries S.A. (Costa Rica)

59. Jupiter Explorations, Ltd. (Canada)

60. Kenilworth Mines, Ltd. (Canada)

61. Klondike Yukon Mining Company (Canada)

62. KoKanee Moly Mines, Ltd. (Canada)

63. Land Sales Corporation (Canada)

64. Los Dos Hermanos, S.A. (Spain)

65. Lynbar Mining Corp. Ltd. (Canada)

66. Massive Energy Ltd. (Canada)

67. Mercantile Bank and Trust & Co., Ltd. (Cayman Island)

68. Multireal Properties, Inc. (Canada)

69. J.P. Morgan & Company, Ltd., of London, England (not to

be confused with J.P. Morgan & Co., Incorporated, New York)

70. Norart Minerals Limited (Canada)

71. Normandie Trust Company, S.A. (Panama)

72. Northern Survey (Canada)

124
73. Northern Trust Company, S.A. (Switzerland)

74. Northland Minerals, Ltd. (Canada)

75. Obsco Corporation, Ltd. (Canada)

76. Pacific Northwest Developments, Ltd. (Canada)

77. Pan-Alaska Resources, S.A. (Panama)

78. Panamerican Bank & Trust Company (Panama)

79. Pascar Oils Ltd. (Canada)

80. Paul pic Gold Mines, Ltd. (Canada)

81. Pyrotex Mining and Exploration Co., Ltd. (Canada)

82. Radio Hill Mines Co., Ltd. (Canada)

83. Rancho San Rafael, S.A. (Costa Rica)

84. Rodney Gold Mines Limited (Canada)

85. Royal Greyhound and Turf Holdings Limited (South Africa)

86. S.A. Valles & Co., Inc. (Philippines)

87. San Salvador Savings & Loan Co., Ltd. (Bahamas)

88. Santack Mines Limited (Canada)

89. Security Capital Fiscal & Guaranty Corporation S.A. (Panama)

90. Silver Stack Mines, Ltd. (Canada)

91. Societe Anonyme de Refinancement (Switzerland)

92. Strathmore Distillery Company, Ltd. (Scotland)

93. Strathross Blending Company Limited (England)

94. Swiss Caribbean Development & Finance Corporation

(Switzerland)

95. Tam O'Shanter, Ltd. (Switzerland)

96. Timberland (Canada)

97. Trans-American Investments, Limited (Canada)

98. Trihope Resources, Ltd. (West Indies)

99. Trust Company of Jamaica, Ltd. (West Indies)

100. United Mining and Milling Corporation (Bahamas)

101. Unitrust Limited (Ireland)

102. Vacationland (Canada)

103. Valores de Inversion, S.A. (Mexico)

104. Victoria Oriente, Inc. (Panama)

105. Warden Walker Worldwide Investment Co. (England)

106. Wee Gee Uranium Mines, Ltd. (Canada)

107. Western International Explorations, Ltd. (Bahamas)

108. Yukon Wolverine Mining Company (Canada)

125
Self-Regulatory Organizations: Expenses, Pre-tax Income and Balance

Sheet Structure

In 1991, the total revenues of all self-regulatory organizations (SROs)

with marketplace jurisdiction rose approximately $52.7 million, an increase

of approximately 6.1% from 1990 (1990 recognized a .7% decrease below

1989; 1989 a 5.1% increase over 1988). The New York Stock Exchange

(NYSE), National Association of Securities Dealers (NASD), American

Stock Exchange (Amex) and the Chicago Board Options Exchange (CBOE)

accounted for 83.8% of all SRO total revenues, up from 82.3% in 1990, which

was up from 79.5% in 1989. The SROs' revenues were earned primarily

from listing, trading and market data fees. The NYSE reported total

revenues of $374.5 million, up 7.4% from 1990, of which 37% consisted

of listing fees, 20% consisted of trading fees, and 14% consisted of market

data fees. The Amex reported total revenues of $100.9 million (of which

11% consisted of listing fees), down 5.4% from 1990. The CBOE reported

total revenues of $77.5 million, up 6.1%from the previous year. The NASD

reported an increase in total revenues of $33 million, or 18%, to $215.6

million. Other SROs reporting revenue increases were the Philadelphia

Stock Exchange (Phlx) which reported a $280,000 increase, or 1.4%, to $20.7

million, and the Pacific Stock Exchange (PSE), which reported a $1.4 million

increase in revenues, or 3.6%, to $39.7 million. Other SROs that reported

a decrease in revenues were the Midwest Stock Exchange (MSE), which

reported a $5.9 million decrease, or 7.6%, to $71.1 million; the Boston

Stock Exchange (BSE)which reported a $575,000, or 4.3%, decrease to $12.8

million; the Cincinnati Stock Exchange (CSE), which reported a $138,000,

or 3.6% decrease, to $3.7 million. The largest percentage increase in total

revenues, 18%, was experienced by the NASD. The NASD also reported

the largest magnitude increase of $33 million. The largest percentage

decrease, 7.6%, was recorded by the MSE.

The total expenses of all marketplace SROs were $832.7 million in

1991, a decrease of $13.7 million (1.6%) below 1990. The NASD incurred

the largest magnitude increase in expenses, $10.9 million. The MSE

incurred an increase of $106,000, or.1 %, in expenses, and the CSE incurred

a $41,000, or 1.1%, increase in expenses. All other SROs reported decreases

in expenses, with the NYSE reporting the largest percentage and magnitude

decreases, equalling 5.2% and $17.5 million. With an increase in aggregate

revenues and a decrease in aggregate expenses, aggregate pre-tax income

of the SRO's rose drastically in 1991 by $76.9 million, or 1090%. The NYSE

experienced the largest magni tude increase of $54 million, and also reported

the largest percentage increase in pre-tax income of 1770%. The NASD

also showed a large increase in pre-tax income of $22 million, or 282%.

The BSE, CBOE, Phlx, and PSE all reported increases in pre-tax income.

The MSE reported a decrease of $5.98 million in pre-tax income, the CSE

reported a $180,000 pre-tax income decrease (resulting in pre-tax income

of $12,000) and the Amex showed a decrease of $2.7 million in pre-tax

income. The MSE ($3.4 million), the Amex ($2.3 million), and the Phlx

($652,800) reported pre-tax losses.

126
The total assets of all marketplace SROs were $1,543 million, an

increase of $256 million, or 20%. The MSE showed both the largest

magnitude and percentage increase in total assets, equalling $279 million,

or 98.5%. The NASD reported a large increase in assets of $38.9 million,

or 18%. The NYSE also reported a large increase in assets, equalling $81.4

million or 17.4%. The PSE reported the largest percentage decrease, 15.1%,

in assets and the largest magnitude drop of $7.6 million. The Amex and

the CBOE also reported decreases in total assets. The total liabilities of

marketplace SROs in 1991, increased $220.9 million, or 32.6%, over 1990

levels. The MSE showed the greatest magnitude increase in liabilities of

$151.7 million or 59.7%. The Phi x reported the greatest percentage increase

in liabilities of 71.3%. The NYSE also reported a large increase in liabilities,

equalling $69.6 million or 29.6%. The NASD increased liabilities by $12.4

million, an increase of 21.5%. The CSE and BSE also reported increases

in liabilities. The PSE reported the largest decrease in liabilities of $8.4

million (26.2%), while the Amex reported a 9.9% decrease in liabilities and

the CBOE reported a 9.4% decrease in liabilities.

The aggregate net worth of the marketplace SROs rose $35.2 million

in 1991, an increase of 5.8%. The largest percentage and magnitude

increase in net worth occurred at the NASD, 16.7%, representing an

increase of $26.5 million. The NYSE's net worth increased by $11.8 million

(5.1%). The PSE (4.2%), CBOE (2.4%), BSE (2.2%), and the CSE (1%) also

experienced positive growth in their net worth. The MSE (10.7%), the Phlx

(3%) and the Amex (1.7%) experienced a decrease in net worth.

Clearing agency results have been presented in two charts by their

respective types: depositories and clearing corporations. Aggregate clearing

agency service revenue increased 11%, almost $41 million, in calendar year

1991, due to increases in income from services. This increase offset a

reduction in interest income of 22%, or $24 million. All clearing agencies

adjust fee structures and refunds of fees to provide participants with

attractively priced services, and to meet expenses and provide the amount

of earnings which they desire to retain.

All service revenues at depositories totaled $259 million, up 13%. This

included $31.6 million increase by the Depository Trust Company (DTC)

and a $1.5 million reduction at the Midwest Securities Trust Company

(MSTC), both due to changes in service revenues. Total depository pretax income was down 83%, to almost $448,000. The Participants Trust

Company reported pre-tax net income of $4.1 million, as compared to $1.4

million in 1990. MSTC recorded a loss of $3.7 million in 1991, compared

to a loss of $492,000 in pre-tax profits in 1990. The Philadelphia Stock

Exchange (PSE) had a loss of $172,000 in contrast with the year-earlier

pre-tax loss of $343,000.

The depositories continued to expand their base for service revenues

by increasing the number of shares on deposit and the face value of debt

securities in custody. This was made possible by the further expansion

of depository-eligible issues and the desire of participants to avail

themselves of depository services. The MSTC had 987,000 eligible issues

at year-end, up 11%, and DTC had 929,000, up 12%. In general, eligibility

127
for all types of securities increased. At the end of 1991, the total value

of securities in the depository system reached $5.6 trillion, of which DTC

alone held over $5.0 trillion, including almost $2.4 trillion in certificates

held by others as DTC's agent. More than 67% of the shares of all New

York Stock Exchange, 46% of NASDAQ and 42% of American Stock Exchange

listed U. S. companies were in the depository system at the end of 1991.

In addition, more than 89% of the principal amount of all outstanding

municipal bonds were in the depository system.

Service revenue of clearing corporations increased to over $150 million,

up 8%. As a group, the clearing corporations recorded a net decrease in

pre-tax income of almost $1 million, down 9%. The Midwest Clearing

Corporation's pre-tax income was down over $4 million as a result of a

$3.2 million provision for legal, audit and other expenses pursuant to a

lawsuit relating to certain clearance and settlement practices. The

Government Securities Clearing Corporation, in which the National

Securities Clearing Corporation (NSCC) has an 18% equity interest, had

an increase of almost $2 million, compared to a loss of $1.2 million the

previous year. The Options Clearing Corporation refunded its pre-tax gain

to its participants, as opposed to a $1.5 million pre-tax income in the prior

year. NSCC's pre-tax earnings increased almost $1.2 million.

The combined Pacific Clearing Corporation (PCC) and Pacific Securities

Depository Trust Company (PSDTC) had a pre-tax gain of over $1 million,

up 36%. In April 1987, the PSE announced the closure of the clearance

and depository functions not essential to PSE's trading operations. An

orderly transition of participant activities to other clearing agencies occurred

with most of the securities held by PSDTC transferred to DTe. An initial

$1 million reserve for potential claims was established and increased in

subsequent years by $355,000. The remaining reserve was $921,000 as of

the end of 1991. The combined stockholders' equity of PCC and PSDTC

was almost $7.2 million at the end of 1991. Their parent corporation, PSE,

which guarantees the liabilities of PCC and PSDTC, reported members'

equity of $19.2 million at the end of 1991.

The aggregate shareholders' equity of all clearing corporations and

depositories rose to almost $102 million in 1991. Participant clearing fund

contributions, which provide protection to the clearing agencies in the

event of a participant default, increased by $397 million, or 24%, to over

$2 billion.

128
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Table 9

SELF-REGULATORY ORGANIZATIONS-DEPOSITORIES

1991 REVENUES and EXPENSES lJ

(Thousands of Dollars)

Midwest Philadelphia

Depository Securities Participants Depository

Trust Trust Trust Trust

Company Company Company Company Total

12/31191 1213119121 12/31191 12131191 'JI

Reyenues

Depository Services $195,869 $26,685 $ 28,947 $7,864 $259,364

Interest 68,653 540 6,987 716 76,896

Other 1,386 1,202 2,589

Total Revenues M $264,522 $28,611 $ 35,934 $9,782 $338,849

Expenses

Employee Costs $165,210 $12,891 $ 8,800 $3,913 $190,814

Data Processing and

Communications Costs 16,807 2,605 9,234 1,416 30,062

Occupancy Costs 44,742 3,915 7,067 412 56,136

Contracted Services Cost 1,952 1,952

JUIOtherExpenses $ 37,513 $10,978 $ 6,733 $4,213 $ 59,437

Total Expenses $264,272 $32,341 $ 31,834 $9,954 $338,401

Excess of Revenues

Over Expenses fJI $ 250 $(3,731) $ 4,100 $(172) $ 448

Shareholders' Equity $ 18,826 $ 3,359 $ 15,993 $2,600 $ 40,778

Particlpanfs Fund $632,013 $ 5,870 $234,372 $ 849 $873,104

jJ Although efforts have been made to make the presentations comparable, any single revenue or expense

category may not be completely comparable between any two clearing agencies because of (i) the varying

classification methods employed by the clearing agencies in reporting operating results and (Ii) the grouping

methods employed by the Commission staff due to these varying classification methods. Individual amounts

are shown to the nearest thousand. Totals are the rounded result of the underlying amounts and may not be

the arithmetic sums of the parts.

21 During 1991, MSE contributed $2,000,000 as a capital contribution On January 31, 1992, MSE contributed

$1,000,000 as a capital contribution.

'JI During 1991, PHLX committed an additional capital contribUtion to PDTC of $1 ,456,030.

M Revenues are net pf refunds which have the effect of reducmg a clearing agency's base fee rates.

fJI This is the result of operations and before the effect of Income taxes, which may significantly impact a clearing

agency's net Income.

131
Certificate Immobilization

Book-entry deliveries continued to outdistance physical deliveries in

the settlement of securities transactions among depository participants of

the Depository Trust Company (DTC). This tendency is illustrated in Table

16, CERTIFICATE IMMOBILIZATION TRENDS. The Table captures the

relative significance of the mediums employed, in a ratio of book-entry

deliveries to certificates withdrawn from DTe. The figures include Direct

Mail by Agents and municipal bearer bonds. In 1991, the total certificates

withdrawn decreased 5%, and the ratio of book-entry deliveries to

certificates withdrawn continued to grow. In 1991, the ratio was almost

five times the 1981 ratio of 2.4 book-entry deliveries rendered for every

certificate withdrawn.

Table 10

CERTIFICATE IMMOBILIZATION TRENDS

Depository Trust Company

(Including Bearer Certificates)

1991 1989 1987 1985 1983 1981

Book-entry Deliveries

at DTC (10 thousands) 73,200 68,800 73,800 53,600 48,500 34,200

Total of All Certificates

Withdrawn (in thousands) 6,314 7,700 12,300 11,300 17,600 14,400

Book-entry Deliveries per

Certificates Withdrawn 11.6 8.9 6.0 4.7 2.8 2.4

132
Exemptions

Section 12(h) Exemptions

Section 12(h) of the Securities Exchange Act of 1934 (Exchange Act)

authorizes the Commission to grant a complete or partial exemption from

the registration provisions of Section 12(g) or from other disclosure or

insider trading provisions of the act where such exemption is consistent

with the public interest and the protection of investors. A total of 150

applications were pending at the beginning of 1992 and 2 applications were

filed during the year. Of the 152 applications, none was granted and 85

were withdrawn. In addition, 12 issuers have informally advised the staff

that they intend to withdraw their applications.

Exemptions for Foreign Private Issuers

Rule 12g3-2 provides various exemptions from the registration

provisions of Section 12(g) of the Exchange Act for the securities of foreign

private issuers. The most significant of these exemptions is that contained

in subparagraph (b), which provides an exemption for certain foreign

issuers that submit to the SEC on a current basis the material specified

in the rule. Such material includes that information material to an investment

decision which the issuer: (1) has made or is required to make public

pursuant to the law of the country in which it is incorporated or organized;

(2) has filed or is required to file with a foreign stock exchange on which

its securities are traded and which was made public by such exchange;

or (3) has distributed or is required to distribute to its securityholders.

Periodically, the SEC publishes a list of those foreign issuers that appear

to be current under the exemptive provision. The most current list contains

a total of 814 foreign issuers.

133
Corporate Reorganizations

During 1992, the Commission entered its appearance in 27

reorganization cases filed under Chapter 11 of the Bankruptcy Code

involving companies with aggregated stated assets of over $18 billion and

about 175,000 public investors. Counting these new cases, the Commission

was a party in a total of 176 Chapter 11 cases during the year. In these

cases, the stated assets totalled approximately $98 billion and involved

about one million public investors. During 1992, 22 cases were concluded

through confirmation of a plan of reorganization, dismissal, or liquidation,

leaving 154 cases in which the Commission was a party at year-end.

Table 11

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

Action Auto Stores E.A. MI 1990

ADI Electronics E.D. NY 1987

AlA Industries, Inc. E.D. PA 1984

AI Copeland Enterprises, Inc. W.O. TX 1991

Alexander's Inc. S.D. NY 1992

Alleco Inc. D. MD 1992

Allegheny International, Inc. W.O. PA 1988

Alliant Computer Systems Corp. E.D. MA 1992

Amdura Corporation D. CO 1990

American Carriers, Inc.lI D. KS 1989 1992

American Medical Technologies2! W.O. TX 1990 1992

American West Airlines, Inc. D. AZ 1991

Ames Department Stores, Inc., et al. S.D. NY 1990

Anglo Energy, Inc. S.D. NY 1988

Appletree Markets, Inc. S.D. TX 1992

BankEast Corporationl/ D. NH 1991 1992

Banyon Corp. S.D. NY 1991

Barton Industries Inc. W.O. OK 1991

Bay Financial Corp., et al, D. MA 1990

Beehive International D. UT 1989

Beker Industries Corp. S.D. NY 1986

Branch Industries, Inc. S.D. NY 1985

Bonneville Pacific Corporation D. UT 1992

Camera Enterprises, Inc., et al. D. MA 1989

Carter Hawley Hale Stores Inc. C.D. CA 1991

Casacade International Inc. S.D. FL 1992

C F & I Corporation D. UT 1991

Citywide Securities Corp.M S.D. NY 1985

134
Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

Coated Sales, Inc. S.D. NY 1988

Colorado-Ute Electric Assoclatronjy D. CO 1990 1992

Columbia Gas System, Inc. D. DE 1991

Consolidated Oil & Gas1l D. CO 1989 1992

Conston Corporation E.D. PA 1990

Continental Information Systems S.D. NY 1989

CPT Corp. D. MN 1991

Crazy Eddie, Inc., et al. S.D. NY 1989

Crompton Co., Inc. S.D. NY 1985

Charter Medical corporauonj/ D. DE 1992 1992

Chyron Corporation E.D. NY 1991

Damson Oil Co. S.D. TX 1991

Dakota Minerals, Inc. D. WY 1986

Dart Drug Stores, Inc 'JJ D. MD 1989 1992

Dest Corp. N.D. CA 1989

Domain Technology, Inc. N.D. CA 1989

Doskocil Companies, Inc.1I D. KS 1990 1992

Drexel Burnham Lambert Group, Ltd. S.D. NY 1990

Eagle Clothes, Inc S.D. NY 1989

Eagle-Pitcher Industries, Inc. S.D. OH 1991

Eastern Air Lines, Inc., et al. S.D. NY 1989

EI Paso Electric Co. W.O. TX 1992

Enterprise Technologies, Inc. S.D. TX 1984

Equestrian Ctrs. of Amer., Inc. C.D. CA 1985

EUA Power Corporation D. NH 1991

FairfIeld Communities Inc. E.D. AR 1991

Fed Depart.lAllied Stores et al. S.D. OH 1990

Financial News Network, Inc. S.D. NY 1991

Finest Hour, Inc.1I C.D. CA 1988 1992

Finevest Foods, Inc.1I M.D. FL 1991 1992

First Executive Corporation1l C.D. CA 1991 1992

First Republlcbank Corp. N.D. TX 1989

Forum Group Inc. et al. N.D. TX 1991

Gaylord Container Corp. E.D. LA 1992

General Development Corporation1l S.D. FL 1990 1992

General Homes Corp.1I N.D. TX 1991 1992

General Technologies Group E.D. NY 1990

Greyhound Lines, et al. S.D. TX 1990

Healthcare International, Inc. W.O. TX 1992

Helionetics, Inc. C.D. CA 1986

135

-
136

Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

Hills Department Stores S.D. NY 1991

Infotechnology Inc. S.D. NY 1991

I.M.T., Inc O. MO 1992

Inflight services. Inc. S.D. NY 1987

Insilco Corp. W.O. TX 1991

Integrated Resources, Inc. S.D. NY 1990

Interco Inc. E.D. MO 1991

Intn'l Pharmaceutical Products, tnc.j/ C.D. CA 1988 1992

Inter. American Homes, Inc., et aI. D. NJ 1990

Ironestone Group, Inc. N.D. CA 1991

Kaiser Steel Corp. D. CO 1987

King of Video, Inc. D. NV 1989

Koger Properties, Inc. M.D. Fl 1992

Kurzweil Music Systems Inc. O. MA 1990

Laventhol & Horwath S.D. NY 1991

leisure Technology, Inc. C.O. CA 1991

lone Star Industries, Inc. S.D. NY 1991

lomas Financial Corp. S.D. NY 1990

l TV Corporation S.D. NY 1986

MacGregor Sporting Goods, Inc. D. NJ 1989

Marathon Office Supply, Inc. C.D. CA 1988

Maxicare Health Plus Inc.lI C.D. CA 1989

Metro Airlines, Inc. et aI. N.D. TX 1991

Mclean Industries, Inc. S.D. NY 1987

MCorp (MCorp Financial, Inc.

& MCorp Management) S.D. TX 1989

McCroy Corp. S.D. NY 1992

McCrory Parent Corp. S.D. NY 1992

Meridian Reserve, Inc. W.O. OK 1989

Midland Capital Corp. S.D. NY 1986

Midway Airlines Inc.l! N.D. Il 1991 1992

Midwest Communications Corp. E.D. KY 1991

Monarch Capitol Corp. D. MA 1991

MSR Exploration, ltd. D. MT 1992

Munsingwear Inc.I/ D. MN 1991 1992

National Financial Realty Trust S.D. IN 1990

National Gypsum Company N.D. TX 1991

Newmark & lewis S.D. NY 1991

NBI Inc. D. CO 1991

Nutri Bevco, Inc. S.D. NY 1988

N.V.R., lP E.D. VA 1992

-
Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

Occidental Development Fund III!! C.D. CA 1989

Occidental Development Fund IV!! C.D. CA 1989

Occidental Development Fund V!! C.D. CA 1989

Oliver's Stores E.D. NY 1987

OlR Development Fund lP C.D. CA 1989

OlR Development Fund II lP C.D. CA 1989

Orion Pictures Corp. S.D. NY 1992

Pacific Express Holding, Inc. E.D. CA 1984

PanAm Corporation S.D. NY 1991

Paul Harris Stores, Inc. S.D. IN 1991

Peregrine Entertainment, ltd. C.D. CA 1989

Prime Motors Inns, Inc.l/ S.D. Fl 1991 1992

Public Service Co. of New Hampshire D. NH 1988

OMax Technology Group, Inc. S.D. OH 1989

aT&T, Inc. E.D. NY 1987

Oubix Graphic Systemsll N.D. CA 1989

Ramtek Corporation NO CA 1989

Refinemet International, Inc. C.D. CA 1988

Residential Resources Mortgage

Investment Corporation D. AZ 1989

Resorts International, Inc. et al. D. NJ 1990

Revco D.S. Inc.!! N.D. OH 1988

R.H. Macy & Co. Corp. S.D. NY 1992

Sahlen & Associates S.D. NY 1989

Salant Corporation S.D. NY 1990

Saratoga Standardbreds, Inc. N.D. NY 1990

S.E. Nicholsll S.D. NY 1990 1992

Seatrain lines, Inc. S.D. NY 1981

Servico, Inc.l/ S.D. Fl 1992 1992

Schepps Food Stores, Inc. S.D. TX 1992

Sharon Steel Corp. W.O. PA 1987

SIS Corporation N.D. OH 1989

Sorg Incorporated, et al. S.D. NY 1989

Southland Corporation N.D. TX 1991

Spencer Cos., Inc. D. MA 1987

Spring Meadows Associates!! C.D. CA 1988

Standard Brands Paint Company C.D. CA 1992

Standard Oil and Exploration of

Delaware, Inc. W.O. MI 1991

Statewide Bancorp. D. NJ 1991

Sterling Optical Corp. S.D. NY 1992

Sudbury, Inc. N.D. OH 1992

137

-
138

Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

Swanton Corp. S.D. NY 1985

Systems for Health Care, Inc. N.D. IL 1988

Telstar Satellite Corp. of America!, C.D. CA 1989

TGX Corp. W.D. LA 1990

The Centennial Group, Inc. C.D. CA 1992

The Circle K D. AZ 1990

The Group, Inc. D. NV 1990

The First Connecticut Small

Business Investments Company D. CT 1991

The Lionel Corp. S.D. NY 1991

The Regina Co. D. NJ 1989

The Washington Corporationl/ D. MD 1992 1992

Tidwell Industries, Inc. N.D. AL 1986

Todd Shipyards Corp. D NJ 1988

Towle Manufact /Rosemar Silver S.D. NY 1990

Traweek Investment Fund

No 22, Ltd.!, C.D. CA 1988

Traweek Investment Fund

No 21, Ltd. C.D. CA 1988

Trump Taj Mahal Funding, Inc. D. NJ 1991

Univation, Inc.2/ N.D. CA 1989 1992

United Merchants & Mfg., Inc.l/ D. DE 1991 1992

U S. Home Corp. S.D. NY 1991

Wang Laboratories, Inc. D. MA 1992

Washington Bancorporatron D. DC 1990

Wedgestone Financial D. MA 1991

Wedtech Corp. S.D. NY 1987

Westworld Community Healthcare,

Inc. C.D. CA 1987

Wheeling-Pittsburgh Steel Corp. W.O. PA 1985

WTD Industries, Inc. W.O. WA 1991

Zale Corporation, Inc. N.D. TX 1992

Total Cases Opened (FY 1992): 27

Total Cases Closed (FY 1992): 22

11 Plan of reorganization confirmed.

2/ Debtor liquidated under Chapter 7.

a/ Chapter 11 case dismissed.

!' Debtor's securities not registered under Section 12(g) of the Exchange Act.

-
Other Legislative Developments

This section contains more detailed information regarding legislative

activity that occurred during the second session of the 102nd Congress.

Government Securities

During the 102nd Congress, a number of bills were considered that

would have amended the Government Securities Act of 1986 ("GSA"). The

GSA consists of a limited regulatory scheme, focusing primarily on financial

responsibility and recordkeeping rules, which was adopted in response

to the failures, in the mid-1980's, of several unregulated government

securities dealers that had engaged in financial and recordkeeping

irregularities and fraudulent practices.

In the Senate, two bills amending the GSA were passed in 1991,

S. 1247 and S. 1699. The primary objective of these bills was to reauthorize

the U. S. Treasury (Treasury) rulemaking authority under the GSA prior

to its expiration date in October 1991. However, the August 1991 revelations

by Salomon Brothers Inc. (Salomon) regarding its misconduct in connection

with certain auctions of government securities dramatically influenced

Congressional deliberations regarding the need for more comprehensive

government securities reform legislation. As a result of the Salomon

incident, and the subsequent Joint Report on the Government Securities

Market issued in January 1992 by the Treasury, the Federal Reserve Board,

and the Commission (Joint Report), two bills were actively considered in

the House in 1992 that would have made more substantive changes to the

government securities regulatory scheme: H.R. 4450, which aimed at

reform of the auction process for government securities, and H.R. 3927,

a comprehensive bill designed to reform regulation of the government

securities markets generally.

During 1992,the Commission testified numerous times before Congress

regarding the need for reform of the regulation of the government securi ties

market, particularly regarding the legislative and other recommendations

contained in the Joint Report. Specifically, Chairman Breeden testified

before the Subcommittee on Telecommunications and Finance of the House

Energy and Commerce Committee regarding the government securities

market on October 25, 1991; before the Subcommittee on Securities of the

Senate Banking Committee on January 23,1992 regarding the Joint Report;

before the Subcommittee on Domestic Monetary Policy of the House

Banking Committee on February 6, 1992 and April 28, 1992 regarding the

Joint Report, and H.R. 3927 and H.R. 4450, respectively. William H.

Heyman, Director of the Division of Market Regulation testified before

the Subcommittee on Oversight of the House Ways and Means Committee

regarding the Joint Report on February 3, 1992. In addition, Chairman

Breeden also testified before the Oversight Subcommittee of the House

Ways and Means Committee regarding the Salomon settlement on September

29, 1992.

139
Due to jurisdictional issues in the House and timing constraints as

the end of the 102nd Congress drew to a close, the full House did not

vote on the substance of any government securities reform bill during 1992.

During the final days of the 102nd Congress, an effort was made to link

government securities reform legislation with other pending securities

legislation that had been passed by both houses of Congress. However,

the House and the Senate staff were unable to resolve the significant

differences between the House and Senate bills and agree on a compromise

bill before the close of the 102nd Congress.

Investment Advisers

Two bills were introduced during 1992 that would have amended the

Investment Advisers Act of 1940 to address current limitations in the SEC's

oversight and inspection program for investment advisers. The Senate

bill, S. 2266, focused primarily on establishing a fee structure that would

require registered investment advisers to pay initial registration and

annual fees to the agency, which would be used for costs associated with

investment adviser registration and inspection activities. As passed by

the Senate, S. 2266 also included provisions relating to fidelity bonding,

one-stop filing for investment advisers, and amendments to the managed

account provisions contained in section ll(a) of the Securities Exchange

Act of 1934 (Exchange Act). The House bill, H.R. 5726, contained similar

fee, bonding, and one-stop filing provisions, but was significantly more

comprehensive in nature, containing additional regulatory provisions in

areas such as suitability and transaction reporting requirements for

investment advisers.

On February 20, 1992, Chairman Breeden testified on behalf of the

Commission before the Subcommittee on Securities of the Senate Banking

Committee in support of legislation containing fee, one-stop filing,

suitability, and bond requirement provisions for investment advisers.

On June 10, 1992, Chairman Breeden testified on behalf of the

Commission before the Subcommittee on Telecommunications and Finance

of the House Energy and Commerce Committee concerning the

comprehensive House proposal to amend the Advisers Act. Specifically,

Chairman Breeden testified in support of the fee, fidelity bonding, onestop filing, suitability, broadened enforcement (including felony

disqualification), risk-based scheduling of inspections, and certain

disclosure provisions contained in the House proposal. His testimony did

not support, however, provisions that would have required periodic surveys

of unregistered advisers and imposed a duty to report commissions prior

to transactions.

S. 2266 was passed by the Senate on August 12, 1992. The House

bill, H.R. 5726, passed the House on September 22, 1992 and was combined

with H.R. 4313, the Financial Fraud Detection and Disclosure Act, and H.R.

3047, a bill designed to relax restrictions on managed accounts contained

in section l1(a) of the Exchange Act.

140
Although many in the adviser industry favored the adoption of an

adviser bill during the 102nd Congress, other securities groups objected

to many of the provisions contained in the House bill. The substantial

differences between the bills, coupled with the debate within the industry,

resulted in the House and Senate staff being unable to reach agreement

on the substantive provisions of a compromise adviser bill. Further, the

House's addition of the accounting bill (which had not been considered

by the Senate) further complicated the discussions. Finally, as noted

previously, the Senate wanted to add substantive government securities

provisions to the adviser bill.

As a result of the substantive differences between the House and

Senate bills, the end of the session timing crunch, and various procedural

issues, the advisers bill died. Even an 11th hour effort to move only the

increased fee provisions was unable to get off the ground, due chiefly to

political concerns.

Limited Partnership Roll-ups

In the 102nd Congress, several bills designed to address abuses in

limited partnership roll-up transactions were considered. Roll-ups are

limited partnership reorganizations that usually involve the merger of

limited partnerships into new, larger, corporate entities. During the past

several years, both the Commission and Congress have expressed concern

that many of the advantages generally enjoyed by limited partners in their

original investment were being reduced, or done away with completely,

as a consequence of such mergers. Furthermore, investors have expressed

concerns with respect to abuses in the roll-up transactions themselves, such

as confusing disclosure and a lack of dissenters' rights.

In the House, a bill regarding roll-Up reform, H.R. 1885, was passed

in 1991. In 1992, the focus of Congressional action was on S. 1423, the

Senate counterpart bill.

Although the Commission had testified before Congress several times

regarding roll-Up legislation in 1991, it did not testify before the Senate

regarding S. 1423 in 1992. However, in a letter to Senator Gramm dated

April 8, 1992, Chairman Breeden expressed the view of the Commission

that, as a result of Commission and NASD rulemaking with respect to rollup transactions, the Commission "see[s] no reason to proceed at this time

with legislation." In addition, Chairman Breeden's letter also expressed

the Commission's concerns with particular provisions of S. 1423.

Notably, although S. 1423 had a large number of co-sponsors, the

committee markup of the bill was blocked twice on procedural grounds,

which prevented S. 1423 from reaching the Senate floor for a vote in 1992.

While S. 1423 was later offered and accepted by the Senate on July 1, 1992

as an amendment to an unrelated bill to regulate government sponsored

enterprises, it was ultimately deleted from that bill, and consequently was

not enacted in the 102nd Congress.

141
Accountants and Auditors

Congress has considered a number of bills over the last six years that

would require auditors of companies registered with the Commission to

detect and report certain of their audit clients' illegal acts directly to the

Commission. H.R. 4313, introduced by Representative Wyden in 1992,

was the most recent bill in this area.

Although the Commission did not testify in 1992 regarding H.R. 4313,

it expressed its views regarding the bill in response to a request by

Chairman Dingell of the House Energy and Commerce Committee. In its

letter of August 12, 1992, the Commission stated that: (i) it did not believe

that H.R. 4313 would dramatically change existing law, but rather would

codify present accounting standards and practices; (ii) the principal

provision of H.R. 4313 was its requirement of earlier warning to the

Commission of certain illegal acts by companies registered with the

Commission; (iii) the bill would restate, in certain specified areas, the

Commission's implied authority to set auditing standards; and (iv) the

bill attempted to strike a reasonable balance with respect to the enforcement

of H.R. 4313's new requirements.

H.R. 4313 was passed by the House on September 22,1992 and added

to H.R. 5726, the House Investment Advisers bill. However, no similar

legislation was introduced in the Senate during the 102nd Congress.

Consequently, when the House and the Senate failed to reach agreement

on compromise advisers legislation, the accounting measure died without

further consideration by the Senate.

Securities Litigation Reform/Statute of Limitations

The issue of securities litigation reform arose in 1992 in the context

of Congressional consideration of legislation regarding a statute of

limitations for private actions implied under Section 10(b) of the Exchange

Act and Rule 10b-5 thereunder. Congressional consideration of the private

right of action issue was spurred by the Supreme Court's decision on June

20, 1991, in Lamp], Pleva, Lipkind, Prupis & Petigrow v. Gilbertson. In

response to Lamp], legislation creating new Section 27A of the Exchange

Act was enacted in December 1991 as part of the Federal Deposit Insurance

Corporation Improvement -Act of 1991. Section 27A contains a limited

statute of limitations provision that prevents the retroactive application

of the new statute of limitations for Rule 10b-5 private damages actions

announced in Lampf.

Prior to the adoption of Section 27A in connection with Congressional

consideration of the statute of limitations issue, Chairman Breeden testified

before the Subcommittee on Securities of the Senate Banking Committee

on October 2, 1991, regarding proposed statute of limitations legislation

(5. 1533). As part of his testimony, he suggested that Congress consider

a number of additional litigation reforms, including: (i) a provision shifting,

under certain circumstances, liability for the prevailing party's attorney's

fees to the non-prevailing party; (ii) amendment of the Racketeer Influenced

and Corrupt Organizations Act to delete securities fraud as a predicate

142
offense for purposes of civil actions; (iii) limitation of certain conflicts of

interest between counsel in a class action and members of the class; (iv)

restrictions on the use of disgorgement funds for payment of counsel fees;

and (v) a cap on the personal liability of corporate directors who are not

found to be involved in intentional or deliberate misconduct. On November

21, 1991, Chairman Breeden testified before the Subcommittee on

Telecommunications and Finance of the House Committee on Energy and

Commerce, also regarding statute of limitations legislation (H.R. 3185),

stating that the Commission "believes that legislation to curtail meritless

or unjustified securities litigation would be appropriate."

Legislation consequently was introduced in August 1992, in the House

as H.R. 5828 and in the Senate as S. 3181, proposing various forms of the

reforms suggested by Chairman Breeden as well as several additional

proposals. There were no hearings held on the proposed litigation reforms

during the rest of the 102nd Congress, and both the House and Senate

litigation reform bills subsequently died.

Executive Compensation

Public discussion of issues relating to executive compensation

prompted a number of legislative proposals that were considered during

the 102nd Congress. These included the Corporate Pay Responsibility Act

(5.1198 and H.R. 2522), which, among other things, would have: (i) deemed

any securityholder proposal related to executive compensation a proper

subject for securityholder action; and (ii) required issuers to disclose in

their proxy statements with respect to each director and senior executive,

(A) a single figure for total compensation paid during the period covered

by the proxy statement, including any form of deferred, future or contingent

pay, and (B) a comparison table, comparing the estimated present value

in dollars of any form of deferred, contingent or future compensation, with

comparable figures for compensation paid during the previous two years

and projections of total compensation to be paid in each of the succeeding

five years.

On October 17, 1991, Chairman Breeden testified before the

Subcommittee on Securities of the Senate Committee on Banking, Housing

and Urban Affairs that the Commission was not prepared to support S.

1198 at that time, and was in the process of reviewing its own rules relating

to executive compensation disclosure. Subsequently, on January 31, 1992,

the Chief Accountant of the Commission, Walter P. Schuetze, testified

before the Subcommittee on Oversight of Government Management of the

Senate Committee on Governmental Affairs concerning accounting for

employee stock compensation. On June 4,1992, Chairman Breeden testified

before the Subcommittee on Taxation of the Senate Committee on Finance

and stated that the Commission opposed direct government regulation of

compensation and the indirect use of the tax code or legislatively mandated

accounting rules to try to accomplish the same objective.

143
Shortly after Chairman Breeden's June 4, 1992 testimony, the

Commission proposed new rules designed to improve the public disclosure

of information concerning executive compensation. Notably, on October

16, 1992, the Commission issued final rules designed to make executive

compensation disclosure clearer, more concise, and more useful to

shareholders in the context of proxy and information statements, registration

statements and periodic reports under the Exchange Act, and registration

statements under the Securi ties Act of 1933. As a resul t of the Commission's

consideration and adoption of final rules to improve disclosure of executive

compensation arrangements, the momentum behind legislation in this area

was significantly reduced, and the legislation that had been introduced

subsequently died.

The Public Utility Holding Company Act of 1935

On October 24,1992, the President signed H.R. 776, the Energy Policy

Act of 1992 (P.L. 102-486). Title VII of the Act contains amendments to

the Public Utility Holding Company Act of 1935 (PUHCA).

Although the Commission testified twice before Congress in 1991

regarding predecessor bills to H.R. 776, it did not testify or take a position

on H.R. 776 as enacted. Generally, the Commission's 1991 testimony

supported amendments to PUHCA that would have limited the

Commission's review of acquisitions of independent power producers by

registered holding companies.

As enacted, Title VII of the Energy Act amends PUHCA by creating

two new classes of entities that are exempted from PUHCA. Specifically,

to faciIita te the development of a competi tive independen t power prod uction

industry, the Act creates an exemption from PUHCA for" exempt wholesale

generators," as defined in H.R. 776. In addition, the Act creates an

exemption for "foreign utility companies" in order to facilitate overseas

investments by domestic companies.

Small Business Initiative

In March 1992, the Commission submitted legislation to Congress

designed to promote capital formation for small businesses. The

Commission's legislative package would have increased the statutory

exemption for small offerings under the Securities Act. In addition, it

would have amended the Investment Company Act to remove certain

restrictions on the ability of private investment companies to raise capital

and to facilitate investments by investment companies, including business

development companies, in small businesses.

Three bills were subsequently introduced in Congress in 1992 based

on the Commission's proposals: S. 2518, S. 2727, and H.R. 4938.

Chairman Breeden testified before the Subcommittee on Securities of

the Senate Banking Committee on March 26, 1992 at a hearing to consider

the Commission's small business legislative proposals. The Chairman

expressed the Commission's strong support for enactment of the proposed

legislation. He stated that the Commission's proposals would promote

144
the ability of small businesses to raise capital in the securities markets

directly, and improve flexibility for venture capital funds and other pooled

investment vehicles, without impairing investor protection.

Although hearings were held regarding the Commission's proposed

legislation, none of the three bills that were introduced in Congress in 1992

was reported out of committee.

Jurisdiction Over Stock Index Futures and Margins

Various legislative proposals concerning the Commodity Futures

Trading Commission (CFTC) and jurisdiction over stock index futures and

margins have been considered by Congress since 1989, when alleged

misconduct by commodities brokers in Chicago was revealed. The two

principal legislative proposals in the 102nd Congress were the "Futures

Trading Practices Act of 1991" (5.207) and the "Commodity Futures

Improvement Act" (H.R.707). A conference report on H.R. 707, the

"Futures Trading Practices Act of 1992," was passed by both Houses in

early October, and signed into law by the President on October 28, 1992

(P.L. 102-546).

145
The Securities Industry

Revenues, Expenses, and Selected Balance Sheet Items

Broker-dealers that are registered with the Commission earned a pretax profit of $8.6 billion in calendar year 1991. This was $7.8 billion more

than the previous year, and the largest pre-tax profit reported since the

Commission began collecting this information. Broker-dealers had a pretax return on equity capital of 23.6%, an above average return after four

years of sub-par performance.

Broker-dealers produced revenues of $81.2 billion in 1991, 14% above

the 1990 level. Volume expanded in most lines of business.

Revenues from the traditional dealer businesses were higher after

three years of stagnation. Driven by record trading volume in over-thecounter equities, government securities, and corporate debt, gains from

principal transactions set a new record of $22.5 billion in 1991. This was

an increase of almost $6.8 billion (43%) over the 1990 level. Underwriting

profits of $6.6 billion were at near-record levels, $2.9 billion (77%) higher

than in 1990. Low interest rates encouraged corporations, municipalities,

and individuals with callable debt to refinance, resulting in a record

volume of new issues of investment-grade debt. Also, high price-earnings

ratios may have been the driving force behind the large increase in initial

public offerings and new issues of seasoned equities.

Revenues from the brokerage business rose by 15% in 1991. An

increase in exchange volume contributed to a $2.2 billion increase in

brokerage commissions to $14.2 billion. Declining interest rates

overwhelmed the increase in volume of margin debt outstanding and

margin interest fell by $400 million to $2.8 billion. Revenues from retailing

mutual funds grew by $900 million to $4.2 billion, in part as individuals

responded to low rates on bank certificates of deposit by investing in

corporate and government bond funds.

"All other revenues," which are dominated by interest income from

securities purchased under agreements to resell and fees from handling

private placements, mergers, and acquisitions, fell $2.5 billion (7%) in 1991.

Each of these major component businesses of this revenue item declined

or was stagnant in 1991. Mergers & Acquisitions activity in 1991 fell 25%

from the level of the previous year, while the value of new private

placements dropped 8%. The value of reverse repurchase agreements

outstanding rose slightly during 1991, but the interest rate paid on these

instruments dropped sharply.

Expenses rose 3% to $72.7 billion in 1991. Employee compensation

showed the largest relative increase (17%). Total assets and liabilities

both rose sharply in 1991 to $760.6 billion and $722.1 billion, respectively.

Equity capital increased by $4.1 billion (12%) to $38.5 billion.

146
Table 12

UNCONSOLIDATED FINANCIAL INFORMATION FOR BROKER-DEALERS

1987-1991 jJ

($ in Millions)

1987 1988 1989 1990' 1991P

Reyenues

securities Commissions $ 16,574.1 $ 11,932.4 $ 13,452.0 $ 12,032.2 $ 14,209.3

Gams (Losses) 10 TradlOg and

Investment Accounts 14,423.0 16,667.0 16,246.6 15,746.5 22,529.9

Profits (Losses) from Underwriting

and selling Groups 5,719.4 5,606.8 4,5366 3,728.3 6,592.6

MarglO Interest 3,4933 3,154.6 3,859.7 3,179.4 2,771.1

Revenues from sale of Investment

Company Shares 4,069.3 2,644.0 3,038.1 3,241.6 4,176.3

All Other Revenues 21,825.3 26,095.5 35,731.1 33,428.3 30,946.5

Total Revenues $ 66,104.4 $ 66,100.4 $ 76,864.0 $ 71,3562 $ 81,225.7

Registered Representatives'

Compensation (Part" Only) 21 $ 11,042.2 $ 9,004.4 $ 8,975.2 $ 8,267.2 $ 9,830.6

Other Employee Compensation

and Benefits 12,110.9 12,1500 12,497.6 12,5128 14,382.9

Compensation to Partners and

Voting Stockholder Officers 2,429.6 2,263.8 2,267.6 2,150.6 2,560.3

Commissions and Clearance Paid

to Other Brokers 3,562.6 2,8038 3,0568 2,959.4 3,1993

Interest Expenses 16,473.4 19,502.0 29,822.5 28,093.1 24,1452

Regulatory Fees and Expenses 432.4 4900 573.7 564.3 5771

All Other Expenses 21 16,843.4 16,409.2 16,847.8 16,0186 17,956.8

Total Expenses $ 62,894.5 $ 62,6230 $ 74,0411 $ 70,566.1 $ 72,6520

Income and profitabilitY

Pre-tax Income $ 3,209.9 $ 3,477.3 $ 2,822.9 $ 790.1 $ 8,573.7

Pre-tax Profit Margin 4.9 5.3 37 1.1 10.6

Pre-tax Return on Equity 9.8 9.8 7.7 2.2 23.6

Assets LlabiljtJes and caonal

Total Assets $477,4424 $546,2157 $652,177.0 $657,226.5 $760,587.0

Liabilities

(a) Unsubordinated liabilities 430,498.3 495,705.6 600,440.7 607,803.0 $705,922.5

(b) SUbordinated liabilities 12,686.8 13,974.2 15,354.7 15,090.8 16,197.6

(c) Total Liabilities 443,185.1 509,679.8 615,795.4 622,893.8 722,1201

Ownership Equity $ 34,257.3 $ 36,535.9 $ 36,381.5 $ 34,332.7 $ 38,466.9

Number of Firms 9,515 9,217 8,832 8,437 7,754

Figures may not add due to rounding.

r revised

p preliminary

1/ calendar, rather than fiscal, year data is reported in this table.

2/ Registered representatives' compensation for firms that neither carry nor clear is included 10 .other expenses"

as this expense item is not reported separately on Part IIA of the Focus Report.

Source: Focus Report

147

~

=

=
Table 13

UNCONSOLIDATED ANNUAL REVENUES AND EXPENSES FOR BROKER-DEALERS

DOING A PUBLIC BUSINESS

1987-1991 jJ

($ in Milions)

1987 1988 1989 1990' 1991P

Reyenues

securities Commissions $16,016.2 $11,515.3 $13,012.7 $11,659.7 $13,710.5

Gains (losses) in Trading and

Investment Accounts 12,393.4 15,296.3 15,048.6 14,869.5 21,257.5

Profits (losses) from Underwrltmg

and Selling Groups 5,718.5 5,605.6 4,5364 3,728.0 6,591.4

Margin Interest 3,467.0 3,135.5 3,813.3 3,158.8 2,732.4

Revenues from sale of Investment

Company Shares 4,069.5 2,643.2 3,037.8 3,241.6 4,176.2

All Other Revenues 21,450.2 26,039.0 35,1894 32,578.0 30,194.8

Total Revenues $63,114.8 $64,235.0 $74,638.3 $69,235.6 $78,6628

Expenses

Registered Representatives'

Compensation (Part II only) 21 $11,032.4 $ 8,993.3 $ 8,962.7 $ 8,245.3 $ 9,819.5

Other Employee Compensation

and Benefits 11,869.7 11,9009 12,191.4 12,209.2 14,005.2

Compensation to Partners and

Votmg Stockholder Officers 2,185.2 2,063.5 2,090.0 1,983.5 2,375.9

commtssions and Clearance Paid

to Other Brokers 3,355.8 2,641.0 2,867.9 2,7962 3,001.8

Interest Expenses 16,179.1 19,2681 29,354.6 27,6306 23,721.4

RegUlatory Fees and Expenses 399.9 451.9 5160 509.4 510.9

All Other Expenses 21 16,284.1 15,968.3 16,348.5 15,580.4 17,385.8

Total Expenses $61,306.0 $61,287.0 $72,331.0 $68,954.4 $70,820.5

Income and profitability

Pre-tax Income $ 1,808.8 $ 2,948.0 $ 2,307.3 $ 281.2 $ 7,842.3

Pre-tax Profit Margin 2.9 4.6 31 0.4 10.0

Pre-tax Return on Equity 6.1 9.0 6.8 0.9 23.2

Number of Firms 6,307 6,005 5,746 5,424 5,111

Figures may not add due to roundmg.

r reVised

p preliminary

11 calendar, rather than fiscal, year data IS reported in thiS table.

21 Registered representatives' compensanon for firms that neither carry nor clear is included in "other expenses"

as ttns expense item is not reported separately on Part IIA of the Focus Report.

Source' Focus Report

148

=

=
Table 14

UNCONSOLIDATED BALANCE SHEET FOR BROKER-DEALERS

DOING A PUBLIC BUSINESS

YEAR-END, 1987-1991 1/

($ in Millions)

1987 1988 1989 1990' 1991P

cash $ 7,538.9 $ 9,612.2 $ 9,870.8 $ 10,9681 $ 10,274.1

Receivables from Other

Broker-dealers 61,953.1 67,598.2 90,157.3 118,413.1 160,963.7

Receivables from Customers 38,706.4 40,236.3 40,3204 37,177.8 50,4654

Receivables from Non-customers 3,370.1 3,061.9 1,362.9 1,157.7 2.1258

Long Positions In securities

and Commodities 118,150.2 130,758.1 211,232.1 208,166.3 237,443.7

securities and Investments

not Readily Marketable 4604 6189 1,247.5 1,190.2 1,863.9

Securities Purchased Under Agreements

to Resell (Part II only) 21 213,935.0 258,034.5 257,235.0 237,235.6 254,008.1

Exchange Membership 345.4 363.7 360.5 332.3 3134

Other Assets 21 21,339.1 23.424.1 26.3565 26,014.3 23,325.7

Total Assets $465,798.6 $533,707.8 $638,143.0 $640,655.5 $740,783.7

Liabilities and EquitY capital

Bank Loans Payable $ 20,756.0 $ 22,9536 $ 22,759.5 $ 18,342.2 $ 24,778.4

Payables to Other Broker-dealers 43,138.1 46,336.5 49,602.0 46,0389 62,5767

Payables to Non-customers 4,173.1 4,143.7 4,6104 7,5105 13,730.6

Payables to Customers 34,328.7 39,3129 46,969.3 55,549.7 71,616.1

Short Positions in securities

and Commodities 73,725.8 92,414.4 93,6827 104,690.0 109,670.1

Securities Sold Under Repurchase

Agreements (Part II only) 21 213,049.9 243,828.7 328,382.8 320,773.3 364,172.3

Other Non-subordinated LiabilltJes 21 32,681.0 37,016.5 43,067.2 40,973.2 43,389.9

Subordinated LiabilltJes 12,306.4 13,534.5 14,991 9 14,763.0 15,314.0

Total Liabilities $434,158.9 $499,540.8 $604,065.8 $608,640.8 $705,2481

Equity capital $ 31,639.6 $ 34,166.9 $ 34,077.2 $ 32,0146 $ 35,535.6

Number affirms 6,307 6,005 5,746 5,424 5,111

Figures may not add due to rounding.

r revised

p preliminary

1/ calendar, rather than fiscal, year data is reported in this table.

21 Resale agreements and repurchase agreements for firms that neither carry nor clear are included In "other

assets" and "other non-subordinated liabilities," respectively, as these Items are not reported separately on

Part IIA of the Focus Report.

Source: Focus Report

149

~

=

=
Carrying and Clearing Firms

Data for carrying and clearing firms that do a public business is presentee'

here to allow for more detail as reporting requirements for firms that neither carry

nor clear differ and as data aggregation of these two types of firms results in

loss of detail. Carrying and clearing firms are those firms that clear securities

transactions or maintain possession or control of customers' cash or securities.

This group produced 85 percent of the securities industry's total revenues in

calendar year 1991.

Brokerage activity accounted for about 23 cents of each revenue dollar in

1991, about the same as the level in 1990. Securities commissions were the most

important component, producing 15 cents of each dollar of revenue, while margin

interest and revenues from mutual fund sales each generated four cents.

The dealer side produced 66 cents of each dollar of revenue, up from the

62 cents earned in 1990. Twenty-nine cents came from trading and investments,

an increase from 23 cents in 1990, as trading volume in securities that typically

are traded over-the-counter reached new highs in 1991. Nine cents came from

underwriting, up sharply from six cents in 1990. Only 29 cents came from other

securities-related revenues, a decline from the 34 cents in 1990. This revenue

item is comprised primarily of interest income from securities purchased under

agreements to resell and fees from handling private placements, mergers, and

acquisitions.

Expenses accounted for 90 cents of each revenue dollar in 1991, resulting

in a pre-tax profit margin of ten cents per revenue dollar. Interest remained the

most important expense category in 1991, consuming 34 cents of each revenue

dollar, even though this item was down significantly from 45 cents in 1990.

Employee-related expenses-registered representatives' compensation and clerical

and administrative employees' expenses-increased to 31 cents from 29 cents in

1990.

Total assets of broker-dealers carrying and clearing customer accounts were

$730.2 billion at year-end 1991, a 16% increase from 1990. The distribution of

these assets also changed. Higher trading volume contributed to an increase in

receivables. By contrast, reverse repurchase agreements, U.S.government securities,

and other money market instruments showed relative declines.

Total liabilities increased significantly to $699.3 billion in 1991. Bank loans

and payables showed the most substantial increase, while the growth of repurchase

agreements and short positions was more modest. Owners' equity rose 11% from

$27.8 billion in 1990 to $31.0 billion in 1991.

150
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Table 16

UNCONSOLIDATED REVENUES AND EXPENSES FOR

CARRYING/CLEARING BROKER-DEALERS 11

($ in Millions)

1990' 1991'

Percent Percent Percent

ofT01aI ofTolal Change

Dollars Revenues Dollars Revenues 1990-1991

SecuntJes Commissions $ 8,758.3 14.3% $10,3404 15.0% 18.1%

Gains (Losses) in Trading and

Investment Accounts 14,060.8 23.0 19,657.1 28.6 39.8

Profits (Losses) From Underwriting

and Seiling Groups 3,496.5 57 6,2755 9.1 79.5

Margin Interest 3,158.8 52 2,732.4 4.0 (13.5)

Revenues from sale of Investment

Company Shares 2,077 4 34 2,710.5 39 30.5

Miscellaneous Fees 2,5259 4.1 2,702.9 3.9 7.0

Revenues from Research 20.1 25.1 24.9

Other Securities Related Revenues 20,600.1 33.7 19,699.1 28.7 (4.4)

CommodltJes Revenues 1,8197 30 881.7 1.3 (51.5)

All Other Revenues 4,659.3 7.6 3,731.1 5.4 (19.9)

Total Revenues $61,176.9 100.0% $68,755.8 100.0% 124%

Registered Representatives' Compensation $ 8,245.3 13.50/0 $ 9,819.5 14.30/0 19.1%

Other Employee Compensation and Benefits 9,732.6 15.9 11,155.2 16.2 14.6

Compensation to Partners and Voting

Stockholder Officers 1,231.8 2.0 1,569.6 2.3 274

Commissions and Clearance Paid to

Other Brokers 1,9353 3.2 1,973.6 2.9 2.0

Communications 2,430.1 4.0 2,292.8 3.3 (5.6)

Occupancy and Equipment Costs 3,3901 5.5 3,196.7 4.6 (5.7)

Data Processing Costs 797.1 1.3 768.0 1.1 (3.7)

Interest Expenses 27,439.2 44.9 23,567.7 34.3 (14.1)

Regulatory Fees and Expenses 438.4 0.7 436.2 0.6 (0.5)

Losses in Error Accounts and Bad Debts 3388 0.6 412.7 0.6 21.8

All Other Expenses 5,278.7 8.6 6,978.6 10.1 32.2

Total Expenses $61,257.5 100.1% $62,170.6 90.40/0 1.5%

Income and Profitabilnv

Pre-tax Income $ (80.6) $ 6,585.2

Pre-tax Profit Margin (0.1) 9.6

Pre-tax Return on Equity (0.3) 22.4

Number of Firms 947 885

Figures may not add due to rounding .

under .05%.

r revsed

p preliminary

11 Calendar, rather than fiscal, year data is reported in this table.

Note: InclUdes information for firms doing a public business that carry customer accounts or clear securities

transactions

Source Focus Report

152

~

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=

=
I able 1/

UNCONSOUDATED BALANCE SHEET FOR CARRYING/CLEARING

BROKER-DEALERS jJ

($ in Millions)

Year-end 1990' Year-end 1991p

Percent Percent Percent

ofTotal ofTotal Change

Dollars Assets Dollars Assets 1990-1991

cash $ 10,405.3 1.6% $ 9,596.7 1.3% (7.8)%

Receivables from Other Broker-dealers 116,469.3 18.4 158,542.5 21.7 36.1

(a) securities Failed to Deliver 7,318.7 1.2 13,066.5 1.8 78.5

(b) securities Borrowed 96,036.4 15.2 132,477.1 18.1 37.9

(c) Other 13,114.2 2.1 12,998.8 1.8 (0.9)

Receivables from Customers 37,177.8 5.9 50,465.4 6.9 35.7

Receivables from Non-customers 899.2 0.1 1,881.8 0.3 109.3

long Positions in securities and

Commodities 204,669.8 32.4 232,545.2 31.8 13.6

(a) Bankers Acceptances, Certificates

of Deposit and Commercial Paper 14,872.5 2.4 10,366.8 1.4 (30.3)

(b) U.S. and canadian Government

Obligations 141,058.1 22.3 156,188.3 21.4 10.7

(c) State and Municipal Government

Obligations 7,908.1 1.3 9,428.1 1.3 19.2

(d) Corporate Obligations 26,415.7 4.2 37,114.4 5.1 40.5

(e) Stocks and Warrants 9,107.5 1.5 13,118.5 1.8 35.1

(1) Options 864.0 0.1 1,243.4 0.2 43.9

(g) Arbitrage 1,877.1 0.3 3,127.9 0.4 66.6

(h) Other securities 1,422.5 0.2 1,547.2 0.2 8.8

(i) Spot Commodities 334.1 0.1 196.2 0.0 (41.3)

securities and Investments Not Readily Marketable 1,052.1 0.2 1,758.2 0.2 67.1

securities Purchased Under Agreements to Resell 237,235.6 37.5 254,008.1 34.8 7.1

Exchange Membership 295.7 283.3 0.0 (4.2)

Other Assets 23,897.7 3.8 21,130.4 2.9 (11.6)

Total Assets $632,102.6 100.0% $730,211.4 100.0% 15.5%

Liabillties and Equjty capital

Bank loans Payable $ 18,257.5 29% $ 24,688.9 3.40/. 35.2%

Payables to Other Broker-dealers 45,371.6 7.2 61,407.2 8.4 35.3

(a) securities Failed to Receive 5,923.1 0.9 12,695.5 1.7 114.3

(b) securities loaned 31,181.8 4.9 36,794.8 5.0 18.0

(c) Other 8,266.7 1.3 11,916.9 1.6 44.2

Payables to Non-customers 7,287.4 1.2 13,360.7 1.8 83.3

Payables to Customers 55,549.7 8.8 71,616.1 9.8 28.9

Short Positions in securities and Commodities 102,898.9 16.3 107,245.4 14.7 4.2

securities Sold Under Repurchase Agreements 320,773.3 50.7 364,172.3 49.9 13.5

Other Non-subordinated liabilities 39,870.5 6.3 42,017.9 5.8 5.4

SUbordinated liabilities 14,260.5 2.3 14,743.8 2.0 3.4

Total liabilities $604,269.7 95.6 $699,252.2 95.8 15.7

Equity capital $ 27,832.9 4.4% $ 30,959.2 4.2% 11.2%

Number of Firms 947 885

Figures may not add due to rounding.

* under .05% r = reVised

p = preliminary

11 calendar, rather than fiscal, ~ear data is reported in this table.

Note: Includes information for rms doing a public business that carry customer accounts or clear securities

transactions.

Source: Focus Report 153

~
Securities on Exchanges

Market Value and Share Volume

The market value of equity and option transactions (trading in stocks,

options, warrants, and rights) on registered exchanges totaled $1.9 trillion

in 1991. Of this total, approximately $1.8 trillion, or 93%, represented

the market value of transactions in stocks, rights and warrants; $125

billion, 7%, were options transactions (including exercises of options on

listed stocks).

The value of equity and option transactions on the New York Stock

Exchange (NYSE) was $1.5 trillion, up 10% from the previous year. The

market value of such transactions on the American Stock Exchange (AMEX)

increased 7% to $69.1 billion and by 4% to $300.1 billion on all other

exchanges. The volume of trading in stocks (excluding rights and warrants)

on all registered exchanges totaled 58.0 billion shares, a 9% increase from

the previous year, with 82% of the total accounted for by trading on the

NYSE.

The volume of options contracts traded (excluding exercised contracts)

was 199 million contracts in 1991, 5% lower than in 1990. The market value

of these contracts decreased 4% to $76.1 billion. The volume of contracts

executed on the Chicago Board Options Exchange fell 6% to 121.7 million;

trading in options on the AMEX fell 5%; contract volume on the Philadelphia

Stock Exchange fell 2%; and trading in options on the Pacific Stock Exchange

increased 0.2%.

154
NASDAQ (Share Volume and Dollar Volume)

NASDAQ share volume and dollar value information for over-thecounter trading has been reported on a daily basis since November 1,1971.

At the end of 1991, there were 4,684 issues in the NASDAQ system, as

compared to 4,706 a year earlier and 3,050 at the end of 1980.

Share volume for 1991 was 41.3 billion, as compared to 33.4 billion

in 1990 and 6.7 billion in 1980. This trading volume encompasses the

number of shares bought and sold by market makers plus their net inventory

changes. The dollar volume of shares traded in the NASDAQ system was

$693.9 billion during 1991, as compared to $452.4 billion in 1990 and $68.7

billion in 1980.

Share and Dollar Volume by Exchange

Share volume on all registered exchanges totaled 58.3 billion, an

increase of 8% from the previous year. The New York Stock Exchange

accounted for 82% of the 1991 share volume; the American Stock Exchange,

6%; the Midwest Stock Exchange, 5%; and the Pacific Stock Exchange, 4%.

The dollar value of stocks, rights, and warrants traded was $1.8

trillion, 10% higher than the previous year. Trading on the New York

Stock Exchange contributed 86% of the total. The Midwest Stock Exchange

and Pacific Stock Exchange contributed 4% and 3%, respectively. The

American Stock Exchange accounted for 2% of dollar volume.

155
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Table 20

SHARE VOLUME BY EXCHANGES u

(In Percentage)

Total Share

Volume

Year (in Thousands) NYSE AMEX MSE PSE PHLX BSE CSE Others 2/

1945 769,018 6587 21.31 1.77 298 1.06 0.66 0.05 6.30

1950 893,320 76.32 13.54 2.16 3.11 0.97 0.65 0.09 3.16

1955 1,321,401 68.85 19.19 2.09 3.08 0.85 0.48 0.05 5.41

1960 1,441,120 68.47 22.27 2.20 3.11 0.88 0.38 0.04 2.65

1961 2,142,523 6499 25.58 2.22 3.41 0.79 0.30 0.04 2.67

1962 1,711,945 71.31 20.11 2.34 2.95 0.87 0.31 0.04 2.07

1963 1,880,793 72.93 18.83 2.32 2.82 0.83 0.29 0.04 1.94

1964 2,118,326 72.81 19.42 2.43 2.65 0.93 0.29 0.03 144

1965 2,671,012 69.90 22.53 2.63 2.33 0.81 0.26 0.05 1.49

1966 3,313,899 69.38 22.84 2.56 2.68 0.86 0.40 0.05 1.23

1967 4,646,553 6440 28.41 2.35 2.46 0.87 0.43 0.02 106

1968 5,407,923 61.98 29.74 2.63 264 0.89 0.78 001 133

1969 5,134,856 63.16 27.61 2.84 3.47 1.22 0.51 0.00 119

1970 4,834,887 71.28 19.03 3.16 3.68 1.63 0.51 0.02 0.69

1971 6,172,668 71.34 18.42 3.52 3.72 1.91 0.43 0.03 0.63

1972 6,518,132 70.47 18.22 3.71 4.13 2.21 0.59 0.03 0.64

1973 5,899,678 74.92 13.75 4.09 3.68 2.19 0.71 0.04 0.62

1974 4,950,842 7847 10.28 4.40 3.48 1.82 0.86 0.05 064

1975 6,376,094 80.99 8.97 3.97 3.26 1.54 0.85 0.13 0.29

1976 7,129,132 80.05 9.35 3.87 3.93 1.42 0.78 0.44 0.16

1977 7,124,640 79.71 9.56 3.96 3.72 1.49 0.66 0.64 0.26

1978 9,630,065 79.53 10.65 3.56 3.84 1.49 0.60 0.16 0.17

1979 10,960,424 79.88 10.85 3.30 3.27 1.64 0.55 0.28 0.23

1980 15,587,986 79.94 10.78 3.84 2.80 1.54 0.57 0.32 0.21

1981 15,969,186 80.68 9.32 4.60 2.87 1.55 0.51 0.37 0.10

1982 22,491,935 81.22 6.96 5.09 3.62 2.18 048 0.38 0.07

1983 30,316,014 80.37 7.45 5.48 3.56 2.20 0.65 0.19 0.10

1984 30,548,014 82.54 5.26 6.03 3.31 1.79 0.85 0.18 0.04

1985 37,187,567 81.52 5.78 6.12 3.66 1.47 1.27 0.15 0.03

1986 48,580,524 81.12 628 5.73 3.68 1.53 1.33 0.30 0.02

1987 64,082,996 83.09 5.57 5.19 3.23 1.30 1.28 0.30 0.04

1988 52,665,654 83.74 4.95 5.26 3.03 1.29 1.32 0.39 0.02

1989 54,416,790 81.33 6.02 5.44 3.34 1.80 1.64 0.41 0.02

1990 53,746,087 81.86 6.23 4.68 3.16 1.82 1.71 0.53 0.01

1991 58,296,284 82.00 5.52 4.66 3.58 1.60 1.77 0.86 0.01

1/ Share volume for exchanges includes stocks, rights and warrants; calendar, rather than fiscal, year data is reported in

thiS table.

2/lncludes all eXchanges not listed individually.

Source. SEC Form R-31

158
Table 21

DOLLAR VOLUME BY EXCHANGES 11

(In Percentage)

TotalDollar

Volume

Year ($ in Thousands) NYSE AMEX MSE PSE PHLX BSE CSE Others 21

1945 $ 16,284,552 82.75 0.81 2.00 1.78 0.96 1.16 0.06 0.48

1950 21,808,284 85.91 6.85 2.35 219 1.03 1.12 0.11 0.44

1955 38,039,107 86.31 6.98 2.44 1.90 1.03 0.78 0.09 0.47

1960 45,309,825 83.80 9.35 2.72 1.94 1.03 0.60 0.07 0.49

1961 64,071,623 82.43 10.71 2.75 1.99 1.03 0.49 0.07 0.53

1962 54,855,293 86.32 6.81 2.75 2.00 1.05 0.46 0.07 0.54

1963 64,437,900 8519 7.51 2.72 2.39 1.06 0.41 0.06 0.66

1964 72,461,584 83.49 8.45 3.15 2.48 1.14 0.42 0.06 0.81

1965 89,549,093 81.78 991 3.44 2.43 1.12 0.42 0.08 0.82

1966 123,697,737 79.n 11.84 3.14 2.84 110 0.56 0.07 0.68

1967 162,189,211 77.29 14.48 3.08 279 1.13 0.66 0.03 0.54

1968 197,116,367 73.55 17.99 3.12 2.65 1.13 1.04 0.01 0.51

1969 176,389,759 73.48 17.59 3.39 3.12 1.43 0.67 0.01 0.31

1970 131,707,946 78.44 11.11 3.76 381 1.99 0.67 0.03 0.19

1971 186,375,130 79.07 9.98 4.00 3.79 2.29 0.58 0.05 0.24

1972 205,956,263 77.n 10.37 4.29 3.94 2.56 0.75 0.05 0.27

1973 178,863,622 82.07 6.06 4.54 3.55 2.45 1.00 0.06 0.27

1974 118,828,270 83.63 4.40 4.90 3.50 2.03 1.24 0.06 024

1975 157,256,676 85.20 3.67 4.64 3.26 1.73 1.19 0.17 014

1976 195,224,812 84.35 3.88 4.76 3.83 1.69 0.94 0.53 0.02

19n 187,393,084 83.96 4.60 4.79 3.53 1.62 0.74 0.75 0.01

1978 251,618,179 83.67 613 4.16 3.64 1.62 0.61 0.17 0.00

1979 300,475,510 83.72 6.94 3.83 278 1.80 0.56 0.35 0.02

1980 476,500,688 83.53 7.33 4.33 2.27 1.61 0.52 0.40 001

1981 491,017,139 84.74 5.41 5.04 2.32 1.60 0.49 0.40 0.00

1982 603,094,266 85.32 327 5.83 3.05 1.59 0.51 0.43 0.00

1983 958,304,168 85.13 3.32 6.28 2.86 1.55 0.66 016 0.04

1984 951,318,448 85.61 226 6.57 2.93 1.58 0.85 0.19 0.00

1985 1,200,127,848 85.25 2.23 6.59 3.06 1.49 120 0.18 0.00

1986 1,707,117,112 85.02 2.56 6.00 3.00 1.57 1.44 0.41 0.00

1987 2,286,902,788 86.79 2.32 5.32 2.53 1.35 1.33 0.35 0.00

1988 1,587,950,769 86.81 1.96 5.46 2.62 1.33 1.34 0.49 0.00

1989 1,847,766,971 85.49 2.35 5.46 2.84 1.n 1.56 0.54 0.00

1990 1,616,798,075 86.15 2.33 4.58 2.n 1.79 1.63 0.74 0.00

1991 1,778,398,022 86.20 2.31 4.34 3.05 1.54 1.72 0.83 0.01

lJ Dollarvolume for exchanges includes stocks, rllJhtsand warrants; calendar, rather than fiscal, year data is

reported in this table.

21 Includes all exchanges not listed individually.

Source: SECForm R-31

159
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Table 23

VALUE OF STOCKS LISTED ON EXCHANGES

($ in Billions)

NewYork American ExclUSively

As of Stock Stock On Other

Dec 31 Exchange Exchange Exchanges Total

1938 $ 47.5 $ 108 $ 583

1940 46.5 10.1 566

1941 41.9 86 50.5

1942 358 74 432

1943 47.6 99 57.5

1944 555 11 2 667

1945 738 14.4 882

1946 68.6 132 81.8

1947 683 12.1 804

1948 67.0 11.9 30 81.9

1949 76.3 122 3.1 916

1950 938 139 3.3 111.0

1951 1095 165 32 1292

1952 1205 169 3.1 1405

1953 117 3 15.3 2.8 1354

1954 1691 22.1 3.6 1948

1955 207.7 271 4.0 2388

1956 219.2 310 3.8 2540

1957 1956 255 31 2242

1958 2767 31.7 4.3 3127

1959 307.7 254 4.2 337.3

1960 3070 242 41 3353

1961 387.8 330 5.3 426.1

1962 3458 244 40 3742

1963 411.3 261 4.3 441.7

1964 474.3 28.2 4.3 506.8

1965 537.5 309 47 5731

1966 482.5 27.9 40 5144

1967 6058 43.0 39 652.7

1968 6923 612 60 7595

1969 629.5 47.7 5.4 6826

1970 6364 395 48 6807

1971 741.8 491 4.7 7956

1972 871.5 55.6 5.6 9327

1973 7210 38.7 4.1 7638

1974 511.1 23.3 2.9 537.3

1975 6851 29.3 4.3 7187

1976 858.3 36.0 42 8985

1977 776.7 37.6 4.2 818.5

1978 8227 39.2 2.9 864.8

1979 960.6 578 3.9 1,0223

1980 1,242.8 1035 29 1,3492

1981 1,143.8 89.4 5.0 1,2382

1982 1,305.4 776 68 1,3897

1983 1,522.2 80.1 6.6 1,608.8

1984 1,529.5 52.0 5.8 1,5873

1985 1,882.7 63.2 5.9 1,951 8

1986 2,128.5 70.3 6.5 2,2053

1987 2,132.2 67.0 5.9 2,2051

1988 2,366.1 84.1 4.9 2,4551

1989 2,903.5 1009 4.6 3,009.0

1990 2,6921 69.9 3.9 2,7659

1991 3,547.5 90.3 43 3,6421

Source' SECForm 1392

161
Table 24

APPROPRIATED FUNDS vs FEES. COLLECTED

$ Millions

450

400

350

300

406

200

250

150

100

50

APPROPRIATED

FUNDING

~.' ... r*'

.-

226

162

o

FY1976 78 80 82 84 86 88 90 92

n ~ ~ ~ ~ ~ ~ ~

Excludes dlsgorgements from fraud actions.

rJ FY1991 appropriated funding has been adjusted to exclude

offsetting collections not In appropriated estimates.

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