Fourth Annual Report

of the

Securities and Exchange

Commission

Fiscal Year Ended June 30, 1938

UNITED STATES

GOVERNMENT PRINTING OFFICE

WASHINGTON: 1938

For lIII1eby the Superintendent of Documents. Washington. D. C. - - - - - - - - Price III ceJlts
SECURITms AND EXCHANGE COMMISSION

omoe: 1778 P8lUlSYlvllllla A.venue NW.

Washlngton, D. O.

COMMISSIONERS

WILLIAM O. DOUGLAS, Chairman

GEORGE C. MATHEWS

ROBERT E. HEALY

JEROME N. FRANK

JOHN W. HANES 1

FRANCIS P. BRASSOR, Secretary

Address All Communications

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.

IResigned June 30, 1938.
LETTER OF TRANSMITTAL

SECURITIES AND EXCHANGE COMMISSION,

Washington, January 3, 1939.

SIR: I have the honor to transmit to you the Fourth Annual Report

of the Securities and Exchange Commission, in compliance with

the provisions of Section 23 (b) of the Securities Exchange Act of

1934, approved June 6, 1934, and Section 23 of the Public Utility

Holding Company Act of 1935, approved August 26, 1935.

Respectfully,

WILLIAM O. DOUGLAS,

Ohairman.

The PRESIDENT OF THE SENATE,

The SPEAKER OF THE HOUSE OF REPRESENTATIVES,

Washington, D. O.

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CONTENTS

Introduction

Registration of Public Utility Holding Companies ..

Orders Granting Exemptions from Registration under the Public Utility Holding Company Act of 1935

Reorganization, Simplification, and Integration of Registered Public Utility Holding Companies and Subsidiaries

Rules, Regulations, and Forms under the Public Utility Holding Company Act of 1935

Issuance of Securities by Registered Holding Companies and Their Subsidiaries

Acquisition of Securities or Utility Assets and Other Interests by Registered Holding Companies or Their Subsidiaries

Uniform System of Accounts for Public Utility Holding Companies Service Companies

Statements Required Pursuant to Section 12 (i) of the Public Utility Holding Company Act of 1935

National Securities Exchanges

Exchange Reorganization

Round 'fable Conferences

Exchanges Registered., ______ _ _

Exchanges Exempted from Registration

Registration of Securities on Exchanges

Applications for Registration of Securities on Exchanges

Statistics of Securities Registered or Exempt from Registration on Exchanges

Applications for the Withdrawal or Striking from Listing and Registration of Securities on Exchanges

Applications for the Granting, Extension, and Termination of Unlisted Trading Privileges on Exchanges

Regulation of the Over-the-Counter Markets

The Maloney Amendment and Rules Thereunder

Registration of Brokers and Dealers

Registration of Securities Under the Securities Act of 1933

Examination of Securities Act Registration Statements

Statistics of Securities Registered under the Securities ActExemption from Registration Requirements of Securities Act of 1933

Securities Act and Securities Exchange Act Forms, Rules, and Regulations ,

Litigation under the Public Utility Holding Company Act of 1935

Litigation under the Securities Act of 1933 and the Securities Exchange Act of 1934

Complaints, Informal and Formal Investigations Public Hearings

Formal Opinions

Securities Act of 1933, as Amended

Securities Exchange Act of 1934, as Amended

Public Utility Holding Company Act of 1935

Miscellaneous

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Page

Reports of Officers, Directors, and Principal Stockholdera.i., ____________ 66

General Scope of Reporting Requirements______________________ 66

Volume of Reports______ _____ ____ ___ _____________________ 67

Decline in Reports Needing AmendmenL______________________ 67

Decline in Late Filing of Reporta______________________________ 67

Extent of Compliance with Reporting Requirements_____________ 68

Publication of Security Ownership Reports_____________________ 68

Solicitation of Proxies, Consents, and Authorizations under the Securities

Exchange Act of 1934 and the Public Utility Holding Company Act of

1935___________________________________________________________ 69

Confidential Treatment of Applications, Reports, or Documents., ________ 73

Report on the Study and Investigation of Protective and Reorganization

Committees_____________________________________________________ 74

Study of Investment Trusts and Investment Companiea, _______________ 76

Margin Regulatlons..c , , ________________________ ____________ _ 80

Detection of Manipulative and Deceptive Practices____________________ 80

Market Surveillance , _ _ ____________________ __________________ 80

Trading Investigations , ___ ___________________________________ 81

Disposition of Trading Cases______ __ _ 82

Miscellaneous_______________________________________________ 86

Special Studies and the Preparation of Rules__________________________ 87

Short Selling________________________________________________ 87

Trading by Officers, Directors, and Principal Stockholdere.,., ______ 88

Segregation ._______ 88

Financial Safeguards-Richard Whitney & Company __ _ _________ 89

Margins____________________________________________________ 90

Miscellaneous Exchange Studies and Rules_____________________ 91

Over-the-Counter Studies..c., , ___________ _ 91

Admission to Practice as Attorney or Agent Before the Commission______ 92

Public Reference Rooma.c.,., __________________ ______________________ 93

Publications______________________________________________________ 94

Information Releases_________________________________________ 94

Registration Record, Securities Act of 1933_____________________ 95

OtherPublications___________________________________________ 95

Personnel_________________________________________________________ 96

Flscal Affairs______________________________________________________ 96

APPENDIXES

ApPENDIX I. Rules of Practice; _ _ 99

ApPENDIX II. Guides to Forms 113

ApPENDIX III. Securities Act Registration Statements as to which stop

orders, consent refusal orders, and withdrawal orders

were issued July 1, 1937, to June 30, 1938_____________ 136

ApPENDIX IV. List of Publications as of December 9, 1938_____________ 141

ApPENDIX V. Statistical tables:

Table 1. Effective registrations of new seeu'ritiea-e-totals, from

September 1934 to June 1938, by months_____________________ 143

Table 2. Effective registrations of new securities, by types of securities, from July 1937 to June 1938, by months_________________ 144

Table 3. Effective registrations of new securities, by major industrial groups, from July 1937 to June 1938, by months__________ 145

Table 4. Effective registrations of new eecuritles-e-reductdon of

gross amount of all effective securities to estimated net cash proceeds accruing to issuers, from July 1937 to June 1938, by months; 147
CONTENTS vn

APPENDIX V. Statistical tables-Continued. Page

Table 5, part 1. Effective registrations of new securltiee-e-proposad

uses of estimated net cash proceeds of new securities registered

for account of issuers, from July 1937 to June 1938, by months..; 148

Table 5, part 2. Effective registrations of new securities--proposed

uses of estimated net cash proceeds of new securities reaistered

for account of issuers, from July 1937 to June 1938, by months., , 149

Table 6. Effective registrations of new securities-detailed statistics

by industries-fiscal year ended June 30, 1938_ _______________ 150

Table 7. Effective registrations of new securities-channels of distribution of new securities intended for cash offering for account of

issuers--fiscal year ended June 30,1938______________________ 158

Table 8. Effective registrations of reorganization and exchange

securities, by types of securities, from July 1937 to June 1938, by

months___________________________________________________ 160

'Table 9. Effective registrations of reorganization and exchange

securities, by major industrial groups, from July 1937 to June

1938, by months___________________________________________ 161

Table 10, part 1. Transactions in all stocks for account of members,

New York Stock Exchange, by weeks, June 28, 1937-June 25,

1938_____________________________________________________ 162

Table 10, part 2. Transactions in all stocks for account of members,

New York Curb Exchange, by weeks, June 28, 1937-June 25,

1938_____________________________________________________ 164

Table 11, part 1. Value and volume of sales on registered exchanges.

Grand totals for the year ended June 30, 1938________________ 166

Table 11, part 2. Total market value of all sales, monthly, from July

1937 to June 1938, inclusive________________________________ 167

Table 11, part 3. Market value of stock sales, monthly, from July

1937 to June 1938, inclusive_________________________________ 168

Table 11, part 4. Market value of bond sales, monthly, from July

1937 to June 1938, inclusive J _ _ __ _ _ __ 169

Table 11, part 5. Volume of stock sales, monthly, from July 1937 to

June 1938, inclusive .___ __ 170

Table 11, part 6. Principal amount of bond sales, monthly, from

July 1937 to June 1938, inclusive____________________________ 171

APPENDIX VI. Litigation Involving Statutes Administered by the Commission , _ _ _________________ __ 172

Table I. Injunctive proceedings brought by Commission under

Securities Act of 1933 and Securities Exchange Act of 1934 which

were pending during the fiscal year ended June 30,1938________ 172

Table II. Indictments returned for violation of the Securities Act of

1933 and the Securities Exchange Act of 1934 which were pending

during the fiscal year ended June 30,1938____________________ 178

Table III. Petitions for review of orders of Commission under Securities Act of 1933 pending in circuit courts of appeals during fiscal

year ended June 30, 1938 ._________ 188

Table IV. Petitions for review of orders of Commission under

Securities Exchange Act of 1934 (other than confidential treatment cases) pending in circuit courts of appeals during the fiscal

year ended June 30, 1938___________________________________ 188

Table V. Petitions for review of orders denying confidential treatment under Section 24 (b) of the Securities Exchange Act of 1934

which were pending in circuit courts of appeals during the fiscal

year ended June 30,1938___________________________________ 189
VIII CONTENTS

ApPENDIX VI. Litigation Involving Statutes Administered by the Commission-Continued.

Table VI. Cases involving constitutionality of Public Utility

Holding Company Act of 1935 pending during the fiscal year

ended June 30, 1938_ _ _ _ _ __ 190

Table VII. Proceedings by Commission, pending during the fiscal

year ended June 30, 1938, to enforce subpenas under Section 22 (b)

of Securities Act of 1933_ _ _ _ _ __ __ _ _ _ _ __ _ _ _ _ _ ____ _ __ __ _ _ _ _ _ __ 191

Table VIII. Suits pending during the fiscal year ended June 30, 1938,

to enjoin enforcement of or compliance with subpenas issued by

Commission______________________________________________ 191

Table IX. Miscellaneous suits against Commission or Commissioners

pending during fiscal year ended June 30, 1938________________ 192

Table X. Contempt proceedings pending during the fiscal year

ended June 30, 1938________________________________________ 192

Table XI. Suits against Commission to enjoin enforcement of

Securities Act and/or Securities Exchange Act with the exception

of subpenas issued by the Commission_______________________ 193

ApPENDIX VII. List of Registered Public Utility Holding Companies as

at June 30,1938_________________________________ 194

ApPENDIXVIII. Cross-Reference Table to the General Rules. and Regulations Under the Securities Exchange Act of 1934- _ _ _ _ 196
FOURTH ANNUAL REPORT OF THE SECURITIES

AND EXCHANGE COMMISSION

WASHINGTON, D. C.

INTRODUCTION

The Securities and Exchange Commission is required, pursuant to

the provisions of Section 23 (b) of the Securities Exchange Act of

1934 and Section 23 of the Public Utility Holding Company Act of

1935, to submit annually a report to the Congress covering the work

of the Commission for the preceding year and such information,

data, and recommendations for further legislation as it may find

advisable. The following report, made pursuant to such provisions,

covers the fiscal year ended June 30, 1938.

The Securities and Exchange Commission was created under its

organic Act, the Securities Exchange Act of 1934, approved June 6,

1934, for the purpose of administering this Act and the Securities

Act of 1933.1 The Congress next passed the Public Utility Holding

Company Act of 1935,which Act became effective on August 26,1935.

So that during the fiscal years 1936 and 1937 the Commission had

three major legislative enactments under its jurisdiction. Through

the passage of Public No. 621, 74th Congress, approved May 27,

1936, the Congress further strengthened certain provisions of the

Securities Exchange Act of 1934 by amending, in addition to other

sections, Section 15 thereof, relating to over-the-counter markets.

This constituted in brief the status of legislation falling within the

jurisdiction of the Commission as of June 30, 1937.

During the closing days of the last session of the 75th Congress,

new legislation was passed which placed additional responsibilities

and duties upon this Commission. This new legislation comprises

the following:

(1) The Maloney Act (Public No. 719, 75th Congress)

approved by the President on June 25,1938. This Act amends

certain sections of the Securities Exchange Act of 1934, relating to the regulation of the over-the-counter markets and

imposes new duties upon the Commission with respect thereto.

In brief, this amendment provides for a system of regulation

in the over-the-counter markets through the formation of

1Sections 201 to 209of Title II of the Scenrities Exchsnge Act of 1934amended and repealed certain provisions of the Scenrities Actof1933. A further, but very slight, amendment was made on August II, 1935,

In the Motor Carrier Act of 1935.

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voluntary associations of investment bankers, dealers, and

brokers doing business in these markets under appropriateGovernmental supervision.

(2) The Chandler Act (Public No. 696, 75th Congress),

approved by the President on June 22, 1938. This Act eonstitutes a comprehensive revision of the National Bankruptcy

Act. Chapter X thereof imposes new duties upon the Commission with respect to corporate reorganization procedure,

by providing the Federal courts with the administrative assistance of the Commission in such complex and difficult tasks asexamining and reporting on plans of reorganization. _

(3) Public Resolution No. 113, 75th Congress, approved by

the President on June 16, 1938. This resolution established

a Temporary National Economic Committee consisting of six

members of the Congress and six representatives of Executivedepartments and independent establishments of the Government. The Securities and Exchange Commission is represented on the Temporary National Economic Committee by

Chairman Douglas and his alternate, Commissioner Frank.

This Committee is charged with the duty of making a full and

complete study and investigation with respect to the matters

referred to in the President's Message of .April 29, 1938, on

monopolistic practices and economic and financial concentration. The Committee has assigned certain studies to each

of these departments and independent agencies. To datestudies assigned to the Securities and Exchange Commission

include insurance companies, investment banking, and corporate practices .

.Asurvey of some of the more important provisions of the legislativeenactments enumerated above, together with a brief summarization

of each major project thereunder, is included in the body of the report.

For the sake of efficient administration, the Commission hasestablished several divisions in Washington, D. C., and nine regional

offices." The organization chart, included below, outlines the present

divisional structure of the Commission. The Commissioners, staff

officers, and regional administrators, as of the close of the last fiscal

year are as follows:

Commissioners:

Douglas, William 0., Chairman

Mathews, George C.

Healy, Robert E.

Frank, Jerome

Hanes, John W.

J On November 21, 1938,the Commlsslon announced tbe establishment of a new Regional Office In Clever

land, Ohio. Mr. Dan Tyler Moore was appointed RegIonal Administrator of this office.

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FOURTH ANNUAL REPORT 3

Commissioner Douglas was elected Chairman of the Commission

on September 21, 1937, for the period ending June 30, 1938,3vice

Chairman James M. Landis, who resigned on September 15, 1937.

Commissioner Mathews was reappointed Commissioner on May 28,

1938, for the term ending June 5, 1943.

Commissioner Frank was appointed Commissioner on December

20, 1937, for the term ending June 5, 1942, vice James M. Landis.

Commissioner Hanes was appointed Commissioner on December

20, 1937, for the term ending June 5, 1940, vice J. D. Ross, who

resigned as Commissioner October 31, 1937. Commissioner Hanes

resigned as Commissioner on June 30, 1938.4

Staff' Officers:

Allen, James, Supervisor of Information Research

Bane, Baldwin B., Director of the Registration Division

Blaisdell, Thomas C., Jr., Director of the S. E. C. Monopoly

Study Ii

Blough, Carman G., Chief Accountant II

Brassor, Francis P., Secretary of the Commission and Director

of the Administrative Division

Clark, Samuel 0., Jr., Director of the Reorganization Division 1

Gourrich, Paul P., Technical Adviser to the Commission and

Director of the Investment Trust Study 8

Kenney, William J., Chief of the Oil and Gas Unit 9

Neff, Harold H., Director of the Division of Forms and Regulations

Purcell, Ganson, Director of the Trading and Exchange

Division

Sheridan, Edwin A., Executive Assistant to the Chairman

Smith, C. Roy, Director of the Public Utilities Division

Throop, Allen A., General Counsel 10

'On July I, 1938, Commissioner Douglas was reelected Chairman of the Commission, for the period

ending June 30, 1939.

Mr. Edward C. Eicher was appointed Commissioner on December I, 1938,for the term ending June II,

19«l, vice Commissioner John W. Hanes

Mr. Blaisdell was appointed Director of the S. E. C. Monopoly StUdy on July 16, 1938.

'Mr. Blough resigned .August 15,1938, and Mr. William W. Werntz was appointed Chief .Accountant.

, Mr. Clark was appointed Director of the Reorganization DIvision on July 12, 1938

Mr. Gourrlch was appointed Technical.Advlser to the Commission on July 1,1938. Mr. Gourrlch was

formerly Director of the Research DIvision, which DIvision was transferred to the Trading and Exchange

DIvision

Mr. Kenney resigned .August 12, 1938,and Mr. John M. CII1ford was appointed Chief of the on and

GasUnlt.

J'Mr. Throop resigned .August 28, 1938,and :Mr. Chester T. Lane was appointed General Counsel.

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RelionaJ Administrators:

Allred, Oran H., Fort Worth Regional Office

Caffrey, James J., N ew York Regional Office

Green, William, Atlanta Regional Office

Judy, Howard A., San Francisco Regional Office

Karr, Day, Seattle Regional Office

Kennedy, W. McNeill, Chicago Regional Office

Lary, Howard N., Denver Regional Office

Malone, William M., Washington Field Office

Rooney, Joseph P., Boston Regional Office
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REGISTRATION OF PUBLIC UTILITY HOLDING COMPANffiS

An outstanding event of the past fiscal year was the decision by the

Supreme Court of the United States upholding the constitutionality

of the registration provisions of the Public Utility Holding Company

Act of 1935.11

On the day the above-mentioned decision was rendered, several of

the larger unregistered holding companies filed notification of registration. With a few exceptions, the remainder of the industry subject

to the Act and unregistered filed their notifications as rapidly thereafter

as the forms could be completed and forwarded to the Commission.

Registration under the provisions of the Public Utility Holding

Company Act of 1935 is accomplished by the public utility holding

company filing with the Commission a notification of registration

(Form U-5A) and, within a prescribed time, a registration statement

(Form U-5B). The Commission's report for the fiscal year ended

June 30, 1937, described in some detail the information required to be

furnished on Form U-5B; An analysis of the completed forms now

on file has shown a wealth of information not heretofore available.

This information has been and will continue to be of great assistance

to the public and to the Commission in the discharge of its duties.

As a result of experience, the Commission, on May 17, 1938, promulgated an amended Form U-5B (registration statement). The

amendments to this form made no changes of substance. They were

designed to produce greater precision, clarity, and simplification in

the presentation of the data required. The important changes in

this amended form included requirements as to additional information

relating to the surplus accounts of system companies and to the original cost of securities acquired by system companies.

The Commission also, on May 17, 1938, promulgated Form U-5S,

which is an annual supplement to the Form U-5B registration statement. The purpose of this new form is to keep the information

contained in the registration statement current and up to date.

At the beginning of the fiscal year, 36 public utility holding company systems had registered under the Act containing altogether 86

registered holding companies. At the close of the year, 55 public

utility holding company systems had registered containing 139

registered holding companies. This represents during the year an

approximate increase of 215 percent in the value of holding company

system assets registered under the Act.

The 55 registered public utility holding company systems as of

June 30, 1938, together with an indication of their approximate consolidated assets as of December 31,1937, are identified in the following

table:

U DecIded on March 28, 1938,303 U. B. 419 (1938), and S1lIIlIII8I'ked on p. 46 et seq. of thls report
FOURTH ANNUAL REPORT

Name 011llll/tll rompanll ",.tem

.American States Utilities COrporation

American Utilities Service Oorporation

American Water Works and Electric Company, Inc

Arkansas Natural Gas COrporation

Associated Gas and Electric COmpany

British-American Utilities Corporation

-Oentral-Public Utility Corporation

Oentral States Edison, Inc

-Oities Service Power and Light Company

-Oitisens Public Service COmpany

Citizens Utilities Company

-Colonial Utilities, Incorporated

-Columbia Gas & Electric Corporation, The

-Oommonwealth & Southern Corporation, The

'COmmunity Gas and Power Company

-Communlty Power and Light Company

-Orescent Public Service Company

'East Coast Public Service COmpany

'Eastern Utilities Associates

'Electric Bond and Share COmpany

'Engineers Public Service COmpany

Federal Water Service COrporation

"Foster Petroleum Company

-Great Lakes Utilities Company

Interstate Gas and Electric COmpany

"Lone Star Gas COrporation

'Middle West Corporation, The

Midland United Company

'National Fuel Gas Company

'National Gas and Electric Corporation

"National Publie Utilities Corporation

New England Power Association

New England Public Service COmpany

'North American Company, The

North American Gas and }t~lectricCOmpany

'North Continent Utilities Corporation ._

"Penn Western Gas & Electric Company

Peoples Light and Power COmpany

Republic Electric Power Corporation

Republic Service Corporation

Bandar COrporation

'Southeast Power & Light COmpany

Southern Union Gas COmpany

-Southwestern Development Company

Staudard Power and Light Corporation

United Cities Utilities COmpany

United Corporation

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Alleta-comotldated,

approrimatt,

Dec. 91, 19:n

$11,989,373

18,719,346

455,189,065

108,579,230

I,166,985, 655

88,937

131,742,274

1,631,099

428,485,473

2,851,669

11,848,108

3,936,623

724,879,407

1,194,040,376

61,190,745

51,811,928

12,124,703

3,265,788

42,727,909

2,626,284,057

369,046,447

192,181,483

(b)

4,632,851

1,527,252

155,822,973

598,812,328

353,804,627

94,948,812

6,859,209

5,220,464

455,339,356

190,982,970

1,183,270,807

21,831,166

24,858,840

77,300,240

16,743,963

3,285,268

8,552,497

129,516

1,042,085

14,026,694

25,222,662

1,217,382,507

2,044,161

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These figures were obtained from various sources generally considered reliable, such as, annual reports

to stockholders. registration statements, and commercial manuals, and no determination as to the IlCClU'lI07

~hereof has been made by the Commission.

Foster Petroleum Corporation-Company vpry small and assets cannot be ascertained .

United Corporatlon-A company holding blocks of voting stocks of holding company lIYBteIDSwhich

Art' separately registered and whose assets are Included under the name of each Individual company.

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Name of utilltll companll 81I8tem

United Gas Improvement Company, The

United Light and Power Company, The

United Punlie Utilities Corporation

United Telephone and Electric Company, The

Utilities Power and Light Corporation

Utilities Stock and Bond Corporation

Walnut Electric & Gas Corporation

Washington and Suburban Companies

A88ets-Consolidated,

approx,mate,

Dec. 91, 1997

$828,040,177

572,822,348

21,223,979

6,180,232

303,812,597

3,902,689

1,884,691

48,723,024

Total, all systems_______________ __ _________ 13, 869, 830, 680

Appendix VII contains a complete list of the 139holding companies

which were registered as of June 30, 1938.

ORDERS GRANTING EXEMPTIONS FROM REGISTRATION UNDER

THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

Under the provisions of Sections 2 and 3 of the Public Utility

Holding Company Act of 1935, authority is granted to the Commission to exempt by order certain types of companies from the obligations, duties, and liabilities imposed by that ActY The requirements

as to the various kinds of applications for exemption under these

sections are extremely flexible.

The form such exemptions may take varies considerably, that is,

among other things, (1) a company may be declared not a "holding

company" as that term is defined in Section 2 (a) (7) of the Act; (2)

not to be a subsidiary of a specified holding company pursuant to

Section 2 (a) (8); or (3) a holding company may be exempted from

the registration requirements if it falls within one of the categories

specified in Section 3 (a). The Commission is also empowered by

the provisions of Section 3 (b) to exempt certain subsidiaries of

registered holding companies from such provisions of the Act which

it finds proper if such subsidiaries carry on their business wholly in

foreign countries.

However, before the Commission acts on any application for exemption, public hearings are held at which any interested member of

the public or a representative of a State public utility commission

may appear and take part in the proceedings. In granting any of

these exemptions, the Commission is directed by the Act to impose

such conditions as may be necessary to protect the public interest or

the interest of investors or consumers.

The following statistics indicate the number of applications for

exemption received, granted, withdrawn, and pending at the close of

the fiscal year:

The Oommisslon's powers to exempt by rule are not discussed in this section.

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l"OURTH A~Xr_U. rust-orrr 9

Number cr I Number of

Number or Number or apphoanons

applications apphcatlons applieanons pending at received approved withdrawn close or fiscal year

To June 30, 1937_________________ ... _________________ 399 87 172 140 July 1, 1937, to June 30,1938 _________________. ________ 45 13 42 131

Includes 1 reopened application.

REORGANIZATION, SIMPLIFICATION, AND INTEGRATION OF REGISTERED PUBLIC UTILITY HOLDING COMPANIES AND SUBSIDIARIES

Section 11 of the Public Utility Holding Company Act imposes

upon the Commission the duty of passing upon all plans, whether voluntary or involuntary, for the reorganization of registered holding

companies or their subsidiaries, and the duty of requiring the corporate simplification and geographical integration of public utility holding company systems.

Subparagraph (1) of Section 11 (b) of the Act provides that it shall

be the duty of the Commission to require by order each registered

holding company and subsidiary to take such action as the Commission shall find necessary to limit the operations of the holding company

system of which such company is a part to a single integrated public

utility system and to such other businesses as are reasonably incidental

or economically necessary to the operations of such integrated public

utility system. The Commission may, however, permit a registered

holding company to control more than one integrated public utility

system if it finds that each additional system cannot be operated as

an independent system without the loss of substantial economies,

that each is located in one or adjoining states, and that the combination of such systems under the control of a single holding company

is not so large as to impair the advantages of localized management.

Subparagraph (2) of Section 11 (b) provides that it shall be the duty

of the Commission to require by order that each registered holding

company and subsidiary take such steps as the Commission shall find

necessary to insure that the corporate structure and continued existence of each company in the holding company system does not unduly

or unnecessarily complicate the structure or unfairly or inequitably

distribute voting power among stockholders in the holding company

system. More particularly, the Commission's order shall require that

each holding company shall cease to be a holding company with respect

to any subsidiary which itself has a subsidiary which is a holding company. Both subparagraphs of this section are to be effectuated as

soon as practicable after January 1, 1938.

Section 11 (e) provides an alternative method for complying with

these standards established in Section 11 (b). Under Section 11 (e)

104189-39--2

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Any registered holding company or subsidiary may submit a plan

to the Commission for the divestment of control, securities, or other

assets, or for other action by such company or any subsidiary for the

purpose of enabling it or any subsidiary to comply with the provisions

of Section 11 (b). If, after hearing, the Commission shall find such

plan necessary to effectuate the provisions of Section 11 (b) and fair

and equitable to the persons affected by the plan, the Commission

shall make an order approving the plan:

It will be realized that the problem of conforming the electric and

gas utilities to the requirements of Section 11 (b) is a task of great

magnitude. Its most expeditious accomplishment turns upon the

willingness of the industry voluntarily to take the necessary steps."

The Commission's policy has been and is to give each holding company every reasonable opportunity to effectuate the Section 11 (b)

programs by voluntary proceedings, and to institute involuntary proceedings under Section 11 (b) only as a last resort or where the exigencies of special situations make such a course desirable or necessary.

By June 30, 1938, relatively few plans for compliance with Section

11 (b) had been submitted to the Commission. It had not at that

date instituted any involuntary proceedings. But in this connection

it should be recalled that only part of the industry was operating under

the statute prior to the Supreme Court decision in the Electric Bond

and Share case on March 28, 1938, and that Section 11 (b) did not

become mandatory until January 1, 1938. But a sound commencement and real progress were made in the Section 11 (b) program. In

that connection the following three cases, however, will be of interest:

American Water Works and Electric Company, Incorporated

On December 30, 1937, the Commission approved, with certain

modifications, the first major plan of corporate simplification filed

pursuant to the provisions of Section 11 (e). This concerned the

application of American Water Works and Electric Company, Incorporated. This company controls, through the medium of The West

Penn Electric Company, an intermediate holding company, stocks in

public utility and holding companies whose electric operations extend

over an area covering portions of the States of Pennsylvania, West

Virginia, Ohio, Maryland, and Virginia. The area extends, roughly,

300 miles north and south and 300 miles east and west. The assets

of American Water Works and Electric system on a consolidated

basis amount to approximately $455,189,065 and its annual con11On May 5, 1938,1'Committee of Holding Company Exeeutlves was chosen by 14major utility systems

(or the purpose of conferring WIth the Oomnusslon from time to time on these and other problems arising

under the PUblic Utility Holding Company Act of 1935. On August 3, 1938,Chairman Douglas addressed

a letter to the heads of all registered holding companies requesting the various systems to present, not later

than December I, 1938, tentative suggestions and programs looking toward compliance with Sections

U (b) iI) and 11 (b) (2) <Of the Public Utility Holding Company Act of 1935.
FOURTH ANNUAL REPORT 11

-solidated earnings amount to approximately $58,868,968 (both as of

December 31, 1937).14

In addition to its electric operations and a small amount of gas

.service, subsidiaries of American Water Works and Electric Company.

Incorporated, are engaged in a number of other businesses which do

not constitute public utility enterprises within the meaning of the

Public Utility Holding Company Act of 1935. These include water

'works, coal appliance sales, electric railway and bus transportation.

. and bridges, agriculture, and certain other minor operations.

The plan submitted by the applicant contemplated, by process 01

.dissolution, merger and re-alignment, the elimination of several

"second-degree" holding company relationships, the continuance of

which is forbidden under the terms of Section 11 (b) (2) of the statute.

No change in the actual physical utility properties of the applicant

was involved inasmuch as the company contended and the Commission

.found that the operations of its electric and gas utility subsidiaries

-were limited to a single integrated public utility system.

The Commission found that the retention by American Water

Works and Electric Company, Incorporated, of its water properties

(other than those controlled through American Communities Company) and its coal and appliance businesses were reasonably incidental

and economically appropriate to the operation of its integrated public

utility system.

The Commission reserved its decision with respect to the applicant's

retention of its interest in American Communities Company system

to afford an opportunity to effectuate the elimination of American

-'Communities Company as an intermediate company, and the recapitalization or reorganization of its system, and an increase of applicant's equity therein.

The Commission found that the applicant's interests in its agricultural properties in California were not reasonably incidental or economically necessary or appropriate to its utility operations, and gave

the applicant a reasonable period of time to dispose of these interests.

The Commission found that the distribution of voting power in the

. applicant and its subsidiaries, especially in the event of non-payment

. of preferred stock dividends, was not fair and equitable. The appli-

. cant was given a reasonable period of time to effect appropriate

changes in that respect.

Finally the Commission found that upon consummation of the simplification plan, the corporate structure of the American Water Works

and Electric system, except as relates to the distribution of voting

power and subject to approval of a plan to simplify and reorganize the

American Communities Company system and to increase applicant's

equity therein, would conform to the requirements of Section 11 (b) (2).

.. These figures were obtained from the annual report of American Water Works and Electric Company,

=: Inc., to Its stockholders for the year ended December 31, 1937.

-

-

-

~
12 SECURITIES AND EXCHANGE COMMISSION

Massachusetts Utdities Associates

The second voluntary simplification plan was filed by Massachusetts

Utilities Associates, a registered holding company and a subsidiary of

New England Power Association. Under the plan, Massachusetts

Utilities Associates was to absorb three of its direct subsidiary subholding companies, Massachusetts Lighting Companies, Central

Massachusetts Light & Power Company, and Commonwealth Gas &

Electric Companies. Upon consummation of the plan the 16 utility

subsidiaries of these 3 sub-holding companies would become direct

subsidiaries of Massachusetts Utilities Associates. This plan was

approved by the Commission on January 11, 1938.

Penn Western Gas and Electric Company

Penn Western Gas and Electric Company is a registered holding

company whose assets consisted principally of common stocks of the

following subsidiaries:

(1) Pennsylvania Gas & Electric Corporation, a registered holding

company which has 16 subsidiaries engaged in the manufactured and

natural gas business in Pennsylvania, New York, Massachusetts,

Rhode Island, and Virginia. (Applicant owned 100% of the Class B

common stock.)

(2) American Railways Corporation, a non-utility holding company

with one subsidiary, which supplies transportation service in Dayton,

Ohio. (Applicant owned 100% of the common stock.)

(3) Iowa Public Service Company, which is primarily an electric

and gas utility company, serving the central and western portion of

Iowa. It is also a registered holding company. (Applicant owns

42.3% of the common stock and the balance is owned by Sioux City

Gas and Electric Company.)

(4) Sioux City Gas and Electric Company, which is primarily an

electric and gas utility company serving Sioux City, Iowa. Itis also

a registered holding company. (Applicant owns 87.5% of the common stock and the balance is owned by Iowa Public Service Company.)

The application of Penn Western Gas and Electric Company

proposed a partial liquidating dividend to applicant's common stockholders of its holdings in Pennsylvania Gas and Electric Corporation,

American Railways Corporation and Iowa Public Service Company.

This divestment would leave Penn WesteJV with but one direct

subsidiary, namely, Sioux City Gas and Electric Company.

Severance of the "Eastern" holding company system, namely,

Pennsylvania Gas and Electric Corporation, from the "Western"

holdings of the system would be a distinct step toward meeting the

requirements of Section 11. In addition, the applicant satisfied the

Commission that it intends, within a reasonable period of time, to

eliminate certain inter-company holdings which now complicate the
FOURTH ANNUAL REPORT 13

system and then to distribute the balance of its holdings, including the

stock of Sioux City Gas and Electric Company, to its own stockholders, and that, thereupon, Penn Western Gas and Electric Company will be dissolved. Accordingly, the Commission approved the

application on March 30, 1938.

Including the 3 cases noted above, there have been filed 24 applications during the fiscal year dealing with plans for the reorganization

and simplification of 16 holding company systems. As of June 30,

1937, there were 3 such applications pending. Of the total 27 applications, the Commission disposed of 7 and 20 were pending as of June

30,1938. The total approximate consolidated assets affected by these

plans amounted to $4,213,655,479.

RULES, REGULATIONS, AND FORMS UNDER THE PUBLIC UTILITY

HOLDING COMPANY ACT OF 1935

Pursuant to the provisions of the Public Utility Holding Company

Act of 1935, the Commission, during the fiscal year ended June 30,

1938, adopted 19 new rules and amended 19 existing rules. The

Commission also adopted 6 new forms and amended 1 form.

The new rules adopted during the past fiscal year include the

following:

Rule U-3D-715 Subsidiaries exempted under Section 3 (b) also exempted

as affiliates and not deemed subsidiaries when acting

within scope of exemption.

Rule U-3D-8 Exemption of subsidiaries subject to jurisdiction of Interstate Commerce Commission.

Rule U-3D-9 Exempting certain securities issued in connection with

installment sales.

Rule U-3D-IO Exempting issue of note for purchase price of equipment.

Rule U-3D-l L Exempting issue and sale of evidences of indebtedness to

consumers for advances by them to be used solely for

construction of electric or gas line extensions.

Rule U-9G-4 Applications for approval of investment programs for

current funds of registered holding companies or subsidiaries. (Designed to facilitate the use of surplus

funds of utility holding companies in diversified investment programs in both utility and non-utility securities.)

Rule U-llF-L Applications for approval of reorganization plans.

Rule U-llF-2 Commission approval of fees in connection with reorganization proceedings.

Rule U-12B-L Extensions of credit to foreign companies.

Rule U-12D- L Sale of public utility securities and utility assets by registered holding companies.

Rule U-5 Non-disclosure of information obtained in the course of

examinations, studies, and investigations.

Rule U-12E-L ._ Definitions of various terms used in Rules U-12E-2 to

U-12E-6, inclusive.

II Rules promulgated under the Public Utility Holding Company Act or 1935are designated by II "U".

The middle figures in the designation, as In this instance "3D". indicate that the subject matter or the rule

JB concerned with the subject matter or Section 3 (d) or the Act.
14 SECURITIES AND EXCHANGE COMMISSION

Rule U-12E-2 Solicitation of proxies.

Rule U-12E-3 Solicitations of authorization in connection with reorgani--

zation.

Rule U-12E-4 Applications for reports on plans.

Rule U-12E-5 Declarations as to solicitations.

Rule U-12E-6 Incorporation by reference.

Rule U-14-2_ _______ Annual supplements to registration statements, form andtime of filing.

Rule U-14-3 Annual reports by public utility holding companies.

The following rules were amended during the past year:

Rule U-3 General requirements of applications and declarations:

Rule U-3A5-L Exemption of certain extra-territorial holding companies..

(No longer exempts foreign holding companies having

domestic public utility holding companies from registration if they acquire or negotiate for acquisition of

certain assets or securities.)

Rule U-3D-5 Exemption of non-utility subsidiaries.

Rule U-5B-L Registration statements, form and time of filing.

(Amended by prescribing a new Form U-5B registration

statement, such new form being optional for any IlOmpany which has filed notification of registration prior to.

effective date of this amendment.)

Rule U-7A-L Form of declarations. (Adds (b): Such a declaration.

shall become effective only at such time as the Commission shall fix by order. Every order for hearing on adeclaration shall include an order to declarant to shoW'

cause why such declaration shall become effective.)

Rule U-llF-2 Commission approval (Iffees in connection with reorganization proceedings. (A minor amendment.) (Amended so'

as to require that the application to the Commission be

filed with the Commission before a petition for fees or

expenses is filed with the court and also that the applicant include a copy of the Commission's findings and

order on the application in the petition to the eourt.)

Rule U-l4-L Reports of acquisitions under Rule U-9C-3.

Rule U-17C-3 Officers and directors approved by a federal court. (Under

this new rule, subject to certain limitations, once a<.

person is so appointed or designated, he may by virtueof this appointment also serve as officer or director

of any subsidiary of said company or voting trust.)

Rule U-17C-4 Owners of securities and their representatives. (Amended'

to permit registered holding companies or their subsidiaries to have, under certain circumstances, as their

officers or directors, representatives of owners of 10

percent of outstanding voting securities, regardless of

such representative's financial connections.)

Rule U-17G-6 Limitations on number of directors and officers having

financial connections. (Limits the number of directors

and officers having financial connections, and was

extended to include the new category in Rule U-17G-4.)
FOURTH AN:KUAL REPORT 15

Rule U-17e-7 Institutions having specified loaning capacity, or located in

territory served. (Amended so that an officeror director

of financial institutions may occupy a similar position in

any subsidiary company, even though the territory

served by such subsidiary company does not meet the

requirements set forth in the rule.)

Rule U-17e-1L Independent officersor directors. (Extending from January

1, 1938, to January 1, 1939, the period during which

independent officers or directors of financial institutions

meeting specified conditions, may continue to act as

officers or directors of registered holding companies or

subsidiary companies.)

Rule U-9A2-3 Exemption from Section 9 (a) (2). (Narrows in some

respects, and broadens in other respects, the exemption

from Section 9 (a) (2) of the Aet.)

Rule U-9e-3 (5)____ Certain acquisitions of securities exempted.

Rule U-9e-3 (6)____ Certain acquisitions of securities exempted. (Both of

these amendments deal with acquisitions of securitiesby way of dividend where the dividend is payable either

in securities or in cash or other property at the election

of the acquiring company. Such an acquisition is not

within the scope of the exemption granted by Rule

U-9e-3 (5), as amended, but may fall within theexemption granted by Rule U-9e-3 (6), as amended, if

the issuing company is either a majority-owned subsidiary or is not, immeditely before or after the acquisition, an associate of the acquiring company. The

amendment to Rule U-9C-3 (6) also broadens in other

respects the exemption as to acquisitions of securities of

a company which was not, before or after the acquisition,

an associate company of the issuer.)

Rule U-9C-3 (9) Certain aequisittons of securities exempted. (Amended

by adding clause (f) which extends the types of exempted

acquisitions acquired by virtue of a reorganization to

include securities acquired incidentally to transactions

exempted by Rule U-3D-8 under certain clrcumstanees.)

Rule U-9e-3 (11) Certain acquisitions of securities exempted. (Amended

by striking from that rule the proviso that only securities

whose issuance was duly authorized by rule or order of

the Commission could be acquired under the rule.

The amended rule makes more liberal the exemption

granted by this rule.)

Rule U-11F-L Applications for approval of reorganization plans.

(Amended by adding to paragraph (d) at the end of the

first sentence: "or any rules or order pursuant to

Section 12.")

Rule U-12D-L Sale of public utility securities and utility assets by

registered holding companies. (Amended by adding

paragraph (f).)

The new forms promulgated during the past fiscal year are as follows:

Form U-5S Annual supplement to registration statement (Form

U-5B).

Form U-6B-2 Certificate of notification.'G

I' Adopted July 1, 1938.
16 SECURITIES AND EXCHANGE COMMISSION

Form U-12D-L Form for application for approval of sale of utility

securities.

Form U-12D-2 Form for application for approval of sale of utility assets.

Form U-14-L Quarterly reports of security acquisitions.

Form U-14-3 Annual report of registered public utility holding companies.

The following form was amended during the past fiscal year:

Form U-5B Amended form of registration statement. (The important changes in Form U-5B include the requirements

as to additional information relating to the surplus

accounts of system companies and information relating

to the original cost of securities acquired by system

companies.)

ISSUANCE OF SECURITIES BY REGISTERED HOLDING COMPANIES

AND THEIR SUBSIDIARIES

The Commission received, during the fiscal year ended June 30,

1938, 94 applications or declarations under the provisions of Sections

6 (b) and 7 of the Public Utility Holding Company Act of 1935,

relating to the issue of securities by registered holding companies or

their subsidiaries.

The following table discloses the number of applications or declarations received, approved, denied, withdrawn, or dismissed, and pending

as of June 30, 1938:

Number of Number of Number of Number of Number of

applications appheations applieations applications applications

cr deelara- or declare- or declara- or deelara- or declare- tions with- nons pending nons tions tions

received approved denied drawn or at close of

dismissed fiscal year

To June 30, 1937_________________ 119 87 0 1l 21

July 1, 1937, to June 30, 1938_____ 94 75 1 10 29

TotaL 213 162 1 21

I

Of the total 94 applications and declarations received during the

past year, the 75 which have been approved by the Commission

related to the issue of $321,505,000 of securities; those denied related

to $27,500,000 of securities; the 21 withdrawn or dismissed related to

$17,385,000 of securities; and the 29 pending at the close of the

fiscal year related to securities amounting to over $112,533,000.

Since the Act became effective, a total of 213 applications and declarations have been filed with the Commission relating to the issue of

over $1,543,923,000 of securities.

As was the case in the year ended June 30, 1937, a very large

proportion of the security issues covered securities which were issued

for the purpose of refunding outstanding securities by issuance of

other securities having lower interest or dividend rates. In many

_____________________ -----~--------
FOURTH ANNUAL REPORT 17

instances, the issues had been previously authorized by state commissions in states in which the issuing company was'incorporated anddoing business. In more than one instance, the staff of the Commission, before granting an exemption or allowing the declaration to

become effective, made suggestions which materially improved the

character of the securities and their relationship to the capital structure and earning power of the company.

ACQUISITION OF SECURITIES OR UTILITY ASSETS AND OTHER

INTERESTS BY REGISTERED HOLDING COMPANIES OR THEIR

SUBSIDIARIES

During the year ended June 30, 1938, the Commission received 49

applications requesting approval of the acquisition of securities and

assets under Section 10 of the Public Utility Holding Company Act

of 1935. At the beginning of the year, 15 such applications were

pending. Of these 64 applications, 37 were approved or exempted

by rule, 7 were withdrawn and 20 were pending at the close of the

year.

The following statistics indicate the number of applications received,

approved or exempted by rule, withdrawn or dismissed, and pending

at the close of the fiscal year:

NumberoC NumberoC Number of NumberoC apphcations applleations appheations

applrcations approved or Withdrawn pendma at

received exempted or dis- close or fiscal by role missed year

To June 30, 1937________________________________ 76 53 8 15

July 1, 1937, to June 30,1938 ____________________ 49 37 7 20

TotaL ___________________________________ 125 90 15 ------_.------

Of the total 125 applications received since the effective date of the

Act, 102 requested approval of the acquisition of securities, and the

remaining 23 requested approval of the acquisition of utility assets or

an interest in a business.

UNIFORM SYSTEM OF ACCOUNTS FOR PUBLIC UTILITY HOLDING

COMPANIES

On October 21, 1937, the Commission adopted Form U-14-3 for

use by registered holding companies in filing annual reports of financial

condition and results of operations. The information required in the

annual report form is based upon the Uniform System of Accounts

for Public Utility Holding Companies promulgated by the Commission

August 8, 1936, and made effective as of January 1, 1937. These

annual reports cover the calendar' year and are required to be filed

with the Commission on or before May 1 of each year. The first
18 SECURITIES AND EXCHANGE COMMISSION

of such reports cover the calendar year 1937 and permit for the first

time accurate current comparisons of financial data pertaining to

different holding companies.

The requirements of the form include certain questions designed to

give historical data concerning the companies, including date and

state of incorporation or organization and information concerning

consolidations, mergers, or reorganizations to which the company

has been a party; a list of the directors and of the managing officers as

of the close of the year; finanoial statements, including a comparative

balance sheet showing the financial condition of the company as of

the beginning of the year (or period) and as of the close of the year,

an income account showing the results of operation during the period

between balance sheet dates and a statement of surplus showing the

changes therein during the same period of time. This form also provides for numerous schedules calling for additional information concerning items included in the principal balance sheet, and income,

expense, and surplus accounts. Among these are a schedule calling

for a detailed analysis of investments at the close of the year, together

with information with respect to investments acquired or disposed of

during the year, and a schedule for a report of the dividend and

interest revenues in detail.

During the fiscal year ended June 30, 1938, 54 annual reports of

public utility holding companies were received.

SERVICE COMPANIES

'Section 13 of the Public Utility Holding Company Act of 1935 is

designed, in major part, to regulate the performance of services, sales,

and construction by companies in a holding company system for companies within the system. Broadly speaking, the Act permits such

intra-system services to be performed only at cost and subject to such

limitations as the Commission finds appropriate in the public interest.

With certain exceptions, therefore, the Act, and the rules adopted

under this section, provide that services be performed, if performed

by a company within the system, by a company whose methods of

Tendering services and calculating costs have been approved by the

Commission. The Commission, during the past year, received 6

applications for approval of mutual service companies and 12 applications for approval of subsidiary service companies. One application

for approval of a subsidiary service company, pending on July 1, 1937,

was withdrawn during the course of the past year. Of the 6 applications for approval of mutual service companies, all of them were

pending at the close of the year, while of the 12 applications for

approval of subsidiary service companies, 2 were approved, 1 was

withdrawn, and 9 were pending as of June 30, 1938.

The following statistics indicate the number of applications received,

approved, withdrawn, and pending at the close of the fiscal year:
FOURTH ANNUAL REPORT 19

Number of

Number of Number of Number of applications

applications applications aPjlltcations J::ndinl!: at received approved WIthdrawn ose of fiscal year

Mutual Subsid- Mutual Subsld- Mutual Subsld- Mutual substdservice lary service larr service Iary service Iarr

com. service com- service corn- service com- service

panies com. pames com. panles com- panies com- panies panies panies panies

-- -- -- -- -- -- -- To June 30, 1937....• _. ____. __. __.. _. 4 13 4 11 0 1 0 1

.July 1, 1937, to June 30, 1938_________ 6 12 0 2 0 2 6 9

Total_. ______.• _______. ________ -- -- -- -- -- -- -- -- 10 25 4 13 0 3 -------- _.-. .._--..

Mutual service companies and subsidiary service companies, the

.applications of which have been approved by the Commission, are

required to file annual reports (Form U-13-60) with the Commission

-on or before April 1 of each year for the prior calendar year. These

annual reports are based upon the Uniform System of Accounts for

Mutual Service and Subsidiary Service Companies, which became

effective August 1, 1936. Consequently, the annual reports filed

with the Commission during the year ended June 30, 1937, covered

at most a period of 5 months. The reports filed during the past year

cover the first complete year for which results reported on this form

were available. Through the medium of these reports, a study is

.being made of the operating methods of various service companies

-which will enable the Commission to make suggestions and if neces-

.sary to promulgate orders to insure an accurate distribution of costs for

this class of service in accordance with the standards set forth in

Section 13 of the Act. During the year ended June 30, 1938, 15 such

.snnual reports were received.

STATEMENTS REQUIRED PURSUANT TO SECTION 12 (i) OF THE

PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

Section 12 (i) of the Public Utility Holding Company Act of 1935

'requires the filing of statements by any person employed or retained

by any registered holding company or any subsidiary thereof who

-presents, advocates or opposes any matter affecting any registered

'holding company or any subsidiary thereof, before the Congress or

.any member or committee thereof, or before the Securities and Ex-

-change Commission or the Federal Power Commission, or any member,

officer, or employee of either such Commission, in such form and detail

as the Securities and Exchange Commission shall by rules, regulations,

or order prescribe. The information required to be contained in

these statements pertains to the nature and character of such retainer

or employment, and the amount of compensation received or to be

received, directly or indirectly, in connection therewith.
20 SECURITIES AND EXCHANGE COMMISSION

During the year ended -June 30, 1938, 76 statements on Form

U-12 (i)-1 were filed pursuant to Section 12 (i) of the Public Utility

Holding Company Act of 1935.11

NATIONAL SECURITIES EXCHANGES

Exchange Reorganization

During the past fiscal year, material progress has been made toward

the attainment of one of the Commission's vital objectives, namely,

the adequate supervision of national securities exchanges. The Commission has consistently advocated such regulation by the exchanges

themselves that the Commission need only exercise a residual control or supervision. Ithad long been apparent, however, that serious.

defects in the organization of many exchanges had hindered their

effective assumption of this degree of responsibility for the conduct

of their business. Efforts were being made, however, by groups of

members of certain exchanges to replace the cumbersome administrative mechanism with organizations that were adapted to current

needs. To these efforts the Commission gave its encouragement.

In connection with this matter, conferences between representatives

of the New York Stock Exchange and the Commission were held

during the latter part of the year 1937. During these conferences

various plans were discussed, but no agreement as to an adequate

solution could be reached. Therefore, on November 23, 1937, the

Commission, through its Chairman, publicly requested the New York

Stock Exchange to proceed at once to work out a satisfactory plan of

reorganization in order that the needs of efficient management of an

important public institution might be satisfied. In compliance with

this request, the Exchange appointed an independent committee to

study and report on the need for such a reorganization. This Committee, headed by Carle C. Conway, Chairman of the Board of

Directors of the Continental Can Company, immediately instituted

studies and on January 27, 1938,submitted an outstanding report to

the Exchange. This report recognized the fact that national securitiesexchanges are public institutions impressed with a public trust, and

provided a plan for a modern administrative organization to supplant

the old outmoded one. On March 17,1938, the Exchange, in order to

effectuate the principal recommendations contained in this report,

voted to adopt a radically revised constitution. On May 16, 1938,

that constitution became effective and the newly elected Exchange

administration assumed office. William McC. Martin, Jr., was elected

President on June 30, 1938.

The reorganization of the New York Stock Exchange provides for

direct representation of the public on the Board of Governors and in11 On July 9,1938, the Oommisslon adopted two forms, namely, Form U-12 (I)-A and Form U-12 (I)-B, in

lieu of the old Form U-12 (i)-I. These forms bPcame effective on August I, 1938.
IWURTH A.."N'NUALREPORT 21

creased representation of Exchange firms doing business with the

public. Further results of this reorganization are as follows: The administrative structure has been greatly simplified; the number of

standing committees was reduced from 17 to 7; the President of the

Exchange is a salaried individual and may not be a member of the

Exchange; and executive staffs have been created to carry out, under

the direction of the President of the Exchange, the administrative

functions formerly conducted by the Governors sitting as committee

members.

The process of exchange reorganization has not been limited to

the New York Stock Exchange. In addition, on March 31, 1938,

the Chicago Stock Exchange, after long and careful study, effected

a revision of its constitution to provide a form of administrative

organization more in keeping with the modern, progressive concept

of a stock exchange. Also, the New York Curb Exchange appointed

a committee to study its organizational problems and to make recommendations in regard thereto. At the end of the past fiscal year this

committee had not as yet made public its findings and recornmendations." On February 15, 1938, the Detroit Stock Exchange materially amended its constitution and rules in order to effect changes in

its existing procedure and practice.

Round Table Conferences

An outgrowth of the reorganization of the New York Stock Exchange

has been the creation of a mechanism for the discussion and disposition of various problems in which both the Commission and the Exchange are interested. Round table conferences, first proposed by

the Commission's Chairman, were inaugurated on June 3, 1938.

At the first meeting the Chairman, in setting forth the agenda for the

conferences, named five principal subjects for future exploration,

namely, a trust institution to perform the banking and custodial

functions of brokers; the problems of trading on the floor, including

aspects of segregation of the broker-dealer functions as respects the

specialist and the floor trader; the quality and quantity of bond trading on the Exchange; the conduct of business in odd lots; and a

comprehensive examination of commission rates for transactions in

securities on the Exchange. A second meeting was held on June 9,

1938, and during subsequent months these discussions have become

a regular practice. The Exchange has appointed a special committee

to represent it in the meetings and the Commission has been represented by some of its members as well as by staff officials. Prior

18 On July 13, 1938, the Advisory Oomnuttss to the Committee on Organization and Admmistratron issued

a report in which It urged adoption of a form of organization SImilar in eertam features to that of the New

York Stock Exchange. On October 4, 1938, the Board of Governors of the New York Curb Exchange sub.

mltted to the membership It~ Plan of Reorgamsatmn, embodying suggestions substentially the same in

theory as those proposed and carried out on the New York Stock Exchange. This plan was approved by

the membership WIth only one dissenting vote.
22 SECURITIES AND EXCHANGE COMMISSION

to the end of the past fiscal year, no definite results of these confer-.

ences were announced inasmuch as the program with the new management had been so recently undertaken. However, material progresswas made toward working out financial safeguards for customers'

property 19 and toward studying the marked decline which had taken

place during recent years in bond trading on exchanges. Further

consideration of the segregation problem, as well as other subjects,

also was under continued discussion.

Exchanges Registered

In addition to the major revision in exchange reorganization,

many changes in exchange rules and practices were also made. During the fiscal year ended June 30, 1938, more than 250 amendments

were filed by registered exchanges in connection with their applications for registration, which amendments were examined for the

purpose of ascertaining compliance with the Securities Exchange

Act of 1934 and the rules and regulations of the Commission. Furthermore, studies have been made of the organization, rules, trading

practices, listing procedure and personnel of seven national securities

exchanges and one exempted exchange. The exchanges which were

so examined are listed below:

Chicago Board of Trade

Los Angeles Stock Exchange

Philadelphia Stock Exchange

San Francisco Curb Exchange

San Francisco Mining Exchange

San Francisco Stock Exchange

Seattle Stock Exchange

Standard Stock Exchange of Spokane

At the time of the examination of the San Francisco Curb Exchange

and the San Francisco Stock Exchange, negotiations had already been

undertaken for a merger of the two institutions. Commission representatives assisted in the ensuing conferences and, on April 15, 1938,

the San Francisco Curb Exchange applied to the Commission for

permission to withdraw its registration as a national securities exchange

in pursuance of a plan for its dissolution and consolidation with

the San Francisco Stock Exchange. In its application, the San

Francisco Curb Exchange declared that its reasons for seeking the

withdrawal of its registration were (1) that the Exchange had been

formed primarily for the purpose of providing a market for unlisted

stocks and that this field had become materially restricted during the

past 4 years with a gradual reduction in the number of issues enjoying

.. On October 31, 1938,the CommissIon and the New York Stock Exchanl(e announced the results to that

date of these conferences In the form of a JoInt program designed to prevent the repentton of certain abuses

and lax praetiees and to provide certain protective assurances to customers through the establishment oC

more stringent requirements respecting financial responslbillty of brokers and dealers. See Report oC

Securities and Exchange Oommtssion in the matter of Richard Whttney, et al., Vol. I, Part II, November

1.19380
FOUHTH ANNC \L UEPonT 23

unlisted trading privileges on the Exchange; (2) that approximately

78 percent of its members were members of or affiliated with member

firms of the San Francisco Stock Exchange, the facilities of which

were considered sufficient for the volume of trading experienced in

the region during the past several years; and (3) that, under conditions

then existing, it was believed that the dissolution of the San Francisco

Curb Exchange and the absorption of its trading privileges by the

San Francisco Stock Exchange would result in a continuance of market

facilities on an improved basis and would stimulate the growth of

the San Francisco Stock Exchange as a regional exchange to the ultimate benefit of the general public and industry in the region of the

Exchange. On April 21, 1938, the Commission issued an order granting the application of the San Francisco Curb Exchange to withdraw

its registration as a national securities exchange. Pursuant to Rule

JF7 of the General Rules and Regulations under the Securities

Exchange Act of 1934, securities admitted to unlisted trading privileges on. the San Francisco Curb Exchange were transferred to the

San Francisco Stock Exchange for trading thereon as securities

admitted to unlisted trading privileges.

On February 26, 1938, the Commission issued an order granting

the application of the Chicago Curb Exchange for the withdrawal

of its registration as a national securities exchange. This application

cited as reasons for withdrawal the facts that its membership had

substantially declined, that it had operated at a large deficit for the

past 4 years and that the volume of its listings and transactions Wf!A

insufficient to warrant continued operation.

The Buffalo Stock Exchange, which had been permitted to withdraw its registration as a national securities exchange with leave to

apply for reinstatement, originally before April 1, 1937, and subsequently before April 30, 1938, again requested and received a further

extension of time until June 30, 1938, within which it might apply for

reinstatement as a national securities exchange. As of June 30,1938,

the Buffalo Stock Exchange had made no application for reinstatement.

The 20 exchanges listed below constitute those national securities

exchanges registered with the Commission as of June 30, 1938:

Baltimore Stock Exchange

Board of Trade of the City of Chicago

Boston Stock Exchange

Chicago Stock Exchange

Cincinnati Stock Exchange

Cleveland Stock Exchange

Detroit Stock Exchange

Los Angeles Stock Exchange

New Orleans Stock Exchange

New York Stock Exchange

New York Curb Exchange

New York Real Estate Securities Exchange, Inc.
24 SECURITIES AND EXCHANGE COMMISSION

Philadelphia Stock Exchange

Pittsburgh Stock Exchange

St. Louis Stock Exchange

Salt Lake Stock Exchange

San Francisco Stock Exchange

San Francisco Mining Exchange

Standard Stock Exchange of Spokane

Washington (D. C.) Stock Exchange

Exchanges Exempted from Registration

As of June 30, 1938, the 7 exchanges granted exemption from registration as national securities exchanges remain the same as for the

past 2 fiscal years and are as follows:

Colorado Springs Stock Exchange

Honolulu Stock Exchange

Milwaukee Grain and Stock Exchange

Minneapolis-St. Paul Stock Exchange

Richmond Stock Exchange

Seattle Stock Exchange

Wheeling Stock Exchange

REGISTRATION OF SECURITIES ON EXCHANGES

Applications for Registration of Securities on Exchanges

Under the Securities Exchange Act of 1934, financial and other

pertinent factual data had been made available to the public with

respect to 2,485 companies having securities listed and registered on

national securities exchanges. These registrants include most of the

leading nationally known companies in the United States as well as

many with activities of a sectional or local character.

The Securities Exchange Act of 1934requires that a company seeking such registration of its securities must file an application on the

appropriate form prescribed by the Commission, which application

must contain detailed financial data, including schedules breaking

down the more significant accounts reflected therein. In general, the

financial data thus required include, among others, such items of vital

interest to investors as sales, cost of goods sold, and inventories.

The application must also reveal pertinent information concerning the

history of the company, its capital structure and that of its affiliates,

the full terms ofits securities, warrants, rights, and options, the control

and management of its affairs, and the remuneration of its officers

and directors.

Under the Securities Exchange Act of 1934 and the General Rules

and Regulations promulgated thereunder, each of the 2,485 companies

with securities listed and registered on national securities exchanges

also has the duty to file within 120 days after the close of its fiscal

year, with the Commission and the exchange, an annual report bringing up to date the financial and other more important items of information contained in its application for registration of securities. In
FOURTH ANNUAL REPORT 25

addition, each must also file a current report for any calendar month

during the interim in the event certain material changes occur in its

affairs.

All of these 2,485 applications and several thousand supplementary

annual and current reports have been examined by the Commission

to determine whether they furnish adequate disclosure of information

required by the Act and the rules and regulations pertaining thereto.

Where deficiencies are discovered as a result of the examination, the

registrant is required to file correcting amendments, which in turn are

examined as to their sufficiency in the same manner as the original

application or report.

Certain information is also required to be filed by companies whose

securities are listed on the seven exchanges which are exempted from

registration pursuant to the Act.

At the beginning of the fiscal year, proceedings were pending under

Section 19 (a) (2) of the Act to determine whether to suspend for a

period not exceeding 12 months or to withdraw the registration of

securities of three companies, which securities were listed on national

securities exchanges. During the year, similar proceedings were instituted with respect to securities of 11 additional companies. This

action was based upon the failure of these registrants to comply with

Sections 12 or 13 20 of the Act and the Commission's rules and regulations thereunder. Eleven of these proceedings were disposed of,

four by dismissal and seven by orders of the Commission withdrawing

the registration; and three were still pending at the close of the year.

The Commission made effective as of January 3, 1938, revised rules

and forms governing the registration of certain securities for "when

issued" trading on exchanges." This revision consisted in general of

the clarification and simplification of rules and forms previously used

in connection with such securities. The two changes of most significance as a practical matter were:

(1) Under the old rules, "when issued" trading was limited

to the exchange where the security to be issued wonld ultimately be traded. Under the new rules, "when issued" trading

is also possible on the' exchange where the seourity bearing the

warrant or right is listed. A similar change has been made

with respect to trading in issued warrants,

10 Section 12of the Securities Exchange Act of 1934requires the registration of all securities which are

listed on a national securities exchange, unless such securities are specifically exempted from registration by

the Act or by the rules and regulations promulgated thereunder. Section 13provides that the Information

contained in the application for registration filed under Section 12shall be kept reasonably current In accord.

ance with the rules and regulations of the Commission.

IIThe old rules JD4 to JD12, Inclusive, were changed Into one rule designated JD4. Forms I-J and 2-J

were revised and continued under the same designations; Form 4-J was revised and designated Form 15AN;

and amendment Forms 3-J and 5-J were dlsconttnued and In lieu thereof the standard amendment Form 8

was made applicable for amendments to Forms I-I, 2-1, and 15AN,

104139-39-3
26 SECURITIES AND EXCHANGE COMMISSION

(2) A change in procedure provides for a notice of deficiency

to be issued by the Commission if an application for "when

issued" trading does not comply with the rules. This nctice

has the effect of automatically delaying the effectiveness of the

registration but shall bE' withdrawn when the deficiencies are

remedied. A hearing as to the adequacy of such notice is provided for upon request. If no hearing is requested and the

notice is not withdrawn the application is regarded as

abandoned.

Statistics of Securities Registered or J1:xempt From Registration on Exchanges

The number of applications, reports, and amendments :filed in connection with the listing and registration of securities on exchanges

during the year are tabulated below:

New applications on basic forms and supplemental appllcations_______________________________________________ 385

Applications for "when issued" trading in unissued warrants; 14

Applications for "when issued" trading in unissued securities

other than warrants__________________________________ 2

Statements in respect of exemption of issued warrants______ 25

Annual and current reports 4,629

AmendInents 4,493

The following table identifies the basic forms used by issuers in

registering securities under the Securities Exchange Act of 1934 and

the number of securities registered and issuers involved as of June 30,

1937, and June 30, 1938:

As of lune 3D, 1937 As of 1une 3D, 1938

Form Description

- Securities Issuers Securities Issuers

registered involved registered involved

7 Provisional registration form_____________________ 18 11 1 1

10 General corporations ______________________________ 2,848 1,876 2,806 i.sn 11 Unincorporated issuers ____________________________ 27 13 25 13

12 Issuers making annual reports under Section 20 of

the Interstate Commerce Act, as amended, or

under Section 219 of the Commtmlcations Act of 1934 ""- n2 193 687 189

l2-A Issuers in receivership or bankruptcy and making

annual reports under Section 20 of the Interstate

Commerce Act, as amended, or under Section 219 of the Communications Act of 1934. __________ 128 2li 128 2li

13 Insurance companies other than Ufeand title Insur- ance companies __________________________________ 16 16 15 16

14 Certificates of deposit issued by a committee ______ ss 39 48 30

15 Incorporsted investment companies _______________ 104 61 101 ss 16 Voting trust certificates and underlying securities __ 43 35 37 32

17 Unincorporated issuers engaged primarily in the

business of Investing or trsdlpg in seeurtnes _____ 8 6 8 6

18 Foreign governments and poIlticaI subdivisions thereof __________________________________________ 188 86 179 84

19 American certltlcates issued sgBinst foreign securities and for the underlying seeurltles _____________ 13 11 12 11

20 Seeuritles other than bonds of foreign prlvlote issuers ___________________________________________ 6 3 2 1

21 Bonds offoreign private issuers ____________________ 95 ss 90 54

•

___________ • _______________ ________________
FOURTH ANNUAL REPORT 27

As of June 30, 1937 As of June 30, 1938

Form Description Securities Issuers Securities Issuers

registered involved registered involved

22 Securities of issuers reorganized in insolvency pro- ceedings or tbeir successors ______________________ 70 34 93 46

23 Securities of successor issuers otber tban tbose sue- eeeding insolvent issuers _________________________ 34 26 78 50

24 Bank bolding companies ------_ .. --_ .. 5 5

TotaL _______________________________________ 4,368 2,489 4,314 2,490

Includes /; issuers having secunties registered on 2 basic forms.

There is presented below a classification, by industries, of the different types of issuers having securities registered on national securities exchanges as of June 30, 1937, and June 30, 1938.

Number of issuers

Industry

As of June As of June 30,1937 30, 1938

Transportation and communication (railroads, telephone, etc.) ______________ 318 314

Metal mining (Including non-ferrous) _______________________________________ 269 274 Machinery and tools ___________. ____________________________________________ 202 211

Transportation equipment (automobiles, parts, accessories, ete.) _____________ 164 163 Merchandising (cbain stores, department stores, eto.) ________________________ 166 161

Financial and investment (investment trusts, fire insurance, etc.} ___________ 136 139 Food and related products 105 103 Utility operating (electric and gas) __________________________________________ 98 97 Miscellaneous manufacturing 86 86 Oil and gas wells ._ 77 82 Cbemicals and allied products 73 74

Bnilding and related companies (including lumber) _________________________ 55 65 Textiles and tbeir products 68 59 Beverages (breweries and distilleries} 66 66

Utility holding (electric, gas, and water) ____________________________________ 61 55 Iron and steel (excluding machinery) 63 54 Oil refining and distributing 50 43 Paper and paper products ___________________________________________________ 32 39 Tire, rubber, and leatber products 35 37 ReaJ estate 28 28 00aJ mining 26 27 Printing, pnbJishing, and allied industries _____.. ______.... ____... ___________ 23 26 Utility operating-bolding (electric, gas, and water) 22 23 Tobacco products ._ 22 22 Agriculture 17 18 Miscellaneous other 257 230

TotaL 2,489 2,48Il

The following tables show, separately for stocks and bonds, the

total number of securities, classified according to the basis for admission to dealing, on all exchanges as of June 30,1938.22 The number of

II Duplications bave been eliminated as follows: wbere a security Is registered and also unilsted, It Is

counted once under registered; If registered on two or more exchanges, It Is counted only once. (SecurIties exempted under Section 3 (a) (12) of the Securities Exchange Act of 1934, sucb as Federal, State, and

municlpal obligations, are not included.)

__________________________ ---- ------

•

•

______ • _________________________________• _________

____• __________• ________________________________

____________________________________________________• _____

___• ___________________________________________

_______________• ____________________________• _____

_____• __________________________________

_____• _______________________• __________

______________• ___• __________________________• ___

_________________• _________________________

_______________________________• ________• _________________________

_______________________________________• ______________________• __

_________ • ________________

_________________________________ • ________• ______________

_____• _______________________________• __• _________________________

__________•__•__________________• ________• ________________

____• _________• ___________________• _____________• ________________
28 SECURITIES AND EXCHANGE COMMISSION

shares of stock and the principal amount of bonds are shown for securities other than those admitted to unlisted trading privileges.

STOCKS

Column I Column II

Issues

Basis for admission undupli- Number of Issues Number of to dealing cated as Number of shares au. undupli- Number of shares au. to bases thonzed for cated as tborized for

for ad. shares listed addition to to shares listed addition to mission list exchange list to dealing

Registered , "_ 2,847 2, 281,651,962 211,410,951 2,847 2,281,651,962 211,410,951

Temporarily exempted cOO 30,078,963 1,100,733 cOO 30,078,963 1,100,733

from regtstration.,

Listed on exempted ex- changes _. 142 37.760,302 160,927 194 105,720,488 2,062,012

Admitted to unlisted

.tradlng pri vlleges on

natronal exchanges 647 --------------~ ... 1,223 ---'"'----------- ... Admrtted to unlisted

trading privileges on

exempted exchanges 106 153--_ ...

--- TotaL. _. ._ 3,802 2, 349,491,227 212,672,611 ... .. ..

BONDS

Issues

undupli- Principal Issues Principal

Basis for admission catedas Principal amount au. undupll- Principal amount an. to dealing to bases amount thorrzed for cated amount thorl7.ed for

for ad- listed addition to ssto hsted addItion to mission list exchange list to dealing

Registered ., _.' .1,467 $24,082,423,832$1,172,809,189 .1,467 $24,082,423,832$1,172,809,189

Temporarily exempted

from registration c28 531,278,673 9,202,100 .28 531,278,673 9,202, 100

Listed on exempted ex- changes ._. 31 96,606,400 ... ..... ... .... 34 170,312,100--_ ..._------- ...

Admitted to unlIsted

trading privileges on

national exchanges 452 ..... ...... ... 496 .. ... ........ ..... ----_ ...... _----.. Admitted to unlisted

trading privileges on

exempted exchanges 10 _._ -------_ ... .. 14 _._

Total_ 1,988 24,710,308, 905 1,182,011,289 ..---_ .. .. .._-------- ..

Includes 2 stock issues in pounds sterling in the amounts of £2,851,1l9listed and £325,560for addition to

list. These amounts are excluded from the number ofshares shown above .

Includes 8 bond issues inpounds sterling and 2 bond issues in French francs in the amounts of £37,IIYl,7fID

and 65,375,500French francs listed. These amounts are excluded from the principal amount in dollarll

shown above.

e Includes certain securities resulting from modifications of previously listed securities, securities of certain

banks, and securities of certain issuers in bankruptcy or receivership or in the process of reorganization

under the Bankruptcy Act. These securities have been temporarily exempted from the operation of section 12 (a) of the Securities Exchange Act of 1934upon specified terms and conditions and for stated periods

pursuant to rules and regulanons of the Commission.

•••

__•

_••• ___

___•

__________

• •

____ -------- ----- -------------

__•••

__

__

----- ---------- --------------

---- ----- ---

-----------

-----------

--------------

----------- --

__•• __•

•

• _

__

___ __

__ __ ____•• ---- - - - - -

____ ---- --- ---- ------------ - ----- - - _ -

__

••• __•• ____•

•__••__•• •• _ - ---

---

•• _•••••

- ----

_••• --------------

---------- ---

•

•
FOURTH ANNUAL REPOR1.' 29

The following tables show, separately for bonds and stocks, the

number of securities registered and admitted to unlisted trading privileges, which securities were admitted to dealing on one, or more than

one, national securities exchange as of June 30, 1938:

STOCKS

(See footnote for explanation of column headings)

Classification

(a) (b) (e) (d) (e) (I) (e) (b)

-- -- -- -- ------ Total stock Issues registered __________________2,847 1,968 0 330 0 281 148 59 61

Total stock ISSUesadmitted to unlisted tradmg

privileges on national exchanges ____________ 1,223 0 649 0 25 281 148 59 61

BONDS

Total bond issues registered __________________1,467 1,273 0 154 0 37 1 1 1

Total bond issues admitted to unlisted trading privlleges on national exchanges ____________ 496 0 456 0 0 37 1 1 1

UnduplIcated total of stock ISSuesregistered and admitted to unlisted

trading prrvileges on national exchanges 3,521

Unduplicated total of stock ISSUesregistered and admitted to unlisted

trading privileges on national exchanges which were admitted to

dealings on more than 1 such exchange_____________________________904-25.68% of unduplleated total.

Unduplicated total of bond Issues registered and adnntted to unlisted

trading prrvileges on national exchanges 1,923

UnduplJcated total of bond ISSuesregistered and admitted to unlisted

trading pnvileges on national exchanges which were admitted to

dealings on more than 1 such exchange_____________________________194-10.08% of unduplicated total

• Registered on 1 exchange only •

• Admitted to unlisted trading prrvileges on 1exchange only •

Registered on more than 1 exchange.

d Admitted to unlisted trading privileges on more than 1 exchange .

Registered on 1 exchange and admitted to unlisted trading privileges on 1 exchange.

f Registered on 1 exchange and admrtted to unlisted trading prrvileges on more than 1 exchange.

e Registered on more than 1 exchange and admitted to unhsted trading privileges on 1exchange.

b Registered on more than 1exchange and admitted to unlisted trading privileges on more than 1exchange.

•

•

•
30 SECURITIES AND EXCHANGE COMMISSION

The following table indicates for each exchange the numbers of

issuers and securities and the basis for admission to dealing as of

June 30, 1938:

Total Stocks Bonds

Total Name of exchange ISSU' issues ers R X U XL XU Total R X U XL XU Total

----- ----- - - -- Baltimore 83 126 50 4 26 ---- ---- 80 34 1 11 ..-- ---.. 46 Boston _. 362 458 167 1 204 ...--- 372 85 1 -._-- ---- ---- 86

Chiesgo Board of Trade 47 60 51 ---- 5 ---- 56 4 .--- ---- 4

Chicago Stock Exchange 256 352 285 14 ----- ---- 299 42 11 .. ---- ...._- 53

CincinnatL 67 106 96 1 ----- ---- 97 9 ---- ----- .. .... 9

Cleveland .,_ •. 76 92 89 2 ----- ... ---- 91 1 ----- ---- -...-- 1

Colorado Springs a 15 16 ---- 16 ---- 16 ------ .._-- ----- ---- ---- 0

Detroit 110 119 103 16 ---- ---- 119 ---- ---- ---- 0

Honolulu a_. ---------_ ...-- 98 123 ---- 59 55 114 ------ ----- 6 3 9

Los Angeles 175 217 140 1 58 ---- ---- 199 18 ---- ...--.... ---- 18

Milwaukee Orain& stock», 55 83 ------ ---- ----- 72 72 ------ ---- ----- ---- 11 11

Mlnneepolis-Bt. Paula 22 30 ------ ---- 27 3 30 ..----- ----- ---- ---- 0

New Orleans _. 20 36 3 ---- 16 ---- ---- 19 11 ---- 6 ---- ---- 17

New York Curb 1,079 1,517 510 ---- 616 ---- 1,126 54 ---- 337 ---- ---- 391

New York Real Estate 1115 226 88 ---- 88 ------ ---- 138 ---- -_ ... 138

New York Stock 1,237 2,530 1,251 13 ... _- ---- 1,264 1,252 14 ----- ---- ..- 1,266

Philadelphia. 426 539 63 5 383 ---- ---- 451 85 3 ---- ---- 88

Pittsburgh 83 104 69 3 30 ---- ---- 102 2 ---- --...- RIchmond a 32 42 ------ ...--- ---.. 38 ---- 38 ------ ---- ...--- 4 ---- 4

St. Louis, 57 95 85 2 ----- 87 6 2 ----- ---- ---- 8

Salt Lake 102 104 98 ---- 6 ---- 104 ------ ---- .. ---- --..- 0

San Francisco Mmmg.; 62 68 66 2 ---- 68 ...---- ---- ----- ---- ---- 0

San Francisco Stock 284 360 168 4 160 332 22 ---- 6 ---- ---- 28

Seattle a_ 61 67 ------ ----- 23 27 50 ------ ---- ----- 17 ---- 17

Bpokane, ., 38 40 29 11 ---- ..-- 40 ..---- -_ ..- ----- ---- ---- 0

Washington, D. C 34 49 26 12 ----- ---- 38 11 ---- ----- ---- ---- 11

WheelIng 27 41 ------ ---- ----- 33 33 ------ ---- 8 --.- 8

a Exempted from reglstration as a national securities exchange.

R, registered; X, temporanly exempted from registration; U, admitted to unlisted trading privileges on

a national seeurities exchange; XL, hsted on an exempted exchange; and XU. admitted to unlisted trading

prrvileges on an exempted exchange.

Applications for the Withdrawal or Striking from Listing and Registration 01

Securities on Exchanges

Pursuant to Rule JD2 (b), 64 applications were filed with the Commission during the past year for the withdrawal or striking from

listing and registration of securities fully listed and registered on na.-

tional securities exchanges. As of June 30, 1937,22 such applications

were pending. Of this combined total, 65 were granted and 21 were

pending as of June 30, 1938.

Pursuant to Rule JD3 (a), the Commission received 226 certifications from exchanges stating that securities fully listed and registered

thereon had been paid, redeemed, or retired in full.

Applications for the Granting, Extension, and Termination of Unlisted Trading

Privileges on Exchanges

Ru1e JF2 (a) permits unlisted trading privileges on a national

securities exchange to continue in a security where minor changes

- - - -

••••••••• __• "'" - _____• __•• ____•••• ---- ---- ----- ---- ___

---- ---- __

••••• _•• ___• ___ ---- -- - _ -

__ •••• _•• ___ --- ---- __• _____ ------ ----- __•'" ••••••••••••• _ ---- ------ ----- ------ ----- ---- __••••••••••••• ---- ---- ••• ----- ---- __

__••••• _••••

••••• __•• __ ---- •••• ------ ---- w ___

-

•••••••••• ----- _ -- _••••••••••• _ ----- ••••••• __•• _••• _ ----- ---- ~ ••••••••••••••• - - _

•••••••• _•••••••• ---- ---- ••••••••• __•• _•• __ ---- - --- •• ----- ---- - _

••••••• ---- ---- ----------------- ---- •• __• ___ _••• _•• _ ---- - _

•••••• ---- __ _

"__•••• _•• _••• _•• ---- -----
FOURTH ANNUAL REPORT 31

have occurred therein, such as changes in the title, the interest rate,

the par value, amount outstanding, etc. The rule provides that

exchanges shall notify the Commission of any such changes promptly

after learning thereof. During the fiscal year ended June ?Q, .1938,

the Commission received 739 such notifications.

If more substantial changes are made in securities, an application

must be filed by the exchange in support of the contention that the

altered security is substantially equivalent to the security admitted

to unlisted trading privileges thereon. The application must be

approved by the Commission before the altered security may be

traded in lieu of the original security. Subsection (b) of Rule JF2

prescribes the information to be contained in such application.

During the fiscal year in question, 22 applications were received by the

Commission, of which 14 were granted and 8 were denied.

Clause 2 of Section 12 (f) of the Securities Exchange Act of 1934,

as amended on May 27, 1936, provides that the Commission, upon

application by a national securities exchange, and upon conforming

with certain standards, may extend unlisted trading privileges to

securities duly listed and registered on another national securities

exchange. As of June 30, 1937, 45 such applications were pending.

During the fiscal year ended June 30, 1938,26 additional applications

were filed. Of these 71 applications, 37 were granted, 7 were denied,

5 were withdrawn, the Commission reserved decision in connection

with 1 application, and 21 were pending as of June 30, 1938.

The amended Section 12 (f) also permits the Commission, upon

application by a national securities exchange, to extend unlisted

trading privileges to securities in respect of which there is available,

from a registration statement and periodical reports or other data

filed pursuant to the rules or regulations of the Commission adopted

under the Securities Act of 1933 or the Securities Exchange Act of

1934, information substantially equivalent to that required in respect

of a security duly listed and registered on a national securities exchange.

As of June 30, 1937,22 such applications were pending. During the

fiscal year ended June 30, 1938, 4 additional applications were filed.

Of these 26 applications, 12 were granted, 6 were denied, 4 were

withdrawn and 4 were pending as of June 30, 1938.

As of June 30, 1937, there were pending before the Commission two

applications by a broker or dealer for the termination of unlisted trading privileges on the New York Curb Exchange. These applications

were granted during the fiscal year. An application by an issuer for

the termination of unlisted trading privileges in its common stock on

the same exchange was filed on June 24, 1938, and was pending at the

close of the fiscal year.

During the past year, the Commission was notified, pursuant to

Rule JF3 (c), of the removal from unlisted trading privileges of 360
32 SECURITIES AND EXCHANGE COMMISSION

securities. Of this number, 14 were removed when the registration

of the Chicago Curb Exchange was withdrawn on March 15, 1938,

and 166 were removed when the registration of the San Francisco

Curb Exchange was withdrawn on April 30, 1938.

When the San Francisco Stock Exchange absorbed the San Francisco Curb Exchange on April 30, 1938, the Commission amended its

Rule JF7 so as to permit an exchange which has absorbed another

exchange in the same metropolitan area to continue unlisted trading

privileges in those securities which enjoyed unlisted trading privileges

on the other exchange at the time of the absorption. The 166 securities which had theretofore been admitted to such privileges on

the San Francisco Curb Exchange were accordingly transferred to the

San Francisco Stock Exchange.

As of June 30, 1938, 13national securities exchanges and 3 exempted

exchanges permitted trading in securities on an unlisted basis. Of

the 13 registered exchanges, 5 permitted trading in both stocks and

bonds on an unlisted basis and the other 8 exchanges in stocks only.

As of June 30, 1938, 1,223 stock and 496 bond issues were admitted to

unlisted trading privileges on the 13 registered exchanges. The

combined total represented 1,719 securities 23 against a total of 1,883

securities admitted to unlisted trading privileges on June 30, 1937.

Thus, during the year there was a net decline of 164 securities so

admitted.

There are three exempted exchanges upon which securities are

admitted to unlisted trading privileges. As of June 30, 1938, 153

stock and 14 bond issues were admitted to unlisted trading privileges

on these exchanges. The combined total represented 167 securities,"

compared with 164 at the end of the previous year.

REGULATION OF THE OVER-THE-COUNTER MARKETS

The Maloney Amendment and Rules Thereunder

During the past fiscal year, the work of the Commission in the overthe-counter securities markets has been signalized by the inauguration

of a comprehensive program for administering and supervising this

important branch of the securities business. This program had its

origin several years ago in a cooperative endeavor of the Commission

and various voluntary associations of brokers and dealers, particularly the Investment Bankers Conference, Inc., to improve the

standards of practice prevailing in the business. The program is

based upon a bill introduced in the Senate by Senator Francis T.

Maloney, of Connecticut, who availed himself, inter alia, of material

accumulated by the Commission in the intensive studies it had conducted and of the conclusions which had been reached in the frequent

n This figure does not represent the total of admissions to dealings on an unlisted trading basis since many

IIllCUritlesenjoy this privilege on more than one exchange.
FOURTH ANNUAL REPORT 33

round table conferences between the Commission and representatives

of the various groups of investment bankers, dealers, and brokers.

Representatives of the Commission appeared in support of the bill at

hearings before the Committee on Banking and Currency of the Senate

and a subcommittee of the Committee on Interstate and Foreign

Commerce of the House of Representatives. After some amendment,

this bill was passed by the Congress as Public No. 719, 75th Congress,

and was approved by the President on June 25, 1938.

The new legislation follows the principle of conferring upon regulatory groups from business a primary responsibility for enforcing high

standards of business conduct upon their members. In part, it

amends the Securities Exchange Act of 1934 by inserting after Section

15 of the Act a new Section 15A. In its essentials, the new section

sets up a system of regulation in the over-the-counter markets through

the formation of voluntary associations of investment bankers, dealers

and brokers doing business in these markets under appropriate Governmental supervision. This system is designed to provide investors

in the over-the-counter markets with protection comparable to that

provided by the Securities Exchange Act of 1934 with respect to

national securities exchanges and is, patterned upon the control of

exchanges provided in that Act. '

Prior to passage of Public No. 719, 75th Congress, known as

the "Maloney Act", the Commission drafted an extensive set of

rules under Sections 15 (c), 10 (b), 17 (a), and 23 (a) of the Securities Exchange Act of 1934, as a result of study and research into

over-the-counter trading practices. These rules, defining practices

which are manipulative, deceptive, or fraudulent in the over-thecounter markets were adopted by the Commission and became

effective on October 1, 1937, as Rules MCI through MC8 and GB2,

GB3, and OAl. Rule MC9 was subsequently adopted and became

effective on March 1, 1938.

The Maloney Amendment, in addition to adding a new section to

the Securities Exchange Act of 1934, effected certain amendments in

Section 15 (c). These amendments are designed to clarify and

strengthen the direct regulatory powers of the Commission with

respect to the over-the-counter markets, as well as to provide the

Commission with certain additional direct powers over fictitious

quotations and the financial responsibility of brokers and dealers.

As a result of these amendments the former Section 15 (c) became

Section 15 (c) (1). Therefore, on June 28, 1938, the rules defining

manipulative, deceptive, and fraudulent practices in the over-thecounter markets were repromulgated under the new Section 15 (c)

(1), and the rules renumbered as Rules X-15Cl-l through X -15CI-9.

~
34 SECURITIES AND EXCHANGE COMMISSION

Registration of Brokers and Dealers

The following tables denote the principal facts with regard to the

registration of brokers and dealers pursuant to.Section 15 (b) of the

Securities Exchange Act of 1934. Table 1 is a record showing the

disposition of all applications received since May 28, 1935, the date

when the registration program was inaugurated. Table 2 shows

similar figures pertaining to the work covered during the past fiscal

year.

TABLE I.-Registration oj brokers and dealers under Section 15 (b) oj the Securities

Exchange Act oj 1931,.

Cumulative

June 3D, 1937 June 3D, 1938

Applications: Filed _______________________________________________________ 8,276 ---------- 9,530 ,v ithdrawn ________________________________________________ ---------- ---------- 318 --_ ...------ 346

Registrations. Effective as of date given ___________________________________ ---------- 6, 736 --_ ...------ 6,809 Denied _____________________________________________________

---------- 18 --_ ..------ 21 Suspended _________________________________________________

---..------ 1 ---------- 3 Revoked ___________________________________________________

---------- 16 ---------- 32 Withdrawn ________________________________________________

---------- 1,078 ---------- 2, 161 Canceled ___________________________________________________ ---------- ---------- ---------- 64

Applications and suspended registrations canceled by operation

of amendment to Section Hi (May 27, 1936)' __________________ ---.....----- 17 ---------- 17 Applications pending __________________________________________ ---------- 92 ---------- 77

--- ------ --- TotaL ___________________________________________________ 8,276 8, 276 9,530 9,53()

The registration program was inaugurated In May 1935 and the first applications were received on

May 28, 1935 The cumulative record therefore dati's from May 28, 1935 .

When the amendment to secnon 15 of the Securities Exchange Act of 1934 tiecame effective (May 27.

1936) brokers and dealers whose applications were pending on that date and regtstrants whose registrations

were under suspension were afforded opportunity to bring their appheattons under the amended Act. The

figure shown here Includes 13 applications and 4 suspended regtstrations which were canceled by operation

of the amendment because of the failure of such apphcants and registrants to request that their applications

be considered as applications 1I1edunder the amended Act.

TABLE 2.-Registration of brokers and dealers under Section 15 (b)

Effective registrations as of June 3D, 1937_____________________________________________________ 6,736

Applications pending on June 3D, 1937________________________________________________________ 92

Applications filed during year ended June 30, 1938____________________________________________ 1,254

TotaL_____ __ __ __ __ _ __ ___ _______ __ 8, OBit

Applications withdmwn during year ending June 3D, 1938_ 28

Registrations withdrawn during year ending June 3D, 1938____________________________________ 1,083

Registrations canceled during year ending June 30, 1938______________________________________ 64

Registrations denied during year ending June 3D, 1938________________________________________ 3

Registrations suspended during year ending June 30,1938____________________________________ It

Registrations revoked during year ending June 30, 1938_______________________________________ 16

Registrations effective on June 30, 1938_______________________________________________________ 6, BOll

Applications pending on June 30, 1938________________________________________________________ 77

Total __ ._________________ __ ___ __ ____ 8, ll8Z

•

•

•
FOURTH ANNUAL REPORT 35

REGISTRATION OF SECURITIES UNDER THE SECURITIES ACT OF 1933

Examination of Securities Act Registration Statements

Unless a registration statement under the Securities Act of 1933

is in effect as to a security, the security may not (except where one of

the exemptions from registration provided by the Act is available)

be publicly offered for sale or sold in interstate commerce or through

the mails. A security may be registered by filing with the Commission on an appropriate form a registration statement meeting the

conditions specified in the Act. Forms have been prescribed by the

Commission for registration of the various types of security. All

of these forms are designed to secure a fair disclosure of material facts

concerning the security to be offered for sale to the public and the

issuer thereof, in order that the investor may thus be better able

intelligently to appraise its desirability as an investment.

A required part of each registration statement is a prospectus

which must contain the more essential information set forth in the

registration statement. A copy of such prospectus must be given

to every person to whom the security covered thereby is offered for

sale and to every purchaser at or before the time of the sale.

The registration statement becomes effective on the twentieth day

after its filing with the Commission, except in certain cases as provided

in the Act. This 20-day period enables an investor to consider facts

concerning the proposed security issue before it is offered for sale. It

also gives a reasonable time for the Commission to make an examination of the registration statement for omissions, incomplete disclosures

and inaccuracies. Under the Securities Act of 1933 the Commission

is not empowered to express approval of the merits or value of any

security, but is limited to requiring the disclosure of the material

facts necessary for the investor to exercise properly his own judgment.

It is important to note that the registration statement constitutes

a record of the representations made in connection with the offering,

and thus, if any such representations were false, simplifies the problem

of proof in any legal proceedings which may result.

Where the examination and analysis of the registration statement

disclose deficiencies but nevertheless reveal an honest attempt to meet

the specified requirements, the registrant is advised of the deficiencies.

In such case the deficiencies may be corrected by the filing of amendments. However, where the examination shows that the registration

statement includes untrue statements or omissions of material facts

which reflect intentional or reckless disregard of the standard of fair

disclosure prescribed by the Act, stop order proceedings usually are

instituted immediately. The Commission also has the power to

refuse registration in any case where the information presented in

the registration statement is incomplete or inaccurate on its face and

to undertake investigations involving examination of the issuer, under-
36 SECURITIES AND EXCHANGE COMMISSION

writer, or any other person to determine whether a stop order should

issue in any particular case. In addition, the Commission may suspend registration even after a registration statement becomes effective where it develops that the information furnished therein is untrue

or misleading in any material respect.

The Act provides that neither the fact that a registration statement

for a security has been filed or is in effect, nor the fact that a stop order

is not in effect with respect to that particular statement, shall be

deemed a finding by the Commission that the registration statement is

true and accurate on its face, or that it does not contain an untrue

statement of material fact, or a material omission, or be held to mean

that the Commission has in any way passed upon the merits of, or

given its approval to, the security. The statute makes it a criminal

offense to represent otherwise to any prospective purchaser.

Section 15 (d) of the Securities Exchange Act of 1934, as amended,

provides for the filing of annual reports with the Commission by certain issuers having securities registered under the Securities Act of

1933. During the year there were filed 180 such annual reports, which

were examined in the same manner as registration statements.

In order to give some indication of the result of the Commission's

examinations in securing fair disclosure in registration statements, a

few typical cases are briefly summarized below:

(1) A registrant acting as sponsor-depositor of an unincorporated

investment trust sought to register 18,000,000 trust shares to be offered

to the public at varying prices based upon the previous day's closing

sale prices of the trust's portfolio. The proposed aggregate offering

price of these shares approximated $19,620,000. The sponsor-depositor had previously registered two blocks amounting to 862,069 and

3,000,000 shares, respectively.

The prospectus contained a tabulated sample price make-up sheet

representing that in the computation of the daily offering price of the

trust shares the only premium, commonly called "service charge" or

"load," to be received by the registrant was the 9~% premium for

the sale of shares to the public plus "breakage" of fractional cents

resulting from rounding out the offering price per share to the next

higher cent where fractions of a cent were involved. This representation as to the amount taken out for such charges was further supported

by a statement in the prospectus that the estimated net proceeds accruing to the investor approximated 91.3%. (Proceeds to the sponsordepositor corporation of 8.7% of the offering price would approximately equal a 9%% premium on the creation price.)

However, it developed from certain additional information filed

in connection with its third registration statement that the sponsordepositor was receiving income in connection with the sale of securities

in an amount exceeding the charges disclosed in the prospectus. Fur-
FOURTH ANNUAL REPORT 37

ther examination revealed that this registrant enjoyed unrevealed

profits adverse to the interests of the trust and security holders. The

chief source of such unrevealed profits, discovered as a result of the

Commission's investigation, arose from the mechanics employed in

the creation of trust shares. The sponsor-depositor "closed" with the

trustee at 4:30 p. m., at which time the sponsor-depositor had before

it the price make-up sheet used during the current day and the newly

determined price make-up sheet to be used the following day. In the

event the "new" price was higher than the "current" price, orders received were filled, and additional shares were purchased in advance of

orders, at the lower "current" price, such unordered shares being sold

the following day at a higher price, the sponsor-depositor pocketing

the increase. Conversely, if the "new" price were lower, the sponsordepositor withheld placing orders on shares already sold to the public,

pocketing the difference represented by the decline in the market for

the period such purchases were withheld. Through this device (not

disclosed in the registration statement) the registrant made additional

profits and the trust was deprived of funds which would otherwise

have flown into it. Furthermore, the sponsor-depositor used different

bases in creating and in selling shares whereby it was able to acquire

trust shares from the "trustee" at the bid value of the portfolio underlying the shares, although in selling the same shares it used the sales

value and added thereto the "load." It was the sponsor-depositor

who received the benefit of this "spread" between the closing bid and

closing sales price of the portfolio per share.

The Commission discovered from its investigation that by reason

of this undisclosed practice, together with the method of computing

the creation and offering prices of the trust shares, and the profits

from the so-called "breakage" received by the registrant, the "load"

borne by investors approximated 12%, rather than 9%% as claimed

in the registration statement, and that therefore approximately 88%

of the investors' funds actually accrued to the trust, instead of

approximately 91.3% as represented in the prospectus.

Because of these material omissions, and the failure to set forth

clearly in the prospectus certain other information required to be

furnished, the Commission instituted proceedings, resulting in the

issuance of a stop order suspending the effectiveness of all three of

the registration statements filed by this registrant. Subsequently

the registrant amended its registration statement so as to include

those material facts, as well as a statement of its contingent liability

to purchasers of its shares resulting from failure properly to disclose

these facts.

(2) In a registration statement as originally filed by a company

organized to construct and operate a mill for the purpose of refining

and milling custom ores, it was stated that various engineers had
38 SECURITIES AND EXCHANGE OOMMISSION

attested to adequacy of ore reserves in the surrounding territory.

One engineer indicated in a report which was filed as a part of the

registration statement that a property near the mill contained a

potential ore body of some 2,000,000 tons of ore with values averaging

$12 per ton. As a further apparent indication of the need for a mill, the

issuer had drawn 12 contingent contracts with the owners of surround

ing properties which provided lor the supplying and milling of ores.

These "contracts" provided no penalty for the failure top rovide ores

in the amounts specified therein. As a result of an investigation by the

Commission, the registration statement was amended by the registrant,

before it became effective, so as to include the following statements:

a. "The investor should bear in mind that this is a highly

speculative proposition. Itinvolves construction at investor's

expense of a comparatively large custom mill in a district where

suitable ore in substantial quantity has not been blocked out

and is not known to exist (beyond an amount sufficient for

about three month's operation of the mill at initial capacity),

in anticipation that if adequate milling facilities are made

readily available suitable ore will be discovered, mined and

delivered to the proposed mill by mines which cannot, or do

not wish to, incur the expense and hazard of constructing and

operating their own mills."

b. "Records of shipments of ore during 1937 in this vicinity

indicate that all were of high grade, and showed one mine

shipped two hundred tons, one shipped thirty tons, one shipped

five tons and one shipped two tons * * * None of these

mines, except possibly one or two, is equipped to mine and

deliver low grade ore in quantity, and all or most of them

would require financial aid * * *."

c. "A principal purpose of this company is to provide milling facilities for the --- Company 24 and thus afforded an

opportunity to develop its mining properties without incurring

the additional expense to itself or its stockholders of erecting

and operating its own mill."

d. "There is no provision for the withholding or escrow of

proceeds of sales of stock until a specified amount estimated as

sufficient to complete necessary construction and assure operation has been subscribed, and if a sufficient amount should

not be received the company would have only a partially completed mill or a plant without adequate capital to operate and

stockholders would be faced with the necessity of raising more

funds or of suffering losses on their investments."

(3) A newly formed corporation, described as an investment trust

of the general management type, sought to register 299,093 common

.. The company referred to Is under practically the same control as the registrant.
FOURTH ANNUAL REPORT 39

shares out of an authorized 300,000 shares with a stated value of $1

per share.

At the time of filing there were 907 shares of stock outstanding

sold to the members of the management group for a cash consideration

of $15 per share. The initial offering price was to be $15 per share

and thereafter at the liquidating value, based on the market value of

investments, plus a "load" of 7~% of such offering price.

The plan of operation provided for a management contract with a

corporation formed in 1929 which had sponsored another trust since

that time. The prospectus as originally filed contained six pages of

statistical data including a summary of the record made by the

managed trust and a comparison of such record with the results which

would have been obtained had a permanent investment of $10,000

been made in common stock of each of the 15 largest corporations; 15

corporations for which was recorded the greatest number of sales on the

New York Stock Exchange during 1928; or the 15 corporations having

the largest number of stockholders during the period January 9, 1929,

to December 31, 1937, which was selected for these comparisons.

These data purported to show the advantage of a managed investment and ended with a comparative table on a percentage basis showing that the trust suffered a shrinkage of only 11.8% in value for the

period under review, whereas the other groups on the arbitrary basis

assumed showed shrinkages ranging from 30.6% to 71.3%. The

Commission took the position that such a comparison, based on the

one hand on actual facts and on the other on assumed transactions on

a different basis, was misleading. As a result, the statistical tables and

percentages were eliminated from the prospectus, there being substituted therefor a clear statement of the proposed operation of the new

trust and data concerning the record made by the old trust under the

same management.

(4) A Delaware corporation filed a registration statement covering

15,000 shares of $1.50 convertible preferred stock (par value $5) and

52,750 shares of common stock ($1 par). Under the charter provisions the preferred stock was entitled in liquidation to $25 per share

and was proposed to be offered at $27.50 per share to net the company $25, of which $5 was to be allocated to capital and $20 to paid-in

surplus. Under the Delaware statutes, corporations may pay dividends on any class of stock out of paid-in surplus. The registration

statement and prospectus did not disclose the possibility that thus,

under the laws of Delaware, the common stock holders might receive

dividends out of surplus contributed by the preferred stock holders,

thereby taking away the surplus contributed by the preferred holders

covering the excess of liquidating value over par value. Accordingly,

the Commission required the registrant to include as a footnote to the
40 SECURITIES AND EXCHANGE COMMISSION

preferred stock account in the balance sheet a statement of the aggregate amount to which the preferred stock would be entitled in liquidation, and an opinion of counsel for the company as to whether there

was any legal restriction on surplus by reason of the fact that the

amount to which preferred shareholders would be entitled in liquidation exceeded the par value of the stock. It was stated in the footnote that in the opinion of counsel there was no such restriction but

that it was the present intention of the company to limit the payment

of dividends to the amount of surplus in excess of $20 per share of

preferred stock outstanding.

Since the effective date of the registration statement, the company

has indicated its intention to remove from surplus and allocate to

capital, by proper legal procedure, a sufficient amount of such surplus

to cover the full liquidating value of the preferred stock.

Statistics of Securities Registered Under the Securities Act

At the beginning of the fiscal year there were 3,281 registration statements on file, of which 2,571 were effective, 143 were under stop or

refusal order, and 422 had been withdrawn, while 145 were under

examination or held pending the receipt of amendments.

During the year 459 additional registration statements were filed,

and there were 454 registration statements which became effective

(of which latter all but 13 were fully effective); a total of 2,941 statements were effective at the end of the period, 84 of those effective at

the beginning of the period or during the period either having been

withdrawn or placed under stop order.

The net number of registration statements withdrawn during the

year increased by 156, to a total of 578 on June 30, 1938. The net

number of stop or refusal orders increased during the period by 10, a

total of 153 of such orders being in effect on June 30, 1938. As of

June 30, 1938, there were 68 registration statements in the process of

examination or awaiting amendments.

Appendix III contains a list of the registration statements as to

which stop orders, consent refusal orders, and withdrawal orders were

issued during the year. It also jincludes the name of the registrant

and aggregate dollar amount of the proposed offering involved in

each case.

It might be well to point out that apart from the 459 additional

registration statements proper there were also filed during the year a

total of 1,813 amendments to registration statements.P Many of

these amendments involve substantial changes in the information

previously furnished, and all were given the same detailed examination

as that given in the case of the original registration statements.

IIIncludJng 1,296amendments classed as "pre-elfectlve" and 517as "post-elfectivc." Tbese flgures do

Dot take into account certain purely formal amendments classed as "delaying" amendJnents of wbicb 854

were also tiled during tbe period.
FOURTH ANNUAL REPORT 41

During the fiscal year ended June 30, 1938, registrations for

$1,912,000,000 of new securities 26 became effective under the Securities Act. This compares with a total of $4,686,000,000 for the

previous fiscal year and $4,677,000,000 for the fiscal year ended

June 30, 1936.

Of the total of $1,912,000,000 which was registered during the

year, approximately 29.1% of the total must be deducted as having

been registered for purposes other than immediate cash sales for the

account of the registrants. This figure includes $270,000,000 of

securities which were to be reserved against the conversion of issues

having convertible features; $124,000,000 registered "for the account

of others"; $76,000,000 registered for exchange for other securities

mainly in connection with substitution of new bonds or preferred

stocks for the old issues; $54,000,000 reserved against the exercise of

options and warrants; $4,000,000 for issuance for various assets,

claims, selling commissions, etc., and $28,000,000 reserved for subsequent issuance.

Registrants expected to offer for immediate cash sale for their own

accounts the balance of $1,356,000,000of registered securities remaining after these deductions. Of this amount, it was anticipated that

approximately $60,000,000 (4.4% of the estimated gross proceeds)

would go for commissions and discounts to underwriters and agents

and for the registrants' own selling expenses. Slightly more than

$10,000,000 (0.8% of the estimated gross proceeds) would go for

other expenses in connection with the flotation and issuance of

securities. This left approximately $1,286,000,000 as the estimated

net cash proceeds which were expected to be received by the registrants themselves.

Of these net cash proceeds it was indicated that approximately

$457,000,000 or 35.5% would be used for new money purposes. This

is the highest ratio of estimated net proceeds intended for new money

purposes for any fiscal year since the Securities Act became effective.

But it should be noted that as an absolute total it amounts to only

approximately 51% of the new money which was expected to be

raised from the sale of securities registered in the previous fiscal year.

Registration statements indicated that the new money was to be

allocated approximately as follows: $272,000,000 (against $257,000,000

in the preceding fiscal year) for expenditures for plant and equipment

and $185,000,000(against $633,000,000)for additional working capital.

Of the balance of net cash proceeds indicated in the registration

.. In addition to these new issues, there were effectively registered during the fiscal year ended Jnne 30,

1938,approximately $193,000,000of voting trust certificates, certificates of deposit and securities proposed to

be offered in exchange forregistrants' or predecessors' securities as well as the guarantee by a parent company

o( $25,000,000 principal amount ot subsldiary debt. In the preceding fiscal year, registrations ofreorganization and exchange securities covered seeunties valued at $164,00<>,000 and there were also registered the guarantees or four individuals on three bond and note Issues having an aggregate principal amount of slightly

under $1,000,000.

104139-39-4
42 SECURITIES AND EXCHANGE COMMISSION

statements, $451,000,000 (35.1 of all net proceeds) was intended

for the repayment of indebtedness while $348,000,000 (27.1% of total

net proceeds) was intended to be used for the purchase of securities for

investment.

The distribution of the proposed uses of net proceeds for the last

fiscal year as against proposed uses for the preceding two fiscal years

is shown in the following table: .

Year ended Year ended Year ended

1une 30,1938 1une 30,1937 lune30, 1936

Total net cash proceeds ($000,000)•••••••••.•••• , •.•••••. $1,286 $3,492 $3,782

Intended for:

Repayment ofindebtedness ..••••••••••..•••••••••••••••.. 351% 55.4% 74.2%

Retirement of preferred stock •..• •.• •. •••..• _._.••••• 1.2% 6.5% 5.6%

Increase of working caprtal, ..•••...•• •..•••...•..•.. ••.• 14 4% 18 1% 5.5%

Plant and equipment expenditures •.•.•.•.• •.•• ••..•• _. 21.1% 7.4% 3.2%

Purchase of sacunnes for investment ••..•••••••••.•• 27.1% 10.1% 10.1%

Other purposes. ..••..•• •..•• •..• •.• •.•..••..• 1.1% 2.5% 1.4%

Total .• _._•••.•• _._.••• .•• _. .,. 100 0% 100.0% 100.0%

The registration statements disclosed that approximately

$1,106,000,000 or 81.6% of the $1,356,000,000 of securities proposed

for cash offering for the account of the registrants were to be offered

to the public generally, $232.000,000 or 17.1% to the registrants'

security holders, and $18,000,000 or 1.3% to special persons. About

$817,000,000 or 60.2% of the securities were underwritten while

$424,000,000 or 31.3% were to be offered by various selling agents

and $115,000,000 or 8.5% were to be offered by the registrants

themselves.

Of the total of $1,642,000,000 of securities effectively registered

(after deducting amounts reserved against conversion), approximately $463,000,000 or 28.2% were for common stock issues;

$250,000,000 or 15.2% were for preferred stock issues; $228,000,000

or 13.9% were for certificates of participation, beneficial interest and

warrants; $321,000,000 or 19.5% were for secured bonds; $367,000,000

or 22.4% were for debentures and $13,000,000 or 0.8% were for shortterm notes. Interest-bearing obligations, then, totaled 42.7%, stock

issues 43.4%, and other types of securities 13.9%.

Approximately $601,000,000 or 36.6% of the total registrations

(after deducting only the amounts reserved against conversion) were

for manufacturing companies; $458,000,000 or 27.9% were for financial

and investment companies; $454,000,000 or 27.7% were for electric

light and power, gas and water utility companies; $44,000,000 or

2.6% were for transportation and communication companies (exclusive

of common carriers exempted under the Securities Act); $27,000,000

or 1.7% were for companies in the extractive industries; $25,000,000

~

__ __ _

_ _

_ ___ _ __

_

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•

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__•••• _ ___•••• _••• _•••• __
FOURTH ANNUAL REPORT 43

or 1.5% were for merchandising companies and $33,000,000 or 2.0%

were for all other registrants including a foreign governmental issuer.

Detailed statistical tables showing number of issues, type of securities, classification of issuers, gross proceeds, net proceeds, cost of

distribution, channels of distribution, and proposed use of funds for

the securities registered under the Securities Act of 1933 during the

year ended June 30, 1938, are contained in Appendix V. In interpreting the tables as well as the summary figures quoted above, it should be

kept in mind that these statistics are based solely on the registration

statements filed by the registrants with the Securities and Exchange

Commission. All the data, therefore, refer to registrants' intentions

and estimates as they appear in the registration statements on the

effective dates and, thus: in reality represent statistics of intentions to

sell securities rather than statistics of actual sales of securities.

EXEMPTION FROM REGISTRATION REQUIREMENTS OF SECURITIES

ACT OF 1933

Under Section 3 (b) of the Securities Act of 1933, as amended, the

Commission is authorized to prescribe rules and regulations providing

for conditional exemptions of certain issues of securities from the

provisions of this Act. This subsection provides, however, that no

issue of securities shall be exempted where the aggregate amount at

which such issue is offered to the public exceeds $100,000. The

Commission, acting pursuant to this authority, has adopted Regulations A, B, and B-T, the latter of which became effective on March

1, 1938. Regulation A pertains to exemptions other than those

relating to oil and gas interests. Regulation B covers exemptions

relating to fractional undivided interests in oil or gas rights. Regulation B-T provides for exemptions pertaining to interests in an oil

royalty trust or similar type of trust or unincorporated association.

During the past fiscal year there were received and examined 353

prospectuses filed pursuant to Rule 202 of Regulation A of the General

Rules and Regulations under the Securities Act of 1933. The securities covered by these propectuses represent an aggregate offering

price, mainly of stocks, of $26,827,793. Numerous amendments filed

in connection with these prospectuses were also examined.

Also, during the past fiscal year, there were received and examined

1,794 offering sheets, together with 630 amendments, filed pursuant to

Regulation B of the General Rules and Regulations under the Securities Act of 1933. The securities covered by these offering sheets

represent an aggregate offering price of approximately $20,000,000.

The following statistics indicate the various actions of the Commission

with respect to those filings which did not satisfy the requirements

of the regulation:
44 SECURITIES AND EXCHANGE COl\DIISSION

Temporary Suspension Orders 553

Orders for Hearing and Designating Trial Examiner (Rule

340 (b))______________________________________________ 19

Orders Terminating Proceeding Mter Amendment 419

Orders Consenting to Withdrawal and Terminating Proceeding , 121

Orders Terminating Effectiveness of Offering Sheet (No Proceeding Pending)______________________________________ 93

Orders Terminating Proceeding Mter Explanation___________ 9

Orders Consenting to Amendment (No Proceeding Pending) __ 88

Orders Consenting to Withdrawal (No Proceeding Pending) __ 72

Orders Terminating Effectiveness of Offering Sheet and Terminating Proeeeding , _______ _ __ ____ 4

Order Rejecting List of Persons on Whose Behalf Offering Sheet

is Filed_____ 9

Up to June 30, 1938, no filings had as' yet been made under

Regulation B-T.

On April 22, 1938, the Commission undertook a tentative simplification of its rules governing exemptions by adopting an additional

exemption designated as Rule 210 of Regulation A. This was designed

as a temporary rule and to aid the Commission in ascertaining whether

a lightening of such requirements would help small business enterprises

to raise capital. This rule was to remain in effect until October 29,

1938,27and is applicable to any issue of securities offered for cash

provided the aggregate offering price does not exceed $100,000, but

does not apply to oil and gas interests which are covered by Regulations Band B-T. The primary condition of this new exemption is

the compliance with the Blue Sky Laws of all States in which the

securities are offered, sold, or delivered after sale. This exemption

does not extend to transactions effected in the District of Columbia.

As a further condition of the exemption, a notice of intention to issue

securities under the new rule must be filed at the Washington office

of the Commission. In addition, copies of all prospectuses, letters or

other communications used at the commencement of the public offering or subsequently sent to more than 10 persons are to be filed with

the Commission prior to use.

As an integral part of this effort to ascertain if alteration of these

requirements would assist particularly the small business enterprise

in obtaining new capital more simply and economically, the Commission established during the month of April, a special unit in the

Registration Division to which was assigned the function of aiding

prospective registrants and advising them and their representatives

on any problems which may arise in connection with their registration

statements. Pending completion of this program, a number of

amendments were made in the existing forms. One of these was an

amendment to Form A-2. This form may be used by corporations,

other than finance companies, which have total assets not exceeding

If On October 'n. 1938,the Commission announced an extension in substance for 4 months. until the end

of February 1939,of the effectiveness of Rille 210of Regulation A and the amendment to Form A-2
FOUR'.rH ANNUAL REPORT 45

-!) million dollars and which have been in existence for at least 5 years

.and have had a net income for 1 fiscal year of the past 5. However,

.as a result of the amendment, corporations meeting these conditions

.are permitted to omit historical financial information and are required

to file certified profit-and-loss statements, and schedules supporting

balance sheet and profit-and-loss statements, only for the latest fiscal

'year before the date of the certified balance sheet and for any period

between the two. This amendment is experimental in nature and will

not be effective after October 29, 1938, unless further action is taken

by the Commission."

During the last 2 months of the year, when Rule 210 was in force,

the Commission received and examined thereunder 45 letters of notifi-

-cation for issues aggregating $3,034,000. In this connection, a comparison of the filings under Rules 202 and 210 during the months of

May and June 1938 with filings under Rule 202 for the preceding 2

months and the corresponding months a year before might be of some

interest. In May 1938 there were filed 17 prospectuses under Rule

202 involving an aggregate offering of $1,356,700 together with 23

Ietters of notification under Rule 210 involving an aggregate offering

of $1,405,000, making a total of 40 filings involving $2,761,700. CorTesponding figures for June 1938 were 26 prospectuses, $1,750,000;

22 letters of notification, $1,629,000; or a total of 48 filings involving

$3,379,000. In comparison the prospectuses under Rule 202 filed in

March 1938 numbered 31 for $2,094,500 and in April 1938, 29 for

$2,157,300. Such prospectuses filed in May 1937 numbered 44 for

$3,549,105 and for June 1937 there were 37 for $3,050,700.

SECURITIES ACT AND SECURITIES EXCHANGE ACT FORMS, RULES,

AND REGULATIONS

A program of basic revision of the forms for registration of securities

and for reports by issuers under the Securities Act of 1933 and the

Securities Exchange Act of 1934 was carried forward by the Commission during the past fiscal year. In addition, the preparation of a

new accounting handbook containing a compilation of the requirements as to form and content of financial statements filed with registration statements of and reports by issuers under the Securities Act

of 1933 and the Securities Exchange Act of 1934 was carried forward

during the year. Like the general form for registration, which is in

process of preparation, this handbook when completed will contain

provisions of general application as well as requirements for particular

classes of persons, so that the necessary measure of particularization

may be achieved without undue repetition. Drafts of this compilation of financial requirements and of the proposed general form were

submitted for criticism during the year to a large number of account-. 17 On October ZT, 1938,the Commission announced an extension in substance for 4 months, until the

end of February 1939.of the effectiveness of Rule 210 of Regulation A and the amendment to Form A-2.
46 SECURITIES AND EXCHANGE COMMISSION

ants, lawyers, investment bankers, security analysts, teachers, and

other experts in the securities field. At the close of the fiscal year,

the Commission was engaged in re-examining the material in the light

of the comments and suggestions of such experts. The other new

forms in the series, for special types of securities and issuers, were

also in the course of preparation. Principal forms in this group were

those for recently organized issuers and for fixed investment trusts.

A number of amendments to the existing forms for registration under

the Securities Act of 1933 were also made during the past year and

several revisions of rules and regulations were adopted.

Additional interpretative opinions were published during the past

year. These opinions were designed to assist registrants in making

prospectuses concise and intelligible to the investing public without

omitting material information or violating the Securities Act of 1933.

By taking portions of actual prospectuses :filed under the Act and

reducing them to a fraction of their original length, the opinions

pointed out the possibilities for eliminating excess legal verbiage and

providing more readable documents. The examples of condensed

statements in these opinions were followed in many prospectuses

subsequently prepared by registrants.

During the past year several changes were made in the forms and

rules and regulations under the Securities Exchange Act of 1934.2S

The Commission also adopted and published a new form (Form 24-K)

for annual reports of bank holding companies. This form completed

the series of forms for annual reports of issuers having securities

registered on national securities exchanges.

During the last part of the fiscal year, the existing regulations

and forms under the Securities Act of 1933, the Securities Exchange

Act of 1934, and the Public Utility Holding Company Act of 1935,

were set up in form for inclusion in the Code of Federal Regulations,

under the supervision of the Codification Board, as required by the

Federal Register Act and the regulations of the Administrative

Committee of the Federal Register.

LITIGATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT

OF 1935

The decision of the United States Supreme Court in Electric Bond

& Share Oompany v. Securities and Exchange Oommission, 303 U. S.

419 (1938), sustaining the separability and constitutional validity of

Sections 4 (a) and 5, the registration provisions, of the Public Utility

Holding Company Act of 1935, by far overshadowed all other litigation during the past year. The background of the case reflects its

JI On October 1, 1938,the Commission announced the adoption of a system of designation for Its General

Rules and Regulations under the securities Exchange Act of 1934,which indicetes the partleular section of

the Act to which the respective rules relate. Under this new system all rules under the Act are designated

lIS..x..rules. See Appendix VITI.
l!'OURTH ANNUAL REPORT 47

importance. Within a few months after the passage of the Act on

August 26, 1935, a total of 58 suits were brought challenging the Act

as unconstitutional; none, however, but this single case instituted by

the Government as a test suit culminated in a decision on constitutionality by the Supreme Court. Burco v. Whitworth, 297 U. S.

726 (936), ended with the denial of a petition for certiorari. North

American Company v. Landis, 299 U. S. 248 (1936), terminated with a

decision by the Supreme Court vacating the District Court's order

and remanding the cause for further proceedings. The Supreme

Court sustained the power of the District Court to stay its own

proceedings and thus affirmed the position taken by the Government.

The remaining suits were handled in accordance with a uniform policy

developed by the Commission in collaboration with the Department of

Justice. No effort was made to defend on their merits actions brought

outside the District of Columbia, and in each such suit appropriate

motions were made for dismissal for lack of jurisdiction. The suits

then remained pending as to the local Government officials. In 26-

cases injunctions were issued against parties subject to the jurisdiction

of the court, and in the remainder, the courts either refused to make

any disposition until after a decision by the Supreme Court on theconstitutionality of the Act or the parties themselves agreed to hold

the litigation in abeyance until such a decision.

The status of cases involving the constitutionality of the Act still

pending during the fiscal year is indicated in Table 6 of Appendix VI.

Itmay be noted here that in some of these cases the bill of complaint

has already been dismissed and that in all of the cases the company

involved has registered pursuant to the mandate of the SupremeCourt, so that the issues between the Commission and such company

are moot. The Electric Bond & Share case thus marks the successful

conclusion of a preliminary phase in the administration of this highly

important statute.

The suit was begun in the United States District Court for theSouthern District of New York on November 26, 1935, by a bill of

complaint which sought to compel the principal defendant and 12 intermediate holding companies in the Bond and Share holding company

system to comply with Sections 4 (a) and 5 of the Act. The defendants' answer to the bill of complaint was divided into two parts:

a first defense by which they sought to have the bill dismissed on the

ground that not only Sections 4 (a) and 5 but the entire Act, including

each and every provision thereof, was unconstitutional; and a separate

and distinct defense by way of counterclaim and cross bill by which

they sought to enjoin the plaintiff Commission and the individual

cross defendants from enforcing any provision of the Act and sought

to obtain a declaratory judgment that the whole Act, including each

and every provision thereof, was unconstitutional. On June 30, 1936~

a stipulation of facts, approximately 2,000 pages in length, was filed
48 SECURITIES AND EXCHANGE COMMISSION

with the court. On January 29, 1937, Judge Julian W. Mack, in an

exhaustive opinion, held that the registration provisions were the

only provisions of the Act as to which any justiciable controversy

existed or was presented to the court; that the registration provisions

were separable from the other provisions of the Act and standing

alone served a useful purpose to which legal effect could be given;

and that the registration provisions, as applied to the 13 defendants,

constituted a valid exercise by the Congress of the federal power over

interstate commerce and the mails. The District Court further held

that the cross bill presented no justiciable case or controversy, "and

no actual controversy" within the Federal Declaratory Judgments

Act, and that in any event defendants have failed to show irreparable

or substantial damage, present or imminent, to support the cross bill.

By its decree the District Court dismissed the cross bill both as against

the plaintiff Commission and the individual cross defendants, and

awarded relief as prayed for in the bill of complaint by ordering that the

13 defendants be enjoined, so long as they should not have registered

with the Commission under Sections 4 (a) and 5 (a) of the Act, from

carrying on any of the activities in interstate commerce or through

the mails forbidden to unregistered holding companies by the several

subparagraphs of Section 4 (a). (18 Fed. Supp. 131 (S. D. N. Y.

1937).) The Circuit Court of Appeals, on November 8, 1937, all

three judges concurring, affirmed the District Court's decree both in

the enforcement of the registration provisions and the dismissal of

the cross bill (92 F. (2d) 580 (C. C. A. 2d, 1937)}.

On March 28, 1938, the Supreme Court, speaking through Mr.

Chief Justice Hughes, reaffirmed the decree of the District Court.

Mr. Justice McReynolds dissented without opinion, and Mr. J ustice

Cardozo and Mr. Justice Reed took no part in the consideration and

decision of the case. The Court concluded that the defendant companies are engaged in activities within the reach of the power of

Congress; that Sections 4 (a) and 5 are separable from the remaining

provisions of the Act; and that standing alone the registration provisions constitute a useful and valid regulation by the informatory

process. The cross bill was disposed of as follows:

"Defendants are not entitled to invoke the Federal Declaratory Judgment Act in order to obtain an advisory decree upon

a hypothetical state of facts. . .. By the cross bill, defendants seek a judgment that each and every provision of the

Act is unconstitutional. It presents a variety of hypothetical

controversies which may never become real. We are invited

to enter into a speculative inquiry for the purpose of condemning statutory provisions the effect of which in concrete situations, not yet developed, cannot now be definitely perceived.

We must decline that invitation."
FOURTH ANNUAL REPORT 49

John Lawless, Jr., v. Securities and Exchange Oommiseion, et al., is

the first case in which a circuit court of appeals has bean petitioned to

review an order of the Oommission under the Public Utility Holding

Company Act of 1935. On December 1, 1935, International Paper

and Power Company (hereinafter called the Company) filed an application for exemption under Section 3 (a) (5) of the Act and an application for an order under Section 2 (a) (8) declaring that the New

England Power Association was not a subsidiary of International

Hydro-Electric System and the Company, and that Moreau Manufacturing Oorporation was not a subsidiary of International HydroElectric System and the Company. If these applications were filed

in good faith, the statute afforded the Oompany a temporary exemption from the requirements of the Act.

While these exemptions were pending, on March 12, 1937, the

Company filed an application with the Commission in which it

asked (1) for a report "in the manner provided in Section 11 (g) (2)

of said Act," on a plan for change in capitalization which it desired

to propose for the approval and authorization of its shareholders,

and (2) for an order exempting it from the provisions of Sections 4 (a)

and 6 (a) of the Act, and from all other provisions applicable to the

changes in shareholders' rights involved in the plan and to the

securities which it proposed to issue under the plan.

Justification for this somewhat unusual request was claimed to exist

in the fact that if the exemption which the Company claimed to enjoy

should be terminated by act of the Commission after the plan had

become effective and after the change in securities had been completed,

doubt would be cast upon the legality of the securities proposed to be

issued under the plan. On March 29, 1937, the Commission conducted a hearing on the application for a report on the plan and for

exemption from the relevant provisions of the Act. On May 5, 1937,

the Commission issued a report on the reorganization plan and an

opinion without order declaring that power existed to make the report,

and thereafter, on July 31; 1937, following a second hearing, the Commission issued an order exempting the Company from the provisions

of Sections 4 (a) and 6 (a) and all other sections of the Act applicable

to the proposed plan."

On September 11, 1937, John Lawless, Jr., filed a petition for review

in the Circuit Court of Appeals for the First Circuit alleging that the

Commission had no power to make the report or order and requesting

that such action be set aside. The decision of the Court has not yet

been announced.

It Chairman Douglas, In a written opinion, dissented from the order of July 31, 1937. Cornmlssioner

Healy, likewise In written opinions, dissented from the report on the plan and opmion accompanying the

report and took no part In the order of July 31, 1937.
50 SECURITIES AND EXCHANGE COMMISSION

One other proceeding may be noted here. Section 11 (g) of the Act

provides, in part, that in any proceeding in a court of the United

States in which a receiver or trustee is appointed for any registered

holding company, the court shall not appoint any person other than

the Commission as trustee or receiver without notifying the Commission and giving it an opportunity to be heard before making any such

appointment. More than a year after the effective date of the registration requirements of the Act, Utilities Power and Light Corporation filed a petition for reorganization under Section 77B of the Bankruptcy Act in the United States District Court for the Northern

District of Illinois. On January 9, 1937, 5 days after the petition

was filed, the debtor was temporarily continued in possession, and on

March 6,1937, this possession was made permanent, and an investigator was appointed to consider and report upon certain charges of mismanagement. This report was filed with the Court on July 30, 1937,

and on the following day the Commission was notified that on August

2,1937, a hearing would be held for the purpose of considering whether

the debtor should be kept in possession or whether an independent

trustee should be appointed. Taking the view that the circumstances

of the case required an independent trustee to represent and protect

the interests of investors and consumers, the Commission appeared at

the hearing as amicus curiae and moved for the discharge of the

debtor. After extended argument and despite opposition, the Court,

on August 14, 1937, accepted the view of the Commission and entered

an order removing the debtor from possession and appointing Mr.

Willoughby G. Walling trustee for the estate.

LITIGATION UNDER THE SECURITIES ACT OF 1933 AND THE

SECURITIES EXCHANGE ACT OF 1934

There was an increase in the amount of both civil and criminal

litigation under the Securities Act of 1933 and the Securities Exchange

Act of 1934 during the past fiscal year. The number of civil cases, by

types, pending, filed and closed during the fiscal year ended June 30,

1938, is indicated in the following table:
FOUR'.rH ANNUAL REPOR'I' 51

Statement indicating number of civil litigation cases under Securities Act and

Securities Exchange Act by types of cases

Total Total Total cases Total Total cases Total Total cases Instl- cases instl- tuted Instl- cases closed cases cases

tuted during tuted closed durmg closed pendTypes of cases prior fiscal prior pnor fiscal prior ing

to year to as of to year to July ended July June July ended July

1,1937 June 1,1938 1,1937 June 1,1938 30,1938

30,1938 30,1938

-- -- -- -- -- -- Suits by Commission to enjoin violations of

seeunttee Act and/or Securities Exchange Act. _______________________________________ 137 81 218 109 91 200 18

Sults by Oommission Involving the enforcement of subpenas Issued pursuant to Securities Act and/or seeunues Exchange Act. 14 3 17 13 3 16 1

Suits against Oommisslon involving the enforcement of subpenas Issued pursuant to

Securities Act and/or Securities Exchange Act ________________________________________ 3 0 3 0 3 3 0

Contempt proceedings for violation of Injunction obtained pursuant to Beeurlnes Act

and/or Securities Exchange Act ____________ 2 1 3 0 2 2 1

Suits against Oommlssion to enjoin enforcement of Securities Act and/or SecuritIes

Exchange Act with the exception of subpenas ISSued by the Commlsslon ___________ 5 3 8 4 3 7 1

Petitions for review of Commission's orders

by Circuit Courts of Appeal (or Court of

Appeal for District of Columbia) pursuant

to Section 9 (a) of SEcurities Act or Section 25

(a) of Seeurrties Exchange Act. _____________ 34 6 40 12 13 25 15

Miscellaneous suits against Commission or officers of Commisslon, _____________________ 0 1 1 0 0 0 1

--- ------------------ Totals _________________________________ 195 95 200 138 115 253 37

As a result of suits instituted by the Commission, by June 30, 1938,

486 firms and individuals had been permanently enjoined from the

acts and practices complained of, 217 of such injunctions having been

obtained during the past fiscal year."

Cases that were pending under the Securities Act of 1933 and the

Securities Exchange Act of 1934 during the past fiscal year are listed

and briefly described in Appendix VI. Among the more interesting

cases which merit a fuller description are the following:

United Siaue v: Troutman, et al.-On February 21, 1938, Percival

H. Troutman, President of the Union Trust Company of Denver,

Colo., and Ralph L. Young, President of the Bankers National

Securities Corporation of Denver, Wale convicted of violation of the

Securities Act of 1933. Troutman was sentenced to serve 5 years in

Leavenworth and fined $2,500, and Young was sentenced to serve

15 months, for conspiracy. One defendant was found not guilty

and a verdict of acquittal was direoted as to another. The defendants

JI These figures Include some firms and individuals as to whom the injunction was subsequently vacated.
52 SECURITIES AND EXCHANGE COMMISSION

were charged with making false representations in the sale of trust

agreements and securities of a group of corporations and investment

trusts known as the "Union Group." The companies operated by

the defendants had been operating at a loss and the whole picture

was one of a shell composed of fictitious assets. The operations were

largely carried on by means of the so-called "sell and switch" device

and the defendants were charged with having induced a large number

of persons in many states to switch out of one kind of investment

trust unit into another kind of unit or into stock of corporations

affiliated with the Union Trust Company. On March 3, 1938, the

defendants filed notice of appeal.

Pace v: United States.-An indictment was returned in the Northern

District of Texas alleging that four defendants had violated the fraud

provisions of the Securities Act of 1933 in the sale of stock of the Atlas

Holding Company, a Nevada corporation. Three defendants pleaded

guilty and received sentences ranging from 18 months to 4 years.

The fourth defendant, S. A. Pace, was convicted and sentenced to 7

years in the penitentiary. On February 8, 1938, the Circuit Court of

Appeals for the Fifth Circuit confirmed the conviction of Pace. The

Circuit Court found that the evidence showed that Pace and the other

defendants had "* * * devised and operated a scheme to defraud

holders of stock in building and loan associations by exchanging with

them the shares of the Atlas Holding Company. Acting in concert,

these parties obtained the names of numerous parties who were not

versed in the business of securities and investments, and who had

deposited their earnings, or purchased stock, in building and loan

associations which had been embarrassed by the depression and had

either suspended payment of dividends, curtailed dividends, or were

in liquidation. These small investors were approached by one or

more of the defendants, and representations were made to them that

the affairs of the association were being grossly mismanaged; that

there was a deficiency of assets; and that the association's stock was

otherwise a bad investment. The Atlas stock was represented to be

a safe and sound investment yielding high earnings. It was usually

represented that the particular association under discussion owned

certain property which the defendants, or Atlas, wished to acquire,

and that the association's stock would be worth par to them in the

purchase of the property. The victim being persuaded, the transfer

was effected by the defendants, acting in concert and cooperating to

the end that the victim parted with whatever remained of his earnings

for a stock that was worthless."

Securities and Exchange Oommission v. Harry Ladner, et al.-Qn

June 28, 1938, the Commission instituted an injunctive proceeding in

the District Court for the Eastern District of Pennsylvania to enjoin

Harry Ladner and Karl S. Ladner from violation of the fraud pro-
FOURTH ANNUAL REPORT 53

visions of the Securities Act of 1933. The defendants had acquired

more than $1,000,000 worth of the securities of the Studebaker Corporation of New Jersey, the Richfield Oil Company of California, the

Willys-Overland Company and other corporations, which, through

receiverships and reorganizations, had been succeeded by successor

corporations of the same or similar names. The Commission alleged

that the defendants were preparing to launch a campaign to sell these

obsolete and worthless certificates by representing that they were the

securities of the successor corporations. On the same date that the

action was instituted the defendants consented to the entry of a permanent injunction.

Securities and Exchange Oommission v. Universal Service Association, et al.-On March 30, 1936, the Commission filed a bill of complaint in the District Court for the Northern District of Illinois to

enjoin Universal Service Association and certain individuals from

violations of the registration and fraud provisions of the Securities

Act of 1933 in the sale of what, according to the allegations of the

Commission, constituted securities. The Universal Service Association and the Universal Order of Plenocrats were engaged in securing

"applications for enrollment" in their two companies and accepting

payments of "contributions" on these applications. The defendants

contended that the Universal Order of Plenocrats, the name of which

was a combination of Latin and Greek words meaning "The Power

of Plenty," was engaged in teaching American citizens how to establish and maintain a cooperative Commonwealth and that the "contributions" would be used to bring forth a natural increase from the

natural resources of the earth. The enrollees were assured ot an increase 'of 30% per annum on the "contributions" and the return of

such "contributions" intact at the expiration of 5 years. The Commission contended that the sale of memberships in the order was

nothirig more than the sale of securities as that term is defined in the

Securities Act of 1933. The Commission further contended that the

fraud provisions of the Securities Act of 1933 had been violated in

that the defendants had failed to disclose that both the Universal

Service Association and the Universal Order of Plenocrats were and

always had been insolvent and that the payments allegedly made

from the "30% natural increase" were in fact paid out of the contributions of subsequent members. On April 14, 1938, a permanent

injunction restraining further violations of the registration and fraud

provisions was entered. The defendants have filed notice of intention to appeal.

Securities and Exchange Oommission v. R. J. Koeppe &J Oompany,

et al.-On November 9, 1936, the Commission filed a bill of complaint

in the District Court for the Northern District of Illinois charging

the defendants, a firm of brokers and dealers, with violations of both
54 SECURITIES Al'."DEXCHANGE COMMISSION

the Securities Act of 1933 and the Securities Exchange Act of 1934,

through a series of market manipulations in the stock of the Paducah

Cooperage Co., Inc., and the Wahl Company during the fall of 1935.

The Commission alleged that during a 3-month period the price of

Paducah stock was raised some 200 percent and quickly collapsed as

soon as support was withdrawn. It was further alleged that the

advance in price of both stocks was accomplished by a heavy volume

of trading; buying at the high for the day; establishing the closing

price for the day; placing matched orders; paying commissions to

other brokers who induced their customers to purchase the stock;

etc. The District Court found that the manipulation itself constituted a violation of the Securities Exchange Act of 1934 and the

failure to inform many of the persons to whom the defendants were

selling stock at the market that the price was being advanced by their

manipulations was fraud under the terms of the Securities Act of 1933.

On April 30, 1937, a permanent injunction was granted from which the

defendants appealed. On February 4, 1938, the Circuit Court of

Appeals for the Seventh Circuit affirmed the decree.

Securities and Exchange Oommission v. Torr & 00., et al.-In December 1935, the Commission instituted suit in the District Court for the

Southern District of New York to enjoin certain individuals and a

co-partnership from further violations of the fraud provisions of the

Securities Act of 1933 and the provisions of the Securities Exchange

Act of 1934 prohibiting manipulation of security prices. The Commission alleged that the defendants distributed stock of the Trans-Lux

Daylight Picture Screen Corporation against an option held by Torr

& Company, and that their methods of distribution involved manipulation and a conspiracy designed to cause purchasers to be deceived

through having various persons, agents of the defendants, recommend

the purchase of Trans-Lux stock without disclosing the fact that such

persons were to receive as commissions for making these recommendations $12.50 to $25.00 per hundred shares for all purchases of the stock

on the New York Curb Exchange that could be attributed to their

recommendations. The Commission further alleged that the purchases which were the consequence of the recommendations resulted

in artificially increasing the activity of the stock on the Curb Exchange.

A preliminary injunction was obtained in the District Court which

was appealed to the Circuit Court of Appeals for the Second Circuit

and there reversed on the ground of lack of justification for special

relief pending trial. The Commission thereafter had a hearing on

the merits before the District Court, and a permanent injunction was

granted March 4, 1938, against Torr & Company and 11 individuals,

restraining further violations of the Securities Act of 1933 and the

Securities Exchange Act of 1934, and against 2 individuals restraining

further violation of the Securities Exchange Act of 1934.
FOURTH ANNUAL REPORT 55

Securities and Exchange Oommission v. Benjamin Franklin Foundation, Inc., et al.; Securities arid Exchange Oommission v. Oapital

Savings Plan, Inc., et al.; Securities and Exchange Oommission v.

Financial IndependenceFounders, Inc.-On February 4, and June 27,

1938, the Commission filed bills in the United States District Court

for the District of New Jersey to restrain Benjamin Franklin Foundation, Inc., together with certain of its officers, and Financial Independence Founders, Inc., respectively, from violations of registration

and fraud provisions of the Securities Act of 1933. On June 23, 1938,

suit was instituted in the United States District Court for the Eastern

District of Pennsylvania to enjoin Capital Savings Plan, Inc., and

Independence Shares Corporation, its wholly owned subsidiary, from

violations of the fraud provisions of such Act. Each of the companies

was engaged in the issuance and distribution of certain types of

investment trust certificates commonly known as "Thrift" or "Foundation" plans which peculiarly originated in this country shortly after

the precipitous decline of market values in the fall of 1929. In form,

the certificates were investment contracts which contemplated

monthly payments of $10 or more, in multiples of $5, over a period of

10 years to a corporate trustee which immediately applied such monies

to the purchase of shares of an underlying investment trust, either of

the fixed or restricted management type. All three complaints

alleged that the defendants in the sale of their respective certificates

had misrepresented material facts relative to the character and operation of such certificates and had omitted to reveal various fees and

costs charged against the payments made thereon by reason of which

the statements made, in the light of the circumstances under which

they were made, were misleading. On February 10, 1938, Benjamin

Franklin Foundation, Inc., and three of its officers consented to the

entry of the permanent injunction prayed for in the Commission's

bill, without admitting wilfullness in the violations alleged. On

June 23 and June 27, 1938, permanent injunctions were likewise

consented to and entered against Capital Savings Plan, Inc., and its

subsidiary company, and against Financial Independence Founders,

Inc., respectively, restraining them from the violations alleged.

Securities and Exchange Oommission v. Sunbeam GoldMines Oompany, et al.-In May 1937, the Commission instituted an injunctive

action in the United States District Court for the Western District

of Washington to enjoin the issuance of promissory notes by the Sunbeam Gold Mines Company without compliance with the registration provisions of the Securities Act of 1933. The defendant company, Sunbeam Gold Mines Company, which had previously been

enjoined from further violation of the fraud provisions of the Securities Act of 1933 and the broker-dealer provisions of the Securities

Exchange Act of 1934, was engaged in negotiations looking to the
56 SECURITIES AND EXCHANGE COMMISSION

acquisition of the assets of Golden West Mining Company, which

had previously been enjoined from further violations of the registration provisions of the Securities Act of 1933 and the broker-dealer

provisions of the Securities Exchange Act of 1934. During the

course of these negotiations, an offering of promissory notes of the

defendant, Sunbeam Gold Mines Company, was made to its own

existing stockholders and the existing stockholders of Golden West

Mining Company, aggregating approximately 530 in number. The

District Court held that while the notes were securities and had been

the subject of sales, the transactions of the defendants, being confined to existing stockholders, had not, irrespective of the number

of such stockholders, involved a public offering and consequently

were not subject to the requirement of registration. From this

decision the Commission appealed, and on March 21, 1938, the Cir

cuit Court of Appeals for the Ninth Circuit reversed the District

Court, and, after reviewing the legislative history of Section 4 (1)

of the Securities Act of 1933, held that the offering, although confined

to stockholders, was nevertheless a public offering.

Securities and Exchange Oommission v. Oonsolidated Mines of Oalifornia, et al.-0n November 30, 1937, the Commission applied to the

District Court for the Southern District of California to enforce compliance with a subpena duces tecum directed against appellants in

the course of the investigation conducted by the Commission into

the affairs of the corporation. The subpena was issued pursuant to

an order of investigation which recited that the Commission had

reasonable grounds to believe that the corporation and its officers

were selling the securities of the corporation, although no registration

statement was on file, in violation of the registration provisions of

the Securities Act of 1933, and thet in the sale of these securities

untrue statements were being made concerning the extent and value

of ore bodies and the profits to be derived by the corporation from

its operation, in violation of the fraud provisions of the Securities

Act of 1933. The subpena required the production of engineer's

reports, mining records, and other exhibits and letters concerning

the properties operated by appellant. The Court granted the Commission's application on December 29, 1937, and on June 30, 1938,

the Circuit Court of Appeals for the Ninth Circuit affirmed the

decision of the lower Court. The Circuit Court held that the subpena was not too broad because the documents called for were clearly

material. It compared the Commission's investigations to those of

a grand jury, where the identity of the offender, and the existence

and nature of the offense are normally developed at the conclusion

of its labors, not at the beginning. For that reason the Court held

that the subpena power should not be limited too narrowly by forecasts of the probable results of the investigation.
FOURTH ANNUAL REPORT 57

Frank J. Ryan v. M. U. Newfield and Western Union Telegraph

Oompany, et al.-In March 1937, three suits were instituted in the

Southern District of Florida against representatives of the Commission and against the Western Union and Postal Telegraph Companies

to enjoin enforcement of and compliance with certain subpenas

duces tecum calling for the production of copies of certain telegrams

sent or received by the plaintiffs. The subpenas were issued pursuant to an order of investigation reciting that the Commission had

reasonable grounds to believe that the securities of the Ryan Florida

Corporation and of the Florida Tex Oil Company had been sold in

violation of the registration and fraud provisions of the Securities

Act of 1933 and authorizing an investigation of the corporations and

certain individuals. The three cases, involving almost identical

questions, were consolidated for trial. On April 14, 1937, District

Judge Alexander Akerman, of Tampa, granted interlocutory orders

restraining the enforcement of the subpenas stating that "The rights

of the plaintiffs as to the privacy of their telegrams is protected by

the Fourth and Fifth Amendments, and this right extends even when

telegrams are in the possession of the telegraph companies." An

appeal from this decision was taken by the Commission, and on July

22, 1937, the Circuit Court of Appeals for the Fifth Circuit reversed

the decision of the District Court, holding that the subpenas did not

constitute unreasonable searches and seizures and that the plaintiffs

had no standing to invoke the Fourth or Fifth Amendments. The

Court further stated "* * * we think it plain, that in enacting

the Securities Legislation in question, Congress was well within its

constitutional powers, and that the investigations and subpenas under

attack are fully supported by that legislation." On October 18, 1937,

plaintiffs' petitions for a writ of certiorari were denied by the Supreme

Court of the United States, and on November 8 and November 15,

1937, that Court denied a petition for rehearing and a motion for

leave to file a second petition. On December 2, 1937, Judge Akerman dissolved and vacated the interlocutory orders of injunction and

dismissed all of the plaintiffs' bills.

Woolley v. United States.-On May 31, 1938, the United States

Circuit Court of Appeals for the Ninth Circuit affirmed the conviction

of Ernest R. Woolley, who had been previously sentenced to serve

3 years in the Federal penitentiary and fined $1,000 for perjury during

the course of an investigation conducted by the Commission, the order

for which recited that the Commission had reasonable grounds to

believe that Woolley and others had violated the registration and

fraud provisions of the Securities Act of 1933 in the sale of stock of

the Cota Oil Company. It was charged that Woolley, after being

duly sworn before an officer of the Commission in connection with

the investigation, testified falsely that he had no part in the organ104139-39--5
58 SECURITIES A);"DEXCHA);"GE CmnnSSIOK

ization or incorporation of Cota Oil Company and that he was not

connected with the operation of that company and had no information

about its affairs. The Circuit Court upheld the constitutionality of

Section 20 (a) and ruled that even though the investigation was ex

parte false testimony therein constituted perjury. The Court held

that the function of the Commission in investigating probable violations of the Securities Act of 1933is closely akin to that of the grand

jury, that if false testimony has a tendency to influence the investigation it is material and will support a conviction for perjury, and that

the Commission had authority to "determine what matters are material to an inquiry," which authority may be delegated to an examining

officer. A petition for certiorari has been filed with the SupremeCourt of the United States.

United States v. Secord, Vanderpoel &: Company, Inc., et al.-On

June 29, 1938, Secord, Vanderpoel & Company, Inc., Max Strahl,

Morton Edell, Edwin T. Vanderpoel, and Walter Gutterson, were

found guilty of violation of the Securities Act of 1933 in the United

States District Court for the Southern District of New York in connection with false representations made in the sale of stock of a number

of mining corporations. Lynn N. Secord pleaded guilty, and four other

defendants tried were found not guilty. Certain of the latter are

under indictment by the Federal Grand Jury in New York City for

fraudulent distribution of the stock of Hidalgo Gold Mining Company.

In the Vanderpoel case, sentences ranging from -fines to 3 years

imprisonment were imposed. Before prosecution the Securities and

Exchange Commission obtained temporary injunctions enjoining the

defendants from further violations of the fraud provisions of the

Securities Act of 1933. Secord, Vanderpoel & Company had sold

the various mining company stocks by means of the distribution of

circulars and "market letters" addressed to persons on certain "sucker

lists." The prospective victims were deluged with long-distance

telephone calls urging them to dispose of other securities and invest

in the mining stocks. The victims were then "switched" into the

stock of another company which owned a mine which had not been

in operation since 1929 and possessed no tangible assets, the stock of

which had been bought by Secord, Vanderpoel & Company at from

30~ to 60~ a share and sold at $1.50. False representations were

made that the price of the stock of the latter company would go as

high as $5 within 30 days; that a "pool" was being formed to manipulate the stock; and that the Securities and Exchange Commission had

approved listing of this stock on the New York Curb Exchange.

United States v. R. Cummins &: Company, H. H. Landay, et al.-

On August 27, 1937, Edward A. Attix, an attorney, Samuel Lafata,

Leonard E. Brown, Harry H. Landay, and Frank R. Lane, all residents

of Detroit, were convicted in the United States District Court at
FO"CRTH AN~UAL REPORT

Detroit, Mich., for violations of the registration and fraud provisions

of the Securities Act of 1933 in the sale of stock of R. Cummins &

Company. Sentences totaling 19 years and fines totaling $50,000

were imposed. An appeal is pending before the Sixth Circuit Court

of Appeals. It was alleged that the defendants organized and

dominated R. Cummins & Company, Inc., and issued to themselves

approximately 500,000 shares of bonus stock, much of which was sold

to the public upon the representation that the stock was being sold

for the corporation and that the proceeds from its sale would be paid

into the company's treasury. The indictment further charged that

the defendants falsely represented that the corporation was an old

established distillery company which formerly operated in Kentucky,

and that they padded the company's payroll, received "kick backs"

from contractors who furnished machinery for the rehabilitation of

the plant, and obtained stock by selling property to the corporation

at prices greatly in excess of the price paid for it.

COMPLAINTS, INFORMAL AND FORMAL INVESTIGATIONS

The Commission still receives a heavy volume of complaints and

inquiries. While most of the complaints come from investors, a

considerable number are received from State Securities Commissions, State and Federal officials, and voluntary agencies such as

Better Business Bureaus and Chambers of Commerce. A reply is

made to every complaint, and to the extent that the Commission's

powers and the subject matter permit, every complaint is investigated. The Commission continued to use its facilities, directly and

through public and private agencies, to call attention to the many

fraudulent and illegal devices too often employed to defraud the

investing public.

At the beginning of the past fiscal year, 750 complaint cases were

pending. During the year, 545 new cases have been set up and 600'

cases disposed of. As of June 30, 1938, 695 cases were pending.

The number of such cases, and of formal and informal investigations

during the past 2 fiscal years, is as follows:

Report of complaints, informal investigations, and formal investigahons for fiscal

year 1937 a

Cases Cases Total Cases Cases docketed cases to closed pending July I, 1936, be ac- July I, 1936, pending

July I, to June counted to June July I, 1936 30,1937 for 30,1937 1937

Cases set up as result of complaints _____________ 1,174 678 1,852 1,102 7:;&

Informal investigations 989 591 1,580 953 6'0 Formal Investigatmns ___________________________ 185 87 272 149 123

Under both the Securities Act of 1933 and the Securities Exchange Act of 1934.

_____•• ___________________

•
60 SECURITIES AND EXCHANGE COMMISSION

Report of complaints, informal investigations, and formal investigations for fise&l

year 1938.

Cases Cases Total Cases Cases pending docketed cases to closed pending July 1, 1937, be ao- July 1, 1937 July I, to June counted to June July I, 1937 30, 1938 for 30,1938 1938

Cases set up as result of complaints ______________ 750 545 1,295 600 695

Informal investigations __________________________ 627 292 919 473 446 Formal mvestlgations ___________________________ 123 253 376 127 249

& Under both tbe Securrties Act of 1933 and the S6curities Exchange Act of 1934

.A full description of the Commission's practice with respect to

the investigation of complaints is contained in the Third Annual

Report. The Securities Violations Files have been enlarged during

the past fiscal year by the addition of 6,35-3items of information

pertaining to existing files and the addition of 3,097 new names to

such files. On June 30, 1938, the Commission had assembled data

concerning 28,476 persons or corporations against whom State or

Federal action had been taken during the past 10 years or more in

connection with the sale of securities.

PUBLIC HEARINGS

The following statistics indicate the number of public hearings

held by fiscal years for 1936, 1937, and 1938.

Public hearings held

July 1,1935, to July 1,1936, to July 1, 1937, to June 30, 1936 June 30, 1937 J nne 30, 1938

Beeuntles Act of 1933__________________________________________ 55 174 62 Securities Exchange Act of 1934_______________________________ 37 44 116

Public Utility Holding Company Act of 1935 a 124 180 191

TotaL e._____________ . ___________ . __ 216 398 369

a Exclusive of Investment Trust Study.

FORMAL OPINIONS

The Commission, during the past year, issued 179 formal opinions

involving matters under the Securities Act of 1933, the Securities

Exchange Act of 1934, and the Public Utility Holding Company Act

of 1935. These opinions were issued in the following cases:

Securities Act of 1933, as Amended

CONSENTING TO WITHDRAWAL OF REGISTRATION STATEMENT:

In the Matter ofSeneca Petroleum Corporation Apr. 19,1938

•

___ • ____ ••• _____

________• _______•___
FOURTH ANNUAL REPORT 61

DENYING MOTION FOR DECLARATION THAT REGISTRATION STATEMENT HAS BEEN AMENDED IN ACCORDANCE WITH STOP ORDER:

In the Matter ofAIDerican Kid Company Feb. 11,1938

Underwriters Group, Inc Jan. 10, 1938

FIXING EFFECTIVE DATE OF AMENDMENTS TO REGISTRATION

STATEME~TS AND DISMISSING STOP ORDER PROCEEDINGS:

In the Matter ofBondholders COIDIDitteefor Republic of Colombia Dollar Bonds Dec. 7;1937

Consolidated Funds Corporation Sept. 9,1937

Equity Corporation Aug. 23,1937

Monroe Loan SOciety May 25, 1938

STOP ORDERS:

In the Matter ofBering Straits Tin Mines, Inc July 2,1937

Canusa Gold Mines Limited July 15,1937

Cimarron Petroleum Trust Feb. 25,1938

Corporate Leaders Securities Company Aug. 21,1937

Crusader Aircraft Corporation Feb. 11,1938

Gold Dust Mining & Milling Company Jan. 12,1938

(Amended) June 1-1,1938

Golden Conqueror Mines, Inc Aug. 6,1937

Herman Hanson Oil Syndicate Sept. 15, 1937

Kane-America Corporation Dec. 14,1937

Kinner Airplane and Motor Corporation, Ltd Dec. 17,1937

Metropolitan Personal Loan Company ________________ Oct. 28, 1937

Oklahoma-Texas Trust Sept. 23, 1937

Old Diamond Gold Mines, Limited (No Personal Liability) Oct. 8, 1937

Paper Sales Company of Detroit, Inc Sept. 16, 1937

(Revised) Jan. 27, 1938

Petersen Engine Co., Inc Dec. 2,1937

Puget Sound Distillery, Inc Apr. 22,1938

Queensboro Gold Mines, Ltd . Nov. 17,1937

Seminole Provident Trust Nov. 15,1937

South Umpqua Mining Company Mar. 7,1938

Sunbeam Gold Mines Company Apr. 1,1938

T. I. S. Management Corporation Feb. 25,1938

Trenton Valley Distillers Corporation Jan. 18,1938

Virginia City Gold Mining Company Nov. 16, 193T

Ypres Cadillac Mines Limited (No Personal Liability) Jan. 11,1938

8eeurities Exchange Act of 1934, as Amended

BROKER AND DEALER:

In the Matter ofAlbert Ahrens, doing business as Albert Ahrens Company.i Bept. 13, 1937

L. P. Atwater & Company Sept. 18, 1937

William A. Bachrach, doing business as Wilbac Securities

Company Oct. 29,1937

Collateral Bankers, Inc Sept. 13,1937

Foreman and Company, Incorporated Feb. 2,1938

Henry Friedlander, doing business as Henry Friedlander

& Company and doing business as Acme Royalty Company; and William V. Stenton & Company, a corpora- tion July 14,1937

" "" " "

" " " " " "
62 SECURITIES .\.KD EXCHAKGE COl\DIISSIOK

BROKERANDDEALER-Continued.

In the Matter of-Continued

Frank B. Hanilin July 10,1937

Herbert A. Jacobs, doing business as Herjay Company __ Sept. 13, 1937

Securities Exchange Corporation Sept. 21,1937

William J. Stratton, doing business as William J. Stratton

COmpany Feb. 19,1938

Trusteed Collateral Corporation Feb. 7,1938

Edward J. Wiley, doing business as E. J. Wiley Company May 23, 1938

MANIPULATION:

In the Matter ofGerald M. Loeb, et al Apr. 26,1938

Gerald M. Loeb and Gordon B. Crary, individually and

as partners of E. F. Hutton & Co., a partnership, and

H. Terry Morrison, individually Mar. 4,1938

Michael J. Meehan . July 31,1937

White, Weld & Company June 21,1938

Charles C. Wright, et al Feb. 28,1938

UNLISTEDTRADING:

In the Matter ofAtlas Corporation Jan. 8,1938

Atlas Corporation . . Apr. 21, 1938

Berkey & Gay Furniture Company Jan. 8,1938

Bethelehem Steel Corporation July 20,1937

Boston Stock Exchange (Applications for Unlisted Trading Privileges in 15 Securities) July 14,1937

Los Angeles Stock Exchange (Applications for Unlisted

Trading Privileges in 16 Securities) Apr. 1,1938

Nash-Kelvinator Corporation Apr. 18,1938

National Tunnel & Mines Company __________________ Sept. 11, 19i17

New York Curb Exchange (Applications for Unlisted

Trading Privileges in 14 Securities) Jan. 21,1938

Niagara Hudson Power Corporation Apr. 21,19il8

San Francisco Curb Exchange (Applications for Unlisted

Trading Privileges in 7 Securities) Aug. 6,1937

The Studebaker Corporation July 20,1937

Utah-Idaho Sugar Company Sept. 11,1937

WITHDRAWALANDSTRIKINGFROMLISTINGANDREGISTRATION:

In the Matter ofThe Autoline Oil Company Mar. 3,1938

Jumbo Extension Mining Company Jan. 31,1938

Michigan-Utah Consolidated Mines Company Jan. 31,1938

Mother Lode Coalition Mines Company Mar. 30,1938

North American Securities Company -- July 7,1937

Obra Mines Corporation Mar. 28,1938

Prima Company Mar. 14, 1938

Richfield Oil Corporation Jan. 21,1938

Rosetta Mines Company Jan. 31,1938

The Teok-Hughes Gold Mines, Limited June 21,1938

United Towns Electric Company, Ltd Feb. 11,1938

_
FOURTH ANN{)AL REPORT 63

'Public Utility Holding Company Act of 1935

.ACQUISITION OF SECURITIES, ASSETS, BUSINESS, OR OTHER INTERESTS:

In the Matter ofBellows Falls Hydro-Electric Corporation Dec. 16,1937

Commonwealth Edison Company, Commonwealth Subsidiary Corporation Aug. 31,1937

Cumberland County Power and Light Company Dec. 30,1937

Eastern Shore Gas Corporation July 26,1937

Federal Water Service Corporation Apr. 29,1938

The Greenville Electric Light and Power Co Aug. 25,1937

International Hydro-Electric System July 14,1937

Iowa Power and Light Company May 9,1938

Keokuk Electric Company, Fort Madison Electric Company, Dallas City Light COmpany Dec. 23,1937

Lexington Utilities Company, Kentucky Securities Company Dec. 29,1937

Lone Star Gas Corporation, Lone Star Gas Company, and

Community Natural Gas Company Dec. 3,1937

The Middle West Corporation Feb. 15,1938

National Gas & Electric COrporation July 31,1937

NY PA NJ Utilities Company, Keystone Utilities, Inc June 30,1938

Peoples Light and Power Company and subsidiaries Nov. 15,1937

Public Service Corporation of Texas, Mobeetie Gas Company Dec. 22, 1937

Public Service Company. of New Hampshire Dec. 1,1937

Sioux CIty Gas & Electric Company Jan. 13,1938

Southern Natural Gas Company Mar. 21, 1938

Southwestern Development Company Oct. 28, 1937

ALLOWANCE OF FEES, EXPENSES, AND REMUNERATION:

In the Matter ofCharles True Adams, Trustee of Utilities Power and Light

Corporation and Central Service Corporation May 23,1938

DECLARATION WITH RESPECT TO ORGANIZATION AND CONDUCT OF

BUSINESS OF SUBSIDIARY SERnCE COMPANY:

In the Matter ofColumbia Engineering Corporation Apr. 16,1938

General Management Corporation Aug. 27,1937

DECLARING ApPLICANT NOT To BE AN ELECTRIC UTILITY COMPANY:

In the Matter ofSloss-Sheffield Steel & Iron Company June 15,1938

"DECLARING ApPLICANT NOT To BE A HOLDING COMPANY:

In the Matter ofAlbert D. Brokaw, A. Faison Dixon, and H. Harper

McKee, a partnership doing business under the name

of Brokaw, Dixon and McKee Dec. 18,1937

Central New Hampshire Power Company _____________ Feb. 10, 1938

Great Lakes Utilities Corporation Dec. 22,1937

Hugh M. Morris & Harold S. Schutt, Trustees, Peoples

Light and Power COrporation June 1,1938

Public Service Corporation of Texas Jan. 7,1938

The Twin State Gas and Electric Company May 21,1938

West Penn Railways Company Dec. 30,1937

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•
64 SECURITIES _-\.NDEXCHAKGE COl\UnSSION

DECLARING ApPLICANT NOT To BE A SUBSIDIARY COMPANY OF A

SPECIFIED HOLDING COMPANY:

In the Matter ofThe Cleveland-Cliffs Iron Company, the Cliffs Corporation, Wm. G. Mather, Cyrus S. Eaton & Edward B.

Greene, as Voting Trustees, Wm. G. Mather, S. Livingston Mather, and G. G. Wade, as Voting Trustees, Wm.

G. Mather, Individually Apr. 15,193B

DENYING ApPLICATION FOR RE-HEARING:

In the Matter ofInternational Paper and Power Company Oct. 12,1937

DISMISSING DECLARATION:

In the Matter ofThe Mission Oil Company Jan. 17,193B

DIVIDEND DECLARATIONS AND PAYMENTS:

In the Matter ofColumbia Gas & Electric COrporation Apr. 8,193B

Commonwealth Gas & Electric Companies Dec. 23,1937

Nebraska Natural Gas Company Dec. 6,1937

Penn Western Gas & Electric Company Mar. 25, 193B

Southwestern Development Company Dec. 8,1937

West Texas Gas Company Nov. 24, 1937

EXEMPTION FROM PROVISIONS OF THE ACT:

In the Matter ofGodfrey L. Cabot, Inc Mar. 25, 193B

The Cleveland-Cliffs Iron Company, The Cliffs Corporation, Wm. G. Mather, Cyrus S. Eaton, and Edward B.

Greene, as Voting Trustees, Wm. G. Mather, S. Livingston Mather, and G. G. Wade, as Voting Trustees, Wm.

G. Mather, Individually Apr. 15,1938-

General Electric Company, Electrical Securities Corporation, G. E. Employees Securities Corporation Mar. 16, 193B

Hickok Oil Corporation June 8,193B

Kennecott Copper Corporation Mar. 16, 193B

Middle West Utilities Company of Canada, Limited July 9,1937

Phelps Dodge Corporation May 26,1938

F. L. Putnam & Company, Inc Nov. 29, 1937

Stone & Webster and Blodget, Incorporated Mar. 14, 193B

Utilities Holding Corporation Apr. 14,1938-

The Youngstown Sheet and Tube Company, The Youngstown Corporation, and The Continental Supply Company _________________________________________ Nov. 19, 1937

EXEMPTION OF SECURITY TRANSACTIONS FROM PROVISIONS OF

SECTION 6 (.A) OF THE ACT:

In the Matter ofAlabama Gas Company Nov. 16,1937

The Buckeye Light & Power Company Aug. 25,1937

Central Maine Power Company May 26,193B

Central Ohio Light & Power Company Dec. 31,1937

Cumberland County Power and Light Company Feb. 28,1938

Detroit City Gas Company July 3,1937

Fall River Electric Light Company May 14,193B

Granite State Electric Company July 2,1937

International Paper & Power Company July 31,1937

•
FOURTH ANNUAL REPORT

EXEMPTION OF SECURITYTRANSACTIONSFROM PROVISlONBOF

SECTION6 (A) OF THE ACT-Continued.

In the Matter of-Continued.

Knife River Coal Mining Company

The Mystic Power Company

The Narragansett Electric Company

New York State Electric & Gas Corporation

II

Northern Berkshire Gas Company

Peoples Service Company

Potomac Electric Power Company

Public Service Company of New Hampshire

The St. Louis County Gas Company

South Carolina Utilities Company, Walnut Electric &

Gas Corporation

Tidewater Electric Service Company J

Washington Gas Light Company

Webster and Southbridge Gas & Electric Company

Wisconsin Michigan Power Company

EXEMPTIONOF ACQUISITIONOF SECURITIESFROM PROVISIONSOF

SECTION9 (A) OF THE ACT:

In the Matter ofAmerican Utilities Service Corporation

Copper District Power Company, The Middle West Corporation

The Middle West Corporation

u u

United Public Utilities Corporation

" " " "

65

Jan. 27, 1938

Sept. 20, 1937

July 17, 1937

Apr. 29, 1938

June 3,1938

Nov. 19, 1937

Jan. 14, 1938

Nov. 26, 1937

May 28,1938

Aug. 27,1937

Apr. 26,1938

Aug. 28,1937

June 4,1938

Aug. 28, 1937

Dec. 9,1937

Sept. 7, 1937

Nov. 3,1937

Aug. 26, 1937

Nov. 26,1937

Nov. 24,1937

Jan. 27, 1938

FIXING DATE FOR DECLARATIONTO BECOMEEFFECTIVE:

In the Matter ofAmerican Light & Traction Company, San Antonio Public Service Company Mar. 16, 1938

American Water Works and Electric Company, Inc Jan. 19,1938

Copper District Power Company, The Middle West

Corporation Nov. 3, 1937

Federal Water Service Corporation Apr. 29,1938

Iowa Power and Light Company May 9,1938

The Kansas Electric Power Company _________________ July 28, 1937

June 3,1938

The Kansas Power Company Aug. 13,1937

Keokuk Electric Company, Fort Madison Electric Company, Dallas City Light Company Dec. 23,1937

Massachusetts Lighting Companies and Massachusetts

Utilities Associates, Central Massachusetts Light &

Power Company and Massachusetts Utilities Associates, Commonwealth Gas & Electric Companies and

Massachusetts Utilities Associates Jan. 7,1938

Minnesota Utilities Company Oct. 11,1937

Oklahoma Power and Water Company ________________ July 20, 1937

Old Dominion Power Company Aug. 26,1937

Public Service Corporation of Texas, Mobeetie Gas Company Dec. 22,1937

San Antonio Public Service Company May 25,1938

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66 SECURITIES AND EXCHANGE COMMISSION

Dec. 20, 1937

Dec. 8,1937

Nov. 19, 1937

Sept. 25, 1937

Mar. 25, 1938

Nov. 18, 1937

FIXINGDATEFORDECLARATIONTOBECOMEEFFECTIVE-Continued.

In the Matter of-Continued.

South Carolina Utilities Company

Southern Natural Gas Company

Worcester County Electric Company

PERMITTINGDECLARATIONTO BECOMEEFFECTIVE:

In the Matter ofGardner Electric Light Company

" " " " General Public Utilities, Inc

Haverhill Electric Company, Gloucester Electric Company, Beverly Gas and Electric Company, Malden

Electric Company, Suburban Gas and Electric Company, Salem Gas Light Company Oct. 26,1937

Lone Star Gas Corporation and Lone Star Gas Company_ July 26,1937

Louisiana Ice and Electric Company, Inc June 27,1938

Louisiana Steam Generating Corporation and Gulf States

Utilities Company Apr. 22, 1938

National Gas & Electric Corporation July 31,1937

(Amended) Aug. 3, 1937

Nebraska Natural Gas Company Dec. 6,1937

New England Power Company Apr. 27,1938

North Boston Lighting Properties Oct. 26,1937

Northern States Power Company Dec. 11,1937

Peoples Light and Power Company and subsidiaries., ___ Nov. 15, 1937

Peoples Water and Gas Company May 28,1938

Puget Sound Power & Light Company June 29,1938

Southwestern Development Company Oct. 28,1937

West Texas Gas Company Nov. 24, 1937

REFUSING TO PERMIT DECLARATIONTO BECOMEEFFECTIVE:

In the Matter ofNorthern States Power Company Nov. 6,1937

REORGANIZATIONPLAN:

In the Matter ofAmerican Water Works and Electric Company, lnc Dec. 30,1937

Genesee Valley Gas Company, Inc Jan. 24,1938

STUDYAND INVESTIGATION:

In the Matter ofAlpha Shares, United Standard Oil Fund of America,

Inc., Monthly Income Shares, Ino., of New York,

Monthly Income Shares, Ine., of N. J Aug. 11,1937

Miscellaneous

ADMISSIONSTO PRACTICE:

In the Matter ofVan Dorn, Joseph H Mar. 23, 1938

REPORTS OF OFFICERS, DIRECTORS, AND PRINCIPAL STOCKHOLDERS

General Scope of Reporting Requirements

Every person who is an officer, director, or principal stockholder-

(a principal stockholder is one who beneficially owns, directly or indirectly, more than 10% of any class of registered equity security) of

an issuer which has any class of equity security listed and registered

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FOURTH ANXVAL REPORT 67

on any national securities exchange is required by Section 16 (a) of

the Securities Exchange Act of 1934 to file with the Commission

and the exchange an initial report showing his holdings of, and a

monthly report disclosing all his transactions in, any equity security

of the company of which he is the direct or indirect beneficial owner.

Likewise, every person who is an officer or a director of a holding

company which is registered under the Public Utility Holding Company Act of 1935, is required by Section 17 (a) thereof to file similar

reports covering his holdings of and transactions in all securities of

the registered holding company and its subsidiaries.

Volume of Reports

The comparative numbers of original and amended ownership

reports filed with and examined by the Commission during each of

the past 2 years are tabulated below.

Reports filed and examined

Origtnal reports-Securities Exchange Act

Amended reports-Securities Exchange AcL

Original reports-Holding Company Act

Amended reports-Holding Company Act

Fiscal year '1937

25, 022

5, 101

416

44

Fiscal year

1938

19,200

2,61&

83~

90t

Up to the close of the year 25,843 persons had filed with the Commission r09,732 ownership reports disclosing 35,529 different security

ownership positions and changes therein. These reports relate to the

equity securities of 2,345 companies having equity securities registered on national securities exchanges under the Securities Exchange

Act of 1934 and to the securities of 157 holding companies registered

under the Public Utility Holding Company Act of 1935 and of the

subsidiaries thereof.

Decline in Reports Needing Amendment

When the examination of a report indicates that it is deficient.

because of any material incompleteness, inconsistency, or inaccuracy,

an amended report is required to be filed, which is examined in the

same manner as the original report. Where amended reports are

thus necessary, they are obtained, in most cases, in less than a month

after the original was filed. While one out of every five reports filed

during the year 1937 required such arnendment, this ratio dropped to

about one out of every eight during the past year.

Decline in Late Filing of Reports

The law prescribes a period within which each type of report is due

to be filed, and from time to time a certain number of reports are

received after the date they are due. The chief reasons stated for

such delay in the filing of reports include: ignorance of the reporting

requirements; overlooking transactions made by the reporter or his

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68 SECURITIES AND EXCHANGE COMMISSION

broker or agent; illness; absence from office or principal place of

business; delay in obtaining information from partnership or personal

holding company as to its transactions; and ignorance of reductions

in total issued amount of a class of stock, through conversions, etc.,

whereby reporter had unwittingly become a principal stockholder.

The Commission recognizes that, in order to effectuate the purpose

of Sections 16 (b) of the Securities Exchange Act of 1934 and 17 (b)

of the Public Utility Holding Company Act of 1935, accurate information as to security transactions should be available to interested

persons as soon as possible after they occur, since the existing statutory

2-year limitation of any action thereunder runs from the date on

which the profit from a purchase and sale or sale and purchase within

the 6-month period was realized. Accordingly, the Commission has

taken steps to eliminate every possible instance of the late filing of

ownership reports, with the result that the proportion of original

Form 4 reports filed late (i. e., after the tenth day of the month

following that which they cover) to the total number of original Form 4

reports filed decreased during the year by about 20%. It might be

added that approximately half of the late reports are generally received not more than a month after the date they are due.

Extent of Compliance with Reporting Requirements

An investigation has been made of the extent of compliance with

!the reporting requirements of Section 1.6 (a) of the Securities Ex-

-change Act of 1934 during the period of nearly 4 years that they have

'been in force. It discloses only 34 known cases of persons who have

failed for various reasons t-o file certain reports apparently required

of them (mainly initial reports of security position on Form 5 or 6)

after the usual efforts have been made to obtain them. A principal

reason for such delinquency in these few instances is the inability

-despite exhaustive search to locate the person who had the obligation

to file the report. It also develops that the companies of which

certain of the persons delinquent in this respect are officersand directors

have been dissolved, or the registration of their securities has been

withdrawn by order of the Commission pursuant to Section 19 (a)

(2) of the Act. However, when it is recalled that more than 35,000

security ownership positions have so far been reported to the Commission, this comparatively small number of delinquents indicates that

not more than one person out of every thousand persons subject to

Section 16 (a) has failed to comply with its provisions to the extent

of filing at least an initial report. .

Publication of Security Ownership Reports

Information as to the security transactions and holdings of officers,

directors and principal stockholders, disclosed in their reports which

are filed on Forms 4, 5, 6, U-17-1 and U-17-2, is compiled and published by the Commission in a semi-monthly Official Srmmary of
FOURTH ANNUAL REPORT 69

Security Transactions and Holdings which is widely distributed among

newspaper correspondents, individual investors and other interested

persons. Copies of these summaries are also available at each office

of the Commission and each national securities exchange. In addition, the actual reports are available for public inspection both at the

office of the Commission in Washington, D. C., and the particular

exchange with which an additional copy of reports relating to the issuer

concerned must be filed.

SOLICITATION OF PROXIES, CONSENTS, AND AUTHORIZATIONS

UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND THE.

PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

During the fiscal year, 2,232 solicitations of proxies, consents, or

authorizations and 447 follow-up communications thereon were

examined for compliance with the rules promulgated by the Commission under authority of Section 14 (a) of the Securities Exchange

Act of 1934. In a substantial number of cases in which the soliciting

material was either false or misleading in character or deficient in the

descriptive material called for by the proxy rules, communications

containing information, clarifying or supplementing the original

soliciting literature, were required to be sent to security holders.

Depending upon the character of the particular case, either new

proxies, consents, or authorizations were solicited or security holdens

were afforded an opportunity to revoke or confirm the proxies whiels

they had given. In other cases, in order to avoid the possibility of

failure to comply with such rules, proxies were not voted upon matters

which appeared either not to have been described or to have been

inadequately described in the soliciting literature.

Inone case the management solicited approval of a managerial and

stock option contract entered into between the president of the corporation and the corporation, which contract provided for a substantial salary and for options to the president to purchase stock of the

corporation at a price to be calculated on the basis set forth in the

contract, and also requested the approval of purchases by the corporation of its own common stock. The Commission concluded after

examining the proxy soliciting material that such material did not

comply with the proxy rules in that it failed to disclose that the

president, by virtue of ownership of almost half of the outstanding

common stock, had practical control of the corporation at the-time

of making the contract and that no other member of the board 0f

directors owned any stock of the corporation so that in fact there' was

no bargaining between the corporation and the president ever the

terms of the contract. The material also failed to disclose that the

purchase price of the stock under the options calculated on the basis

provided in the contract was substantially below the market price of
70 SECURITIES AND EXCHAKGE COMl\IISSIOK

the stock at the date of solicitation, so that under the contract, the

terms of which he had apparently dictated, the president was in a

position to realize a substantial profit on the stock options. The

material further failed to disclose that some of the purchases of stock

which the management desired to have ratified were made at private

-sales at varying prices, some of them as high as $20 a share over the

market price at the time of the purchase. The Commission required

that a further communication disclosing these facts and a form of

revocation or confirmation be sent to stockholders to enable them to

revoke or confirm their proxies on the basis of the subsequent information.

In another case the management solicited approval by stockholders

of the proposed dissolution of the company. In the course of such

solicitation a letter was sent to stockholders over the signature of the

president in which he urged both common and preferred stockholders

to vote in favor of the dissolution and in which he stated that he owned

six and one-half times as many shares of the common stock as he

owned of preferred. The Commission, after examining the material

used by the management, concluded that it failed to comply with the

proxy rules in that it gave no information from which an owner of

common stock could deduce that upon dissolution of the company

there would probably be no funds available for distribution to the

holders of the common stock, and in that the president neglected to

state that there were almost eight times as many shares of common

stock outstanding as there were preferred, so that in fact he had a

proportionately larger interest in the preferred stock than he had in

the common, although his statement that he owned six and one-half

times as many shares of common stock than of preferred was calculated

to lead stockholders to believe that his principal interest lay in

common stock.

The company refused, in the first instance, to send stockholders a

further communication disclosing these facts. When, however, it

appeared that the Commission would take action pursuant to the

authority conferred by Section 21 (e) of the Securities Exchange Act

of 1934 and file a bill seeking an order restraining the use of the proxies

obtained from the management's solicitation, the company did send

a communication to stockholders containing the necessary information and also sent a form of confirmation to be used 'by stockholders

confirming proxies previously given. Only proxies confirmed or

obtained on the basis of the subsequent communication were voted

on the question of the dissolution of the company.

There was a substantial increase during the fiscal year inthe number

of occasions on which corporate counselor other representatives of

management submitted proposed proxy soliciting material to the

Commission for comment in advance of its use.
FOURTH ANNUAL REPORT 71

Under Section 11 (g) of the Public Utility Holding Company Act

-of 1935 solicitation of proxies or other authorizations in connection

with a reorganization plan of a registered holding company or a.

subsidiary is prohibited unless, among other things, the plan has been

proposed by the Commission or submitted to the Commission by a.

person having a bona fide interest in the reorganization and is accompanied or preceded by a copy of the Commission's report on the plan.

Under Section 12 (e) of the Act solicitation of proxies and other

authorizations regarding any securities of registered holding companies

.and their subsidiaries is prohibited except in accordance with the

Commission's rules, regulations or orders.

Pursuant to the provisions of these sections of the Act, the Commission, on July 26, 1937, adopted rules and regulations governing

the solicitation of proxies, deposits, consents, and dissents in respect

of securities of holding companies registered under the Public Utility

Holding Company Act of 1935 or their subsidiaries.

These rules (Rules U-12E-1 through U-12E-6) may be divided into

two general catagories: First, the rules apply to the solicitation of

proxies, deposits, consents, and dissents from owners of securities of

registered holding companies and subsidiaries, in connection with

reorganization plans and for other similar purposes; second, the

rules make applicable the existing and other future rules with respect

to proxies under the Securities Exchange Act of 1934 to certain solietations of a proxy regarding a security of a registered holding company

or subsidiary. Generally speaking, the rules set up standards to

which those soliciting proxies must conform. Such standards, for

instance, call for periodic accounting by protective committees,

prohibition against trading in securities by committee members and

detailed information through Commission reports to enable those

solicited for votes to act with some judgment.

More specifically, Rule U-12E-1 defines the terms used in the rules

adopted pursuant to Sections 11 (g) and 12 (e) of the Public Utility

Holding Company Act of 1935. Rule U-12E-2 provides that no person shall solicit, with certain exceptions, any proxy regarding any

security of a registered holding company or a subsidiary thereof except

upon compliance with the rules and regulations adopted pursuant to

Section 14 (a) of the Securities Exchange .Act of 1934, which rules

would be applicable to such solicitation if "uch securities were registered on a national securities exchange.

Rule U-12E-3 deals with solicitation of authorizations in connection

with reorganizations. This rule imposes general requirements as to

the terms and conditions upon whirh such solicitations must be made.

Among such requirements are provisions for independent review and

determination of all fees and expenses, the submission of periodic

reports and statements of account, the prohibition of the buying or
72 SECURITIES AND EXCHANGE COMMISSION

selling of securities affected by the reorganization on behalf of the

persons making the solicitation, and the right to revoke such authorizations and to withdraw securities from deposit, without expense, priorto the exercise of the authorization. The rule also deals with different

types of solicitation classified according to the scope of the solicitation

and the kind of authority solicited. Limited requirements are im~

posed in regard to solicitations from not more than 25 owners of securities and also from security holders without limit as to number which

are restricted to representation in connection with preliminary action

pertaining to such activities as the negotiation, formulation, or development of the plan, and the appearance before courts or commissions

where such action does not authorize consent to or dissent from a.

plan on behalf of the persons solicited. More comprehensive information is required to be submitted to the Commission and to security

holders in connection with solicitations of proxies or authorizations

which empower the persons making the solicitation to consent to ordissent from any plan of reorganization, whether such authorization

is granted upon condition or absolutely.

The use of deposit agreements and the deposit of securities is, in

effect, greatly curtailed by the rules. Deposits of securities may not

be solicited until after the plan has been prepared and the Commission

has made a report thereon, except in certain special circumstances.

where the Commission finds that the deposit of securities is necessary

in order to accomplish certain specified purposes such as the maintenance of actions at law or in equity for the protection of the rights of

the owners of such securities, the collection or distribution of payments

on account of securities, the tender of securities in connection with a

contemplated purchase of assets at a judicial or foreclosure sale, or

for other purposes found by the Commission to be in the interest ofsecurity holders.

Rules U-12E-4, 5, and 6 prescribe the form and content of applications for reports on plans and for declarations in connection with

solicitations to be made in accordance with Rule U-12E-3. These

rules require the statement of comprehensive information as to the.

terms of any plan, financial and other data relative to the fairness and

feasibility of a plan, the interests of persons composing or negotiatingthe plan and soliciting with respect to it, the basis upon which claims

for expenses and compensation are to be made, and description of themanner in which solicitations are to be made. Forms of agreements.

with security holders, authorizations and letters of solicitation and

other soliciting material are also required to be filed as exhibits.

Itis expected that the general revision of the rules adopted under'

Section 14 (a) of the Securities Exchange Act of 1934 referred to in

the Third Annual Report of the Commission will be promulgated early-
FOURTH ANNUAL REPORT 73-

in the fiscal year ending June 30, 1939.31 This revision will be based

on the experience of security holders, corporations, and the Commission's staff over a period of almost 3 years.

CONFIDENTIAL TREATMENT OF APPLICATIONS, REPORTS, OR

DOCUMENTS

Under the provisions of Section 24 (b) of the Securities Exchange

Act of 1934, and the rules adopted thereunder, persons who object

to the public disclosure of information contained in any application,

report, or document filed by them with the Commission under that

Act may submit the confidential portion of such material to the.

Chairman of the Commission, together with an application stating

the grounds upon which the objection to public disclosure is based.

The Commission is empowered to grant or deny such application.

The Securities Act of 1933, as amended, also authorizes confidential

treatment by the Commission of material contracts filed in connection with registration statements where the disclosure of such contracts would impair their value and would not be necessary for the

protection of investors. Similarly, the Commission may act onapplications for confidential treatment of information in applications,

declarations, reports, or other documents filed under the Public Utility

Holding Company Act of 1935.

During the year, 139 applications for the confidential treatment of

certain material were filed, involving a total of 195 separate items

of information, principally in connection with the annual reports of

such issuers filed with the Commission pursuant to Section 13 of the

Securities Exchange Act of 1934. Material filed by 298 applicants

involving 381 items of information (including applications pendingat the beginning of the fiscal year), was made available for public

inspection during the year, pursuant to Rule UB2 (which rule was.

redesignated as Rule X-24B-2 as of September 10, 1938),.the Commission having determined that disclosure of such information is in.

the public interest, or the applicants having withdrawn their objections to its public disclosure. Sixty-one applications for confidential

treatment (including a number pending from the previous year),

submitted by 35 applicants, involving 90 items of information, were

granted during the year and 56 private hearings on applications for

confidential treatment were held at the request of the various applicants.

Ii A complete revision of the rules and regulations relating to the solicitation of proxies, consents, or

authonsetrons with respect to securities registered on national securities exchanges was published by the

Oommission on August 11, 1938, drsignated as Regulation X-H. The new rules substantially broaden

the amount of information which Is to be made available to the security holders whose proxies are solicited

and Increase the facility with which he may determine the nature ofthe matters upon WhICha vote ISbeing.

sought.

104139-39--6
74 SECURITIES AND EXCHANGE COMMISSIOX

Twenty-one applications for confidential treatment of material

contracts or portions thereof submitted in connection with registration statements filed under the Securities Act of 1933, as amended,

were submitted during the year, pursuant to Rule 580 under that

Act. Of these requests, 17 were granted in whole or in part, 1 was

denied, and 3 were withdrawn.

Twenty-two applications for confidential treatment of material

filed under the Public Utility Holding Company Act of 1935 were

received during the year, all of which applications were pending on

June 30, 1938.

At the beginning of the year, there were pending in several U. S.

Circuit Courts of Appeal 21 petitions filed by issuers seeking to

review determinations by the Commission denying applications for

confidential treatment. During the year, 11 of these petitions were

dismissed on the motion of the petitioners, and the material involved

was made public. At the close of the year, it was expected that 3

of the remaining 10 petitions would be presently dismissed. Only

one petition for judicial review of the Commission's determinations

in such matters was filed during the fiscal year. Appendix VI,

Table 5, contains a summary of all confidential treatment cases

pending in the courts during the past fiscal year and their status as

of June 30, 1938.

REPORT ON THE STUDY AND INVESTIGATION OF PROTECTIVE AND

REORGANIZATION COMMITTEES

During the past fiscal year the Commission has continued to report

to the Congress the results of its study and investigation of the work,

activities, personnel, and functions of protective and reorganization

committees, pursuant to the authority conferred upon it by Section

211 of the Securities Exchange Act of 1934. This study was originally

under the general supervision of Chairman William O. Douglas and

during the last year under the supervision of Commissioner Jerome

Frank, with Abe Fortas as Assistant Director and Samuel O. Clark,

Jr., as Counsel.

Part VII of the Commission's report, which pertains to Management Plans Without Aid of Committees, was transmitted to the

Congress on May 10, 1938. This volume deals with so-called voluntary reorganizations and contains recommendations for legislative

action designed to correct the abuses prevalent in this field. In

addition to Part VII referred to above, the parts of this report which

have been completed and transmitted to the Congress are as follows:

Part I. Strategy and Techniques of Protective and Reorganization Committees.

Part II. Committees and Conflicts of Interest.

Part III. Committees for the Holders of Real Estate Bonds.
FOURTH ANNUAL REPORT 75

Part IV. Committees for the Holders of Municipal and

Quasi-Municipal Obligations.

Part V. Protective Committees and Agencies for Holders

of Defaulted Governmental Bonds.

Part VI. Trustees Under Indentures.

A final report, Part VIII, Conclusions and Recommendations, is

now in the process of completion. This volume includes an extensive

discussion of the law relating to corporate reorganizations and an

examination ofrecent legislative reforms in this field.

The basic recommendations contained in the various parts of the

report described above were embodied in three bills which were under

consideration by the 75th Congress: The Barkley Bill (S. 2344), the

Lea Bill (H. R. 6968), and Chapter X of the Chandler Bill (H. R.

6439, H. R. 8046). The last-named bill was sponsored by Congressman Walter Chandler in the House and Senator Joseph C. O'Mahoney

in the Senate. This bill, which constitutes a comprehensive revision

of the National Bankruptcy Act, was enacted by the Congress and

approved by the President on June 22, 1938. Chapter X of this Act,

as now amended, effects a number of substantive and procedural

improvements in the corporate reorganization provisions previously

known as Section 77B and embodies many of the recommendations

made by this Commission to the Congress in Part I of the report in

question. Among the more important of these changes are the provisions which require the appointment of disinterested trustees in

every case of substantial size and which supply administrative assistance to the Federal Courts by placing the Commission's technical

facilities in business and financial matters at their disposal in reorganization cases under Chapter X. The court may invite or permit the

Commission to appear in any reorganization proceeding thereunder.

In addition, the court may, in any such reorganization proceeding,

refer reorganization plans to the Commission for an advisory report

thereon. Such reference is mandatory where liabilities of a debtor

corporation exceed $3,000,000. The Commission has authorized the

creation of a Reorganization Division in connection with the exercise

of its functions under this chapter.

The Barkley Bill (S. 2344), introduced on June 6, 1937, deals with

the corporate trustee and the trust indenture. It was favorably

reported by the Senate Banking and Currency Committee on April

19, 1938, and hearings on a companion bill (H. R. 10292), introduced

in the House of Representatives on April 18, 1938, were held before

the House Committee on Interstate and Foreign Commerce. Hearings were also held on the Lea Bill (H. R. 6968) before the House

Committee on Interstate and Foreign Commerce. This bill relates

generally to the solicitation of proxies, deposits, and assents in connection with reorganizations. Representatives of the Commission
76 SECURITIES AND EXCHAKGE COM:\USSror-;

assisted the Congressional Committees in drafting the above described legislation and appeared at committee hearings and testified

in connection therewith.

STUDY OF INVESTMENT TRUSTS AND INVESTMENT COMPANIES

The Commission is completing its study of investment trusts and

investment companies, being conducted pursuant to Section 30 of the

Public Utility Holding Company Act of 1935. This study and the

preparation of the reports have been under the general supervision of

Commissioner Robert E. Healy, with Paul P. Gourrich, Technical

Adviser to the Commission, as Director of the Study, the late William

R. Spratt, Jr., as Chief of the Study, David Schenker as Counsel and

L. M. C. Smith as Associate Counsel.

On June 11, 1938, the Commission transmitted Part One of its final

report to the Congress. This part of the report, consisting of three

chapters, deals with the origin, scope, and conduct of the study, the

nature and classification of investment companies, and the origins of

the investment company movement in this country.

Part Two of this final report, consisting of eight chapters containing

detailed analyses of statistical data, is practically completed. The

Commission will transmit these chapters to the Congress immediately

upon completion."

Both Part Three, dealing with the economic significance of investment companies and their control of industry, and Part Four, treating

with the abuses and defects in connection with investment companies,

as well as six supplemental reports relating respectively to fixed and

semi-fixed investment trusts, installment investment plans, companies

issuing face amount installment certificates, common or commingled

trust funds, investment counsel and investment advisory services,

and British management investment trusts, are nearing completion

and will be submitted to the Congress within the current fiscal year.

During the past fiscal year, the Commission conducted additional

public examinations on approximately 90 investment companies, at

which about 13,000 pages of testimony were taken and approximately 2,700 exhibits were introduced into evidence.

In addition, the Commission held a public conference with representatives of investment counsel and investment advisory services to

supplement the basic statistical information obtained from the replies

to the questionnaire prepared by these organizations.

The following are the names of the companies upon which public

inquiries were held during the past fiscal year:

"Volume I, Volume II, and Volume III covering the first five chapters of Part Two were transmitted too

the Congress on July 28,1938,September 19,1938,and October 31,1938,respectively.
FOURTH AX~UAL REPORT 77

Management Investment Companies

Administered Fund Second, Inc. See First Income Trading Corporation.

Affiliated Fund, Inc. (formerly known as Affiliated Investors Fund, Inc.).

Aldred Investment Trust.

Alexander Fund, The.

.Alphs Shares, Inc.

Investors Fund of America, Inc.

Monthly Income Shares, Inc. (New Jersey).

Monthly Income Shares, Inc. (New York).

United Standard Oil-fund of America, Inc.

.American and Continental Corporation. See American General Corporation.

American and Dominion Corporation.

American Utilities & General Corporation.

American Founders Corporation. See American General Corporation.

American Founders Trust. See American General Corporation.

American & General Securities Corporation. See American General Corporation.

American General Corporation (Founders Group).

American and Continental Corporation.

American Founders Corporation.

American Founders Trust.

American & General Securities Corporation.

American Securities Corporation.

Founders Associates.

General Investment Corporation.

Insuranshares Certificates, Inc.

Insuranshares Corporation of Delaware.

.Insuranshares & General Management Corporation.

International & General Corporation.

International Securities Corporation of America.

International Securities Trust of America.

Investment Trust Associates.

North and South American Corporation (Delaware).

Second International Securities Corporation.

United Founders Corporation.

United States & British International Co., Ltd .

. United States Electric Power Corporation.

United States & Overseas Corporation .

.American 1. G. Chemical Corporation.

American Securities Corporation (formerly known as Founders General Corporation). See American General Corporation.

American Utilities & General Corporation. See American & Dominion Corporation.

Bond & Share Trading Corporation. See First Income Trading Corporation.

Broad Street Investing Co., Ine., The. See Tri-Continental Corporation.

Capital Administration Co., Ltd. See Tri-Continental Corporation.

Consolidated Investment Trust.

Kidder Participations, Inc.

Kidder Participations, Inc. No.2.

Kidder Participations, Inc. No.3.

Kidder Peabody Acceptance Corporation.

Continental Securities Corporation. See First Income Trading Corporation.

Continental Securities Corporation (old). See First Income Trading Corporation.

Continental Securities Holding Corporation. See First Income Trading Corporation.
78 SECURITIES AND EXCHANGE COM2\HSSION

Continental Shares, Inc.

Eastern Utilities Investing Corporation (formerly known as Eastern Utility

Preferred Holding Corporation).

First Income Trading Corporation.

Administered Fund Second, Inc.

Bond & Share Trading Corporation.

Bureo, Inc.

Continental Securities Corporation.

Continental Securities Corporation (old).

Continental Securities Holding Corporation.

Insuranshares Corporation of Delaware.

Reynolds Investing Co., Inc.

Founders Associates. See American General Corporation.

Founders Group, The. See American General Corporation.

General Investment Corporation (formerly known as Public Utility HoldingCorporation of America). See American General Corporation.

Graymur Corporation. See Tri-Continental Corporation.

International & General Corporation. See American General Corporation.

International Securities Corporation of America. See American General Corporation.

International Securities Trust of America. See American General Corporation.

Investment Trust Associates. See American General Corporation.

Investors Equity Co., Inc. See Tri-Continental Corporation.

Investors Fund of America, Inc. (formerly known as Corporate Securities Fund;

Ine.), See Alpha Shares, Inc.

Kidder Participations, Inc. See Consolidated Investment Trust.

Kidder Participations, Inc. No.2. See Consolidated Investment Trust.

Kidder Participations, Inc. No.3. See Consolidated Investment Trust.

Kidder Peabody Acceptance Corporation. See Consolidated Investment Trust.

Marine Share Corporation (formerly known as Randwood Corporation). SeeMarine Union Investors, Inc.

Marine Union Investors, Inc.

Marine Share Corporation.

Niagara Cataract Consolidated Corporation.

Pan-American Share Corporation.

Monthly Income Shares, Inc. (New Jersey). See Alpha Shares, Inc.

MontWy Income Shares, Inc. (New York). See Alpha Shares, Inc.

Niagara Cataract Consolidated Corporation. See Marine Union Investors, Inc.

Niagara Share Corporation (Delaware). See Niagara Share Corporation of

Maryland.

Niagara Share Corporation of Maryland.

Bennie Share Corporation.

Niagara Share Corporation (Delaware).

Niagara Share Corporation (New York).

Union Rochester Share Corporation.

Niagara Share Corporation (New York). See Niagara Share Corporation of

Maryland.

North & South American Corporation (Delaware). See American General Cor:'

poration,

Pan-American Share Corporation. See Marine Union Investors, Inc.

Railroad Shares Corporation. See Seaboard Utilities Shares Corporation.

Reynolds Investing Co., Inc. See First Income Trading Corporation.
FOURTH ANNUAL REPORT 79>

Seaboard Utilities Shares Corporation (Delaware).

Railroad Shares Corporation.

Seaboard Utilities Shares Corporation (Massachusetts).

Utilities Hydro & Rails Shares Corporation.

Seaboard Utilities Shares Corporation (Massachusetts). See Seaboard Utilities

Shares Corporation (Delaware).

Second International Securities Corporation. See American General Corporation;

Selected Industries, Inc. See Tri-Continental Corporation.

Tri-Continental Corporation.

Broad Street Investing Co., Inc., The.

Capital Administration Co., Ltd.

Graymur Corporation.

Investors Equity Co., Inc.

Selected Industries, Inc.

Wedgwood Investing Corporation.

Union Rochester Share Corporation. See Niagara Share Corporation of Maryland.

United Founders Corporation. See American General Corporation.

United Standard Oil-fund of America, Inc. See Alpha Shares, Inc.

United States & British International Co., Ltd. See American General Corporation.

United States Electric Power Corporation. See American General Corporation.

United States & Overseas Corporation. See American General Corporation.

Utilities Hydro & Rails Shares Corporation. See Seaboard Utilities Shares Corporation (Delaware).

Wedgwood Investing Corporation. See Tri-Continental Corporation.

Fixed and Semi-Fixed Investment Trusts

ABC Trust Shares, Series D. See Alpha Shares, Inc.

ABC Trust Shares, Series E. See Alpha Shares, Inc.

Affiliated Fund, Inc.

Super-Corporations of America Trust Shares, Series A.

Super-Corporations of America Trust Shares, Series B.

Super-Corporations of America Trust Shares, Series C.

Super-Corporations of America Trust Shares, Series D.

Super-Corporations of America Trust Shares, Series AA.

Super-Corporations of America Trust Shares, Series BB.

Alpha Shares, Inc.

ABC Trust Shares, Series D.

ABC Trust Shares, Series E.

American Composite Trust Shares, Cumulative Series.

Collateral Trustee Shares, Series A.

Trustee Standard Investment Shares, Series C.

Trustee Standard Investment Shares, Series D.

Trustee Standard Oilshares, Series A.

Trustee Standard Oilshares, Series B.

Trusteed New York Bank Shares.

Universal Trust Shares.

American Composite Trust Shares, Cumulative Series. See Alpha Shares, Inc.

Collateral Trustee Shares, Series A. See Alpha Shares, Inc.

Super-Corporations of America Trust Shares, Series A. See Affiliated Fund, Inc.

Super-Corporations of America Trust Shares, Series B. See Affiliated Fund, Inc.

Super-Corporations of America Trust Shares, Series C. See Affiliated Fund, Inc.

Super-Corporations of America Trust Shares, Series D. See Affiliated Fund, Inc.

Super-Corporations of America Trust Shares, Series AA. See Affiliated Fund, Inc.
"80 SECURITIES AND EXCHANGE COl\DnSSION

Super-Corporations of America Trust Shares, Series BB. See Affiliated Fund, Inc.

Trustee Standard Investment Shares, Series C. See Alpha Shares, Inc.

'Trustee Standard Investment Shares, Series D. See Alpha Shares, Inc.

"Trustee Standard Oilshares, Series A. See Alpha Shares, Inc.

"Trustee Standard Oilshares, Series B. See Alpha Shares, Inc.

Trusteed New York Bank Shares. See Alpha Shares, Inc.

Universal Trust Shares. See Alpha Shares, Inc.

Sponsors of Installment Investment Plans

Income Foundation Fund, Inc.

Income Foundation, Inc.

Face Amount Installment Certificate Companies

Fidelity Investment Association.

Investors Syndicate.

MARGIN REGULATIONS

Regulations T and U, dealing with margin requirements, were

promulgated by the Board of Governors of the Federal Reserve

System pursuant to Section 7 of the Securities Exchange Act of 1934.

But responsibility for enforcement of Regulation T devolves upon the

Commission. Accordingly, the Commission has continued, with such

personnel as was available, its systematic inspection of the books and

records of firms carrying margin accounts for customers.

Following the revision of Regulation T, which became effective on

January 1, 1938, Commission representatives' visited the offices of

security dealers in selected vicinities throughout the country for the purpose of reviewing their methods of doing business. As a result of this

work the Commission was able to assist numerous dealers in securities

in arriving at a greater understanding of the requirements of Regulation T and other rules and regulations adopted pursuant to the Securities Exchange Act of 1934.

The New York, Boston, Chicago and San Francisco Regional

Offices of the Commission are at present equipped to carry on margin

inspections on a small scale. These inspections cover the accounts

carried by members of the exchanges in these regions. The accounts

of non-member brokers and dealers subject to Regulation T are also

receiving such inspection as personnel limitations permit.

The results of these inspections have been made available to the Board

of Governors of the Federal Reserve System, and in a number of

instances the Commission has referred these results to various exchanges for disciplinary action.

DETECTION OF MANIPULATIVE AND DECEPTIVE PRACTICES

Market Surveillance

During the past fiscal year, the Commission rounded out its procedure for the systematic surveillance of trading in securities on ex-

-change markets for the purpose of detecting manipulative activity.
FOURTH A.L~NUAL REPORT 81

At the close of the fiscal year, daily volume and price movements of

3,133 exchange issues were under continued observation." These

observations continue the routine established by the Commission for

scrutinizing the market action of securities in the light of developments affecting the general market and specific industries.

This routine is supplemented by special observations of securities

in the process of primary and secondary distribution, securities for

which any substantial options are outstanding and securities in which

unusual transactions by officers, directors, or principal stockholders

have been reported. Data serving as a basis for these observations

are secured from examination of the terms of offering of all registration statements filed under the Securities Act of 1933 pertaining to

securities traded on the exchange or convertible into any such security;

from reports furnished by the New York Stock Exchange and the

New York Curb Exchange of all essential facts of secondary distributions of securities traded on these exchanges where members are

required to submit their distribution plans to the exchange for approval; from reports furnished by these exchanges of all options of

which they were notified by their members; by examination of the

reports filed under Section 16 (a) of the Securities Exchange Act ot

1934 and Section 17 (a) (2) of the Public Utility Holding Company

Act of 1935; from information furnished by members of the public;

and from other sources.

The Commission has also sought to extend its observation of securities traded in the over-the-counter markets. The methods used in

observing the market action of such securities are, in general, similar

to those employed in the case of securities traded on exchanges, but

even greater emphasis is placed upon the importance of market action

during distributions, and careful studies are made of all registration

statements filed under the Securities Act of 1933.

Trading Investigations

Trading investigations are conducted by the Commission for the

purpose of detecting the use of manipulative practices in connection

with the trading in securities registered on national securities exchanges. For reasons of policy the Commission keeps confidential.

the fact that trading in a security is under investigation lest knowledge

of the existence ofsuch an investigation react adversely upon the issuer

or its securities. These investigations entail varying degrees of time

and effort. Some cases mey be disposed of after a short investigation.

Inother cases it becomes necessary for the Commission to reconstruct

the market over an extended period of time.

In the conduct of these investigations the Commission frequently

finds it necessary to resort to the subpena power conferred upon it by

!IThe figure given above includes some duplication, inasmuch as one issue traded on two exchanges Illtreated as two separate issues.
82 SECURITIES AND EXOHANGE CO.Ml\IISSIO~

Section 21 (b) of the Securities Exchange Act of 1934. Such cases

are classified as formal investigations. These are frequently preceded

by investigations which are conducted without the use of subpena

power and in that sense are informal in nature. To expedite its work,

the Commission divides informal cases into flying quizzes and preliminary investigations. The flying quiz is designed to detect and

discourage incipient manipulation by a prompt determination of the

causes for unusual market behavior. Often the results of a flying

quiz point to a legitimate reason for the activity under review and the

case is closed. Frequently they uncover facts which require a more

extended investigation, in which case a preliminary investigation is

undertaken.

During the fiscal year 66 flying quizzes were in progress, of which 19

developed into preliminary investigations and 35 were closed. There

were 12 flying quizzes still in process at the end of the year. On July

1, 1937, 48 preliminary investigations were in process. During the

fiscal year 27 such investigations were initiated and 40 were closed.

As the result of these preliminary investigations, 11 formal investigations were authorized. There were 24 preliminary investigations

pending at the end of the year. On July 1, 1937, 29 formal investigations were in process and during the year 14 new formal investigations

were authorized and 14 were closed, leaving 29 still in process at the

end of the year.

Thus, a total of 154 trading investigations were in progress throughout the year, of which 65 were pending at the end of the year. In

many of the 89 cases which were closed, evidence was obtained which

resulted in affirmative action by the Commission, the Department of

Justice, or national securities exchanges.

Disposition of Trading Cases

There are a number of remedies which the Commission may invoke

against persons who have violated the anti-manipulative provisions

of the Securities Exchange Act of 1934. It may seek to enjoin the

persons complained of through the courts. It may refer the matter

to the Department of Justice for criminal prosecution, and it may also

take appropriate administrative action. Thus, if the respondent is a

member of a national securities exchange, proceedings may be instituted by the Commission under Section 19 (a) (3) of the Securities

Exchange Act of 1934 to determine whether such member shall

be suspended for a period not exceeding 12 months or expelled from

the exchange. If the respondent is a registered broker-dealer

(whether a member of an exchange or a non-member) the Commission

may, pursuant to Section 15 (b) of such Act, conduct hearings to

determine whether such registration shall be revoked.

Since by the provisions of Section 6 (b) the rules of a registered

national securities exchange must include a provision for the expul-
FOURTH ANNUAL REPORT 83

sion, suspension, or disciplining of any member who wilfully violates

any provision of the Securities Exchange Act of 1934 or any rule or

regulation thereunder, the Commission may refer evidence of such

violation to the appropriate exchange for disciplinary action under its

rules.

During the past fiscal year, formal action was taken in a total of

15 cases of alleged violation of Section 9 of the Securities Exchange

Act of 1934, the provisions of which prohibit manipulation of security

prices. Five proceedings under Section 19 (a) (3) of the Act resulted

in the expulsion or suspension of members from exchanges; one

hearing for revocation of registration of a broker-dealer resulted in the

withdrawal of the registration; permanent injunctions were secured

in the courts in four cases; two convictions were secured in criminal

prosecutions conducted by the Department of Justice; another case

was referred to that department; and two references were made to

exchanges on evidence of violation of Section 9 of the Securities

Exchange Act of 1934. These references resulted in the dissolution

of one firm, with an undertaking that certain partners of that firm

should not apply for membership in the exchange or partnership in any

member firm, and in the expulsion of one exchange member and the

suspension of another. A chronological record of action taken on

cases involving violation of Section 9 during the fiscal year ended

June 30,1938, follows: 34

Securities Exchange Act of 1934-Comrnission Action taken on Section 9 Cases

During the Fiscal Year Ended June 30, 1938.

On August 19, 1937, the Commission issued an order expelling

Michael J. Meehan from membership on the New York Stock Exchange, the New York Curb Exchange and the Board of Trade of the

City of Chicago. This action was based upon proceedings instituted

under Section 19 (a) (3) on October 26, 1935, which alleged violations

of Sections 9 (a) (1) and 9 (a) (2) in transactions in Ballanca Aircraft.

Corporation common stock on the New York Curb Exchange during

1935.

On August 7, 1937, E. L. Cord and Morris Markin consented to

being permanently enjoined by the U. S. District Court at Chicago

from further violations of Section 9 of the Securities Exchange Act of

1934. This action resulted from an investigation of the activities

and transactions of these persons in the securities of Checker Cab

Manufacturing Corp., Parmelee Transportation Co., and Chicago

Yellow Cab Co., and of Cord in Auburn Automobile Co. stock during

1935and 1936.

On August 7, 1937,John R. Moore consented to being permanently

enjoined from further violations of Section 9 (a) (2) of the Securities

Exchange Act of 1934 and Section 17 (a) of the Securities Act of 1933

.. From this record Is omitted the case referred to the Department of Justiee, since no publie action has

yet been taken.
84 SECURITIES AND EXCHANGE COMMISSION

following a bill of complaint entered in the U. S. District Court for

the Eastern District of Washington. This action resulted from an

investigation into the transactions of Moore, then an officer of the

National Company of Idaho, Inc., during March 1937 in Jack

Waite Mining Company common stock listed on the Standard Stock

Exchange of Spokane.

On October 8, 1937, Thomas F. Gagen, a member of the Boston

Stock Exchange consented to suspension as a member of that exchange

for 1 year beginning October 11, 1937. Gagen was a respondent in

proceedings which were instituted under Section 19 (a) (3) in May

1936, based on transactions on the Boston Stock Exchange in East

Boston Company capital stock during 1935. A hearing was ordered on

October 8, 1937, to determine whether the broker-dealer registration

of John L. Cronan, a former partner of Gagen and a participant in the

transactions complained of, should not be revoked. Cronan withdrew

his registration on January 5,1938.

On October 16, 1937, the Commission announced that as a result

of investigations conducted by the New York Stock Exchange, the

New York Curb Exchange and the Commission, the firm of Arnold &

Co., members of the New York Stock Exchange and associate members of the New York Curb Exchange, executed and delivered to the

New York Stock Exchange an undertaking to dissolve on or before

October 20, 1937. The undertaking stipulated that if any new firm

be formed, neither Roy W. Arnold nor Maurice Goodman, then

partners in Arnold & Co., will be partners of such firm. Roy W.

Arnold tendered his resignation as an associate member of the New

York Curb Exchange effective October 20, 1937. This action was

taken as a result of an investigation conducted by the Commission

late in 1936 and early in 1937 into their activities in connection with

transactions in the common stock of Pierce Governor 00., on the

New York Curb Exchange. Substantial evidence was adduced of

acts of members of this firm which indicated the existence of possible

violations of Sections 9 (a) (1),9 (a) (2) and 11 (d) (1) of the Securities

Exchange Act of 1934. On April 8, 1937, the Commission authorized

the reference of this matter to both the New York Stock and New

York Curb Exchanges. Arnold & Co. withdrew their broker-dealer

registration on December 6, 1937.

On January 21, 1938, the U. S. District Court of Massachusetts

sentenced Morey Getz who pleaded guilty to violation of Section

9 (a) (1) of the Securities Exchange Act of 1934 to 1 year and 1 day.

His sentence was suspended and he was placed on probation. Two

indictments alleging such violation were brought on January 4, 1937,

in connection with his transactions in Suburban Electric Securities

Company common stock on the Boston Stock Exchange during 1936.

On February 4, 1938, the U. S. Circuit Court of Appeals for the
FOURTH ANNUAL REPORT 85

Seventh Circuit affirmed the action of the District Court for the

Northern District of Illinois in enjoining R. J. Koeppe & Co. from

further violations of Section 9 (a) (1), (2), and (3) of the Securities

Exchange Act of 1934 and Section 17 (a) (2) of the Securities Act of

1933. This case involved transactions of R. J. Koeppe in the common

stocks of Paducah Cooperage Co., Inc., and Wahl Company during

1935, the former security then registered on the Chicago Curb Exchange and the latter security registered on the Chicago Stock

Exchange

On February 28, 1938, Charles C. Wright, a member of the New

York Stock Exchange, the New York Curb Exchange, the Philadelphia

Stock Exchange, the Chicago Stock Exchange and the Board of

Trade of the City of Chicago, was expelled from such exchanges,

effective April 30, 1938. Norman Stern and Herbert King, members

of the New York Stock Exchange and the New York Curb Exchange,

were suspended from such exchanges for 1 year beginning April 30,

1938. This action resulted from proceedings initiated under Section

19 (a) (3) on February 27, 1936, based upon their transactions in the

common stock of Kinner Airplane & Motor Corp., Ltd., on the

Los Angeles Stock Exchange during 1935. An appeal to the U. S.

Circuit Court of Appeals by the respondent Wright is now pending.

On March 5, 1938,the U. S. District Court for the Southern District

of New York permanently enjoined 16 individuals and the firm of

Torr & Co. from further violations of Section 9 (a) (2) of the Securities

Exchange Act of 1934 and Section 17 (a) (1) of the Securities Act of

1933. This action was based upon an investigation of the transactions

during 1935 of these individuals in the common stock of Trans-Lux

Daylight Picture Screen Corporation, a registered security on the

New York Curb Exchange.

On May 12, 1938,the U. S. District Court for the Southern District

of New York sentenced seven individuals who pleaded guilty to fraud

and manipulation in the sale of the common stock of Standard Commercial Tobacco Company, General Bronze Corporation, and Cable

Electric Products, Inc. They received sentences of 1 year and 1 day,

and 2 years. The individuals operated as H. W. Schmid Co. and the

indictment which was brought on March 30, 1937, alleged violations

of Sections 9 (a) (1) and 9 (a) (2) of the Securities Exchange Act of

1934, as well as violations of the Securities Act of 1933 and the mail

fraud statutes.

On Ml1Y18, 1938, Gerald M. Loeb and Gordon B. Crary, partners

ofE. F. Hutton & Co., members of the New York Stock Exchange, the

New York Curb Exchange, the Board of Trade of the City of Chicago,

and the Los Angeles Stock Exchange, having resigned as partners

from that firm agreed, for a period of 10 and 8 months, respectively,

not to become a member of a national securities exchange, and not to
86 SECURITIES AKD EXCH--\.NGE COMMISSION

apply for registration as a broker or dealer, and not to become ft

partner, official or director, or branch manager of any registered

broker or dealer. Such action resulted from the institution of proceedings under Section 19 (a) (3) on December 31, 1937, against

these persons in connection with their transactions in the capital stock

of Auburn Automobile Company during 1935 and 1936.

On June 1, 1938, the Chicago Stock Exchange suspended W. S.

Mills, Jr., for a period of 1 year and expelled H. J. Mills. This action

was based upon a reference to the Exchange by the Commission of

information concerning certain transactions in 1937 in Backstay Welt

Company common stock, a security registered on the Chicago Stock

Exchange.

On June 21, 1938, the Commission by order suspended Faris R.

Russell, a partner of White, Weld & Co., for a period of 90 days from

August 21, 1938, from membership on the New York Stock Exchange,

the New York Curb Exchange, and the Board of Trade of the City of

Chicago. This action was based upon the institution of proceedings

under Section 19 (a) (3) on April 23, 1936, in connection with the

activities and transactions of White, Weld & Co. during 1935 in the

common stock of A. O. Smith Corporation, then a security registered

on the New York Curb Exchange.

On April 7, 1938, the Trial Examiner's report on the proceedingsinstituted under Section 19 (a) (3) against the firm of W. E. Hutton

and certain of its partners was filed with the Commission. Briefs in

support of the findings of the Trial Examiner, exceptions to such findings and briefs in support of such exceptions were filed on October 5;

1938. Reply briefs are to be filed by February 1, 1939, and February

8, 1939 has been set as the date for oral argument before the Commission.

Miscellaneous

As a result of trading investigations evidence was uncovered in

numerous instances of violations of other provisions of the Securities

Exchange Act of 1934 as well as of the Securities Act of 1933 and of the

rules and settled practices of national securities exchanges. Trading

investigations have sometimes resulted in the institution of stop order

proceedings under Section 8 (d), and examinations under Section 8 (e),

of the Securities Act of 1933. A notable instance occurring during the

past year was in the matter of Austin Silver Mining Company, in which

a stop order was entered by the Commission on July 13, 1938.

On June 27, 1938, stop order proceedings under Section 8 (d) were

instituted in the matter of Reiter-Foster Oil Co. as a result of facts

adduced in a trading investigation. In numerous other instances the

facts uncovered by a trading investigation have resulted in the filing of

amendments to registration statements, the revision of reports filed

under Section 16 of the Securities Exchange Act of 1934 by officers;
FOUHTH A.N~UAL REPORT 87

directors, and principal stockholders, and in other ways have brought

about compliance with the provisions of these Acts.

Trading investigations have led to the institution of proceedings

for the purpose of enjoining continued violations of Section 8 (b) of

the Securities Exchange Act of 1934 and Section 17 of the SecuritiesAct of 1933. Thus, on February 4, 1938, upon application by theCommission, the U. S. District Court sitting in Philadelphia permanently enjoined John W. Fry of Philadelphia from the furthersale of securities in violation of the above sections. This action wasbased on facts developed during a trading investigation and as a

result John W. Fry & Co. withdrew its registration as broker-dealer.

During the fiscal year, a program for more vigilant administration of

national securities exchanges has been developed as narrated elsewhere in this report. In continuance of its former policy, the Commission has assisted national securities exchanges in their efforts to

enforce their own rules and in many instances matters have been

brought to the attention of national securities exchanges which, as fl,

result, have taken disciplinary action against members, who havebeen censured, fined, and in some cases suspended or expelled. In

one instance a specialist was fined by an exchange and required to

undo four trades. Disciplinary action of this character has been

predicated upon such matters as the failure of members to keep'

proper records, insolvency, violation of Regulation T of the Board of

Governors of the Federal Reserve System, manipulative practices;

and other violations of exchange rules.

In addition, facts disclosed by trading investigations have indicated

the necessity for rules and regulations which have been adopted by

the Commission pursuant to the provisions of the Securities Exchange

Act of 1934, and have influenced national securities exchanges to.

amend or supplement their own rules.

SPECIAL STUDIES AND THE PREPARATION OF RULES

Short Selling

.Although the problems relating to short selling have received

continuous attention from the Commission since its creation in 1934,

market conditions, until the past fiscal year, did not present an opportunity for first-hand current observation of short selling in severely

declining markets. The Commission used the opportunity afforded

by the sharp drop in prices in September and October of 1937 to make

a detailed study of transactions in 20 selected stocks listed on the

New York Stock Exchange during the periods of September 7 to 13r

inclusive, and October 18 to 23, inclusive.

As a result of this study the Commission issued Rules X-lOA-I,

X-lOA-2 and X-3B-3 on January 24, 1938, effective on February 8,

1938. The principal effect of these rules is to require that any short
88 SECURITIES AND EXCHANGE COMMISSION

sale of a security must be made at a price above the last preceding

sale price. Since the issuance of Rule X-1OA-1, two exemptions

from its provisions have been adopted. On February 10, 1938, the

Commission allowed an exemption applicable to equalizing transactions on domestic exchanges; on April 8, 1938, certain arbitrage

transactions were exempted.

Subsequently, the Commission called for data similar to that which

provided the bases for its study of the market in September and

October of 1937. The same stocks which had been used at that time

were again subjected to detailed scrutiny for the period of March 21

to April 2, 1938, inclusive. This re-check of its data will permit the

Commission to judge the adequacy and effectiveness of its regulations.

Trading by Officers, Directors. and Principal Stockholders

At this time the Commission also instituted a study and review of

the effects of the requirements of Section 16 (a) of the Securities

Exchange Act of 1934. This section covers the trading by officers,

directors and principal stockholders in the securities of their own

companies. The Commission's study, which is still in process, covers

all reports filed with the Commission since this section of the Act

became applicable, in an effort to determine (a) the extent to which

this trading is carried on, (b) the price ranges of securities in which

there appears to be the greatest concentration of this type of trading,

(c) other characteristics of the securities in which this type of trading

appears to be concentrated, and (d) the extent to which the reduction

in this type of trading, resulting from the publicity requirements of

the statute, affected the general market.

Segregation

Continuing the procedure suggested in the Commission's report

on the Feasibility and Advisability of the Complete Segregation of

the Functions of Dealer and Broker," the Commission carried on

during the fiscal year the study of this problem and has prepared

drafts of rules to require the registration of members of certain

national securities exchanges as floor traders and to impose certain

limitations upon their activities; to limit securities positions of members' registered firms carrying margin accounts for customers; and to

require the filing of reports of all transactions of such firms. These

rules, in tentative form, have been sent to all exchanges for comment

and criticism. Discussions of the proposed rules have been instituted.

Further study has also been devoted to the activities of specialists,

with emphasis upon material which the New York Stock Exchange

assembled in cooperation with the Commission indicating the financial

resources of specialists. This information should enable the Commission to determine whether these resources are adequate to permit

U Transmitted to Congress on June 20, 1936, and subsequently published by the Commission.
1!~OURTH ANXUAL RJ<JPORT 89

specialists to perform their function in the maintenance of fair and

orderly markets in the securities in which they are registered.

Financial Safeguards-Richard Whitney & Company

The efforts of the Commission continued to be directed toward the

creation of effective means of protecting customers from loss through

the insolvency of brokerage firms. In this connection, the failure of

the firm of Richard Whitney & Company, members of the New York

Stock Exchange, and the disclosures of misappropriations of customers' funds and securities by the senior partner demonstrated the

urgent necessity of more adequate regulation.

The investigation of the circumstances antecedent to and surrounding the failure of Richard Whitney and Company and the expulsion of Richard Whitney from the New York Stock Exchange

was, in this connection, one of the most significant ever undertaken

by the Commission. Richard Whitney had held the highest offices

in the New York Stock Exchange, having been Chairman of the

Business Conduct Committee, Vice President, and President for

several terms. At the time of his failure and exposure in March

1938, he was a member of the Governing Committee, a member of

the Law Committee, and Trustee of the Gratuity Fund.

The Securities and Exchange Commission received information

concerning Richard Whitney's misconduct and the financial distress

-of his firm during the evening of March 7, 1938, when these matters

were brought to its attention by Exchange officials. The Commission

ordered an immediate investigation on the morning of March 8, 1938.

On March 8,1938, the New York Stock Exchange suspended the firm

-of Richard Whitney and Company for insolvency and issued a statement indicating that Richard Whitney, senior partner of the firm, had

been guilty of misconduct. On March 17, 1938,Richard Whitney was

-expelled from the Exchange and two of his partners were suspended for

3 years. In the meantime, Richard Whitney had been indicted for

grand larceny in the first degree for appropriating to his own use securities entrusted to him in a fiduciary capacity. To these indictments he

pleaded guilty and, on April 11, 1938, was sentenced to a term of

from 5 to 10years in Sing Sing Prison.

In order to determine the necessity for additional legislation or rules

or regulations for the protection of investors and brokerage customers

the Commission on April 6, 1938, ordered that a public hearing be

held pursuant to Section 21 (a) of the Securities Exchange Act of 1934

to ascertain the facts, conditions, practices, and matters antecedent

to and culminating in the failure of Richard Whitney and Company.

Fifty-two witnesses, all officials, members, or partners of members

of the New York Stock Exchange, or Commission experts, testified

during the course of the hearings, which began on April 8, 1938, and

ended on June 29, 1938. Throughout. these proceedings the Exchange

104139-39--7
90 SECURITIES AND EXCHANGE COMMISSION

was represented by counsel, as were all witnesses who desired counsel.

The printed record of the proceedings comprises 937 pages of testimony

and over 100 exhibits."

On February 23, 1938, after extensive study by the Commission's

staff, a draft of tentative rules and forms pursuant to Section 8 (b) of

the Securities Exchange Act of 1934 was sent to exchanges, accountants, and other experts in brokerage accounting for comment and

criticism. These proposed rules limit the aggregate indebtedness of

brokers to a fixed percentage of their net capital. Numerous conferences have been held with exchange officials and accounting experts

and the suggestions submitted to the Commission are being considered

preparatory to the issuance of a revised draft of rules and forms.

On March 17,1938, the Commission submitted to all exchanges and

organizations of over-the-counter brokers and dealers a list of questions

relating to the suggestion to require brokers and dealers to furnish the

Commission and all customers periodic statements of their financial

condition. The Commission received in response numerous suggestions which are now under consideration.

Rules have also been drafted pursuant to the provisions of Section

8 (c) of the Act concerning the hypothecation and commingling of

customers' securities by brokers.

On May 20, 1938, the Chairman of the Commission, discussing

problems of security of customers' property, publicly urged the New

York Stock Exchange to study means further to prevent misuse of

customers' funds and securities, and suggested as one device the

creation of a central trust institution to assume the functions of banking, clearing of securities, and the custodial duties of all members of the

Exchange. The Commission's staff has given a considerable amount

of time to joint exploration with Exchange officials of the possibilities

of establishing such an institution. Other devices to serve as financial

safeguards of brokerage solvency have also been under consideration.

Margins

The Commission assisted the staff of the Board of Governors of the

Federal Reserve System in the revision of Regulation T which became.

effective January 1, 1938. The Commission's staff also conferred

with members of the Board's staff with respect to the formulation of

a procedure for the inspection of banks, relative to conformity with

Regulation U. The Commission's investigation of Richard Whitney

.. On November 1, 1938, the COmmission published a report of its Investigation. Part I of the report

contains a complete statement of the facts of the case, based on the record developed In the course of the

public hearings. Part II sets forth the reforms recently inaugurated or announced by the new management

of the New York Stock Exchange, together with the Commlsslon's program under the Securities Exchange

Act of 1934,respecting the further protection of custemers of brokerage houses. Part In contains the conclusions of the Commission. These reports may be purchased frOIDthe SUperintendent of Documents

(Washington, D. C.) .. Volume I, containing Parts I,II, and In Is available at 20 cents per copy. VolumeII. which contains a complete transcript of the testimony taken In the pnbllc hearings, Is available at $I

per copy. Volume ill, which contains all the exhibits introduced In evidence during the public hearings,

Is aveflable at 65 cents per copy.
FOURTH ANNUAL REPORT 91

& Company and loans outstanding to that firm indicated the desirability of initiating such inspections.

Miscellaneous Exchange Studies and Rules

The Commission, during the fiscal year, sent to representative groups,

two successive drafts of rules under Section 9 (a) (6) of the Securities

Exchange Act of 1934, prescribing practices to be followed in connection with pegging, fixing, and stabilizing the price of registered securities. The first draft, dated January 3, 1938, was thoroughly revised

on the basis of suggestions made by representative banks, investment

bankers, underwriters, stock exchange members, and stock exchanges

themselves, as well as by the Investment Bankers Association, the

Investment Bankers Conference, Inc., and the New York Security

Dealers Association. Subsequently this revision was made the basis

of a shorter draft of rules applicable to a limited number of situations

and this draft, dated June 27, 1938, was again sent to representatives

oftheindustry on July 1,1938.

Rules under Section 17 (a), requiring the maintenance of specific

records by brokers and dealers, have been prepared in an effort to

codify the best brokerage accounting procedure now employed by

representative exchange members. The value of these rules lies

chiefly in the establishment of uniform bookkeeping for non-member

brokers and dealers, some of whom have been found by the Commission to maintain their records in an unbusinesslike manner.

Additional projects for study of matters relating to exchange

procedure have included a survey of the odd-lot business, a study of

trading procedure on the London Stock Exchange, a study of British

methods of security distribution, a statistical analysis of commission

rates on domestic exchanges, and an investigation of the problems of

business solicitation by exchange members.

Over-the-Counter Studies

The Commission's general examination of the problem of establishing adequate supervision over the business of brokers and dealers

doing business in the over-the-counter market, has, as has already

been noted, served as a basis for the new legislation which became

effective on June 25, 1938.37 However, another study of majorimportance on the machinery for the collection, publication and

dissemination of quotations and transactions for securities dealt in

in the over-the-counter market was also begun. The Commission

has also turned its attention to the creation of financial safeguards forcustomers dealing with non-member brokers and dealers in order toassure to such customers a degree of protection against insolvency and

malfeasance comparable to that afforded customers of exchange

member firms.

11 For further discussion of Public Act No. 719,76th Congress. Introduced as the Maloney Bill, pages 3:l

and 33,supra.

_
92 SECURITIES AND EXCHANGE COMMISSION

ADMISSION TO PRACTICE AS ATTORNEY OR AGENT BEFORE THE

COMMISSION

On June 25, 1938, the Commission adopted Amended Rules of

Practice, effective July 1, 1938,38which revoked and replaced all

previously adopted Rules of Practice. Rule II of the Amended Rules

of Practice, which rule pertains to appearance and practice before

the Commission, does not provide for the formal admission of any

person to practice before the Commission, nor does it provide for the

maintenance of a register such as the one established November 1,

1935, in which were entered the names and addresses of all persons

admitted to practice before the Commission.

Under Rule II, as amended, practice before the Commission has

been defined to include the preparation of any statement, opinion,

or other paper by any attorney, accountant, engineer, or other expert,

filed with the Commission in any registration statement, application,

or other document with the consent of such attorney, accountant,

engineer, or other expert. Therefore, all persons who present cases

before the Commission, or who prepare material to be filed with the

Commission are regarded as practicing before the Commission. Any

person may be disqualified and denied, temporarily or permanently,

the privilege of appearing or practicing before the Commission in

any way, if such person is found, after a hearing in the matter, not to

possess the requisite qualifications to represent others or to be lacking

in character or integrity or to have engaged in unethical or improper

professional conduct. Thus, persons preparing statements, opinions,

and other papers filed with the Commission, as set forth above, are

subject to disqualification and disbarment to the same extent as those

appearing before the Commission in person.

Prior to July 1, 1938, the Rules of Practice provided for the admission to practice as Attorney or Agent before the Commission of those

persons who filed applications therefor and were found by the Commission to possess the requisite qualifications to represent others

before it. Inasmuch as the Commission no longer requires formal

admission to practice and has discontinued the above mentioned

register, the enrollment of all persons admitted to practice terminated

July 1, 1938, and those persons have been so informed. The Commission has also informed those persons whose applications for

admission to practice before it were pending at the time the Rules of

Practice were amended that, in view of the foregoing, their applications

had been filed without further action.

The following statistics indicate the number of applications received

since the register referred to above was established (November 1,

1935), and prior to its abolishment (July 1, 1938), the number of persons admitted to practice, and the number of applications pending as

ofJune 30,1938 .

.. These Rules of Practice appear III Appendix I.
FOURTH ANNUAL REPORT 93

Number of applications Number of persons admitted

received to practice Number of apphcations

Nov. 1, 1935, July 1, 1937, Nov. 1, 1935, July 1, 1937, pending June

to to to to 30,1938

June 30, 1937 June 30, 1938 June 30, 1937 June 30, 1938

Attorneys ___________________ 1,609 582 1,571 565 52 Agents ______________________ 671 118 659 110 13

Total ---------------- 2,280 700 2,230 675 65

Total admitted to practice 2,905

Applications:

VVithdrawn_______________________________________ 7

I>enied___________________________________________ 2

Terminated by death; _ _ _ __ ____ ____ ____ __________ __ 1

Admissions:

VVuhdra'vn_______________________________________ 2

Stricken from rolls.L; ______________________________ 1

Terminated by death______________________________ 14

With respect to practice before the Commission by former members

of the staff of the Commission, or by persons employing the services

of former members of the staff, the Commission has issued the

following statement:

"Under the amended Rules of Practice any former member

of the staff of the Commission who shall appear in a representative capacity in any matter, including an investigation

conducted by the Commission, which was pending before the

Commission during the period of his employment and with

which matter he has, by virtue of his employment with the

Commission, such familiarity as to be prejudicial to the proper

conduct of the case, or in which matter he acted for the Commission in such a way as to make unethical his subsequent

connection therewith, and any person employing the services

of any such former member of the staff in such matters, without

first obtaining the consent of the Commission, may be held to

be lacking in proper professional conduct."

PUBLIC REFERENCE ROOMS

During the past year, the facilities in the Public Reference Room of

the Commission at Washington, D. C., were utilized by more than

10,200 members of the public seeking information from registration

statements, applications, reports, declarations, and other documents

filed with the Commission and available for public inspection. As in

previous years, thousands of letters and telephone calls were received

.from members of the public requesting registered information. The
94 SECURITIES AND EXCHANGE COMMISSION

Commission, through the facilities provided for the sale of public

registered information, filled more than 3,500 orders for photocopies

of material, involving 249,160 pages.

In the Public Reference Room in the New York Regional Office,

there are available for public inspection copies of such applications for

permanent registration of securities on all national securities exchanges,

except the New York Stock Exchange and the New York Curb

Exchange, as have received final examination in the Commission,

together with copies of supplemental reports and amendments thereto.

There are also available in this Public Reference Room copies of

annual reports filed pursuant to the provisions of Section 15 (d) of

the Securities Exchange Act of 1934, as amended, by issuers that have

securities registered under the Securities Act of 1933, as amended, and

copies of prospectuses filed pursuant to Rules 202, 210, and 800 Cb)

of the General Rules and Regulations promulgated under the Securities Act of 1933, as amended. During the year ended June 30, 1938,

more than 10,600 members of the public seeking registered public

information, forms, releases, and other material, visited this Public

Reference Room.

More than 3,100 members of the public requesting registered information, forms, releases, and other material were received in the

Public Reference Room of the Chicago Regional Office. In this

Public Reference Room, there are available for public inspection

copies of applications for permanent registration of securities on the

New York Stock Exchange and the New York Curb Exchange which

have received final examination in the Commission, together with

copies of all supplemental reports and amendments thereto.

Duplicate copies of all applications for permanent registration of

securities on national securities exchanges are available for inspection by the public at the respective exchanges upon which the securi,ties are registered.

Duplicate copies of applications for registration statements of

broker or dealer transacting business on over-the-counter markets,

together with supplemental statements thereto, filed with the Commission under the Securities Exchange Act of 1934, are available for

public inspection in each regional office having jurisdiction over the

zone in which the principal office of the broker or dealer is located.

Photocopies of registered public information may be procured from

the offices of the Commission inWashington, D. C., only.

PUBLICATIONS

Information Releases

The activities of the Commission are made known to the public

through information releases -which are currently issued. These releases include the announcement of rules, regulations, findings,

'opinions, and orders of the Commission; filings of registration state-
FOURTH ANNUAL REPORT 95

ments, applications, declarations, and reports; public hearings; reports of security issuers, officers, directors, and principal stockholders; and other activities. The releases of the Commission are

classified according to subject and made available through issuance

to the press and the medium of a mailing list maintained for the

convenience of those persons who desire to. receive them as they are

issued. Upon request, members of the public may have their names

placed upon the mailing list to receive all or any classes of releases.

During the year ended June 30, 1938, the Commission published

276 releases under the Securities Act of 1933, 493 releases under the

Securities Exchange Act of 1934, and 419 releases under the Public

Utility Holding Company Act of 1935. There were also published

301 releases pertaining to daily figures on odd-lot trading on the

New York Stock Exchange, and 160 general releases.

There is given below a classification, according to subject matter, of

the total 1,649 information releases issued by the Commission during

the past fiscal year:

Orders of the Commission______________________________ 474

Filing of Registration Statements, Applications, and other

Public Documents_________________ 472

StatistiC& Data_______________________________________ 436

Reports of Court Actions_______________________________ 117

Rules, Regulations. Interpretations______________________ 82

Investment Trust Study_______ 17

Personnel Changes and Appointments____________________ 16

Accounting Opinions______ 6

lTnclassified___________________________________________ 29

Total releases issued 1,649

Registration Record, Securities Act of 1933

In addition to the various classes of releases described above, the

Commission publishes a daily report known as the Registration

Record. This report, which was first made available for public distribution on May 10, 1937, and more fully described in the Third

Annual Report of this Commission, contains information concerning

events occurring each day in connection with each security issue with

respect to which there is a registration statement under the Securities

Act of 1933.

Other Publications

Other publications issued by the Commission during the year in-

-eluded the following:"

Report to the Congress on the Study and Investigation of the Work, Activities,

Personnel and Functions of Protective and Reorganization Committees:

Part VII. Management Plans without Aid of Committees.

It For list of publications as of December 9,1938, see Appendix IV.

_
96 SECURITIES AND EXCHANGE COMMISSION

Report to the Congress on the Study of Investment Trusts and Investment Companies:

Part 1. Origin, Scope, and Conduct of the Study; Nature and Classification of Investment Trusts and Investment Companies; and Origins of the Investment Trust and Investment Company Movement in the United States.

Decisions of the Commission, Volume 1, containing all decisions contained and

printed in Volume 1, Nos. 1, 2, and 3.

Twenty-four semi-monthly issues of the Official Summary of Stock Transactions

and Holdings of Officers, Directors, and Principal Stockholders.

List of Securities Traded on Exchanges under the Securities Exchange Act of 1934

as of June 30, 1938, together with supplements thereto.

PERSONNEL

At the close of the fiscal year ended June 30, 1938, the personnel of

the Commission comprised 5 Commissioners and 1,209 employees. Of

these 1,209 employees, 794 were men and 415 were women.

Statistics:

Commissioners ________________________________________ 5

Departmental:

Permanent________________________________________ 973

Temporary_______________________________________ 23

Regional offices:

Permanent________________________________________ 213

Temporary_______________________________________ 0

TotaL 1,214

Subject to retirement act . __ .. __ ______ ____ 724

FISCAL AFFAIRS

Appropriations for fiscal year 1938

Salaries and expenses __ . __________________________________ $3, 850, 000-

Printing and binding______________________________________ 45,000-

Total appropriated.____________________________________ 3,895,000

Obligations for fiscal year 1938

Salaries

Departmental

Field

Expenses

Mileage and witness fees

Supplies and material;

Communications service .

Travelexpense

Transportation of things . .

Reporting hearings .

Light and power .

Rents

Repairs and alterations ..

Special and miscellaneous expenses .

Purchase of equipment __. _. . _

Total obligations for salaries and expenses . __

2,504,536

637, 746

15,867

107,005

52,018

145, 796

2,032

43, 143

3, 410

67, 954

9,225

1,880

49,350-

3,639,962

_

_

_

_

_

_

• _

_

_

_

_

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FOURTH ANNUAL REPORT

Obligations for fiscal year 1938--Continued

Obligations for printing and binding

Grand total obligations

Unobligated balance

Appropriations

RECEIPTS FOR THE FISCAL YEAR 1938

97

$44,806

3,684,768

210,232

3,895,000

During

revenue.f

as follows:

the fiscal year the Commission received $716,456.35 in

The source and disposition of the amounts collected are

In special deTransferred Inspecial posit account Net to general deposit at beginning amount fund of the account at Subtotal of fiscal year collected Treasury end of (less refunds during

during fiscal fiscal year account exoes- fiscal year

year sive fees)

Sales of photo dupllcatrons __________ $19,736.79 $3,275 75 $23,012. 54 $1,537 10 $21,475.44

Registratron of securities ____________ 332,305.96 45,641. 09 377,947 05 157,466.66 220,480.39

Registration of exchanges ___________ 474,219.86 104. 73 474,324. 59 31.66 474,29293

Miscellaneous revenue 208.04 208.04 .45 207.59

Grand total 826,470 65 49,021.57 875,492.22 159,035.87 716,456. 35

Comparison of receipts for the fiscal year 1938 with those for the fiscal years 1935,

1936, and 1937, and the total receipts of the Commission since its creation

Character of receipts 1935 1936 1937 1938 Total

Fees from registration of seeurttles, $160,299 25 $496, 850. 89 $528, 020. 17 $220, 480. 39 $1, 405, 650. 70

Fees from registered exchanges ____ 61,659.86 382,460.11 545, 792. fJ8 474,292. 93 1,464,204.98

Fees from saleofphoto duplications, 5,738.75 20,892. 61 29,612.89 21,475 44 77,719.69

Miscellaneous revenue ____________ .95 196.53 354 99 207.59 760.06

Grand total ________________ 227,698. 81 900,400 14 I, 103, 780. 13 716,456.35 2, 948, 335. 43

.. This sum IS not available for expenditure by the Commission but is deposited mto the U. S. Treasury

as miscellaneous receipts. The Commission is at hberty to expend only such funds as the Congress appropriates for its use.

_

_

_

_

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_____ • _____________

APPENDIX I

RULES OF PRACTICE AS AMENDED JUNE 25, 1938

EFFECTIVE JULY 1, 1938

RULE I

BUSINESS HOURS-REGIONAL OFFICES

The principal office of the Commission at Washington, D. C., is

open on each business day, excepting Saturdays, from 9 a. m, to

4:30 p. m., and on Saturdays from 9 a. m. to 1 p. m, Regional offices

are maintained at New York, Boston, Atlanta, Chicago, Fort Worth,

Denver, San Francisco, and Seattle.

RULE II

APPEARANCE AND PRACTICE BEFORE THE COMMISSION

(a) An individual may appear in his own behalf, a member of a

partnership may represent the partnership, a bona-fide offlcer of a

corporation, trust or association may represent the corporation,

trust or association, and an officer or employee of a state commission

or of a department or political subdivision of a state may represent

the state commission or the department or political subdivision of

the state, in any proceeding.

(b) A person may be represented in any proceeding by an attorney

at law admitted to practice before the Supreme Court of the United

States, or the highest court of any State or Territory of the United

States, or the Court of Appeals or the District Court of the United

States for the District of Columbia.

(c) A person shall not be represented at any hearing before the

Commission or a trial examiner except as stated in paragraphs (a)

and (b) of this rule.

(d) Any person appearing before or transacting business with the

Commission in a representative capacity may be required to file a

power of attorney with the Commission showing his authority to

act in such capacity.

(e) The Commission may disqualify, and deny, temporarily or permanently, the privilege of appearing or practicing before it in any

way to, any person who is found by the Commission after hearing

99
100 SECURITIES AND EXCHANGE COM:\IISSION

in the matter

(1) Not to possess the requisite qualifications to represent

others; or

(2) To be lacking in character or integrity or to have engaged

in unethical or improper professional conduct.

(j) Contemptuous conduct at any hearing before the Commission

or a trial examiner shall be ground for exclusion from said hearing

and for summary suspension without a hearing for the duration of

the hearing.

(g) For the purposes of this rule, practicing before the Commission shall include the preparation of any statement, opinion or other

paper by any attorney, accountant, engineer or other expert, filed

with the Commission in any registration statement, application, report or other document with the consent of such attorney, accountant,

engineer or other expert.

RULE III

NOTICE OF HEARINGS

(a) Whenever a hearing is ordered by the Commission in any proceeding, notice ofsuch hearing shall be given by the Secretary or other

duly designated officerof the Commission to the registrant, applicant,

or other parties to the proceeding, or to the person designated as being

authorized to receive notices issued by the Commission. Such notice

shall state the time, place and subject matter of the hearing and, in

proceedings instituted by the Commission, shall be accompanied, except as pro;'ided in paragraph (b) hereof, by a short and simple statement of the matters to be considered and determined. Such notice

shall be given by personal service, registered mail, or confirmed telegraphic notice, a reasonable time in advance of the hearing.

(b) Whenever a hearing is ordered by the Commission in any

proceeding pursuant to Section 8 of the Securities Act of 1933, as

amended, notice of such hearing shall be given by the Secretary or

other duly designated officer of the Commission to the person designated in the registration statement as being authorized to receive

service and notice of orders and notices issued by the Commission

relating to such registration statement. Such notice shall state the

time and place of hearing and shall include a statement of the items

in the registration statement by number or name which appear to be

incomplete or inaccurate in any material respect, or to include any

untrue statement of a material fact, or to omit a statement of any material fact required to be stated therein or necessary to make the statement therein not misleading. Such notice shall be given either by personal service or by confirmed telegraphic notice a reasonable time in

advance of the hearing. The personal notice or the confirmation of

telegraphic notice shall be accompanied by a short and simple statement of the matters and items specified to be considered and

determined.
FOURTH AJ.~XUALREPORT

RULE IV

AMENDMENTS

101

(a) Whenever a hearing is ordered by the Commission in any proceeding pursuant to Section 8 of the Securities Act of 1933, as

amended, and items in the registration statement which appear to he

incomplete or inaccurate in any material respect, or to include any

untrue statement of a material fact, or to omit a statement of any

material fact required to he stated therein or necessary to make

the statements therein not misleading, are not particularly specified

in the notice, such items shall be so specified by amendment to the

notice prior to the taking of testimony in regard to such items. The

trial examiner may grant or deny a motion for such amendment. Such

motions shall be in writing, and may be filed with the trial examiner

at any time prior to the termination of the hearing. On request of

the registrant the trial examiner, after granting such motion, shall

grant a reasonable time within which the registrant may familiarize

himself with such matters before taking testimony in regard to such

items.

(b) In any other proceeding instituted hy the Commission, amendment may be allowed to the order, rule to show cause or other moving

papers, by the Commission on application to it, or by it upon its own

motion.

(c) When issues not raised by the pleading of a party or the Commission's statement of matters to be considered and determined are

tried by express or implied consent of the parties, they may be treated

in all respects as if they had been raised in the pleadings.

RULE V

HEARINGS FOR THE PURPOSE OF TAKING EVIDENCE

(a) Hearings for the purpose of taking evidence shall be held

as ordered by the Commission.

(b) All such hearings shall be held before the Commission, one

or more of its members, or a duly designated officer, herein referred

to as the trial examiner, and all such hearings, except hearings pursuant to the provisions of Clause 30 of Schedule A of the Securities

Act of 1933, as amended, or Section 24 (h) of the Securities Exchange Act of 1934, as amended, or Section 22 (b) of the Public

Utility Holding Company Act of 1935, shall be public unless otherwise ordered by the Commission.

(c) Hearings for the purpose of taking evidence shall be stenographically reported and a transcript thereof shall be made which

shall he a part of the record of the proceeding. Transcripts of

public hearings will be supplied by the official reporter at the pre-
102 SECURITIES AND EXCHANGE COMMISSION

scribed rates. Transcripts of private hearings will be supplied at

the prescribed rates to the parties.

(d) Objections to the admission or exclusion of evidence before

the Commission or trial examiner shall be in short form, stating

the grounds of objections relied upon, and the transcript shall not

include argument or debate thereon except as ordered by the Commission or the trial examiner. Exception to any such ruling must

be noted before the trial examiner in order to be urged before the

Commission. Rulings by the Commission or trial examiner on such

objections shall be a part of-the transcript.

(e) In any proceeding the Commission or the trial examiner may

call for the production of further evidence upon any issue, and, upon

notice to all parties, may reopen any hearing at any time prior to

the Commission's order disposing of such proceeding.

if) Subpenas requiring the attendance of witnesses from any

place in the United States at any designated place of hearing may

be issued by any member of the Commission or any officer designated

by it for that purpose in connection with any hearing ordered by

the Commission, upon written application therefor.

(g) Subpenas for the production of documentary evidence will

issue only upon application in writing, which must specify, as nearly

as may be, the documents desired and the facts to be proved by

them, in sufficient detail to indicate the materiality and relevance

of the documents desired.

(h) Witnesses summoned before the Commission shall be paid the

same fees and mileage that are paid to witnesses in the courts of

the United States, and witnesses whose depositions are taken and the

persons taking the same shall severally be entitled to the same fees

as are paid for like services in the courts of the United States.

Witness fees and mileage shall be paid by the party at whose instance

the witnesses appear.

(i) In proceedings pursuant to the provisions of Clause 30 of

Schedule A of the Securities Act of 1933, as amended, or Section

24 (b) of the Securities Exchange Act of 1934, as amended, or Section 22 (b) of the Public Utility Holding Company Act of 1935,

if a hearing for the purpose of taking testimony is requested, the

Commission may in its discretion, prior to the hearing, require the

registrant to furnish in writing additional information in respect

of its grounds of objection. Failure to supply the information so

requested within 15 days from the date of receipt by the registrant of a notice of the information required, shall be deemed a

waiver of the objections to public disclosure of that portion of the

information filed confidentially with respect to which the additional

information required by the Commission relates, unless the Commission shall otherwise order for good cause shown at or before the

expiration of such I5-day period.
IWURTH ANNUAL REPORT

RULE VI

MOTIONS

103

{a) Motions in any proceeding before a trial examiner which relate

to the introduction or striking of evidence, or motions before a trial

examiner in any proceeding pursuant to Section 8 of the Securities

Act of 1933, as amended, which relate to amendment of the notice

of hearing to include additional items of the registration statement

as provided in Rule IV (a), may be ruled on by the trial examiner.

All other motions shall be ruled on by the Commission.

(b) Motions or similar pleadings calling for determination by the

Commission shall be filed with the Secretary or other duly designated

officer of the Commission in writing, provided that motions or similar

pleadings calling for determination by the Commission but made in

the course of a hearing, may be filed with the trial examiner in writing, who shall refer such motion to the Commission. Any such motion

or similar pleading shall be accompanied by a written brief of the

points and authorities relied upon in support of the same. Any party

or counsel to the Commission may file a reply brief within 5 days after

service upon him of such motion or other pleading as provided in

Rule XIV, unless otherwise ordered by the Commission. Motions

and similar pleadings will be considered on the briefs filed following

the time for filing the reply brief, unless otherwise ordered by the

Commission. No oral argument will be heard on such matters unless

the Commission so directs.

RULE VII

EXTENSIONS OF TIME-CONTINUANCES AND ADJOURNMENTS

Except as otherwise expressly provided by law, the Commission for

cause shown may extend any time limits prescribed by these rules for

filing any papers, and may continue or adjourn any hearing. 'A hearing before a trial examiner shall begin at the time and place ordered

by the Commission, but thereafter may be successively adjourned to

such time and place as may be ordered by the Commission or by the

trial examiner.

RULE VIII

DEPOSITIONS

(a) The Commission may, for cause shown, order testimony to be

taken by deposition.

(b) If any party or counsel to the Commission desires to take a

deposition he shall make application in writing, setting forth the reasons why such deposition should be taken, the name and residence of

the witness, the matters concerning which it is expected the witness will
104 SECURITIES AND EXCHANGE COMMISSION

testify, and the time and place proposed for the taking of the deposition. Thereupon the Commission may, in its discretion, issue an order

which will name the witness whose deposition is to be taken and specify

the time when, the place where, and the designated officer before whom

the witness is to testify. Such order shall be served upon all parties

and counsel to the Commission by the Secretary, or other duly designated officer of the Commission, a reasonable time in advance of the

time fixed for taking testimony.

(c) Witnesses whose testimony is taken by deposition shall be

sworn or shall affirm before any questions are put to them. Each

question propounded shall be recorded and the answers shall be taken

down in the words of the witness.

(d) Objections to questions or evidence shall be in short form,

stating the grounds of objection relied upon, but no transcript filed

by the officer shall include argument or debate. Objections to questions or evidence shall be noted by the officer upon the deposition,

but he shall not have power to decide on the competency or materiality

or relevancy of evidence. Objections to questions or evidence not

taken before the officer shall be deemed waived.

(e) The testimony shall be reduced to writing by the officer, or

under his direction, after which the deposition shall be subscribed by

the witness and certified in usual form by the officer. The original

deposition and exhibits shall be forwarded under seal to the Secretary

of the Commission with such number of copies as may be requested

by the Secretary of the Commission. Upon receipt thereof the Secretary shall file the original in the proceedings and shall forward

a copy to each party or his attorney of record and to counsel to the

Commission.

(j) Such depositions shall conform to the specifications of Rule XV.

(g) Any part of a deposition not received in evidence at a hearing

before the Commission or a trial examiner shall not constitute a part

of the record in such proceeding, unless the parties and counsel to the

Commission shall so agree, or the Commission so orders.

(h) Depositions may also be taken and submitted on written interrogatories in substantially the same manner as depositions taken by

oral examination. The interrogatories shall be filed with the application in triplicate, and copies thereof shall be served on all other parties

and counsel to the Commission by the Secretary or other duly designated officer of the Commission. Within 5 days any other party or

counsel to the Commission may file with the Secretary his objections,

if any, to such interrogatories, and may file such cross-interrogatories

as he desires to submit. Cross-interrogatories shall be filed in triplicate, and copies shall be served on all other parties and counsel to the

Commission, who shall have 3 days thereafter to file their objections,

if any, to such cross-interrogatories. Objections to interrogatories or
l"OURTH ANNUAL REPORT 105

cross-interrogatories shall be settled by the Commission or trial examiner. Objections to interrogatories shall be made before the order

for taking the deposition issues and if not so made shall be deemed

waived. When a deposition is taken upon written interrogatories and

cross-interrogatories, neither any party nor counsel to the Commission

shall be present or represented, and no person other than the witness, a

stenographic reporter, and the officershall be present at the examination of the witness, which fact shall be certified by the officer, who

shall propound the interrogatories and cross-interrogatories to the

witness in their order and reduce the testimony to writing in the

witness' own words.

RULE IX

TRIAL EXAMINER'S REPORT

(a) Following any hearing before a trial examiner, except hearings in proceedings pursuant to the provisions of Clause 30 of

Schedule A of the Securities Act of 1933, as amended, or Section

24 (b) of the Securities Exchange Act of 1934, as amended, or Section 22 (b) of the Public Utility Holding Company Act of 1935,

the transcript of the testimony shall forthwith be filed with the Secretary of the Commission. Following any hearing before a trial

examiner in the excepted cases, the transcript of the testimony shall

forthwith be filed with the Chairman of the Commission.

(b) Following any hearing before a trial examiner other than

(1) a hearing under the Public Utility Holding Company Act of

1935, or (2) a hearing on the question of postponement of the effective date of registration of a broker or dealer under Section 15 (b)

of the Securities Exchange Act of 1934, as amended, pending final

determination whether such registration shall be denied, or (3) a

hearing pursuant to the provisions of Clause 30 of Schedule A of the

Securities Act of 1933, as amended, or Section 24 (b) of the Securities Exchange Act of 1934, as amended, the trial examiner shall,

within 10 days after service upon him by the Secretary or other

duly designated officerof the Commission of a copy of the transcript

of the testimony, file with the Secretary of the Commission his

report containing his findings of fact.

(c) Such report shall be advisory only, and the findings of fact

therein contained shall not be binding upon the Commission. The

initial page of the report shall contain a statement to such effect.

In any proceeding in which, under the provisions of Rule XIII (b)

of the Rules of Practice of the Commission, the report is first to be

made available to the public on the opening date of public argument

on the merits before the Commission, or in the event of submission

to the Commission without argument, on the date of such submission, the initial page of the report shall also contain a statement to

104139-39--8
106 SECURITIES .\ND EXCHANGE COMMISSION

the effect that the report is confidential, shall not be made public,

and is for the use only of the Commission, the respondent or respondents, and counsel, but copies of the report issued on or after

such opening date or submission may omit such statement.

(d) A copy of such report shall be forthwith served on each party

and on counsel to the Commission by the Secretary or other duly

designated officer of the Commission.

(e) Within 5 days after the conclusion of the hearing in any proceeding any party or counsel to the Commission may submit to the

presiding officer, or, in the case of a hearing before a trial examiner in respect of which no trial examiner's report is required to

be submitted, to the officer designated in paragraph (a) of this rule

as the person with whom transcripts of testimony are to be filed, a

statement in writing in terse outline setting forth such party's request for specific findings, which may be accompanied by a brief

in support thereof.' A copy of such request and brief in support

thereof shall be served upon each party and upon counsel to the Commission as provided in Rule XIV in the case of a hearing before a

trial examiner in respect of which no trial examiner's report is required to be submitted. A copy of such request and brief in support

thereof shall be served upon each party and upon counsel to the Commission by the presiding officer in the case of a hearing in which a

trial examiner's report is to be submitted in which event the trial examiner shall immediately certify the facts concerning such service,

including the dates thereof to the Secretary of the Commission. In

all cases where such requests and briefs in support thereof are served

upon each party and upon counsel to the Commission by the trial

examiner the provisions of Rule XIII (d) shall not be applicable.

This paragraph shall not apply to any proceeding on the question of

postponement of the effective date of registration of a broker or

dealer under Section 15 (b) of the Securities Exchange Act of 1934,

as amended, pending final determination whether such registration

shall be denied.

en All requests for specific findings filed pursuant to paragraph (e)

of this rule shall be a part of the record.

I On October 14, 1938,the Commission amended Rule IX (.) of the Rules of Practice by striking the

first sentence of said rule and substituting the following sentence:

"Within five days after the receipt of a COpyof the transcript of the testimony, If promptly at the con.

elusion of the hearing he has ordered a copy thereof, or If he has not ordered a eopy, within five days alter

the Ii1lngof the transcript of the testimony with the duly designated officer of the Commission, any party

or counsel to the Commission may Submit to the presiding officer, or, in the case of a hearing before a trial

examiner in respect of which no trial examiner's report Is required to be submitted, to the officer designated In paragraph (0) of this Rule as the person with wbom transcripts of testimony are to be filed, a

statement in writing In terse outline setting forth such party's request for specific findingS, which may be

accompanled by a brlelln support thereof."
FOURTH ANNUAL REPORT

RULE X

EXCEPTIONS

107

(a) Within 5 days after receipt of a copy of the trial examiner's

report, any party or counsel to the Commission may file exceptions

to the findings of the trial examiner or to his failure to make findings,

or to the admission or exclusion of evidence. A copy of such exceptions shall be forthwith served on each party and on counsel to the

Commission by the Secretary or other duly designated officer of the

Commission. Exceptions shall be argued only at the final hearing on

the merits before the Commission.

(b) Objections to the findings of the trial examiner or to his failure

to make findings not saved by exception filed pursuant to this rule

will be deemed to have been abandoned and may be disregarded.

Objections to the admission or exclusion of evidence not saved by

exception at the time of the hearing for the purpose of taking evidence and included in the exceptions filed pursuant to this rule will

be deemed to have been abandoned and may be disregarded.

RULE XI

BRIEFS

(a) Any party to a proceeding or counsel to the Commission may

file a brief in support of his contentions and exceptions within 15

days from the date of service on such party or on counsel to the

Commission of a copy of the trial examiner's report. In a case where

no trial examiner's report is to be filed and a request for specific findings is filed by a party to the proceeding or counsel to the Commission, any party to the proceeding or counsel to the Commission may

file a brief in support of his contentions and exceptions within 15

days of the filing as provided in paragraph (e) of Rule IX hereof by

such party or counsel to the Commission of such request for specific

findings, or within 15 days from the date of service on such party or

on counsel to the Commission of a copy of such request for specific

findings. In a case where no trial examiner's report is to be filed and

where no request for specific findings is filed, any party to a proceeding or counsel to the Commission may file a brief in support of his

contentions and exceptions within 15 days from the date when the

transcript of-testimony is filed with the Secretary or other duly designated officer of the Commission.

(b) All briefs shall be confined to the particular matters in issue.

Each exception or request for findings which is briefed shall be supported by a concise argument and by citation of such statutes, decisions and other authorities and by page references to such portions

of the record, as may be relevant. If the exception relates to the
108 SECURITIES AND EXCHANGE COMMISSION

admission or exclusion of evidence, the substance of the evidence

admitted or excluded shall be set forth in the brief with appropriate

references to the transcript. Reply briefs shall be confined to matters in original briefs of opposing parties. Reply briefs in proceedings held pursuant to the provisions of Olause 30 of Schedule A of

the Securities Act of 1933, as amended, or Section 24 (b) of the

Securities Exchange Act of 1934, as amended, or Section 22 (b) of the

Public Utility Holding Oompany Act of 1935, will be received only by

special permission of the Oommission. Any scandalous or impertinent

matter contained in any brief may be stricken on order of the CommISSIOn.

(c) Exceptions and, in cases where no trial examiner's report is to.

be filed, requests for specific findings not briefed in accordance with

Rule XI may be regarded by the Oommission as waived.

(d) All briefs, including briefs filed pursuant to Rule VI, contain--

ing more than 10 pages shall include an index and table of cases.

The date of each brief must appear on its front cover or title page ..

If briefs are typewritten or mimeographed, 10 copies shall be filed; if

printed, 20 copies, provided that only 7 copies of briefs in proceedings held pursuant to the provisions of Olause 30 of Schedule A of the

Securities Act of 1933, as amended, or Section 24 (b) of the Securities

Exchange Act of 1934, as amended, or Section 22 (b) of the Public

Utility Holding Oompany Act of 1935, need be filed in any instance.

No brief shall exceed 60 pages in length, except with the permission

of the Oommission.

(e) Oopies of briefs shall be served by the Secretary or other duly

designated officer of the Oommission on the parties to the proceeding

and on counsel to the Oommission, and reply briefs may be filed within.

5 days thereafter. Such reply briefs as are authorized by the Oommission in proceedings held pursuant to the provisions of Olause 30,

of Schedule A of the Securities Act of 1933, as amended, or Section

24 (b) of the Securities Exchange Act of 1934, as amended, or Section

22 (b) of the Public Utility Holding Oompany Act of 1935, shall be

filed within 5 days after such authorization.

(j) Briefs not filed on or before the time fixed in these rules will

be received only upon special permission of the Oommission.

(g) Without regard to the foregoing provisions of this rule with

respect to filing of briefs, in the event an application is submitted to.

the Oommission for final determination pursuant to paragraph (e) of

Rule UB2 under the Securities Exchange Act of 1934, as amended,

or paragraph (c) of Rule U-22B-l under the Public Utility HoldingOompany Act of 1935, either party or counsel to the Oommission may

file a brief in support of his contentions within 15 days from the timeof such submission. In such proceeding, reply briefs will be received

only upon special permission of the Commission.
FOURTH ANNUAL REPORT 109

(h) This rule shall not apply to any proceeding on the question oi

postponement of the effective date of registration of a broker or dealer

under Section 15 (b) of the Securities Exchange Act of 1934, as

amended, pending final determination whether such registration shall

be denied and in any such proceeding neither any party nor counsel

to the Commission shall be entitled to file a brief.

RULE XII

HEARING BEFORE THE COMMISSION

(a) Upon written request of any party or of counsel to the Commission, which must be made within the time provided for filing the

original briefs or, in the case of a proceeding on the question of postponement of the effective date of registration of a broker or dealer

under Section 15 (b) of the Securities Exchange Act of 1934, as

.amended, pending final determination whether such registration shall

be denied, before the close of the hearing for the purpose of taking

evidence, the matter will be set down for oral argument before

the Commission; provided that, except upon order of the Commission, neither any party nor counsel to the Commission will be peromitted to make oral argument before the Commission on matters

arising out of proceedings pursuant to the provisions of Clause 30 of

Schedule A of the Securities Act of 1933, as amended, or Section 24 (b)

of the Securities Exchange Act of 1934, as amended, or Section 22 (b)

of the Public Utility Holding Company Act of 1935.

(b) In a case where no trial examiner's report is made, the Com-

-mission shall determine the matter on the moving papers, the tran-

-script of the testimony and exhibits received at the hearing, requests

for specific findings, if any, the briefs of the parties and counsel to

the Commission, if any, and oral argument before the Commission, if

any.

(c) The Commission, upon its own motion or upon application in

writing by any party or counsel to the Commission for leave to adduce

additional evidence which application shall show to the satisfaction

of the Commission that such additional evidence is material and that

there were reasonable grounds for failure to adduce such evidence at

the hearing before the Commission or the trial examiner, may hear

such additional evidence or may refer the proceeding to the trial

-examiner for the taking of such additional evidence.

(d) Any petition for rehearing by the Commission shall be filed

within 5 days after issuance of the order complained of and shall

clearly state the specific grounds and the specific matters upon which

rehearing is sought.
110 SECURITIES AND EXCHANGE COMMISSION

RULE XIII

FILING PAPERS-DOCKET-COMPUTATION OF TIME

(a) All reports, exceptions, briefs, and other papers required to be

filed with the Commission in any proceeding shall be filed with the

Secretary, except that all papers containing data as to which confidential treatment is sought pursuant to Rules 580, UB2, or U-22B-l

of the Rules and Regulations of the Commission, together with applications making objection to the disclosure thereof, shall be filed with

the Chairman. Any such papers may be sent by mail or express to

the officer with whom they are directed to be filed) but must be received by such officer at the officeof the Commission, in Washington,

D. C., within the time limit, if any, for such filing.

(b) All papers containing data as to which confidential treatment

is sought pursuant to Rules 580, UB2, or U-22B-l of the Rules and

Regulations of the Commission, together with any application making

objection to the disclosure thereof, or other papers relating in any

way to such application, shall be made available to the public only in

accordance with the applicable provisions of Rules 580 (h), UB2 (i),

or U-22B-1. The report of the trial examiner, exceptions thereto,

requests for findings, and briefs in support of such requests or in

support of or in opposition to such exceptions, which are filed in connection with any hearing pursuant to Section 15 (b) or Section 19 (a)

(3) of the Securities Exchange Act of 1934, as amended, shall first be

made available to the public on the opening date of public argument

on the merits before the Commission or in the event of submission to

the Commission without argument upon the date of such submission.

(c) The Secretary shall maintain a docket of all proceedings, and

each proceeding shall be assigned a number.

(d) Wherever under these rules, unless otherwise expressly provided, any limitation is made as to the time within which any reports, exceptions, briefs, or other papers are required to be filed

with the Commission in any proceeding, trial examiners and parties

who are residents of the following states: Montana, Idaho, Wyoming,

Colorado, New Mexico, Utah, Arizona, Nevada, Washington, Oregon,

and California, shall have an additional period of 5 days; and trial

examiners and parties who reside beyond the confines of the continental United States shall have an additional period of 20 dayswithin which to file such reports, exceptions, briefs, and other papers.

For the purposes of this rule the person upon whom service is made

by the Commission is the party whose residence shall determinewhether the additional time provided herein shall be granted.

(e) In computing any period of time prescribed or allowed by

these rules or by order of the Commission, the day of the act, event,

or default after which the designated period of time begins to run
FOURTH ANNUAL REPORT 111

is not to be included. The last day of the period so computed is to

be included, unless it is a Sunday or a legal holiday in the District of

Columbia, in which event the period runs until the end of the next

day which is neither a Sunday nor a holiday. Intermediate Sundays

and holidays shall be included in the computation. A half-holiday

shall be considered as other days and not as a holiday.

(j) Unless otherwise specifically provided in these rules, an original and 8 copies of all papers shall be filed, unless the same be printed.

in which case 20 copies shall be filed.

RULE XIV

SERVICE OF REPORTS, EXCEPTIONS, BRIEFS, AND OTHER PAPERS

(a) All reports, exceptions, briefs, requests for specific findings, or

other documents or papers required by these rules to be served on

any party to a proceeding, or on counsel to the Commission, shall

be served by the Secretary or other duly designated officer of theCommission, provided that such papers concerning applications for

confidential treatment pursuant to the provisions of Clause 30 of

Schedule A of the Securities Act of 1933, as amended, or Section

24 (b) of the Securities Exchange Act of 1934, as amended, or Section 22 (b) of the Public Utility Holding Company Act of 1935,

shall be served by the Chairman.

(b) Subject to the provisions of Rule III (a) hereof, such service,

except on counsel to the Commission, shall be made by personal service on the party or his attorney of record or by registered mail

addressed to the party or his attorney of record.

RULE XV

FORMAL REQUIREMENTS AS TO PAPERS FILED IN PROCEEDINGS

(a) All papers filed under these rules shall be typewritten, mimeographed, or printed, shall be plainly legible, shall be on one gradeof good unglazed white paper approximately 8 inches wide and 1O~

inches long, with left-hand margin 1 inches wide, and shall be

bound at the upper left-hand corner. They shall be double-spaced,

except that quotations shall be single-spaced and indented. If

printed, they shall be in either 10- or 12-point type with doubleleaded text and single-leaded quotations.

(b) All papers must be signed in ink by the party filing the same,

or his duly authorized agent or attorney, or counsel to the Commission, and must show the address of the signer.

(c) All papers filed must include at the head thereof, or on a title

page, the name of the Commission, the names of the parties, and

the subject of the particular paper or pleading, and the docket number

assigned to the proceeding.

~
112 SECURITIES AND EXCH--\.NGE COMMISSION

RULE XVI

SIGNATURE OF COMMISSION ORDERS

All orders of the Commission shall be signed by the Secretary or

such other person as may be authorized by the Commission.

RULE XVII

INTERVENTION

Any person upon proper showing of sufficient interest in the subject

matter may, upon application in writing to the Commission duly made,

be allowed to intervene in any proceeding upon such terms and

conditions as the Commission may prescribe.

RULE XVIII

CONSOLIDATION

By order of the Commission, or upon agreement between the

parties and counsel to the Commission, proceedings involving a common question of law or fact may be joined for hearing of any or all the

matters in issue in such proceedings and such proceedings may be

consolidated; and the Commission may make such orders concerning

the conduct of such proceedings as may tend to avoid unnecessary

costs or delay.

RULE XIX

NONAPPLICABILITY OF RULES TO INVESTIGATIONS

These rules, other than Rule II, shall not be applicable to investigations conducted by the Commission pursuant to Sections 8 (e)

19 (b), and 20 (a) of the Securities Act of 1933, as amended, Sections

21 (a) and 21 (b) of the Securities Exchange Act of 1934, as amended,

or Sections 11 (a), 13 (g), 18 (a), 18 (b), 18 (e) and 30 of the Public

Utility Holding Company Act of 1935.
APPENDIX II

GUIDES TO FORMS 1

GUIDE TO FORMS ADOPTED UNDER THE SECURITIES ACT OF 193~

FOR REGISTRATION STATEMENTS

FORM A-l-GENERAL FORM

(a) General Rule.-This form is to be used for registration under

the Securities Act of 1933, as amended, of all securities for the

registration of which no other form is specifically prescribed.

(b) Special Rule.-Notwithstanding the rules for the use of

Form A-2 for corporations, Form A-I may be used by any incorporated investment trust for registration under the Securities Act

of 1933, as amended, of an additional block of securities of a class,.

part of which has previously been registered on Form A-I.

FORM A-O-l FOR SECURITIES OF CORPORATIONS ORGANIZED WITHIN 2

YEARS TO ENGAGE IN THE EXPLOITATION OF MINERAL DEPOSITS

(OTHER THAN OIL OR GAS)

This form is to be used for registration under the Securities Act

of 1933 of securities of any corporation organized within 2 years

prior to the date of filing the registration statement to engage primarily in the exploitation of mineral deposits (other than oil or gas)

if such securities are to be sold to the public for cash or purchasers'

obligations to pay cash.

This form shall not be used, however, by any corporation which

(a) has any subsidiary, or (b) was organized to take over and continue the business of another person or persons, unless such other

persons were organized within such 2 years.

FORM A-2-FOR CORPORATIONS

This form is to be used for registration statements, except such

statements as to which a special form is specifically prescribed,

under the Securities Act of 1933, as amended, by any corporation

which files profit-and-loss statements for 3 years and which meets

either one of the following conditions: (a) Such corporation has

I This guide is designed to aid in the selection of appropriate forms and is revised from time to time ascircumstances require. Copies of the forms herein referred to will be furnished without charge upon.

request.

113
114 SECURITIES AND EXCHANGE COMMISSION

made annually available to its security holders, for at least 10 years,

financial reports (which may be reports consolidating the reports of

the corporation and its subsidiaries) including at least a balance

sheet and a profit-and-Ioss or income statement, or (b) such corporation had a net income for any 2 fiscal years of the 5 fiscal years pre-

-ceding the date of the latest balance sheet filed with the registration

statement. If such corporation has subsidiaries, such income shall

be determined on the basis of consolidated reports for such corporation and its subsidiaries. Notwithstanding what is hereinabove prescribed in this paragraph, however, this form shall not be used by

any corporation organized within 10 years, if the majority of the

capital stock thereof was issued to promoters of the corporation in

consideration of property or services, or if more than one-half of

the proceeds of the sale of securities of such corporation has been

used to purchase property acquired by the corporation from the

promoters of the corporation.

This form may also be used for registration statements (except

such statements as to which a special form is specifically prescribed)

by a corporation organized for the purpose of distributing to its

stockholders only, water, electricity, or gas, and prohibited from

paying any dividends to its stockholders except upon its dissolution

or liquidation, provided that:

1. The corporation has been in existence at least 15 years prior to

the date of the filing of the registration statement;

2. There has been no default by the corporation upon any of its

funded indebtedness within the period of 15 years prior to the date

-ofthe filing of the registration statement;

3. The registrant will have a total indebtedness, upon the issuance

of the securities registered, not exceeding 50 percent of the amount,

less valuation reserves, at which the total assets of the registrant

are carried on the latest balance sheet of the registrant filed with

the registration statement, giving effect to the proceeds of the

securities registered; and

4. Within the period of 10 years preceding the date of the filing

of the registration statement, the corporation shall not have failed

to levy and collect assessments in amounts sufficient to meet all

current charges.

SPECIAL RULES AS TO THE USE OF FORM A-2 FOR CORPORATIONS

1. Notwithstanding that Form E-l is specifically prescribed for

use in cases involving an exchange of securities by the issuer thereof

for others of its securities or a modification of the terms of securities

by agreement between the issuer and its security holders, a registrant

-otherwise entitled to use Form A-2 may, at its option, use Form

A-2 in any such case if the registrant is not in reorganization pur-
FOURTH ANNUAL REPORT 115

euant to Section 77B of the Bankruptcy Act or in bankruptcy or

receivership and if no default exists on any outstanding funded

-debt (other than a default in sinking fund payments which has been

waived by the holders of at least 80 percent in principal amount of

the issue outstanding). If Form A-2 is used pursuant to this rule,

the fee payable for registration shall be calculated in accordance

with Instruction 7 in Form E-I, and the table setting forth the

calculation shall be prepared as prescribed in such form.

2. Form A-2 may be used by a registrant if all the following

'Conditions exist:

(a) The registrant was organized as the successor to a single predecessor, or to a group of predecessors one of which, at the time of

succession, directly or indirectly owned substantially all of the outstanding stock of all the other predecessors;

(b) The registrant acquired all of the assets and assumed all of

the liabilities of such predecessor or predecessors, and the capital

structure of the registrant immediately following the succession was

substantially the same as the capital structure of the single predecessor, or as the consolidated capital structure of the group of predecessors, except for such changes as may have resulted from the substitution of issuers incident to the succession or from changes in capital

stock liability per share; and

(c) The single predecessor, or the parent company in a group of

predecessors, could have used Form A-2 if the succession had not

taken place.

In determining whether such single predecessor or such parent

-company in a group of predecessors could have used Form A-2, the

record of the registrant in regard to income or annual reporting to

security holders shall be considered a continuation of the record of

such single predecessor or such parent company. In the case of a

group of predecessor companies, the income of the parent company

-of the group shall be determined on the basis of consolidated reports

for such parent company and its subsidiaries, the subsidiaries to be

included in the consolidated reports whether or not they were combined with the parent company to form the registrant.

3. Notwithstanding the provisions of the last sentence of the rule

for the use of Form A-2 for corporations, that form may be used

by a corporation otherwise entitled to use the form, if the property

acquired from promoters under the circumstances stated in such last

sentence consisted principally of one or more going businesses, or of

securities representing directly or indirectly more than 50 percent of

the voting power controlling such businesses.

4. Notwithstanding the rules as to the use of Form E-I, or the

rule as to the use of Form A-2 for Corporations, Form A-2 may

be used in the situation described below for registration statements,

except those for which a special form (other than Form E-I) is

specifically prescribed, by corporations which file profit-and-loss

:statements of their own or of their predecessors for 3 years and which,
116 SECURITIES AND EXCHANGE COMMISSION

or the predecessors of which, have in the past 15 years paid dividends:

upon any class of common stock for at least 2 consecutive years.

The situation in which Form A-2 may thus be used is that of registration of securities issued or sold in the course of a "reorganization,"

as defined in Rule 5 (1) as to the use of Form E-l, where the only

operation which brings the transaction within the definition is the

acquisition of assets of a subsidiary by the registrant in consideration

of securities of the registrant, or the exchange of securities of the

registrant for outstanding securities of a subsidiary,"

5. Any corporation which was formed by the consolidation of twoor more corporations may use Form A-2, if each of the constituent

corporations which collectively brought in a majority of the assets,

as shown by the books of the constituent corporations prior to the

consolidation, could have used Form A-2 if the consolidation had

not taken place. In determining whether any such constituent corporation could have used Form A-2, the record of the registrant in

regard to income or annual reporting to security holders shall be

considered a continuation of such constituent corporation's record.

In this rule, all the corporations consolidated to form the registrant

are called the "constituent corporations."

6. Form A-2 may be used by a registrant if all the following

conditions exist:

(a) The registrant was a wholly owned subsidiary of a corporation

which, either alone or with one or more of its other wholly owned

subsidiaries, was merged into the registrant;

(b) The registrant acquired all the assets and assumed all the

liabilities of the corporations merged into it; and

(c) The parent corporation could have used Form A-2 had the

merger not taken place. In determining whether such parent corporation could have used Form A-2, the record of the registrant

subsequent to the merger, in regard to income or annual reporting

to security holders, shall be considered a continuation of the record

of such parent corporation.

7. Notwithstanding the provisions of Clause (b) of the rule as to

the use of Form A-2 for corporations, this form may be used by a

corporation which has had a net income for only 1 fiscal year of the

5 fiscal years preceding the date of the latest balance sheet filed

with the registration statement, if-

(1) The corporation was organized at least 5 years prior to the

date of filing;

(2) Total assets of the registrant and its subsidiaries, after deducting valuation and qualifying reserves, amount to not more than

$5,000,000, as shown by the most recent balance sheets filed with the

registration statement; and

Rule 5 (1) defining the term "reorganization" is set forth below under the caption "Form E-l forSeeurttres in Reorganization."•
FOURTH ANNUAL REPORT 117

(3) The registrant is not an investment company, a bank holding

<company,or a small-loan or other finance company."

FORM A-R FOR CORPORATE BONDS SECURED BY MORTGAGE INSURED BY

FEDERAL HOUSING ADMINISTRATION

This form is to be used for registration under the Securities Act

-of 1933, as amended, of corporate bonds constituting part of an

issue secured by mortgage insured by Federal Housing Administration under the authority of Section 207 of the National Housing

Act.

FORM 0-1 FOR SECURITIES OF UNINCORPORATED INVESTMENT TRUSTS

This form is to be used for registration under the Securities Act

of 1933, as amended, of securities of unincorporated investment

trusts of the fixed or restricted management type, having a depositor

or sponsor but not having a board of directors or persons performing

-similarfunctions.

FORM 0-2 FOR CERTAIN TYPES OF CERTIFICATES OF INTEREST IN

SECURITIES

This form is to be used for registration under the Securities Act of

1933 of certificates of interest in securities of a single class of a single

issuer, if the following conditions exist:

(1) The major part of the certificates are to be sold to the public

for cash;

(2) Under the terms of the deposit agreement the depositor (as

defined below) has no rights or duties as depositor, subsequent to the

deposit of the securities with the depositary;

(3) Under the terms of the deposit agreement the power to vote or

-give a consen\ with respect to the deposited securities may be exercised only by, or pursuant to the instructions of, the holders of the

certificates of interest, except a power, if any, to vote to effect a splitup of deposited stock in such manner as to cause no change in the

aggregate capital stock liability of the issuer of the deposited

securities;

(4) The securities deposited by the depositor are registered under

the Securities Act of 1933 in connection with the sale of the

certificates of interest.

FORM 0-3 FOR AMERICAN CERTIFICATES AGAINST FOREIGN ISSUES AND

FOR THE UNDERLYING SECURITIES

This form shall be used for registration under the Securities Act

of 1933 of American certificates (for example, so-called American depositary receipts for foreign shares or American participation certificates in foreign bonds or notes) issued against securities of foreign

, In the absence of further action by the Oommission, this special Rule 7 will cease to be effective after

February 28. 1939.
118 SECURITIES AND EXCHANGI~ COMMISSION

issuers deposited or to be deposited with an .American depositary

(whether physically held by such depositary in America or _abroad}

and of the foreign securities so deposited.

FORM D-l FOR CERTIFICATES OF DEPOSIT

In registering certificates of deposit issued in anticipation of or

in connection with a plan of reorganization or readjustment, Form

D-I shall be used. If a plan of reorganization or readjustment isproposed at the time the call for deposits is to be made, Parts I and II

of Form D-I should be filed at the same time. If no such plan isproposed at the time the call for deposits is to be made, Part I may

be filed alone, and Part II must then be filed before the plan is submitted to the security holders or deposits are solicited under theplan. Part II is an amendment of Part I and as such shall becomeeffective on such date as the Commission may determine, having due

regard to the public interest and the protection of investors.

In the event that a registrant is exempted from the necessity for

filing Part I, he may nevertheless :filePart II.

Before the issuance of the securities provided in the plan of readjustment or reorganization, Form E-I is to be filed by the issuer

of such securities, unless exempted from the necessity of such filing

by the Act.

FORM D-IA FOR CERTIFICATES OF DEPOSIT ISSUED BY ISSUER OF

SECURITIES CALLED FOR DEPOSIT

This form is to be used only where the issuer of the certificates of

deposit is the original issuer of the securities called for deposit, and

only if the certificates of deposit are issued in connection with a plan

of reorganization or readjustment which involves the-issue of new

securities to the holders of certificates of deposit.

FORM E-l FOR SECURITIES IN REORGANIZATION

This form is to be used to register securities (including contracts

of guaranty but excepting voting trust certificates, certificates of

deposit, and certificates of interest or shares in unincorporated investment trusts of the fixed or restricted management type not having

a board of directors or a board of persons performing similar functions, but having a depositor or sponsor) sold or modified in thecourse of a reorganization.'

The "Rules and Instructions Accompanying Form E-I" contain

the following definition of the term "reorganization":

5. As used in these ru1es and the accompanying instructions:

(1) The term "reorganization" includes any transaction involving:

Attention Is called to the roles as to the use of Form A.-2 which permit the use of that form In certain

Instances for securIties In reorganization.

•
FOURTH ANNUAL REPORT 119'

(a) A readjustment by modification of the terms of securities by agreement; or

(b) A readjustment by the exchange of securities by the issuer thereof for others

of its securities; or

(c) The exchange of securities by the issuer thereof for securities of another

issuer; or

(d) The acquisition of assets of II. person, directly or indirectly, partly or

wholly, in consideration of securities distributed or to be distributed as part of

the same transactions directly or indirectly to holders of securities issued by

such person or secured by assets of such person; or

(e) A merger or consolidation.

FORM F-l FOR VOTING TRUST CERTIFICATES

This form is to be used to register voting trust certificates issued

in the course of a reo~ganization or otherwise.

FORM G-l FOR FRACTIONAL UNDIVIDED OIL AND GAS ROYALTY INTERESTS

Form G-l is to be used to register fractional undivided producing

oil and gas royalty interests.

As used in the foregoing paragraph, the term "producing royalty

interest" means any royalty interest in a tract of land from which

oil or gas was being produced in commercial quantities within 7

days prior to the filing of the registration statement and from which

production of oil or gas had not permanently ceased, to the knowledge of the issuer, on the date on which the statement became effective.

FORM G-2 FOR FRACTIONAL UNDIVIDED NONPRODUCING OIL AND GAS

ROYALTY INTERESTS

Form G-2 is to be used to register fractional undivided nonproducing oil arid gas royalty interests.

As used in the foregoing paragraph, the term "nonproducing

royalty interest" means any royalty interest not included in the

definition of "producing royalty interest" above."

INFORMATION AND DOCUMENTS REQUIRED FOR EXEMPTION OF CERTAIN

SECURITIES UNDER SECTION 3 (b) OF THE ACT

Certain issues of securities having an aggregate offering price to

the public not exceeding $100,000 are exempted from the registration

provisions of the Act by regulations of the Commission pursuant toSection 3 (b) of the Act upon compliance with certain conditions

provided in the regulations. The pertinent regulations are available

without charge upon request.

I Form A-I should be used for overridIng royalties and working interests, as distinct from landowners'

royalties for which Forms a-I and 0-2 are appropriate. In the case of overriding royalties or working

Interests, however, the information specified by Form 0-1 or 0-2 should be added to the statement on

Form A-I by way of supplemental materisl.
120 SECURITIES AND EXCHANGE COM~IISSIOX

FORM I-G FOR REPORT OF SALE OF OIL OR GAS RIGHT

This form is to be used for reports of sales of oil or gas rights,

required by Rule 320.

FORM 2-G FOR REPORT OF SALE OF OIL OR GAS RIGHT

This form is to be used for reports of sales of oil or gas rights,

required by Rule 322.

FOR ANNUAL REPORTS OF REGISTRANTS UNDER THE SECURITIES ACT

OF 19336

FORM I-MD GENERAL FORM

This form is to be used for the annual reports, pursuant to Section

15 (d) of the Securities Exchange Act of 1934, of all issuers except

those for which another form is specifically prescribed.

FORM 2-MD FOR SECURITIES OF FIXED INVESTMENT TRUSTS

This form is to be used for annual reports, pursuant to Section

15 (d) of the Securities Exchange Act of 1934, relating to securities

of unincorporated investment trusts of the fixed or restricted management type, having a depositor or sponsor but not having a board

of directors or persons performing similar functions.

FORM 3-MD FOR VOTING TRUST CERTIFICATES

This form is to be used for annual reports, pursuant to Section

15 (d) of the Securities Exchange Act of 1934, relating to voting

trust certificates.

FORM 4-MD FOR CERTIFICATES OF DEPOSIT

This form is to be used for annual reports, pursuant to Section

15 (d) of the Securities Exchange Act of 1934,relating to certificates

of deposit issued by a committee .

The filing of annual reports on these forms isrequired hy Rule X-15D-I, pursuant to Section 15(d) olthe

Securities Exchange Aet of 1934,as amended.

•
'GUIDE TO FORMS ADOPTED UNDER THE SECURITIES EXCHANGE

ACT OF 1934

FOR APPLICATIONS FOR REGISTRATION OF SECURITIES ON NATIONAL

SECURITIES EXCHANGES

Form 7. For provisional applications.-Where the form for permanent registration of any particular class of security has not yet

been authorized, and for a period of 90 days after the filing of applications on such form is authorized, a provisional application for

registration of a security of such class may be filed on Form 7 pursuant

to Rule X-12B-2. (Rule X-12B-2 sets forth the requirements of an

application filed on Form 7.)

Form 8. For amendments to applications for registration or amendments to annual reports.-This form shall be used for amendments

to applications for registration of securities pursuant to Section 12

(b) and (c) of the Securities Exchange Act of 1934 or amendments

to annual reports pursuant to Section 13 of that Act.

Form 8-A. For additional securities.-This form shall be used for

applications for registration of securities on an exchange on which

other securities of the registrant, whether of the same or a different

class, are registered pursuant to Section 12 (b) and (c) of the Act if

Form 10, 11, 13, 15, 17,22, or 23 would be the form appropriate for

registration in case the registrant did not have securities so previously

registered: Provided, That if Form 22 or 23 would be appropriate for

original registration, this form shall be used only if securities of the

registrant issued pursuant to the plan of reorganization or succession

by reason of which Form 22 or 23 would be appropriate for original

registration have been registered on such exchange pursuant to an

application on such form.

Form 8-B. For securities issued in certain cases upon the registrant's succession to an issuer or issuers of previously registered securities.-This form shall be used by an issuer, not having securities

previously registered, for applications filed on and after March 12,

1936, for the registration of securities, if the conditions set forth in

the following paragraphs (a), (b), (c), and (d) exist:

(a) (1) The registrant, having no assets at the time other than

nominal assets, succeeded to a single predecessor which had

securities registered pursuant to Section 12 (b) and (c) of the

Act on the exchange or exchanges on which registration is applied

for on this form; or

(2) The registrant was organized as the successor to, or, having no assets at the time other than nominal assets, succeeded to,

104139--39----9 121
122 SECURITIES AND EXCHANGE COMMISSION

a group of predecessors consisting of a parent which had securities

so registered and one or more wholly owned subsidiaries of such

parent; or

(3) The registrant was a wholly owned subsidiary of a corporation having securities so registered, which corporation, either

alone or with one or more of its other wholly owned subsidiaries,

was merged into the registrant.

(b) Substantially all of the securities to be registered on this

form were or are to be issued in exchange for or otherwise in

respect of previously registered securities of one or more of the

predecessors, or are securities which, having been previously

registered, have become or are to become securities of the registrant by operation of law or otherwise upon the succession.

(c) The registrant acquired all the assets and assumed all theliabilities of its predecessor or predecessors.

(d) Except for such changes as may have resulted (1) from

the substitution of issuers incident to the succession, or (2) from

changes in capital stock liability per share, or (3) from the issuance of securities in satisfaction of dividends or interest in arrears

on securities of predecessors, the capital structure of the registrant

immediately following the succession was substantially the sameas the capital structure of the single predecessor or the combined

capital structure of the predecessors, or in a case falling within

paragraph (a) (3) above, the combined capital structure of all

the constituent corporations.

The term "wholly owned subsidiary" as used in this rule refers to

a subsidiary substantially all the outstanding stock of which is held,

directly or indirectly, by a single parent.

Form 8-0. For registration on an additional exchange.-This form

may be used for applications for registration of securities on an exchange upon which no securities of the registrant are listed and

registered, if securities of the registrant are registered Pvrsuant to.

Section 12 (b), (c), and (d) on another exchange.

Form 10. For corporatiolls.-This form shall be used for applications for the permanent registration of securities of corporations,

filed on and after February 13, 1935, except the following: Securities

of companies making annual reports under Section 20 of the Interstate

Commerce Act, as amended, or under Section 219 of the Communications Act of 1934; certificates of deposit; American certificates

against foreign issues, either government or corporate; securities of

insurance companies, other than companies engaged primarily in the

title insurance business; securities of banks and bank holding companies; securities of investment trusts; securities issued by any corporation organized under the laws of any foreign country other than

a North American country or Cuba; bonds issued by any corporation

organized under the laws of a North American country or Cuba,

which are guaranteed by any foreign government; securities issued

by any corporation, foreign or domestic, which is directly or indirectly

owned or controlled by any foreign government: Provided, however,
FOUU'.rH ANNUAL REPORT 123

That this form shall not be used for applications for the permanent

registration of securities of any corporation for which, at the time

the application is :filed, Form 22 or 23 is prescribed. And provided

further, That this form shall not be used for applications for the

permanent registration of securities of any corporation, if, at the

time the application is :filed, such corporation is in bankruptcy or

receivership or in the process of reorganization pursuant to Section

77 or 77B of the Bankruptcy Act, and (a) a trustee or receiver appointed in such proceedings has title to or possession of a substantial

portion of the assets of such corporation, or (b) such corporation is

in possession of a substantial portion of its assets pursuant to an

order entered under Subdivision (c), Clause (2) of said Section 77 or

Subdivision (c), Clause (1) of said Section 77B. Any foreign issuer

which by this paragraph is to :fileon Form 10 as to any class of securities other than bonds may also :fileon such form for such bonds; and

any issuer of bonds which is organized under the laws of any foreign

country may at its option :fileon Form 10 until 90 days after the proper

form applicable to such foreign issuer shall have been published.

Form 11. For unincorporated issuers.-This form shall be used

for applications :filedon or after March 30, 1935, for the permanent

registration of securities of unincorporated issuers, except the following: Securities of companies making annual reports under Section

20 of the Interstate Commerce Act, as amended, or under Section

219 of the Communications Act of 1934; certificates of deposit; voting trusts certificates; American certificates against foreign issues,

either government or private; securities of insurance companies;

securities of banks and bank holding companies; securities of investment trusts; securities issued by a national of a foreign country

other than a North American country or Cuba; bonds issued by a

national of a North American country or Cuba, which are guaranteed by any foreign government; securities of any issuer, foreign or

domestic, which is directly or indirectly owned or controlled' by any

foreign government: Provided, however, That this form shall not

be used for applications for the permanent registration of securities

of any issuer for which, at the time the application is :filed, Form

22 or 23 is prescribed. And provided further, That this form shall

Bot be used for applications for the permanent registration of securities of any issuer, if, at the time the application is :filed,such issuer

is in bankruptcy or receivership or in the process of reorganization pursuant to Section 77 or 77B of the Bankruptcy Act, and

(a) a trustee or receiver appointed in such proceedings has title to

or possession of a substantial portion of the assets of such issuer,

or (b) such corporation is in possession of a substantial portion of its

assets pursuant to an order entered under Subdivision (c), Clause (2)

of said Section 77 or Subdivision (c), Clause (1) of said Section 77B.
124 SECURITIES AND EXCHANGE COMMISSION

Form 12. For companies making annual reports under Section. 20

oj the Interstate Oommerce Act, as amended, or under Section 219

of the Oommunications Act of 1934.-This form shall be used for

applications filed on or after April 10, 1935, for the permanent registration of securities of companies making annual reports under

Section 20 of the Interstate Commerce Act, as amended, or under

Section 219 of the Communications Act of 1934, except such companies in receivership or in process of reorganization pursuant to

Section 77 of the Bankruptcy Act.

Form 12-A. For companies in receivership or bankruptcy and making annual reports under Section 20 of the Interstate Oommerce Act,

as amended, or under Section 219 oj the Oommunications Act of 1934.-

This form shall be used for applications filed on or after June 17, 1935,

for the permanent registration of securities of companies making

annual reports under Section 20 of the Interstate Commerce Act, as

amended, or under Section 219 of the Communications Act of 1934,

and in receivership or in bankruptcy (including proceedings under

Sections 77 or 77B of the Bankruptcy Act).

Form 13. For imsuromee companies other than life and title insurance companies.-This form shall be used for applications filed on

or after May 7, 1935, for permanent registration of securities of corporations engaged, directly or through subsidiaries, primarily in

the insurance business, except corporations engaged primarily in

the life or title insurance business. This form shall not be used

by corporations engaged primarily in the business of guaranteeing

mortgages or mortgage-participation certificates.

Pending the authorization of a form for registration of securities

of corpora tions engaged primarily in the life insurance business, and

for a period of 30 days after the filing of applications on such form

is authorized, such corporations may file application on Form 13 for

Insurance Companies other than Life and Title Insurance Companies.

Insofar as Form 13 may be inappropriate to the life insurance

business, a corporation engaged in the life insurance business filing

on Form 13, pursuant to this rule, shall furnish information comparable to that required by Form 13; and, in lieu of financial statements required under the Instructions as to Financial Statements

in the Instruction Book for Form 13, such corporation may file a

copy of its last annual statement filed with its State regulatory

authority.

Form 14. For certificates oj deposit issued by a committee.-This

form shall be used for applications on or after May 10, 1935,for the permanent registration of certificates of deposit issued by a committee.

Form 15. For incorporated investment companies.-This form

shall be used for applications filed on or after May 15, 1935, for the

permanent registration of securities of any corporation which is
FOURTH ANNUAL REPORT 125

engaged, either directly or through subsidiaries, primarily in the

business of investing and reinvesting, or trading in securities, for

the purpose of revenue and for profit, and not in general for the

purpose, or with the effect, of exercising control; except securities

of such corporations in process of reorganization pursuant to Section 77B of the Bankruptcy Act or securities of such corporations

in bankruptcy or receivership.

Form 16. For voting trust certificates and underlying securities.-

This form shall be used for applications filed on or after May 18,

1935, for the permanent registration of voting trust certificates and

underlying securities.

Form 17. For unincorporated issuers engaged primarily in the

business of investing or trading in securities.-This form shall be used

for applications filed on or after May 31, 1935,for the permanent registration of securities of any unincorporated issuer which is engaged,

either directly or through subsidiaries, primarily in the business of

investing and reinvesting, or trading, in securities, for the purpose of

revenue and for profit, and not in general for the purpose, or with the

effect, of exercising control; except securities of such issuers in process

of reorganization pursuant to Section 77B of the Bankrupty Act or

securities of such issuers in bankruptcy or receivership.

F-orm 18. For foreign governments and political subdivisions

thereoj.-This form shall be used for applications filed on or after

July 1, 1935, for the permanent registration of securities of any foreign government or political subdivision thereof: Provided, however, That any public corporation or other autonomous. entity in the

nature of a political subdivision, except a State, province, county, or

municipality or similar body politic, may, at its option, use Form

21 in lieu of this form.

Form 19. For American certificates against foreign issues and fOT

the underlying securities.-This form shall be used for applications

. filed on or after July 15, 1935,for the permanent registration of American certificates (for example, so-called American depositary receipts

for foreign shares or American participation certificates in foreign

bonds or notes) issued against securities of foreign issuers deposited

with an American depositary (whether physically held by such depositary in America or abroad) and of the foreign securities so deposited.

Form 20. For securities other than bonds of foreign private issuers.-This form shall be used for applications filed on or after July

15, 1935,for the permanent registration of securities other than bonds

or other evidences of indebtedness (a) issued by a national of a foreign country other than a North American country or Cuba, or (b)

issued by any corporation or unincorporated association, foreign or

domestic, which is directly or indirectly owned or controlled by any

foreign government.
126 SECURITIES AND EXCHANGE COl\1l\IISSION

Form 21. For bonds of foreign private issuers.-This form shall be

used for applications filed on or after July 15, 1935, for the permanent

registration of bonds or other evidences of indebtedness (a) issued by

a national of a foreign country other than a North American country

or Cuba; (b) issued by a national of a North American country or

Cuba which are guaranteed by any foreign government; (c) issued by

any corporation or unincorporated association, foreign or domestic,

which is directly or indirectly owned or controlled by any foreign

government; or (d) issued by any public corporation or other autonomous entity in the nature of a political subdivision which shall at its

option elect to use this form in lieu of Form 18, except that. this

form is not to be used by a State, province, county, or municipality

or similar body politic.

Form 22. For issuers reorganized in insolvency proceedings or

which have succeeded to a person in insolvency proceedings.-This

form shall be used for applications for registration of securities of

any issuer which, pursuant to a plano (a) Has been or is being reorganized in insolvency proceedillgs(b;)°Hr . d 0 0 dir I 0 dir I b- as acquire or 18 to acquire, ect y or ill ect y, su

stantially all of its business and assets (other than cash) from

a person in insolvency proceedings or from such person and one

or more of its subsidiaries, and is continuing or is to continue

the business so acquired; or

(c) Being a subsidiary of a person in insolvency proceedings, has acquired or is to acquire directly or indirectly substantially all of its assets (other than cash and other than assets

owned by it prior to such acquisition) from such person or from

such person and one or more of its subsidiaries;

if the securities are, or are to be, outstanding or issued pursuant to

the plan, or were or are to be issued after the consummation of the

plan: Provided, That this form shall not be used by issuers for which

Form 8-A, 12, or 12-A is prescribed, or for applications filed with the

exchange after the expiration of a full fiscal year of the issuer commencing on or after the date on which the transfer or opening of

accounts was made.

Form 23. For successor issuers.-This form shall be used for applications for registration of securities of any issuer which has acquired,

or is presently to acquire, directly or indirectly (through the acquisition of securities or otherwise) the major portion of its business and

assets (other than cash) by acquiring all or a part of the business and

assets of one or more other persons, and is continuing or is to continue,

the business so acquired: Provided, however, That this form shall not

be used by issuers for which either Form 8-A, 8-B, 12, 12-A, 20, 21,

or 22 is prescribed, or for applications filed with the exchange after

the expiration of a full fiscal year of the issuer commencing on or

after the date of succession.
FOURTH ANNUAL REPORT 127

Form 24. For hank /widing companies.-This form shall be used for

applications for the registration of securities of any person which is

engaged, either directly or through subsidiaries, primarily in the business of owning securities of banks, for the purpose or with the effect

of exercising control.

Form I-J. For registration of unissued warrants for "when issued"

4ealing.-This form is to be used for applications for registration of

unissued warrants, pursuant to Section 12 (d) of the Securities Exchange .Act of 1934 for "when issued" dealing on a national securities

exchange.

Form 2-J. For registration oj unissued securities, other than unissued

warrants for "when issued" dealing.-This form is to be used for

applications for registration of unissued securities, other than unissued

warrants, pursuant to Section 12 (d) of the Securities Exchange .Act

of 1934 for "when issued" dealing on a national securities exchange.

Form I5-AN. For statements in respect oj exemption of issued warrants.-This form is to be used for statements in respect of exemption

of issued warrants, pursuant to Section 3 (a) (12) of the Securities

Exchange .Act of 1934.

FOR REPORTS TO BE FILED BY OFFICERS, DIRECTORS, AND SECURITY

HOLDERS

Form 4. For reporting changes in ownership of equity securities.-

Every person who at any time during any month has been directly

or indirectly the beneficial owner of more than 10 percent of any

class of any equity security (other than an exempted security) which

is listed on a national securities exchange, or a director or an officer

of the issuer of such security, shall, if there has been any change

during such month in his ownership of any equity security of such

issuer, whether registered or not, file with each exchange on which

any equity security of the issuer is listed and registered a statement

on Form 4 (and a single duplicate original thereof with the Commission) indicating his ownership at the close of the calendar month

and such changes in his ownership as have occurred during such

calendar month. Such statements must be received by the Commission and the exchange on or before the 10th day of the month

following that which they cover.

Form 5. For reporting ownership oj equity securities.-In the case of

an equity security (other than an exempted security) which is listed

subsequent to February 15, 1935 on a national securities exchange,

every person who at the time such registration becomes effective is

directly or indirectly the beneficial owner of more than 10 percent of

any class of such security or a director or an officer of the issuer of such

security, shall file with each exchange on which any equity security of

the issuer is listed and registered a statement on Form 5 (and a single
128 SECURITIES AND EXCHANGE Cmil\IISSION

duplicate original thereof with the Commission) of the amount of all

equity securities ofsuch issuer, whether registered or not, so beneficially

owned by him at the time such registration became effective. Such

statement must be received by the Commission and the exchange on or

before the 10th day of the following calendar month. If such person

files a statement on Form 4 for the same calendar month in respect of

the same securities, he need not file an additional statement pursuant

to this paragraph.

Form 6. For reports by persons who have Just become officers or directors or security holders oj more than 10 percent oj any class oj equity

security.-Every person who becomes directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security

(other than an exempted security), which is listed on a national

securities exchange, or becomes a director or an officer of the issuer of

such security, shall file with each exchange on which any equity

security of the issuer is listed and registered a statement on Form 6

(and a single duplicate original thereof with the Commission) of the

amount of all equity securities ofsuch issuer, whether registered or not,

so beneficially owned by him immediately after becoming such beneficial owner, director, or officer. Such statement must be received by

the Commission and the exchange on or before the 10th day following

the day on which such person became such beneficial owner, director,

or officer. Such person need not file the statement required by this

paragraph, if prior to such 10th day and during the calendar month

in which he has become such beneficial owner, director, or officer,

there has been a change in his beneficial ownership which will require

him to file a statement on Form 4 with respect to the same securities.

FOR REGISTRATION OF BROKERS AND DEALERS TRANSACTING BUSINESS

ON OVER-THE-COUNTER MARKETS

Form 3-},;f. F01' applications [or registration oj brokers and dealers,

except applications for which Form 4-Al is authorized.-This form is

to be used for applications filed on or after July 1, 1936, for the registration of brokers and dealers pursuant to Section 15 (b) of the

Securities Exchange Act of 1934, as amended, except applications

for which Form 4-M is authorized to be used.

Form 4-A1. For applications for registration oj partnerships jormed

upon death, withdrawal, or admission of one or more partners in partnerships registered as brokers or dealers.-This form is to be used (a) for

applications filed by a registered partnership on or after July 1, 1936,

pursuant to Section 15 (b) of the Securities Exchange Act of 1934, as

amended, for the registration of a partnership to be formed as the

successor to the applicant by the withdrawal or admission of one or

more partners in the applicant; and (b) for applications filed on or

after October 10, 1936, pursuant to said Section 15 (b) and Rule
FOURTH ANNUAL HEPORT 129

X-15B-4, for the registration of a partnership formed as the successor

to a registered partnership which has been dissolved by the death,

withdrawal, or admission of one or more partners: Provided, That the

application is filed within 30 days after such dissolution.

Form 5-M. For adoption oj applications filed by predecessors.-This

form is to be used by a broker or dealer in adopting as its own an

application for registration on Form 3-M or Form 4-M filed on its

behalf by a predecessor.

Form 6-A1. For supplemental statements to applications for registration oj brokers and dealers.-This form is to be used for correcting

inaccuracies and reporting changes in the information contained or

incorporated in any application filed on Form I-M, Form 3-M, or

Form 4-M or in any adoption filed on Form 5-M or in any supplemental statement filed on Form 2-M or Form 6-M.

FOR ANNUAL AND OTHER REPORTS OF ISSUERS HAVING SECURITIES

REGISTERED ON NATIONAL SECURITIES EXCHANGES

Form 8-K. For current reports.-This form is to be used for the

current reports required by Rule X-13A-6.I

I Rule X-lSA-6. Current repotts. (0) A current report on thc appropriate form shall be filed by the ISSuer

of a seeunty registered on a national seeurities exchange (hereinafter called "the registrant") in case any or

the events enumerated below occurred or shall occur at any tune after the close of the first fiscal year or

other one-year period for which an annual report is required to be filed by the registrant, or if the registrant

had no security registered on a national seeuriues exchange on December 31, 1935,at any time after the registratIon of any of its securrties first became or shall become effective:

(1) A material amendment of any exhrbit previously filed by the registrant pursuant to seenon 12or

13of the Act:

(2) The execution of any voting trust agreement, contract, or indenture of a character required to be

ftled as an exlnbrt m the form of annual report appropriate for the registrant:

(3) A substantial restatement of the capital shares account of the registrant;

(4) The Issuance of any Dewclass of securitIes, or an aggregate Increase or decrease of more than five

'Percent in the amount of any class ofsecurlnes of the registrant outstanding, as last prevrously reported,

unless resulting from an ordinary sinking fund operation: provided that (I) no report need be made

WIth respect to notes, drafts, bills of exchange, or bankers' acceptances having a maturity at the time

of issuance of not exceeding one year, and (ti) for the purposes of this paragraph (4), securities held by

the registrant shall not be deemcd "outstanding",

(5) The granting or extsnsion of any option to purchase equity securities of the registrant from the

registrant, provided that a current report need be made only when one or more options calIing for an

aggregate prmeipal amount of $50,000or more of a single ISSueof eonvortible evidences of Indebtedness,

or an aggregate of 1,000or more shares or other units of any other single class of equity seeurltros, have

been granted Orextended and have not been previously reported;

(6) The exercise, m whole or inpart, of any option to purchase equity seeunues of the registrant from

the registrant, provided that a current report need be made only when a person or persons have acquired

an aggregate principal amount of $50,000Ormare of a single issue of convertible evidences of indebtedness, or an aggregate of 1,000or mare shares or other units of any other single class of equity securities,

through one or more exercises which have not bcen prevrouslv reported:

(7) A person's becoming, or ceasing to be, a parent or subsidiary of the registrant, provided that no

report need be made as to any subsidiary the name ofWhIChwould not be required to be furnished in the

form of annual report appropriate for the registrant,

(8) A substantial revaluation of the assets of the registrant:

(9) A substantial WIthdrawal or substitution with respect to property securing any issue ofregistered

securities;

provided, however, That no report need be filed as to any event eoneernmg which mtormanon substantially

smnlsr to that required by Form S-K shall have been previously reported by the registrant.

(b) The current report shall be filed not more than ten days sfter the close of the calendar month during

which occurred the event obhgating the registrant to file the current report, or if the event occurred prior to

December I, 1936,not later than January 10, 1937.
130 SECURITIES AND EXCHANGE COMMISSION

Form ltl-K, For corporations.-This form is to be used for the

annual reports of all corporations except those for which another

form is specifically prescribed.

Form 11-K. For unincorporated issuers.-This form is to be used

for the annual reports of all unincorporated issuers except those for

which another form is specifically prescribed.

Form 12-K. For companies making annual reports under Section 20

oj the Interstate Commerce Act, as amended, or under Section 219 of the

Communications Act of 1934.-This form is to be used for the annual

reports of companies making annual reports under Section 20 of the

Interstate Commerce Act, as amended, and of carriers making annual

reports under Section 219 of the Communications Act of 1934, except

such companies in receivership or in bankruptcy, including proceedings

for reorganization pursuant to Section 77 or 77B of the Bankruptcy

Act, at the close of the fiscal year for which the report is made.

Form 12A-K. For companies in receivership or bankruptcy at close

of fiscal year and making annual reports under Section 20 of the Interstate Commerce Act, as amended, or under Section 219 of the Communications Act of 1934.-This form is to be used for the annual reports of

companies making annual reports under Section 20 of the Interstate

Commerce Act, as amended, and of carriers making annual reports

under Section 219 of the Communications Act of 1934, if such companies were in receivership or in bankruptcy, including proceedings for

reorganization pursuant to Section 77 or 77B of the Bankruptcy Act,

at the close of the fiscal year for which the report is made.

Form 13-K. For insurance companies other than life and title insurance companies.-This form is to be used for the annual reports of

corporations engaged, directly or through subsidiaries, primarily

in the insurance business, except corporations engaged primarily in

the life or title insurance business. This form is not to be used by

corporations engaged primarily in the business of guaranteeing mortgages or mortgage-participation certificates.

Form 14-K. For certificates of deposit issued by a committee.-

This form is to be used for the annual reports of issuers of certificates

of deposit issued by a committee.

Form 15-K. For incorporated investment companies.-This form

is to be used for the annual reports of corporations engaged either

directly or through subsidiaries primarily in the business of investing

(c) As used In this role, the term "preD/oultv reported" means previously reported In an application for

registration or a report lIIed pursuant to Section 12 or 13 of the Act; the term "option" does not Include

options evidenced by an Issue ofsecurities. such as an Issue ofwarrants or rights; the term "umt" means tbet

unit of a class ofsecurities representing the smallest Interest in the registrant or In property ofthe registrant,

or having the smallest par or face value or denomination which Is separately transferable bya holder thereof.

Unless the context otherwise requires. all other terms used In this role have the same meanings as In the

Act. In the form appropriate for an annual report of the regIStrant, and In the Instruction beok accompanyIng snch form.

(d) The foregoing provisions ofthis rnle shall not be applicable to Issuers orsecurities which are registered

pursuant to an appllcatlon on Form 18. 19, 20. or 21.
FOURTH ANNUAL REPORT 131

and reinvesting or trading in securities for the purpose of revenue

and for profit, and not in general for the purpose or with the effect

of exercising control.

Form 16-K. For voting trust certificates and underlying securities.-

This form is to be used for annual reports relating to securities evidencing a participation in a voting trust agreement or a similar agreement for the holding of securities for voting purposes and to securities

held subject to such agreements.

Form 17-K. For unincorporated issuers engaged primarily in the

business of investing or trading in securities.-This form is to be used

for the annual reports of unincorporated issuers engaged either directly

or through subsidiaries primarily in the business of investing and

reinvesting or trading in securities for the purpose of revenue and for

profit, and not in general for the purpose or with the effect of exercising

control.

Form 18-K. For foreign governments and political subdivisions

thereof.-This form is to be used for the annual reports of foreign

governments or political subdivisions thereof, except any public corporation or other autonomous entity in the nature of a political

subdivision, other than a State, province, county, or municipality or

similar body politic which, at its option, has registered its securities

on Form 21 in lieu of Form 18.

Form 19-K. For issuers of American certificates against foreign

issues and the underlying securities.-This form is to be used for the

annual reports of issuers of American certificates (for example, socalled American depositary receipts for foreign shares or American

participation certificates in foreign bonds or notes) issued against

securities of foreign issuers deposited with an American depositary

(whether physically held by such depositary in America or abroad)

and of the foreign securities so deposited.

Form 20-K. For foreign private issuers registering securities other

than bonds.-This form is to be used for the annual reports of the

following issuers with respect to securities other than bonds or other

evidences of indebtedness: (a) Nationals of a foreign country other

than a North American country or Cuba, and (b) corporations or

unincorporated associations, foreign or domestic, which are directly

or indirectly owned or controlled by any foreign government.

Form 21-K. For foreign private issuers registering bonds.-This

form is to be used for the annual reports of the following issuers with

respect to bonds or other evidences of indebtedness: (a) Nationals of

a foreign country other than a North American country or Cuba,

(b) nationals of a North American country or Cuba if such bonds or

other evidences of indebtedness are guaranteed by any foreign government, (c) corporations or unincorporated associations, foreign or

domestic, which are directly or indirectly owned or controlled by
132 SECUHITIES AND EXCHANGE COl\ll\IISSION

any foreign government, and Cd)public corporations or other autonomous entities in the nature of political subdivisions which, at their

option, have registered securities on Form 21 in lieu of Form 18.

Form 24--K. For bank holding companies.-This form is to be used

for the annual reports of any person which is engaged, either directly

or through subsidiaries, primarily in the business of owning securities

of banks, for the purpose or with the effect of exercising control.

FOR REGISTRATION OR EXEMPTION OF A NATIONAL SECURITIES

EXCHANGE

Form 1. Application for registration or exemption from registration

as a National Securities Exchange.-This form shall be filed in connection with the applications of securities exchanges for registration

or exemption from registration.

Form 9. Amendatory and/or supplementary statement to registration

statement filed by an exchange.-This form shall be used for filing

amendatory and/or supplementary statements to registration statements of national securities exchanges.

Form 9-A. Amendatory and/or supplementary statement to application

for exemption from registration filed by an exchange.-This form shall

be used for filing amendatory and/or supplementary statements to

applications for exemption from registration as national securities

exchanges.
GUIDE TO FORMS ADOPTED UNDER THE PUBLIC UTILITY HOLDING

COMPANY ACT OF 1935

Form U-2. Declaration and periodic report.-This form is to be

used by a subsidiary of a registered holding company primarily engaged in business as a broker or dealer, which claims exemption under

Rule U-3D-4 and also for the quarterly reports to be filed by such a

company.

Form U-3A3-1. Quarterly statement filed by banks claiming exemption.-This form is prescribed for quarterly reports to be filed by banks

claiming exemption from any provisions of the Act by virtue of Rule

U-3A3-1.

Form U-5-A. Notification oj registration.-This form is to be used

for notification of registration pursuant to Section 5 (a) of the Act.

Form U-5-B. Registration statement.-This form is to be used for

registration statements to be filed by registered holding companies

pursuant to Section 5.

Form U-5-S. Annual supplement to registration statement.-This

form is to be used for the annual supplements to registration statements

(Form U-5-B) to be filed by registered holding companies.

Form U-6B-l. Application pursuant to Section 6 (b).-This form is

to be used for applications by subsidiary companies of registered

holding companies, pursuant to Section 6 (b) of the Act, for exemption

from the provisions of Section 6 (a) with respect to the issue or sale of

securities solely for the purpose of financing the business of the

applicant and expressly authorized by the State commission of the

State in which the applicant is organized and doing business.

Form U-6B-2. Certificate oj notification.-This form is to be used

for the filing of certificates of notification by registered holding companies and subsidiaries thereof pursuant to Rule U-6B-2.

Form U-7. Declaration pursuant to Section 7.-This form is to be

used for declarations filed pursuant to Section 7 of the Act, by a

registered holding company or subsidiary company thereof, either in

respect of the.issue or sale of securities issued by it, or in respect of

the exercise by the declarant of any privilege or right to alter the

priorities, preferences, voting power, or other rights of the holders of

any outstanding securities issued by it.

Form U-l0-l. Application pursuant to Section 10 (a) (l).-This

form is to be used for applications for the approval of the' acquisition

of any securities by a registered holding company, or any subsidiary

133
134 SECURITIES AND EXCHANGE COMMISSION

company thereof, or the acquisition of securities of a public utility.

company by a person who is an affiliate (as defined in Clause (A) of

Section 2 (a) (11) of the Act) of such company and of any other public

utility or holding company, or will become such an affiliate by virtue

of such acquisition.

Form U-10-2. Application pursUant to Section 10 (a) (2) or 10 (a)

(S).-This form is to be used for applications for the approval of the

acquisition of any utility assets or other interest in any business by a

registered holding company, or any subsidiary company thereof.

Form U-12D-1. Application pursuant to Section 12 (d).-This form

is to be used for applications for the approval of a sale, directly or

indirectly, by a registered holding company to any person of any

voting security which it owns of a public utility company.

Form-U-12D-2. Application pursuant to Section 12 (d).-Thisform

is to be used for applications for the approval of the sale of utility

assets, directly or indirectly, by registered holding companies.

Form U-12 (i)-1. Statement required pursuant to Section 12 (i).-

This form is to be used for statements to be filed with the Commission,

pursuant to Section 12 (i), by any person employed or retained by any

registered holding company or by any subsidiary company thereof,

who presents, advocates, or opposes any matter affecting any such

company before the Congress or any member or committee thereof,

or before the Securities and Exchange Commission or the Federal

Power Commission or any member, officer, or employee of either

such Commission.

Form U-1S-1. Application for approval of mutual service company

or declaration with respect to organization and conduct of business of

subsidiary service company.-This form is to be used, pursuant to

Rule U-13-22, for an application for approval of a mutual service

company or for a declaration with respect to the organization and

conduct of business of a subsidiary service company.

Form U-13-60. Annual report of mutual and subsidiary service companies.-This form is to be used for the filing of annual reports by

each mutual service company and each subsidiary service company

pursuant to Rule U-13-60.

Form U-14-1. Quarterly report of acquisitions.-This form is prescribed for quarterly reports of acquisitions of securities to be filed by

registered holding companies pursuant to Rule U-14-1.

Form U-14-3. Annual report of registered holding companies.-This

form is to be used for the filing of annual reports by registered holding

companies pursuant to Rule U-14-3.

Form U-17-1. Reports of ownership by officers and directors.-This

form is to be used for statements of ownership required by Section

17 (a) of the Act to be filed by persons who are officers or directors

of a registered holding company at the time when it is registered. A
FOURTH ANNUAL REPORT 135

statement must be filed by every officer and director of a holding

company following its registration and following his appointment or

election after registration, even if he owns no securities of the company or its subsidiaries.

Form U-17-2. Reports of changes of ownership by officers and directors.-This form is to be used by officers and directors of registered

holding companies in reporting changes in their beneficial ownership

of securities of such holding companies or any of their subsidiaries,

as required by Section 17 (a) of the Act.

Form U-17-3. Statement to be signed by officer or director pursuant

to Bule U-17 0-11. -This form is to be used for statements to be signed

by officers or directors with respect to whom exemption is claimed

pursuant to Rule U-17 0-11 from the provisions of Section 17 (c) of

the Act.
APPENDIX III

SECURITIES ACT REGISTRATION STATEMENTS AS TO WHICH

STOP ORDERS, CONSENT REFUSAL ORDERS, AND WITHDRAWAL

ORDERS.WERE ISSUED JULY 1, 1937, TO JUNE 30, 19381

p

Docket Type of

No Issuer Form Amount order or Date action 2

2-3276 Abbott Laboratories, North Ohieago, I1L _________A-2 $370,000 W Sept. 17, 1937

2-3389 Abitibi Reserve Gold Mines, Ltd., Toronto, A-O-l 875,000 W Oct. 16,1937

Ontario f w Sept. 1,1937 2-3251 Acampo Wmery & Distrllenes, Inc, Acampo, A-2 187,980

Calif l Ref. Feb 19,1938

2-3368 Ambassador Pictures, Inc, New York, N. Y ______ A-I 5,596,250 W Oct. 30, 1937 2-3674 Amencan Agents Plate Glass Ins. Co., New York, A-I 500,000 { W May 14,1938 N.Y. Ref. June 24, 1938 2-3689 American Alloys, Inc, Medford. Mass ____________ A-I 380,000 W May 26,1938

2-3351 Amencan Business Credit Corp., New York, A-I 2,406,250 W Sept. 13, 1937 N.Y.

2-3034 American Colortype Oo., Ohfton, N. J ____________ A-2 1,985,000 W Oct 4,1937

2-3434 Amencan Insulator Corp. of Del, New Freedom, A-2 403,250 W Dec. 18, 1937 Pa

2-3290 American Republics Corporation, Houston, Tex ___ A-2 4,142,152 W Oct. 30,1937 2-3125 Amtex Petroleum Corporation, Fort Worth, Tex __ A-I 7,225,000 W Oct. 27,1937

{ W Oct. 21,1937

2-3456 Appalachian Electnc Power Co., Roanoke, Va ____ A-2 66,337,500 Ref. Jan 13,1938

Elf. Feb. 2,1938

2-3308 Associated Services Finance Corp, Washington, A-I 450,000 W June 16, 1938 DC

2-3204 The Autoear Co , Ardmore, Pa ____________________ A-2 3,142,910 W Oct. 7,1937 2-3620 Barley Earhart Corporatron, Portland, MICh ______ A-I 263,180 W May 16,1938 2-2837 Bering Straits 'I'm Mmes, Inc, Seattle, Wash _____ A-I 183,143 SO July 2,1937 2-3259 Black Gold Petroleum Co., Oklahoma City, Okla. A-2 3,000,000 W Oct 5.1937 2-3443 Black Mammoth Cons. Mming Co., Tonopah, A-2 526,500 W Oct. 16,1937 Nev.

2-3198 Boyd Kirkland Gold :t-.fmes, Ltd., Toronto, A-O-l 564,232 W July 19.1937 Ontario. 2-3379 Brainard Steel Corporation, Warren, Ohio _________ A-2 1,015,000 W Jan. 27,1938

{ W Nov. 23,1937 2-3516 Brough Lake Molybdenum, Ltd., Toronto, A-0-1 320,000 Ref. Dec. 23,1937

Ontario Elf. Feb 27,1938 2-3226 City of Buenos Aires, Argentine Republie _________ Sch. B 13,500,000 W I July 26, 1937

{ W Aug. 12,1937 2-3175 Buffalo Idaho Mining Co , Golden, Idaho _________ A-I 170,000 Ref. Nov. 27,1937

Elf. Jan. 16,1938 2-3363 Bullard Co., Bridge ort, Conn ____________________ A-2 I 640 000 W Nov. 11 1937

4

175

I This list includes 205 registratron statements, whieh are classificd as follows

Withdrawals' Withdrawn and not refiled_________________________________________ 160

Total additions to withdrawals. 100

Withdrawn. refiled and- Pending amondment.L. , ______________ _ ___________________ _ __ _ 3 Elfeetive_ ______________ __________ _________ __ ________________ 12

TotaL ______________ ____________ _____ ___ ________________________ 15

Consent r~~~?o;~~~~ of Withdrawals dunn", year ---- -- ----------------

Orders issued and still in force____________________________________________________________ 2 Statements subsequently effectlve. 2

Total issued during year .

Stop orders: Orders issued and still m rorce, 22

Statements subsequently effective or re-effective .. 4

Total issued during year ._ 29.

J ,V Withdrawn.

CRO=Consent refusal order. SO=Stop order. Ref ee Reflled.

Eff.=RegHtratlOn statement fully effective (stop or refusal order having been lIfted, or statement hanna heen reflled)

Re-Eff.= Re-effeetrvo.

136

•

_

_

_

_

=
FOURTH ANNUAL UEPOHT 137

SECURITIES ACT REGISTRATION STATEMENTS AS TO WHICH

STOP ORDERS, CONSENT REFUSAL ORDERS, AND WITHDRAWAL

ORDERS WERE ISSUED JULY 1, 1937, TO JUNE 30, 1938-Continued

Docket

No. Issuer Form Amount

Typeo!

order or

action

Date

June 10,1938

May 14,1938 Mar. 10,1938

Mar. 30,1938

Sept. 11, 1937 Aug 21,1937

May 11,1938

Feb. 11, 1938

Feb. 12,1938

Oct. 1,1937 Nov 1,1937

Jan. 14,1938

May 12,193&

Apr. 29,1938

May 28,1938

Oct. 30, 1937 Nov. 19,1937

July 12,1937

Oct. 29, 1937

Apr. 27, 1938

May 3,1938

Aug. 2,1937

Feb. 14,1938

July 13,1937

Aug. 2,1937

Nov. 3,1937

Aug. 10, 1931

Feb. 28,1938

Jan. 28, 1938

Apr. 29,1938

Jan. 6,1938

Sept 11, 1937

Jan. 12,1938

Aug. 6,1937

Feb 25,1938 June 30,1938 Dec. 18, 1937 July 2,1937

Mar 31,1938

Feb. 5,1938

Nov. 30. 1937

Mar. 17.1938

Sept. 17,1937

Feb 7,1938

Feb 27,1938

Oct 13,1937

Dec 16,1937

Mar 11,1938

May 29,1938

June 2,1938

July 15, 1937

Jan. 6,1938

July 1,1937

Nov. 24,1937

Apr 1,1938

Feb. 25.1938

Sept 4,1937 Jan 7,1938

{

Mar 2,1938

as of Feb. 21, 1938

Aug. 28, 1937

Dec 8,1937

{

Aug 2,1937 as of

July 31,1937

Apr 15,1938

July 31,1937

Nov. 9.1937

w

w

w

w

w

W

W

W

SO

W

SO

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

SO

{SO

Re-ElI. W

W

W

w

W

{

W

Ref

Eff.

W

{

W

Ref.

ElI.

W

SO

W

W

W

W

SO

j W

Ref.

ElI.

W

w

w

w

w

324,945

750,000

300,000

300,000

3,900,000

100,000

1,312,500

5,750,000

131,250

350,000

200,000

323,500

750,000

161,563

2,296,790

3,672,240

194,463

19,440,000

750,0<'0

900,000

402,500

470,000

175,000

600,000

2,066,667

2,625,000

600.000

447,295

3,189,975

3,450,000

250,000

2,396,150

2,001,346

937,500

1,000,000

3,15(',000

87,500

109,112

550,000

750,000

llO5,OOO

187,500

1,714,620

1,435,500

1,250,000

985,876

3,703,073

1,125,000

462,()(10

500,000

1,320,000

555,000

2,124,770

2.200,000

250,000

2,312,500

670.000

398000

A-2

D-l

A-2

A-I

A-I

A-I

A-I

A-I

A-I

E-l

A-2

A-2

A-2

A-2

A-2

A-I

A-I

A-2

A-I

o-i

c-i

A-2

A-I

A-I

A-I

A-2

A-2

A-2

A-O-l

A-2

A-I

A-2

A-I

A-O-l

A-I

A-2

A-I

A-I

A-I

A-O-l

A-2

A-2

A-O-l

A-I

A-I

A-2

A-I

A-I

A-I

Callahan Consolldated Mines, Inc, Wallace,

Idaho. Calo Food Products, Inc, Oakland, CalIL

Cameron Fuel Oil Motors Corp., Now York, K. Y_

A S. Campbell Co, Inc, East Boston, Mass Canusa Gold Mines, Ltd., Toronto, Ontario

Capps Gold Mine, Ltd, Toronto, Ontano Carrell Stcel Co , ChICagO, Ill A M Castle & Co, Ohicago, IlL

Chester Pure SIlk Hosiery Co, St LOUIS,Mo Ormarron Petroleum Trust, Tulsa. Okla

Cinecolor, Inc, Los Angeles, Calrf.;

CItizens Mortgage & socunncs Co .. Sprrngfleld,

Mo

Clarksburg Columbus Short Route Bridge Co,

Parkersburg, W. Va

Colonial Decorative Oorporatron, New York, N Y_ A-I

Colossal Mines. Inc, Indianapolis, Ind

Oommercial DIscount Co. Los Angeles, Cahf.,

Commonwealth Investment Co, San Francisco,

Calif. Consolidated Gas Electnc Light & Power Co. of Baltimore, Baltnnore, Md

Consoltdated 011 Co., WIChIta Falls, 'I'ex

Consoltdated Royal Chemical Co , Olneago, 111. Consoltdated Sciences, Inc., Rochester, N Y

Consumers Steel Products Corp., Detroit, MICh

Corporate Leaders Secunties Co , W ilmmgton, DcL Crude 011 Corporation of Amerrca, Tulsa. Okla

Crusader Aircraft Corporation, Denver, Colo Cutler Hammer, Inc., Milwaukee, WIS

Dayton Rubber Manufactunng Co , Dayton, Ohio; Detroit Steel Products Co., Detroit, Mieh

Dewey & Almy Chemical Co , Cambridge, Mass __ Dewey Portland Cement Co, Kansas City, Mo Display Products, Inc., Detroit, Mieh Dixie Refining Oo., Detroit, Mroh

Douglas & Lomason Co, Detroit, M1Ch

Eastern Consolidated Gas Co., Baltimore, Md Eberhardt & Co., Wilmington, DeL

Economic Analysts, Ine., New York, N Y Economy Baler Co., AI!n Arbor, Mreh

Eureka Mining & Milltng Co, 'Seattle, Wash

Fabrica Dornimcana de 'I'ejrdos Por a Pre-Orgam- zatron Syndicate

Farms, Inc., Pensacola, Fla_______________________ A-I

Federal Mogul Corporation, Detrort, Mich________ A-2

Florida Towmg Oorporatron, Jaoksonville, Fla.c ,; A-I Foster wlteeler Corporation, New York, N. Y____ A-2 Foundation Co., New York, N. Y_________________ A-2

Furniture Mich Shops of America, Ine., Grand Rapids,

General Banknote Corporation, New York, N Y __

General Reinsurance Corporation, New York, N. Y_ GIbbs & Co., Chicago, IlL

L. H Gilmer Co., Philadelphia, Pa

Gold Dust Mming & Millmg Co., Colorado Springs, Colo

Golden Conqueror Mmes, Ine., Mamtou, Colo

Gongoll ASSOCIates,Ine., Minueapohs, Mmn

Grabler Manufacturmg Co., Cleveland, Ohio H. L. Green ('0, Inc., New York. N Y

Green Mountam Distillery, Ine., Burlington, Vt._ Greta OIl Oorporanon, Houston, Tex

Guardian Gold Mines, Ltd, KIrkland Lake, OntarlO________ A-O-l

Hampden Brewing Co. Chicopee, Mass___________ A-2

104139--39----10

2-3343

2-2786

2-3440

2-3481

2-2591

2-3395

2-3095

2-3399

2-3563

2-1712

2-3338

2-3176

2-3465

2-2876

2-3592

2-2928

2-3482

2-3708

2-3622

2-3497

2-3232

2-3062

2-1865

2-3618

2-3415

2-3403

2-3181

2-3258

2-3387

2-3543

2-2261

2-3217

2 3367

2-2725

2-1643

2-1089

2-3509

2-3596

2-2632

2-348!l

2-3022

2-1816

2-3398

2-3036

2-3306

2-3386

2-3043

2-3428

2-3286

2-3331

2-1449

2-3382

2-3265

2-3114

2-3591

2-3233

2-3491

2-3372

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_
138 SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT REGISTRATION STATEMENTS AS TO WHICH

STOP ORDERS, CONSENT REFUSAL ORDERS, AND WITHDRAWAL

ORDERS WERE ISSUED JULY 1, 1937, TO JUNE 30, 1938-Continued

Docket Type of

No. Issuer Form Amount order or Date action

2-2948 Hearst Magazines, Inc., New York, N. Y._. A-2 13,390,000 W Sept. 1,1937

2-3031 Hearst Publications, Inc., San Francisco, CaIlL. __ A-2 23,175,000 W Do.

2-3074 Herman Hanson Oil Syndicate, Turtle Lake, N. Dak. A-I 35,000 SO Sept. 15, 1937

'2-2459 Hollywood Famous Pictures, Inc., Los Angeles, Cahf. A-I 87,500 W Sept. 2,1937

~62 Homi Signal ManufactUring Corp., New York, N. Y _._._ A-I 239,309 W Dec 13,1937

{ W Sept. 22,1937

2-3404 Hughes Printing Oo., Esst Stroudsburg, Pa _______ A-2 200,000 Ref. Nov. 15,1937

{Dec. 27. 1937 EfT. as of Dec. 26. 1937 2-3138 Industries Ca8ital Corp. of N. Y., New York, N. Y A-I 1,500,000 W July 19,1937 2-3219 Inland Steel 0., Chicago, IlL____________________ A-2 9,900,000 W July 8,1937

2-3411 International Cinema, Inc., Los Angeles, CaIlL _____ A-I 250,000 W Feb. 2,1938

2-2992 Kane America Corporation, Fort Worth, Tex _______ E-1 93,714 SO Dec. 14, 1937 2-2696 Kentucky Valley Distilling Co , Loulsville, Ky ____ A-I 699,900 \\T Feb. 16, 1938

2-2349 KlDner Airplane & Motor Oorp., Ltd., Glendale, oenr. _________,_________________________________ A-I 250,320 SO Dec. 17,1937 2-3384 Lane Bryant, Inc., New York, N. Y A-2 3,000,000 W Mar. 22, 1938

2-3659 La Pause Gold Mining Corp., Ltd., Montreal, Quebec, Canada _________________________________ A-O-l 200,000 W Apr. 27,1938 2-3645 Edgar P. Lewis & Sons, Inc., Malden, Masa., ____ A-2 206,339 W May 3,1938 2-3530 Lima Cord Sole & Heel Co., Lima, Ohlo ____._- ___ A-2 123,860 W Mar. 24,1938

I

W July 17,1937

Ref. Aug 4,1937 2-3194 The Lionel Corporation, New York, N. Y. ________ A-2 2,160,000 rUg. 28,1937 Eff. lISof Aug 24,1937 2-3646 Lockheed Aircraft Corporation, Burbank, CaIlL __ A-2 660,000 W Apr. 18,1938 2-3599 Louisiana Texas Trust, TUlsa, Okla _______________ A-I 750,000 W Apr. 4,1938

2-3364 Louisvrlle Drying Machinery Co., Louisville, Ky __ A-2 560,000 W Oct. 8,1937 2-3519 Low Cost Housing. Inc., Los Angeles, Calif, ______ A-I 250,000 W Dec. 1,1937

2-3329 The Lufkin Rule Co., Saginaw, Mich A-2 1,348,100 W Jan. 25,1938 2-698 Lulu Milling Corporation, Salt Lake City, Utah ___ A-I 110,000 { C~O Mar. 28,1934

MacAndrew Red Lake Gold Mines, Ltd., Tor. Aug. 11, 1937 2-3609 onto, Ontano , A-O-l 1,625,000 W Mar. 26, 1938 2-3541 Managed Estates, Inc., Philadelphia, Pa __________ A-I 510,000 W Feb. 11, 1938 2-3451 Mar Tex 011 Oo., Houston, Tex ___________________ A-I 2,000,000 W Nov. 4, 1937 2-1809 Marine Airlines, Inc., New York, N. Y A-I 1,123,250 W Jan. 5,1938 2-3571 Maritime Investment Corporation, Los Angeles, CaliL A-I 498,000 W May 3,1938 2-3339 Marquette Metal Products Co .. Cleveland, Ohlo, __ A-2 1,862,500 W Oct. 9,1937 2-2965 Master Electric Co., Dayton, Ohio ________________ A-2 625,000 W Apr. 4,1ll3S 2-3101 Metropolitan New York cor8" New York, N. Y_ A-I 1,002,000 W May 16,1938 2-2149 Metropolitan Personal Loan 0., Allentown, Pa_._ A-I 2,841,150 SO Oct. 28,1937 2-3199 Miami Herald Publlsblng Co., Miami, Fla ________ A-2 800,000 W Do. 2-3350 Mining Truth Blind Pool of 1937, Spokane, Wash __ A-I 250,000 W Oct. 7,1937

2-143 Montana Highlands Gold Mining Co., Butte, MCI'nt._ _. ._--- A-I 149,499 W Jan, 27,ll1S8-

2-3525 Mountain States Power Oo., Albany, Oreg ________ A-2 8, 605, 563 W Jan. 5,1938

2-2526 Do D-1-A 7,596,079 W Do. 2-3470 Mulilns Manufacturing Oorp., Salem, Ohio A-2 137,500 W Apr. 1,1938 2-3228 Naico North American Importing Corporation, Los Angeles, Call!.. A-I 480,000 W Oct. 16,1937

2-3480 National Airlines, Ine., St. Petersburg, Fla_. ______ A-I 487,500 W Feb. 16,1938

2-3122 National Gypsum Co., Buffalo, N. Y A-2 8,400,055 W July 2,1937

2-3061 New Amsterdam ClISUBlty Co., Baltimore, Md A-2 925,000 W Oct. 2, 1937

{ W Jan. 5,1938

2-3373 Northern Oklahoma Gas Oo., Ponca City, Okla. __ A-I 349,200 Ref. Mar. 28,1938

Elf. Apr. 17,1938

2-3330 Northern States Power Co., Minneapolis, Mlnn. __ A-2 27,087,500 W Nov. 19,1937 2-3365 Nfieari River Fnilt Co., Ine., New York, N. Y _. __ A-I 375,000 W Dec. 11, 1937 2-3401 Orman &< Co., 1efferson City, Mo A-2 647,000 W Feb. 3,1938 2-3207 O'Connor Moffatt & Co., San Franctsco, CaiiC A-2 650,000 W July 20,1931 ~93 Ohio Finance Co., Columbus, Ohio A-2 457,468 W Dec. 22,1937 2-1575 011 Ridge Oll & Refining Co., Las Vegas, Nev. ___ A-I 500,000 W Feb. 17,1938 2-1808 Oklahoma Texas Trust, Tulsa, Okla _______________ A-I 1,070,000 SO Sept. 23, 1937 2-2921 Old Diamond Gold Mines, Ltd., Madoc, Ontario __ A-I 341,250 SO Oct. 8,1937 2-2402 Paper Sales Co. of Detroit, Inc., Detroit, Mlch_. __ A-I 600,000 SO Sept. 16,1937 2-2324 Petersen Engine cOe Inc., Brooklyn, N. Y A-I 400,000 SO Dec. 2, 1937 2-3391 Plillilps Petroleum 0., New York, N. Y._. ______ A-2 25,555,343 W Jan. 25, 1938 2-3298 Plywood Container Corp. of Missouri, St. Louis,

337, 500 {

W Sept. 23,1937 Mo_ ._ A-I Ref. Nov. 22, 1931

Eff. June 7,1938

_____•

______• __________________••• __••• ___________

________________________________ • _______• __

__••• _____•••• _•••• __••••• ____•• ••• ____

__•• --- _______

•• ___________

________________________ ______• ___•

__• _______•

______________________________• ___________•

•• _________• __-- ---- - _____• ________

___________•_____• ___________________• ___• __

•• _____

__________________________• __

__ • _______•• _

__ •

______________•

__• ______ • ________

__• _____

•••••• ____• _____•• ___• _____•______• ___• ____
FOURTH ANNUAL HEPORT 139

SECURITIES ACT REGISTRATION STATEMENTS AS TO WHICH

STOP ORDERS, CONSENT REFUSAL ORDERS, AND WITHDRAWAL

ORDERS WERE ISSUED JULY 1,1937, TO JUNE 30, 1938-Continued

Docket Type of

No. Issuer Form Amount order or Date

aetron

:H621 Progress Vacuum Corporation, Cleveland, Ohio ___ A-I 300,000 W Apr. 15,1938

:H531 Puget Sound Distillery, Ine., Seattle, Wash _______ A-I 1,495,000 SO Apr. 22, 1938

:H695 Qt1IlrteTly Income Shares, Ine., Jersey City, N. L_ A-2 24,099,639 W June 2, 1938

2-2922 Quoonsboro Gold Mmes, Ltd., Toronto, Ontario __ A-I 322,250 SO Nov. 17,1937

2-2642 Ray Airconditioning Corporation, New York, N. Y ____________________________________________ A-I 1,294,750 W Mar. 16, 1938

:HI06 Raytheon Manufacturing Co , Newton, Mass _____ A-I 512,000 W July 29,1937 2-3360 Retail Druggists Display Corp., Washington, D. C_ A-I 1,950,000 W Dec 23,1937 :H195 Retail Stores Credit Corp., Baltimore, Md ________ A-I 520,000 W July 31,1937 :H196 _____do _____________________________________________ F-l 20,000 W Do.

2--3089 Revere Cogper & Brass, Ino., New York, N. Y ____ A-2 14,879.700 W July 12,1937

2-3163 RICe Ranc Oil Co., Los Angeles, CaliL __________ A-2 150,000 W Aug. 2,1937

2-3664 Robe Coin Machine Mfg. Co, Las Vegas, Nev ____ A-I 400,000 W May 3,1938 2-2044 Robot Hand Corporation, Detroit, Mich __________ A-I 1,875,000 W Feb. 12, 1938

2-3453 Royal Manufacturing Co. of Duquesne, Duquesne, Pa _______________________________________________ A-2 261,800 W Jan 12,1938

2-3371 Rustless Iron & Steel Corp., Baltimore, Md ________ A-2 882, 128 W Nov. 5,1937

{ W Oct. 30,1937

2-3370 Saeo Lowell Shops, Boston, Mass _________________ E-l 3,616,649 Ref. Nov. 26,1937

Elf. Dec, 16, 1937

2-3639 Salvage Oil & Fuel Co., Robinson, TIL ____________ A-I 500,000 W Apr 15,1938 2-3495 Sandt Farm Equipment Oorp., Easton, Pa ________ A-I 125,000 W Dec. 13,1937

:H239 Santa Rita Oil Co., Long Beach, CahL ____________ A-I 325,000 W Aug 12,1937

:HI09 Schmidt Brewing Co., Ine., Olympia, Wash _______ A-I 389,999 W July 28,1937

2-3655 J. W. Seavey Hop Corporation, Portland, Oreg ____ A-I 450.000 CRO June 29, 1938

2-2131 Seminole Provident Trust, Tulsa, Okla ____________ A-I 800,000 SO Nov. 15,1937

2-3560 Seneca Petroleum Corporation, New York, N. Y __ A-I 2,898,750 W Apr 19,1938

2-3511 Service Insurance Associates, Inc., Seattle, Wash __ A-I 456,000 { CRO Dec, 15,1937

Elf. Feb. 11, 1938

2-3569 Service National Life Insurance Co., Washington, D. C ____________________________________________ A-I 400,000 W Jan. 18,1938

2-3425 Signode Steel Btrappmg Co., Chicago, TIL ________ A-2 275,000 W Dec. 8,1937 2-3529 Silversmith Mmes, Ltd., Seattle, Wash ___________ A-2 150,000 W Dec 17,1937 2--3326 Philip A. Smger & Bro., Inc., Newark, N. 1.______A-2 691,250 W Mar. 16,1938 2--3433 Snap On Tools Corporation, Kenosha, Wis ________ A-2 585,000 W Dec. 9.1937

2--2609 Somoa Products Co., Inc, Chicago, Ill ____________ A-I 250,000 W July 19,1937

2--2561 South Umpqua Mining Oo., Portland, Oreg _______ A-I 375,000 SO Mar. 7,1938

2-2358 Southwestern Light & Power Co , Tulsa, Okla ____ A-2 7,395,000 W July 3,1937

2-3369 Spencer Shoe Corporation, Boston, Mass __________ A-2 1,500,000 W May 7,1938

2-351:i1 Spokane Oklahoma Gas & Oil Co., Spokane, Wash_ A-I 125,000 W Mar. 29.1938

2--3441 Square D Oo., Detroit, Mich ______________________ A-2 1,500,000 W Dec. 4,1937

2-3650 The Squibb Plan, Inc., New York, N. Y __________ A-I 3,630,000 W June 7,1938

2--3065 Standard Fruit & Steamship Corp., New Orleans, La _______________________________________________ A-2 586,800 W Aug. 14,1937

2-3496 State Street Investment Corp., Boston, Mass ______ A-I 7,078,000 ORO Dec. 21,1937

2-3275 Sterling, Ine., New York, N. Y ___________________ A-2 432,000 W Aug. 17,1937

:H273 Stratbury Manufacturing Co., Galion, Ohio _______ A-2 1,628,100 W Sept. 20, 1937

2-3454 Sturges Aulsbrook Jones Oorp., Sturgis, Mich _____ A-I 470,000 W Feb. 15, 1938

2-3396 Submarine Gold Dredging Co., Spokane, Wash ___ A-O-l 5,000 W Oct. 26,1937

2-3537 Sunbeam Gold Mmes Co., Tacoma, Wash ________ A-Q-l 501,113 SO Apr. 1,1938

2-3179 Switllk N. Parachute & Equipment Corp., Trenton, J _____________________________________________ A-I 565,000 W Sept. 22, 1937

2--1303 T. I.S. Management Corporation, Jersey City, N. J_ 0-1 1,017,241 f SO Feb. 25, 1938

\ Re-Elf. Mar. 4, 1938

2-2316 do o-i 4,560,000 { SO Feb. 25, 1938

Re-Elf. Mar. 4,1938

2-3485 do 0-1 19,620,000 { SO Feb. 25, 1938 Elf. Mar. 4,1938 2-3051 Transoontinental Petroleum Oorp., Dallas, Tex ___ A-I 1,990,000 W Oct. 22, 1937

2-1879 Trenton Valley Distillers Corp., Detroit, Mich ____ A-I 341,250 SO Jan. 18,1938

:H26O do. ._ A-I 1,250,000 W July 17,1937

2-3189 Trojan onCo~ Las Vegas, Nev. .. A-I 1,125,000 { CRO Aug. 7,1937

Elf. Oct. 1,1937 2-3457 Trusteed Annuities, Inc , Seattle, Wash A-I 900,000 W Oct. 26,1937 2-3267 The Twentieth Century Co., Chicago, Ill _. A-2 1,073,000 W Sept. 11,1937 2-1353 United Specialties Co., Detroit, Mich _____________ A-I 625,000 W Oct. 23,1937

2-3424 Universal Cooler Corporation, Detroit, Mirh ______ A-2 255, 760 W Nov. 9,1937

2-3464 Universal Television Corp., New York, N. Y ______ A-I 1,250,000 W Nov. 13,1937

2-3.'i62 VaneUe Hosiery Mills, Dallas, Tex .. A-I 400,000 W Apr. 27,193!1 :H245 Virginia City Gold Mining Co., Spokane, WllSb ____ A-I 256,617 SO Nov. 16,1937 2-3459 Wayne Pump Co., Fort Wayne, Ind .... A-2 1,168,600 W Nov. 22, 1937

2-3427 Weinberger iDrug Stores, Inc., Cleveland, Ohio ____ A-2 520,000 W Dec. 9,1937

Winters Orampton Corporation, Grandville, lI4ich .. . A-I 250.000 W Apr. 25, IP38

_____ ___________ •________• _______________________

_____ ___••• _____________•• _______•• ______• ________

_____ ____________• ______•• ____• _____________• __

_____ __• ________

________•• _

•• _____

_________ •• _ _

__• _______

~ '" ________ -- __ _______ __________________
140 SECURITIES .AND EXCHANGE CO:Ml\lISSlON

SECURITIES ACT REGISTRATION STATEMENTS AS TO WHICH:

STOP ORDERS, CONSENT REFUSAL ORDERS, AND WITHDRA WAh

ORDERS WERE ISSUED JULY 1, 1937, TO JUNE 30, 1938-Continued

Docket Form

Type of

No. Issuer Amount order or Date

action

{ W Ort. 2,1937

2-3409 Wolvenne Mines, Ltd., Toronto, Ontario _________ A-I 200.000 Ref. Feb. 24,1938

rPr. 9,1938 E1f as of Mar. 16,1938

{ W Sept. 9,1937

2-3249 "roman Lake Goldfields Development, Ltd., A-I 180.000 Ref. Sept. 17,1937

Toronto, Ontario _________________ ._. ___________ {NOV. 20,1937 Elf as of Oct. 7,1937

2-3427 Woldart Inc, Now York, N. Y ____________________ A-I 75.000 W Deo 6,1937

2-3566 York Ire Machmery Corporation, York, Pa _______ A-2 6,362,373 W Apr. 9,1938

2-3397 Ypres Cadillac Mines, Ltd , Toronto, Ontario _____ A-O-l 461,617 SO Jan. 11,1938

{ W Jnly 16,IQ37

2-3017 The Zonohtc Co, Libby, Mont, __________________ A-2 146,426 Ref. Mar. 31,1938

{MaY 7,1938 Elf. as of Apr. 20,1938
APPENDIX IV

LIST OF PUBLICATIONS AS OF DECEMBER 9, 1938

Copies of the material listed below may be procured from the

'Publications Unit, Securities and Exchange Commission, Washington,

D.C.

ACTS:

Securities Act of 1933, as amended.

Provisions of Federal Laws Relating to the Securities Act of 1933, as amended.

Securities Exchange Act of 1934, as amended.

Public Utility Holding Company Act of 1935.

National Bankruptcy Act, as amended June 22, 1938 (Chandler Act).

MISCELLANEOUS:

Addresses by Commissioners and members of the staff of the Commission.

Official Summary of Security Transactions and Holdings of Officers, Directors

and Principal Stockholders. (Issued twice monthly.)

Directory of Over-The-Counter Brokers and Dealers Registered with the

Securities and Exchange Commission as of April 30, 1938.

Directory of Brokers and Dealers in Oil or Gas Interests Registered with the

Securities and Exchange Commission as of January 22, 1938.

Securities Traded on Exchanges under the Securities Exchange Act of 1934.

Work of the Securities and Exchange Commission. (This pamphlet describes

briefly the duties and activities of the Commission.)

"RELEASES:

Releases are issued covering the Commission's official actions, orders, rulings,

opinions, etc., under the Securities Act of 1933, the Securities Exchange Act

of 1934, and the Public Utility Holding Company Act of 1935. An order

blank is provided for placing names on the mailing list.

Compilation of Releases under the Securities Act of 1933, to and including

December 31, 1936.

Compilation of Releases under the Securities Exchange Act of 1934, to and

including December 31, 1936.

Compilation of Releases under. the Public Utility Holding Company Act of

1935, to and including December 31, 1936.

"REPORTS:

Report on the Government of Securities Exchanges. (Published as House

Document No. 85.)

Report on the Feasibility and Advisability of the Complete Segregation of

the Functions of Dealer and Broker.

Preliminary Summary of the Progress of the Study of Investment Trusts

and Investment Companies.

Report on the Study of Investment Trusts and Investment Companies:

Part One: Origin, Scope and Conduct of the Study; Nature and Classification

,of Investment Trusts and Investment Companies; Origins of the Investment Trust

:and Investment Company Movement in the United States.

Part Two: The following chapters of the Statistical Survey of Investment

Trusts and Investment Companies.

Chapters I and II: Preface to Statistics Describing the Sources of Data and

Methods of Analysis Used; Growth of Total Assets and Survey of Financial

.Statements for the Period 1927-1936.

Chapters III and IV: Sales and Repurchases of Securities of Investment Trusts

and Investment Companies; Trading in the Securities of Investment Trusts and

Investment Companies.

141

•
142 SECUHITIES AND EXCHANGE COMMISSION

.15

1. 00

.20

,60

$0. 20

1.00

.56

REPORTS-Continued.

Chapter V: Ownership and Control of Investment Trusts and Investment

Companies.

Report on Trading in Unlisted Securities upon Exchanges.

RULES, REGULATIONS, AND FORMS:

General Rules and Regulations under the Securities Act of 1933.

Guide to Forms Adopted under the Securities Act of 1933, as amended.

General Rules and Regulations under the Securities Exchange Act of 1934.

Guide to Forms Adopted under the Securities Exchange Act of 1934, as

amended.

General Rules and Regulations under the Public Utility Holding Company

Act of 1935.

Rules of Practice.

Regulation regarding the Sale of Copies of Registered Information.

UNIFORM SYSTEMS OF ACCOUNTS:

Uniform System of Accounts for Mutual Service Companies and Subsidiary

Service Companies.

Uniform System of Accounts for Public Utility Holding Companies.

COPIES OF THE MATERIAL LISTED BELOW MAY BE PROCURED FROM THE SUPERINTENDENT OF DOCUMENTS, GOVERNMENT PRINTING OFFICE, WASHINGTON, D. C.

Decisions of the Securities and Exchange Commission:

Volume 1, No.1 (July 2, 1934, to September 3, 1935). Out of Print.

Volume 1, No.2 (September 4, 1935, to June 30, 1936). Price 25 cents.

Volume 1, No.3 (July 1, 1936, to December 31, 1936). Price 45 cents.

Volume 1-(Buckram bound) Contains all decisions printed in Volume 1,

Nos. 1, 2, and 3. Complete with table of cases reported with the

Sections of the Acts involved and an index-digest of the cases. Price $1.75.

Volume 2, Part 1 (January 1, 1937, to June 30, 1937). Price 50 cents.

Official Summary of Holdings of Officers, Directors, and Principal Stockholders

as of December 31, 1935. Price 35 cents.

First Annual Report of the Securities and Exchange Commission, Fiscal year

ended June 30, 1935. Price 10 cents.

Second Annual Report of the Securities and'Exchange Commission, Fiscal year

ended June 30, 1936. Price 15 cents.

Third Annual Report of the Securities and Exchange Commission, Fiscal year

ended June 30, 1937. Price 25 cents.

Report on the Study and Investigation of the Work, Activities, Personnel, and

Functions of Protective and Reorganization Committees:

Part I. Strategy and Techniques of Protective and Reorganization Price Committees $1.00

II. Committees and Conflicts of Interest___________________ .60

III. Committees for the Holders of Real Estate Bonds________ , 25

IV. Committees for Holders of Municipal and Quasi-Municipal Obligations

V. Protective Committees and Agencies for Holders of Defaulted Foreign Governmental Bonds

VI. Trustees under Indentures

VII. Management Plans Without Aid of Committees

Investigation in the matter of Richard Whitney et al:

Volume 1. Report of the Commission

2. Transcript of Hearing

3. Exhibits

_

_

_

_

_

_

_
APPENDIX V

STATISTICAL TABLES

TABLE I.-Effective registrations of new securities l-totals, from September 1934 to

June lOSS, by months

[Dollar figures in thousands)

Total securitles effectively regis. tered

Month Num.

ber of

state

ments

Numbero!

ISSues

Total

amount

registered

Total, Jess seeunties

registered

for reserve against con- version-«

Estimated

gross Proceeds

Total (after

other dedue- tIODS)' propo~ed to be

offered for

cash for ac- counts of registrantsEstlOiated

gross proceeds

152, 510 181,631

86,~

124,399-

31,861

145,429

9,061

36.010-

124,581

105,322

121,293

164,921

684,789

$27,535

27,057

32, 20.5

36,795

476, 79~ 227,407

244,304

370,146

250,791

196,201

258,395.

175,938

-47li,110

613.190-

262, 106

385,821

3,936.211

273,808

415,710-

339,194

153,970

142, 440

323.059

3.633 086

313, 188

208.638

196,388

437, 53~

229.226

599.82!

69,999-

140,5'0

63,8~

91,289

53,850

213,843

1,355,628

10.794

36,843

130,016

135,41'1

132, ~37

171.091

754.839

508,216

2.53.447

291.465

400.877

256,408

205,618

205,389

224,459

108.516

126.866

35,455

193,745

356.888

259.375

237,198

506, 2.57

248,675

675,424

$34.592

28,876

34,647

39.791

383,126

475,933

438,055

257,528

186,854

362,468

4.387.781

'03.941

207,250

573.799

701,100

307,244

453.006

4.432.372

78,838

186,650

68,334

96,931

85,276

231.123

1,641,582

429.990

491,400

469.907

238,076

238.068

369.065

4.686,296

266.886

302.343

IM,395

127.621

38,159

201, 374

$36.004

29.567

34.647

40.241

362.925

286.022

260.080

526,830

266.026

698,408

805.698

11.044

36,843

130.016

154.597

140.208

192.631

'05,696

212,089

583.391

751,013

319.319

523.439

4,677,301

530.475

254,062

319.874

406,087

289, m 212.085

79.909

206,698

69.212

97,371

93, 634

'02,448

1,912, 050

253

18

10

27

30

33

39

22

16

32

26

85

69

52

36

52

75

52

50

42

65

56

57

110

79

79

114

67

124

48

56

83

128

83

104

824

38

29

29

34

36

26

559

69

93

113

161

88

81

1,178

IS

13

14

IS

13

9

24

'0

'0

30

39

42

53

87

1'9

59

67

56

52

79

49

82

47

56

79

97

62

61

193

787

1934 September

October

N oveOl ber

December

19S5 January ._. February ._. '_ March

ApriL

May ._

June

Total, September 193t-June 1935 __

19S5 July .___ 47

August___________ 34 September 30 October 49 November 46

December .______________________ 43

1936 January

February

March

ApnL ._ May ._._._ ] une

Total fiscal year 1936

1936 ]nly _" ._. August_.

September _. .•• October

November _. December

1937 Jan\lllfY _. ._ •.

February . ._ ._ March _. _.

tfa~:::::::::::::::::::: :::::::::::::::_ June ._._

Total fiscal year 1937

July 1937 •• ••••• = 60

August_._ •• •• • ._. • 48

september., .____ 38 October ._ .___ 30

N ovember 37 December • •• ._.____ 46

1938 January 17 February ._ 22

March _. ._.. 18 ApriL_ . '0

May _. ._ 24

rnne., . . •. 16

Total fiscal year 1938. •• • _. -asa

, New securities in this table, as well as fn the followmg 6 tables, include all securities fnlly effectivlt under the securities Act of 1933 with the exception of reorgamsatlon and exchange securities, for which see tables 8 and 9. , For nature of these other deductions, see table 4.

143

••• _•• __•• • • _ • ••• • _ • _

_

••• __•__••••• • _ __••• •• • • • _ __• • • • _ •• • _

• __• • _

__• • ••• • • __• __ •

•

• _

• • • • •• _ • • •• _

•__ __•• • • •• __ • ••• • _

• __

_••• __• _•• _••••• • • _ • • __

• • __• __ __•• • • • • '

•• __•• • __• __ • ••• _

•• ••• •• __• __•

•__ __ •• •_•••• __ •• _ •• • __• • •• • _

__ • • •• __•• __• •

__• __• •

__• • •• __

••• __•• • •__•

•••••• •• __• • •• __• • • • __• • __

• • __• __•• • __• • • __•

•• •••• _•• __

••__ •• •____ ••_
144 SECURITIES ~\ND EXCHANGE COl\Il\lISSIOK

TABLE 2.-EjJective registrations of new securities.t by types of securities, from

J111y 1937 to June 1938, by months

[Dollar figures m thousands]

Common stock Preferred stock

Total securities Total, Total (after Total secunties Total, Total (after

effectively reg- less seeu- other de- effectively reg. less secu- other de.

istered rmes reg- ductions)! istered rities reg- duetions)!

proposed to proposed to Month istered for be offered rstered for he offered reserve for cash for reserve for cash for against account of agamst account of Num- Total conver- regis- Num- Total eonver- regts- amount sion-Es- amount ston-e-Bs- ber of regis- trmated trants her of regts- timated trantsIssues EstImated issues Estimated tered gross gross pro' tered gross gross pro- proceeds eeeds proceeds ceeds

---- ---- 1997 July 48 $122. 289 $61,792 $31,054 21 $~5, 690 $84,690 $65,348 August, _____________ 47 171, 547 93.663 66,664 10 65,194 66,194 57,062 September 34 82,621 34,742 19,901 7 10,263 10,263 5,129 October _. ___________ 16 10.574 9,831 7,972 12 26,013 26,000 25,713 November 30 23,092 20,388 18,124 10 6,144 6,144 5,194 December _________ 33 82.637 75.239 56.724 17 20,768 20,536 17,367

1938 January _____________ 9 17,523 17,452 10.276 3 710 710 707 February ____________ 14 84,749 64,700 29,009 5 2.028 2,028 2.028 March 11 3~. 194 37,316 35.727 7 3,854 3,~54 2,159 Aprrl, 21 22,530 22,090 16,.';93 4 2.481 2,481 2,481 May 17 21,828 13,470 3.846 3 23,397 23,397 23.397 June. 8 53,417 12.092 2,635 6 3.225 3,225 2.529

TotaL ---288 730,998 462,775 298.525 105 2,';0,768 249,523 209,113

Certificates of parttcrpanon, beneficial Secured bonds mterest and warrants

1997 July ,_ _._ 10 25,390 25.390 24,756 5 29,929 29,929 27,765 August 7 6,696 6,696 -.---------- 3 30,453 30,453 30,453 September. 5 1,624 1,624 -----------. 5 13,887 13,887 13,455 October ______._. __._ 4 12,175 12,175 11,854 4 78,860 78,860 78,860 November _________._ 10 7,531 7,531 7,150 ------.- ---------. -.-----.-- December ._ ------iil;999 9 50.212 50,212 50,190 10 35,625 35,625

1998 January _____________ 20 19,688 18,688 18,688 3 11,463 11,463 9,803 February '_"_ 6 53.284 1'3,284 42,893 2 56.488 56,488 56,488 March ._. 6 13,160 13,160 13,160 4 8.532 8.532 7.285 Aprrl, 5 7,591' 7.595 7,450 3 3.715 3,715 3,715 ]\fay. 8 22. 694 22,694 1.000 5 18,215 18,215 18,107 June ________ . _______ 7 8.992 8,992 5.056 2 33.955 33.955 33,955

TotaL. 97 229,041 228,041 182,198 46 321,122 321,122 298,884

Debentures and short-term notes I Total all securities

1937 July _._. I 3,588 3,588 3,588 85 266,~6 205,389 152,510 August_._. ._ 2 27,453 27,453 27,453 69 302. 343 224,459 181,631

September .•• 1 48,000 48,000 48,000 52 156,395 108,516 86,486 October _. . ._------ ._------.- --.-._------ 36 127,621 126,866 124,399 November __._~______ 2 1,392 1,392 1,392 52 38: 159 35,455 31,861 December 6 12,133 12,133 2,149 75 201,374 193,745 145,4211

1938 January. ____________ 1 30,525 30,525 30,525 36 79,909 78,838 69,999 February 2 10,150 10,150 10,110 29 206,698 186,650 140,527 March __ •. __________ 1 5,473 5,473 5.473 29 69,212 68.334 63,803 ApnL 1 61,050 61,050 61,050 34 97.371 95,931 91,289 May 3 7,500 7, bOO 7,500 36 93,634 85,276 53,850 June __________. ______ 3 172.859 172.859 169,669 26 272. 448 231,123 213,843

Total; _________ 23 380,121 380,121 366.908 559 1,912,050 1,641,582 1,355, 628

I New seeuntles in this table mclude all securities fully effective under the Becunnes Act of 1933 with the exception of reorganrzatton and exchange secunties, for which see tables 8 and 9. For nature of these otber deduetions see table 4. I 7 Issues of short-term notes totaling $12.735,163 (of which all but $9,545,674 were intended to be offered for cash for the account of the registrants) were effectively registered during the fiscal year as follows: November 1937, 1 issue for $1,060,000, December 1937, 5 issues for $11,635,163; February 1938, 1 Issue for .$100,000

KOTE.-For back figures see Third Annual Report p. 127, and Second Annual Report, pp 98 and 99.

___•• ____________

__ • _______

__• ________

_____ •• ______ ______•• _______

_•• __• __• __• ____ _______ • ____•• _

____•• __

____• ___•• •• ___________• __

____• __••

_____•• __

__• ____ __ • ________ ______________• ____• ___• ______

___•• __

__• __________

___• ____

___•• __ __ ________ ----------

_______• ___

___• __••• ___

_______• ______

___ • _____• ______

•
FOU"HTH ANNUAL REPOR'.r 145

TABLE 3.-Effective registrations of new securities, I by major mdustrial groups,

from July 1937 to June 1938, by months

[Dollar figures m thousands]

Extractive mdustries Manufacturing industries

$~rg ~~~ ~e ..... 'C g~~!e Total securities ef- ~.E~ -g.s8~l:4 Total securities etfec- '~.S~ -g2~~C.

fectively registered gj"'-

....gtS '0 - ....rn trvely registered ~ :.@ "'l;j - .... tn

Z(D~ ~~.;j~e ~(D~ 8~~~8 Month 1: C;f.:::1 ttl g~~~ 5 Is ~8.Bf~ " ~&~fbO - 'c; (DC)~CD s~.8"O~ 'O~ C)cPs:letl

O2J ~~~o~ {I)"" 0 0 'c; Ul .... Oc:J

-1:l~ tr.l ..... O ....'C

.... ~.E !1 ~.8~~ S~e=~ft) a;~ ~g c;g~ :g~~c]{t) "" S5~ :-~ -:''0 g: .eEl .e'" .eEl

82l 8~ ~8 ~~oe c;;= a)=~-g 82l S!J ~a~ -;ege 'd1::3a>::3t!'g

"'''' ",- ",iil' o ......Q boO ~~'E8~8 ",,,, '" c3e 02Z0b.O o~'E 8r.l Bz-;; Z .... Eo< Eo< ztl Z Eo< Eo<

-- --- -- ---- 19117

July __________ 9 10 $6,782 $6,782 $3,699 29 44 $165,521 $106,232 $79,371

August _______ 3 4 6,063 6,063 5,063 32 44 214,658 138,214 102,500

September ___ 8 10 2,310 2,310 8,159 21 32 130,375 82,496 61,803 October ______ 1 1 1,125 1,125 1,125 11 11 29,449 29,449 27,627

November ___ 3 3 1,268 1,268 409 17 23 7,270 6,123 4,775

December ____ 4 6 3, st7 3,st7 1,597 23 44 61,537 54,077 28,325

1938

1anuary ______ 2 3 569 569 375 5 7 2,280 2,209 1,191

February ____ 5 6 1,551 1,551 1,101 3 4 55,562 35,514 526 March _______ 2 3 1,015 815 200 7 15 9,283 8,605 7,700

ApriL _______ 3 4 1,450 1,450 1,434 11 15 4,975 4,537 3,248 May _________ 4 5 1,074 1,074 280 10 16 40,322 31,964 31,138 June _________ 1 1 563 563 285 3 5 101,158 101,158 100,388

------- ------ TotaL. 45 56 27,315 27,115 17,427 172 260 822,389 600,576 448,590

Financial and investment companies Merohandlsmg companies

I I 1937

1uly __________ 12 17 U5,566 $43,771 $39,567 5 9 $11,164 $10,752 $1,562

AugusL_. ___ 6 7 30,541 30,307 30,144 2 3 7,269 7,269 5,564

September 3 3 8,395 8,395 8,395 .. October 11 16 16,788 16,033 15,424 ----.-

November ___ 11 17 24,906 23,929 22,997 3 4 1,258 1,226 1,050

December 11 13 109,208 109,099 102,732 -.----

19118

January ____._ 7 23 36,856 35,856 28,228 ------ ------ ------372- ------372- ---------i24 February ____ 9 11 81,400 81,400 70,963 1 2 March 5 6 49,050 49,050 48,462 ApriL 4 4 20,754 20,754 2O,7st -.---------- May 5 6 31,094 31,094 1,450 ------------ June _________ 5 8 8,528 8,528 7,776 2 3 5,652 5,402 250

-- 458,214 -- TotaL_ 89 131 463,085 396,892 13 21 25,715 2.5,020 8,550

TransportatIOn and oommunieation Electric light and power, gas. and water

compames companies

191J7

July . -.---- 3 3 $35,167 $35,167 $25,625 August 4 9 36,216 35,010 34,611

September. __ 2 3 $2,127 $2,127 $1,320 3 3 12,497 12,497 12,497

October ______ 2 2 362 362 362 4 5 79,610 79,610 79,610

November 1 2 910 910 630

December ____ 2 3 3,443 3,443 3,443 2 4 13,629 13,629 7.082

19118

January 2 2 39,705 39,705 39,705

February 2 3 67,308 67,308 67,308 March _______ 1 2 2,115 2,115 420 ------64;iii5 AprlL _____._ 3 5 4,992 4,990 1,050 4 4 64,514 64,514 May _________

--30; 555- 5 9 21,145 21,145 20,983 June 1 1 30,555 30,555 4 8 125,993 84,919 74,590

TotaL. 11 16 43,594 43,592 37,150 34 52 496,693 454,413 426,805

I New securities m this table mclude all securities fully effective under the Securities Act of 1933 with

the exception ofreorgamzation and exchange securrties, for which see tables 8 and 9.

For nature of these other deductions see table 4.

~ "'" -

'" ~ ~~ ~ ~~ ~

___ ------ ------ --~------- -------- ------------ ______ ------ ---------- ---------- ------------

____ ------ ---------- ---------- ------------

_______ ------ ------ ---------- ---------- ------------ _______ ------ ------ ---------- ---------- _________ ------ ------ ---------- ----------

_______ __ ------ ~- ------ ---------- ------------ _______ ------------

___ ------ ------ -------- ---------- ------------

______ ------ ------ -------- ---------- ------------ ____ ------ ------ -------- ---------- ------------

_________ ---

•
146 SECURITIES AND EXCHANGE COMMISSION

TABLE 3.-Effective registrations of new securities, by major industrial groups,

from July 1937 to June 1938, by months-Continued

[Dollar figures in thousands)

Other registrants I Total, all registrants

~~i ~~~he .!5~i g.8~!e Total seour rt ies fie -go""''''' Total securities ..-'" "d o .... Q,

effectively regis- ~-.se effectively regis- ~~a ~-.sfO'J md-:: lB'"+; tered ~~O'J ta,tSJ::(;3 tered ~E&l0 Month fD'g~~

alil~'; -5~~::tQ

"$ 8 08,0 .... gll'$ ~8.5f -c..,.. '0 :::~o !2s'Oi -

0... .. '0 M ~.2o'j ft.:l"'otJ

'" ... "" "Q; Po 'C CI5

'" _-='i I~Ul e lila> t~ ~~;:B~~~ lila> Iil! -.."" e:;;'it;s. .oS °8$ ~'i~~ -'in'~1;;8CD .oS .0'" ~5S :;'i: S."l .oll! c;=fD='~a5 S."l ell! ~sil, (1) ... =0 3~~g~i s- 8 ..~S8tiJ o~'Ese s ~BgQ "''" '"a> "''" ",- '"a> 0- Cofil 0

Z~ Z .. Eo< ... Z~ Z .. Eo< Eo<

----- ------ 1981 .July __________ 2 2 $2,686 $2,686 $2,686 60 85 $266,886 $205,389 $152,510 AUjrnSt_______ 1 2 7,596 7,596 3, 750 48 69 302, 343 224,459 181,631 September ___ 1 1 691 691 613 38 52 156,395 108, 516 86,486 October ______ 1 1 287 287 250 30 36 127,621 126,866 124,399 November ___ 2 3 2,548 2,000 2, 000 37 52 38,159 35,455 31,861 Dooember ____ 4 5 10,010 9,950 2, 250 46 75 201,3i4 193, 745 145,42il

19S8 .January ______ 1 1 500 500 500 17 36 79,909 78,838 69,999 February _____ 2 3 506 506 506 22 29 200,698 186,650 140,527 March _______ 3 3 7,749 7,749 7,021 18 29 69.212 68,334 63,803 ApriL _______ 2 2 685 685 638 27 34 97,371 96,931 91,289 May _________ ...-._-_.--- 24 36 93,634 85,276 53,850 -1une. ________-.---- ------ -------- --------.- ------------ 16 26 272,448 231,123 213,843

------------------------- TotaL_ 19 23 33,259 32, 651 20,213 383 559 1,912,050 1,641,682 1,355,628

IIncludes agriculture, real estate, service industries, miscellaneous domestic companies, foreign com. Jlanies, and foreign governments

NOTE.-For back ligures see Third Annual Report, pp. 129end 130; S Jld Annual Report, p, 100; FIrst

.Annual Report, pp. i2 Bud 73.

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FOURTH ANNUAL REPORT 147
148 SECURITIES AND EXCHANGE COMMISSION
l?OURTH ANNUAL Rl<JPORT 149

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TABLE 7.-EJJeetive registrations of new securities l-channels of distribution oj new securities intended for cash oJJeringfor account of issuers-fiscal year ended

June 30, 1938

[Estimated gross proceeds in thousands of dollars!

To own security holders by- To public byIndustry

Issuers Agents I Total Under- Agents Total Issuers Under.

writers writers

Agriculture_._. _. ._ 2,938 -----_ ..- ---...--- 2,938 ------- -------- --_ .._--- Extractive industries: Metal minmg 1,179 3 273 1,454 350 641 4,323 5,313 011and gas wells 150 225 172 547 1,214 2,354 4,253 7,822

Quarrying and nonmetal mming.L. 146 ---.--.- ------- 146 ------- 1,750 285 2,035

------------------------ Total, extractive Industries 1,476 228 444 2,147 1,564 4,745 8,861 15,170

Manufacturing industrtes- Food and related products ________._ 5,090 ---7;787 5,090 123 15,511 80 15,719 Tobacco products, ._ 7,787 ------- -------- -------- --------- Beverages: Beer, ale, etc . 1,070 -------- ------- 1,070 300 174 374 848 Distilled Iiquors ._. roo roo 759 759 Other beverages _. 1,743 1,743 .. -.------ ------------------------- Total, beverages 1,070 1,743 500 3,313 300 174 1,133 1,607

'I'extiles and their products --- --------- ------------ ----654 ---9;009 -"9;563 715 876 1,591 Lumber and lumber products ______ 3,300 2,084 5,384 Paper and paperj,roducts 850 BEO 17,068 1,196 18,265 Prmt., pub] .an allred md ________ 351 351 1,829 -------- 875 2.704 Chemicals and allied products ______ 11,046 600 ._----- 11,646 ------- 8,715 1,813 10,528 Mineral 011 refg. (mel distr ) 44,244 _.------ --- ... _-- 44,244 ------- 1,406 1,764 3,170

Tire and other rubber products •._._ ------- -------- 113 113 210 ...------- 210

Leather and leather manufactures •• 1,500 -------- 1,500 BUIlding and related products. --'-ii5 --47;869 ------- -47;984 ~------ 3.500 1,898 5,398 Iron and steel (axel. maehy.); ______ 149.046 248 149,294 Nonferrous metals 824 -------- ------- 824 ------- 132 -- ..----- 132 Machmery and tools (excluding transportation equipment) _____._ 3,180 27,781 269 31.210 40, 9,724 2.578 12,708 'I'ransportation equlpment; , 719 13 401 1,133 1,688 1,630 3,089 6,406 MISC.mIg industries _______________ 782 9,695 160 10,637 99 26,073 5,603 31,774

------------------------ Total manufaeturing industries 68,474 104,498 1,794 174.766 4.450 238,703 23,236 266.389

Ffnancialand investment companies: = = Investment and trading companies: Closed end management cos 1,655 1,655

Open end management cos ... 6,605 251.788 258,393 Investment plans.; 10,000 71,052 81,052 FIxed trusts. 27,481 27,481

Total, mvestment and trad- ------------------ ------ Ing companies ------- -------- ------- ------- 16,605 -------- 351,977 368, 681

Commercial credit, finance, and ------------------------ mortgage companies ___________.. 240 352 244 836 1,000 346 4,510 6.856 Industrial and persona] loan cos. ___ 1,238 1,238 875 7,803 8.678 Insurance companies .• 450 450 533 3,454 3.988 Other tin. and mvest. cos_. ._ 1,928 1.928

------------ ------ ------ Total fln. and invest. cos. 690 352 1,481 2,524 19,013 346 369,672 389,031

Merchandising _. ._. 1,089 4,625 = ------- 5,714 ------- 1,934 778 2,712

Real estat.e_._ .... 3,500 3,500

Construction and allied industrles ----_ .. --_ ... = ... ----_ ..

"Transportation and communication. ___ 828 262 = = ~------ 1.089 -.----- 32,626 6.'10 33,256

'Servlce Indnstrles ._. 248 = ---= - ~------ 248 813 4,794 5,606

"Electric It. and pwr., gas and water: = = = Ho]dinj: comf.inies------.-.------_.- -'---30 --39;083 -3li;ii4 ---- ... _- 13,394 -------- 13,394

Operatlng-ho ding compames._. ___. --.-243 191,6.';S ... _------ 191,655 Operating eompanles, ._. 2,629 2,872 ..----- 175, 136 2,894 178, 001

Total electrte light and power, ------------------------ gas and water 2,659 39,083 243 41,986 380,185 2,894 383,080

---I :MlsrelJ8I1eousdomestic companies. 31 31 -_ .. 297 297

Foreign companies _._---- = = = 1= = -------- ------- ---_.-- ------- -------- ;;;;;;;;; ---_ ....-_.

Forefgn governments and subdlvisions __ 6,755 6.765

Orand total ._ 78,432 149,048 3,962 231,443 --

25,027 666, 107 414, 662=1,105, 796

Footnota at end of table.

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FOUR'.rH ANNUAL REPORT 159

TABLE 7.-Effective registrations of new securities !.-channels of distribution of

new securities intended for cash offering for account of issuers-fiscal year ended

June 30, 1938

[Estimated gross proceeds in thousands of dollars]

To "others" by- Distributed byIndustry Grand

total Issuers Under. Agents Total Issuers Under- Agents writers writers

------- -- --------- _~griculture--- ~----...- -------- -_ ..---- ------- 2,938 -------- -------- 2, 938

Extractive industries: -- = = -- -- ---= Metal mining ----iOii -_ .. 1,529 643 4,595 6,768 Oil and gas wells ___________________ 10 110 1,464 2, 589 4,425 8, 478 Quarrying and nonmetal mimng ___ 146 1,750 285 2,181

-- ---------- --------- Total extractive industries 100 10 _______ 110 3,140 4,982 9,305 17,427

.ManUfacturing Industrles. = = Food and related produ~ .. .. 5,218 15,511 80 20,809 Tobacco products __________________ 7,787 -------- 7,787

Beverages Beer, ale, etc 300 300 1,670 174 374 2,218 DIstilled hquozs -------- ------- 1,259 1,259 Other beverages. _______________ 1,743 1,743

-- ------------------ Total beverages ----- ....----- 300 -------- ------- 300 1,670 1,917 1,633

-------- Textiles and their products -------- ._----- ----400 715 876 1,591 Lumber and lumber products ______ -----53 400 554 12,709 2,084 15, 347 Paper and paper products __________ 53 903 17,008 1,196 19,168

Prin.twg, publishing, and allied in- dustnes _______ . __________________ 131 131 1,829 -..------ 1,357 3,186 Chemicals and allied products. .. .. 11,046 9,315 1,813 22,174 Mmeral 011refining (includIng dis- trlbution) , 4,880 4,880 49,125 1,406 1,764 52,295 TIre and other rubber products _____ 210 113 323 Leather and leather manuraeturea.; 1,500 .... _--- ... 1,500

Building and related products 237 .. ... --_ .... --- 237 237 3,500 1,898 5,635 Iron and steel (excluding machin- erv) ___________________ 90 90 205 196,915 248 197,368 Nonferrous metals __________________ 35 35 859 132 -------- 991 Machinery and tools (excluding

transportatron equipment) _____ ._ 573 654 -----_ .. 1,227 4,159 38, 159 2,846 45, 165 Transportation equipment _______ ._ 82 ......... ---- --- ....-- 82 2, 489 1,642 3, 491 7,621

Miscellaneous manufacturing In- dustries ______________________._._ 880 35,768 5, 763 42, 410

--- -- ---- ------I- Total manufacturing indus- tnes _. 6,251 1,054 131 7,436 79,174 344,255 25,161 448,590

= ----- ===-0

"Financial and investment companies: Investment and tradIng eompames: Closed end management com. panies ..._- ------_. ..--- ...-... -----_ ... .... 1,655 1,656

Open end management com. panies

--4;897 -"4;897 6,605 -_ ...---_ ... 251,788 258, 393 Investment plans 10,000 75,949 85, 949 Fixed trusts ____________._. _____ 27,481 27,481

--------- ----------- Total investment and tradIng

4,897 4,897 companies ._ --...-... -... -------- 16,605 -_ ..... .. 356,874 373,478

-- ------------------- Commercial credit, finance, and mortgage companies ............. ----_ ..... 1,240 698 4,754 6,692

Industrial and personal loan com- panles --...-........ --_.---- 440 440 875 9,481 10,356 Insurance companies 983 ........ 3,454 4,438

Other finanCIal and investment companles ..... ---_ ..._-- ...--_ ...... -_ .. . .-... .. 1,928 1,928

--------- ----------- Total financial and invest- ment companies ----ii4 5, 337 5, 337 19,703 698 376,491 396,892 _Merchandising. _._. 124 1,213 6,559 778 8,560

Real eseate.; ._ ._. 500 --- = = ---= ;;;;;;;: 500 500 3,500

Construction and al1led industrles --... _--. -....._---- = = = ------- .. ..---...- --.---- -----.-- --------

"Transportation and communication. ___ 2, 721= 84 2,805 3,54ll 32, 972 630 37,160

Service industries. 306 .. ... .. 306 554 813=4,794 =6,160

= =====- Footnote at end of tahle.

______________•• __________

= __________ • ________• __ ----

_____• __

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________________ ---

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= = __ •• _______ __•_______• -------- -------- = = ~ __• ___

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160 SECURITIES A!\D EXCHANGE CO)Il\HSSIOX

TABLE 7.-EfJective registrations of new securities I-channels of distribution oj new securtues intended for cash ofJering j01. account oj issuers-c-fiscal year ended

June 30, 1938-Continued

[Estimated gross proceeds in thousands of dollars]

To "others" by- Distnbuted byIndustry Grand

Issuers Under- Agents Total Issuers Under- Agents total

writers writers

--- --- --------------- Electrichght and power, gas, and water: Holding companies _________________ 233 ---_#--- 30 263 233 13,394 30 13,657

Operatrng-hclding companies _______ --1;229 -----248 .--_.-- --i;477 30 230,738 -------- 230,769 Operating compames _______________ 3,858 175,384 3,138 182,380

------ ------------------ Total eleetrie light and power, gas, and water __________________ 1,461 248 30 1,740 4,121 419,517 3,168 426,805

:Miscellaneous domestic companies _____ ---32 ---

________---

.------

---32 ---63 ---

________ ---297= 360

Foreign companies _____________________------- -._----- ------- ------- -.----- ----._-- ---.-.-- -----._-- --- ------ --- Foreign governments and subdivisions , ------- ----.--- ------- -.----- ------- 6,755 -------- 6,755

Grand total; 11,495 1,396 5,498 11l,390114,954 816,550 424,123 1,355,628

1 New securities in this table mclude all securities fully effectrve under the Secunties Act of 1933with the

exceptIon of reorganrzation and exchange seeurities, for which see tables 8 and 9_

NOTE.-For back figures see Third Annual Report, pages 144-147, Second Annual Report, page 112; First Annual Report, pages 84-85.

TABLE 8.-EfJective reqtstraiions of reorganization and exchange securities, by

types of securities, from July 1937 to June 1938, by months

Number of issues ApprOXImate market value I in thousands of

'" dollars

d

13 ~. .h t..

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'" ,,~ .. !!3 ,0 ~%l: ..,. '" 8 .: '" co +> .s+> =+> S S .sl e S .sl " l: ...- o£ f E+: i ,0 0 :l '" co~ ., "" 0 0 co " "" 0

Z 0 Po< 0 <ll A <ll 0 E-< 0 p., 0 <ll A <ll 0 E-< - ---- ------ - --- ---- - ---- ----- 1937

Iuly _________ , 1 2 1 3 -._--- ---. .--- 9,212 2,077 11,288 .August

---2 --- ---- --- --- _.-- ---- --2 -_.--- .--- ---- ------ --- ---- ------ --733 ------- September ___ October I I 71,674 72,407 2 ___ --- ---- I ---- ---- 3 4 -.---- ---- ---- 118 -.-- ------ 469 588 November ___ 3 1 --- 3 I 5 4 ____ 23,771 --- 197 23,971 December 2. --- ---- --- --- -.-- 28 ---- 28 ------ ---- .--- ------ --- ---- 14,919 ----- 14,919

1988

Ianuary ______ '2 I --- I 1 2 5 0 0 136 ---295 1,595 1,731 February ____ 2.__ --- March -_.- 2 2 295 5 1 --- AprIl I '2 I 5 39 148 4.7,619 3SO 8,157 40 1 1 --- 1 3 278 0 251 -3;i53 ----0 May 529 4 7 1 8 55;i49 3,153 lune 5 1 --- ---- 2 ---- 1 2 6 2 ---- 100 306 55,557 - -- - - - - --- - -- - - --- - ------- TotaL_ 28 6 2 8 1 42 12 71 71,997 079,322 251 35,298 5,728 192,596

I Represents actual market value or ~3 of face value where market value was not available.

'These seeuntles were registered !D 2 registration statements, one of which statements is ineluded in the preceding tables covering new securrnes

'These secunties were registered in 3 registration statements, one of which statements IS Included in the preceding tables.

'Excluded from the total numher of issues (but meluded m the aggregate value) are the certIficates of deposit for the first-mortgage certtfleates, first-trust mortgage certIficates, first-mortgage assignments and

first, second, or third mortgages or instruments of like legal effect of the Mortgage Guarantee Company, of Baltimore, Md.

These securities Were registered !D a regrstranon statement that is included 10 the preceding tables.

NOTE.-For back figures see Third Annual Report, p.148, Second Annual Report, p. 113; FIrSt Annual Report, p. 86.

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166 SECURITIES AND EXCHANGE COMMISSION

TABLE 11, PART I.-Value and volume of sales on registered exchanges. Grand

totals for the year ended June 30, 19381

Market value Market value Market value Volume of Principal

of all sales ofstock sales of bond sales stock sales amount of

(thousands of (thousands of (thousands of (thousands of bond sales

(thousands of dolIars) dolIars) dollars) shares) dollars)

Baltimore Stock Exchange ______ 9,350 8,679 671 802 1,889 Boston Stock Exchange _________ 184, 149 183,966 183 5, 449 270 Chicago Board of Trade _________ 406 406 0 116 0 Chicago Curb Exchange , _______ 315 315 0 283 0 Chicago Stock Exchange ________ 108,859 108,841 18 10,282 48 Oinemnatl Stock Exchange ______ 4,269 4,091 178 157 192 Cleveland Stock Exchange ,_____ 8,782 8,643 0 490 0 Detroit Stock Exchange _________ 36,385 36,385 -------------- 3,890 -------------0 Los Angeles Stock Exchange ____ 61,584 61,584 0 7,211

New Orleans Stock Exchange ___ 906 504 402 109 397 New York Curb Exchange ______ 1,035,925 753,900 282, 025 69,146 354, 965

New York Real Estate Securities Exchange ______________________ 6 0 6 0 12 :New York Stock Exchange ______ 13,093,591 11,656,013 1,437,578 430,671 2,049,797 :Philadelphia Stock Exchange ____ 75,392 75,317 75 3,391 724 Pittsburgh Stock Exchange ______ 27,065 27,041 24 1,734 22 St. LoUIS Stock Exchange _______ 7,486 7,144 342 316 950 Salt Lake Stock Exchange _______ 2,948 2,948 -------------- 14,679 -------_.- ...--- San Francisco Curb Exchange "_ 12,902 12, 873 29 3,256 30 San Francisco Mmmg Exehanga, 577 577 ---------_ ..--- 4,569 -- ---- --'---40 San Francisco Stock Exchange ___ 87,263 87,224 39 5,304

Standard Spokane Stock Exchange of _______________________ 362 362 ._ .._--- ..----- 1,805 Washington ---218 Stock Exchange ____ 976 775 201 15

Total, all registered ex. changes _________________ 14,759,498 13,037,588 1,721,771 553,675 2,409,664

Footnotes at end of table.

•

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FOURTH ANNUAL REPORT 167
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APPENDIX VII

LIST OF REGISTERED PUBLIC UTILITY HOLDING COMPANIES AS OF

JUNE 30, 1938

American Gas & Electric Co. Columbia Gas & Electric CorAmerican Gas & Power Co. poration.

American Light & Traction Co. Commonwealth & Southern CorAmerican Power & Light Co. poration, The.

American Public Service Co. Commonwealth Light & Power

American States Utilities Cor- Company (trustee).

poration. Commonwealth Utilities CorAmerican Utilities Service Cor- poration.

poration (trustees). Community Gas & Power Co.

American Utilities Service Cor- Community Power & Light Co.

poration. Consolidated Electric & Gas Co.

American Water Works & Elec- Continental Gas & Electric Cortric Co., Inc. poration.

Arkansas-Missouri Power Cor- Crescent Public Service Co.

poration. Derby Gas & Electric Corporation.

Arkansas Natural Gas Corpora- Des Moines Electric Light Co.

tion. East Coast Public Service Co.

Associated Electric Co. Eastern Power Co.

Associated Gas & Electric Co. Eastern Utilities Associates.

Associated Gas & Electric Cor- East Tennessee Light & Power

poration. Co.

Atlantic Seaboard Corporation. Electric Bond & Share Co.

British-American Utilities Cor- Electric Power & Light Corporation. poration.

Central and South West Utilities EI Paso Electric Co.

Co. Engineers Public Service Co.

Central Arkansas Public Service Federal Light & Traction Co.

Corporation. Federal Water Service CorporaCentral Public Utility Corporation tion.

(trustees). Foster Petroleum Corporation.

Central Public Utility Corpora- Gary Electric & Gas Co.

tion. General Gas & Electric CorporaCentral States Edison, Inc. tion,

Central States Power & Light General Public Utilities, Inc.

Corporation. Granite City Generating Co.

Central States Utilities Corpora- (trustees).

tion. Great Lakes Utilities Co. (trusCentral U. S. Utilities Co. tees).

Cities Service Power & Light Co. Great Lakes Utilities Co.

Citizens Public Service Co. Huntington Gas Co.

Citizens Utilities Co. lllinois Traction Co.

Colonial Utilities Corporation. Inland Power & Light CorporaColonial Utilities, Inc. tion (trustee).

194
FOURTH ANNUAL REPORT 195

Interstate Gas & Electric Co. Peoples Light & Power Co.

Interstate Light & Power Co. Philadelphia Co.

Interstate Power Co. Philadelphia Electric Power Co.

Iowa-Nebraska Light & Power Pittsburgh & West Virginia GasCo. Co.

Iowa Public Service Co. Public Utilities Securities CorpoKeystone Utilities, Inc. ration (trustees).

Lehigh Power Securities Corpora- Republic Electric Power Corpotion. ration.

Lone Star Gas Corporation. Republic Service Corporation.

Louisville Gas & Electric Co. Sandal' Corporation.

Middle West Corporation, The. Sioux City Gas & Electric Co.

Midland United Co. (trustees). Southeastern Electric & Gas Co.

Midland Utilities Company Southeast Power & Light Co.

(trustees). Southern Natural Gas Co.

Minneapolis General Electric Co. Southern Union Gas Co.

Mission Oil Co. Southwestern Development Co.

National Fuel Gas Co. Southwestern Public Service Co.

National Gas & Electric Corpora- Standard Gas & Electric Co.

tion. Standard Power & Light CorporaNational Light, Heat & Power Co. tion.

National Power & Light Co. Susquehanna Utilities Co.

National Public Utilities Corpora- Toledo Light & Power Co.

tion. Union Electric Power CorporaNew England Power Association tion.

(trustees). United American Co.

New England Power Association. United Cities Utilities Co.

New England Public Service Co. United Corporation, The.

North American Co., The. United Gas Improvement Co.,

North American Edison Co. The.

North American Gas & Electric United Light & Power Co., The.

Co. United Light & Railways Co., The

North American Light & Power United Public Service CorporaCo. tion.

North Continent Utilities Corpo- United Public Utilities Corporaration. tion (trustees).

Northeastern Water & Electric United Public Utilities CorporaCorporation. tion.

Northeastern Water Companies, United Telephone & Electric Co.,.

Inc. The (trustees).

Northern New England Co. Utah Power & Light Co.

Northern States Power Co. (Del.). Utilities Power & Light CorporaNorthern States Power Co. tion.

(Minn.). Utilities Stock & Bond CorporaNorth West Utilities Co. tion.

NY PA NJ Utilities Co. Utility Operators Co.

Pacific Power & Light Co. Walnut Electric & Gas CorporaPennsylvania Gas & Electric tion.

Corporation. Washington & Suburban Cos.

Pennsylvania Gas & Electric Co. Washington Gas & Electric Co.

Penn Western Gas & Electric Co. Western Public Service Co., The,

Peoples Light & Power Co. West Penn Electric Co., The.

(trustees). West Penn Railways Co.
APPENDIX vm

CROSS-REFERENCE TABLE TO THE GENERAL RULES AND REGULATIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934

The printed compilation of General Rules and Regulations under

the Securities Exchange Act of 1934, as amended to and including

September 10, 1938, contains a new system of rule designation and

arrangement. The following table indicates the designations under

which the rules appeared in previous mimeograph compilations and

the corresponding designations in the new printed compilation.

Rules LAI to LA7, inclusive, were not included in the new printed

compilation because they would cease to be effective on October 1,

1938, except as to any subject matter or meeting as to which the first

solicitation was made prior to such date. The new proxy rules,

Regulation X-14 (Rules X-14A-l to X-14A-9 and Schedule 14A),

which were published August 11, 1938, in release No. 1823, have been

included in the new printed compilation.

Rule number in previ- Rule number in

ous compilation printe,l comp,lati01l

AL X-I.

A2 X-2.

A3 X-3.

A4 X-4.

ANL X-7C2-1.

AN4 X-3A12-1.

AN5 X-3Al2-2.

AN8 X-12A-1.

AN9. X-12A-2.

AN11 X-12A-3.

AN15 X-12A-4.

AN18 X-3A12-3.

AN19 X-12A-5.

AN20 X-12A-6.

AN2L X-12A-7.

AN22 X-15A-1.

AN23 X-12A-8.

AN24 : X-16C-1.

ATL X-3B-1.

AT2 X-3B-2.

X-&B-3 }(-3B-3.

CBL }(-6B-1.

CB2 }(-6B-2.

CB3 X-6B-3.

CB4 X-6B-4.

GBL }(-lOB-1.

GB2 }(-lOB-2.

GB3 }(-lOB-3.

196

Rule number in previ- Rule number in

ous compilation printed compilati01l

GB4 }(-lOB-4.

X-I0A-l JC-I0A-l.

JC-IOA-2 X-IOA-2.

HDL JC-11Dl-1.

JBL JC-12B-1.

.IB2 JC-12B-2.

JB3 }(-12B-3.

JB4 JC-12B-4.

JB5 :X-12B-5.

JB6 }(-12B-6.

JB8 X-12B-7.

JB9 JC-12B-8.

JDL JC-12D1-1.

JD2 JC-12D2-1.

JD3 X-12D2-2.

JD4, sec. L X-12D3-1.

JD4, sec. 2 }(-12D3-2.

JD4, sec. 3 JC-12D3-3.

JD4, sec. 4 JC-12D3-4.

.TD4, sec. 5 }(-12D3-5.

JD4, sec. 6 }(-12D3-6.

.ID!, sec. 7 JC-12D3-7.

.ID4, sec. 8 }(-12D3-8.

.ID4.,sec. 9 }(-12D3-9.

JFL JC-12F-1.

.IF2 }(-12F-2 .

.IF3 }(-12F-3.

.IF4 }(-12F-4.
FOURTH ANNUAL REPORT 197

Rule number in previ- Ruk number in

ous compilation printed compIlatIon

JF5 X-12F-5.

JF7 X-12F-6.

KAL X-13A-L

KA2 X-13A-2.

KA4 X-13A-3.

KA5 X-13A-4.

KA6 X-13A-5.

KA7 X-13A-6.

KBL X-13B-L

MBL X-15B-L

MB2 X-15B-2.

MB3 X-15B-3.

MB4 X-15B-4.

MB5 X-15B-5.

MCL X-15CI-L

MC2 X-15C1-2.

MC3 X-15C1-3.

MC4 X-15CI-4.

MC5 X-15CI-5.

MC6 X-15C1-6.

MC7 X-15CI-7.

Rule number in pre vi- Rule number in

ous compilations printed compUatlon

MC8 X-15CI-8.

MC9 X-15CI-9.

MDL X-15D-L

MD2 X-15D-2.

MD3 X-15D-3.

NAL X-16A-L

NA2 X-I6A-2.

NA3 X-16A-3.

NA4 X-16A-4.

NA5 X-16A-5.

NA6 X-16A-6.

NBL X-16B-L

NB2 X-16B-2.

NB3 X-16B-3.

NDL X-16D-L

OAL X-17A-L

UBL X-24B-L

UB2 X-24B-2.

UB3 X-24B-3.

UB4 X-24B-4.

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