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Twentieth J\nnual Report; ~'o-;.(L- I i _.~__'{

of the

c ~(: 5, Securities and Exchange

Commission

Fiscal Year Ended June 30, 1954

UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1955

For .ale by the Superintendent of Documents, U. S. Government Printing Office

Wauhington 25, D. C. Price 45 centa (paper cover)

~

-
II

SECURITIES AND EXCHANGE COMMISSION

Headquarters Office

425Second Street NW.

Washington 25, D. C.

COMMISSIONERS

RALPH H. DEMMLER, Chairman

PAUL R. ROWEN

CLARENCE H. ADAMS

J. SINCLAIR ARMSTRONG

A. JACKSON GOODWIN, JR.

ORVAL L. DuBOIS, Secretary
LETTER OF TRANSRlITTAL 

SZCURITIE~AND EXCHANGECOMMISSION, 

Washington,D. C., Januuv 51, 1955. 

SIR: I have the honor t,o transmit to you the Tnrentiet,h Annual 

Report of the Securities and Exchange Commission, coyering the 

fiscal year July 1, 1953 to June 30, 1954, in accordance with the provisions of section 23 (b) of the Securities Exchange Act of 1934, 

approved June 6, 1934; section 23 of the Public Utility Holding 

Company Act of 1935, approved August 26, 1935; sect,ion 46 .(a) of 

the Investment Company Act of 1940, approved August 22! 1940; 

section 216 of the Investment Advisers Act of 1940, approved August 

22, 1940; and section 3 of the act of June 29, 1949, amending the 

Bretton Woods Agreements Act. 

~'es~ectfull~, 

RALPHH. DEMNLER, 

Chairman. 

THE PRESIDENTOF THE SENATE, 


THE SPEAKER OF THE HOUSEOF REPRESENTATIVES, 


Uitshington, D. C. 

III 

TABLE OF CONTENTS

Page

Fore\¥ord_________________________________________________________ XI

Commissioners and staff officers_____________________________________ XII

Regional and branch offices_________________________________________ XII

Biographies of commissioners , __ ___________________________ XIII

PART I

AMENDMENT OF SECURITIES LAWS AND REVISION OF RULES

AND FORMS

Amendment of securities laws___________________________________ 1

Dissemination of information during waiting period.,., __________ 1

Use of prospectuses after effective date of registration., _________ 2

Simplification of information requirements for prospectuses

used more than 13 months________________________________ 2

Extension of credit by dealers in new issues____________________ 2

When-issued trading___ _______ _________________________ 2

The offering of institutional type of debt securities., ___________ 3

Simplified registration procedures for investment compauics; ___ 3

Revision of rules and forrns.,., ________________________ _______ 3

Form 8-5_________________________________________________ 3

Form 8-9_________________________________________________ 4

Rule 173_ _ __ ______ ________ __ _ 4

Rule 415_ 4

Regulation D _____________________________________________ 4

When-issued trading _ ______________________________________ 5

Class registration of securities, ______________________________ 5

Forms 8-K and ID-IL_____________________________________ 6

Rule X-12A-l_ ___ __ __ ________________________ 7

Rescission of Form 9-K and of Rules X-13A-13 and X-15D-13__ 7

Proxy rules , , _____________________________________________ 7

Rule X-16B-6_ S

Form N-SB-l_____ ___ _ ______ S

Forms N-30A-l and N-30B-L__ ___________________________ S

PART II

ADMINISTRATION OF THE SECURITIES ACT OF 1933

Description of the registration process____ ________________________ 9

Registration statement and prospectus; ______________________ 9

Examination procedure_____ ________________________________ 10

Time required to complete registration_______________________ 10

Volume of securities registered __________________________________ 11

Registration statements flled.L; ___ ___________ __ 13

Disclosure obtained by the registration process_ ___________________ 13

Exemption from registration under the act________________________ 16

Litigation under the Securities AcL_______ _____ ____ ________ 19

Injunctive actions :____ ____ __ ________ 19

Participation as amicus curiae__ _______ _________ ___ 21

v
VI TABLE OF CONTENTS

PART III

AD:\lINISTRATION OF THE SECURITIES EXCHANGE ACT OF

1934

Regulation of exchanges and exchange trading; ___________________ 22

Registration and exemption of exchanges , ____________________ 22

Disciplinary action by exchanges ____________________________ 24

Registration of securities on exchanges , , __ _______________________ 25

Suspension of trading , __ ___ ____ _____ 26

Market value and volume of securities traded on exchanges; ________ 27

Market value of stocks on exchanges_________________________ 27

Comparative volumes on exchanges__________________________ 28

Block distributions reported by stock exchanges_______________ 29

Unlisted trading privileges on exchanges__________________________ 3(}

Number of issues admitted to unlisted trading , _ _ __ _______ 31

Volume of unlisted trading in stocks on exchanges; ____________ 32

Application for unlisted trading privileges- 32

Changes in securities admitted to unlisted trading privileges- ___ 33

Delisting of securities from exchanges , __ _____________ 33

Securities delisted by application- ___________________________ 33

Securities delisted by notificatdon., ___________________________ 33

Manipulation and stabilization, ___ _________________________ 33

Manipulation- _____ ____ ____ ____ ___________________________ 33

Stabilization , _____________________________________________ 34

Security ownership by corporation insidera.; , _____________________ 35

Recovery of insiders' profits by company _____________________ 36

Regulation of proxies- ___ __ ___ _ 37

Scopc of proxy regulation___________________________________ 37

Statistics relating to proxy staternents..., ______________________ 37

Regulation of brokers and dealers in over-the-counter markets_______ 38

Registration _ _ ____________________________________________ 38

Simplification of forms and rules applicable to the registration of

broke~dealers___________________________________________ 38

Administrative proceedings , ________________________________ 39

Broker-dealer Inspections., __________________________________ 42

Investigationsc., , ______________________________ _________ 43

Financial reports _ _________________________________________ 44

Supervision of activities of National Association of Securities Dealers,

Inc________________________________________________________ 44

~1embership-------------------------------------------___ 44

Disciplinary actions_________ ____ ______ _____ 44

Commission review of N ASD disciplinary actions.i.. . ___________ 45

Commission review of action on membership., , ________________ 45

Commission action on N ASD rules ___ _______________________ 46

Changes in Commission rules applicable to N ASD _____________ 47

Litigation under the Securities Exchange Aet , ____________________ 47

PART IV

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING CO:.\IPANY ACT OF 1935

Composition of registered holding company systems_______ _________ 5(}

Summary of changes, ______________________________________ 5(}
TABLE OF CONTENTS VII

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935-Continued Page

Significant developments in and litigation involving holding company

systems____________________________________________________ 52

Revision of rules, forms and procedures__________________________ 70

Pending proposals for revision_______________________________ 72

Revisions of forrns..; _______ ________________________________ 75

Processing of fee applications for services rendered in section 11

reorganization proceedinga.; , ___ __ ________ ___ _ 76

Cooperation with State and local regulatory authorities.L; , _________ 77

Financing of registered public utility holding company systems______ 78

Financing of electric generating companies supplying facilities of the

Atomic Energy Commission___ ________ ____ __ 86

PART V

PARTICIPATION OF THE COMMISSION IN CORPORATE REORGANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY

ACT, AS AMENDED

Summary of activltiea.c.,., _ __________ _____ 88

Problems in the administration of the estate _ _________________ 89

Activities with respect to allowances., ___ _____________________ 89

Consummation of plan _____________________________________ 91

PART VI

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939__ 92

PART VII

ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF

1940

Companies registered under the Act______________________________ 93

Types of new investment companies registered; ___________________ 94

Registration of Canadian investment companies., , _________________ 95

Current information., _ __ _ _________________ 96

Applications filed, _____________________________________________ 96

PART VIII

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT OF

1940___________________________________________________________ 98

Litigation under the Investment Advisers Act of 1940______________ 99

PART IX

RELATED ACTIVITIES OF THE COMMISSION

Court proceedings , _ _ __________________ 100

Civil proceedings__________________________________________ 100

Criminal prooeedings., ______________________________________ 100

Complaints and investigations___________________________________ 104

Section of securities violationa, __________________________________ 105

Activities of the Commission in accounting and auditing____________ 106

Opinions of the Commission., __________ _______ _______________ 108

International financial and economic matters______________________ 109

Confidential treatment of applications, reports, and documents______ 110

Statistics and special studies; __ ___________ 111
VIII TABLE OF CONTENTS

RELATED ACTIVITIES OF THE COMMISSION-Continued Page

Capital markets, ______________________________________________ 111

AIl new securities offerings__________________________________ 111

Issues registered under Securities Act of 1933_________________ 112

Corporate securities outstanding_____________________________ 113

Investment companies; __ _ _ ______ __ _ 113

Stock markets_________________________________________________ 113

Saving study ______ _ ___________________________________ 114

Financial position of corporationa.c , , ____________________________ 114

Working capital , ___ ____________________________________ 114

Balance sheet and income statements; _ ______________________ 115

Plant and equipment expenditures of U. S. business_______________ 115

Personnel_____________________________________________________ 115

Fiscal affairs, ____________________________ __________________ 116

Appropriation and expenditures , ____________________________ 116

Fees and revenues; __ _________ _________________ 116

Publications , __ _ __ ______________________________ 117

Information available for public inspection_____ ___________________ 117

Public hearings________________________________________________ 118

PART X

APPENDIX-STATISTICAL TABLES

Table 1. 20 year record of registration fully effective under the Securities

Act of 1933___ ____ ____ _________ ___________ 120

Table 2. Registrations fully effective under the Securities Act of 1933,

fiscal year 1954_ __ _ _____________________________________ 121

Part 1. Distribution by months_________________________________ 121

Part 2. Purpose of registration and type of security________________ 121

Part 3. Industry of registrants__________________________________ 122

Part 4. Use of proceeds________________________________________ 123

Table 3. New securities offered for cash sale in the United States_______ 124

Part 1. Type of offering________________________________________ 124

Part 2. Type of security________________________________________ 125

Part 3. Type of issuec_________________________________________ 126

Part 4. Private placement of corporate securities__________________ 127

Table 4. Proposed use of net proceeds from the sale of new corporate securities offered for eash , _ __ ________________________________ 128

Part 1. All corporate___________________________________________ 128

Part 2. Manufacturing_____ _________ ____________________ _ 128

Part 3. Mining_______ ____ __ _ __ __________ _ _ 129

Part 4. Electric, gas and wateL_________________________________ 129

Part 5. Railroad; _ _ _ __ _ ____________________ _____ __ 130

Part 6. Other transportation ___________________________________ 130

Part 7. Communication; __ __________ ________ ___ _________ _ 131

Part 8. Financial and real estate.. _ _ __________ _________ __ 131

Part 9. Commercial and other., _________________________________ 132

Table 5. Summary of corporate sec unties publicly offered and privately

placed from 1934 through June 1954_______________________ 133

Table 6. Brokers and dealers registered under the Securities Exchange Act

of 1934--effective registrations as of June 30, 1954, classified by

type of organization and by location of principal office_______ 134
TABLE OF CONTENTS IX

Table 7. Market value and volume of sales effected on securities exchanges

in the 12-month period ending December 31, 1953 and the 6-

month period ending June 30, 1954________________________ 135

Table 8. Issues and issuers on exchanges as of June 30, 1954____________ 136

Part 1. Number of issues on each exchange_______________________ 136

Part 2. Unduplicated number of issues on all exchanges____________ 136

Part 3. Unduplicated number of issuers haying securities traded on all

exchanges___________________________________________ 136

Table 9. Companies in active registered public utility holding company

systems as of June 30,1954______________________________ 137

Table 10. Reorganization proceedings in which the Commission participated during the fiscal year 1954_________________________ 138

Table 11. Summary of cases instatuted in the courts by the Cornrnission., , 139

Table 12. Summary of cases instituted against the Commission. cases in

which the Commission participated as intervenor or amicus

curiae, and reorganization cases on appeal under chapter X in

which the Commission participated__ _ _ __ _ 139

Table 13. Injunctive proceedings brought by the Commission which were

pending during the fiscal year 1954_______________________ 140

Table 14. Indictments returned for violat.lon of acts administered by the

Commission and related Federal statutes which were pending

during the fiscal year 1954_______________________________ 142

Table 15. Petitions for review of orders of the Commission which were

pending in courts of appeals during the fiscal year 1954_____ 147

Table 16. Criminal contempt proceedmgs pending during the fiscal year

1954__________________________________________________ 148

Table 17. Cases III which the Commission participated as intervenor or as

amicus curiae pendmg during the fiscal year 1954___________ 149

Table 18. Proceedings by the Commission to enforce subpenas pending

during the fiscal year 1954____ ______________________ __ 150

Table 19. Miscellaneous actions involving the Commission or its employees pending during the fiscal year 1954________________ 150

Table 20. Actions to enforce voluntary plans under section 11 (e) of the

Public Utility Holding Company Act pending during the fiscal

year 1954_____________________________________________ 151

Table 21. Actions under section 11 (d) of the Public Utility Holding Company Act pending during the fiscal year 1954______________ 152

Table 22. Reorganization cases under chapter X of the Bankruptcy Act

pending during the fiscal year 1954 in which the Commission

participated when appeals were taken from district court

orders________________________________________________ 153

Table 23. A 21-year summary of criminal cases developed by the Commission , _ _ _ ___________________________________________ 154

Table 24. Summary of criminal cases developed by the Commission which

were still pending on June 30. 1954_______________________ 155

Table 25. A 21-year summary classifying all defendants in criminal cases

developed by the Commission____________________________ 155

Table 26. A 21-year summary of all injunction cases instituted by the Commission.. _ _ _ _________________ _____ ______________ ____ 156

FOREWORD

This is the 20th Annual Report of the Securities and Exchange

Commission to the Congress for the fiscal year July 1, 1953to June 30,

1954. The report describes the Commission's activities during the

year in discharging its duties under the various statutes which it

administers, including the supervision of registration of securities for

sale to the public, the surveillance of the securities markets, the

regulation of the activities of brokers and dealers, the regulation of

registered public utility holding company systems and investment

companies and litigation in the courts.

The year was marked by the enactment by the Congress, by

unanimous vote, of the first substantial amendment to the laws

regulating the offering and sale of securities in many years. This

amendment was drafted following extensive conferences with representatives of the securities industry and members of Congressional

committees. The most important change accomplished was the

revision of the definitions of "offering" and "selling" to provide for

increased dissemination of information to prospective investors about

securities being offered, thereby furthering the concept of full disclosure. This legislation is described in detail in this report.

During the year the Commission engaged in an intensive program

of revising and simplifying its rules, forms and procedures for the

purpose of removing unnecessary complexities and duplications. The

Commission also reviewed and revised its administrative organization

and processes with a view to providing more aggressive and effective

enforcement of the securities laws for the greater protection of investors. One aspect of this program is an endeavor to obtain more

effective cooperation between the Commission and state securities

administrators. The details of the Commission's activities in these

respects are also included in this report.

Xl
COMMISSIONERS AND STAFF OFFICERS

(As of November 15, 1954)

Commissioners Terju~~lre3

RALPH H. DEMMLER, of Pennsylvania, Chairman__________________ 1957

PAUL R. ROWEN, of Massachusetts______________________________ 1955

CLARENCE H. ADAMS,of Connecticut____________________________ 1956

J. SINCLAIR ARMSTRONG,of Illinois______________________________ 1958

A. JACKSON GOODWIN,JR., of Alabama___________________________ 1959

Secretary: ORVAL L. DuBOIS

Staff Officers

JOHN V. BOWSER, Executive Director; Director, Division of Administrative

Management.

EDWARDT. TAIT, Executive Assistant to the Chairman.

BYRON D. WOODSIDE, Director, Division of Corporation Finance.

ROBERT A. McDoWELL, Director, Division of Corporate Regulation.

RAY GARRETT, JR., Associate Director.

HAROLD C. PATTERSON,Director, Division of Trading and Exchanges.

'WILLIAMH. TIMBERS, General Counsel.

MYRON S. ISAACS, Associate General Counsel.

EARLE C. KING, Chief Accountant.

LEONARDHELFENSTEIN, Director, Office of Opinion Writing.

BALDWIN B. BANE, Executive Adviser to the Commission.

REGIONAL AND BRANCH OFFICES

Regional Administrators

Region I.-Francis J. Purcell, 42 Broadway, New York 4, New York

Region 2.-Philip E. Kendrick, Federal Building, U. S. Post Office and Courthouse, Post Office Square, Boston 9, Mass.

Region 3.-William Green, Peachtree Seventh BUilding (Room 350), Atlanta

5, Georgia

Region 4.-Thomas B. Hart, Bankers Building (Room 630), 105 West

Adams Street, Chicago 3, Ill.

Region 5.-0ran H. Allred, United States Courthouse (Room 301) Tenth

and Lamar Streets, Fort Worth 2, Texas

Region 6.-William L. Cohn, New Customhouse (Room 162), Nineteenth

and Stout Streets, Denver 2, Colo.

Region 7.-Andrew D. Orrick, Appraisers Building (Room 334), 630 Sansome

Street, San Francisco 11, Calif.

Region 8.-James E. Newton, 905 Second Avenue Building (Room 304),

Seattle 4, Wash.

Region 9.-William S. Marshall, 131 Indiana Avenue (Room 115), Washington, D. C.

Branch Offices

Standard Building (Room 1628), 1370 Ontario Street, Cleveland, Ohio

Federal Building (Room 1074), Detroit 26, Mich.

United States Post Office and Courthouse (Room 1737) 312 North Spring

Street, Los Angeles 12, Calif.

PIOneer Building (Room 400) Fourth and Roberts Streets, St. Paull, Minn.

XU
COl\fl\HSSIONERS

Ralph H. Demmler, Chairman

Chairman Demmler was born in Pittsburgh, Pa. on August 22, 1904

and has been a lifelong resident of that city. Chairman Demmler

received an A. B. degree from Allegheny College in 1925 and an LL. B.

degree from the Law School of the University of Pittsburgh in 1928.

He was admitted to the Pennsylvania bar in 1928 and thereafter

specialized in corporate and banking law. Between 1928 and 1930 he

was associated with C. E. Theobald, Esq. and between 1930 and 1938

with the firm of Watson & Freeman. He was a partner in the firm of

Hirsch, Shumaker, Demmler & Bash from 1938 to 1941. Between

1941 and 1943 he served as trust officer of Commonwealth Trust

Company of Pittsburgh. Between 1943 and 1953 he was associated

with the firm of Reed, Smith, Shaw & McClay, and was a partner in

that firm from 1948 until June 15, 1953. On June 17, 1953, he took

office as a m-mbor of the Securities and Exchange Commission for a

term of office expiring June 5, 1957 and was designated Chairman of

the Commission by the President.

Paul R. Rowen

Commissioner Rowen was born in Brighton, Mass., October 7, 1899.

He received an A. B. degree from Georgetown University in 1921,

attended Harvard Law School from 1921 to 1924, received an LL. B.

degree from Boston University Law School in 1925 and was admitted

to the Bar of Massachusetts in 1926. From 1926 to 1932 Mr. Rowen

was engaged in the general practice of law in Boston. From 1932 to

1936 he served successively as assistant district attorney in Boston,

as assistant counsel, regional litigation attorney, N. R. A., in Washington, D. C., and as legal consultant, Federal Coordinator of Transportation, in Washington, D. C. In 1936 Mr. Rowen became a member of the staff of the Commission at its office in Washington, D. C.,

and served as an attorney on the staff until 1939. Thereafter, Mr.

Rowen was appointed regional administrator of the Commission's

Boston regional office and served in that capacity for over 6 years.

On May 28, 1948, he took office as a member of the Securities and

Exchange Commission and on June 14, 1950, was reappointed for a

term of office ending June 5, 1955.

Clarence H. Adams

Commissioner Adams was born in Wells, Maine, on November 1,

1905, and resides in Bloomfield, Conn. In 1925he moved to Connecticut where he entered the investment banking business. In 1931 he

326394-55-2 XIII
XIV COMMISSIONERS

organized the securities division of the Banking Department and

became the first Securities Administrator of Connecticut, responsible

for the administration of the Connecticut Securities Act, which position he held until 1950. In 1945he served as President of the National

Association of State Securities Administrators. His business background includes membership in an investment banking firm in Hartford, and he headed a lending institution in that city. On May 8, 1952,

be wok office as a member of the Securities and Exchange Commission for a term of office expiring June 5, 1956.

J. Sinclair Armstrong

Commissioner Armstrong was born in New York City on October 15,

1915. He received an A. B. degree from Harvard College in 1938 and

an LL. B. degree from Harvard Law School in 1941. After passing the

New York State Bar Examination in 1941 he moved to Chicago,

Illinois, in July 1941 was admitted to practice in Illinois in that year,

and from 1941 to 1945 was associated with the law firm of Isham,

Lincoln & Beale. From 1945 to 1946 he was on active duty in the

U. S. Naval Reserve, assigned to the Officeof the General Counsel for

the Department of the Navy in Washington. In 1946 he returned to

Isham, Lincoln & Beale, becoming a partner of the firm in 1950. On

July 16, 1953, he took office as a member of the Securities and Exchange Commission for a term of office expiring June 5, 1958. He

also serves as the Commission's delegate as a member of the President's Conference on Administrative Procedure.

A. Jackson Goodwin, Jr.

Commissioner Goodwin was born in Anniston, Ala., on October 18,

1911 and resides in that city. He received an A. B. degree from

Princeton University in 1934 and an M. B. A. degree from Harvard

Business School in 1936. Between 1936 and 1940 he was associated

with the investment banking firm of Dillon, Read & Co. Between 1946

and 1952, after 5 years military service during which, among other

duties, he served as an assistr nt and aide to Undersecretary of War

Robert P. Patterson and in the European Theater of Operations as a

Lieutenant Oolonel, he was associated with the Anniston National

Bank of Anniston, Ala., as vice president and director. In 1952 and

1953 he was a Director of the Federal Reserve Bank of Atlanta,

Birmingham Branch, and a Director of the Life Insurance Company

of Alabama. On July 16, 1953, he took office as a member of the

Securities and Exchange Commission for a term of office expiring

June 5, 1954, and was reappointed for a term expiring June 5, 1959.
PART I

AMENDMENT OF SECURITIES LAWS AND REVISION OF

RULES AND FORMS

AMENDMENT OF SECURITIES LAWS

During the fiscal year Congress adopted by a unanimous vote a.

statute amending the securities acts administered by the Commission,

the first such amendment in many years.' It effected important

changes in the Securities Act of 1933 and limited changes, largely

technical, in the Securities Exchange Act of 1934, the Trust Indenture

Act of 1939, and the Investment Company Act of 1940. After conferences during the fall of 1953 with representatives of the securities

industry and with the Chairmen of the Committees and subcommittees of the Senate and House of Representatives having jurisdiction,

the Commission prepared a draft bill. The original bill contained provisions dealing with eight problems, seven of which were enacted as

outlined below. The eighth, a proposal to increase the maximum exemption from registration pursuant to section 3(b) of the Securities

Act from $300,000 to $500,000, was not adopted. The changes made

are summarized below:

1. Dissemination of information during waiting period.-The

Securities Act of 1933 requires the registration with the Commission

of securities to be publicly offered. Prior to the amendment, the Act

prohibited the offering of a security for sale as well as the actual

consummation of a sale prior to the effective date of the registration

statement. Although it is a basic purpose of the Act that information

concerning securities to be offered to the public shall be given widespread distribution during the so-called waiting period between the

filing and effective dates of the registration statement, normally a

period of about twenty days, sellers of securities had been reluctant

to give full effect to this purpose because of uncertainty whether dissemination of information by means of the preliminary or so-called

"red herring" prospectus during this period might be construed as

illegal sales activity which would subject them to civil and criminal

liabilities and penalties.

To eliminate this deterrent to furnishing prospective investors with

information concerning securities to be offered, the amended act perIpublic Law 677, &'!d Congress, Chapter 667, 2d SeSSIOn(68 Stat. 683), approved August 10, 1954,

effective October 10, 1954.

1
2 SECURITIES AND EXCHANGE COMNI:ISSION

mits written offers during the waiting period by means of a prospectus

which meets the requirements of the Commission's rules. It thus removes the difficult distinction, inherent in previous practice, that it

was lawful and desirable for an underwriter or dealer to disseminate

information during the waiting period but illegal to offer to sell or to

solicit offers to buy. The Act as amended, however, continues to

make sales, contracts of sale, and contracts to sell unlawful before the

registration statement becomes effective.

2. Use of prospectuses after effective date of registration.-

The Securities Act requires persons selling securities to deliver prospectuses to purchasers in the initial distribution of a security, regardless of how long the distribution might take. Prior to its amendment

it also required the delivery of a prospectus by securities dealers in

trading transactions for one year after the commencement of an offering even though the initial distribution of the security had long been

completed. This one-year period for trading transactions, as distinguished from actual distribution, had been recognized as unrealistically

long. Accordingly, the Act was amended to reduce the one-year period to 40 days after the effective date of the registration statement

or after the commencement of the public offering, whichever date is

later. The statutory provision requiring a dealer to deliver a prospectus so long as he is disposing of an unsold allotment or otherwise

participating in an initial distribution remains unchanged. For certain types of investment companies which continuously offer securities, the amended Act requires the use of prospectuses in all transactions, so long as securities of the same class are currently being

offered or sold by the issuer or by or through an underwriter.

3. Simplification of information requirements for prospectuses

used more than 13 months.-Before amendment, the Securities Act

required that prospectuses which are used more than 13 months after

the effective date of a registration statement should contain information as of a date within one year of its use. This produced a hardship

in many cases. As amended, the Act provides that where a prospectus is used more than 9months after the effective date the information contained therein shall be as of a date within 16 months of

such use.

4. Extension of credit by dealers in new issues.-The Securities

Exchange Act of 1934 prohibited the extension of credit by dealers to

purchasers of a new issue for six months after the offering period. It

was felt that the six-month period was unnecessarily long and that a

3D-day period, as provided by the amended Act, would be sufficient

to insure against the misuse of credit in distributions.

5. "When-issued" trading.-The amendment removes an ambiguity in the Securities Exchange Act by eliminating the last sentence
TWENTIETH ANNUAL REPORT 3

of section 12 (d) of that Act which placed seemingly unnecessary and

irrelevant limitations on the authority of the Commission to adopt

rules for the effective regulation of "when-issued" trading.

6. The offering of institutional type of debt securities.-The

Trust Indenture Act of 1939 required inclusion of a summary of

certain specified indenture provisions in a prospectus used in the sale

of debt securities. This created problems in the formulation of

simpler forms of prospectuses for this type of security. The amendment makes clear that the summary need be included in the prospectus only to the extent required by the rules and regulations of the

Commission. It should therefore facilitate the simplication of prospectuses. As discussed below the Commission has adopted a simple

and short form for the registration of institutional type debt securities.

7. Simplified registration procedures for investment companies.-

In order to have a supply of registered shares on hand at all times,

investment companies which engage in continuous offerings of their

shares have heretofore been required to file new registration statements under the Securities Act periodically. The statutory amendment will permit such a company to increase the number of its

registered shares by amendment of its registration statement in lieu

of filing a new registration statement.

REVISION OF RULES AND FORMS

The Commission constantly reviews its rules and forms with a view

to making such revisions and clarifications as are necessary and

appropriate to keep pace with changing practices and new developments. During the past fiscal year the Commission gave particular

attention to clarifying and simplifying many of the existing rules and

forms. A primary objective is to eliminate duplication and to

encourage concisenesswithout the sacrifice of any safeguards necessary

for the protection of investors.

Considerable progress was made by the Commission during the 1954

fiscal year in carrying out this program. At the present time it is

engaged in preparing further revisions, including those made necessary

by the recent amendments of the securities acts. Certain of the

changes made during the 1954 fiscal year are outlined below. Other

revisions of rules and forms which are of primary interest to special

groups, such as brokers and dealers and public utility holding companies, are described in the parts of this report dealing with the

regulation of the activities of such persons and companies.

Form S-5.-Form S-5 was revised to simplify registration under

the Securities Act of 1933 and result in more intelligible prospectuses

for open-end management investment companies."

• Seeurrties Act release No. 3493 (December 15, 1953).
4 SECURITIES AND EXCHANGE COMMISSION

Form S-9.-Form S-9 has been adopted for the registration of nonconvertible fixed interest debt securities of American and Canadian

companies. It is available for use by an issuer which has been in

business at least 10years, has a prescribed substantial earnings history,

and has filed annual and other periodic reports pursuant to section

13 or 15 (d) of the Securities Exchange Act of 1934. The standards

prescribed in this new form were developed after a thorough analysis

of all debt issues registered with the Commission during the years

1951 to 1953, inclusive. By this process, informational requirements

have been limited essentially to five items, namely, financial statements of the issuer consisting principally of a balance sheet and a

five-year summary of earnings and surplus; a brief statement of the

principal business of the issuer and related matters; a description of

the use of proceeds of the financing; a description of the securities

being offered; and offering price information. The form does not

require the detailed information prescribed by the general registration forms for securities which do not meet the standards prescribed

for Form &-9. Because of the substantially shorter prospectuses

permissible with this form the Commission expects to be in a position

to consider favorably requests to reduce substantially the waiting

period between the filing date and the effective date of registration

statements for such security issues,"

Rule 173.-Provisions of various Acts administered by the Commission authorize it to institute injunctive actions and create certain

civil liabilities. Since rights arising because of violations of these

Acts may prove unenforceable against persons who are not residents

of the United States where it is impossible to obtain service upon them,

Rule 173 was adopted under the Securities Act to implement the

provisions of that Act, and to afford to the Commission and others

the same opportunity to enforce rights or obligations against such

persons as is available in the case of residents. Similar rules also

have been adopted under other acts, and appropriate forms to be

used for filing irrevocable consents to service have been adopted.'

Rule 415.-Rule 415, adopted under the Securities Act, simplifies

the registration procedure for securities offered at competitive bidding.

It provides that, under certain conditions, a post-effective amendment reflecting the results of the bidding becomes effective without

further order upon the filing thereof with the Commission or a regional

or branch office. Appropriate amendments to and rescission of such

other rules as were necessary in this connection were also adopted."

Regulation D.-Regulation D provides a conditional exemption

from registration under the Securities Act for offerings not exceeding

3 Securities Act release No. 3509 (Jw} 21, 1954).

, Securities Act release No. 3506 (June 30,1954)

Securities Act release No. 3494 (January 13, 1954).

•

•
TWENTIETH ANNUAL REPORT 5

$300,000 in anyone year made by Canadian issuers or by domestic

issuers having their principal business operations in Canada. The

promulgation of this regulation followed the amendment of the extradition agreements between the United States and Canada. It is

a part of a comprehensive program designed to prevent fraud and

remedy certain abuses in the sale of Canadian securities in this country in violation of American law.

Its adoption was an experiment in international cooperation in

stamping out security frauds across the border. The Securities Commission of the Province of Ontario, after the close of the fiscal year,

indicated its dissatisfaction with the operation of the Regulation and

the Commission is presently studying whether it should be modified

or withdrawn. The Commission is also studying other aspects of

the problem of securities sales to United States citizens from the

Dominion of Canada. Regulation D is merely one phase of a much

larger over-all problem,"

"When-Issued" Trading.-Regulation X-12D-3 provided for the

registration for "when-issued" trading on national securities exchanges

of unissued short-term warrants and unissued securities other than

short-term warrants. Form I-J was required to be filed for the registration of warrants and Form 2-J for other unissued securities.

Regulation X-12D-3 had been obsolete for most purposes since the

Commission amended rule X-12A-4 in June 1950 to provide that an

unissued short-term contract as well as an issued short-term warrant

could be traded on an exchange as an exempted security and the only

cases in which Regulation X-12D-3 still served a substantial practical

purpose arose where the securities to be traded were the subject of a

voluntary subscription or exchange right granted to the holders of a

security traded on the exchange. During the fiscal year rule X-12A-5

was amended to cover these cases and generally to simplify the requirements. As amended, rule X-12A-5 is far less burdensome to

issuers and exchanges than the provisions of Regulation X-12D-3,

and nevertheless affords adequate protection to investors. Upon the

adoption of the amendments to rule X-12A-5 the Commission rescinded Regulation X-12D-3 including Forms 1-J and 2-J.

The Commission also rescinded rules X-12A-6, X-12A-7, X-12A-8,

and X-12A-9 providing exemptions from registration under the Securities Exchange Act. Situations to which rules X-126A-6 and rule

X-12A-8 related are covered by rule X-12A-5, as amended, and rules

X-12A-7 and X-12A-9, having been promulgated in the light of

particular circumstances, were no longer of general usefulness."

Class registration of securities.-Under Regulation X-12D-l, registration was effective under the Securities Exchange Act only as to a

e Securities Act release No. 3495 (January 13, 1954).

r Securities Exchange Act release No. 4989 (January 28,1954).
6 SECURITIES AND EXCHANGE C0l\1]I,1ISSIO~

specified amount of a class of security, so that, if additional shares or

amounts of the same class were to be subsequently issued, a new application on Form 8-A was required to be filed for registration of such additional amounts. During the fiscal year the regulation was amended

to provide that the original application for registration is deemed

to cover the entire class of security, and the subsequent registration

of any additional unissued shares or amounts of the same class becomes

effective automatically when they are issued, without any further application, certification or order. The new procedure makes unnecessary a large majority of the applications previously filed on Form 8-A,

since most such applications have been filed to register additional

blocks of a class of security already registered. Consequently, applications on Form 8-A will be filed henceforth only in the event that a

new class of securities is to be registered. The Commission believes

that the time and expense to be saved by registrants, exchanges and

the Commission through the operation of this new procedure will be

considerable.

Revisions have also been made in Form 8-A which considerably

shorten the old form, principally by deleting certain requirements

made unnecessary in view of the new class registration technique."

Forms 8-K and lo-K.-These forms, which are used by companies

having securities listed on stock exchanges or registered under the

Securities Act of 1933 for current reports and annual reports, respectively, were revised during the fiscal year. Form 8-K was revised to

eliminate certain items to limit the requirements with respect to exhibits and to clarify those concerning financial statements. One of

the principal changes made in the revision of Form 10-K brings its

requirements into conformity with corresponding requirements of the

Commission's proxy rules. Thus, it is provided that, if a proxy statement has been filed under those rules, certain information furnished

in such statement need not be repeated in answer to corresponding

items of Form lO-K, and no refiling or incorporation by reference of

the proxy statement for this purpose is necessary. In addition,

financial statements contained in such proxy statements, or in annual

reports to security holders, may be incorporated by reference where

such financial statements substantially meet the requirements of Form

10-K.

Clarification also has been made of the provision which permits

companies filing reports with the Federal Power Commission to

substitute their reports to that Commission and thereby satisfy in

large part the requirements of this Commission's Form 10-K. A

new general instruction has been added to Form lo-K to make the

form available for use by railroads, motor carriers and communication

companies which formerly used Forms 12-K and 12A-K, providing

8 Seountres Exchange Act release No. 4!190(1anuary 28, 1954).
TWENTIETH .ANJ\TUALREPORT 7

for the use of annual reports to the Interstate Commerce Commission

or the Federal Communications Commission, or annual reports to

stockholders, to satisfy substantially all requirements of this Commission's form. Accordingly, Forms 12-K and 12A-K were rescinded."

RuIe X-l2A-l.-This rule provided an exemption from the registration requirements of the Securities Exchange Act for the capital stock

of certain banking institutions traded on a national securities exchange.

During the fiscal year the rule was amended to extend the scope of the

exemption so that, when a national securities exchange merges into or

is absorbed by another exchange, the exemption which was available

for such securities on the merged or absorbed exchange will continue

in effect on the surviving exchange."

Rescission of Form 9-K and of Rules X-13A-13 and X-15D-13.-

In reviewing its activities, procedures and requirements to determine

the extent to which eliminations, revisions or modifications might be

made without a material adverse effect on the public interest, the

Commission invited all interested persons to submit their views and

comments in regard to a proposal to rescind Form 9-K, the form for

quarterly reports for gross sales and operating revenues, and Rules

X-13A-13 and 15D-13, the rules relating to the filing of such reports

under the Securities Exchange Act. After considering the comments

and data submitted, the Commission rescinded this form and its

related rules, although the Commission is continuing to keep under

study the adequacy of its annual and interim reporting requirements.'!

Proxy rules.-Rule X-14A-8 formerly provided for inclusion in an

issuer's proxy material of stockholder proposals which were proper

subjects for action by security holders, but did not specifically provide

that state law was the standard for determining what constituted

"a proper subject for action although the Commission's staff had so

interpreted the rule." The proxy rules as amended specifically

provide that a security holder's proposal may be omitted from the

management proxy material if it is one which, under the laws of the

issuer's domicile, is not a proper subject for action by security holders.

The rule places the burden of proof upon the management to show that

a particular security holder's proposal is not a proper one for inclusion

in management's proxy material. Thus, if management contends

that a proposal may be omitted because it is not proper under state

law, it will be incumbent upon management to refer to the applicable

statute or case law and furnish a supporting opinion cf counsel

satisfactory to the Commission.

Under paragraph X-14A-8 (c) (5) of the amended rule management

is specifically permitted to omit from its proxy material tl proposal

'Securities Exchange Act release 1\0 4991 (January 28,1954).

10 Securities Exchange Act release No 4945 (September 29,1954).

11 Seeunties Exchange Act release No 4949 (October 9,1954).
8 SECURITIES AND EXCHANGE COMMISSION

which is a recommendation or request with respect to the conduct of

the ordinary business operations of the issuer.

Prior to recent revisions of the proxy rules, a stockholder proposal

included in the management's proxy material had to be repeated in

subsequent proxy statements, upon request, provided it received 3%

of the total number of votes cast at the last annual or subsequent

special meeting. This resulted in repetitive submissions of proposals

which had received very modest stockholder interest. The proxy

rules now provide that a proposal may be omitted for a period of three

years from the last previous submission if the proposal was submitted

within the previous five years and received less than a 3% vote in

the case of a single submission, less than a 6% vote upon a second

submission, or less than a 10% vote upon a third or subsequent

submission during such 5-year period.

Rule X-14A-8 of the proxy rules formerly provided that any stockholder proposal submitted to an issuer with respect to an annual

meeting would, if submitted more than 30 days in advance of the

corresponding date on which proxy material was released for the last

annual meeting, be prima facie deemed to have been submitted within

a reasonable time. The rule has been amended to extend this period

from 30 days to 60 days, so as to give more time for the consideration

of security holders' proposals."

Rule X-16B-6.-This rule which grants a partial exemption from

section 16 (h) of the Securities Exchange Act with respect to profits

which might otherwise be deemed to have been realized and recoverable where there is a purchase by an officer, director or 10% stockholder of an equity security pursuant to the exercise of an option or

similar right and a subsequent sale of such security was amended to

clarify the conditions under which the exemption is available."

Form. N-8B-I.-Form N-8B-I is the basic form for registration of

management investment companies under the Investment Company

Act. Recent revisions have been made based on the Commission's

experience with these companies and take into consideration the fact

that the form is now used chiefly by newly-organized companies and

consequently call for much less information than was previously

required. 14

Forms N-30A-I and N-30B-1.-These annual and quarterly reporting forms required to be filed by registered management investment companies pursuant to section 30 of the Investment Company

Act and sections 13 and 15 (d) of the Securities Exchange Act have

been revised to eliminate the duplication of information filed."

Securities Exchange Act release No 4979 (January 6, 1954).

11Securities Exchange Act release No. 4998 (February 9,1954).

I' Investment Company Act release No 1932 (December 15, 1953).

"Investment Company Act release No. 1978 (May 6, J954).

"
PART II

ADMINISTRATION OF THE SECURITIES ACT OF 1933 ,

The Securities Act of 1933 is designed to provide disclosure to

investors of material facts concerning securities publicly offered for

sale by use of the mails or other instrumentalities of interstate commerce, and to prevent misrepresentation, deceit or other fraudulent

practices in the sale of securities. Disclosure is obtained by requiring the issuer of such securities to file with the Commission a registration statement, and related prospectus, containing significant

information about the issuer and the offering. These documents are

available for public inspection as soon as they are filed. In addition

the prospectus must be furnished to the purchaser at or before delivery of the security. The contents of the registration statement

are the primary responsibility of the issuer and the underwriter; the

Commission has no authority to control the nature or quality of a

security to be offered for public sale or to approve or disapprove its

merits or the terms of its distribution.

DESCRIPTION OF mE REGISTRATION PROCESS

Registration Statement and Prospectus

Registration of any security proposed to be publicly offered may be

secured by filing with the Commission a registration statement on

the applicable form containing prescribed disclosures. The Commission has adopted several such forms designed to disclose appropriately for the type of issue involved the classes of information

specified in Schedule A of the Act. In general the registration statement must describe such items as the names of persons who participate

in the direction, management, or control of the issuer's business; their

security holdings, remuneration paid and options or bonus and profitsharing privileges allotted to them; the character and size of the business enterprise; its capital structure and past history and earnings;

its financial statements, certified by independent accountants; underwriters' commissions; pending or threatened legal proceedings; and

the purpose to which the proceeds of the offering are to be applied.

The prospectus constitutes a part of the registration statement and

presents in summary the more important of the required disclosures.

Although several different registration forms are currently available,

the majority of registrants use Form 8-1, the general form for busi9
10 SECURITIES AND EXCHANGE COM1\IfISSION

ness companies. Next in deman.d is Form 8-5, designed for open-end

management investment companies. During the 1954 fiscal year

out of 649 registration statements filed, 432 or two-thirds were on

Form 8-1 while 123 or nearly one-fifth were on Form 8-5.

Examination Procedure

The commission is charged with the responsibility of preventing the

sale of securities to the public on the basis ofstatements which on their

face appear to contain inaccurate or incomplete information. The

staff of the Division of Corporation Finance examines each registration statement for compliance with the standards of disclosure

and usually notifies the registrant by an informal letter of comment

of any material respect in which the statement apparently fails to

conform to these requirements. The registrant is thus afforded

an opportunity to file an amendment before the statement becomes

effective. In addition, the Commission has power, after notice

and opportunity for hearing, to issue an order suspending the effectiveness of a registration statement. No such orders were issued

during the 1954 fiscal year

Time Required to Complete Registration

Because prompt examination of a registration statement is important to industry, the Commission completes its analysis in the shortest

possible time consistent with the public interest. Congress provided

for a lapse of 20 days in the ordinary case between the filing date of a

registration statement and the time it may become effective. The

waiting period is designed to provide investors with an opportunity

to become familiar with the proposed security. Widespread publicity

is given to information disclosed in the registration statement immediately on its filing. The commission is empowered to accelerate

the effective date so as to shorten the 20-day waiting period where the

facts justify such action. In exercising this power, the Commission is

required by statute to take into account the adequacy of the information already available to the public, the complexity of the particular

financing, and the public interest and protection of investors.

The median time which elapsed between the filing and the effective

date with respect to 629 registration statements that became effective

during the 1954fiscal year was 22 days, one less than the corresponding

figure in the preceding year. This time was divided among the three

principal stages of the registration process as follows: (a) from date of

filing registration statement to date of letter of comment, 10 days;
TWENTIETH ANNUAL REPORT 11

(b) from date of letter of comment to date of filing first material

amendment, 7 days; and (c) from date of filing first amendment to

date of filing final amendment and effective date ofregistration, 5 days.

VOLUME OF SECURITIES REGISTERED

Securities effectively registered under the Securities Act of 1933

during the fiscal year 1954 totalled $9.2 billion, the second highest

volume in the twenty-year period of the Commission's history. The

amount of registrations in each of the post-war years has exceeded

$5 billion and reached a high point of $9.5 billion in 1952. These

figures cover all registrations including new issues sold for cash by the

issuer, secondary distributions, and securities issued for other than

cash proceeds, such as exchange transactions and issues reserved for

conversion of other securities.

The most important category of registrations, new issues to be sold

for cash for account of the issuer, amounted to almost $7.5 billion in

the 1954 fiscal year as compared with an average of somewhat over

$6 billion for the last five fiscal years. In this five-year period, 51

percent of the dollar volume of new cash issues consisted of debt

securities, 40 percent common stock, and 9 percent preferred stock.

The relatively high proportion of common stock registrations in

recent years results in part from the large amount of securities registered by investment companies.

Figures for each of the fiscal years 1935 through 1954 appear

in appendix table 1, showing the number of statements, total amounts

registered, and a classification by type of security for new issues

to be sold for cash for account of the issuing company. More detailed

information on registrations for the 1954fiscal year is given in appendix

table 2.

Of the dollar amount of securities registered in the 1954 fiscal year,

80.5 percent was for account of issuers for cash sale, 17.9 percent for

account of issuers for other than cash sale and 1.7 percent was for the

account of others, as shown below. Most of the registrations involving issues not to be sold for cash cover securities reserved for conversion of other registered securities.

Registered for account of issuers for cash sale $7,381,199,000

Registered for account of issuers for other than cash sale , _____ 1, 637, 951, 000

Registered for account of others than the issuers______________ 154,352,000

9,173,502, 000
12 SECURITIES AND EXCHANGE COMMISSION

The classification by industry of securities registered for cash

sale for account of issuers in the fiscal year 1954 is as follows:

~anufacturing--------_----------------------_---~--_- ~ning

Electric, gas and water

Transportation, other than railroad

Communication

Investment companies

Other financial and real estate

Trade

Service

Construction

Total corporate

Foreign government-----------------------------------

Total

Inmilliom

$958

89

2, 722

4

932

1,557

512

52

13

8

6, 844

537

7,381

Perce,.,t

oftotol

13.0

1.2

36.9

0.0

12.6

21. 1

6.9

0.7

0.2

0.1

92.7

7.3

100.0

Electric and gas companies have accounted for the largest volume of

registrations not only in the 1954 fiscal year but for several years

past. Registrations of securities by companies in this field during the

last five years have averaged more than two billion dollars per year,

the large amount mainly reflecting two factors. First, the great

post-war expansion of public utilities plant facilities has been financed

to a considerable extent by funds raised in the capital markets, whereas

in other industries more reliance has been placed on internal sources

of funds, including retained earnings and depreciation accruals.

Second, as compared with other industries, more of their securities

have been offered publicly and registered under the 1933 Act, rather

than placed privately with institutional investors.

The next largest volume of issues in the 1954 fiscal year was registered by investment companies. Issues of these companies, which

have formed approximately one-fifth of total registrations of new cash

issues in recent years, are classified according to type of organization

for the fiscal years 1953 and 1954:

Management open-end companies

Management closed-end companies

Unit and face amount certificate companies

(InmiUiom)

1953 1954

$1, 113 $1, 106

36 5

458 446

1,607 1,557

Manufacturing companies ranked third in volume of registrations

in 1954, but accounted for only 13 percent of total registrations.

While expenditures for new plant and equipment by manufacturing

companies have been at record levels during the last few years, com-

_

_

_

_

_

_

_

_

_

_

_

_

_

_
TWENTIETH ANNUAL REPORT 13

panies in this group have used internal sources of funds to a major

extent, and also have sold a large proportion of their securities

privately.

About 67 percent of the net proceeds of the corporate securities

registered for cash sale for account of issuers in the fiscal year 1954was

designated for new money purposes, including plant, equipment and

working capital. Almost 6 percent was for retirement of securities

and 27 percent for other purposes, principally the purchase ofsecurities

by investment companies. This distribution followsfairly closely the

pattern of the last five years.

REGISTRATION STATEMENTS FILED

During the 1954 fiscal year 649 registration statements were filed

covering proposed offerings aggregating $8,983,752,628, compared

with 621 statements covering an aggregate of $7,399,059,928 in the

1953 fiscal year, an increase of approximately $1,585,000,000. The

649 statements included 151 filed by companies which had not previously registered securities under the Act.

Particulars regarding the disposition of all registration statements

filed are summarized below.

Number and cisposition of registration statements filed

Prior to July 1, July I, 1953, to Total as of June

1953 June 30, 1954 30,1954

Registration statements: Filed ______________________________________._. 10,369 649 11,018

Effective-net. 8,853 '628 , 9,469 Under stop or refusal order-net ______________ 184 ° Wlthdrawn 184 __________________________________ 1,259 38 1,297 Pending at June 30,1953 ______________________ 73 ------------------ ---.-------------- Pending at June 30,1954 ______________________ -----.------------ ------------------ 68

TotaL 10,369 ------------------ 11,018

Aggregate dollar amount: As tIled ________________ $85,999,247, 566 $8, 983, 572, 628 $94, 982, 820, 194

I This figure does not include one registration statement which was withdrawn after becoming effective

during the current year. 2 This figure does not include 12 registration statements which became effeetrve prior to July 1, 1953 and

were WIthdrawn during the current year as they are counted ill the number WIthdrawn.

DISCLOSURES OBTAINED BY THE REGISTRATION PROCESS

Disclosures secured by the staff's examination of registration statements during the 1954 fiscal year are illustrated by the following

examples.

Dealings with promotera.-e-A corporation which operated two dog

racing tracks proposed a public offering of debentures and common

stock by means of a prospectus which failed to disclose adequately

transactions with the promoters and certain facts bearing on the

risks involved. Before the registration statement was permitted to

become effective, a section was inserted at the beginning of the

___________________•• __________

___________________________________•__
14 SECURITIES AND EXCHA..~GE COMMISSION

prospectus disclosing transactions pursuant to which the corporation acquired the tracks from the promoters. It showed, among

other things, that the promoters received from the corporation shortterm notes in the amount of $300,000 and debentures of the issue to

be registered in the amount of $300,000, together with rights to purchase at 1~ per share a total of 167,502 shares of common stock of

the corporation which was to be offered to the public at a price of

$1.00 per share; that the promoters and officerswere to receive annual

salaries aggregating $62,500 plus a bonus; and that for the corporation's latest fiscal year, its :first year in operation, four officers had

waived a portion of their salaries to the aggregate extent of $24,000

to enable the corporation to pay interest on its outstanding debentures. In addition it was pointed out that the book value of the

corporation's tangible assets for each $1,000 of debentures outstanding was $573.64;that the corporation's first year of operations resulted

in a deficit, and its liabilities exceeded its assets as of the date of its

most recent balance sheet; and that the value of the common stock

had been diluted by the sale of 209,956 shares of such stock at 1~

per share.

Effect of declining sales on earnings.-The prospectus filed in

January 1954 with the registration statement of a company engaged

in a highly competitive line of manufacture contained somewhat

broad generalizations under "Recent Developments" indicating that

the volume of sales and level of earnings had fallen off. After the

staff elicited from representatives of the company details concerning

the extent and effect of this downward trend, the prospectus was

amended to include the specific statement that "Sales for the month

of December 1953 approximated 62% of average monthly sales for

the SL." months ended August 31, 1953, earnings for the quarter ended

November 30, 1953 approximated 52% of average quarterly earnings

for the six months ended August 31, 1953, and sales backlog at January 31, 1954approximated 62% of such backlog at August 31, 1953."

Estimates of mineral reserves and profit margin.-The prospectus accompanying a registration statement filed by a company proposing to erect a sulphur mining plant stated that only 25.8 acres of the

308 acres held by the company had been explored and was accompanied by an engineering report which estimated that the 25.8 acres

contained 1,027,283 long tons of recoverable sulphur. As to the

remaining acreage, the officers were said to "hope and believe" that

substantial deposits of sulphur underlay most of the tract. It was

added "With domestic prices at around $30.00 per ton and world

prices ranging from $75 upward, and it is hoped production costs will

be around $5.00 per ton, the Corporation believes it can make a good

showing profit-wise." After inquiries by the Commission's staff con-
TWENTIETH ANNUAL REPORT 15

cerning, among other things, the justification for the engineer's

estimate of sulphur in the light of the procedures he employed, the

prospectus was amended to disclose that the accomplished drilling

indicated there were 115,000 tons of sulphur in the explored part of

the acreage; that at that stage the company could not say there was

more than 115,000 tons; and that the plant then under construction

could not be financially successful if no more than 115,000 tons of

sulphur were found. The amended prospectus omitted the estimate

of sulphur mining costs and included a statement that the sulphur

concentration was such as to make it likely that operating costs

would be high. It also disclosed that, whereas the 600,000 shares

to be offered for public sale were priced at $1.00 per share, a total

of 2,651,250 shares had been acquired by the promoters "at no substantial cost to themselves other than time and effort spent."

Reflection in financial statements of rate refund by utility

company.-In 1952, a regulatory agency issued an order permitting

a utility company registering securities under the Securities Act

to put into effect increased rates, but requiring it to refund any

portion of such increase ultimately found not justified by that agency.

In a further order issued in 1954, establishing rates to become effective

during 1954, that agency stated that it would appear that the refund

which would have to be made would be in the neighborhood of

$32,000,000,subject to reduction for adjustment of purchase contracts

and income taxes. These facts were disclosed in the registration

statement as orginally filed but the accompanying financial sta tements

reflected no provision for the net effect of the refund. As a result of

the staff's letter of comment and subsequent conference with representatives of the registrant, the financial statements were amended

to reduce the net income in excessof 20 per cent for the two years and

the interim period affected, being the amounts of the estimated net

refund, and to include the sum of these amounts as a liability in the

balance sheet.

Impact of seasonal business on earnings.-Effective and fair disclosure of results of operations for interim periods is often troublesome, particularly when a company's operations are subject to marked

seasonal variation. An aggravated instance of this situation was

found in the case of a registrant which has shown a very rapid expansion during the last five years.

The financial statements of this company as initially filed revealed

that the net profit for the first five months of the current fiscal year

amounted to approximately $1,500,000, and indicated that, owing to

the seasonal nature of the business, earnings for the first five months

of a fiscal year had historically been materially greater than for the

balance of the year. The extent of the past seasonal variation could

326394-55-3 ~ _ ~_____ _
16 SECURITIES AND EXCHANGE COMMISSION

not be determined from the financial data furnished. Therefore, a

danger existed that the five months' earnings of $1,500,000 could be

misinterpreted as indicating an annual rate grossly in excess of the

amount which reasonably could be anticipated. In order to avoid

this danger, the registrant was required to furnish the results of

operations for the same period of the previous fiscal year for comparison

with the :firstfive months of the current fiscal year. When the comparison was furnished, it was observed that the net profit for the:first

five months of the previous fiscal year was approximately equal to

the net profit for the entire fiscal year. The registrant was thereupon

requested also to add a statement in respect of the net profit reported

for the :first five months of the current fiscal year indicating that

substantially all earnings for the entire fiscal year had historically

been made during the :firstfive months.

EXEMPTION FROM REGISTRATION UNDER THE ACT

The Commission is authorized under Section 3 (b) of the Act to

adopt rules providing exemption from the registration requirements

for public offerings of securities not exceeding a maximum of $300,000.

Among the six types of exemption provided by the Commission under

this authority, the three most commonly used are: Regulation A, the

general exemption for issues up to $300,000 for issuers; Regulation B,

the exemption for fractional undivided interests in oil or gas rights up

to $100,000 j and Regulation D, the exemption for Canadian securities

with the same dollar limitations as Regulation A.

Exemption from registration under Section 3 (b) of the Act does

not carry exemption from the civil liabilities for material misstatements or omissions imposed by Section 12 (2) or from the criminal

liabilities for fraud imposed by Section 17.

Exempt Offerings under Regulation A

New procedure.-Regulation A was revised in March 1953 so as

to make it mandatory to use an offering circular containing specified

information which includes financial statements. In order to assure

uniformity in the standards required of offering circulars filed under

this new Regulation, the headquarters staff participated with the

regional officesin the processing of material filed pursuant to the Regulation. Beginning in the latter part of the fiscal year, the Commission

instituted a program of transferring to the regional offices responsibility for the examination and processing of Regulation A cases.

Denial or suspension of exemption.-While Regulation A provides for the denial or suspension of the exemption in appropriate

cases, the Commission has exercised its power to issue orders thereunder sparingly because it believes it is preferable to resolve disclosure

problems in conferences with issuers and underwriters wherever pos-
TWE1>.""rIETH ANNUAL REPORT 17

sible. The four companies subjected to such formal action up to the

dose of the 1954 fiscal year were:

Dakota-Montana Oil Leaseholds, Inc.; suspension, Securities Act

Release No. 3477 (1953); suspension order vacated, Securities Act

Release No. 3481 (1953).

Pioneer Enterprises, Inc.; denial, Securities Act Release No. 3486

(1953).

Apartment Owners, Inc.; suspension, Securities Act Releases Kos.

3496 and 3498 (1954); denial, Securities Act Release No. 3507 (1954).

Utah-Wyoming Atomic Corporation; suspension, Securities Act

Releases Nos. 3505 and 3508 (1954).

Volume of filings.-During the 1954 fiscal year 1,175 notifications

were filed under Regulation A covering proposed offerings of $187,-

153,226, compared with 1,528 notifications covering proposed offerings of $223,350,026, in the 1953 fiscal year. Included in the 1954

totals are 142 notifications covering stock offerings of $24,747,941

'with respect to companies engaged in the oil and gas business, and

172 filings covering offerings of $29,903,097 with respect to mining

companies. In addition, 2,382 items of sales literature, excluding

initial offering circulars, were filed.

Certain particulars regarding these offerings are set forth in the

following table.

Ojfenngs made under Regulation A in 1954 fiscal year

Desenpnon

SiZe:

g~~ig~i~~i~;:~ ~:~===== =: . . =:::

Number

503

213

459

1,175

Underwriting: Employed 501

Not used .__ 674

{)1ferors: 1,175 Issuing companies .• . . ._ 1,079 Stockholders . . _. . .____ 92

Issuers and stockholders jointly . .___ 4

1,175

Most of the underwritings were undertaken by commercial under-

.writers who participated in 419 offerings while officers, directors or

other persons not regularly engaged in the securities business handled

the remaining 82 cases.

Exempt Offerings under Regulation B

During the 1954 fiscal year, the Commission received 156 offering

sheets filed under Regulation B. These filings in connection with

-exempt offerings of oil and gas securities were examined by the

=============== ===== === == ==== ====== ==

• • • ______ ___ ____________________________ __

• _ __ _

' _ • • _______ __ _

• __• • • •• •
18 SECURITIES AND EXCHANGE COMMISSION

specialized Oil and Gas Unit which collaborates with the Commission

staff generally in the solution of the technical and complex problems

peculiar to oil and gas securities which arise under various of the

Acts and regulations administered by the Commission.

Action taken on fiiinqe under Regulation B

Temporary suspension orders-Rule 340 (a) _ _ _ __ _ 9

Orders termmating proceedmgs after amendment________________________ 3

Orders consenting to withdrawal of offering sheet and terminating proceedings__________________________________________________________ 3

Order terminating effectiveness of offering sheeL________________________ 1

Orders accepting amendment of offering sheet (no proceeding pending)____ 72

Orders consenting to withdrawal of offering sheet (no proceeding pending)__ 2

Total number of orders ------________________ 90

Confidential reports of sales.-As an aid in determining whether

violations of law have occurred in the marketing of securities exempt

under Regulation B, the Commission obtains confidential reports of

actual sales made pursuant to such exemption. During the 1954

fiscal year, 1,699 such reports covering aggregate sales of $770,042

were filed.

Exempt Offerings under Regulation D

By the adoption of Regulation D on March 6, 1953, as a companion to the revised Regulation A, the Commission provided for

the first time an exemption from the registration requirements of

the Act for' public offerings of securities, not exceeding $300,000 in

anyone year, made by Canadian issuers or by domestic issuers

having their principal business operations in Canada. To obtain

the exemption, an offeror must file 'with the Commission a notification, and in all cases an offering circular, containing pertinent information regarding the issuer and the security proposed to be sold in

the United States. This information must include finanical

statements .

.During the 1954 fiscal year 46 notifications were filed under Regulation D covering aggregate offerings of $11,334,350. They represented 42 issuers proposing to explore for uranium or other minerals,

three to engage in the oil and gas business, and one in lumbering.

After the close of the 1954fiscal year, the Commission on August 16,

19.54 issued its first order pursuant to Regulation D suspending

exemption with respect to a public offering.of securities of Northwest

Uranium Corporation. 1 The reasons assigned by the Commission

for the suspension included reasonable catise to believe that the use

of the company's offering circular would and did operate as a fraud

_____ and deceit upon the purchasers of said securities, I

1 Securities Act release No. 3511 (August 16, 1954).
TWENTIETH A1\TNUALREPORT

LITIGATION UNDER THE SECURITIES ACT

19

Injunctive Actions

Injunctions are sometimes sought to restrain continued violation of

the Securities Act when it appears that damage to the public is

threatened.

The cases during the fiscal year 1954 were of a varied nature. In

S. E. O. v. Ohemi-Oote Perlite Oorporation and Otto T. Ball.' the

'Commission's complaint charged that the defendants had sold per-

-sonally owned stock of the defendant Ball in Chemi-Cote Perlite

Corporation without registration, and that the defendants represented

that the corporation was in excellent financial condition with assets

in excess of $23,000,000 when, in fact, the company had a deficit of

$185,000 and assets not exceeding $100,000; that the company's

perlite mining claims were worth $4,500,000 when, in fact, there was

no reasonable basis for any such valuation; that the proceeds from

the sale of such securities being sold at $10 per share would be used

by Chemi-Cote Perlite Corporation for the purpose of financing its

operation when, in fact, in some instances one-half of the proceeds

from the sale of such stock was being paid to salesmen as commissions,

and the stock being offered was the personally owned stock of the

defendant Otto T. Ball. The defendants consented to a final judgment enjoining them from further violation of the registration and

anti-fraud provisions of the Securities Act.

S. E. O. v. Professional Life Insurance Oompany, J. Olifton Butler

Agencies and J. Olinton Butler 3 was an action to enjoin the defendants

from violating the registration and anti-fraud provisions of the

Securities Act. The complaint alleged that the defendants had purchased an office building for the defendant, Professional Life Insurance Company, for $465,000, and within a few days thereafter

arranged to have such building appraised at $650,000, an appreciation

of $185,000 over cost, and a short time thereafter issued a dividend

of stock of the company to J. Clinton Butler based upon the claimed

appreciation in value of the building. The shares received by the

defendant Butler as a stock dividend were later sold by him without

disclosing to purchasers that such shares were owned by him personally and that the proceeds would be retained by him and not

placed in the treasury of Professional Life Insurance Company. It

was also alleged that the defendants omitted to state to purchasers

that Professional Life Insurance Company was operating at a loss

and had no surplus or realized profits at the time the shares were

sold. A stipulation was entered into between the Commission and

the defendants whereby it was agreed that the defendants, J. Clinton

2 N. D. Texas, No. 2620.

3 X. D. Te"as. No. 2640.
20 SECURITIES AND EXCHANGE COMMISSION

Butler and J. Clinton Butler Agencies, a registered broker-dealer,

would consent to the entry of a permanent injunction and that J.

Clinton Butler would completely disassociate himself from the management and control of Professional Life Insurance Company. When

the Commission was satisfied that the terms of the stipulation had

been complied with, it moved for the dismissal of the action against

Professional Life Insurance Company. The injunction against J.

Clinton Butler and J. Clinton Butler Agencies continued in effect.

The broker-dealer registration of J. Clinton Butler Agencies was

withdrawn.

A judgment was entered in an action, S. E. O. v. Glen F. McBurney 4

in which the Commission's complaint filed in the previous year,

alleged that the defendant in the sale of units of interest in oil and

gas rights in a leasehold interest had violated the registration and the

anti-fraud provisions of the Securities Act. Although the defendant

filed an answer to the fraud count, he later consented to the entry of

judgment on both counts.

In S. E. O. v, Kaye, Real & 00., Inc., John A. Kaye and Stanwood

Oil Oorporation." the complaint alleged that defendant John A. Kaye

has been controlling stockholder of Kaye, Real & Co., Inc., a broker

and dealer in securities, and of Stanwood Oil Corporation, and that

the defendants had been selling stock of Stanwood Oil Corporation

without registration and had been employing a fraudulent scheme

involving acquisition of control of the management and operations of

Stanwood Oil Corporation by defendants John A. Kaye and Kaye,

Real & Co., Inc., to whom approximately 1,000,000 shares out of a

total of 1,472,519 shares outstanding had been issued; that the

defendants thereupon disseminated numerous false statements concerning the increased value of Stanwood stock by reason of the acquisition by said corporation of various other companies and business

enterprises,"

Other actions taken by the Commission during the fiscal year resulted in injunctions of violations of the registration provisions of the

Securities Act include: S. E. C. v. Dominaire Constructions, Inc. and

V. L. Arnold,7 involving an offering of securities to develop mortarless

interlocking concrete blocks; S. E. O. v. Lever Motors Corporation,S

involving an offering of securities for the development of a lever-type

motor, and S. E. C. v, H. H. Tucker.' involving an offering of personal

notes, evidences of indebtedness, investment contracts and profitsharing agreements.

'N. D. Texas, No. 2640.

S. D. N. Y., No. 00-100 .

A permanent mjunction was entered after the close of the fiscal year.

7 W. D. WashIngton, No. 3558.

'N. D. Illinois, No. 53-0-1954

N. D. Texas, No. 2607.

•

•

•

•
TWENTIETH ANNUAL REPORT 21

Participation as Amicus Curiae

In Wilko v, Swan,10 in a decision reversing the Court of Appeals

for the Second Circuit," the Supreme Court sustained the position

urged by the Commission as amicus curiae that a customer cannot be

deprived by a securities firm of the court remedy afforded him by

Section 12 (2) of the Securities Act for alleged misrepresentations in

the sale of securities through a pre-transaction stipulation for arbitration of future disputes. In an opinion delivered by Mr. Justice

Reed, the Court held that the pre-transaction agreement contravened

the anti-waiver provisions of Section 14 of the Act, and conflicted

with the remedial purposes of the legislation.

The Commission also participated as amicus curiae in Bentsen v.

Blackwell, in which the Supreme Court granted a writ of certiorari 1Z

and subsequently dismissed the writ after the oral argument had "developed the undesirability of deciding the questions in this case on

the pleadings" .13 Petitioner had sought certiorari solely on the question whether the civil recovery provisions of Section 12 (2) of the

Securities Act require that the mails or instruments of interstate

commerce be used to transmit the particular misrepresentations complained of, or whether, as the Court of Appeals for the Fifth Circuit

had ruled 14 and as the Commission had urged, it sufficed that the

mails were used elsewhere in the sale transaction-in this case allegedly

to deliver the documents essential to the investment contracts sold.

"346 u. S. 427 (1953).

11201 F. 2d 4;l9 (1953), previously discussed in 19th Annual Report, p. 17.

II 346 U. S.908 (1953).

11347 U. S. 925 (1954).

Ii 203 F. 2d 690 (1953), prevlously discussed in 19th Annual Report, p. 16.
PART III

AD:\I1NISTRATION OF THE SECURITIES EXCHANGE ACT

OF 1934

The Securities Exchange Act of 1934 is designed to insure the maintenance of fair and honest markets in securities transactions on the

organized exchanges and in the over-the-counter markets. Accordingly, the Act provides for the regulation of such transactions and of

matters related thereto. It requires that information as to the condition of corporations whose securities are listed on a national securities

exchange shall be made available to the public and provides for the

registration of such securities, such exchanges, brokers and dealers

in securities, and associations of brokers and dealers. It also regulates

the use of credit in securities trading. While the authority to issue

rules regarding such credit is lodged in the Board of Governors of the

Federal Reserve System, the administration of these rules and of the

other provisions of the Act is vested in the Commission.

REGl:LATION OF EXCHANGES AND EXCHANGE TRADING

Registration and Exemption of Exchanges

At the close of the 1954 fiscal year the following 15 exchanges were

registered as national securities exchanges:

American Stock Exchange New York Stock Exchange

Boston Stock Exchange Philadelphia-Baltimore Stock ExChicago Board of Trade change

Cincinnati Stock Exchange Pittsburgh Stock Exchange

Detroit Stock Exchange Salt Lake Stock Exchange

Los Angeles Stock Exchange San Francisco Mining Exchange

Midwest Stock Exchange San Francisco Stock Exchange

Xew Orleans Stock Exchange Spokane Stock Exchange

Four exchanges were exempted from registration at the close of

the fiscal year:

Colorado Springs Stock Exchange

Honolulu Stock Exchange

Richmond Stock Exchange

Wheeling Stock Exchange

During the year the Washington Stock Exchange was merged into

and absorbed by the Philadelphia-Baltimore Stock Exchange under

an arrangement which provided for the creation of a Washington

Stock Exchange Branch of the Philadelphia-Baltimore Stock Exchange.

Trading commenced on the new branch at the opening of business on

October 15, 1953, and on December 31, 1953, the Washington Stock

22
TWENTIETH ANNUAL REPORT 23

Exchange was permitted to withdraw its registration as a national

securities exchange.

Information pertinent to the organization, rules of procedure,

trading practices, membership requirements and related matters of

each exchange is contained in its registration or exemption statement,

and any changes in such information are required to be reported

promptly by the exchanges. During the year, the exchanges reported

numerous changes, including the following:

The New York and American stock exchanges rescinded rules which

had placed limitations on purchases made by certain members on the

floors of these exchanges for accounts in which they had an interest.

The New York, American, Midwest, Los Angeles and San Francisco

stock exchanges rescinded rules, commonly referred to as the "Daylight Margin Rules", which had required exchange members to deposit at the close of each trading day an amount which would represent sufficient margin, under the terms of the Federal Reserve Board's

regulation T, for the maximum position taken by the member during

the trading day. The rescission of these rules had the effect of placing

exchange members in the same position as the general public with

respect to the initial margining of transactions and the withdrawal of

proceeds of sales.

The New York and American stock exchanges rescinded rules

which, with certain exceptions, had prohibited partners of member

firms or voting stockholders of member corporations from having

margin accounts (except at a bank) if their firm or corporation carried

margin accounts for customers, and which had prohibited member

firms and member corporations carrying margin accounts for customers

from making transactions in securities if the market value of securities

carried in proprietary accounts was equal to or greater than their net

capital.

The Boston Stock Exchange amended its rules relating to the registration: of corporations as member corporations of the exchange by

rescinding the provisions that prohibited member corporations from

carrying margin accounts and required member corporations to segregate customers' free-credit balances in special bank accounts with

restrictions on withdrawals from such accounts. This action was

designed to bring its rules pertaining to member corporations into

conformity with rules of various other exchanges.

The Pittsburgh Stock Exchange amended its rules to permit corporations engaged in the securities business to become members of the

exchange.

The Salt Lake Stock Exchange completed the revision of its rules

which,together with the new constitution it had adopted in the preceding year, were designed, among other things, to strengthen the financial
24 SECURITIES AND EXCHANGE COMMISSION

responsibility of its members and to improve inspection and audit

requirements.

The New York, American, Boston and San Francisco stock exchanges revised the minimum net capital requirements for members,

member firms and member corporations by providing, among other

things, that aggregate indebtedness may not exceed 2000% of net

capital. The previous limit had been 1500%.

The Midwest Stock Exchange changed the minimum net capital

requirement of member corporations from 10% to 6%% of aggregate

indebtedness, so that aggregate indebtedness may not exceed 1500%

of net capital as compared with the previous 1000% limit. The

Philadelphia-Baltimore Stock Exchange provided that aggregate indebtedness of member corporations may not exceed 2000% of net

capital as compared with the previous 1000% limit. These changes

established uniformity in capital requirements between corporate and

other members of these two exchanges.

The New York, Boston, Detroit, Los Angeles, Midwest, Philadelphia-Baltimore, Pittsburgh and San Francisco stock exchanges

adopted new schedules of increased commission rates. The new rates

are substantially identical on these exchanges. They contain an innovation which provides for a discount from the regular commission

where a purchase and sale, or sale and purchase, of a single security

for one account is completed within 30 calendar days.

The Cincinnati Stock Exchange, effective May 3, 1954, adopted a

new schedule of increased commission rates applicable to stocks

traded solely on that exchange.

The Honolulu Stock Exchange adopted a revised Constitution and

Rules for the purpose of clarifying and strengthening the provisions

thereof. The revision included a new schedule of increased commission rates.

Disciplinary Action by Exchanges

Each national securities exchange reports to the Commission any

action of a disciplinary nature taken by it against any of its members,

or against any partner or employee of a member, for violation of the

Securities Exchange Act or any rule thereunder or of any exchange

rule. During the year, 5 exchanges reported 40 cases of disciplinary

action against members, member firms and partners of member firms.

The actions reported included fines ranging from $100 to $5,000 in

17 cases, with total fines aggregating $9,807.50, expulsion of 1 individual and suspension of another from exchange membership, revo-
TWENTIETH ANNUAL REPORT 25

cation of the registration of 1 member as a specialist, and censure of

individuals and firms for infractions of exchange rules. The rules

violated included those pertaining to specialists, floor traders, short

sales, capital requirements and the filing of financial statements.

REGISTRATION OF SECURITIES ON EXCHANGES

Unless a security is registered under the Act (or is exempt therefrom), it is unlawful to effect any transaction in the security on any

national securities exchange. Pursuant to Section 12 an issuer may

register a class of securities on an exchange by filing with the Commission and the exchange an application which discloses pertinent

information concerning the issuer and its affairs. Each such issuer

is required by Section 13 to file periodic reports keeping that information current. These applications and reports furnish details about

the issuer's capital structure, the terms of its securities, information

about the persons who direct, manage, or control its affairs, remuneration paid its officers and directors, allotment of options and bonus

and profit-sharing arrangements; and financial statements certified

by independent accountants.

Applications for registration of securities and periodic reports filed

under this Act are examined by the staff of the Division of Corporation Finance to determine that the fair and adequate disclosure

required by the statute appears to have been made.

The Commission has greatly simplified the registration process by

the adoption of new Rule X-12D1-1, under which the old procedure

of registration by separate successive applications, each covering

a specified number of shares or a certain principal amount of bonds

of a given class of security, was changed to a new method providing

for the registration by a single application covering an entire class

of security, regardless of the amount already issued or which may

subsequently be issued.

Statistics of Securities Registered on Exchanges

At the close of the 1954 fiscal year, 2,204 issuers had 2,641 stock

issues and 1,009 bond issues registered on national securities exchanges.

During the year, securities of 37 new issuers became registered on

exchanges while the registration of all securities of 43 issuers was

terminated.

The following table shows for the fiscal year the number of applications filed under Section 12 and of reports filed under Section 13

and, pursuant to undertakings contained in registration statements

filed under the Securities Act to supply information equivalent to
26 SECURITIES A.."W EXCHANGE COMl\llSSION

that supplied with respect to securities registered on an exchange,

under Section 15(d) of the Securities Exchange Act:

Application for registration of classes of securities on exchanges; _________ 160

Annualreports 2,884

Current reports 4, 413

Information concerning the number of securities traded on each

stock exchange is shown in the appendix.

Suspension of Trading

The Commission is authorized by the Act, after notice and opportunity for hearing, to suspend for a period not exceeding 12 months

or withdraw the registration of a security on an exchange if the issuer

fails to comply with any provision of the Act or the rules and regulations; and it may summarily suspend trading in such a security for

a period not exceeding 10 days if the public interest so requires.

The Commission summarily prohibited trading in the common

stock of Adolph Gobel, Inc. on the American Stock Exchange by

ordering successive 10-day suspensions from March 13, 1953 to

February 19, 1954. It had received advice from Gobel's accountants

that, on the basis of information they had discovered after their

audit, certified financial statements included in Gobel's annual report

for 1952understated the reported loss of $437,070.57by approximately

$213,000. The Commission also commenced a proceeding to determine whether to suspend or withdraw exchange registration of this

stock, and conducted hearings on this question. New accountants

retained by Gobel found the amount of loss in question to be $582,-

021.89. Meanwhile certain creditors filed a petition for reorganization

of Gobel under Chapter X of the Bankruptcy Act.

The Commission on February 18, 1954 ordered its proceedings

terminated and published its findings and opinion stating it was

satisfied that, since the disclosures made were substantially correct,

there was no further need to deny stockholders access to the exchange

market. The Commission pointed out that the report of the new

accountants, explored in the record of the proceeding, took into account the allegations of the former accountants, analyzed the transactions which required different accounting treatment on Gobel's

books, and contained a detailed reconciliation between the loss

reported in the statement certified by the former accountant and

reported by the new accountants. In addition, the Commissio-i

noted that the affairs of Gobel had come under the direction of a

trustee, subject to court supervis'on.
TWENTIETH AJ\TNUALREPORT 27

MARKET VALUE AND VOLUME OF SECURITIES TRADED ON

EXCHANGES

The unduplicated total market value on December 31, 1953, of all

stocks and bonds admitted to trading on one or more of the 19 stock

exchanges in the United States was $236,097,628,000.

1, 530

808

702

Stocks:

New York Stock Exchange

American Stock Exchange

All other exchanges

Number of

Issues Market value Dec. 31,1953

$117,257,208,000

15,298,342,000

2,788,227,000

Total

Bonds:

New York Stock Exchange

Anlerican Stock Exchange

All other exchanges

Total

Total stocks and bonds

3,040

984

84

32

1,100

4,140

135,343,777,000

99,827,875,000

793,051,000

132,925,000

100,753,851,000

236,097,628,000

The N ew York Stock Exchange and American Stock Exchange

figures are as reported by those exchanges. There is no duplication

of issues between those two exchanges. However, over half the issues

of stocks listed on the New York Stock Exchange, comprising about

85% of the number of shares so listed, were also admitted to trading

on from one to nine regional exchanges, and about 30% of the issues

of stocks and number of shares on the American Stock Exchange were

also admitted to trading on from one to six regional exchanges.

The amounts shown for "all other exchanges" in the above table

were based on the number of shares outstanding exclusive of treasury

shares, instead of on the number of registered shares as in previous

years, producing slightly smaller aggregates in consequence.

The bonds on the New York Stock Exchange included United

States Government and New York State and City issues with an

aggregate market value of $78,109,634,000.

:Market Value of Stocks on Exchanges

The $135.3 billion aggregate market value of all stocks available

for trading on the exchanges at the close of 1953 compared with

$140.5 billion at the close of 1952. On the New York Stock Exchange,

aggregate stock values increased from $117.3 billion on December 31,

1953 to $139.2 billion on June 30, 1954. Reports as of the latter date

are not available for the other exchanges.

_

_

_

_

_

_

_

_

_
28 SECURITIES AND EXCHANGE COMMISSION

Comparative Number of Stock Issues on Exchanges

Net number of stock issues on excnange8

New Ameri- Exclu- New Ameri- ExeluYork can srvely Total York can srvely Total

June 30 Stock Stock on on June 30 Stock Stock on on Ex- Ex- other exchanges Ex- Ex- other exchanges ex- ex- change change changes change change changes

-- --- --- I --- --- --- --- 194L 1,240 1,045 1,153 I 3,438 1948 1,425 819 818 3,062 1942____ 1,254 1,003 1,113 , 3,370 1949_____ 1,462 804 786 3,052 1943____ 1,250 968 1,063 3,281 1950_____ 1,484 779 775 3,038 1944____ 1,270 928 981 3,179 195L ____ 1,495 765 772 3,032 1945____ 1,293 :gl 951 3,139 1952_____ 1,528 783 751 3,062 1946____ 1,351 895 3,106 1953_____ 1,539 807 731 3,077 1947____ 1,377 836 870 3,083 1954_____ 1,546 811 700 3,057

X ew listings of stocks exclusively on the regional exchanges are not

sufficiently numerous to offset the reduction in number of their

exclusive listings which goes on continually because of retirements,

mergers, loss of exclusive status by listing on aNew York stock

exchange, and other reasons. Only 7 regional exchanges obtained any

exclusive stock listings during 1953, such listings consisting of 4 preferred and 5 common issues. Preferred stock listings are frequently

made for other purposes than trading, a usual purpose being compliance with statutes with respect to legality for trust investment.

The 5 new common stock issues listed had a year-end market value

aggregating only $5,300,000. The regional exchanges continue to

obtain substantial new listings of stocks which are also lisped on one

or the other of the New York stock exchanges. Their principal

acquisitions, however, are unlisted trading privileges in stocks listed

elsewhere, predominantly on the New York Stock Exchange. The

following shows the aggregate figures relating to stock admissions

during 1953 on 1 or more regional exchanges, with market values computed as of December 31, 1953:

Issues Shares Market value

New listings only on regional exchanges ___________________________ 9 8,525,758 $26, 500, 000 Simnltaneous New York and regional hstings _____________________ 19 18,888,012 352, 600, 000 New regional listings of stocks already listed m New York ________ 12 30,717,849 571, 900, 000 New York hsted stocks admitted to unlisted trading on regional exchanges _______________________________________________________ 70 380,874, 820 11, 106, 000, 000

110 439, 006, 439 12,057,000,000

Portion only on regional exchanges ________________________________ 9 8,525,758 $26, 500, 000 Portion also on New York Stock Exchange _______________________ 79 374, 587, 459 11,816,567,933 Portion also on American Stock Exchange ________________________ 22 65,893,222 213, 932, 067

110 439, 006, 439 12, 057, 000, 000

Comparative Volumes on Exchanges

Market value and volume of sales on all domestic stock exchanges

for the year 1953 and for the 6 months ending June 30, 1954, are

shown in appendix table 7. Comparable information for prior years

is shown in previous annual reports.

___ ' _____
TWENTIETH ANNUAL REPORT 29

Block Distributions Reported by Stock Exchanges

Rule X-10B-2, in substance, prohibits any person engaged in distributing a security from paying any other person for soliciting or

inducing a third person to buy the security on a national securities

exchange. An exemption from the prohibition of the rule is provided

for those cases where compensation is paid pursuant to the terms of

a plan, :filedby a national securities exchange and declared effective

by the Commission, authorizing the payment of such compensation

in connection with a distribution of securities.

Pursuant to the terms of this exemption, two types of plans have

been developed to permit distributions of large blocks of securities to

be made on a national securities exchange. The first of these, designated the "Special Offering Plan", was evolved in 1941 as a result of

numerous conferences between representatives of the Commission

and of various stock exchanges, and the Commission declared effective

a special offering plan for each of the following nine exchanges on the

date shown opposite each:

New York Stock Exchange Feb. 14, 1942

San Francisco Stock Exchange Apr. 17,1942

American Stock Exchange ~ay 15,1942

Philadelphia-Baltimore Stock Exchange Sept. 23,1943

Detroit Stock Exchange Nov. 18, 1943

Midwest Stock Exchange Mar. 27, 1944

Cincinnati Stock Exchange June 26,1944

Los Angeles Stock Exchange May 28, 1948

Boston Stock Exchange Sept. 15,1948

The second type of plan, designated the "Exchange Distribution

Plan", was initially declared effective for the New York Stock Exchange on August 21, 1953 for an experimental period ex...piring on

February 26, 1954 which expiration date was subsequently extended

to February 28, 1955. The American, Midwest, and San Francisco

stock exchanges each :filed plans similar to that of the New York

Stock Exchange and they were also declared effective for an experimental period expiring on February 28, 1955.

These two types of plans permit a block ofsecurities to be distributed

through the facilities of a national securities exchange when it has been

determined that the regular market on the floor of the exchange cannot

absorb the particular block within a reasonable time and at a reasonable price or prices. They contain antimanipulative controls and also

require participating members to make certain disclosures to persons

whose orders are solicited. The principal differences between the

provisions of the two plans is in the manner of determining the offering

price of the security and the charges to buyers on their purchases of

the security. In this regard, a special offering is made at a fixed price

consistent with the existing auction market price of the security while
30 SECURITIES AND EXCHANGE COMMISSION

an exchange distribution is made in the regular auction market on the

floor of the exchange.

Buyers of a security which is the subject of a special offering are not

charged any commission on their purchases and obtain the security at

the net price of the offering. On the other hand, buyers of a security

which is the subject of an exchange distribution on the New York

Stock Exchange, American Stock Exchange and San Francisco Stock

Exchange pay commissions in agency transactions and are charged

net prices in principal transactions. In exchange distributions on the

Midwest Stock Exchange, however, purchasers need not be charged

commissionsin agency transactions and may be charged the equivalent

of a commission in principal transactions.

In addition to these two methods of distributing large blocks of

securities on stock exchanges, a third method is commonly employed

to distribute blocks of securities listed on exchanges to the public

over the counter, commonly referred to as a "Secondary Distribution".

Such distributions take place when it has been determined that it

would not be possible or in the best interest of the various parties

involved to sell the shares on the exchange in the regular way or by

employing either the special offering or exchange distribution technique. The distributions generally take place after the close of

exchange trading. As in the case of special offerings, buyers obtain the

security from the dealer at the net price of the offering, which usually

is at or about the most recent price registered on the exchange. Itis

generally the practice of exchanges to require members to obtain the

approval of the exchange before participating in such secondary

distributions.

The following table shows the number and dollar volume of special

offerings and exchange distributions reported by the exchanges having

such plans in effect, as well as similar figures for secondary distributions which exchanges have approved for member participation and

reported to the Commission.

Total sales

TWELVE MONTHS ENDED DECEMBER 31, 195.3'

Number Shares m Value (thoumade orrginal offer Shares sands of

dollars)

Special offermas ___________ ------------------------ 17 470,587 380,680 10,486 Exchange distnbutions Secondary distnbunons ____________________________ ----7:110::533- 68 6.906,017 108,229

SIX MONTHS ENDED JUNE 30, 1954I

Special oftcnngs I Exchange drstnbutions ,

Secondary distnbunons 2~ 1 ~~:~~

38 2,355.378

63,

383 279,6901

2,406.262

1,946

7.641

77,763

I Details of these distrrbuttons appear m the Stattsttca! Bulletin published mouthly by the Commission, , The first exchange distrrbution was made January 6, 19M.

_____________________________ -------------- --------------

-- -- -- -- -- ------- _-- -- _ , _
TWENTIETH ANNUAL REPORT

UNLISTED TRADING PRIVILEGES ON EXCHANGES

31

Number of Issues Admitted to Unlisted Trading

Securities are said to be admitted to unlisted trading on a stock

exchange when the admission to trading is approved by the exchange

without application by or agreement with the issuer. Such admissions are governed by section 12(f) of the Securities Exchange Act

the respective clauses of which section are referred to in the following

text and tables.

In the tables, the "Clause 1" stocks are the residue of those admitted to unlisted trading prior to March 1, 1934,and they are shown

in two categories, those which are "unlisted only" and those which

are also listed and registered on a stock exchange other than that

where they are admitted to unlisted trading. The "Clause 2" stocks

are those admitted to unlisted trading pursuant to Commission grants

of applications by stock exchanges conditioned on existing listing and

registration on some other stock exchange. The "Clause 3" stocks

are those admitted to unlisted trading pursuant to Commission grants

of applications by stock exchanges conditioned upon the availability

of information substantially equivalent to that filed in the case of

listed issues. The following table, for comparative purposes, also

shows the number of listed stock issues on each stock exchange.

Number of stock issues available for trading June 30, 1954

Unlisted only' LISted and registered on

On a another evchaugs

Stock exchange listed

baSIS I

Clause 1 Clause 3 Clause 1 Clause 2 Clause3'

--- --- --- --- --- American 513 239 2 53 3 1 Boston 88 1 0 157 157 0 Chicago Board of Trade __________________ 8 3 0 2 0 0 Cmeinnatr., ______________________________ 53 0 0 0 85 0 Colorado Springs _________________________ 13 0 0 0 0 0 Detroit. __________________________________116 0 0 14 105 0 Honolulu _________________________________ 56 31 0 0 0 0 Los Angeles 180 1 0 39 155 0 Midwest. 407 0 0 0 94 0 New Orleans _____________________________ 3 9 0 4 2 0 New York I,M6 0 0 0 0 0 Philadelphia. Baltimore ___________________ 163 4 0 257 140 0 Pittsburgh _______________________________ M 0 0 16 59 0 Richmond ________________________________ 27 0 0 0 0 0 Salt Lake 94 3 0 0 0 1 San Francisco mtutug _____________________ 43 0 0 0 0 0 San FrancISCO stock _______________________ 209 36 0 65 82 0 Spokane

Wheeling 25 5 0 1 1 0 16 0 0 0 3 0

Total' --- --- --- --- 3,614 332 2 608 886 2

I Includes Issues registered, issues temporarily exempted from registration, and ISsues hsted on the 4

exemptedexch.mges None of these ISsues has any hsted status on any dornestio stock exchange, except that 9 of the 36 San FrancISCO Stock Exchange ISSUesare also listed on an exempted exchange. 3 These issues became hsted and registered on other exchanges subsequent to their admlssion to unlisted

trading pursuant to Clause 3011 the Amencan and Salt Lake exchanges.

, Duplication of issues among exchanges brings the figures to more than the actual number of ISSUes

involved,

326394-55-4

______•__________________________ ________•__________________________

______________________• _______ ________________________• _______

________________________• _______

'

_________________________•_______

__________________________•_______ _________________________• _______

______________________• _______ --- ---

•
32 SECURITIES AND EXCHANGE COMMISSION

Volume of Unlisted Trading in Stocks on Exchanges

The reported volume of shares traded on an unlisted basis on thestock exchanges during the calendar year 1953 included 20,968,165

in stocks admitted to unlisted trading only and 21,457,187 in stockslisted and registered on an exchange other than that where the unlisted trading occurred. These amounts were respectively 3.30% and

3.38% of the total share volume reported on all exchanges.

Unlisted share volume on exchanges in 1953

U nlisted only I Listed and registered on another

Stock exchange

exchange

Clause 1 Clause 3 Clause 1 Clause 2 Olause B

Amerrcan _________________________ 18,399,824 15,640 4,543,529 689,900 13,090 Boston 8,622 0 1,591,663 974, 945 0 Chicago Board of Tmde 0 0 0 0 0 CmcmnatL 0 0 0 260,980 0 Colorado Springs __________________________ 0 0 0 0 0 Detroit ___________________ 0 0 179,482 1,150,731 0 Honolulu 41,149 0 0 0 0 Los Angeles_. 2, 154 0 699,821 1,636,904 0 Midwest. ________________________________ 0 0 0 4,080,608 0 New Orleans 31,143 0 2,001 6,163 It New York Stock _________________________ . 0 0 0 0 0 Phtladelphia- Baltimore. . 17,337 0 2,015,492 1,055,034 0 Pittsburgh 0 0 187,996 2C4,216 0 Biehmond _______________________________. 0 0 0 0 0 Salt Lake _________________________________ 298 0 0 0 482 San FrancISCO Mmmg, ____________________ 0 0 0 0 0 San FrancISCO Stock 2,337,218 0 1,160,207 996,065 0 Spokane 114,780 0 1,400 20 0 Washington, D. C.' _______________________ 0 0 0 4,743 0 Wheeling __________________________________ 0 0 0 1,715 0

20,952,525 15,640 10,381,591 11,062,024 13,572

I Pnor to merger into Phlladelphra-Baltnnore Stock Exchange.

The volumes are as reported by the stock exchanges or other

reporting agencies, and are less than the actual amounts in some

cases, particularly with respect to American Stock Exchange figures,

which exclude odd lots and other items not reported on the stock

tickers. The figures are exclusive of volumes in short-term rights.

Applications for Unlisted Trading Privileges

Pursuant to applications filed by the exchanges under Clause 2 of

section 12 (f) and approved by the Commission during the fiscal year,

unlisted trading privileges were extended as follows:

Number

Stock exchange of ,tockB

Boston_______________________________________________________ 16

Clncinnati____________________________________________________ 16

I>ctroit_______________________________________________________ 9

Los Angeles . . .__ 14

Philadelphia-Baltimore _ 6

Pittsburgh____________________________________________________ 3

San Francisco__________________________________________ 5

69

•_______ __________• _________________________

_______________• ___ _____ • ________• ____________• ___

•________________ _________________• ________________

____________• ________________

• ______________________• _______

_____• _____• ______ ________________________• _______

•

__• ____________________ ______________• ____________________

•
TWENTIETH ANNUAL REPORT 33

Changes in Securities Admitted to Unlisted Trading Privileges

The usual considerable number of notifications of minor changes in

securities admitted to unlisted trading was received during the fiscal

year from the stock exchanges pursuant to paragraph (a) of rule

X-12F-2.

Applications for continuance of trading in unlisted issues after more

important changes than those contemplated under paragraph (a) of

rule X-12F-2 are made under paragraph (b) thereof. Three such

applications were filed during the fiscal year by the American Stock;

Exchange, of which 2 were granted and 1 withdrawn.

DELISTING OF SECURITIES FROM EXCHANGES

Securities Delisted by Application

During the fiscal year ending June 30,1954, the Commission granted

20 applications filed by exchanges or issuers to strike securities from

exchange listing and registration pursuant to section 12 (d) and rule

X-12D2-1. The applications included 11 by exchanges, covering 8

stock and 9 bond issues; and 9 by issuers, covering 8 stock issues, 1 of

which was removed from 2 exchanges. The applications by exchanges

were based on the undesirability, for various reasons, of further exchange trading. The applications by issuers were based on liquidation in one instance, reduced public holdings and limited trading volumes in two, and on the fact that the stock remained listed on another

exchange in the remaining instances.

Securities Dellsted by Notification

Notifications effecting the removal because of redemption or retirement of 115 issues from listing and registration on national securities

exchanges were received during the fiscal year. Removals from more

than one exchange brought the total removals to 136. The American

Stock Exchange removed 7 issues from listing and registration when

they became listed and registered on the New York Stock Exchange.

The exempted exchanges removed 3 issues from listed trading thereon.

MANIPULATION AND STABILIZATION

Manipulation

The Securities Exchange Act prohibits manipulative practices in the

securities markets. The Commission's analysts constantly watch for

unusual or unexplained market activity. They observe the tickers of

the leading exchanges and examine the quotation sheets of all exchanges.. The financial news-ticker, leading newspapers and various

financial publications and services are also closely followed. Overthe-counter surveillance is maintained by the examination of the bids

and offers appearing in the sheets of the national quotation services

and charts are kept on securities having actively quoted markets.
34 SECURITIES AND EXCHANGE COMMISSION

179 14

79 11

100 3

When unusual or unexplained market activity is observed, all known

information regarding the security is evaluated and a decision made as

to the necessity for an investigation. These investigations take two

forms. The "quiz" or "preliminary" investigation is designed rapidly

to discover evidence of unlawful activity. If a quiz discloses no evidence of violations it is closed. If violations are discovered, the information obtained in the quiz is made available to the proper division

of the Commission or to the appropriate outside agency for punitive

or corrective action. If the quiz indicates that more intensive investigation is necessary, a formal order may be issued by the Commission. Such an order empowers members of the staff to subpoena

pertinent material and to take testimony under oath. Virtually all

of the Commission's investigations are privately conducted so that

no unfair reflection will be cast on any persons or securities and the

trading markets will not be upset.

The following table shows the number of quizzes and formal investigations initiated in the fiscal year 1954 and the number closed or completed during the same period and tho number pending at the ending

of the fiscal year:

Trading inuestiqatume

I

Quizzes gatlons

------------------------1---

Pending June 30, 1953

Imtiated during fiscal year

Total to be accounted for ------

Closed Of completed during fiscal year

Cbanged to formal during fiscal year 110 4 3

113 4 Total disposed of.

Pending at end of fiscal year_________________________________________________________ 66 10

When securities are to be offered to the public their markets are

watched very closely to make sure that the price is not artificially

raised prior to the distribution. .All registered offerings and all

offerings made under Regulations A and D (in all some 1849 offerings

having a value exceeding $9,365,000,000)were so observed during the

fiscal year. Hundreds of other smaller offerings, such as secondary

distributions and distributions of securities under special plans filed

by the exchanges, were also checked and many were kept under

special observation for considerable lengths of time.

Stabilization

All stabilizing operations are very carefully observed. During the

fiscal year, stabilizing was effected in connection with stock offerings

aggregating 21,759,000 shares having an aggregate public offering

price of $403,086,000. Bond issues having a total offering price of

Il~~~

_

_

_

_

• _ _

• • _

==
TWENTIETH A.."il'.'1JALREPORT 35

$65,000,000 were also stabilized. To accomplish this stabilization,

220,257 shares of stock were purchased by the offerors at a cost of

$3,657,000. Bonds costing $442,500 were also bought by stabilizers.

In connection with these operations more than 7,000 stabilizing

reports were received and examined during the fiscal year.

During the fiscal year, the Commission engaged in the formulation

and release for public comment of rules relating to the stabilization of

securities under the Securities Exchange Act.' Three proposed rules

deal with (l) permissible underwriters' trading prior to and during a

distribution; (2) the times, methods and prices at which stabilizing

transactions are permissible; and (3) permissible stabilizing transactions in connection with the offering of rights to security holders

to subscribe for additional securities.

Following the Commission's Statement of Policy in 1940/ rather

than promulgate specific rules in connection with stabilizing practices,

the Commission had depended upon informal interpretations, some of

which were issued in the form of releases but most of which were

individually rendered by letter or telephone in answer to specific request. The Committee on Interstate and Foreign Commerce of the

House of Representatives recommended in a report, dated December

30, 1952, that "The Commission should earnestly and expeditiously

grapple with the problem of stabilization with the view either of the

early promulgation of rules publicly covering these operations, or of

recommending to the Congress such changes in legislation as its experience and study show now to be desirable." 3 The proposed rules

were circulated for public comment on May 18, 1954, after intensive

study by the staff and review by the Commission.

After the close of the fiscal year, a public hearing was held on July

8, 1954, and since that time an ad hoc committee of the public has

conferred with and submitted additional proposals to the staff. The

final recommendations of the staff with respect to the proposed rules

are expected to be submitted to the Commission in the near future.

SECURITY OWNERSHIP BY CORPORATION INSIDERS

Officers, directors and owners of more than 10% of a listed stock

are required by section 16(a) of the Securities Exchange Act to file

with the Commission and the exchange, initial reports disclosing their

direct and indirect beneficial ownership of each class of stock issued

by their company and additional reports disclosing subsequent changes

in such ownership. The Public Utility Holding Company Act and the

Investment Company Act contain similar requirements.

1 Securities Exchange Act release No 5040 (May 18, 1954).

2 Securities Exchange Act release No, 2446 (March 18, 1940).

3 House of Representatives, Report No 2508, 82d Congress, 2d session, page 3.
36 SECURITIES AND EXCHANGE CO:MMISSION

Deseripnon of report

All reports are available for public inspection. Inaddition, in order

to make the information filed pursuant to the regulation readily

available in usable form, it is condensed and published in the Commission's monthly "Official Summary of Security Transactions and

Holdings," which is distributed on a subscription basis by the Government Printing Office.

The steady growth over a number of years in the volume of insiders'

reports filed with the Commission, mentioned in last year's annual

report, continued during the 1954 fiscal year. Compared with the

14,765 reports filed during the 1944 fiscal year, the 23,199 reports

filed in 1954 reflect a 10-year increase in these annual :filingsapproximating 57%. The following tabulation shows details concerning the

reports filed during the 1954 fiscal year.

Number of ownership reports of officers, directors, principal security holders, and

certain other affiliated persons filed and examined during the fiscal year ended

June 30, 1954-

I

Original Amended Total

reports reports

--------------------i---------

seeunnes Exchange Act of 1934 1 Form 4

Form 5

Form 6

19,555

366

2,122

521

5

14

20,076

371

2,136

Total______________ 22,043 540 22,583

Pubhc UtilIty Holding Company Act of 1935: Form U-17-1 Form U-17-2

Total

Investment Company Act of 1940:' Form N--30F-1

Form N-30F-2

57

271

328

54

231

3

o

3

o

o

60

271

331

54

231

Total. 285 0 285

Grand totaL.______________________________________________________ 22, 656 543 23,199

I Form 4ls used to report changes in ownership; Form 5to report ownership at the time any equity security

Is first listed and registered on a national securities exchange; and Form 6 to report ownership of persons

who subsequently become officers, directors or principal stockholders of the issuer .

Form U-17-1 is used for initial reports and Form U-17-2 for reports of changes of ownership.

s Form N-30F-lls used for initial reports and Form N-30F-2 for reports of changes of ownership.

Recovery of Insiders' Profits by Company

For the purpose of preventing the unfair use of information which

may have been obtained by an insider by reason of his relationship

to his company, sections 16 (b) of the Securities Exchange Act, 17 (b)

of the Public Utility Holding Company Act, and 30 (f) of the Investment Company Act provide for the recovery by or on behalf of the

issuer of any profit realized by the insider from certain purchases and'

sales, or sales and purchases, of securities of the company within

any period of less than 6 months. The Commission is not charged

with the enforcement of the civil remedies created by these provisions,

which are matters for determination by the courts in actions brought

_

_ • _

• _

_

_

_

_

===

•
TWENTIETH ANNUAL REPORT 37

by the proper parties. However, the Commission has participated

as amicus curiae in a number of suits instituted under these provisions

where questions of statutory interpretation are involved.

REGULATION OF PROXIES

Scope of Proxy Regulation

Under sections 14 (a) of the Securities Exchange Act, 12 (e) of the

Public Utility Holding Company Act of 1935, and 20 (a) of the Investment Company Act of 1940 the Commission has adopted Regulation

X-14 requiring the disclosure of pertinent information in connection

with the solicitation of proxies, consents and authorizations in respect

of securities of companies subject to those statutes. The regulation

also provides means whereby any security holders so desiring may communicate with other security holders when management is soliciting

proxies, either by arranging for the independent distribution of their

own proxy statements or by including their proposals in the proxy

statements sent out by management.

Copies of proposed proxy material must be filed with the Commission in preliminary form at least 10 days prior to the date of the

proposed solicitation. Where preliminary material fails to meet the

prescribed disclosure standards, the management or other group

responsible for its preparation is notified informally and given an

opportunity to avoid such defects in the preparation of the proxy

material in the definitive form in which it may be furnished to all

stockholders.

Statistics Relating to Proxy Statements

During the calendar year 1953 1,860 solicitations were made pursuant to Regulation X-14. of which 1,838 were conducted by management and 22 by non-management groups.

The purpose for which proxies are most often sought is the voting

for nominees for directors. In 1953 this was an item of business in

1,715 stockholders' meetings, while at 119 meetings it was not involved. The remaining 26 solicitations sought consents or authorizations from stockholders with respect to proposals not involving any

meeting or any election of directors.

The 1,838 management solicitations were made in 1953 by 1,695

companies, the difference of 143 in these figures reflecting repeated

solicitations made in certain cases. Such repeated solicitations,

whether by management or opposition groups, arise especially in

connection with proxy contests.

During the first five months of 1954, twenty-five companies were

subject to proxy contests for control or for representation on the

board of directors compared to 18 such contests during the entire

.cal~ndar year 1953.
38 SECURITIES AND EXCHANGE COMMISSION

The nature and the frequency of corporate business other than

election of directors on which stockholders' decisions were sought in

the calendar year 1953 are shown below.

Number

of proxy

Nature of bU"'1ess other than electIOn of directors stoJemenu

Mergers, consolidations, acquisition of businesses, and purchases and sales

ofproperly_____________________________________________________ 66

Issuance of new securities, modification of existing securities, and recapitalization plans other than mergers and consolidations____________ 197

Employee pension plans; ____________ __ __ ____ __ _ 94

Employee stock purchase and stock option plans______________________ 98

Bonus and profit-sharing plans; __ __________ __ ___ __ __ ______ 31

Indemnification of officers and directors.. _ _______________ _____ __ 14

Approval of independent auditors____________________________________ 463

Amendments to by-laws, and other matters___________________________ 205

REGULATION OF BROKERS AND DEALERS IN OVER-THE-COUNTER

MARKETS

Registration

Section 15 (a) of the Securities Exchange Act requires the registration of brokers and dealers using the mails or instrumentalities of

interstate commerce to effect transactions in securities on the overthe-counter markets, except those brokers and dealers whose business

is exclusively intrastate or exclusively in exempt securities.

Set forth below are certain data with respect to registrations of

brokers and dealers and applications therefor during the fiscal year

1954:

Effective registrations at close of preceding fiscal year __________________ 4, 053

Applications pending at close of preceding year________________________ 57

Applications filed during year_______________________________________ 584

Total 4,694

Applications denied

Applications withdrawn __ . _

Applications cancelled

Registrations withdrawn

Registrations cancelled

Registration suspended pending determination of revocation proceedings __ Registrations revoked

Registrations effective at end of yearApplications pending at end of year

5

17

1

383

88

1

20

4, 132

47

Total 4,694

Simplification of Forms and Rules Applicable to the Registration of BrokerDealers

The Commission during the fiscal year substantially revised forms

and rules pertaining to the registration of brokers and dealers.'

Becurrnes Exchange Act release No. 5000(February 15, 1954).

_

_

_

_

_

_

_

•
TWENTIETH ANNUAL REPORT 39

This action was taken in connection with a comprehensive review of

rules, regulations, forms and procedures, to eliminate duplication and

to simplify the requirements wherever practicable without prejudice

to the public interest or to the protection of investors.

In adopting the new forms for registration as a broker-dealer and

in revising applicable rules, the Commission acted on the view that,

wherever possible, an application for registration should be limited

generally to information necessary to determine whether a registrant,

or an applicant for registration, or any controlled, or controlling

person, is subject to a statutory disqualification.

Form BD adopted during the year, applicable to brokers and dealers,

is an all-purpose form to be used: (1) as the form of application for

registration; (2) as the form to amend such an application; and (3)

as the form of supplemental report to be filed by a registered person.

The new four page Form BD contains only nine items or questions,

whereas Form 3-M previously used as an application for registration,

consisted of twelve pages and required furnishing information under

twenty-seven items. Adoption of Form BD made it possible to

rescind the single-purpose Forms 3-M, 4-M, 5-M and 6-~f formerly

used by broker-dealers. As a part of these actions the Commission,

in each instance, amended applicable rules under the controlling

statutes.

Both the previous and the current rules require that the information

contained in the application for registration of brokers or dealers be

kept current by amendments to the original application. By providing

that the new forms may be used as supplements to tlie old forms,

persons registered before adoption of the new forms are now required

only to furnish current information with respect to the information

in the abbreviated and simplified new forms. It is anticipated that,

after these initial supplements have been filed, there will be a substantial reduction in the volume of amendments required to be filed

with the Commission by registered broker-dealers.

Administrative Proceedings

The Commission is empowered, with due regard for the public

interest and the protection of investors, to deny or revoke the registration of brokers and dealers pursuant to section 15 (b) of the Act

and, pursuant to section 15A and 19 (a) of the Act, to suspend or expel

brokers and dealers from membership in a national securities association or national securities exchange, where misconduct of various

types on the part of the broker-dealer, or its partners, officers,directors

or employees is shown:
40 SECURITIES AND EXCHANGE COMMISSION

The following tabulations reflect the type and number of such

administrative proceedings instituted by the Commission during the1954 fiscal year and their disposition:

Administrative proceedings to deny and revoke registration, to BUllpendand ezpel

from membership in a national securities associaiion or exohanqe

Proceedings pending at start of fiscal year to:

Revoke registratdon., , ____ ___ ____ __________ _ 29

Revoke registration and suspend or expel from NASD 1 or exchangea.; , 12

Deny registration to applicant____________________________________ 0

Total proceedings pending; _ _ __ _ __ _____ ___ __ 41

Proceedings insitituted during fiscal year to:

Revoke registration., ____ ________ _ _____________ 12

Revoke registration and suspend or expel from NASD or exchanges.L; ; 5

Deny registration to applicants____________________________________ IS

Total proceedings Instituted , ____ _ ________ ___ 35-

Total proceedings current during fiscal year_______________________ 7&

Disposition of proceedings

Proceedings to revoke registration:

Dismissed on withdrawal of registration , _____ ______ _____ ____ 6

Dismissed on cancellation of registration____________________________ 5-

Dismissed-registration permitted to continue in effect_______________ &

Registration revoked.; , __ __ _ _ ____ 15-

Total________________________________________________________ 3Z ,

Proceedings to revoke registration and suspend or expel from NASD or exchanges:

Registration revoked and registrant expelled from NASD_____________ 2

Registration revoked and registrant expelled from N ASD and exchanges., 1

Registration revoked-no action taken on NASD membership_________ 2'

Dismissed-registration and membership permitted to continue in effeet., 2'

Suspended for a period of time from NASD_________________________ Z

Total________________________________________________________ 9.

Proceedings to deny registration to applicant:

Dismissed on withdrawal of application____________________________ 9-

Discontinued on cancellation of broker-dealer application_____________ 1

Registration denied; ____ __ _____ ____________ _____ _______ 5-

Total________________________________________________________ 15.

Total proceedings disposed oL__________________________________ 56.

I The National ASSOCiationof Securities Dealers, Inc. Is the onl~ national securities association registered!

with the Commission.
TWENTIETH ANNUAL REPORT 41

Disposition of proceedings-Continued

Proceedings pending at the end of fiscal year to:

Revoke registration_____ ______ ______ ________ _ 10

Revoke registration and suspend or expel from NASD or exohangea.c , , 7

Deny registration to applicants____________________________________ 3

Total proceedings pending at end of fiscal year____________________ 20

Total proceedings accounted for_________________________________ 76

.As shown in the above table, there were no proceedings on1 the

question of denial of registration pending at the beginning of the

fiscal year. However, 18 such proceedings were instituted during

the year of which 16 related to applications for registration filed by

Canadian brokers and dealers. The Commission orders for proceedings in the latter group charged, in effect, that the Canadian brokers

and dealers had sold and delivered to persons in the United States

stock of certain Canadian companies in violation of the securities

registration and anti-fraud provisions of the Securities Act of 1933

and the broker-dealer registration provisions of the Exchange Act.

During the pendency of these proceedings, 9 of the respondents

withdrew their applications for registration; one application was

cancelled because of the death of the respondent and one proceeding

is still pending. The Commission issued orders of denial in the

remaining 5 cases,"

Three administrative proceedings decided during the year involved,

among other things, the failure of a firm to comply with the net

capital requirements of the Commission. In one case the Commission

revoked registrant's registration 6 because its aggregate indebtedness

exceeded 2000 per centum of its net capital, and in another the Commission made similar findings with respect to violation of the net

capital rule and also found that registrant failed to keep its books

and records current and failed to disclose that the controlling interest

in the firm had been sold to an undisclosed person.' In the third

case violation of the net capital rule was also found but the Commission

noted that the firm had revised its practices and concluded that a

suspension from membership in the National Association of Securities

Dealers, Inc. for a period of 10 days was a sufficient sanction."

Some of the other proceedings disposed of during the year involved

violations of rule X-17A-5 in that the registrants in some instances

filed false and misleading financial statements with this Commission,

I Adelaide Securltiu, Ltd., Becurities Exchange Act release No. 5041; R. W. Brown, Ltd., secunties Ex.

change Act release :'<0. 5042;HarT1l RaU7nOnd CGT1I, dba H. R. COT1J Co., Seeurrtres Exchange Act release

No. 5043; Greenwood SecuritieS Corporation, Ltd., seounues Exchange AGtrelease No.liO«; '1ormont '1radlnl1

Corporation, Ltd., Securities Exchange Act release No. 5045.

I Miller'" Co., Securities Exchange Act release No. 4931.

, Kobbe Co., Inc., Securities Exchange Act release No. 4940.

Douglass'" Co., Secnrities Exchange Act release No. 5039.

'"

'"

•
42 SECURITIES AND EXCHA..''IWECOMMISSION

and in other instances failed to file statements of financial condition

as required by the rule. In other instances, permanent injunctions

restraining the registrants from engaging in and continuing unlawful

acts and practices in connection with the purchase and sale of securities

were the basis for the revocation orders.

Broker-Dealer Inspections

Section 17 (a) of the Securities Exchange Act empowers the Commission to make periodic, special, and other examinations of the books

and records of brokers and dealers. Under this section the Commission conducts an inspection program to determine whether brokers

and dealers are complying with the requirements of the Acts administered by the Commission.

During the fiscal year the Commission's Regional Officesreported

on 788 such inspections, 621 of which were inspections of members of

the NASD. As in former years, a substantial number of violations

of the rules and regulations were discovered, including non-compliance

with the capital rule, the hypothecation rule and Regulation T prescribed by the Board of Governors of the Federal Reserve System.

There were a very few instances where brokers and dealers were taking secret profits. There were a number of transactions in which the

reasonableness of the price charged to the customer in relation to the

current market price, or the concurrent cost, was questionable, and a

substantial number of miscellaneous infractions too scattered and

varied to classify.

The Commission does not necessarily take formal action against a

registered broker or dealer who appears from these inspections to

have violated the Acts. The character of the activity and the public

interest are considered in determining whether action is appropriate.

If the violations appear to be inadvertent or the result of misinformation, the Commission affords the broker-dealer an opportunity to

correct its practices if possible, or to satisfy the Commission that they

will not continue.

The extent of the broker-dealer inspection program depends primarily on the availability of funds. Many members of the investing

public have the erroneous impression that every registered brokerdealer firm is inspected regularly in a manner comparable to the

examinations made of banking institutions. This, of course, is not so,

and would be possible only with a substantial increase in personnel

and a corresponding increase in costs.

In addition to the .Commission, inspections of brokers and dealers

are made by the National Association of Securities Dealers, Inc.,

some of the national securities exchanges and some of the states.

These inspections vary widely in character, scope, and frequency.

There have been cases where several agencies have inspected a single
TWENTIETH AlIj'NUALREPORT 43

firm in a relatively short period of time, and others where a firm subject to inspection by several agencies has remained uninspected for

an extended period. This problem calls for coordination between

inspecting agencies designed to avoid multiplicity of inspections of

some firms and long-term omission of inspections of other firms.

A survey conducted by the SEC Liaison Committee of the National

Association of Securities Administrators, working in cooperation with

this Commission, indicated a lack of uniformity in inspection programs and differences in jurisdiction which make impracticable a

system whereby the findings of one inspecting agency would be available to other agencies. The results of this survey were discussed with

representatives of National Association of Securities Administrators,

various national securities exchanges and the 1\ational Association of

Securities Dealers, Inc.

This study culminated in adoption of a program for the interchange

of information as to dates of inspection between inspecting agencies.

However, under this program, the results of any inspections are confidential to the inspecting agency. This pooling of information as to

when and by whom inspections have recently been made permits the

scheduling of routine inspections so as to reduce haphazard duplications of inspections and omissions to inspect. The program applies

only to routine inspections, and no inspecting agency is in any way

restricted in its freedom to inspect or investigate for good cause, such

as on a customer's complaint or an indication of unsatisfactory financial condition. To evaluate the program would be impracticable at

this early date, but there are indications that it will effectively reduce

the number of uninspected and overinspected firms.

The active participants at the year-end included the Commission,

the National Association of Securities Dealers, Inc., the New York

Stock Exchange, the American Stock Exchange, the San Francisco

Stock Exchange, the Midwest Stock Exchange and practically every

state whose laws and procedures provide for an effective inspection

or examination program, including the states of California, Connecticut, Illinois, Michigan, Minnesota, Oklahoma, Oregon, Washington and Wisconsin. Itis anticipated that, as other exchanges and

states develop effective inspection programs, their participation in

this cooperative effort will become of increasing importance. In

addition to the states named above many others which conduct limited inspection programs have signified their cooperation to the extent

of their jurisdiction and inspection facilities.

Investigations

Investigations of brokers and dealers may result from the inspection program, complaints from members of the public or information
SECURITIES AND EXCHANGE COMMISSION

received from sources such as state securities commissions, securities

exchanges and associations and "better business bureaus." When

investigations are completed and the evidence has been analyzed, the

:staff, where appropriate, recommends to the Commission that it

institute injunctive action or institute proceedings to revoke registration or to suspend or expel from membership in the national securities

exchange or association to which the broker or dealer may belong, or

refer the matter to the Department of Justice for criminal prosecution.

The number of such investigations during the fiscal year were as

follows:

Pending July 1, 1953____ ___________ ____ _______ __ 185

Commenced duringyear________________________________ 75

Closed during year _ _ _ _ _ _______ __ _______ ___ 149

Pending July 1, 1954 -_________________________ 111

Financial Reports

The Commission's rule X-17A-5 requires brokers and dealers to

file financial reports each calendar year. During the 1954 fiscal year

3950 such reports were filed. Examination of the financial report

filed by a broker-dealer affords the staff an opportunity to determine

whether, as of the date of the report, the firm is in compliance with

the capital requirements prescribed by rule X-15C3-1, and if it is

not, the fum is given an opportunity, if consistent with the public

interest and the protection of investors, to bring its financial condition

up to the required standards. If the firm fails to do so promply, the

Commission takes appropriate action.

SUPERVISION OF ACTIVITIES OF NATIONAL ASSOCIATION OF

SECURITIES DEALERS, INC.

Membership

The National Association of Securities Dealers, Inc. continued as

the only national securities association registered with the Commission. The Association reported that during the fiscal year its

membership increased by 57 to a total of 3,091 at June 30, 1954, as a

result of 281 admissions to, and 224 terminations of membership.

The Association also reported that at June 30, 1954 there were registered with it as registered representatives 35,679 individuals, including generally all partners, officers, salesmen, traders and other

persons associated with, or employed by, member firms in capacities

which involve their doing business directly with the public. The

number of persons so registered increased by 2,091 during the year

as a result of 6,087 initial registrations, 2,250 re-registrations and

6,246 terminations of registration.

Disciplinary Actions

During the fiscal year the Commission received from the NASD

reports of final action in twenty-seven disciplinary proceedings in
TWENTIETH ANNUAL REPORT 45

which formal complaints alleging violations of specified provisions of

the Association's Rules of Fair Practice had been filed against members, eight of which involved members and the remaining nineteen

involved not only members, but also one or more registered representatives of such members.

In five of the proceedings members were expelled, in seven members

were fined and in six were censured, and in ten no disciplinary action

was taken against the members. With respect to registered representatives, the registrations of seven were revoked, four were suspended,

fines were imposed on four representatives and censure upon six, and

the complaint was dismissed in one case. In a few of the cases more

than one type of sanction was imposed with respect to the person

disciplined. The fines imposed ranged from $100 to $3,500 and the

suspensions from 14 days to one year. In some instances costs were

assessed.

<Commission Review of NASD Disciplinary Actions

Section 15A (g) of the Act provides that disciplinary actions by the

NASD are subject to review by the Commission on its own motion

,or on the application of any aggrieved person. Two such petitions,

described in earlier Annual Reports, were pending at the close of the

last fiscal year and during the year their status remained unchanged. 9

In addition, three other petitions were filed during the year. One of

these, filed on behalf of Gilbert Parker Investing, Inc. under this

section and in the alternative under section 15A(b) (4) described

below, concerned a decision by the NASD that Parker and his firm

were not eligible for membership because of a disqualification arising

from an earlier NASD disciplinary action. This petition was withdrawn prior to determination by the Commission.

Petitions for review were filed with the Commission with respect to

two decisions of the Board of Governors of the NASD expelling

members found to have violated designated rules in selling oil royalties

to customers at unfair prices and to have by such violations been

guilty of conduct inconsistent with just and equitable principles of

trade. Both these appeals were pending at the end of the fiscal

year.

Commission Review of Action on Membership

The Act in section 15A (b) (4) and the by-laws of the NASD provide

that, except where the Commission with due regard to the public

interest approves or directs to the contrary, no broker or dealer may be

, The pending cases concern petrtions filed by Earl L. Combest from" two-year suspension as registered

-representative and a fine of $2,500, and by OtIS & Co. from a two-year suspension from membersrnp. Subsequent to the close of the fiscal year the suspension of Combest was cancelled but the action imposing the tine

was affirmed. (Securities Exchange Act Release No. 5064, July 13,1954) and the petition of OtIS & Co. was

dlsmlSSCd moot, follOWIng the revocation by the N ASD of its suspension order (Securrtles Exchange Act

Release No 5110, November 4,1954.)

""
46 SECURITIES AND EXCHANGE COMMISSION

admitted to or continued in membership if he or any controlling or

controlled person is expelled or is currently under suspension from

such an association for violation of a rule prohibiting conduct inconsistent with just and equitable principles of trade, or is subject to an

order of the Commission denying or revoking his broker-dealer registration, or was a "cause" of any such order of expulsion, current

suspension or denial or revocation.

Pursuant to this authority the Commission approved applications

for the continuation in membership of three firms while employing

persons formerly associated with Charles E. Bailey & CO.lOand one

firm employing a person formerly associated with Mason, Moran & Co."

The status of two other cases pending at the start of this fiscal year

was unchanged at the year end."

Commission Action on NASD Rules

Section 15A (j) of the Act provides that the Commission shall

disapprove changes in the rules of a national securities association

unless such changes appear to the Commission to be consistent with

the requirements for such rules as contained in sub-section 15A(b) of

the Act.

The Commission, on June 30, 1952, had disapproved, pending further order, a rule adopted by the Association providing for notice

under certain conditions to a member (the "employer member")

before another member (the "executing member") knowingly executes

purchases or sales of a security for the account of a partner, officer,

registered representative or employee of the employer member."

At the same time the Commission gave notice that it had under consideration a proposal to adopt rule X-10B-6 which had the same

broad objective. Broadly stated, both rules were designed to provide notice to a firm of transactions by employees or associates

effected through other firms so that a member, in his own interest

and in the interest of his customers, might weigh the effect, if any,

of such transactions handled outside his own office.

The Commission on the basis of further study of the problem involved and on the comments received on its proposed rule concluded

that its own rule should not be adopted and that the Association's

rule should be permitted to become effective. The Commission by

order, therefore, vacated its earlier order which had disapproved the

Association's proposed rule. i4

10 seeunues Exchange Art Release No. 5030 (Apnl 20, 1954).

II Seeurrties Exchange Act Release No 5025 (AprIl 8, 1954).

IJ The pending cases coneerned peutions filed on behalf of. Franklm Drstributors, Inc. (Securities Ex.

change Act Release No 4818); and a member firm seekmg approval of Its contmuance as a member WIth

William A. Spanier as an employee and controlled person. (Securitres Exchange Act Release No. 481l.)

13 Becurrtres Exchange Act Release No 4723 (June 30,1952).

"SecurItIes Exchange Act Release No. 4924 (August 21, 1953).
TWENTIETH A...~UAL REPORT 47

Change in Commission Rules Applicable to NASD

As another step in its program for the simplification of rules,

the Commission adopted amendments to paragraph (b) of its rule

X-15AJ-l and to Forms X-15AA-l and X-15AJ-2 under the Securities Exchange Act which had the effect of reducing the information

required to be filed with the Commission by national securities assoeiations." The amendments eliminated a requirement that such an

association file annually with the Commission as a part of its registration statement a list of members arranged on a geographical basis

and information concerning the amount of dues payable each year

by each member. The amendments were adopted at the request of

the NASD on the grounds that the information had little value but

was difficult and expensive to compile.

In addition the Association during the year amended sections 4,

5 and 6 of Article XV of the by-laws and section 27 (a) of Article III

of the Rules of Fair Practice all of which relate to registered representatives. The effect of the integrated amendments to the by-laws

was to provide for continuous jurisdiction over a registered representative so that a change of employment from one member to another

would no longer terminate the responsibility of the representative for

actions committed during a previous employment. Section 27(a) of

the Rules of Fair Practice imposed on a member an obligation to

supervise certain activities of specified employees. The amendment

to this section extended the scope of the rule to encompass all registered representatives, instead of only salesmen, and to all transactions

with or for a customer, instead of only sales or offers to customers.

LITIGATION UNDER THE SECURITIES EXCHANGE ACT

During the fiscal year the Commission found it necessary to apply

to the federal courts on a number of occasions for injunctive relief

to prevent continuing violations of the Securities Exchange Act.

One such action was S.E.O. vs. Lawrence L. Smith,16 in which the

Commission's complaint charged the defendant with violating the

anti-manipulative and anti-fraud provisions of the Act in that he

effected a series of transactions in a security registered on a national

securities exchange for the purpose of inducing others to purchase or

sell shares of such security. The orders were placed with several

brokers. The complaint alleged that the defendant represented to

brokers that he would pay for the securities purchased for his account

on the settlement date when, in fact, the defendant knew that he

could not settle and pay on the due date. It was also charged that

11securlnes Exchange Act release No. 4942 (September 22,1963).

liD. Marne No. 1033.

326394-55-5
48 SECURITIES AND EXCHANGE COMMISSION

the defendant issued checks in purported payment for securities purchased on his order when, in fact, the defendant knew he had insufficient funds available to honor such checks. Because of the activities of the defendant, certain brokers and dealers were forced to sell

the securities on the market at prices less than the amount agreed

to be paid by the defendant and less than the cost of such securities

to such brokers and dealers. The defendant consented to the entry

of judgment.

In connection with an investigation the Commission found it

necessary to file a complaint in S.E.O. vs. Charles M. Weber, doing

business as Weber-Millican Oompany,17 a registered broker-dealer, to

require registrant to permit representatives of the Commission to

examine certain books and records. The complaint alleged that

Weber-Millican refused to make available for reasonable inspection

and examination by representatives of the Commission, as required

by the Act, books and records which the defendant must keep and

make available pursuant to the rules adopted under the statute.

The defendant consented to the entry of judgment.

A complaint charging violation of the Commission's net capital

rule was filed in S.E.O. vs. W. E. Buford & 00., Inc:" The complaint alleged that the defendant's aggregate indebtedness to other

persons exceeded 2000 per centum of its net capital as defined in the

rule. In addition to an injunction the Commission also sought the

appointment of a receiver. Subsequent to the filing of thc complaint

and the entry of a temporary restraining order, the defendant entered

into certain transactions and arrangements with creditors which

brought its financial condition within the standards prescribed by the

rule promulgated for the protection of investors. Under the circumstances the Commission entered into a stipulation with the defendant

forming the basis of the court's order wherein W. E. Buford & Co.,

Inc. consented to the entry of a judgment to enjoin the defendant

from future violations of the rule and undertook to file with the

Commission monthly financial reports for one year. It was provided

that if the defendant is in full compliance with the requirements of

the Commission's rule for the one-year period, the court may vacate

the judgment on motion of the defendant. However, the defendant

agreed that if during that period he should violate the rule, he would

not oppose an application by the Commission for the appointment of

a receiver of the defendant's business. Jurisdiction was retained by

the court for the purpose of giving full effect to this arrangement.

In S.E.a. vs, George McKaig,19 the Commission alleged that

McKaig, individually and doing business as George McKaig & Com17 S. D. New York No. 90--147.

18 W. D. Virginia No. 391.

IID. Maille No. 1132.
TWENTIETH ANNUAL REPORT 49

pany, hypothecated securities of customers under circumstances

which permitted the securities to be subjected to liens in excess of

those permitted by Commission rules. In addition to charging other

violations of the hypothecation rules, the complaint also charged

that the defendant permitted his indebtedness to exceed the limitations prescribed by the Commission's net capital rule, that he failed

to keep required books and records, and filed uncertified accounts of

financial condition, although required to file certified reports. The

action was pending at the end of the fiscal year.

Participation as Amicus Curiae

In Connell v. Errion." the Commission filed a brief as amicus curiae

by invitation of the Court. It expressed the view that the antifraud provisions of rule X-10B-5 under section 10 (b) of the Securities

Exchange Act of 1934 were applicable to a combination purchase of

securities and property which did not come within the definition of

securities under the Act, and that under section 29 (b) of the Act the

defrauded seller could obtain rescission of the entire transaction,

including the transfer of the non-securities, for violation of the rule,

or obtain monetary relief by way of damages as an alternative to

specific restitution. Defendants had sought dismissal of the complaint which was based upon alleged violations of the rule. In deny-

-ing the motion to dismiss, the Court indicated from the bench that

its conclusion was based largely upon the Commission's arguments."

Textron, Inc. v, American Woolen Oompany 22 was a suit to enjoin

announcement of the results of a vote for officers and directors of

the American Woolen Company taken at a stockholders' meeting

because a substantial number of proxies counted for and necessary

to the existence of a quorum allegedly had been obtained in violation

of the Commission's proxy rules under section 14 (a) of the Securities

Exchange Act of 1934. The Commission filed a statement with the

Court expressing the view.with which the Court subsequently agreed,

that a shareholder could maintain a private action in a federal district court based upon an alleged violation of the Commission's proxy

rules in a proper case, notwithstanding the fact that the Commission

itself did not institute an action. The Court found, however, that

the alleged violations did not invalidate the proxies for the purpose

of being counted toward a quorum, and that under the circumstances

federal jurisdiction could not be based on the Securities Exchange

Act, although the Court took jurisdiction on other grounds.

JO W. D. Wash., Civil Action No. 3556.

It 'I'ranserrpt ofstatement of the Court on January 25, 1954,p, 5.

D 122 F. Supp. 305 (D. Mass, 1954).
PART IV

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING

COMPANY ACT OF 1935

The Public Utility Holding Company Act of 1935 provides forthree separate areas of regulation of holding company systems which

control electric utility companies and companies engaged in the retail

distribution of natural or manufactured gas. The first embraces

those provisions of the Act which require physical integration of the

public utility and related properties of holding company systems, and

the simplification of intercorporate relationships and financial structures of the systems. The second area of regulation covers financing

operations of registered holding companies and their subsidiaries,

acquisitions and dispositions of securities and properties, their ac--

counting practices and servicing arrangements and other intercompany transactions. The third area includes the provisions of the Act

providing exemptions for intrastate and foreign holding company

systems and systems which are only incidentally holding company

systems and those provisions of the Act regulating the right of a person

who is affiliated with a public utility company to acquire securities resuIting in a second such affiliation.

COMPOSITION OF REGISTERED HOLDING COMPANY SYSTEMSSUMMARY OF CHANGES

On June 30, 1954 there were 29 public utility holding company

systems which were subject to the regulatory provisions of the Act

as registered holding company systems. Included were 25 registered

holding companies which function solely as holding companies, 10

other registered holding companies which were also operating companies, 133 electric and gas utility subsidiaries and 156 non-utility

subsidiaries, a total of 324 companies. For the convenience of discussion these 29 registered systems are referred to as "active systems"

60

-
TWENTIEm ANNUAL REPORT 51

-and-a table showing the composition of such systems as of June 30,

19M appears in appendix table 9. In addition there were 6 companies

which had registered as holding companies but which had disposed of

.all of their utility subsidiaries.

On June 30, 1953 there were 35 active registered holding company

systems aggregating 372 companies.1 The six systems which had

ceased to be active registered systems as of June 30, 1954,2 comprised

-eight registered holding companies, 11 electric and gas utility subsidiaries and six non-utility subsidiaries. One public utility company

.registered as a holding company during 1954, because it had entered

into a contract for the purchase of another utility company, but

-ceased to be a registered holding company in the same fiscal year

following the cancellation of this contract.

Active registered systems added one public utility subsidiary and

four non-utility subsidiaries in 1954. Fifteen public utility subsidiaries with net assets aggregating $265 million and two non-utility

'subsidiaries with assets of $5 million 3 were divested by their respective

holding company parents and as a result were no longer subject to

the Act as components of registered systems." Twenty-three companies were absorbed by mergers or consolidations, 9 were eliminated

by dissolution, and 16 companies ceased to be associated with the

active systems as a consequence of exemptions and other changes in

'status. The following table shows the changes which occurred during the year in the composition of active registered holding company

-systems.

, Not included III these totals were 11 other eompanies which had registered as holding companies, but

as of June 30, 1953 no longer owned any public utilib- subsidiarres

These systems consisted of American Power & Light Company, Derby Gas & Electric Corporation,

Kinzna Oil & Gas Corporatron, North Contment Uttlities Corporatron, Republic Service Corporation,

SouthWesWn Development Company, and their respectrve subsidiaries .

• The assets of one of tnese conrpanles at the time of divestment \I ere uot reported •

During the 19-year penod from Dec. I, 1935 to Iune 30, 1954 registered noldmg companies have divested

'themselves of 829 subsidiarfes WIth aggregate assets of over $11,;68,000,000 WhICh, as a result of such divest.

ments, ceased to be subject to the Act as of June 30, 1954 as components of registered systoms. These tom.

panies meluded 259 electric utIhty eompames WIth assets of $9,201,000,000, 158 gas utJllty com pames WIth

'8SSCts of $874,000,000, and 412 non-utihty companies with assets of over $1,693,000,000.

•

•

•
52 SECURITIES AND EXCHANGE CO:MMISSION

Summary of changes in the composition of active registered public utility holdinrr

company systems

TWELVE MONTHS ENDED JUNE 30, 19M

Registered Registered Electric Non- Total

holdmg holding and gas utillty companie

companies operating utillty companies in active companies companies systems

--- ------ Companies in aetrve registered holding company systorns-s-June 30, 1953_____________________________ 35 12 164 161 37 Additions: Companies acquired during fiscal year 1954______ ---- ...--- 1 4 6 Holding company systems registered during year_ 1 1

--- ,--- --- --- --- Total companies associated WIth active systems during 1954__________________________________ 36 12 165 165 378

Deductions: Companies divested by holding companies; no longer subject to Act. _________________________ ---.------ 15 2 17 Companies dissolved ____________________________ 4 2 '5 II

Companies absorbed in mergers or eonsoltdattons. 113 2 15 Compames converted from status of registered

holding companies or subsldiarles thereof to

status of exempt holding company systems or

other status not associated with registered systems _______________________________________ '6 ---------- '2 3 If

Changes in classification of companies in active registered systems as result of change status I 2 ---------- (3) ---------- --- --- --- --- --- Companies in active registered holding company systems--June 30,1954 _____________________________ 25 10 133 166 324

I Includes 5 companies for the New England Electrrc System. Four new subsidiary companies were

organized in this system to consolidate 9 previously existlng subsidiaries. Only the net change Js reflected

in this table. , The transformation of Republic Service Oorporation (Del) and its two subsidiaries from an active

registered system on June 30, 1953 to an exempt holdmg company system eonsistlng of two companies as a J

June 30, 1954 is reflected in this table as one nonutiltty company dissolved, and one registered holding

company and one utillty company converted to other status. Actually a new Republic Service Corporation

(Pa.) was organized to take over the assets and business of the Delaware company. The table shows only

the net effect . Denotes an addition.

SIGNIFICANT DEVELOPMENTS IN AND LITIGATION INVOLVING

HOWING COMPANY SYSTEMS

American & Foreign Power Company, Inc.

During the fiscal year the Commission entered an order granting'

American & Foreign Power Company, Inc. an exemption as a holding

company and as a subsidiary of Electric Bond and Share Company

pursuant to sections 3 (a) (5) and 3 (b) of the Act.s After the close

of the fiscal year, the Commission disposed of certain remaining

claims in prior reorganizations proceedings for fees and expenses

arising out of the section 11 (e) proceedings." As a result of the

order active regulatory supervision over the company has been

reduced to a minimum, consisting of only such attention as is required

by section 3 (c) of the Act in the continuing but limited surveillance

of companies exempted from the statute. A summary of the proceedings before the Commission and the courts leading to the corporate.

simplification of this system pursuant to section 11 (e) of the Act.

appears in the 18th Annual Report .

• Holding Company Act release No. 12196 (November 2,1953) •

Holding Company Act release No. 12677 (October 11, 19M).

--~------- ---------~

___ •

•

•
TWE~""TIETH A..~'1JAL REPORT 53

American Gas and Electric Company

American Gas and Electric Company controls the largest of the

regional integrated holding company systems. During the fiscal year

the Commission approved a voluntary proposal for the acquisition by

Indiana & Michigan Electric Company, a subsidiary operating company, of all of the assets of Citizens Heat, Light and Power Company,

another subsidiary operating company, following which the latter"

was dissolved.' The transaction was consummated on April 26, 1954.

As the result of two other proposals approved by the Commission

American Gas and Electric Company acquired all of the outstanding

common stock of Flat Top Power Company, a non-affiliated publicutility company 8 and The Ohio Power Company, a subsidiary of

American Gas and Electric Company, acquired the electric generating

and distribution facilities of the village of Arlington, Ohio." The

company also holds 37.8 percent of the common stock of Ohio Valley

Electric Company, recently organized to generate power for the

Atomic Energy Commission's plant at Portsmouth, Ohio.

Pending for determination by the Commission is a proposal filed

pursuant to section 11 (e) of the Act providing for, among other

things, the merger of two system operating companies, The Ohio Power

Company and Central Ohio Light & Power Company."

American Natural Gas Company

American Natural Gas Company is solely a holding company with

four direct subsidiaries, Michigan Consolidated Gas Company, Milwaukee Gas Light Company, Michigan-Wisconsin Pipe Line Company

and American Natural Gas Service Company. An indirect subsidiary, Milwaukee Solvay Coke Company, was owned by MilwaukeeGas at the end of the fiscal year.

At the beginning of the fiscal year the Commission had pending

for decision a question concerning the retainability of the interest

of American Natural Gas in Milwaukee Solvay, a non-utility, as an

"other business" under section 11 (b) (1) of the Act. The Commission decided to permit the retention of this interest on the ground

that circumstances giving rise to its earlier order permitting retention had not changed sufficiently to require divestment, subject

however, to the Commission's continuing jurisdiction to determine

whether future conditions may require such action,"

American Power & Light Company

The various proceedings before the Commission and the Federal

Courts leading to the dissolution and liquidation of this system were7 Holding Company Act release No. 12403 (March 11, 1954)

Holding COmpany Act release No. 12429 (March 26, 1954).

'Holding Company Act release No. 12058 (Jn1y 16,1953).

10 Holding Company Act release No. 12663 (September 20,1954).

11 Holding Company Act release No. 12317 (January 22, 1954).

•

•
54 SECURITIES AND EXCHAJ.~GE COMMISSION

reported in the 19th and earlier Annual Reports. On December 29,

1953 the Commission released jurisdiction over fees and expenses

claimed by certain participants in the proceedings which terminated

with the plan of dissolution approved by the Commission on March 21,

1953P This action disposed of the remaining questions connected

with the reorganization of the American Power & Light system. The

company has filed an application for an order pursuant to section

5 (d) of the Act declaring that it has ceased to be a holding company.

Central Public Utility Corporation

At the beginning of the fiscal year the Commission had pending

for decision the approval of a plan filed pursuant to section 11 (e)

of the Act by Central Public Utility Corporation ("Cenpuc"). This

plan provided for the elimination from the system of Central Indiana

Gas Company, Cenpuc's only domestic public utility subsidiary; the

dissolution of Central Natural Gas Corporation, a non-utility subsidiary; the merger with Cenpuc of Islands Gas and Electric Company,

an exempt holding company subsidiary; and an application for exemption pursuant to section 3 (a) (5) of the Act of Cenpuc and its

subsidiaries to be granted upon consummation of the preceding steps."

Subsequently Cenpuc filed an amendment to this plan requesting that

the proposals relating to the merger of Islands Gas with Cenpuc and

the application for exemption be eliminated. 14 The Commission

approved the plan providing for the distribution by Cenpuc to its

stockholders on a pro rata basis of the reclassified stock of Central

Indiana Gas Company and the liquidation and dissolution of Central

Natural Gas Corporation." Those provisions of the original plan,

which the company had requested to have withdrawn, were not

considered.

During the year the Commission issued three other orders pertaining to this system under section 11 (e) of the Act. In one the Commission authorized the withdrawal of an application for approval of

a plan providing for the recapitalization of Islands." In another

it approved certain applications for fees and expenses incurred in

connection with an earlier plan of reorganization approved by the

Commission on June 13, 1952,17and in the third it approved, and

released jurisdiction with respect to, the procedures for the selection

of a new board of directors of Central Indiana Gas Company following

its divestment by Cenpuc."

11 Holding Company Act release No. 12286.

13 Holding Company Act release Xo.11898 (May 8, 1953).

II Holdmg Company Act release No. 12205 (November 6, 1953).

"Holding Company Act release No. 12236 (December 4,1953).

16 Holding Company Act release No. 12083 (Jnly 28,1953).

11 Holding Company Act release No. 12126 (September 3,1953).

18 Holding Company Act release No. 12368 (February 17,1954).
TWENTIETH M\J\lJAL REPORT 55

Cities Service Company

Cities Service Company is a registered holding company under

commitment pursuant to section 11 (b) of the Act to dispose of all of

its utility interests. The only public utility interests still owned by

Cities at the beginning of the fiscal year included two domestic gas

utility subsidiaries, Arkansas-Louisiana Gas Company and The Gas

Service Company, and one foreign gas utility, Dominion Natural Gas

Company, Ltd., a subsidiary company exempt pursuant to section

3 (b) of the Act. A contract was entered into with a neighboring

public utility company, ::\Iissouri Public Service Company, for the

sale to it by Cities Service of its holdings of all of the common stock

of The Gas Service Company subject to the requisite regulatory

approvals. Following hearings before the Commission, in which the

Missouri Public Service Commission and the Kansas State Corporation Commission appeared as parties, Cities Service and Missouri

Public Service withdrew their respective applications. On April 6,

1954 the Commission approved a proposal for the sale of the stock of

Gas Service Company at competitive bidding." The sale was

consummated on April 20, 1954.

During the fiscal year the Commission also issued an order releasing

jurisdiction over fees and expenses arising out of a plan to bring the

system of Arkansas Natural Gas Corporation (formerly a registered

holding company subsidiary and now known as Arkansas Fuel Oil

Corporation) into compliance with section 11 (b) of the Act.20

Consolidated Natural Gas Company

This company is a holding company controlling four gas utility

subsidiaries, and a gas transmission subsidiary. During the fiscal

year the Commission considered two proposals relating to the sale

and acquisition of properties. In one the Commission authorized

the sale by Hope Natural Gas Company, a subsidiary, of certain gas

leases, wells and equipment to The Mauufacturers Light and Heat

Company, a subsidiary of Columbia Gas System, Inc., also a registered

holding company." ' In the second case, New York State Natural

Gas Corporation, a non-utility subsidiary, requested approval of a

proposal to acquire certain gas producing and transmission properties

from The Manufacturers Light and Heat Company. The Commission

dismissed the application for lack of jurisdiction."

Eastern Utilities Associates

Eastern Utilities Associates is solely a holding company controlling

an electric utility system operating in the states of Rhode Island and

Massachusetts. The plan for the reorganization ot this holding

l'Holdmg Company Act release No. 12445.

20 Holding Company Aa release No. 12506 (May 21, 1954).

'1 Holding Company Act release No. 12191 (October 28, 1953).

"Holding Company Act release No. 12257 (December 14, 1953).
56 SECURITIES AND EXCHANGE COMMISSION

company system pursuant to section l1(e) of the Act was described

in the Commission's 19th Annual Report. During 1954 $7 million

of collateral trust bonds were issued as contemplated by the plan."

The Commission also approved various claims for fees and expenses

in connection with the reorganization."

Electric Bond and Share Company

Pursuant to the provisions of plans approved by the Commission

under section 11 (e) in previous fiscal years, Electric Bond and Share

Company is in the process of reducing to less than 5 percent its holdings of the common stocks of its only domestic utility subsidiary,

United Gas Corporation, with the intention of qualifying for an exemption under section 3 (a) (5) of the Act and of transforming itself into

a registered investment company under the Investment Company

Act of ]940.

Several remaining residual matters pertaining to the effectuation of

plans filed in prior years were acted upon by the Commission during

the fiscal year. Among these were transactions pertaining to the disposal of (a) portions of Bond and Share's holdings of United Gas

common stock," which holdings had been reduced as of June 30, 1954

to 12.1 percent of such outstanding stock and (b) all of Bond and

Sharp's holdings of 4,256 shares of common stock of Portland Gas and

Coke Company," which had been received as a liquidating distribution from Bond and Share's former subsidiary, American Power and

Light Company.

Applications for fees and expenses incurred by various participants

in connection with Bond and Share's final comprehensive plan of

reorganization were also considered by the Commission during the

fiscal year, and the Commission issued an order authorizing and directing Bond and Share to pay certain fees and expenses." Certain

other applications for approval of fees and expenses were pending at

the close of the fiscal year.

Electric Power & Light Corporation

At the close of the prior fiscal year appeals were pending from an

order of the United States District Court for the Southern District

of New York sustaining the Commission's determinations with respect

to fee claimants in the proceedings for the reorganization and dissolution of Electric Power & Light Corporation, a registered holding company subsidiary of Electric Bond and Share Company.

On February 25, 1954 the United States Court of Appeals for the

Second Circuit affirmed in part and reversed in part the decision of

23 Holding Company Act release No. 12382 (March 2, 1954).

Holding Company Act releases Nos. 12632 (August 24, 1954) and 12681 (October 13, 1954).

"Holding Company Act releases Nos. 12255 (December 11, 1953) and 12263 (December 17,1953)

.. Holding Company Act release No 12129 (September 4,1953).

~'HoldIng Company Act release No. 12567 (June 29, 1954).

"

•
TWENTIETH ANNUAL REPORT 57

the District Court." In its reversal the court of appeals held, in

effect, that the Commission's jurisdiction to pass upon fees and expenses in a section 11 (e) reorganization of a subsidiary does not

extend to fees proposed to be paid by a parent registered holding

company to individuals retained by it to perform services in connection with the subsidiary's reorganization. The Commission and a

stockholders' committee petitioned the United States Supreme Court

for certiorari on June 21, 1954.29 Certiorari was granted on the Commission's petition on October 14, 1954 and the Committee's petition

was denied on the same date.

Engineers Public Service Company

The application of the Commission to the United States District

Court for the District of Delaware for enforcement of its order approving and denying fees and expenses claimed by participants in the

proceedings for the reorganization of Engineers Public Service Company," which was referred to in the 19th Annual Report, was decided

-on February 16, 1954.31 The district court awarded fees to certain

claimants in amounts larger than had been allowed by the Commission.

'Subsequently the Commission issued a supplemental order approving

;the payment of additional compensation to one claimant," and filed

a notice of appeal in the United States Court of Appeals, Third

Circuit, with respect to those portions of the district court's order

relating to the allowances to two other claimants."

'General Public Utilities Corporation

General Public Utilities Corporation ("GPU") is a holding company

-controlling the electric utility system which emerged from the reorganization of the former Associated Gas and Electric Company system.

Its seven domestic electric utility subsidiaries operate in the States

of New York, New Jersey and Pennsylvania.

Earlier proceedings regarding the integration and simplification of

this company's system are described in the 19th Annual Report.

Hearings before a hearing examiner were held during the year on a re-

-quest by GPU that the Commission modify its order, entered December 28, 1951 pursuant to section 11 (b) (1) of the Act insofar as said

order directed GPU to divest itself of its subsidiaries Northern Pennsylvania Power Company and the Waverly Electric Light and Power

Company." GPU seeks to retain these companies as a part of its

integrated system. The matter was still under consideration at the

-end of the fiscal year.

JlIn re EUetTlC Power &< Light Corporation, 210 F. 2d 585 (C. A.. 2, 1954).

It Nos. 153, 154 (1954).

10 Holding Company Act release No. 11096 (March 26,1952).

"In re Engimere Public Service Companll, 116 F. Supp. 930 (D. DeI. 19M).

12 Holding Company Act release No. 12470 (April 20, 1954).

II Civil Action No. 11,310 (C. A. 3, March 11, 1954)

.u Holding Company Act release No. 12056 (July 16, 1953).

•
58 SECURITIES AJ.~D EXCHANGE COMMISSION

International Hydro-Electric System

During the fiscal year a number of steps were taken in further consummation of the plan for the reorganization of International HydroElectric System ("IRES") into an investment company. Details of

this plan were summarized in the 19th Annual Report. Steps taken

included the retirement of IRES' preferred stock and the sale of 125,-

000 shares of the common stock of New England Electric System thus

reducing IRES' holdings to 5.07 percent of the outstanding shares.

At the end of the fiscal year steps remaining to be taken in consummation of the plan included disposition of applications for fees

and expenses aggregating approximately $1,500,000, disposition of tax

claims, resolution of a controversy now pending before the United

States District Court for the District of Massachusetts concerning an

election for members of the Board of Directors, and the formulation

of definitive plans for conversion of IRES into an investment

company.

The 19th Annual Report contained a description of the proposal of

IRES' Trustee to sell certain properties of Eastern New York Power

Corporation, subsidiary of IHES, to the New York State Electric and

Gas Corporation. On appeal by the City of Plattsburg, New York,

the United States Court of Appeals for the First Circuit on November

12, 1953affirmed the order of the district court approving the contract

of sale."

Interstate PowerCompany

During the fiscal year the Commission issued an order authorizing

Interstate Power Company of Delaware to sell, and Wisconsin Power

and Light Company, a non-affiliated exempt holding company, to

acquire, all of the outstanding capital stock of the Delaware company's subsidiary, Interstate Power Company of Wisconsin.36 On

November 30, 1953 this transaction was consummated. Wisconsin

Power and Light has indicated its intention of ultimately merging

Interstate Power Company of Wisconsin into itself. The Delaware

company now has only one public utility subsidiary, East Dubuque

Electric Company.

Koppers Company, Inc.

A description of developments with respect to Koppers Company,

Inc. and its former subsidiary, Eastern Gas & Fuel Associates, were

reported in the 17th Annual Report.

During 1954Koppers further reduced its common stock holdings in

Eastern, as required by the Commission's order of June 26, 1945,87

G~ty of Platt3burg v, Brickley, 208 F. 2d 800 (C. A. 1, 1953)

•• Holding Company Act Release No. 12206 (November 6,1953).

37 Holding Company Act Release Xo, 5888.

" •
TWENTIETH ANNUAL REPORT 59

by selling 100,231 shares of such stock to the public. After the sale,

Koppers filed an application requesting the Commission to modify the

order of June 26, 1945 so as to permit it to continue ownership of its

remaining holdings of 13,000 shares of the common stock of Eastern,

and requesting an order under section 5 (d) of the Act declaring that

it had ceased to be a holding company. The Commission granted

both of these requests and dismissed a pending application by Koppers

for exemption pursuant to section 3 (a) of the Act on the ground that

the relief granted under section 5 (d) of the Act rendered such application moot."

An application by Eastern requesting an exemption pursuant to

section 3 (a) of the Act was still pending at the close of the fiscal year.

Upon application by the Commission for enforcement of its order

approving and denying various applications for fees and expenses

incident to the reorganization of Eastern Gas & Fuel Associates, the

United States District Court for the District of Massachusetts,

affirmed the Commission's denial of reimbursement to Koppers for

expenses it had incurred in connection with such reorganization. The

court reversed the Commission with respect to its denial of fees

claimed by a stockholders' committee member by reason of securities

transactions effected by the wife of such committee member while the

reorganization proceedings were in progress." Both Koppers and the

Commission appealed from the decision of the district court to the

United States Court of Appeals for the First Circuit, where the

appeals are pending.

Long Island Lighting Company

As discussed in the 19th Annual Report, Long Island has ceased to

be a registered holding company. During the fiscal year 1954, how-

.ever, litigation and administrative proceedings with respect to applications for fees and expenses in connection with the company's

reorganization in 1950were completed. On March 12,1954 the United

States Court of Appeals for the Second Circuit affirmed in part and

reversed in part 40 an order of the United States District Court for the

Eastern District of New York." which enforced in part and remanded

in part the order of the Commission 42 awarding and denying the fees

and expenses claimed by various participants in the reorganization.

Thereafter the Commission issued its second order approving allowances in accordance with the decision of the appellate court."

IS Holding Company Act Release No. 12320 (January 22, 1954).

"Inre Eastern Gas &: Fuel Assoc,ateB. 120 F. Supp. 460 CD. C. Mass., 1953)

0 Sub nom. NzeholB et at. v. S. E. C. et at., 211 F. 2d 412 (C. A. 2, 1954).

U Unreported (E. D. N. Y., Civil Action No. 10,413, May 11, 1953).

"Holdmg Company Act release No. 11695 (February 8,1953)

.... Holding Company Act release No, 12581 (July 9,1954).

•

•

•
60 SECURITIES AND EXCHANGE COMMISSION

In an independent action for damages for alleged fraud in the reorganization proceedings filed by Ennis M. Nichols et al. against Long

Island, described at page 83 of the 19th Annual Report, the United

States Court of Appeals affirmed the District Court's order of dismissal, but did not indicate explicitly in its judgment that litigation of

those charges was also barred in the reorganization proceedings on theground of res judicata." Subsequently, on the basis of the decision

of the Court of Appeals, the District Court held that appellants werebarred from proceeding further both in the independent action and.

directly in the reorganization proceedings." Thereupon, appellants.

petitioned the Court of Appeals to amend and clarify its earlier judg~

ment so as to eliminate the bar to direct proceedings in the roorgan--

ization court. However, the Court of Appeals amended its judgment

to state explicitly that further proceedings in the reorganization court.

were likewise barred under its findings of res judicata." Appellants"

petition to the United States Supreme Court for a writ of certiorari;

from this amended order was denied on October 14, 1954.41

Market Street Railway Company

The fee litigation in connection with the dissolution of Market Street

Railway Company, formerly a non-utility subsidiary of Standard

Gas and Electric Company, referred to in the 19th Annual Report,

was terminated on July 27, 1954 when the Commission issued its,

order 48 approving allowances of fees and expenses to one of the participants in the reorganization proceedings in accordance with the

decision of the United States Court of Appeals, Ninth Circuit." The

Commission also approved an application for additional fees and

expenses claimed by certain counsel in connection with a section 11(e)

plan approved by the Commission involving, among other things, thesettlement of an open account indebtedness due Standard Gas and

Electric Company from Market Street Railway Company."

The company has not yet been dissolved, as directed in the Com--

mission's order dated October 24, 1950, because of a claim for a refund

against the Board of Equalization of the State of California, seeking.

the return of sales taxes paid under protest in 1950.

Middle South Utilities, Inc.

Middle South Utilities, Inc. through its subsidiaries, ArkansasPower & Light Company, Louisiana Power & Light Company, Mississippi Power & Light Company and New Orleans Public Service,

Inc., operates an integrated electric utility system in the States of

.. Nichol3 et al. v. Long 13land Llghtl1lg Co. et al., 2fll F. 2d 931 (C. A. 2.195~.

"NlChol3 et al. v. Long Island Lighting Co. et al., unreported (E. D. N. Y. Civil Action,No.13,054, 1anuary

19,1954)

•• Nicho13 et al. v, Long I3land Llghtl1lg Co. et al., 211 F. 2d 392 (C. A. 2,1954).

"348 U. S. 827 (954)

.. Holding Company Act Release No. 12599.

.. Securities and Exchange Commi33lon v. Cogan,201 F. 2d 78 (C. A. 9,1951) and 201 F. 2d 82 (C. A. 9, 1962).

If Holding Company Act Release No. 12563 (June 25,1964).

•

•
TWENTIETH ANNUAL REPORT 61

Arkansas, Louisiana and Mississippi. The company also owns a 10

percent interest in Electric Energy, Inc., a large generating company

organized to furnish electricity for the Paducah, Kentucky, plant of

the Atomic Energy Commission.

During the fiscal year Middle South applied pursuant to section

l1(c) of the Act for an extension of time to comply with the Commission's order of March 20, 195351 requiring Middle South and its subsidiaries to dispose of their direct and indirect interests in the nonelectric properties owned by certain subsidiaries. The Commission

granted a one year extension from March 20, 1954 to comply with the

order, except with respect to certain water properties located at Crystal Springs, Mississippi.P Subsequently, on April 15, 1954 Middle

South sold the Crystal Springs water properties to Union Water Service Company, a non-affiliated company, for a base price of $50,000.

New England Electric System

New England Electric System ("NEES") and its subsidiary com-,

panies constitute the largest utility system in New England. As of

December 31, 1953 the system had 30 subsidiaries, including 10 gas

utility companies, 16 electric utility companies, two combined gas.

and electric utility companies, one service company and one real

estate company.

The principal problems remaining to be resolved by the system

pursuant to section 11 (b) of the Act pertain to the retainability of

its gas properties. One attempt to dispose of these properties in

1951 failed because the successful bidder was unable to finance the.

purchase." However, considerable progress has been made toward

the further segregation of the electric and gas properties of the system and in effecting divestments.

Two proposals providing for rearrangement of the gas and electric

properties of certain subsidiaries and related financing transactions

were approved by the Commission during the fiscal year. In one of

these, the gas and electric properties of Beverly Gas and Electric

Company, Gloucester Electric Company, Gloucester Gas Light Company, Salem Electric Lighting Company and Salem Gas Light Com-.

pany were separated and merged respectively into a single newly

organized gas company, North Shore Gas Company, and into a

single newly organized electric company, Essex County Electric

Company." The other proposal provided, among other things, for

the transfer by Suburban Gas and Electric Company of its gas

properties to the Mystic Valley Gas Company, formerly Malden and

Melrose Gas Light Company; the merger of Arlington Gas Light .

.. Holding Company Act release No. 11782.

.. Holding Company Act release No. 12475 (April 28, 1954)

.. Holding Company Act release No 11252 (May 15, 1952).

U Holding Company Act release No. 12168 (October 9,1953).

•
62 SECURITIES A.,.~DEXCHANGE COMMISSION

Company with Mystic Valley; and the merger of Suburban Gas and

Electric into Suburban Electric Company, formerly the Malden

Electric Company. 55

On July 22, 1954, acting pursuant to authority from the Commission, NEES sold all the outstanding capital stock of Berkshire Gas

Company, a gas utility subsidiary, to Pittsfield Coal Gas Company,

a non-affiliated corporation," and on March 29, 1954, NEES caused

Athol Gas Company, another of its gas utility subsidiaries, to sell

its assets to non-affiliated interests and dissolve.

New England Gas and Electric Association

New England Gas and Electric Association is a Massachusetts

trust which directly or indirectly held common stocks of nine subsidiary companies at the close of the fiscal year. Six of these companies are utility companies furnishing either electricity or gas, one

is a gas transmission company, one a heating company, and another

a service company. All operate in the State of Massachusetts.

Among the physical property rearrangements and divestments

during the fiscal year was a merger of one subsidiary, Plymouth Gas

Light Company, with another subsidiary, New Bedford Gas and

Edison Light Company." NEGEA also was authorized to sell to

Public Service Company of New Hampshire, a non-affiliated exempt

holding and public utility company, its holdings of all of the outstanding capital stock of New Hampshire Electric Company, an

exempt holding company controlling Kittery Electric Light

Company. 58

Shortly after the close of the fiscal year, NEGEA filed a statement

on behalf of itself and its remaining subsidiaries claiming and thereby

obtaining exemption from the provisions of the Act as an intrastate

holding company system as provided by rule U-2, promulgated under

section 3 (a) of the Act.

The North American Company

Union Electric Company of Missouri

A plan filed by The North American Company pursuant to section

11 (e) of the Act providing for its liquidation was fully described in

the 18th Annual Report. In brief, under the plan North American

proposed to distribute to its stockholders its holdings of all of the

common stock of Union Electric Company of Missouri in the form of

liquidating dividends over a two-year period ending in January 1955.

Union Electric, Korth American's only remaining utility subsidiary,

which also is a registered holding company, is expected to continue as

a holding-operating company.

"Holdmg Company Act Release No. 12169 (October 9,1953)

.. Holding Company Act Release No. 12511 (May 25, 1954).

Holding Company Act Release No. 12060 (July 16, 1953).

68 Holding Company Act Release No 12510 (May 25,1954).

•

"
TWENTIETH ANNUAL REPORT 63

On January 21, 1954North American made a second liquidating distribution to its stockholders of the common stock of Union Electric

at the rate of one share of Union Electric common stock for each 10

shares of parent company common stock held.

On May 28, 1954, the Commission approved a proposal filed by

North American and its non-utility subsidiary, 60 Broadway Building

Corporation, providing for the liquidation and dissolution of the latter,

and for a sale of its office building to the Hanover Bank of New York

City for $3,100,000.59 North American reported that, in accordance

with the plan of liquidation, the proceeds from this sale were transferred to Union Electric on July 15, 1954.

In another proposal approved by the Commission, North American's

non-utility subsidiary company, Hevi-Duty Electric Company, was

authorized to purchase the total issued and outstanding common

stock of a non-affiliated company, Anchor Manufacturing Company."

As a result of the acquisition of all of the common stock of Missouri

Edison Company, a non-affiliated public utility company, Union

Electric added a subsidiary to its system during the fiscal year." In

its order the Commission reserved jurisdiction to determine at a later

date the question of the retainability by Union Electric of the gas

properties of Missouri Edison.

Union Electric also owns a 40 percent interest in Electric Energy,

Inc., a large generating company organized to furnish electricity for

the Paducah, Kentucky, plant of the Atomic Energy Commission.

Union Electric was granted an extension until December 31, 1954-,

of the time to dispose of certain water and ice properties and electric

properties located at Clinton, Missouri," as required by the Commission's order of December 28, 1950.63

Shortly after the close of the fiscal year Missouri Power & Light

Company, a subsidiary of Union Electric, disposed of its water properties at Excelsior Springs, Missouri, by the sale thereof to the City of

Excelsior Springs for a base price of $500,000.

Applications for fees and expenses incurred by various applicants in

connection with the plans involving Korth American and its subsidiaries approved pursuant to section 11 (e) of the Act were also disposed

of by the Commission during the fiscal year."

North Continent Utilities Corporation

At the beginning of the fiscal year North Continent Utilities Corporation had one statutory utility subsidiary, Great Northern Gas

Company, Ltd., which was organized and operating in Ontario,

"Holdmg Company Act Release No 12519.

"Holdlllg Company Act Release Xo 12046(July 9,1953). 'I Holding Company Act Release No. 12262(July 15,1953).

62 Holdlllg Company Act Releases Xos 12045(July 9, 1953), 12304(Jan 13,1954), and 12574(July 2,1954).

sa Holding Company Act Release No. 10320.

.. HoJdmg COmpany Act Releases xes 12240(Dec 4,1933) and 12241(Dec. 4, 1953).

326394-55-6
64 SECURITIES AND EXCHANGE COMMISSION

Canada. On November 30, 1953, North Continent sold its interest in

Great Northern to Alberta Consolidated Gas Utilities, Ltd., a nonaffiliated Canadian company now known as Great Northern

Gas Utilities, Ltd., for approximately $533,639. Subsequently,

the Board of Directors of North Continent took steps to dissolve

the corporation and the Commission authorized the company

to distribute its remaining assets in the form of liquidating

dividends to its stockholders." In January 1954 the Commission

issued an order pursuant to section 5 (d) of the Act declaring that

North Continent had ceased to be a holding company and that its

registration as a holding company had ceased to be in effect."

Northern New England Company

New England Public Service Company

Proceedings pertaining to the liquidation of Northern New England

Company and New England Public Service Company have been described in the 18th Annual Report. During 1954 the Commission

issued orders allowing various fees and expenses." One fee application remains for determination.

Northern States Power Company (Del.)

Northern States Power Company (Minn.)

In the 19th Annual Report reference was made to appeals taken by

the Commission and by Standard Gas and Electric Company (formerly the parent of Northern States (Del.) from a decision of the United

States District Court for the District of Minnesota affirming in part

and reversing in part an order of the Commission approving and denying fees and expenses arising out of proceedings for the dissolution of

Northern States Power Company (Del.).68 The United States Court

of Appeals for the Eighth Circuit affirmed the decision of the district

court on April 19, 1954 69 and Standard Gas filed a petition for certiorari with the United States Supreme Court, which was denied on

October 14,1954.

The 19th Annual Report also described consolidated proceedings

involving issues as to compliance by Northern States (Minn.) with

section 11 (b) (1) of the Act and whether the company was entitled to

an exemption as a holding company pursuant to section 3 (a) (2) of the

Act. On February 1,1954 the Commission granted a severance of the

exemption issues and on September 16, 1954, following the presentation of briefs and oral arguments, including a brief and oral argument

of the city of St. Paul in favor of exemption, the Commission issued its

opinion and order granting an exemption effective October 15, 1954.70

.. Holding Company Act release No. 12261 (Dec. 15, 1953)

.. Holding Company Act release No. 12326 (Jan. zr, 1954).

17 Holding Company Act releases Nos. 12605 (July 29, 1954) and 12664 (Sept. 22, 1954)

11 In re Northern States Power Co., 119 F. Supp. 331(D. Minn., 1953).

Sub. nom. Standard Gas and ElectrIc c«, v. S. E. C., 212 F. 2d 407 (C. A. 8, 1954).

"Holding Company Act release No. 12655.

•

•

•

"
TWENTIETH ANNUAL REPORT 65

The order was based, among other things, on the findings that Northern States is predominantly a public-utility company and that an

exemption would not be detrimental to the public interest.

In addition to the above proceedings, the Commission authorized

Northern States to acquire from the Minneapolis Street Railway

Company and the St. Paul City Railway Company, two non-affiliated

companies, certain electric generating and distribution facilities for a

base purchase price of $1,500,000.71 Authorization was also granted

to permit United Power and Land Company, a wholly owned subsidiary, to sell, and Northern States to acquire, all of United's utility

assets and certain of its non-utility assets."

Pennsylvania Gas & Electric Corporation

The 19th Annual Report described this company's reorganization

plan pursuant to section 11 (e) of the Act. The plan was consummated during 1954, and thereafter the Commission approved fees for

services rendered in connection with the plan and related expenses."

Republic Service Corporation

During the fiscal year this company amended its reorganization plan

pursuant to section 11 (e) of the Act~which was described in the 19th

Annual Report, in certain minor respects, and the Commission issued

its order approving the plan as amended." There emerged from this

reorganization an intrastate holding company system consisting of

the newly organized Republic Service Corporation (Pennsylvania) and

its subsidiary, Cumberland Valley Electric Company (Pennsylvania).

On December 8, 1953 Republic of Pennsylvania filed a statement with

the Commission on behalf of itself and Cumberland claiming and

thereby obtaining exemption as provided by rule U-2, promulgated

under section 3 (a) of the Act.

Southwestern Development Company

Earlier proceedings involving the reorganization of this holding

company system were described in the 18th Annual Report. On

November 18, 1953 Southwestern Development Company and its subsidiaries filed applications for approval of certain transactions designed

to consolidate the seven companies of the system into a single gas

utility company, which in turn would hold all the common stock of a

single nonutility company. At the time the application was filed,

Southwestern had four gas utility subsidiaries, Amarillo Gas Company,

Clayton Gas Company, Dalhart Gas Company, and West Texas Gas

Company. It also controlled two nonutility subsidiaries, Amarillo

Oil Company, and Red River Gas Company. Fifty-one percent of

71 Holding Company Act Release No. 12035 (July 2, 1953).

lJ Holding Company Act Release No. 12180 (Oct. 21,1953).

73 Holding Company Act Releases Nos. 12628 (Aug, 19, 1954) and 12685 (Oct. 21, 1954).

74 Holdmg Company Act Release No. 12186 (Oct. 26, 1953).

-
66 SECURITIES AND EXCHANGE COMMISSION

the voting securities of Southwestern were owned by Sinclair Oil

Corporation, which had been granted exemption as a holding company

by an order of the Commission pursuant to section 3 (a) of the Act.75

The proposed transactions involved the change of the name of

Amarillo Gas to Pioneer Natural Gas Company and the merger or

consolidation into that company of Southwestern, West Texas, Dalhart and Clayton. Itwas also proposed that Red River Gas Company

be merged into Amarillo Oil and that the latter emerge as a subsidiary

of Pioneer. The Commission granted the application 76 and later

entered a second order declaring that Southwestern had ceased to be

a registered holding company." Fees and expenses which arose out

of the consolidation proceedings were allowed by the Commission in a

subsequent order."

On June 2, 1954 the Commission issued an order 79 releasing jurisdiction over certain fees and expenses claimed in connection with the

original plan for the reorganization of Southwestern which was approved by the Commission on December 21, 1951.80

Standard Power and Light Corporation

Standard Gas and Electric Company

Philadelphia Company

As a result of consummation of various reorganization plans approved by the Commission pursuant to section 11 (e) of the Act,

which were described in the 18th and 19th Annual Reports, these

three registered holding companies have eliminated all of their previously outstanding senior securities and, except for short-term bank

notes and intra-system debt, have reduced their respective capitalizations to a single class ofstock.

The remaining steps required of these three companies to complete

compliance with outstanding orders of the Commission under section

11 (b) of the Act have been delayed pending determination of certain

tax liabilities and the disposition of approximately $6,000,000 of fee

and expense claims arising out of the reorganization proceeding. A

question of major importance, which must be settled before the liquidation of Standard Gas and Philadelphia Company can be completed,

is the dispute between these companies and the Department of the

Treasury as to their Federal income tax liabilities for the years 1942

to 1950, inclusive. The companies anticipate that the examination

and review of these tax matters by the Treasury Department will be

completed by the middle of the fiscal year 1955. The Commission

approved the payments of approximately $2,000,000 of fees and

Holdmg Company Act Release 1'\0. 10998 (Jan. 10, 1%2).

"Holdlllg Company Act Release No. 12277(Dec. 24, 1953).

"Holdlllg Company Act Release xo. 12432 (1\[ar 29,1954).

Holding Company Act Release No. 12636 (Aug. 26, 1954).

"Holdlllg Company Act Release No. 12523.

"Holdml' Company Act Release :\0. 10969

"

"
TWENTIETH A1>,TJ'I,lJALREPORT 67

expenses to all but two of the more than 60 participants in the various

proceedings for the reorganization of the Standard Power system under

section 11 of the Act.81 There remain for determination by the

Oommission one fee claim for $3,500,000, one undetermined claim,

and certain expenses. Upon a challenge by the claimant of the large

fee to the jurisdiction of the Commission the United States District

Oourt for the District of Delaware directed that he be permitted

to file his claim with the court, but that proceedings thereon be

stayed until the Oommission had an opportunity to hear and determine

such claim."

On ~1ay 5, 1954 Standard Power filed a plan pursuant to section

11 (e) of the Act proposing the settlement of all claims between itself

and H. ~r. Byllesby and Company. The alleged claims and cross

claims have not heretofore been passed upon by the Oommission,

although various aspects of them, and the transactions out of which

they arose, have been considered. In addition, there is pending in

the United States District Oourt for the District of Delaware, an

action for an accounting brought on behalf of Standard Power against

Byllesby and others."

On July 8, 1954 a plan for the liquidation of Equitable Auto Company, a wholly owned subsidiary of Philadelphia, was approved by the

Commission and subsequently consummated."

The uncertainties respecting the amounts of fee claims and Federal

tax liabilities to be borne by Standard Gas and Philadelphia have

affected the timing of Standard Power's plans to become a registered

investment company as disclosed in the 19th Annual Report. No

application for this purpose has been filed with the Oommission as yet.

As of the close of the fiscal year 1954, Standard Power's assets

consisted mainly of 53.6 percent of the common stock of Standard

Gas and small amounts of the common stocks of present and former

public utility subsidiaries of Standard Gas and Philadelphia. Standard Gas' assets consisted principally of all of the common stock of

Philadelphia and minor investments in other companies. Philadelphia Oompany's assets comprised 13 percent of the common stock

of Duquesne Light Company, 51 percent of the common stock of

Pittsburgh Railways Oompany and miscellaneous other holdings.

The United Corporation

The United Oorporation, a registered holding company, has reached

the final stages of compliance with the integration and simplification

81 Holding Company Act releases Nos. 12496 (Mar 14,1954),12596 (July 23,1954) and 12647 (Sept 8,1954).

82In re Standard Gas and Eleetru: Company, el al., unreported, (D C. Del, Oivil Action Nos, 489 ancl149i,

Aug. 3D,1954).

83 Homewood, et al., v, Standard Power and Light Corp., H .• \f By/lesby and Company, et al , (D. C Del.,

CIVil Action No. 229, 1944).

J4 Holding Oompany Aet Release No. 12579.
68 SECURITIES AND EXCHANGE COM:MISSION

standards of section 11 (b) of the Act. The company has reduced its

public utility interests to not more than 4.9 percent of the total voting

securities of anyone utility company and is in the process of trans.

forming itself into a closed-end, non-diversified investment company.

The proposals approved by the Commission leading toward the

transformation of United Corporation into an investment company

and proceedings before the Commission and the Federal courts

relating thereto were described in the 18th Annual Report.

The 19th Annual Report contained a description of the litigation

instituted by certain stockholders of United Corporation in the United

States Court of Appeals for the District of Columbia Circuit, involving

certain orders of the Commission approving the final plan for the

corporate simplification of the United Corporation system pursuant

to section 11 (e) of the Act. A protective committee for the option

warrant holders had intervened in these proceedings. The Court of

Appeals affirmed the Commission's orders approving the plan and

held that it had jurisdiction to review the orders in their entirety,

including those provisions subject to enforcement by a district court.

The United States Supreme Court granted certiorari to the warrant

holders' committee on October 12, 195385 and denied the petition of

the stockholders on January 11, 1954.86 On January 4, 1954 the

Supreme Court determined that the Court of Appeals had erroneously

taken jurisdiction over those provisions of the plan which the Commission had reserved for district court enforcement." These related

to the cancellation of United Corporation's option warrants without

compensation to the holders thereof and the amendment of the corporation's charter and by-laws to provide for cumulative voting and

a 50 percent quorum at stockholders' meetings. The Supreme Court

affirmed the decision of the Court of Appeals in respect of other portions of the Commission's order which were not subject to district

court enforcement. Subsequently, the Supreme Court denied the

petitioners' application for a stay and for leave to file a petition for

rehearing.f On March 18, 1954, counsel for the Committee representing the holders of option warrants filed an application with the

Commission requesting, among other things, the reopening of the

proceedings before the Commission so as to permit presentation of

further evidence in support of modification of the Commission's

opinion and order requiring cancellation of the warrants. The

application was denied," and subsequently, on October 11, 1954, the

.. General Praeaine Committee for the Holders of Option Warrants of 7he UniUd Corp., v. S. E. C., 3tr

U. S.81O (1953)

.. DoWning et al, v. S. E. C., 346 U. S. 930 (1954).

17 'Ihe General Proucuoe Committee for the Holder' of Option Warrant.! of 7 he UniUd Corp., v. S. E. C

et 01., 346 U. S. 521 (1954) .

.. Downtng et al., v, S. E. C. et al., 347 U. S. 911 (1954).

88 Holding Company Act Release No. 12621 (Aug. 17, 1954).

•
TWENTIETH ANNUAL REPORT 69

Commission made application to the United States District Court,

District of Delaware, for enforcement of this provision of United

Corporation's plan as well as the provision for amendment of its

charter and by-laws.

At the beginning of the fiscal year there was pending in the United

States Court of Appeals for the District of Columbia Circuit a petition by certain stockholders of the corporation under section 24 (a)

of the Act for review of the Commission's order dated May 2, 1952 90

approving a program for the investment of $24,500,000 of the company's surplus funds pursuant to section 9(c)(3) of the Act. The

petition also sought review of an order of the Commission dated

June 24, 1952,91approving a proposal by United Corporation to make

a public offering of its holdings of the common stock of South Jersey

Gas Company. The Court of Appeals dismissed the petition." Subsequently the Commission granted United Corporation's application

for an amendment of the Commission's order of May 2, 1952 which

would allow greater flexibility in respect of the acquisition of securities

pursuant to its investment program.P

During the fiscal year the Commission participated in three proceedings in the Federal courts relating to its orders approving and

denying applications for fees and expenses arising out of the various

proceedings for the reorganization of United Corporation. On September 15, 1953 the United States District Court for the Northern

District of New York, affirmed 94 an order of the Commission 95which

denied reimbursement to United Corporation for expenses and fees

incurred by it in the reorganization of its former subsidiary, Niagara

Hudson Power Corporation. An appeal filed by United Corporation

in the United States Court of Appeals for the Second Circuit on

December 15, 1953 was pending at the close of the fiscal year.

On March 2, 1954, the United States District Court for the District

of Delaware affirmed in part and reversed in part an order of the

Commission dated June 4, 195296 allowing and denying fees in connection with the reorganization proceedings of United Corporation.

The Commission's order made determinations with respect to 14

applications. Three were granted in the amounts requested; eight

were granted in substantially reduced amounts; and three applications were denied. The District Court affirmed part of the order,

but reversed and remanded the Commission's order as to one applica00Holding Company Act Release No. 11209.

t1 Holding Company Act Release 1'0.11349.

II Downing et aZ., v, S. E. C., unreported (CIvil Acnon No. 11478; March 23, 1954).

II Holding Company Act Release No. 12488 (May 11, 1954).

Inre Niagara Hudson Power Corp., 114 F. Supp. 683.

"Holding Company Act Release No. 11667 (Jan. 14, 1953)

.. Holding Company Act Release No. 11290.

"

•
70 SECURITIES AND EXCHANGE COMMISSION

tion with directions to grant increased allowances." No appeal

was taken.

The 19th Annual Report contains a description of the Commission's

order dated June 16, 1953 approving and denying applications for

fees and expenses which arose from the dissolution of Public Service

Corporation of New Jersey, a former subsidiary of United Corporation, pursuant to section 11 (e) of the Act. A petition for review

was filed in the United States Court of Appeals for the Third Circuit

by the counsel to Public Service, whose application for fees was

granted in reduced amount, and by United Corporation, whose expenses in connection with the reorganization of Public Service were

disallowed by the Commission. The Court of Appeals reversed that

portion of the Commission's order approving a reduced allowance for

the counsel to Public Service and affirmed the Commission's action

denying allowances of expenses to United Corporation." A petition

for certiorari filed by United Corporation with the "United States

Supreme Court on May 27, 1954 was denied on October 14,

1954.

REVISION OF RULES, FORMS AND PROCEDURES

Early in the fiscal year the Commission initiated a program to

reexamine all rules, forms and procedures under the Act. The purpose of this program was to make it possible for the Commission

better to carry out its functions with a reduced staff. The program

has resulted in substantial revision ofrules and forms, thereby reducing

duplicative filing requirements, eliminating the demand for material

no longer needed in administering the Act, and streamlining procedures

where streamlining seemed appropriate.

Revisions of Rules and Regulations

Rule U-11 was revised on October 5, 1953 so as to facilitate investment in the equity securities of public utilities by certain individuals

and corporations. Under the revised rule any individual who has

previously been authorized by the Commission to acquire as much as

five percent of the voting securities of two or more electric or gas utility

companies or holding companies may acquire unlimited amounts of

additional securities of such companies without obtaining prior authorization by the Commission. A company which is not itself a holding

company or a subsidiary of a registered holding company and which

has previously been authorized to acquire as much as five percent of

the voting securities of two or more electric or gas utilities or holding

companies may acquire additional voting securities of such companies

up to, but not including, 10 percent of the total voting power without

prior approval. Previously each acquisition above 5 percent required

"In re 1 he United Corporatson, 119 F. Supp. 524 (1954).

's In re Public Sermce Corp. of New Jersey, 211 F. 2d 231 (1954).
TWENTIETH M>.TNUAL REPORT 71

separate approval. Experience has shown, however, that Commission

examination ofsubsequent acquisitions above 5percent served no useful

purpose, once the creation of an affiliation had been approved, until

the acquisitions became sufficient to cause the acquirer to become a

holding company. Both the industry and the Commission are saved

needless labor and expense by the revision."

A new rule, rule U-13, was adopted on December 24, 1953 to

facilitate the conversion of certain registered holding companies into

investment companies as a means of compliance with the provisions

of section 11 (b) of the Act. Two registered holding companies,

Electric Bond and Share Company and The United Corporation,

have disposed of the greater part of their domestic utility interests

and have been authorized by the Commission to convert themselves

into investment companies to be registered as such pursuant to the

Investment Company Act of 1940. Standard Power and Light Corporation and the International Hydro-Electric System have indicated

a similar intention. The new rule exempts nonutility companies

acquired by these registered holding companies, pursuant to an overall

investment program previously approved by the Commission, from

the obligations and duties imposed upon them by the statute as

subsidiaries or affiliates.'?"

Rule U-20 was amended effective September 15, 1954 to prescribe

Form U-1 for the filing of all applications and declarations and

amendments thereto under sections 6 (b), 7, 9 (c) (3),10,12 (b), 12 (c),

12 (d) and 12 (f) of the Act. Previously, a separate form, Form U-A,

was required to be used for the filing of amendments. The practical

effect of the revision was to eliminate Form U-A in the great majority

of cases arising under the Act.'

Rule U-22 was amended effective September 15, 1954 for the purpose of extending the privilege of incorporation by reference in the

filing of all applications and declarations under the Act, Formerly,

the rule permitted applicants and declarants to incorporate by reference only to other documents filed under this statute. The rule, as

amended, permits incorporation by reference to documents filed with

the Commission under any Act administered by it..2

A new rule, rule U-29, was adopted effective April 30, 1954, to

require the filing under separate cover by registered holding companies and their subsidiaries of their published reports to stockholders

and certain other information, all of which was previously incorporated as exhibits to the annual reports filed by registered holding

company systems. The objectives of this revision were to pave the

"Holdmg Company Act Release No. 12161 (Oct. 5, 1953).

160 Holding Company Act release No 122i6 (Dec 24, 1953).

1 Holding Company Act release No, 12611 (Aug. 10, 1954).

, Holding Company Act release No 12611 (Aug 10, 1954).
72 SECURITIES At'TD EXCHANGE COMMISSION

way for the consolidation of annual reporting requirements under the

Securities Exchange Act of 1934 and the Public Utility Holding Company Act of 1935, as more fully described below, and to permit more

efficient disposition of voluminous records after they have ceased to

be the subject of active use."

The Commission adopted an amendment to rule U-50 4 which,

along with companion revisions of certain rules under the Securities

Act of 1933,5was designed to eliminate certain mechanical and administrative impediments which hindered the prompt public offering

of securities following the receipt of bids from prospective underwriters.

Offerings subject to rule U-50 are required to be acted upon by the

Commission under both statutes. Formerly, the company selling the

securities was required to obtain two sets of orders under each statute.

The first orders, in which all provisions of the registration statement

and declaration were cleared, except the price of the sale, to be determined at competitive bidding, and the successful bidders' reoffering

price to the public, were entered prior to the published invitations for

bids. The second orders, giving this information, were entered following determination of the winning bid and offering price and were

required to be obtained before the securities could be offered for sale

to the public. The rules as amended permit immediate award of the

securities to the successful bidder and public offering without the

necessity of the second set of clearance orders in all cases where two or

more bona fide bids are received unless in Ii particular case the Commission should reserve jurisdiction. In its prior experience under

rule U-50 the Commission had only on rare occasions disapproved

an award where two bids were received

Rule U-40 was amended so as to exempt the acquisitions by registered holding companies and their subsidiaries of securities of companies whose principal business is the ownership or licensing of trade

names, trade marks, and service marks used by public utilities in the

ordinary course of their business. b Previously the acquiring company

was required to obtain a specific order of approval from the Commission. This revision was adopted as a result of a petition for such

an amendment filed on December 4, 1953, pursuant to section 4 (d)

of the Administrative Procedure Act and rule XIX of the Commission's Rules of Practice,"

Pending Proposals for Revision

Rule U-45 (b) (6) regulates the manner in which the consolidated

Federal income tax of a registered holding company system may be

• Holding Company Act release No. 12430 (Mar. 29, 1954)•

• Holding Company Act release No. 12298 (Jan. 13, 1954)•

Securities Act of 1933 release No. 3494 (Jan. 13, 1954).

Holding Company Act release No. 12275 (Dec. 23, 1953).

f Holding Company Act release No. 12238.

•

•
TWENTIETH ANNUAL REPORT 73

allocated among the associate companies in the system. It provides

in substance that the tax shall be allocated so that each company

included in the consolidated tax return for the system will bear that

percentage of the consolidated income tax which the income tax

liability of such company on a separate return basis would be to the

aggregate income tax liabilities of the individual companies based on

separate returns. Early in 1953 the Commission had occasion to

consider a specific request by a registered holding company for a

modification of the requirements of this rule. Since the issues raised

by this request appeared sufficiently broad in scope to warrant reconsideration of the rule, the Commission published a notice inviting

comments on the rule." Numerous comments and recommendations

were received from various registered holding companies and from 10

regulatory bodies.

Thereafter the Commission published a notice proposing a cbange

in the rule, the effect of wbich would have been to eliminate intercompany dividends in allocating the tax." After receiving extensive

comments from interested members of the public and holding a public

hearing on the proposal, the Commission directed its staff to make

further studies of the problem." Since the end of the fiscal year the

Commission has revised rule U-45 (b) (6) so as to permit the allocation of taxes among companies in registered holding company systems

in accordance with either of the first two methods specified in Section

1552 of the Internal Revenue Code of 1954, subjecb, however, to certain limitations. 10&

With minor exceptions, rule U-50 requires competitive bidding in

connection with the issuance or sale of securities by registered holding companies and their subsidiaries. During the fiscal year the

Commission instituted a study as to whether competitive bidding is

a condition which should be imposed upon the statutory exemption

afforded by section 6 (b) of the Act. On November 25, 1953 the

Commission published a notice of a proposed amendment to rule U-50

which would exempt from the competitive bidding requirements of the

rule securities issued by certain public utility subsidiaries of

registered holding companies." Such amendment would implement

the exemption provisions of section 6 (b) of the Act which, subject

to such terms and conditions as the Commission deems appropriate in

the public interest or for the protection of investors or consumers,

exempt such issues if they have been expressly authorized by a State

commission. Extensive written comments on the proposed amend-

• Holding Company Act release No. 11761 (Mar. 12, 1953)•

Holding Company Act release No. 12206-X (Nov. 9, 1953).

10 Holding Company Act releases Nos. 12237 (Dec. 7, 1953) and 12288 (Dec. 30, 1953).

10. Holding Company Act Release No. 12776 (January 12, 1955).

11 Holding Company Act release No. 12217-X.

•
74 SECURITIES AND EXCHANGE COMMISSION

ment were received from representatives of the industry, public

regulatory bodies and members of the general public, and on February

18, and March 31, 1954 public hearings were held on the proposal.

At the end of the fiscal year the Commission had not acted on the

proposal.

The employee stock option plan as a means of incentive compensation for executives and employees has been used only to a very limited

extent in the public utility industry. The Commission has not permitted a declaration in respect of any stock purchase plan or stock

option plan to become effective. In the fiscal year 1953 the Commission received from holding companies a number of requests concerning

the issuance of stock to officers or employees of a registered holding

company or any of its subsidiary companies pursuant to an employees'

stock option plan. On )'Iay 15, 1953, the then Director of the Division of Corporate Regulation, acting upon direction of the Commission, sent a letter to each registered holding company stating that the

Commission would give expeditious consideration to stock purchase

plans meeting the prescribed standards which, in effect, would have

made such plans stock option plans. On February 12, 1954,the Commission promulgated for comment a proposed new rule, Rule U-51,

which would make it possible for registered holding companies and

their subsidiaries to use employee stock option plans with appropriate

safeguards to protect the public interest and the interest of investors

and consumsrs.':' .A public hearing on the proposed rule was held on

April 8, 1954. After the close of the fiscal year, the Commission

announced that, following thorough consideration of the entire record

in the matter, it had decided not to adopt the proposed rule U-51

and it also announced withdrawal of the )'Iay 15, 1953 letter referred

to above."

The Public Utility Holding Company Act prohibits a registered

holding company or subsidiary from having as an officer or director

any officer, partner, or representative of any bank, trust company

or investment banker, except as permitted by regulations of the Commission as not adversely affecting the public interest and the interests of investors and consumers. Rule U-70, as presently in

effect, grants exemptions from this prohibition to persons whose

only financial connections are with commercial banking institutions

and small banking investment firms meeting certain described requirements. During the fiscal year the Commission published a proposal

to revise this rule so as to eliminate the numerous complex exemptions inserted from time to time over the years to meet specific

Holding Company Aet release :->0 12354 (February 12, 1954).

13Holding Company Act release :->0. 12i28 (December i, 1954).

"
TWENTIETH AJ\TNUAL REPORT 75

situations which are no longer of particular significance. The proposed revision would simplify the rule and give registered holding

companies and their subsidiaries some additional latitude in the

selection of directors." At the end of the fiscalyear, the Commission

had not acted on the proposal.

During the year the Commission promulgated notices of proposals

to adopt statements of policies setting forth the requirements which

it considered should be met by public utility companies subject to

the regulatory provisions of the Act in their indentures securing

first mortgage bonds and in the protective provisions pertaining to

their preferred stocks In the past, the requirements imposed upon

issuers of mortgage bonds and preferred stocks have varied from time

to time and from issuer to issuer with the result that there have been

charges of unequal treatment by some issuers. The object of the

proposed statements of policies is to reduce this variation and to

provide all interested persons with information as to the standards

respecting indenture and preferred stock charter provisions which

these types of security issues will be measured against." Voluminous

comments were received from representatives of registered holding

company systems and from interested members of the public and these

are under study by the staff.

Revisions of Forms

Generally speaking, the forms prescribed for reporting to the

Commission by registered holding companies and their subsidiaries

had received little attention during the past several years, and much of

the required data was either available in other sources or no longer

essential. In other respects the reports were inadequate. The three

principal forms used by registered systems were revised during the

fiscal year by the elimination of some items, the restatement of

others and an overall attempt to simplify language. The financial

statement requirements in these forms have been strengthened, and

now conform generally to the basic accounting regulations promulgated by the Commission under the Securities Act of 1933 and Securities Exchange Act of 1934.

Form U5S, which is the annual system report required to be filed

by registered holding companies pursuant to the requirements of the

Act, was redesigned so that a single report may now be used to satisfy

the annual reporting requirements under both the Public Utility

Holding Company Act and the Securities Exchange Act for all

associate companies in a particular holding company system." As an

example, this has enabled one registered system to reduce the number

14 Holding Company Act release No. 12242 (December 8,1953).

"Holdmg Company Act Releases Nos. 12507and 12508 (~fay 25,1954)

1& Holding Company Aet Release No 12430 (Maron 29, 1954).
76 SECURITIES A..1Il"DEXCHANGE COMMISSION

ofseparate reports required to be filed by the various system companies

under both statutes from 11 to one. The revision of Form U5S

should result in a real reduction in the time required to be spent by

the Commission's staff in examining annual reports of companies

subject to both the Public Utility Holding Company Act and the

Securities Exchange Act.

Form U-13-60, which is the annual report form for mutual and

subsidiary service companies associated with registered holding

company systems, was also simplified.'? Items calling for material

contained in the system annual report on Form U5S and for detail no

longer deemed necessary were eliminated.

Form U-l, which is used for filing most applications and declarations in respect of financing, acquisitions of securities and assets and

certain other transactions regulated by the Act, was revised and

brought up to date during the fiscal year.IS One important new

requirement was that the financial statements, required to be filed

as exhibits to the form, be prepared in accordance with the Commission's Regulation S-X. The privilege of incorporation by reference of material filed under all statutes administered by the Commission, instead of only to the Holding Company Act, was part of the

revision.

Processing of Fee Applications for Services Rendered in Section 11

Reorganization Proceedings

At the beginning of the present fiscal year the Commission was

faced with a substantial backlog of applications for fees rendered in

prior Section 11 reorganizations. To facilitate handling this backlog,

a new procedure was inaugurated in December 1953 for disposing of

such applications. Under the new procedure, after fee applications

have been filed, the Commission enters an order directing the company or companies who will pay the fees to file with it a report setting

forth, in a manner so as to indicate the proposed allocations thereof

among the affected companies, the amounts of fees and expenses

which those companies have already paid or, after negotiation with

applicants, have agreed to pay, and in cases where negotiations were

unsuccessful, the amounts which such companies recommend for

payment. To avoid any possibility that its original order might be

construed as a waiver of its jurisdiction over fee agreements negotiated pursuant thereto, the Commission reserves jurisdiction therein

of its right to exercise the full power with respect to fees and expenses

which are conferred upon it by the Act.

While the company is carrying on the negotiations and preparing

the report to the Commission referred to above, the staff of the Divi17 Holding Company Act Release No. 12287 (December 30,1953).

18 Holding Company Act Release No. 12611 (August 10, 1954).
TWENTIETH ANNUAL REPORT 77

sion of Corporate Regulation independently studies and prepares an

analysis of the fee applioations on file and makes a preliminary Division

recommendation to the Commission of the amounts which should be

approved as fees for each fee applicant. The Commission is then in a

position, upon receiving the company report, to compare the figures

agreed upon or recommended by the company with those independently recommended by its staff and to determine whether it can approve and direct payment of some or all of the fees agreed upon or the

fees recommended or compromise figures without a public hearing.

Although this new procedure is not adaptable to all of the fee applications pending before the Commission, the Commission has found generally that its use in appropriate cases has greatly facilitated disposition of the cases and has reduced to a minimum the necessity of holding

extensive fee hearings. Since December 1953, the new procedure has

been employed for handling fee applications related to reorganizations

of five holding company systems."

COOPERATION WITH STATE AND LOCAL REGULATORY AUTHORITIES

The Commission has continued to pursue its long established policy

of cooperating to the fullest extent with state public utility commissions and municipal regulatory bodies on all matters of mutual

interest. Aside from day-to-day contacts, most of which are informal

in nature, there were significant instances during the past fiscal year

of cooperation on the part of the Commission with state and local

authorities on public utility matters.

An underlying objective of the Act is to supplement and strengthen

local regulation of public utilities. Notices of proceedings and of

proposals to amend or adopt rules, forms and regulations under the

Act, which are considered likely to be of interest to state and local

authorities, are sent to those agencies. All matters of general interest

are circulated in this manner among the members of the National

Association of Railroad and Utilities Commissioners.

In response to the Commission's published notice dated November

25, 1953/° inviting comments on the proposed amendment to rule

U-50, which would exempt from the competitive bidding requirements

of the rule securities issued by certain state regulated public utility

subsidiaries of registered holding companies, comments and recommendations were received from 41 state commissions and from the

Public Utilities Commission of the District of Columbia.

1I Standard Power and L,ght Corp., Holding Company Act Releases Nos. 12272 (December 23,1953) and

12496 (May 14, 1954); Arkanso. ]I."olural Ga. com., Holding Company Act Releases Nos 12339 (February

2,1954) and 12506 (May 21, 1954); Pennsylvanza Gas Electru: Corp, Holdmg Company Act releases Nos.

12381 (February 26,1954) and 12628 (August 19,1954); Electric Bond and Share Co., Holding Company Act

Releases Nos. 12408 (March 15, 1954) and 12567 (June 29, 1954); and Eastern Utlllliu A••ociau«, Holding

Company Act Releases Nos. 12462 (April 14, 1954) and 12632 (August 24,1954).

"Holdmg Company Act Release No. 12217-X (November 25,1953).

~
78 SECURITIES AND EXCHANGE CO:MMISSION

The proposal by Cities Service Company, a registered holding

company, to sell all of its holdings of the common stock of The Gas

Service Company to Missouri Public Service Company, discussed more

fully in a preceding section of this report, was also the occasion

for active participation by state regulatory authorities. Following

the filing with the Commission of the proposed contract between

Cities Service and Missouri Public Service, the public utility commissions of the States of Missouri, Kansas, Nebraska and Oklahoma,

in which Gas Service operated, were notified of the pending proceedings and of the date set for the hearing and were kept fully advised of

all subsequent developments. The Missouri Public Service Commission and the Kansas State Corporation Commission appeared and were

admitted as parties in the proceedings before the Commission.

FINANCING OF REGISTERED PUBLIC UTILITY HOLDING

COMPANY SYSTEMS

The volume of securities sold for cash or issued in exchange for

refunding purposes by registered holding companies and their subsidiaries during the fiscal year 1954 exceeded that for the preceding

year, even though 17 companies with assets of $270 million were

removed from the jurisdiction of the Act as a result of divestments

pursuant to section 11. A major improvement in the markets for new

securities and continuance of the high rate of post-war public utility

expansion appear to be the principal contributory factors in the

past year's record.

In 1954 registered systems sold $902.9 million of securities to the

public and to institutional investors as compared with $712.2 million

in 1953. In both years this external financing accounted for 26 percent of the total volume of financing by the entire electric and gas

utility industries. The aggregate volume of security sales upon which

the Commission was required to act pursuant to sections 6 and 7 of

the Act, including both sales to the public and intra-system sales,

increased to $1,154.5 million in 1954 from the $993.2 recorded in the

previous year, despite a modest decline in security sales by subsidiaries to their holding company parents from $281.0 million in 1953

to $251.6 million in 1954.

The following table sets forth in detail for the two years the volumes

of securities of various types issued and sold by registered holding

companies and their subsidiaries under sections 6 and 7 of the Act.

Portfolio sales and issuances in connection with reorganizations

are excluded.
TWENTIETH ANNUAL REPORT 79

Totals

Sales of securities for cash and refunding exchange offerings authorczed pursuant to

Sections 6 and 7 of the Public Ut1hty Holding Company Act of 1935 for the fiscal

years ended June 30, 1954, and June 30, 1953

[Dollar figures III thousands]

For fiscal year endedJune 30,1951 June 30,1953

Type of sales I

I I

Totals I Sales to Pri vate Sales to

Gro~:~I:umJ ::::m;:_: Gr~:srell~:um_ Gross I ~um-I Gross! Numsales i ber of I sales ber Of! sales ber of sales "ber of sales I ber of

_________ ._v_a_lu_e_llssues I value Issues I value Issues I value i Issues I value i ISSUes

EleetneandGas 1--'--'--1-1-'-1- Utilities Bonds I I I $348 4. 27 $176 0 11 $26 0 11 $550 4 49 $353 6 , 33

Debentures__________ 25 21 1 1-------- ------- -------- -------1 25 2 I 1 724 Notes________________ 1 2 13 5 4 54.8 54 683 58 80 7 126

Preferred stock._____ 73 7 10 6 0 I 1 -------- ------- 79 71 11 I 70 0 I 9 Common stock.c.L, , 88 6 7 _ _ 126 7 47 2153 54 2026 68

--- --- --- -- --- ---,------ -----

Tota!... ~1~1~ __16_1 20i 5 ~1_~~~_~_L..!i31 779.31~

Hol~~~Jso~~~~_e_s Debentures__________ ==[==--:- 1320 4 --1-== == ~11--1-1==1== 1320 4 25 5 1

Commonstock._____ 225 3 225 3 I 1195 10

---'----~- -- ------ ---1--'---'--

TotaL____________ 154 5 I 7 ( 0 1 161 5 I 8 I 1450, 11

===1====,===

NOngr~~ri:~~~~~~~:: ---10-0- -----1- :::::::: ::::::: :::::::: ::::::: ---10-0-1-----1-1 1~~ Notes t , 19 5 15 19 5 151 22 2 41

Cornman stock______ 24 6 9 24 6 I 9 20 0 13

TotaL____________ 10 0 1 ,~_____ 44 1 24 54.1 I 25 I 68 9) 57

Grand totals 700:4_~_202.5I--17-_25l6_136Il.l545I------z06I9932

As indicated by the preceding table, the numbel' of issues acted

upon by the Commission in 1954 was 100 less than the number for

1953, whereas dollar volume of financing increased $161.3 million

during the past year. This reflects principally a decline in the number

of medium term note issues sold by subsidiaries to their respective

parents.

The electric and gas utility and non-utility operating companies

of registered systems sold $218 million of common stocks in 1954.21

This represents the largest volume of equity financing accomplished

by such operating companies in any fiscal year since 1949. Of

this amount, $119 million were sold to parent holding companies.

The balance of $99 million represented sales of stock to the public

by operating companies which were also top registered holding companies, and by other operating companies in which there was a public

21 Represents sales of securines by all electnc, gas and nonutthty operatmg companies of registered

systems, mcludmg sales to registered holding company parents, but evcludmg sales of seeunties hy one

operating company to another Also excludes all sales of securities by those remstered holding companies

which Iunctrm solely as holdmg cornparnes.

326394-55-7

1

II ~

~
80 SECURITIES AND EXCHANGE COMMISSION

interest resulting from partial divestments. While such a comparison

may be somewhat affected by differences in the methods of subsidiary

financing employed in various systems, it is significant that the total

sales of common stocks by the operating companies of registered

systems accounted for 25 percent of their security sales in 1954, while

total sales of common stocks by all other operating companies in the

electric and gas industries not subject to the Act showed a corresponding ratio of 18 percent.

The financing of registered holding companies (exclusive of holding

companies which are also operating companies) followed a much different pattern. In the fiscal year 1954 they sold $139.0 million of debt

securities and $22.5 million of common stock. They sold $119.5

million of common equity securities in 1953, $108 million in 1952

and an average of more than $80 million in each of the three fiscal

years 1949 to 1951. The amounts of common equity and debt

securities sold for new money purposes in each of the past six fiscal

years by these companies are shown in the following table.

Sales of debt securities and common stocks for new money purposes by registered

holding com/parues uihdch functtoti solely as holding companies. Data for operatinqholaing companies are excluded

(In millions of dollars]

FIScal year

1949 ._

1950 ._ _._.•.

195L .. .. _._. .. .. ... ._ .... _' ... _._.. _. .. _. . .. _. . 1952.. .... .. •. .. ._. •. .. . .. .. . _._ 1953 ._. . . . •.. •. ._._. . . ._

1954 .. _. ... ... ... . ._

Debt I Common

securities stocks

$24 $69 40 91 60 82 104 108

26 120

139 22

The debt financing of $139 million by these registered holding

companies in 1954 represented almost entirely debenture issues by

holding companies in those systems whose operating subsidiaries

have no long-term debt securities in the hands of the public.

The effect of the comparatively small volume of common stock

sales by registered holding companies in 1954 was to reduce to 12.3

percent the percentage of the aggregate external financing of registered systems which was represented by common stocks. In 1953,

26 percent of the total external financing of registered systems was

accounted for by sales of common stocks.

The sharp decline in holding company common stock financing

during 1954 reflects in part the carry-over of funds derived from the

sales of unusually large amounts of holding company common stocks

in 1952 and 1953 as indicated above. Another factor in the year's

results was the financing by one large registered holding company,

The Columbia Gas System, Inc., which presented unusual problems.

That company finances all of its subsidiaries' requirements and faced

• - •

• • -

' _ __ _ _ __ __ _ _ __• __ __ __
TWENTIETH ANNUAL REPORT 81

the problem of raising $130 million to finance the expansion program

of its system. Because of the usual lag in the development of earnings

power on recent property additions and the lag in the procurement of

rate revisions applied for, the company's earnings dropped to a point

where management considered it unwise to attempt to raise the needed

capital by the sale of common stock. As an alternative Columbia's

management proposed and the Commission approved the sale of $90

million of sinking fund debentures in the fiscal year 1954/2 representing 62 percent of the total external debt financing of all registered systems in that year. The debentures included $50 million

subordinated debentures convertible into common stock beginning on

January 1, 1955. This issue represented the second convertible issue

ever authorized by the Commission under section 7 of the Act (the

other having been issued in connection with reorganization under

section 11 of the Act),23and it reflected the extraordinary circumstances present in the case. Columbia sold $22 million of common

stock in 1953 and $20 million in 1952. The consolidated capitalization of the Columbia system as ofJune 30, 1954,reflecting both debenture issues, showed a debt ratio of 55.2 percent and a common equity

ratio of 44.8 percent.

The continued high level of financing activity by registered systems

in 1954was typical of the electric and gas utility industries as a whole.

The first six months of the fiscal year 1954 witnessed a decline of

nearly one percent in the cost of public utility bond money with a

corresponding improvement in the price structure of the common

and preferred stock markets. It is apparent that this development

acted as a potent stimulant to both financing plans and expansion

plans throughout the year. The drop in financing costs also stimulated a modest revival of refunding operations. Registered systems

sold $20 million of refunding issues in 1954 and all other electric and

gas utilities sold $291 million of securities for that purpose. The

latter total includes two bond issues aggregating $105 million sold for

the purpose of refunding two issues which had been outstanding only

about 12 months.

Plant construction expenditures by the electric and gas utility

industries for the fiscal year 1954 recorded the modest increase predicted in the 19th Annual Report. Industry estimates indicate that

construction expenditures for the next two fiscal years may

amount to approximately $3.8 billion in 1955 and approximately $3.5

billion in 1956.

The rights offering continued to dominate the common stock financing of registered systems in 1954, despite the relaxation in 1953 of the

"Holdmg Company Act releases Nos 12458(Apfl113, 1954) and 12554(May 22,1954) Colnmbla has not

yet sought approval for the sale of the addltional $40 mllhon of debt contemplated at that tune.

,. In the Matter of New England Gas and Electric Assae;a/ion, Holding Com pan)' Act releases os 6i29

(June 24, 1946), 7181 (February 11, 1947) and i295 (March 20, 1947).

~
82 SECURITIES AND EXCHANGE COMMISSION

Commission's former policy of requiring that sales of common stock, be

made in this manner except where unusual conditions prevailed. Of

the 10 issues offered in 1954 pursuant to sections 6 and 7 of the Act,

only two, amounting to 10 percent of the total dollar volume, were

sold by means other than rights offerings." 65 percent of the common

stock sold in 1954 by all other electric and gas utilities was offered

through rights offerings.

Common equitu finaucrnq durina the fiscal ?fear 1954 by reqistered holding company

systems and by all other electric and ga.~ utility companies, includinq holding

compames, and gas tranemission. compames. Secondoru offermqs and intercompany transactions excluded

[Dollar figures ill mIllIons]

Registered holding All other electric I TOk~1 electrrc and

com pan)' systems and gas utilities gas utihty industnt's

Type of offering

I

Volume Nv mber V I Numher V0111;11n. of ISSUes olume of ]ssues

Rights., .____._. ____ .__._.' 8 $100 32 $290 40 $390 Pubhc . ... . .' 2 II 16 148 18 159

--- --- --- ---- --- --- Totals ________________ . _________. _._ III 111 48 438 58 549

The trend toward non-underwritten rights offerings noted in 1953

has continued during the past fiscal year. Also in evidence was an

increase in the use of the oversubscription privilege in underwritten

offerings. These:developments are summarized in the following table:

Rights offermo« of common stocks by all electric and gas utility componies, well/ding

holdmg companies and 'gas transmIssion companres, Secondary offerinqs and

intercompany transactions excluded

Number of Issues

Banking arrangements

1954 I~I~

40 I 40 I 37

Percentage of ISSues

Underwrrtten, I

WIth ovcrsubscnptron privilege [

Underwrrtten, i WIthout oversubserrpnon prlvrlege -------. --. .. -. --. i

Nonunderwritten, I

WIth oversut serrpuon prrvrlege , --. --. ----I

Nonunderwrlttr-n, 1 \\ ithout ovorsubscnpnon prrvilege . .. .. __.!

30

40

20

10

20

55

15

10

35

49

13

3

Offerings of securities by issuing companies pursuant to sections

6 (b) and 7 of the Act and portfolio sales by registered holding companies under section 12 (d) are required to be made at competitive

S4Duquesne LIght Company, Holding Company Act release No. 12130 (September 8, 1953); and Utah

Power & LIght Company, Holdmg Company Act release No 12404 (March 11, 1954).

~~~~~~

•______________

____•____•___•• ___ ___ ________

w • _

~ ~__

__- ----- - - -- - ---- -- -

- ---- ----- ----- -- ------ _
TWENTIETH Al~NUAL REPORT 83

bidding in accordance with the provisions of rule U-50. Automatic

exemptions from competitive bidding requirements for certain types of

sales including nonunderwritten sales made to stockholders pursuant

to preemptive rights are provided by clauses (1) through (4) of paragraph (a) of the rule. Under paragraph (a) (5) the Commission may

by order exempt an offering from competitive bidding if it appears

unnecessary or inappropriate to carry out the provisions of the Act.

The following table shows the volume of sales of securities at competitive bidding pursuant to rule U-50 by registered holding companies

and their subsidiaries, including portfolio sales, for 1954 with cumulative totals from May 7, 1941, the effective date of the rule.

Sale of ~ecuntie8 pursuant to nile U-50

[In rmllions of dollars]

July 1, 1953 to June 30, ~ray 7, 1941 to June 30, 1954 1954

Number Amount 1 Number Amount 1 of Issues of ISSUe'S

Bonds. __._. _... ___. __________. _______.. ____________. ___ 27 $.148 370 $5,6.14 Debentures __. _______________________.. __. _______. _____ .5 157 44 1.106 Notes ------------ ------------ 9 75 Prefemicfstock:::: ::::::::::::::::::::::::::::::::::::: 10 74 1f4 88.0 Common Stock. ______________. _______. ________. _______ 7 89 lCi 1.008

Total. ________. ____________. _. _____... __________. 49 668 628 S 708

I Amounts shown represent prmoipal amounts of bonds, debentures and notes, par or stated values of

preferred stocks, and proceeds of sales of common stocks.

Included in the total of $668 million of security sales for the fiscal

year 1954 are two portfolio divestments of common stocks amounting

to $36 million," leaving total sales by issuers at competitive bidding

of $632 million. The difference between the latter figure and the

total external financing by registered systems of $902.9 million

amounted to $271 million, which represented sales of securities pursuant to the various exemptions from competitive bidding requirements

afforded by the rule. Among these exempt sales were $60 million of

securities sold pursuant to the automatic exemptions provided by

clauses (1) through (4) of paragraph (a) of the rule.

The balance of $211 million represented sales of securities by six

companies pursuant to exemptions from the competitive bidding

requirements of rule U-50 granted by orders of the Commission under

paragraph (a) (5) of the rule. Included were sales of three issues

aggregating $48 million which were exempted because of unfavorable

market. conditions and other unusual circumstances attending the

"Inc1ufles sale hy C,tle, Sen-we Company on April 13, 19.04of II' hold mgs of the common stock of The

Gas Service Company for $35 million, Holding Company Act Releases Nos 12410, 12445 anflI251~, anu 'ale

by Standard Power and Lrght Corporation of 34,739 shares of Duquesne LIght Company common stock on

September 16,1953 for $884,000, Holdmg Company Art Release :\'"0.12130
84 SECURITIES AND EXCHANGE COMMISSION

offerings." Another company was granted exemption with respect

to $3 million of its common stock representing the unsubscribed

portion of a non-underwritten rights offering." Two other companies,

organized to construct and operate generating facilities to supply

electric power to Atomic Energy Commission plants, issued $141

million of bonds and $19 million of notes pursuant to long-term construction loan commitments. These agreements extend over periods

of several years and permit the issuing companies to issue their securities to insurance companies from time to time as funds are needed.

Since these arrangements did not lend themselves to the mechanics

of the competitive bidding procedure they were exempted by orders

of the Commission pursuant to paragraph (a) (5) of rule U-50.28

There were three additional issues not included in any of the foregoing totals. New England Gas and Electric Association, a registered

holding company, sold its holdings of all of the preferred and common

stocks of New Hampshire Electric Company to the Public Service

Company of New Hampshire, a non-affiliate, for a consideration consisting of 120,000 shares of common stock and a five year note of

$2,240,000 of the latter eompany.P Union Electric Company of

Missouri, a registered holding company, acquired the common stock

of Missouri Edison Company, a non-affiliate, through the issuance

of shares of its common stock in exchange."

In comparison with the 628 issues of securities totalling $8,708

million sold by registered holding companies and their subsidiaries at

competitive bidding from the effective date of rule U-50 to the end of

the :fiscalyear 1954, 216 issues with volume of $1,825 million were sold

by other means in accordance with orders of the Commission granting

exemptions from competitive bidding pursuant to paragraph (a) (5)

of the rule. The following table sets forth the cumulative totals of

issues and dollar volumes of each type of security sold pursuant to

these exemptions.

.. Arkansas LOUISiana Gas Company bonds, Holding Company Act release No. 12134 (September 16,

1953), Eastern Unhties Associates bonds, Holding Company Att release No. 12382 (Marcil 2, 1954); and

Indiana & Michigan Eleetrie Company preferred stock, Holding Company .Act release No. 12140 (September 21,1954).

27General PUblic Utilities Corporation, Holding Company Act Release 1'0. 12492 (May 12,1954).

'8 Electric Energy, Inc $60 milhon of $95 mrllion of bonds authorized in Holding Company Act release;

Nos 11689 (January 30,1953) and 12048 (July io, 1953), Ohio Valier Electrrc Corporatron $81 million of $Ow

rmlhon of bonds and $19 million of $60 rmlhon of notes authorrzed m Holding Com pan)' Act Ielease No. 120i7

(July 27. 1953).

"Holdmg Company Act release No. 12510 (May 25,1954).

soHolding Company Act release No. 12262 (December 15, 19m).
TWENTIETH ANNUAL REPORT 85

Sales of securities exempted from competitive bidding requirements pursuant to the

provisions of paragraph (a) (5) of rule U-50 by orders of the Commission entered

from May 7, 1941 to June 30, 1954.

[In mllhons of dollars]

Underwritten Nonunderwritten Total

Number Amount I Number Amount I Number Amount I of issues of issues of ISSUes

--- --- --- Bonds 4 $27 64 2 $615 68 2 $842 Debentures, ._. 3 83 5 37 8 120 Notes ._. 21 , 55 21 255 Preferred stock 11 66 25 265 36 331 Common stock ._. 33 279 50 198 83 477

TotaL --- 51 455 165 1,370 216 21, R25

I Proceeds before expenses.

2 These amounts Include $241 million of bonds and $20 mllllon of notes sold up to June 30, 1954 by Electric

Energy, Inc. and Ohio Valley ElectrIc Corporation pursuant to long-term loan commitments authorized by the CommISSIOn. The entire amounts of these commitments were exempted from competitive biddmg

requirements by orders of the Commission pursuant to rule U-50 (a) (5). Tbe total authorlzanons are: Electrre Energy, Inc. $195 million of mortgage bond. of which $165 rmlhon has been taken down; OhIO

Valley Electric Corp., $360 millton of mortgage bonds of which $S1 milhon has been taken down, and $60

millIon of notes of which $20 nnllion has been taken down.

It will be noted from the above table that only 51 issues with

an aggregate dollar value of $455 million were sold through underwriters. Of the $1,370 million of securities sold by means of nonunderwritten transactions exempt from competitive bidding $752

million represented private placements of bonds. Included in the

latter were $241 million of bonds sold pursuant to the construction

loan commitments made by Ohio Valley Electric Corporation and

Electric Energy, Inc. as described above. Two subsidiary natural gas

pipe line companies sold $94 million of bonds during the period under

similar agreements. Also included among these private placements

was an issue of $100 million of collateral trust bonds as part of a

reorganization settlement under section 11 of the Act. All notes

sold during the period and more than half of the debentures sold were

also in the nature of private placements. Sixteen of the preferred

stock issues totalling $243 million, were refunding exchange offerings,

14 of which, with aggregate volume of $227 million, were initiated

prior to the announcement by the Commission of its general policy

requiring competitive bidding in such cases." Sixteen of the common

stock sales, totalling $83 million, represented sales of equity investments in subsidiaries by registered holding companies to other public

utility or holding companies. Sixteen other issues, aggregating $19

million, were in the nature of sales of common stock investments in

small non-retainable subsidiaries directly to private individuals or

small groups of individuals.

Holding Company Act release No. 6449 (March 5, 1946).

--- --- ______• ________• ________• ___________

•______ ________•________•__ _______• ______ ________• ________• __ ---------- ---------- ______ • _________________• __

______ • _______________ __

--- --- --- --- --- •••• _____• _________________• __ '

"
86 SECURITlr::S AXD rXCHANGE COMl\USSION

FINANCING OF ELECTRIC GENERATING COMPANIES SUPPLYING

FACILITIES OF THE ATOMIC ENERGY COMMISSION

Two generating companies which have been organized to furnish

power to facilities of the Atomic Energy Commission are subject to

the Act because they are subsidiaries of registered holding companies.

The initial equity financing of the first of these, Electric Energy, Inc.

(EEl), was approved by the Commission on January 15, 1951.32

The purchasers of the common stock were Central Illinois Public

Service Company, 20%; Illinois Power Company, 20%; Kentucky

Utilities Company, 10%; Middle South Utilities, Inc., 10%; and

Union Electric Company of Missouri, 40%; for an aggregate consideration of $3,500,000. Of these, Middle South and Union Electric are

registered holding companies, Kentucky Utilities and Illinois Power

are exempt holding companies, and Central Illinois is an independent

operating public utility."

EEl has a 25-year contract to furnish the Atomic Energy Commission installation at Paducah, Ky., with 735,000 kw. of power. Since

1951 the Commission has approved additional equity financing of

$2,700,000,34and debt financing in the form of 25-year first-mortgage

bonds in the amounts of $100,000,000 at 3 percent, $65,000,000 at

3% percent, and $30,000,000 at 4% percent." $740,350 in fees and

expe ises for the organization and financing of EEl have been

approved."

Following a similar pattern, the Ohio Valley Electric Company

(OVEC) and its wholly owned subsidiary, Indiana-Kentucky Electric

Company, were organized to construct generating capacity for the

furnishing of 1,800,000 kw, to the Atomic Energy Commission's

plant at Portsmouth, Ohio. The initial equity financing for this

system, consisting of 200,000 common shares to be sold for an aggregate of $20,000,000, was approved by the Commission on November 7,

1952,37with the shares being purchased by the sponsors in the following

percentages:

"Holdmg Company Act release No 10340 (January 15, 19,51)

33 See the COmmle5IOIl'S 17th Annual Reuort (1951), pp 10.2-10:'

,. Holding Company Act release Xo 1Ir,,9 (January 30,1%3)

Holding Company Act releases Nos IOf39 (June 26, 1951), 11689(January 30, 1953), and 12048 (July 10,

1953)

.. Holdmg Company Aet release Nos. 11392(July 21, 1952), 12353(February 10, 1954), and 12457 (AprJ112,

1954)

37Holding Company Aet release No 1l.\78 (Novernber 7,19:;2).

"
TWENTIETH Ml.T1\TUALREPORT 87

Equity

partunpauon.

ratio

Company (percent)

American Gas & Electric Company__________________________________ 37.8

Cincinnati Gas & Electric Company_________________________________ 9.0

Columbus & Southern Ohio Electric Company________________________ 4.3

Dayton Power & LIght Company____________________________________ 4.9

Kentucky Utilities Company________________________________________ 2 5

Louisville Gas & Electric Company__________________________________ 7.0

Ohio Edison Company 16.5

Southern Indiana Gas & Electric Company___________________________ 1. 5

Toledo Edison Company _ _ _ __ __ _ _ __ _ _ _ __ _ _ __ ___ _ __ _ _ _ _ __ _ _ _ _ _ ___ _ _ _ 4. 0

West Penn Electric Company _ __ _ _ _ _ _ _ _ __ _ __ _ _ ___ _ _ _ _ __ _ _ _ _ _ _ ___ _ _ _ _ 12. 5

Of the sponsors, American Gas, West Penn, and Ohio Edison are

registered holding companies, Cincinnati, Kentucky, and Louisville

are exempt holding companies, and the others independent operating

utilities.

Subsequently the Commission has approved the issue by OVEC of

$360,000,000 principal amount of 25-year 3% percent bonds,

$60,000,000 of 4 percent notes to banks, due January 1, 1967, and

$8,000,000 of 2 percent subordinated notes purchased by the sponsors."

$1,026,532 in fees and expenses has been approved since the end of the

fiscal year."

The debt financing arrangements of both EEL and OVEC permit

them to issue their securities to the institutional purchasers from time

to time as funds are needed. Since these mechanics did not lend

themselves to the mechanics of the competitive procedure, they were

exempted from Rule U-50 by orders of the Commission.'?

38Holding Company Act release No 12077 (JIlI~' 27, 1951).

Holdma Company Act release No. 127f4 (December 29,1904)

~D Sec notes 35 and 39, supra

_

"
PART V

PARTICIPATION OF THE COMMISSION IN CORPORATE

REORGANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY ACT, AS AMENDED

Chapter X of the Bankruptcy Act provides a procedure for reorganizing corporations in the federal courts. The Commission's duties

under Chapter X are, at the request or with the approval of the court,

to provide the court and investors with independent expert assistance

on the various legal and financial questions that arise in the proceeding

and to prepare advisory reports on plans of reorganization. The

Commission has no right of appeal in a Chapter X proceeding, but it

may participate in appeals taken by others.

The Commission acts in a purely advisory capacity. It has no

authority either to veto or to require the adoption of a plan of reorganization or to render a decision on any other issue in the proceeding.

Its recommendations are made for the benefit of the judge and the

security holders, affording them its disinterested views in a highly

complex area of corporate law and finance. Generally, the Commission participates only in proceedings in which there is a substantial

public investor interest.

The Commission, due to budget considerations and the need to make

the most effective use of its reduced personnel, is engaged in a re-examination of its functions under Chapter X of the Bankruptcy Act. In

view of the impact upon the federal courts of any curtailment of the

activities of the Commission under Chapter X, the Commission has

sought to obtain the views of the Federal Judiciary as an aid to the

Commission's study of its Chapter X activities. This problem was

presented to the Judicial Conference of the United States on September 23, 1954 and it was suggested that the Federal Judges be invited

to comment upon the functions of the Commission in Chapter X.

The Judicial Conference approved the suggestion and a questionnaire

has been sent to the Federal Judges through the Administrative Office

of the United States Courts, the results of which will be carefully

studied by the Commission.

SUMMARY OF ACTIVITIES

The Commission participated during the 1954 fiscal year in 49

proceedings involving the reorganization of 69 companies with aggregate stated assets of $553,998,000 and aggregate stated indebtedness

of $329,286,000. During the year the Commission, with court ap88
TWENTIETH A.~AL REPORT 89

proval, filed notices of appearances in 4 new proceedings under Chapter

X involving 6 companies with aggregate stated assets of $8,520,000

and aggregate stated indebtedness of $17,373,000. Proceedings involving 13 principal debtor corporations and 1 subsidiary debtor were

dosed during the year. At the end of the year, the Commission was

actively participating in 36 reorganization proceedings involving 55

companies with aggregate stated assets of $489,029,000and aggregate

stated indebtedness of $307,340,000.

Problems in tbe Administration of the Estate

A fundamental aim of Chapter X is to make available to the court,

the parties and the security holders full and accurate information

regarding the debtor's affairs. The independent trustee customarily

transmits to security holders a report on the history and financial

condition of the debtor, the operation of its business, and the desirability of its continuance. Such reports enable security holders to

consider suggestions for a plan of reorganization or proposed plans of

others and aid the court in considering problems before it. The

Commission has consulted through its staff with trustees in connection

with their investigations and the preparation of their reports.

The Commission generally renders assistance in connection with

the varied problems that arise in the administration of the estate.

For example, the Commission has rendered significant aid in the discovery and prosecution of causes of action against former management

or other fiduciaries who may have misused their positions of trust.

In this field of activity, the Commission had occasion to investigate

the affairs of Texas Gas Utilities Company in reorganization under

Chapter X in the United States District Court for the Western District of Texas. The Commission's inquiry uncovered substantial

evidence of mismanagement and overreaching on the part of the

former president of the company. The trustee, using the evidence

developed by the Commission, obtained a substantial judgment from

the former president and others for the benefit of the estate of the

debtor.'

Activities with Respect to Allowances

The Commission makes specific recommendations to the courts

respecting allowances for fees and expenses. The Commission itself

receives no fees or expenses from estates in reorganization and is

primarily concerned with the fairness of the result to the parties and

the public investors.

The reorganization under Chapter X of Central States Electric Corporation was conducted in the District Court for the Eastern District

of Virginia. The trustees brought an action in the District Court

I Huff v, Duke, et al., Unreported, W. D. Tex., 1954.
90 SECURITIES AND EXCHANGE CO:MMISSION

for the Southern District of New York against former officers and

directors of the debtor and others. This action was ultimately unsuccessful 2 and certain of the defendants made an application in the

District Court in New York for allowances of expenses and attorneys'

fees pursuant to Article 6A of the New York Corporation Law which

provides for indemnification to officers and directors of litigation expenses under certain conditions. One defendant, who was not an

officer, sought such an allowance on general equitable principles. The

District Court granted awards to all the applicants," and the trustees

appealed. On the appeal, the Commission, as amicus curiae, urged

that the state indemnification statute should not have been held applicable to a debtor in a Chapter X proceeding, pointing out among

other things that the awards contemplated by the state statutes were

inconsistent with the purpose of Chapter X to insure prosecution of

all causes of action in favor of the estate. The Commission urged

that in any event awards made for legal services and expenses in

connection with an action on behalf of the debtor's estate were within

the exclusive jurisdiction of the District Court in Virginia, where the

reorganization proceeding was pending. The Court of Appeals agreed

that the reorganization court "had the sole power to determine and

measure the rights of the defendants to reimbursement," 4 Accordingly, the Circuit Court for the Second Circuit reversed the order

granting awards.

In another significant appeal involving allowances, in it case where

the Commission was an active participant from the outset, the District

Judge had granted overall allowances substantially in excess of the

Commission's recommendations, although the allowances to certain

creditors' representatives were less than the amounts recommended

by the Commission. The Commission supported an appeal by the

creditors' representatives. The Court of Appeals agreed that the

overall fees awarded were too high in view of the size of the estate and

the work involved. Itpointed out among other things that the record

showed that thousands of hours of the trustees' work was without

commensurate accomplishment or benefit to the estate. The Court

also agreed that creditors' representatives who had been responsible

for increasing the size of the estate and had performed other valuable

services should be awarded more than the District Judge had granted

them. The Court of Appeals revised the allowances in substantial

conformity with the Commission's recommendations."

Austria" v, W'lllams, 103 F. Supp. 64 (S. D. N. Y.,1952) reversed,19S F. 2d 697 (C. A. 2,1952), ceruorart

denied 334 {; S. 9O'l (I952).

8 Austria" v, IVlUlams, Unreported, CIV. Ko 32-149,.4 ugust 21, 1953

4Allstnan V: TVIlllams, - F. 2d - (C. A. 2, 1954).

s In re Solar Manufacturmo Corporation, Samuel Marion appellant, 215 F. 2d 555 (C. A. 3, 1954).

•
TWENTIETH ANNUAL REPORT 91

Consummation of Plan

The Commission examines the corporate charters, by-laws, trust

indentures, and other instruments which are to govern the internal

structure of the reorganized debtor, and in general strives to assure

investors the inclusion of protective features and safeguards which its

experience has shown to be desirable. Another matter with which the

Commission has been concerned in connection with the consummation

of plans of reorganization is the problem of unexchanged securities.

Chapter X provides that a period of not less than five years following

the final decree may be fixed by the judge within which security holders

may make the exchange called for by the plan, after which they are

barred from any participation. The Commission has been anxious to

assure that all security holders obtain the new securities or cash

distributable to them under the plan of reorganization. Accordingly,

it has endeavored to see that adequate notice and publicity is given of

the bar date, that a professional search is made where possible, and

that the bar date is extended when appropriate.

In the reorganization of Chicago, .Aurora &: Elgin Railroad Company,

the plan provided that holders of the outstanding bonds of the company would upon' surrender of their bonds on or before January 15,

1954, receive in exchange therefor shares of common stock of the

successor companies. In December 1953, the Commission learned

that the exchange agent was holding 55,732shares ofstock and $18,370

in accrued dividends for bondholders of the debtor. The Commission

petitioned for an order extending the date for exchanging the outstanding bonds and directing the exchange agent to publish a notice

of the new bar date and to mail written notices to holders of the

unexchanged bonds. The District Court granted the Commission's

request and as a result of the notices given by the exchange agent,

some 33,000 shares were claimed by and delivered to their owners.

In this, as in several other cases, the extension of time granted by the

court proved efficacious in reducing the number of security holders

who failed to make the exchange.
PART VI

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939

The Trust Indenture Act of 1939 requires that bonds, notes, debentures, and similar securities publicly offered for sale, except as

specifically exempted by the Act, be issued under an indenture which

meets the requirements of the Act and has been duly qualified with

the Oommission. The Act operates by requiring that indentures to

be qualified include specified provisions which provide means by which

the rights of holders of securities issued under such indentures may be

protected and enforced. These provisions relate primarily to designated standards of eligibility and qualification of the corporate trustee

so as to provide reasonable financial responsibility and to minimize

conflicting interests. The Act outlaws exculpatory provisions formerly used to eliminate all liability of the indenture trustee, and imposes on the trustee, after default, the duty to use the same degree

of care and skill as a prudent man would use in the conduct of his

own affairs.

The provisions of the Trust Indenture Act are closely integrated

with the requirements of the Securities Act. Registration pursuant

to the Securities Act of securities to be issued under a trust indenture

subject to the Trust Indenture Act is not permitted to become effective

unless the indenture conforms to the requirements of the latter Act,

and necessary information as to the trustee and the indenture must

be contained in the registration statement. In the case of securities

issued in exchange for other securities of the same issuer and securities

issued under a plan approved by a court or other proper authority

which, although exempted from the registration requirements of the

Securities Act, are not exempted from the requirements of the Trust

Indenture Act, the obligor must file an application for the qualification of the indenture, including a statement of the required information concerning the eligibility and qualification of the trustee.

Indentures filed unaer the Trust Indenture Act of 1939

Number Aggregate

amount

Indentures pending June 30, 1953

Indentures filed dunng fiscal year

TotaL ._.

Disposition during fiscal year: Indentures qualified

Indentures deleted by amendment or withdrawn Indentures pending June 30,1954

TotaL _. ._.

92

8 $114,948,IW)

145 3, 688, 733, 320

153 3, 8Q3,682,lbO

139 3,378,298,860

2 37, 633,300

12 387,750,000

153 3,803,682, 160

_

• • __

_

_

_ • _

__• • _••• __•••••• • _
PART VII

ADl\IINISTRATION OF THE INVESTMENT COMPANY

ACT OF 1940

The Investment Company Act of 1940 provides for the registration

and regulation of companies engaged primarily in the business of

investing, reinvesting, and trading in securities. The Act requires,

among other things, disclosure of the finances and investment policies

of these companies. prohibits such companies from changing the nature

of their business or their investment policies without the approval of

their stockholders, regulates the means of custody of the companies'

assets, prohibits underwriters, investment bankers, and brokers from

constituting more than a minority of the directors of such companies,

requires management contracts to be submitted to security holders

for their approval, prohibits transactions between such companies

and their officers, directors and affiliates except with the approval of

the Commission, and regulates the issuance of senior securities. The

Act requires face-amount certificate companies to maintain reserves

adequate to meet maturity payments upon their certificates.

COMPANIES REGISTERED UNDER THE ACT

As of June 30, 1954, 384 investment companies were registered

under the Act, and it is estimated that on that date the aggregate

value of their assets was approximately $8,700,000,000. This represents an increase of approximately $1,700,000,000over the corresponding total at the beginning of the 1954 fiscal year. During the latest

period for which data are available, the 12 months ended March 31,

1954, about 219 registered open-end management and closed-end

management investment companies reported to the Commission

sales to the public of approximately $673,000,000 of their securities

and redemptions and retirements of approximately $267,000,000

leaving a net investment by the public in such companies of approximately $406,000,000, compared with a corresponding net investment

for the preceding 12-month period of approximately $545,000,000.

Investment companies registered at the end of the 1954 fiscal year

were classified as follows:

~anagernentopen-end 174

Management closed-endc , , _ __ __ 106

lJnit_______________________________________________________ 89

Faceamount 15

Total 384

93
94 SECURITIES AND EXCHANGE COMMISSION

TYPES OF NEW INVESTMENT COMPANIES REGISTERED

During the 1954 fiscal year 20 new investment companies were

registered under the Act, of which 8 were open-end management

companies (which redeem their shares on presentation by the shareholder) and 10 were of the closed-end management type (in which the

shareholder does not have a redemption privilege). Two companies

of the unit type were also registered. During the year registration

was terminated with respect to 5 management companies of which 1

was open-end and 4 were closed-end.

Among the open-end management investment companies which

registered during the year one was a company incorporated in Canada

which secured authority to register in accordance with the Commission's policies regarding Canadian investment companies described

below. Another open-end company had a stated investment policy

emphasizing investments in securities of corporations with substantial

interests in California. Of the closed-end companies which registered during the year, three were industrial companies which had

disposed of their business assets and invested the proceeds in securities,

one was organized to provide a medium for the investment of American

funds in Israel, and one was an employees' securities company. The

two unit investment companies registered during the year were

organized for the purpose of operating periodic payment plans for the

purchase of securities of open-end investment companies.

REGISTRATION OF CANADIAN INVESTMENT COMPANIES

Under the terms of the Act, an investment company not incorporated within the United States may publicly offer its own securities in

the United States only by special authorization of the Commission,

where the Commission has found that "by reason of special circumstances or arrangements, it is both legally and practically feasible

effectively to enforce the provisions of" the Act with respect to such

company. At the beginning of the fiscal year, several applications

were pending upon behalf of investment companies incorporated

under the laws of Canada seeking authority to register under the Act

and to sell their securities in this country. Pursuant to Commission

direction, our staff held extended discussions with representatives of

the Canadian companies which had applied for registration and formulated conditions and arrangements designed to facilitate registration

by these companies, with adequate protection for the interests of

investors comparable to that afforded investors in American companies.
TWENTIETH A....~J\lJAL REPORT 95

In order to establish definitive standards for all registrations by

Canadian companies, the Commission, after public notice and opportunity for comment by interested persons, adopted rule N-7D-l

under the Investment Company Act, which prescribes the conditions

and arrangements to be entered into by a management investment

company organized under the laws of Canada prior to the issuance of

an order under Section 7 (d) of the Act permitting the company to

register under the Act and to make an offering of its securities in the

United States. The rule is applicable only to Canadian management

investment companies, and the Commission announced that any conditions and arrangements proposed by investment companies organized under the laws of other foreign countries would be considered by

the Commission on a case-by-case basis in the light of the statutory

standards.

Rule K-7D-l provides, among other things, that in order to implement the statutory means of enforcement of the Investment Company

Act and to assure its effectiveness, the charter and by-laws of the

Canadian company must contain the substantive provisions of the

Act, so that the company in effect agrees that the provisions of the

Act may be enforced as a matter of contract right by shareholders

either in the United States or Canada. Under the rule, a majority

of the officers and directors are required to be citizens of the United

States, and all of such officers and directors must agree to comply

with the Act and consent to the enforcement of such agreements in a

similar manner. In order to effectuate the statutory objectives, the

rule also requires that the company maintain its assets in the United

States, and agree that in the event of noncompliance by the company

or its officers and directors with their agreements or the Commission's

order permitting registration, proceedings for liquidation and distribution of assets may be instituted. The rule also imposes duties and

obligations upon certain affiliated persons of Canadian investment

companies. It is the Commission's view that in substance the rule

will accord protection to investors equal to, although not necessarily

identical with, the protection afforded by the Investment Company

Act to investors in domestic companies.

Contemporaneously with the adoption of rule N-7D-l, the Commission issued two orders granting pending applications for registration of Canadian companies where the applicants had agreed to the

various undertakings prescribed by the rule. Shortly after the close

of the fiscal year, the Commission granted four more applications for

registration by Canadian companies. Each applicant undertook to

comply with all of the requirements of the new rule. As of September

1, 1954, four of the registered Canadian companies had made public

326394-ll5-8
96 SECURITIES AND EXCHA...~GE COMMISSION

offerings of their stock, after registration under the Securities Act of

1933, the offering price of the stock sold aggregating $102,000,000.

CURRENT INFORMATION

The basic information disclosed in notifications of registration and

registration statements is required by statute to be kept up to date.

During the 1954 fiscal year the following current reports and documents were filed:

Annual reports

Quarterly reports

Periodic reports to stockholders (containing financial statements)_

Copies of sales literature

252

868

686

1,829

APPLICATIONS FILED

Various provtsions of the Act provide that applications may be

filed for exemptions or other relief which the Commission may grant

if the statutory standards are met. During the fiscal year a total of

71 applications were filed, including 25 seeking exemption of proposed

transactions between investment companies and affiliates and 5 seeking

a determination that the applicant had ceased to be an investment

company within the meaning of the Act. Since there were 49 applications pending at the beginning of the year, a total of 120 applications

required examination and consideration during the year. Eighty-four

were disposed of and 36 were pending at the close of the year. The

sections of the Act under which these applications were filed, and the

number disposed of in each category, are shown in the following

table.

Applications filed with and acted upon by the Commission under the Investment

Company Act of 1940 during fiscal year ended June 30,1954

Pend. DIs. Pend-,

SectIons Subject Involved Ing Filed posed lng

July I, of June

1953 30,1954

-- -- -- 2,3,6 •. Status and exemptlon 9 24 22 11 7 (a)_. Transactions of an unregistered Investment com. 0 1 1 0 pany. 7 (d) Registration of foreign Investment companies 4 0 2 2 8,35 Compliance with registration requirements 1 0 0 1

8 (0--------------- Termination of registration, 10 5 5 10 9,10,16_ Regulation of affiliations of directors, otlicers, em. 13 2 15 0

ployees, Investment advisers, underwriters and others. 11,25 Regulation of security exchange offers and reorgan- 0 1 0 1 Izatton matters. 12, 13, 14 (a), 15_. Regulation of functions and aetrvrtles of invest. 0 5 5 0 ment companies 17_. . Regulation of transactions wlth affiliated persons 9 25 25 9 18,19,21,22,23 Requirements as to capital structures, loans, dis- 1 5 5 1

tnbuttons and redemptions, and related matters. 20,30 . Proxies, reports and other documents reviewed for 1 1 2 0

26 (a) (2) (C) =ti:~:~~oiIDiooriiticaie-rompa;;,es::: 0 1 0 1 28 1 1 2 0

----- - -- Total. .•. , ..• .• .•... ... _' 49 71 84 36

_

_

_

__ __________

_____________

_____________________________

__•• ___________ _______________

•• _________

__•• __ ••______ _______________________

______________

' __

_________ _____ •• ____

_______ ______

______ ••• __• ____________

_ '" __'" __•• _ __ _ __
TWENTIETH AN1I.TUALREPORT 97

In keeping with the Commission's policy of encouraging the free

operation of business management consistent with the protection

of investors, in processing applications under the Investment Company Act, the endeavor is made so far as possible to resolve any

problems on an informal basis, by discussion and correspondence rather

than by formal hearing procedures. By the use of such techniques

it has been practicable to dispose of most applications without the

necessity of formal hearings. 1

1 Inone case a nearing was held at the request of an mterested investor and the appllcation was dlsposed

of on tbe basis of the facts disclosed by the record, Ineludmg those developed at the nearing. (In the Matter

of Portsmouth. SUel Corpora/ion, Investment Company A~t Release No. 1894,August 12, 1903.)
PART VIII

ADMINISTRATION OF THE INVESTMENT ADVISERS

ACT OF 1940

The Investment Advisers Act of 1940 requires registration of

persons engaged for compensation in the business of advising others

with respect to securities. The Commission is empowered to deny

registration to or revoke the registration of any investment adviser

who, after notice and opportunity for hearing, is found by the Commission to have been convicted or enjoined because of misconduct

arising out of securities transactions or to have made false statements in his application for registration. The Act makes it unlawful

for investment advisers to engage in acts and practices which would

constitute fraud or deceit, requires investment advisers to disclose

the nature of their interest in transactions executed for their clients,

and prohibits profit-sharing arrangements and assignments of

investment advisory contracts without the client's consent.

Statistics of investment adviser registrations-1954 fiscal year

Effective registrations at close of preceding fiscal year , 1,093

Applications pending at close of preceding fiscal year___________________ 9

Applications filed during fiscal year__________________________________ 124

Total 1,226

Registrations cancelled or withdrawn during year;

Registrations denied or revoked during year ,

Registrations effective at end of year ,

Applications pending at end of year

79

2

1,134

11

Tot~ 1,226

During the fiscal year the Commission revoked the registrations of

two investment advisers. In one of the cases the Commission found,

among other things, that respondent, contrary to representations made

in his application for registration and amendment thereto, had previously used and been known by a name other than the name under

which he registered, took powers of attorney from clients, and based

his fees on profit-sharing arrangements.' In the other case, the

Commission found that the investment adviser corporation and its

I Samuel N. Sl1IJut,Investment Advisers ALt Release No. 70 (January 27, 1954).

98

_

_

_

_
TWENTIETH ANNUAL REPORT 99

president had been convicted in a United States District Court of

felonies for violating the fraud provisions of the Investment Advisers

Act."

LITIGATION UNDER THE INVESTMENT ADVISERS ACT OF 1940

During the fiscal year 1954 the Commission filed a complaint to

enjoin Ralph H. Seipel, a registered Investment adviser doing business

as Investors Surety Company, from further violations of Sections

206 (1) and (2) of the Investment Advisers Act of 1940.3 The complaint charged the defendant with falsely representing, among other

things, that Investors Surety Company absolutely guaranteed against

loss in the stock market, that it was the only organization in the

world providing professional trading services for investments and at

the same time maintaining cash reserves to protect against any

possible loss, that it never handled either cash or securities belonging to

its many customers, that it was composed of professional traders in

securities listed on the New York Stock Exchange and had been such

for over 25 years, and that it maintained branch officesin the principal

cities and had a foreign exchange department to convert foreign

currency into dollars.

• Hageman Corporation, Investment Advisers Act Release No. 69 (December 23, 1953)•

• D. C. D. C., No 3431-53.
PART IX

RELATED ACTIVITIES OF THE COMMISSION

COURT PROCEEDINGS

Civil Proceedings

At the beginning of the 1954 fiscal year there were pending in the

courts 13injunctive and related enforcement proceedings instituted by

the Commission to prevent fraudulent and other illegal practices in

the sale of securities. During the year 19 additional proceedings were

instituted and 16 cases were disposed of, leaving 16 of such proceedings

pending at the end of the year. In addition the Commission participated in a large number of reorganization cases under Chapter X of

the Bankruptcy Act, in 9 proceedings in the district courts under

section 11 (e) of the Public Utility Holding Company Act; and in 10

miscellaneous actions, usually as amicus curiae, to advise the court of

its views regarding the construction of provisions of statutes administered by the Commission which were involved in private lawsuits.

The Commission also participated in 36 appeals. Of these, 10 came

before the courts on petitions for reviews of administrative orders; 10

arose out of corporate reorganizations in which the Commission had

taken an active part; 2 were appeals in actions brought by or against

the Commission; 8 were appeals from orders entered pursuant to

section 11 (e) of the Public Utility Holding Company Act; and 6 were

appeals in cases in which the Commission appeared as amicus curiae.

Complete lists of all cases in which the Commission appeared before

a Federal or State Court, either as a party or as amicus curiae, during

the fiscal year, and the status of such cases at the close of the year, are

contained in the appendix tables.

Certain significant aspects of the Commission's litigation during the

year are discussed in the sections of this report relating to the statutes

under which the litigation arose.

Criminal Proceedings

The statutes administered by the Commission provide for the transmission of evidence of violations to the Attorney General, who may

institute criminal proceedings. The Commission, largely through its

regional offices, investigates suspected violations and, in cases where

the facts appear to warrant criminal prosecution, prepares detailed

reports which after careful review by the General Counsel's office and

consideration by the Commission, are forwarded to the Attorney

General. Commission employees familiar with the case often assist

100
TWENTIETH Al\TNUAL REPORT 101

the United States attorneys in its presentation to the grand jury, the

conduct of the trial, and the preparation of briefs on appeal. The

Commission also submits parole reports prepared by its investigators

relating to convicted offenders. Where an investigation discloses

violations of statutes other than those administered by the Commission, the Commission advises the appropriate federal or state agency.

Indictments were returned against 2,245 defendants in 525 cases

developed by the Commission prior to June 30, 1954.1 These figures

include 61 defendants in 20 cases in which indictments were returned

during the past fiscal year. At the close of the fiscal year, of the 481

cases disposed of as to one or more defendants, convictions had been

obtained in 418/ or 87 percent, against a total of 1,196 defendants.

Convictions were obtained against 25 defendants in 15 cases during

the past fiscal year." In addition, two defendants in two cases were

convicted of criminal contempt for violation of injunctive decrees

previously entered against them.'

In the single appellate case decided during the fiscal year judgments

of conviction were affirmed as to all 7 defendants who appealed. At

the close of the fiscal year 7 cases involving 8 defendants were pending

on appeal.

As in prior years, the criminal cases developed and prosecuted

during the fiscal year covered a wide variety of fraudulent activities.

They included fraud relating to mining and oil and gas ventures, the

operation of purported investment plans, the promotion of inventions

and new businesses and the manipulation of securities on a national

securities exchange, as well as fraudulent practices on the part of

securities brokers and dealers and their representatives. In a number

of fraud cases, the defendants were also charged with wilfully violating

the registration provisions of the Securities Act.

Convictions for the fraudulent sale of securities in connection with

oil and gas ventures were obtained in U. S. v. Hamilton (D. Mont.),

U. S. v. Vasen (N. D. TIl.), U. S. v. Frank (W. D. Okla.) and in U. S.

v. Henderson (W. D. Tenn.)." Henderson previously had been convicted on the same charge, violating the Mail Fraud Statute in connection with the sale of fractional undivided interests in oil and gas

rights, but the conviction was reversed upon appeal because of certain

trial errors.

I A condensed stattstienl summary of all errrninal Lases developed by the CommISSIOn from fiscal year

1934 through fiscal year 1954 IS set forth in appendix table 23. Tne status of enmmal cases developed by the

CommISSion wmeh were pending at tne end of the fiscal year IS set forth m appendix table 24.

I The 63remainmg cases, which resulted in acquittals or dtsmissals as to all defendants, meluded a number

where the tndletments were dismissed because of the death of defendants involved .

• One of these cases IS still pending as to two defendants •

Another Criminal contempt case against a single defendant was pending at the close of the year, See

Criminal Contempt Proceeding!', appendix table 16.

Appeals have been filed III the Vasm, Frank and Henderson cases whreh were pending at tbe close of the

fiscal year.

•

•

•
102 SECURITIES AND EXCHANGE COMMISSION

In the Vasen case, which involved a well that reached a depth of

20,450 feet, stated to be the second deepest well in existence, it was

charged that as part of a scheme to defraud, the defendant made

false representations such as that the well was going through an

"Atlantic Ocean of oil," that geologists believed that the producing

formation extended completely across the State of Mississippi and

possibly up to Pennsylvania, and that the oil sands encountered

assured production of thousands of barrels of oil per day. Vasen was

sentenced to a prison term of 5 years to be followed by 5 years probation, and a fine of $25,000 was imposed. The Frank case included

charges of misrepresentation concerning a so-called "magnetic logger"

device which was held out to investors as assuring 100 percent accuracy in the location of oil pools. Frank was sentenced to a term of 18

months imprisonment. In the Hamilton case the defendant was

charged with making false representations with respect to his holdings

and his plans to drill for oil and gas. He falsely stated the monies

received from investors would be used to drill an oil well. Hamilton

was placed on probation for 5 years but the imposition of the sentence

was suspended on condition that full restitution was made to all

investors within a period of 1 year. In the Henderson case the defendant was sentenced to 5 years imprisonment and fined $1,000.

Convictions for the fraudulent selling of securities in mining ventures were obtained in U. S. v. Kendall (W. D. Tex.), U. S. v, Wickham et al. (D. Nev.), U. S. v. Oottrelle (D. Mont.) and U. S. v. Swift

(N. D. Calif.). The misrepresentations followed a common pattern.

The defendants claimed that the mines involved had high grade ore

which was being currently produced when in fact they were barren.

Cottrelle had been a fugitive for 10 years, the indictment against him

having been returned in 1943. He returned voluntarily from Canada

and was sentenced to 3 years imprisonment and a $2,000 fine. Swift

was charged with causing false and misleading statements regarding

a new "ore shute" which were published and caused the stock to rise

on the exchange on which it was listed. Swift was fined $5,000. The

defendants in the other cases were sentenced to terms varying from 2

to 3 years imprisonment.

The promotion of spurious inventions and new businesses continued, during the past fiscal year, to be the subject of abuses in the

sale of securities. In U. S. v. Owens et al. (S. D. Fla.) the defendants

set up dummy corporations and obtained money from their victims

by a variety of misrepresentations and false promises. In U. S. v.

Ross (S. D. Ala.) the indictment charged that the defendant made

false representations concerning the establishment and financing of a

tung oil plant through money obtained from investors and funds purportedly available from the defendant and the Reconstruction Finance
TWENTIETH A;-"TJ'\UAL REPORT 103

Corporation. However, the indictment charged, the defendant converted the money to his own use. In U. S. v. Klein (~. D. Ill.) the

defendant was charged with falsely representing that he was in a

position to purchase a sizable small loan company in Pennsylvania at

a price less than its actual worth and that the investors would receive

an annual return of 10 percent pending completion of the transaction

and 15 percent thereafter. Actually, the indictment charged, Klein

appropriated and converted a large part of the money to his own use.

Another finance company was involved in U. S. v. Palmer (D. Colo.).

There it was charged that defendant, in the sale of stock of the finance

company, falsely represented that the investors were insured by an

agency of the Federal government, that the company was audited

every 3 months by the State of Colorado, and that the company paid

6 percent dividends regardless of profit or loss. The case of U. S. v.

Oox (D. N. Mex.) involved the sale of securities by means of false

representations concerning the alleged returns which investors would

receive upon the purchase of an interest in a dry ice plant. In U. S.

v. Estep (N. D. Tex.) the defendant sold interests in a company manufacturing an alleged fuel-less self-energizing power unit and a machine

which would keep people alive forever. The defendants in these

various cases received sentences of up to 5 years in prison.

In U. S. v. Martin (D. N. Mex.) the defendant was convicted of

falsely representing to his customers that he had executed their orders

to buy securities, that he was holding securities purchased and paid

for by them, and that payments made to them represented dividends

which Martin had received on the stock he was holding for them. In

fact, the indictment charged, Martin had not executed customers'

orders but instead had appropriated and converted to his own use the

securities and money he obtained from them. The defendant was

sentenced to probation for two years and the sentence was suspended.

Following an extensive investigation by the Commission, indictments were returned against 13 individual and 2 corporate defendants

in the United States District Court at Detroit, Mich., charging

them with violating the anti-fraud provisions of the Securities Act,

the mail fraud statute, and the broker-dealer registration provisions

of the Securities Exchange Act, in connection with a stock sale promotion conducted by long distance telephone and the mails from Montreal, Canada, which allegedly resulted in the defrauding of a large number of investors residing in some 40 States and the District ofColumbia,

of over $300,000.6 It is charged in the indictments that defendants

used over 200 false and fraudulent representations relating to alleged

"rights" which investors had as shareholders to purchase additional shares at prices below the current market price, the pur-

• u. S v, T. AI. Parker, tne., et a1. (E. D. Mich.).
104 SECURITIES AND EXCHANGE COMMISSION

ported market and market price for such securities, alleged discoveries

and developments which had taken place on properties owned by the

corporations, the listing of the securities involved on various Canadian

exchanges, guaranteed profits investors were supposed to make, and

numerous other similar matters. A conspiracy indictment was also

returned in connection with this "boiler room" operation against these

15 defendants and 1 other. One of the defendants was also indicted

for perjury committed during the investigation. Nine of the individual defendants who were in the United States have been arraigned.

COMPLAINTS AND INVESTIGATIONS

Each of the Acts administered by the Commission specifically

authorizes it to conduct investigations of possible violations. These

investigations are conducted primarily by the regional offices under

the general administrative supervision of the principal office.

Investigations by the Commission are classified as preliminary or

docketed. Preliminary investigations are initiated when information is received indicating a possible violation of one of the Acts and

are usually conducted informally by telephone inquiries, interviews

and a limited amount of correspondence. Frequently this limited

investigation will disclose that no violation has taken place or that

through a misunderstanding or ignorance of the law one of the statutes has been inadvertently violated. When an inadvertent violation has taken place, the investigation serves the purpose of informing

the violator and brings about a compliance with the law before any

serious damage or loss results to the investing public. However,

should a preliminary investigation reveal the likelihood of substantial violations or widespread public interest, a docketed investigation file is opened and a full-scale investigation undertaken.

The Commission by the various statutes it administers is authorized to issue subpoenas and administer oaths, and to delegate this

power to staff members. In a particular case, an officer designated

by the Commission may issue a subpoena requiring the attendance

of witnesses to testify under oath and may also require the production of books, records and other documents for examination. The

subpoena power is used only in specific instances and only after it

appears that the necessary evidence cannot be otherwise obtained.

This delegation of power by the Commission is made through the

issuance of an order limited to the persons designated therein as

officers and to the purposes of the particular investigation. During

the fiscal year, 36 such orders were issued.

After the investigation is completed, the regional office prepares

a report with the Regional Administrator's recommendation for the
TWENTIETH A~l\UAL REPORT 105

institution of appropriate action or for closing the investigation.

In all instances, these reports are first reviewed by the staff of the

principal officeand subsequently, if the situation warrants, presented

to the Commission for consideration. "Where appropriate, further

steps may be taken such as civil proceedings to enjoin violations,

reference of evidence to the Attorney General, where it appears that

criminal prosecution is warranted, or administrative proceedings

with respect to registered securities, broker-dealers and investment

advisers.

During the fiscal year, the Commission expanded the area of cooperation with state securities authorities by authorizing Regional

Administrators to refer to local authorities evidence obtained in

informal investigations indicating violations of state statutes. The.

object of this procedure is to turn over to the states those cases in

which it appears there is a clear violation of state law and the Regional

Administrator has reason to believe that the state authorities will

take appropriate action. Itis believed that this program will afford

the public greater protection since the enforcement activities of the

Commission can be concentrated on those cases which cannot be

effectively handled by the states. The Commission also co-operates

with other Federal authorities by making available evidence of

violation of other Federal statutes.

The following table shows the investigative activities of the Commission during the fiscal year:

Lnoestiqaiions of possible VIOlations of the acts administered by the commission

Pre11ll11- I Dockcted Totsl nary

Pending June 30, 1953_________________. ___. ___._. ___. _. _____. ______.

--_._---~~-I 744 968 New cases ___________ . ___________. _______. ___._. ______. _____________ 140 321 Transferred from preliminary _______. _________._._. _______. _________ 22 22

405 I 906 1,311

Closed ________. ____. __._ .. _. ____. _. _______. _________. _________. _____ 185

I--------~~-I 564 Transferred to docketed ____. _________________________. _____. ________ 22 22 Pendmg at June 30,1954 ____________________________________________ 198 725

SECTION OF SECURITIES VIOLATIONS

The Commission maintains a Section of Securities Violations for

assistance in the enforcement of the various statutes which it administers and to provide a further means of preventing fraud in the

purchase and sale of securities. This Section has developed files

which serve as a clearing house of information concerning persons who

have been charged with violations of various Federal and state

securities statutes. The specialized information in these files has

been kept current through the co-operation of the United States Post

Office Department, the Federal Bureau of Investigation, parole and
106 SECURITIES AND EXCHANGE COMMISSION

probation officials, state securities commissions, Federal and state

prosecuting attorneys, police officers, Better Business Bureaus, and

members of the United States Chamber of Commerce. By the end

of the 1954fiscal year, these records contained data concerning 59,625

persons against whom Federal or state action had been taken in connection with Securities Violations.

During the past year, additional items of information relating to

3,785 persons were added to the records of this Section, including information concerning 1,414 persons not previously identified therein.

Extensive use is made of this clearing house of information. During

the past year, the Section of Securities Violations received 2,937

letters or reports and sent 1,577 communications to co-operating

agencies.

• ACTIVITIES OF THE COMMISSION IN ACCOUNTING AND AUDITING

The considerable quantity and variety of financial statements filed

with the Commission pursuant to the various statutes give rise to

many questions pertaining to accounting practices and procedures.

Ithas been the consistent policy of the Commission to insist that such

financial statements clearly and unequivocally present to the users

thereof, particularly investors and prospective investors, dependable

data upon which to make their financial decisions. To this end, accounting rules and regulations and changes therein considered necessary to obtain compliance with the applicable statutes are adopted

by the Commission after extensive study and research by the Office

of the Chief Accountant.

Such study and research usually involve correspondence and/or

consultations with persons and groups having an interest in the contemplated action, including among others the American Accounting

Association, American Institute of Accountants, Controllers Institute

of America, National Association of Railroad and Utilities Commissioners, economists, attorneys, investment advisers and analysts,

corporate officials, and other Federal agencies. Where the desirability therefor is indicated, public hearings are held.

The Commission has prescribed uniform systems of accounts for

companies subject to the provisions of the Holding Company Act/ has

adopted rules under the Securities Exchange Act governing accounting and auditing of securities brokers and dealers, and has promulgated rules containing in a single, comprehensive regulation, known as

Regulation S-X,8 which govern the form and content of financial

statements filed in compliance with the various Acts. These regula-

, Uniform System of Accounts for Mutual Service Companies and subsunarv Service Companies (effective August I, 1936);Uniform Systems of Accounts for Public Utility Holdmg Oompanies (effective Jannar}' 1,1937; amended effective January I, 1943).

8 Adopted February 21,1940 (Aeeountmg Series Release No. 12);revised December 20,1950 (Accounting

Series Release No. 70).
TWENTIETH MI."'NUALREPORT 107

tions are implemented by the Accounting Series releases, of which 77

have been issued, designed to make public from time to time opinions

on accounting principles for the purpose of contributing to the development of uniform standards and practice in major accounting

questions. The rules and regulations thus established, except for the

uniform systems of accounts, prescribed the accounting to be followed

only in certain basic respects. In the large area not covered by such

rules, the Commission's principal reliance for the protection of investors is on the determination and application of accounting principles

and standards which are recognized as sound and which have obtained

general acceptance. Most financial statements filed with the Commission are required to be certified by independent public accountants

or certified public accountants.

The 19th Annual Report of the Commission contained a statement

of the circumstances leading up to the adoption, during the current

fiscal year, of Rule 3-20 (d) of Regulation S-X, which sets forth the

disclosure required with respect to all stock option arrangements in

financial statements filed with the Commission."

Because of the divergence of views as to the appropriate manner

of accounting for so-called emergency facilities in financial statements

filed with the Commission, the Commission adopted the policy of

accepting financial statements wherein the portion of the cost of

properties covered by certificates of necessity is amortized over the

five-year statutory period as well as statements wherein the cost of

such facilities is depreciated over the probable useful life of the facilities but which give recognition to the resulting reduction in income

tax benefit after the close of the amortization period. Pursuant to

this policy, registrants in filing statements on either basis make adequate disclosures as to the method followed and the effect which

would have been produced if the alternative method had bepn

followed.

The Commission again had occasion during the fiscal year to

consider the problem raised by departures from cost in the handling

of depreciation, and denied a formal application to adopt a requirement that economic depreciation (based on replacement at current

prices) be reflected either in the accounts or by other appropriate

disclosures.

During the year, several problems arose in respect to foreign issuers

of securities. Foreign standards of accounting and financial reporting

differ in many respects from American standards, and vary from

country to country. In the few, but sizable, filings during the year

by foreign issuers, there have been reflected some departures from

what are considered by American standards to be generally accepted

accounting procedures. In each such instance comprehensive dis-

'Accountmg Serresrelease No. 76. (NGv. 3,1954).
108 SEGGRITIES AND EXCHAJ.~GE COMMISSION

closure of the circumstances and the effects upon the financial statements has been required.

During the fiscal year, the Commission disposed of a proceeding

under Rule II (e) of its Rules of Practice against certifying accountants

alleged to have failed to observe appropriate audit requirements as to

financial statements of a broker-dealer filed pursuant to the requirements of rule X-17 A-5 adopted under Section 17 (a) of the Securities

Exchange Act of 1934. After examining the record in the proceeding,

the Commission was of the opinion that while more thorough auditing

procedures might have resulted in the discovery of certain fictitious

commodity transactions, the record did not disclose a lack of integrity

or improper professional conduct within the meaning of Rule 11 (e),

and accordingly the proceedings against the accountants were dismissed. The Commission, in taking this action, noted that no

member of the public suffered any loss as a result of the transactions

involved."

OPINIONS OF THE CO~E\IISSION

Findings and opinions are issued by the Commission in all cases

where the matter to be der-ided, whether substantive or procedural,

is of sufficient importance to warrant a formal expression of views.

The Office of Opinion Writing, a staff office which is directly responsible to the Commission, aids the Commission in the preparation of

findings and opinions in contested and other cases arising under

statutes administered by it. In accordance with the provisions of the

Administrative Procedure Act requiring a separation between quasiprosecutory functions and quasi-judicial functions, the personnel of

the Office of Opinion vVritmg is entirely independent of the divisions

engaged in the investigation and prosecution of cases. In some cases,

the interested operating division, with the consent of all parties,

participates in the drafting of opinions. During the fiscal year the

Commission issued findings and opinions in 81 matters. This figure

does not include numerous orders which, although of a dispositive

nature, were not accompanied by detailed findings Ora formal opinion.

With minor exceptions, all findings, opinions and orders are publicly

released and constitute a source of information for the bar and other

interested persons.

INTERNATIONAL FINANCIAL AND ECONOMIC MATTERS

During the fiscal year registration statements covering $591,571,960

of securities issued by foreign issuers, government and private, were

effectively registered under the Securities Act. Of this amount

$95,430,960 represented offerings by Canadian private issuers, including one Canadian investment company, and $137,866,000represented

l'Accounting Series release No. 77. (Feb. 19, 1954).
TWE~TIETH illi'''}mAL REPORT 109

offerings by Provinces and cities of Canada. Of the balance,

$354,000,000 represented Israeli offerings, including $350,000,000 by

the State of Israel and $4,000,000 by two private issuers. The total

was completed by a $4,275,000 offering of a Dutch private issuer.

The Commission acted as one of the hosts of missions from Germanv

and Mexico which came to the United States under the auspices of th-e

Foreign Operations Administration to make a study of the organizations, institutions, methods and regulations of the capital markets in

this country.

In September 1953 the Validation Board for German Dollar Bonds,

a joint German and American Board established in this country under

an Agreement dated February 27, 195:3 between the United States

Government and the Federal Republic of Germany, began registration

of West German dollar bonds for validation. There are 92 issues of

such bonds subject to validation, which is required by legislation

enacted by the German Government and is a necessary step before a

bondholder may participate in a settlement which may be offered

pursuant to the London Debt Agreement After the establishment of

validation procedures the Commission adopted rule X-15C2-3, governing the conditions under which W'est German securities could

again be traded in the "['niLedStates markets, such trading having

been suspended since December 8, 1941.11 At the same time the Commission withdrew its request that brokers and dealers refrain from

effecting transactions in 'Vest German securities to the extent that

such trading is not prohibited under the provisions of rule X-15C2-3.

The preparation and adoption of this rule and the proposed re-entry

of the West German dollar bond issues into the markets of the United

States presented many problems which required frequent consultations between members of the Commission's staff, the Department of

State and the Validation Board for German Dollar Bonds. Many of

these problems will continue as settlement offers to American bondholders are forthcoming under the London Debt Agreement.

In connection with the resumption of trading in this country in

West German dollar bonds the Commission has been concerned with

obtaining recent information about the various issuers of these securities and had taken initial steps in November 1952 by requesting the

cooperation of the West German Government in securing such information. Information about the Federal Republic of Germany was

furnished in a circular dated October 6, 1953 relating to an exchange

offer made by that government to the holders of two classes of its old

dollar bonds and old dollar bonds of the Free State of Prussia and the

Conversion Office for German Foreign Debts. Since information

about other West German issuers had not been furnished, the Commission in November 1953, after consultation with the Department

11 Seeurrtles Exchange Act release No 4983 (January 11, 1954).
no SECURITIES AND EXCHANGE COMMISSION

of State, sent direct requests to 63 issuers of German dollar obligations,

including the issuers of the 92 bond issues subject to validation, and

again requested the assistance of the Government of the Federal

Republic in securing this information. As a result of these efforts,

37 German issuers have sent to the Commission copies of their published annual reports (in the German language), which are available

for public inspection at the Commission's Washington office,and where

sufficient copies have been received, are also available for public inspection at the Commission's regional offices in New York, Chicago

and San Francisco.

During the fiscal year the Department of State and the Commission

continued discussions of the proposed treaty relating to the validation

of Austrian dollar bonds. During this period the Commission publicly renewed its request that the securities industry refrain from

trading in Austrian securities until further notice after the establishment of validation procedures. In June 1954 the Commission,

after consultation with the Department of State, sent direct requests

to seven Austrian issuers of dollar bonds that they furnish information

which would be helpful to the American holders of such bonds. In

response to these requests, three Austrian issuers have sent the

Commission copies of their recent annual reports.

The International Bank for Reconstruction and Development announced that during the fiscal year it raised more portfolio capital

for international investment, and from investors in more countries,

than in any earlier period. It offered two issues of United States

bonds, two issues of Swiss franc bonds and one issue of Canadian

dollar bonds. In the distribution of these issues of bonds, the Bank

made available a prospectus giving information about the Bank's

structure and operation. It also filed with the Commission, pursuant

to Regulation BW adopted by the Commission under the amendment

to the Bretton Woods Agreements Act, information comparable to

that which would be required if its securities had been registered

under the Securities Act and the Securities Exchange Act.

CONFIDENTIAL TREATMENT OF APPLICATIONS, REPORTS, AND

DOCUMENTS

The Commission is empowered under various of the Acts administered by it to grant upon application confidential treatment with respect to certain types ofinformation which would otherwise be disclosed

to the public in applications, reports, or other documents filed pursuant to these statutes. In the exercise of such authority, under the

Securities Act, it has adopted ruIe 485 providing that information as

to material contracts, or portions thereof, filed as a part of a registration statement will be held confidential where it determines that

disclosure would impair the value of the contracts and is 'lot necessary
TWENTIETH ~"'1\"'UAL REPORT 111

for the protection of investors. Circumstances under which other

rules provide for confidential treatment of information include cases

where disclosure would be detrimental to the national security.

The number of applications granted, denied or otherwise accounted

for during the year may be noted below.

Applications for confidentuii treatment-e-Ltuis fiscal year

Number Number Number

Act under which filed pending Number I Number denied pending

July 1, received granted or with- June 30, 1954 _1- drawn 1954

Securities Act 0119331 ._ 4 23 26 0 1 Securrties Exchange Act of 1934 0 14 7 6 1 Investment Company Act of 1940 3 0 56 56 0 0 --- --- --- --- --- TotaL _________________... __. __________________ 4 93 89 6 2

1 Filed under Rilles 485 and 171.

'Filed under Rule." X-24B and X-6.

3 Filed under Rnle l'\-45A-1.

The total of 93 applications filed during the year compares with

121 in the 1953 fiscal year and 145 in the 1952 fiscal year.

STATISTICS A~D SPECIAL STliDIES

During the past fiscal year the Commission maintained its statistical series relating to the capital market, savings and investment.

These data which are used by the Congress, other Government agencies, investment and financial institutions are also made available to

the general public in the Commission's monthly Statistical Bulletin

or in press releases. The various series are described below.

CAPITAL MARKETS

All New Securities Offerings

A monthly series on new securities offerings, including corporate

and non-corporate securities, is published in the Statistical Bulletin

of the Commission. In addition, a quarterly series covering COl'POrate issues is published in press release form and contains an analysis

of the data.

The statistics show the volume and character of all new securities

offered for cash in the United States and differ in concept and coverage

from the statistics of registrations shown in other parts of this report.

The offerings series includes only securities actually offered for cash

sale, and only issues offered for account of issuers. The series includes not only issues publicly offered but also issues privately

placed, as well as other issues exempt from registration under the

Securities Act such as intrastate offerings and railroad securities.

The statistics on new offerings are given in tables 3 through 5 of the

appendix.

326394--55--9

____________________ • ____ •• __

' ____________________

•••• ______________
112 SECURITIES AND EXCHANGE COMMISSION

New corporate securities offered for cash sale in the fiscal year

ended June 1954 amounted to $8.5 billion, comparing with $9.3

billion in the preceding fiscal year, which was the highest since 1929.

Proceeds from new issues to be used for new plant and equipment

expenditures totalled $5.6 billion, only $200 million less than in the

1953 fiscal year, reflecting a continuation at near-record levels of the

large-scale capital expansion of corporations. Funds raised in the

capital market for working capital purposes totalled $1.6 billion,

$400 million lower than in the preceding year. The balance of net

proceeds from new issues, amounting to $1.1 billion, was to be used

for repayment of outstanding securities, bank loans and other purposes. Issues of electric, gas and water companies were of considerable importance in the past fiscal year, aggregating $3.6 billion, and

accounting for 34 percent of all issues. Issues of manufacturing

companies, in contrast, amounted to only $1.8 billion, or 21 percent of

total issues, as compared to the preceding year when such issues

amounted to $3.2 billion and comprised 34 percent of all issues. The

distribution of issues among other industry groups for the current

year was as follows: financial and real estate (excluding investment

companies), 12percent; communication, 11percent; mining, 4 percent;

commercial and other, 4 percent; railroad, 3 percent; and other

transportation, 3 percent.

Of total corporate securities issued in the 1954 fiscal period, 63

percent were publicly offered and 37 percent privately placed. Pri-.

vate placements. which amounted to $3.1 billion, were $700 million

lower than in the 1953 period, primarily because of the smaller

volume of financing by manufacturing companies. Statistics on

private placements of corporate issues, classified by type of security

and industry of issuer, appear in appendix table 3, part 4, while comparisons of the volumes of public and private offerings are given in

appendix table 5.

Statistics on non-corporate securities sold for cash are also included

in appendix table 3. During the fiscal year ended June 1954, noncorporate flotations included $12.5 billion of U. S. Government securities, $6.7 billion of state and local issues, $200million of Federal agency

securities and $400 million of foreign government and other issues.

Issues Registered under Securities Act of 1933

Statistics of all securities registered under the Securities Act of 1933

are published in the Statistical Bulletin at quarterly intervals. Statistics covering data on the number and volume of registrations during

the past twenty years and more detailed information for the months

of the fiscal year 1954are given in appendix tables 1 and 2.
TWENTIETH A1\"'NUALREPORT 113

Corporate Securities Outstanding

Beginning this year quarterly figures on the flow of cash through

securities transactions between corporations and investors have been

published in the Statistical Bulletin. Previously, they had been compiled for internal use within the government. The data comprise the

only series in this field and are used in preparing estimates of saving in

the form of securities, in analysis of sources and uses of corporate

funds, moneyflows analysis, and estimates of changes in private debt.

A description of the scope and limitations of the series appears in the

Statistical Bulletin.

In the fiscal year ended June 30, 1954, proceeds from new corporate

securities, net of retirements, amounted to $6.7 billion. This was a

billion dollars less than in the preceding fiscal year and reflected a

lower volume of new issues and a higher amount of repayments.

Retirements of securities in the fiscal year totaled $3.2 billion, $400

million more than in the preceding year chiefly due to an increase in

refunding activity in the final quarter of the period.

Investment Companies

From 1942 through the first quarter of 1954 data were published

quarterly in the Statistical Bulletin for over 200 management investment companies registered under the Investment Company Act of

1940. The statistics included purchases and sales of their own securities, portfolio changes, and aggregates of securities investments and

assets, segregated by open-end and closed-end types. These statistics

were discontinued after the first quarter of 1954 due to the fact that

automatic quarterly reports from investment companies are no longer

required under the Commission's regulations, and also because similar

data are prepared by the National Association of Investment Companies. Net sales of these companies amounted to approximately

$400 million during the fiscal year ended June 1954.

STOCK MARKETS

Statistics are regularly compiled and published in the Statistical

Bulletin on the market value and volume of sales on registered and

exempted securities exchanges, round-lot stock transactions on the

New York exchanges for accounts of members and nonmembers, oddlot stock transactions on the New York exchanges, special offerings

and secondary distributions.

The indexes of stock market prices were continued during the 1954

fiscal year. These indexes are based upon the weekly closing market

prices of 265 common stocks listed on the New York Stock Exchange,

and are composed of seven major industry groups, 29 subordinate

groups, and a composite group. These data are published in the

Statistical Bulletin and are also released weekly. Figures on round-lot
114 SECURITIES AND EXCHANGE COMMISSION

and odd-lot stock transactions are also included in the weekly releaseon stock market indexes.

SAVING STUDY

Estimates of the volume and composition of individuals' saving in

the United States are compiled and released at quarterly intervals.

The study shows the aggregate value of saving in each quarter and the

form in which the saving occurred, such as investment in securities,

expansion of bank deposits, increase in insurance and pension reserves,

etc.

A reconciliation of the Commission's estimates with the personal

saving estimates of the Department of Commerce (derived in connection with its national income series) is published annually in the

National Income Supplement of the Survey of Current Business.

The methods used in deriving the Commission's estimates of individuals' saving, together with a description of sources of data were

published recently.

The rate of individuals' saving in liquid form during the fiscal year

ended June 30, 1954 was maintained at a high level, amounting to

$15.0 billion, and comparing with $15.5 billion in the 1953fiscal year.

Individuals invested $4.2 billion in securities, added $8.2 billion to

their equity in insurance and Government pension reserves, such as

Social Security funds, increased their currency and bank deposits by

$5.4 billion, and increased their shareholdings in savings and loan

associations by $4.0 billion. During the same period, individuals

increased their mortgage debt by $6.5 billion and other consumer debt

by $300 million.

FINANCIAL POSITION OF CORPORATIONS

Working Capital

Data are prepared and released at quarterly intervals on the working capital position of all United States corporations, excluding banks

and insurance companies. These releases show the principal components of current assets and liabilities and an abbreviated analysis

of the sources and uses of corporate funds. At the end of June 1954,

corporate net working capital position was estimated at an all-time

high of $94.1 billion, comparing with a previous peak at the end of

September 1953 of $93.3 billion. The data are used in measuring the

liquid position of corporations and the figures indicate that there has

been little change in liquidity since mid-1951, as measured by theratio of cash and government securities to current liabilities. At the

end of June 1954 this ratio stood at 54 percent. The highest point

of corporate liquidity was reached in 1949 when the ratio was 71

percent.
TWENTIETH ANNUAL REPORT 115

Balance Sheet and Income Statements

A quarterly financial report for all United States manufacturing

concerns is prepared jointly by the Commission and the Federal Trade

Commission. This report, an outgrowth of the working capital

series, gives complete balance sheet data and an abbreviated income

account for all manufacturing companies. Data are classified by

industry and size of company.

PLA.~T AND EQUIPMENT EXPENDITURES OF U. S. BUSINESS

The Commission and the Department of Commerce jointly compile

and release, at quarterly intervals, data on the plant and equipment

expenditures of U. S. business. The series is used as an index of

future business activity and production, as well as capital market

activity. At the close of each quarter, actual capital expenditures for

that quarter are presented, and in addition, anticipated expenditures

for the next two quarters are given. A survey is also made at the

beginning of each year of the expansion plans of business during the

coming year.

During the fiscal year ended June 1954 expenditures for plant and

equipment by American concerns amounted to a record $27.9 billion,

exceeding the previous record figure in the 1953 fiscal year by $800

million. The higher total for the current fiscal year resulted from

peak expenditures during the closing months of 1953; in the first six

months of 1954 (the second half of the 1954 fiscal year) expenditures

were approximately two percent less than in the similar months of the

1953 fiscal year. According to plans at mid-1954, expenditures for

the full calendar year 1954will be about 6 percent less than in calendar

year 1953, and are expected to aggregate $26.7 billion, with most of

the decline attributed to lower expenditures of manufacturing and

railroad companies.

PERSONNEL

The personnel of the Commission was further reduced by 74 employees in the fiscal year 1954, and as of June 30, 1954, consisted of

the following:

Commissioners ._ __ 5

Staff:

Headquarters office 447

Regional Offices 247

-- 694

Total 699

The efforts of the Commission to perform its important functions

effectively and economically continued in the past fiscal year with the

need for individual positions being critically reviewed and those
116 SECURITIES AND EXCHANGE COMM:ISSION

found unnecessary being abolished. Some of the organizational and

operating changes effected by the Commission in fiscal 1954 are

indicated below.

The position of Foreign Economic Adviser was abolished. Such

of his functions as are required by statute are now performed by the

Commission's regular divisions.

The Commission's Cleveland Regional Officebecame a branch office

of the Commission's Chicago Regional Office. Several positions,

including that of a Regional Administrator, were abolished.

The Commission's Division of Corporate Regulation was reorganized into four operating branches in lieu of the former five branches.

The Commission's Division of Trading and Exchanges was reorganized, two branches replacing the former four Branches. Thishas reduced the number of supervisory personnel, consolidated the

enforcement and interpretative activities of the Division in one

branch and concentrated in the second branch other activities such

as financial analysis, exchange registration and regulation, and stabilization. In addition, certain market surveillance work has been

transferred to the New York Regional Office. A number of positions,

including two Assistant Directorships were abolished.

FISCAL AFFAiRS

Appropriation and Expenditures

The following is a summary of the appropriation and expenditures.

for the fiscal year 1954 as compared to the fiscal year 1953:

Fiscal yearAppropriation

Expenditures

1951, 1953

$5,000,000 $5,245,08~

4,988,414 5,236,08u

Unexpended balance; 11,586

Fees and Revenues:

The following fees were collected in the fiscal year 1954:

Character of fee:

Registration of securities issued

Qualification of trust indentures

From registered exchanges

Sale of copies of documents or portions thereof;

Miscellaneous collections

8,994-

$848,623

500

349,769

14,447

2,410

Total 1,215,749

Fees are turned over to the General Fund of the Treasury and are

not available for expenditure by the Commission.

_

_

_

_

_

_

_

_
TWENTIETH ~""NUAL REPORT 117

PUBLICATIONS

Publications issued during the fiscal year include:

Statistical Bulletin. Monthly

Volumes Nos. 24, 25, 26, and 27 of Commission's Decisions and Reports.

Official Summary of Securities Transactions and Holdings of Officers, Directors

and Principal Stockholders, Monthly.

Nineteenth Annual Report of the Commission.

Securities Traded on Exchanges under the Securities Exchange Act of 1934,

as of December 31, 1953.

Companies Registered under the Investment Company Act of 1940, as of December 31, 1953.

Registered Public Utility Holding Companies, December 31, 1953

Financial Report, U. S. Manufacturing Corporations. (Jointly with Federal

Trade Commission). Quarterly, 1953'-

Regulation S-X as of November 3, 1953.

Rules and Regulations under the Securities Act of 1933, February 1, 1954.

Securities Required to be Exchanged for Cash or New Securities, Jan. 1, 1954.

Working Capital of United States Corporations. Quarterly.

Volume and Composition of Saying. Quarterly.

New Securities Offered for Cash. Quarterly.

Plant and Equipment Expenditures of U. S. Corporations. (Jointly with Department of Commerce). Quarterly.

The 'Work of the Securities and Exchange Commission, November 1, 1954.

INFORMATION AVAILABLE FOR PUBLIC INSPECTION

The Commission maintains Public Reference Rooms at the headquarters office in Washington, D. C., and at its Regional Officesin

New York City and Chicago, Ill.

Copies of all public information on file with the Commission contained in registration statements, applications, declarations and other

public documents are available for inspection in the Public Reference

Room in Washington. During the fiscal year 2,368 persons made

personal visits to the Public Reference Room seeking public information and an additional 20,393 requests for registered public information and copies of forms, releases and other material of a public

nature were received. Through the facilities provided for the sale

of reproductions of public information, 1,797 orders involving a total

of 81,710 page units were filled and 662 certificates attesting to the

authenticity of copies of Commission records were prepared. The

Commission also mailed 361,265 copies of publications to persons

requesting them.

There are available in the New York Regional Office copies of recent

filings made by companies which have securities listed on exchanges

other than the New York exchanges and copies of current periodical

reports of many other companies which have filed registration state-
118 SECURITIES A..."l'fDEXCHANGE COMlvIISSION

ments under the Securities Act of 1933. During the fiscal year, 10,793

persons visited this Public Reference Room and more than 7,061

telephone calls were received from persons seeking public information

and copies of forms, releases and other material. In the Chicago

Regional Office there are available copies of recent filings made by

companies which have securities listed on the New York exchanges.

Copies of recent prospectuses used in the public offering of securities

registered under the Securities Acts are available in all Regional

Offices, as are copies of active broker-dealer and investment adviser

registration applications and Regulation A Letters of Notification

filed by persons or companies in the respective regions.

Copies of certain reports filed with the Commission are also available at the respective national securities exchanges upon which the

securities of the issuer are registered.

PUBLIC HEARINGS

The following hearings were held by the Commission during the

fiscal year:

Number oJ

Public proceedings hearing!

Securities Act of 1933_ _ _ __ __ __ __ _ _ _ __ _ __ __ __ __ _ _ __ _ _ _ _ _ ___ _ _ 4

Securities Exchange Act of 1934_ _ _ _ __ __ _ _ __ _ _ __ _ _ __ _ _ _ _ __ _ _ _ __ __ _ __ _ 26

Public Utility Holding Company Act of 1935_________________________ 14

Investment Company Act of 1940___________________________________ 2

Private proceedings

Securities Act of 1933_ _ _ __ __ __ _ _ __ __ _ _ __ _ _ _ _ _ _ _ _ __ _ __ __ _ __ _ _ _ 2

Securities Exchange Act of 1934_____________________________________ 4

Rules of Practice , ________________________________________ ___ 2

Included in the above are four hearings relating to revisions of the

Commission's rules.
PART X

APPENDIX

STATISTICAL TABLES

119
120 SECURITIES AND EXCHANGE COMMISSION

TABLE l.-Twenty year record of registrations fully effective unaer the Securities

Act of 1933

1935-1954

[Amounts in millions of dollars)

For cash sale for account of issuers

FIScal year ended June 30 Number of All regis.

statements trations Bonds, de- Total bentures, Preferred Common and notes

1935' ......... _._. ___. _______. 284 $913 $686 $490 $28 $168 1936. ___. ___________._ ... __.... 689 4,835 3,936 3,153 252 531 1937.. __ .... _._._. _____. ______ 840 4,851 3,635 2,426 406 802 1938__________________ ........ 412 2,101 1,349 666 209 474 1939_. ___.. ___. __.... _. _. ___. _. 344 2,579 2,020 1,593 109 318 1940. ___ . _____. ___.. _._._. ____ 306 1,787 1,433 1,112 110 210 1941. ..... _._. ________________ 313 2,611 2,081 1,721 164 196 1942.. _ . ______________________ 193 2,003 1,465 1,041 162 263 1943_. ______________ . __....... 123 659 486 316 32 137 1944... ____. _. ________________ 221 1,760 1,347 732 343 272 1945__________ ._._ ...... ___. __ 340 3,225 2,715 1,851 407 456 1946... ____. _____. ____________ 661 7,073 5,424 3,102 991 1,331 1947_•. _. ________..... _. ___. __ 493 6,732 4,874 2,937 . 787 1,150 1948.. _. __.. _. _______. ______._ 435 6,405 5,032 2,817 537 1,678 1949____ . _____.. __... __. ______ 429 5,333 4,204 2,795 326 1,083 1950.. ____ .. _. _____._. ________ 487 5,307 4,381 2,127 468 1,786 1951_____________________ ._. __ 487 6,459 5,169 2,838 427 1,904 1952_. ______ . _. ___.. _. _._. ____ 635 9,500 7,529 3,346 851 3,332 1953.. __ ... _. _______________._ 593 7,507 6,326 3,093 424 2,808 1954.. _... _. ______________.. _. 631 9,174 7,381 4,240 531 2,610

, For 10 months ended June 30, 1935.
TWENTIETH A1I.TNUALREPORT

TABLE 2.-Registrations fully effective under the Securities Act of 1933

PART I.-DISTRIBUTION BY MONTHS, FISCAL YEAR ENDED JUNE 30, 1954

[Amounts ill thousands of dollars ']

121

All regrstrattons Proposed for sale Coraccount of ISSuers

Year and month

Number of I Number of Amount Number of I Number of Amount statemeuts issues statements ISSUes I

195~ July __________________________ 47 61 397,481 44 54 373,485 August; ____. _________________ 42 62 254,300 37 55 216,455 September _. __________________ 41 51 676,158 38 48 667,011 October _.___________________._ 50 64 1,9n,9i4 43 54 960,072 November _. _____________. ____ 44 57 355.278 42 49 319,238 December _______________ . ____ 40 61 666,450 35 50 580,542

195-1 January ______________________ 43 52 606,958 38 45 554,611 February _______________. _____ 47 74 362,019 45 68 335,208 Maroh., _.________._._________ 65 76 1,025,042 60 65 959,161 Apnl _____________.._________ 79 102 1,058,678 74 92 902,415 May ______. ________________. __ 73 96 903,859 65 85 803,044 June __. _______________________ 50, 75 889,304 58 66 709,956

Total, fiscal year 1954___ 2631 I 831 9,173,502 5791 731 7,381,199

PART2.-PURPOSE OF REGISTRATION AND TYPE OF SECURITY, FISCAL YEAR ENDED

JUNE 30, 1954

[Amounts ill thousands of dollars 'l

Preferred

stock

Purpose of registration

Type of secunt).

I

Bonds, deAll types bentures,

and notes 3

I

I

I

Common'

stock

All registratrons, ______________________ ... ______________9,173,502 4,248,730 566,440 4,358,332

For account of Issuers for cash sale ______________. ___ 7,381,199 4,240,036 531,142 2,610,021

Corporate ______________________.. ______________ 6,844,411 3,703,248 531,142 2,610,021

Offered to General publlc.. __________. ____________ 5,045,187 2,978,142 414,259 1,652,786

Secunty holders _______.. _______. _____._ 1,452,195 710,636 115,893 625,666 Other special groups ___________ . _______ 347,028 14,470 990 331,568

Foreign governments ___________________________ 536,789 536,789 0 0

For account of ISSuers for other than cash sale. _____ 1,637,951 8,6Q3 35,298 1,593,959

For account of others than Issuers. _________________ 154,3521 0 01 154,352

See footnotes at end of table.
122 SECURITIES AND EXCHANGE COMMISSION

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128 SECUHITIES AND EXCHANGE COMMISSION

TABLE 4.-Proposed uses of net proceeds from the sale of new corporate securities

offered for cash in the United States

PART I.-ALL CORPORATE

[Amounts In thousands of dollars 1]

Proceeds New money

Calendar year and Retire- Other ment of month. Total gross Total net Total new Plant and I Working securtties purposes

proceeds' proceeds 3 money equipment capital

1949 6,051,550 5,959,260 4,606,326 3,724,165 882,160 400,966 951,968 1950 6,361,043 6,261,444 4,006,480 2,965,598 1,040,881 1,271,230 983,734 1951 7,741,099 7,606,520 6,531,403 5,110,105 1,421,298 486,413 588,703 1952 _. 9,534,162 9,380,302 8,179,548 6,311,802 1,867,746 664,056 536,698 1953 8, 897, 996 8,754,721 7,959,966 5,646,840 2,313,126 260,023 534,733

1955 January 654,968 645,614 584,446 481,008 103,438 22,406 38,763 February 688,301 676,369 586,194 352,109 234,084 53,827 36,348 March 695,540 683,675 627,791 438,932 188,858 17,433 38,451

tf:~~~========= 815,257 802,453 747,826 525,201 222,625 23,080 31,547

713,686 697,266 590,507 463,094 127,413 21,947 84,812 Jtme., , ___________._._. ___ 1,166,012 1,147,101 1,033,967 597,134 436,833 24,161 88,973 July _. 520,178 509,724 459,037 364,462 94,574 26,526 24,162 August _. _. 335,667 329,839 270,100 160,632 109,468 5,232 54,507 September __._. ________._ 768,001 757,420 691,288 423,326 267,962 4,372 61,760 October -._ 602,804 589,632 549,544 429,676 119,868 12,241 27,847 November 459,144 451,381 406,061 300,742 105,320 22,363 22,956 December ._ 1,478,438 1,464,248 1,413,206 1,110,525 302,681 26,434 24,609

1954 January _. 571,242 562,800 530,990 484,554 46,437 18,398 13,412 February 455,575 448,292 410,093 338,290 71,802 9,086 29,113 March 726,271 712,578 590,028 473,017 117,011 52,755 69,795 ApriL

May 627,977 615,740 470,612 388,876 81,735 129,398 15,731

849,775 835,741 614,466 472,140 142,326 183,376 37,899 June. •. 1,056,727 1,041,353 812,300 635,313 176,987 181,910 47,143

PART 2.-MANUFACTURING

1949 ._ 1,414,176 1,390,872 851,257 542,078 309,180 44,303 495,311 1950 1,200,017 1,175,363 688,074 312,701 375,374 149,010 338,279 1951_. 3,121,853 3,066,352 2,617,233 1,832,777 784,456 220,828 228,291 1952. _____________________ 4,038,794 3,973,363 3,421,892 2,179,563 1,242,329 260,850 290,621 1953. 2,253,531 2,217,721 1,914,853 1,324,675 590,178 90,115 212,753

1955 January _. ________________ 291,220 287,630 263,919 217,547 46,372 7,856 15,856 February 150,133 146,449 129,284 67,564 61,720 6,411 10,755 March ___________________ 201,083 198,876 182,581 130,436 52,145 6,735 9,561

tl'a~======== .:

314,611 309,139 300,417 244,340 56,077 7,034 1,688

111,495 108,572 68,293 46,482 21,811 19,118 21,162 June. 287,487 283,442 210,885 183,717 27,168 6,984 65,573 July __. ___________________ 134,787 133,018 107,631 86,187 21,443 16,629 8,758 August. __________________ 47,855 46,389 32,948 23,652 9,296 1,946 11,495 September ._. 134,171 132,011 92,794 66,236 26,558 519 38,699 October ______._. __._. _. __ 56,673 55,543 49,863 35,005 14,858 2,066 3,615 November. ___________. __ 100,533 98,860 76,608 21,886 54,723 5,889 16,363 December •. 423,483 417,790 399,632 201,623 198,009 8,930 9,228

1954 January 135,917 134,460 111,186 91,322 19,864 16,494 6,780 February _____________ . __ 52,683 51,536 46,355 23,325 23,030 323 4,857 March . ._ 109,955 106,827 95,068 57,798 37,270 0 11,759

tl'a~~~.:.: .:

87,837 85,686 75,520 42,840 32,680 6,402 3,764

207,831 203,551 180,563 76,207 104,356 7,540 15,448 June; 310,601 305,264 256,060 152,954 103,106 20,800 28,404

see footnotes at end of table.

___________________---

______• ___________- --- ___________• _______--- ______• _____________

_______________- __• ___

_____• ____________

__________ • _____

______••• _______• __

=========

__•• __• ___• ___•• ___ _____• ___• __- __

_______• ____• __

•• _______• _____ •• ____________

________• ____- __ ___ • ____________

______• _________- __ ______• _____________

___________•_________

___• ________ ______

_________• ____• _____ ______• ___________• ___

______• _______• _____

_____•• ___________•• _

_____ • __________

=========== _____• ______• _______

_______ __• __

__________• __ _

____• _____________

_______• __ __• ___

== =========== •_______________ •
'.I,'~ENTIETH A1'.TJ\'1JALREPORT 129

TABLE 4.-Proposed uses of net proceeds from the sale of new corporate securitIes

offered for cash in the United States-Continued

PART 3.-MINING

[Amounts in thousands of dollars ']

Proceeds New money

Calendar year and Retire- Other mentof month J Total gross Total net Total new Plant and Workmg seeuntles purposes

proceeds 3 proceeds 3 money equipment capital

1949 } 1950 (I) (') (I) (') (I) (') 1951 (I)

1952

1953 _._. 235,368 222,051 199,151 113,104 86,048 1,912 20,988

1953

January __________________ 4,286 3,638 2,733 1,731 1,003 0 lJO.'I February ________________ 5,383 4,872 2,477 759 1,717 500 1,895 Mareh 22,140 20,672 14,809 3,873 10,936 0 5,863 A pn 1_____________________ 3,387 3,030 2,649 990 1,659 0 381 May ________________. ____ 37,867 35,847 32,058 16,459 15,599 470 3,319 June 31,817 30,770 29,853 27,022 2,831 0 917 July ______________________ 20,707 19,097 17,599 8,278 9,320 0 1,498 August, __________________ 6,-589 6,028 5.145 2,196 2,949 99 783 September 5,349 5.049 2,756 1.154 1, 602 0 2,292 October __________________ 41,399 37,800 37,197 13,396 23,801 45 559 November _______________ 18,503 17,895 17,422 15,663 1,759 0 473 December ________________ 37,941 37,355 34,454 21,583 12,871 798 2,103

1951,

January _. 33,818 32,220 29,469 20,192 9,277 928 1,823 February _______________ 19,501 17,888 17,294 15,182 2,112 0 594 Mareh ___________________ 29,,354 28,8)5 28,242 16.258 11,984 0 572 AprIL

May 40,769 38,530 24,902 16,123 8,779 12,340 1,288

36,024 34,483 31,526 19,735 11,791 678 2,279 June _____________________ 76.095 74,014 61,052 46,814 14,237 0 12, 963

PART 4.-ELECTRIC, GAS AND WATER

1949 2,319,828 2,275,898 1,837.545 1,818, 560 18,986 233,390 204,963 1950 2,64b.822 2,608,491 1,728,378 1,711,320 17,058 681,577 198,537 1951_________________._. __ 2,454,853 2,411,714 2,186,248 2,158,823 27,425 85,439 140,027 1952______________________ 2,674,694 2,626,377 2,457,823 2,441,862 15,961 87,726 80,827 1953______________________ 3.029,122 2,971,911 2,755,852 2,737,082 18,770 67.034 149,025

1953

January __________________ 217,690 214,344 205,298 193,027 12.271 0 9,046 February ________________ March 257,717 253,307 236,924 235,681 1,243 8,183 8.200 215,757 211,968 204,476 204,329 148 2,061 5,431 ApriL ____________________

May 227,899 223,204 198,932 198,620 312 8,137 16,135 _____________________ 399,476 390,845 348.198 348,010 188 341 42,306 June _____________________ 339,316 330,897 299,600 299,065 535 16,994 14,303 July 213,659 208,551 206,423 206,268 154 1,232 896 August, __________________ 97,817 96,822 86.366 86,346 20 0 10,456 September _______________ 245,778 241,895 226,929 226,512 416 644 14,322 October __________________ 362,477 355,506 333,981 332,692 1,288 5,145 16,381 November 249,284 244,975 224,733 223,383 1,350 15,856 4,3ll6 December ________________ 202.251 199,599 183,993 183,149 844 8,442 7,164

1951,

January 279,398 275,583 274,824 274,780 44 148 611

r;~r%~r~~=:: :::::: :::::=

272,293 269,469 258,076 254,967 3,109 0 11,392

367,192 361,613 305,934 305,889 45 45,695 9,984 Aprrl, ____________________ 313,820 309,478 236,800 235,957 843 72,679 0 May 507,222 500,936 327.243 327,112 131 172, 595 1,097 J une 448,372 442,285 381,103 379,910 1,193 60,183 1,000

See footnotes at end of table.

_____________• ________ ______• _______________

___________________• __

___________________• __

____• __________• __

__•• _______________

______• ______________

____• __________

___________• ____

_________________• __ ____________• ________

_________________• ____

_______• _____• _______•

__• ________________

_______• __• ___________

________ • ______

_______________• __

__________• _________• ______________• ______
130 SECURITIES AND EXCHANGE COMMISSION

TABLE 4.-Proposed uses oj net proceeae Jrom the sale oj new corporate securities

offered [or cash in the United States-Continued

PaT 5.-RAILROAD

[Amounts Inthousands of dollars ']

Proceeds New money

Calendar year and Retire- other ment of month' Total gross Total net Total new Plant and Working seeurrttes purposes

proceeds' proceeds' money equipment capital

1949 459,982 456,353 441,392 441,392 0 11,164 3,797 1950 554,100 548,366 301,408 281,890 19,518 192,651 54,307 195L _._. 335,087 331,864 296,917 291,886 5,030 34,214 733 1952_. ._._ 525,205 520,817 286,526 286,476 50 223,532 10,758 1953 302,397 298,904 267,024 244,254 22, 770 31,879 0

1955 I~~ ._. 39,64& 39,145 25,613 25,613 0 13,531 0 February 50,054 49,255 30,907 22, 928 7,979 18,348 0 March_ ._. 32,368 32,006 32,006 32,006 0 0 0

tfa~~~==.: .: .:

24,594 24,373 24, 373 24,373 0 0 0 14,950 14,780 14,780 14, 780 0 0 0 rune 22,818 22,551 22,551 22,551 0 0 0 Iuly ._. 9,500 9,425 9,425 9,425 0 0 0 August .• 8,696 8,612 8,612 8, 612 0 0 0 September . ._. 24, 526 24,318 24,318 24,318 0 0 0 October __________________ 5,886 5,815 5,815 5,815 0 0 0 November ._. _. 9,640 9,562 9,562 9,562 0 0 0 D8C8IIlber 59,719 59,062 59,062 44,271 14,791 0 0

195,4 January 47,973 47,701 47,701 47,701 0 0 0 February . 30,205 29,858 22,517 22,517 0 7,340 0 March. _._._. . ._ _. 16,402 16,274 14,483 14, 432 51 1,791 0

~:~~=== .: .: .:

31,049 30,834 18,890 18,890 0 11,944 0 971 964 964 964 0 0 0 IUIl1l___________._._._. ___ 7,379 7,310 7,310 7,310 0 0 0

PART6.-0THER TRANSPORTATION

1949.•. _. _. _. ___. _. __•. ___ 340,315 338,695 302,320 298,865 3,455 272 86,102 1950_.. . ._ 259,057 257,182 242,902 241,599 1,303 3,421 10,860 195L _____________________ 159,227 158,240 131,009 123,217 7,792 18,478 8,753 1952. _. _. _________. _____'_ 467,094 462,006 410,778 377,064 33,713 1,119 50,109 1963_. 293,036 289,859 264, 880 260,568 4, 312 3,949 21,031

1955 Ianuary .• _________.. _____ 16,733 16,477 12,223 9,961 2, 262 0 4,254 February .•. ._. . 1,693 1,605 1,605 1,372 233 0 0 March ._. 50,720 49,993 49,743 49,388 355 0 250 ApriL _____._. _______._. __ 41,791 41,534 41,534 41,452, 82 0 0 May •••. _____. __. __._._._ 25,806 25,420 10,420 10,420 0 0 15, 000 I1pl8 22,860 22,383 22,383 22,251 131 0 0 Iuly ________._ .. _.. _______ 37,266 37,041 36,742 36,652 89 0 299 August._._ . ______. __. ____ 6,300 6,163 5,963 5,773 190 0 200 September. _________.. ___ 7,843 7,815 7,069 7,069 0 0 747 October ...• ____. ______... 30,580 30,401 30,352 29,759 592 0 50 November ___ .. __________ 22,823 22,553 21,827 21,529 298 495 231 December ______•.. ___.• __ 28,622 28,474 25,021 24,941 80 3,454 0

195,4 January ___._._. _._... _. __ 17,227 17,043 16,739 16,672 66 0 304 February . ___. ____________ 13,477 13,341 12,822 12,748 74 0 520 March. _______.. _____._._ 42,427 42,025 41,287 41,197 90 0 738 Apru 27,084 26,918 26,809 26,809 0 0 110 May ____._ ••. _.. _... ___._ 19,588 19,476 4, 596 4, 569 38 420 14,460 June, 30,328 30,108 29,949 29,712 237 0 158

See footnotes at end of table.

______•• ____••• ___••• _

•••• ___• ______________

__• ______________

______• ___• _____ _____• ___• ____________

___ __•• _____• __ ____• ____________

__•• __• _____• __

______ ====••_____________ == = == = ____••• __________ __

______• ______ ____

___ ___• ____

•• __ ___••• ___• ____________

•___•___•______•• _ __•• ___ _________

__ ___ ••

== = ==== == = =

___••• _______ ___

_____• ___________• __

__•__ ___ __ __• __• __ _______•

•• ___________________

_______••_________ •__

__•_________________
TWENTIETH ANNUAL REPORT 131

TABLE 4.-Proposed uses of net proceeds from the sale of new corporate securities

offered for cash in the United States-Continued

PART 7.-COMMUNICATION

[Amounts In thousands of dollars 1)

Proceeds New money

Calendar year and Retire- Other mentof month 2 Total gross Total net Total new Plant and Working seeurtttes purposes

proceeds' proceeds 2 money equipment capital

1949 571,080 566,566 504,557 502,679 1,877 49,277 12, 732 1950______________________ 399,391 395,172 304,006 300,264 3,741 81,002 10, 164 1951. _____________________ 612,080 605,095 594,324 574,417 19,907 5,231 5,540 1952______________________ 760,239 753,169 738,924 736,996 1,928 6,095 11, 151 1953______________________ 881,853 873,726 860,967 841,600 19,367 3,164 9,596

1953 January __________________ 28,041 27,882 27,557 27,557 0 0 325 February ________________ 7,455 7,321 6,419 1,322 5,097 0 902 March ___________________ 16,386 15,595 14, 650 14, 614 36 0 945 ApriL ____________________ May 13,636 13,249 11,907 11,416 492 0 1,342 _____________________ 7,331 7,136 5,917 5,878 39 500 718 JW1e _____________________ 37,806 37,182 37,182 36,974 208 0 0 July ______________________20,765 20,167 14, 989 10,913 4, 076 2,203 2, 975 August __________________ 30,768 29,803 29,143 29,098 45 235 425 September _______________ 89,583 88,586 88,207 87,142 1,065 226 153 October __________________ 13,341 13,203 11,393 10,391 1,002 0 1,810 November _______________ 5,619 5,482 5,482 5,419 63 0 0 December ________________ 611,121 608,120 608,120 600,876 7,244 0 0

1954 January __________________26,678 26,277 24,564 24,396 168 228 1,485 February ________________ 7,192 6,890 6,890 6,862 28 0 0 March ___________________ 31,400 30,298 22,202 22,157 45 0 8,096

tf:~~~=====~==== ======== 25,945 25,655 25,404 25,370 35 0 251 41,267 40,413 40,298 40,253 45 0 115 JW1e _____________________ 9,332 9,071 8,240 8,240 0 0 831

PART 8-FINANCIAL AND REAL ESTATE

1949______________________ 599,105 592,559 440,453 43,079 397,374 34,530 117,576 1950______________________ 746,740 739,263 480,164 24, 309 455,846 100,429 158,679 1951______________________ 524,616 515,267 368,485 15,686 352,800 66,030 80,751 1952______________________ 515,178 508,184 409,630 14, 243 395,387 60,498 38,056 1953______________________ 1,576,048 1,560,672 1,452,279 32,116 1,420,162 24, 225 84, 168

1958 January __________________42,894 42, 377 39,596 4,474 35,122 645 2,136

~~r~r:: ~====~~~==~:== .: 131,639 130,603 123,317 3,076 120,241 5,393 1,893

140,861 138,955 119,675 0 119,675 7,151 12,129 AprIL ____________________ 162,292 161,637 151,276 79 151,197 1,854 8,507 May _____________________ 95,500 93,579 91,187 6,749 84,438 287 2, 105 JW1e _____________________ 415,855 412,425 405,576 1,097 404,479 0 6,849 July ______________________ 43,189 42,868 32,203 3,607 28,596 2,507 8,158 August ___________________ 123,944 122,785 92,214 112 92, 102 403 30,168 September _______________ 246,027 243,335 238,535 6,185 232,350 1,735 3,066 October __________________ 80,518 79,913 74, 285 1,381 72, 904 3,000 2,628 November _______________ 45,393 45,057 44, 273 98 «,175 0 783 December ________________ 47,935 47,138 40,140 5,258 34, 882 1,250 5,748

1954

~~~rY-~~===::::::::::: 12,209 11,772 10,906 105 10,801 0 865 51,939 51,167 39,727 443 39,284 0 11,439 March ___________________ 89,669 87,869 64,052 100 53,953 0 33,817 ApriL ___________________ May 51,909 51,222 18,306 222 18,085 24,663 8, 253 _____________________ 26,831 26,253 22, 363 108 22,255 830 3,061 une. J 160,278 159,407 59,486 4, 708 64,778 96,845 3,076

See footnotes at end of table,

____________- _________

___• ________________
132 SECURITIES AND EXCHANGE COMMISSION

TABLE 4.-Proposed uses of net proceeds from the sale of new corporate securities

offered for cash in the United States--Continued

PART 9-COMMERCIAL A:I-I""DOTHER

[Amounts in thousands of dollars I]

Proceeds New money

Calendar year and Retire- Other I ment of month , Total gross Total net Total new Plant and Working securities purposes

proceeds proceeds' money equipment capital

1949______________________ 347,064 338,317 228,801 77,513 151,288 28,030 81,486 1950______________________ 552,916 537,606 261,559 93,516 168,043 63,139 212,908 1951______________________ 533,383 517,988 337,187 113,299 223,888 56,194 124,607 1952______________________ 552,958 536,386 453,975 275,598 178,377 24, 235 58,176 1953______________________ 326,640 319,877 244,960 93,441 151,519 37,745 37,172

1959 January __________________ 14,459 14, 122 7,507 1,098 6,409 374 6,242 February ________________ March 84,228 82,957 55,261 19,407 35,854 14,993 12,703 ___________________ 16,225 15,610 9,851 4,288 5,564 1,487 4,272

tf..~::::::::::::::::::::: 27,046 26,287 16,738 3,931 12,807 6,055 3,494

21,261 21,088 19,655 14,316 5,338 1,231 202 June _____________________ 8,053 7,450 5,937 4,456 1,480 183 1,330 July ______________________ 40,305 39,557 34,025 3,130 30,895 3,954 1,578 August ___________________ 13,697 13,237 9,709 4,842 4,867 2,549 979 September _______________ 14,724 14,411 10,681 4,711 5,970 1,249 2,481 October __________________ 11,930 11,450 6,659 1,236 5,423 1,986 2,805 November _______________ 7,347 6,998 6,154 3,202 2,952 124 720 December ________________ 67,366 66,711 62,784 28,824 33,960 3,560 366

1951, January __________________ 18,022 17,745 15,601 9,385 6,216 600 1,543 February ________________ 8,285 8,143 6,410 2,245 4,166 1,423 310 March ___________________ 39,971 38,858 28,759 15,186 13,573 5,269 4,830

tf..~::::::::::::::::::::: 49,565 47,415 43,980 22,667 21,313 1,370 2,065

10,040 9,665 6,913 3,202 3,710 1,314 1,439 June _____________________ 14, 342 13,894 9,101 5,665 3,436 4,082 711

1 Shght discrepancies between the sum of figures in the tables and the totals shown are due to rounding For earlier data see 18th annual report . Total estimated gross proceeds represent the amount paid for the securities by investors, while total estimated net proceeds represent the amount received by the issuer after payment of compensation to

distributors and other costs of flotation. t Included WIth "Commercial and other."

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134 SECURITIES AND EXCHANGE COMMISSION

TABLE 6.-Brokers and dealers registered under the Securities &change Act of

1934 l-effective reqistratume as of June 30, 1954, ctassified by type of organization

and by location of principal office

Number of registrants Number of proprietors, partners,

officers, etc. , 3

Location of pnneipal office Sole Sole propri- Part- Corpo- propri- Part- Oorpo- Total ner- Total ner- etor- slnps rations s etor- ships rations' ships sbips

--- --- --- --- ------ --- Alabama ____________________________ 22 6 8 8 66 6 25 35 Arizona _____________________________ 18 10 4 4 48 10 12 26 Arkansas ____________________________ 20 10 3 7 47 10 6 31 Cahtorma ___________________________ 246 92 79 75 958 92 425 441 Colorado. ___________________________ 69 39 11 19 188 39 44 105 Connecticut. ________________________ 42 14 15 13 141 14 55 72 Delaware ____________________________ 5 0 3 2 36 0 27 9 District of Columbia ________________ 77 30 18 29 278 30 77 171 Elortda ______________________________ 53 27 10 16 117 27 25 65 Georgia ______________________________ 28 10 6 12 100 10 21 69 Idaho _______________________________ 12 6 4 2 27 6 12 9 Illmols ______________________________192 48 68 76 854 48 304 502 Indiana _____________________________ 49 22 6 21 138 22 13 103 Iowa ________________________________ 32 10 5 17 107 10 11 86 Kansas ______________________________ 37 18 4 15 118 18 9 91 Kentucky ___________________________ 15 5 4 6 50 5 I 14 31 LOUISIana ___________________________ 53 28 21 4 111 28 67 16 Mame _______________________________

Maryland 31 14 2 15 83 14 6 63 ___________________________ 42 19 18 5 132 19 87 26 Massachnsetts _______________________ 217 97 42 78 821 97 242 482 Mielngan ____________________________ 54 10 18 26 231 10 89 132 Minnesota ___________________________ 56 11 7 38 277 11 26 240 MISSISSIPPI. _________________________ 16 8 6 2 27 8 13 6 MISSOurI. ___________________________ 87 17 26 44 399 17 130 252 Montana ____________________________ 9 3 3 3 19 3 6 10 N ebraska ____________________________ 30 10 1 19 109 10 2 97 Nevada _____________________________ 6 3 2 1 11 3 5 3 New Hampshire _____________________ 10 7 0 3 27 7 0 20 New Jersey __________________________ 149 95 27 27 314 95 69 150 New Mexico _________________________ 12 8 2 2 19 8 4 7 New York State (excluding New York City) ________________________ 250 175 28 47 460 175 83 202 North Carolina ______________________ 26 9 5 12 101 9 11 81 North Dakota _______________________ 3 1 1 1 11 1 5 5 OhIO ________________________________ 131 33 40 58 482 33 176 273 Oklahoma ___________________________ 41 28 8 5 67 28 16 23 Oregon ______________________________ 21 7 5 9 55 7 12 36 Pennsylvania ________________________ 205 64 82 59 731 64 .372 295 Rhode Island ________________________ 28 14 10 4 55 14 30 11 South Carolina ______________________ 27 12 6 9 68 12 14 42 South Dakota _______________________ 8 6 0 2 13 6 0 7 Tennessee ___________________________ 40 11 10 19 147 11 29 107 Texas _______________________________ 188 109 28 51 479 109 78 292 Utah ________________________________ 36 14 13 9 96 14 39 43 Vermont- ___________________________ 2 1 0 1 10 1 0 9 Virgmra , ____________________________ 37 16 11 10 121 16 56 49 W ashmgton _________________________ 87 48 8 31 222 48 20 154 West Virzinia _______________________ 12 7 3 2 34 7 9 18 Wisconsm ___________________________ 51 13 7 31 200 13 28 159 W yoming ___________________________ 7 7 0 0 7 7 0 0

--------- --------- ------ Total (excluding New York City) ________________________ 2,889 1,252 688 949 9,212 1,252 2,804 5,156 New York City _____________________ 1,164 336 587 241 4,854 336 3,200 1,318

--- --- --- --- --- --- --- --- 4,053 1,588 1,275 1,190 14,056 1,588 6,004 6,474

1 Domestic registrants only, excludes 79 outside continental limits of the United States.

, Includes directors, officers, trustees, and all other persons occupymg similar status or performing similar

functions , Allocations made among States on the basis of location of principal offices of registrants, not actuallocation of persons Information taken from latest reports filed prior to June 30, 1954.

• Includes all forms of orgaruaations other than sole proprretorships end partnerships.
TWENTIETH ANNUAL REPORT 135

TABLE 7.-Market value and volume of sales effected on securitws exchanges in the

12-month period ended December 31,1953, and the 6-month period ended June 30,

1954- PART 1.-12 MONTHS ENDED DEC. 31, 1953

[Amounts in thousands]

Stocks I Bonds' Rights and warrants

Total

market

value Market Number Market Principal Market Number (dollars) value of value amount value of (dollars) shares (dollars) (dollars) (dollars) units

-------- ---- Registered exchanges 17,488,452 16,660,515 633,532 780,782 909,032 47,155 82,128

American 1,153,636 1,125,699 110,110 18,747 31,581 9,190 3,498 Boston 173,514 171,839 3,938 1,675 1,839 Chicago Board 4 4 (.) Cincinnatl 21,711 20,151 609 530 897 1,030 187 Detroit, 77,740 77,649 3,739 91 216 Los Angeles 163,642 163,221 9,960 421 521 Midwest, 474,457 473,120 14, 960 67 67 1,270 1,416 New Orleans 1,326 1,322 48 4 4 (i) 3 New York 15,009,939 14,218,019 449,327 760,243 875,322 31,677 71,275

Phl1ad~lphIa- Baltimore 174,045 173.203 4,817 194 277 648 810 PIttsburgh 27,395 27,271 1,053 124 51 Salt Lake 1,549 1,549 12,964 San Francisco Mining 359 359 5,196

San FranCISCO Stock 204,883 203,039 15,356 829 717 1,015 2,118 Spokane 687 687 1,300 Washmgton , 3,565 3,383 155 168 167 14 194

---- Exempted exchanges 7.938 7,862 1,073 76 82

Colorado Springs 112 112 216 Honolulu 6,831 6,755 827 76 g2 Riehmond 455 455 10 Wheehng 540 540 20

PART 2 -6 MONTHS ENDED JUNE 30, 1954

Registered exchanges 12,140,558 11,652,971 417,292 454,397 525,788 23,190 40,920

AmerIcan -------- 766,646 744,2J5 68,514 9,965 14,627 12,446 2,437 Boston 112,926 112,926 2,418 Chicago Board

----i3;076- ------304- ------i78- -------;:-- C incinnatL 12,776 101 199 109 Detroit 49,324 49,049 2,147 275 717 Los Angeles 106,723 106,617 6,982 21 19 85 366 Midwest 302,070 301,820 8,962 45 38 205 955 New Orleans 1,818 1,818 50 New York ----3fis7 10,507,345 10.044,250 295,681 453,528 510,220 9,567

Plnladelphla- Baitimore 121,736 120,917 3,369 435 453 384 2,033 Pittsburgh 18, 250 18,249 582 1 5 Salt Lake 1,619 1,619 12,328 San FtsIIClSCO Mining 838 838 8,196 -------.-- -------iii San FraWliseo Stock 137,848 137,518 6,875 302 253 28 Spokane 339 339 884

Exempted exchanges 4,622 4,581 518 38 40 3 3

---- Colorado Springs 55 55 81 --------.- Honolulu 4, 165 4,124 422 38 40 3 3 Richmond

Wheeling 235 235 8 167 167 7

I "Stocks" Include voting trust certificates, American depositary receipts, and certificates of deposit.

, "Bonds" mclude mortgage certIficates and certIficates of deposit for bonds. Smce Mar. 18, 1944, United

States Government bonds have not been mcluded m these data 350 shares . $176.

'The Washington Stock Exchange was merged on Oct. 15, 1953, mto the PhIladelphia-Baltimore Stock Exchange.

NOTE.-Value and volume of sales ~ll'eeted on registered seeunnes exchanges arc reported in connection with fees peid under section 31 of the Securities Exchange Act of 1934. For most exchanges the figures

represent transactions cleared during the calendar month. FIgures may differ from comparable data in

the Statrstical Bulletin due to revisions of data by exchanges.

----

__•

---- ---- ---- ---- ____________________ _____________________ ---------- ---------- _______________ ---------- ---------- ---------- ---------- ___________________

______________________ ---------- ---------- __________________ ---------- ---------- ____________________ _________________

___________________

___• __ ___________________ ---------- ---------- ____________________ ---------- ---------- ---------- ---------- ________ ---------- ---------- ---------- ---------- _________ _____________________ ---------- ---------- ---------- ---------- ________________

---- ---- ---- ___ ---------- ----------

---- ---- ---- ---- _____________ ---------- ---------- ---------- ---------- ____________________ ---------- ---------- ___________________ ---------- ---------- ---------- ---------- ____________________ ---------- ---------- ---------- ----------

___ ---- ---- ____________________

_______________________ ---------- ---------- ---------- ---------- _______________ ----------- __________________ _______________________ ---------- ---------- __________________ _____________________

_________________ ---------- ---------- ---------- ___________________

______ ___________________ ---------- ---------- ____________________ ---------- ---------- ---------- ---------- ________ ---------- ---------- __________ _____________________ ---------- ---------- ---------- ----------

---- ---- ---- ---- ___

---- ---- ---- _____________ ---------- ---------- ---------- ____________________

__• ________________ ---------- ---------- ---------- ---------- ____________________ ---------- ---------- ---------- ----------

•

•
136 SECURITIES AND EXCHANGE COM:MISSION

TABLE S.-Issues and issuers on exchanqee 1

PART I.-NUMBER OF ISSUES ON EACH EXCHANGE AS OF JUNE 30, 1954

Stocks Bonds

Exchanges

R X U XL XU Total R X U XL Total

-- -- -- -- -- -- -- ------ Amerlcan .. _. __. _________________ 508 5 298 ------ ------ 811 19 ------ 62 ------ 81 Boston 87 1 315 .----- 403 20 .----- .----- 20 Chicago Board of Trade 8 5 .----- 13 .----- CinclnnatL _____________________ 53 ------ 85 -.---- 138 ,~ 1 .----- 6 Colorado Sprlngs .---_. 13 -----. 13 Detrolt ------ .----- ---.-- .-.--- ------ __________________________ 116 ------ 119 ---56- 235 ------ .----- ------ .----- ------ Honolulu 31 87 -.---. .--.-- ------ 8 8 Los Angeles= .: .; .; .: .; Midwest. 172 8 195 .----- -----. 375 1 .----- 4 _______________________ 406 1 94 ------ ------ 501 16 .----- --_ .._- 16 New Orleans 3 ------ 15 .----- ------ 18 1 ----4- 2 ------ 3 New York Stock _________________1,544 2 .----- ------ 1,546 964 ---_.- ------ 968 Phlladelphia-Baltlmore 148 15 401 .----- ----.- 564 57 .----. 57 Pittsburgh ______________________54 ------ 75 ------ 129 1 ------ ------ ------ 1 Rlchmond _______________________ ------ ----4- 27 -.---- 27 ------ ------ ------ ------ Salt Lake. 94 ------ ------ ------ 98 ------ ------ ------ ------ ------ San Francisco Minlng ___________ 43 ------ ------ 43 ------ ------ ------ ------ ------ San Francisco Stock _____________ 205 4 183 ------ ------ 392 21 ------ ------ ------ 21 Spokane 25 7 32 Wheellng_. ______________________ ------ ------ ------ 16 3 19 ------ ------ ------ ------ ------

Symbols. R-reglstered; X-temporarily exempted from registration; U-unllsted on a registered ex- change; XL-listed 011 an exempted exchange; XU-unlIsted on an exempted exchange,

PART 2.-UNDUPLICATED NUMBER OF ISSUES ON ALL EXCHANGES AS OF

JUNE 30, 1954'

Status under the Act Stocks Bonds Total Issues

Registered __________________________________________________________ 2,641 1,009 3,650 Temporarily exempted from reglstratlon ____________________________ 20 4 24 Unlisted on registered exchanges ____________________________________ 290 60 350 Listed on exempted exchanges ______________________________________ 76 8 84 Unlisted on exempted exchanges ____________________________________ 30 0 30

Totals ________________________________________________________ 3,057 1,081 4,138

PART 3.-UNDUPLICATED NUMBER OF ISSUERS HAVING SECURITIES TRADED ON

EXCHANGES AS OF JUNE 30, 1954' Number of

Status under the Act: i8.wera Registered., ___ _________ ______________________ ____________________ ___________ __ 2, 204

Temporarily exempted from registratton.; 19

Unlisted on registered exchanges____ 273 Listed on exempted exchanges, _ __ 64

Unlisted on exempted exchanges_______ 28

Totals_ _____ _____ _______________________________________ _______ 2, 588

'Issues exempted under sec. 3 (a) (12) of the Securities Exchange Act, such as those of the United States and Its subdivisions, are not included hen-in, , For the purpose of obtaining net figures, each security in part 2 and each Issuer In part 3 of these tables is counted but once, In the first of the 6 categories mentioned above where it appears; e. g., an tssue registered on several exchanges and admitted to unlisted trading on several others 15counted but once and only under .. Registered."

__________________________ ------ ------ _________ ------ ------ ------ ------ ------ ------

________________ ------

== ==== = = = = ------ ------

____________________ ------

__________ ------ ------

_______________________ ------

_________________________ ------ ------ ------ ------ ------ ------
TWENTIETH ANNUAL REPORT 137

TABLE 9.-Companies in active registered public utility holding company systems

as of June 30, 1954-1

Register- Registered h lding ed operao tlng-holdcoJ;ll~' ing com- mes pames r

Electric

and gas

utility

companies

NonutllIty com.

pames

Total

eompanieslln

systems

-----------------1---------------

1. American Gas and Electric Oo.L; ._________ 1 2. American Natural Gas Co ._____________ 1

3. Central Public Utility Corp_____________________ 1

4. Central and South West Corp___________________ 1 5. Cities Service Co________________________________ 1

6. Columbia Gas System, Ine., The________________ 1

7. Consolidated Natuml Gas Co____________________ 1 8. Delaware Power & Light Co

9. Eastern Gas and Fuel Associates_.

10. Eastern Utilities Associates______________________ 1 11. Electric Bond and Share Oo, 1

12. General Public Utilities Corp____________________ 2

13. Granite City Generating Co. (Voting Trust)_____ 1

14. International Hydro-Electric System (Trustee)___ 2 15. Interstate Power Co_____________________________ 1 16. Middle South Utilities, Inc .__________ 1 17. National Fuel Gas Co ._______ 1

18. New England Electric System___________________ 1

19. New England Gas and Electric Associatlon______ 1

20. North American Co., The_______________________ 1 1 21. Northern States Power Co. (MInn.)_____________ 1 22. OhIO Edison Co_________________________________ 1

23. Philadelphia Electric Power Co__________________ 1 24. Southern Co .. The_______________________________ 1

25. Standard Power and Light Corp_________________ 3 26. Utah Power & Light Co .____ 1

27. West Penn Electric Co., The____________________ 1 1 28. Wisconsin Electric Power Co.___________________ 1

29. Wisconsin Southern Gas Co., Inc________________ 1

12

2

5

6

2

10

4

2

1

4

1

9

1

2

1

6

5

27

6

4

5

3

1

4

1

1

12

2

1

10

4

7

o

66

5

1

o

16

o

9

4

o

2

o

5

2

3

7

7

o

o

3

4

o

11

2

o

23

7

13

7

59

16

6

3

18

5

11

15

2

6

2

7

11

30

10

13

13

4

'2

8

8

r2

25

Ii

:I

25 10 140 158

2

o

3

4

133

o

o

10

o

o

251

Corrections for duplication-Deduct:

Five companies which are subsidiaries In two systems

Two companies which are subsidiaries In three systems

--------------- ---- Total companies In 29 active systems

1 In addition there were 6 other companies which had registered as holdlng companies, but no Ionger'have any public utility suhsidiaries, and their problems under section 11 of the Act are approaching 1Ina1 disposi- tion These 6 companies were The Mission OJ! Company, New England Public Service Company. North Penn Gas Company. Northern New England Company, Pennsylvania Gas & Eleetrie Corporation and The United Corporation. , These companies function solely as holding companies.

'Utility or nonutility operating companies which are also registered holdlng companies derivlng other income from Investments In public utility subsidiaries,

_

_

_

_

_

_

_

_

_ •

• _

_

~ _

_
138 SECURITIES AI\TD EXCHANGE CO:MMISSION

TABLE lO.-Reorganization proceedings in which the Commission participated

during the fiscal year 1954

Petltion- Securites

and Ex- change

Debtor District court Commission

Filed Approved notice of appearance

filed

American Bantam Car Co _______________ W. D. Pa _______ Apr. 19,1950 Apr. 19,1950 May 29,1950 American Fnel & Power Oo.,____________E. D. Ky _______ Dec. 6,1935 Dec. 20,1935 May 1,1940 Buckeye Fuel Co_. _________._. ______ _____do ___________ Nov. 28, 1939 Nov. 28,1939 Do. Buckeye Gas Service Co. _________________do ________________do _____________do ________ Do. Carbreath Gas Co _________________________do ________________do _____________do ________ Do. Inland Gas DIStributing Co _______________do ________________do _____. __ _____do ________ Do. American Sillca-Sand Co., The ___________ N. D IlL ______ Feb. 16, 1951 Mar. 5,1951 May 10,1951 Blackhawk Brewing CO__________________ S. D. Iowa ______ Jan. 4,1952 Jan. 7,1952 Mar. 7,1952 Brand's Restaurant Control Corp ________ S. D. N. Y ______ Aug. 2,1939 Aug. 10, 1939 Aug. 30,1939 Calumet & South Chicago Railway Co __ N. D. IlL ______ June 29,1944 Sept. 18, 1944 Oct. 20,1944 Central States Electric Corp _____________ E. D. Va ________ Feh. 26,1942 Feb. 27, 1942 Mar. 11,1942 Chicago City RaJlway Co ________________ N. D. IlL _______ Nov. 27,1939 Sept. 18, 1944 Oct. 20, 1944 Chicago Railways Co ___._ do ___________ Oct. 15, 1938 _____do ________ Do. Chicago & West Towns Railways, Inc ___ _____do ___________ June 30,1947 July 1,1947 July 24, 1947 Childs Co S. D. N. Y. _____ Aug. 26, 1943 Aug. 27, 1943 Aug. 26,1943 Oonsolldated Caribou Silver Mines, Inc __ D. Colo _________ Nov. 14,1952 Nov. 14,1952 Jan. 21,1953 Dallas Parcel Post Station, Inc ___________ N. D. IlL ______ Sept. 22, 1950 Sept. 22,1950 Oct. 26,1950 Federal Faetllties Realty 'I'rust, ______________do ___________ Dec. 26, 1934 Apr. 25,1935 Oct. 29,1940 Ferry Station Post Office, Inc _____do ___________June 18,1953 Dec. 2,1953 Jan. 29,1954 Franklin County Coal Corp _______. _____ E. D. IlL ______ Oct. 3,1952 Oct. 3,1952 Oct. 3,1952 General Publre Utilitres Corp ____________ S. D. N. Y ______ Jan. 10,1940 Jan. 10,1940 Jan 15,1940 Associated Gas & Electric Corp. __________do. _______________do _____________do ________ Do. AdoU Gobel, Inc _________________________D. N. J.________ July 23, 1953 Sept. 8,1953 Dec. 28,1953 Hankey Baking Co __________. ___________ W. D. Pa _______ Sept. 16,1952 Sept. 16, 1952 Nov. 7,1952 Hotel Martin Co. ofUtlca . N. D. N. Y.____June 6,1935 June 19,1935 June 24,1939 Industrial Office Building Corp __________ D. N. J.________Oct. 3,1947 Oct. 3,1947 Oct. 10,1947 Inland Gas Corp . E. D. Ky _______ Oct. 14, 1935 Nov. 1,1935 Mar. 28, 1939 Internattonal Power Securities Corp _____ D. N. J _________ Feb. 24,1941 Feb. 24,1941 Mar. 3,1941 International Railway Co W.D.N.Y _____ July 28,1947 July 28, 1947 Aug. 4,1947 Keeshin Freight Lines, Inc ___. ___________ N. D. IlL ______ Jan. 31, 1946 Jan. 31, 1946 Apr. 25,1949 Keeshin Motor Express Co., Inc _____ _____do ________________do _____________do ________ Do. Seaboard Freight Lines, Inc _______________do do do . Do. National Freight Lmes, Inc _______________do do ._ do Do. Kellett AIrcraft Corp _____________________E. D. Pa ________ Oct. 18,1946 Oct. 18,1946 Dec. 4,1946 Kentucky Fuel Gas Corp ________________ E. D. Ky _______ Oct. 25, 1935 Nov. 1,1935 Mar. 28, 1939 Kllrotest ManUfacturing Co ______________ W. D. Pa _______ Mar. 23,1953 Mar. 23, 1953 May 4,1953

Las Vegas Thoroughbred Racing Asso- D. Nev _________ Jan. 22,1952 Mar. 1,1952 Feb. 27, 1952

cllltibn. Midland Uluted Co ______________________D. DeL ___._. __ June 9,1934 June 9,1934 June 10,1940 Midland Utilities Co ______________________do ______. ____ _____do _____________do ___. ____ Do.

Momence Milk Cooperative Assoctatton , E. D. IlL_. ____ June 18,1949 June 18, 1949 Sept. 12, 1949 Muntz TV, Inc __________________________N. D. Ill Mar. 2,1954 Mar. 3,1954 Mar. 4,1954 Tel-A. Vogue ______________________________do ________________do _____________do ________ Do. Muntz Industries, Inc ____________________do ________________do ____________.do ________ Do. National Realty Trust. __________________ N. D. IlL ______ Dec. 26, 1934 Apr. 25, 1935 Oct. 29,1940 Nol'W!llk Tire & Rubber Co., The ________ D Conn.. _______ May 20,1949 MaY 20,1949 June 8,1949 Pittsburgh Ratlways Co _________________ W.D.Pa _______ May 10,1938 Ma,- 10, 1938 Jan. 4,1009

Pittsburgh Motor Coach Co _________ _____do ________________do _____________do ________ Do. Pittsburgh Terminal Coal Corp _______________do ___________ Dec. 4,1939 Jan. 2,1940 Jan. 6,1940 Powers Manufacturing Co _______________ E. D. Tex _______ Feb. 11,1954 Feb. 11,1954 June 11,1954

Quaker City Cold Storage Co ____________ E. D. Pa ________ Dec. 17,1941 Feb. 13,1942 Jan. 28,1942 Sierra Nevada Otl Co D.Nev __________June 22,1951 June 22,1951 July 25,1951 Silesian American Corp __________________ S. D. N. Y ______ July 29,1941 July 29,1941 Aug. 1,1941

Solar ManUfacturmg cor~-------------- D. N. J.________ Dec. 14, 1948 Dec. 14, 1948 Dec. 27,1948

South Bay Oonsolidated ater Co., Inc, S D. N. Y ______ Apr. 26,1949 Apr. 26, 1949 May 23.1949 Tela-Tone Radio Corp ___________________ D.N.J _________ Feb. 7,1952 Apr. 21,1952 Apr. 28,1952 Tele-Tone National Corp _________________do ___________ July 21,1952 July 21,1952 Oct. 13,1952 Tela-Tone New York Corp _____do ________________do _____________do ________ Do. RICOTelevision Corp _____do ___________ June 3,1952 June 3,1952 July 7,1952 Texas Gas Uttlities Co ___________________ W. D. Tex ______ Sept. 4,1951 Sept. 21, 1951 Sept. 11,1951 Third Avenue Transit Corp _____________ S. D. N. Y. _____ Oct. 25, 1948 Oct. 25, 1948 Jan. 3,1949 Surface Transportation Corp ______________do. __________ June 21,1949 June 21,1949 July 7,1949

Westchester Street 'I'ransportatron _____do. do .. do Do. Co., Inc. Westchester Electric Railroad Co ____ _____do ________________do _______. _____do ________ Do. Warontas Press, Inc _______________________do. __________ Sept. 8,1949 Sept. 8,1949 Oct. 24,1949 Yonkers Railroad Co ______________________do ___________ JUDe 21,1949 June 21,1949 July 7,1949

Trinity Burldmgs Corp of New York ____ S.D.N. Y ______ Jan. 18,1945 Jan. 18,1945 Feb. 19,1945 Union League Club of Chicago, __________ N. D. Ill ________ Feb. 14,1950 Feb. 14,1950 Apr. 10,1950 U. S. Realty & Improvement Co _________ S.D N. Y ______ Feb. 1,1944 Feb. 1,1944 Feb. 7,1944 Warner Sugar Corp .. _____________________. ___do June 7,1940 July 9,1940 July 9,1940

___________________•

_______•________________________

______•_____

_________• ____

__________________•_____

____• ___________

_______________•____

______•____ ______•__________

________________ ______•_ _____ ___ ____

_____________•__ ______ _____ ________

___• ____

_______________ _______• ___ __•_____

_______• ___
TWENTIETH ANNUAL REPO~T 139

TABLE ll.-Summary of cases instituted in the courts by the Commisston. under the

Securities Act of 1933, the Securities Exchange Act of 1934, the Public Uti12ty

Holdtnq Company Act of 1935, the Investment Company Act of 1940, and the

Investment Advisers Act of 1940

Total I Total Cases I Cases Cases ill- Total Cases cases In. cases pending pending stituted cases closed strtuted closed pending

Types of cases up to endlup to end at end at end during during during

of 1954 I of 1953 1954 1954 of 1954 of 1954 fiscal fiscal fiscal 1954 fiscal fiscal fiscal fiscal

year year year year year year year

-/- ------------ Actions to enjoin violanons of the above acts ________________ 653 637 16 13 Ii 30 14

Acnons to enforce subpenas

under the Secuntres Act and the Securities Exchange Act., 57 57 0 0 2 2 Z Actions to carry out voluntary

plans to comply With section 11 (b) of the Holding Com- pany Act _____________________ 110 102 8 10 2 12 4 MIScellaneous actions __________ 19 17 2 2 2 4 2

-1- -/- -------- ---- TotaL ___________________ 839 813 26 25 23 48 22

TABLE 12.-Summary of cases institutea aqainet the Commission, cases in which the

Commission ptirticipated as intervenor or amicus curiae, and reorganization cases on appeal under ch. X in which the Commission parucipatea

Total Total Cases Cases Cases in- Total Cases cases m- cases pending pendmg stituted cases closed strtuted closed pending

Types of cases up to end up to end at end at end during dunng during

of 1954 of 1954 of 1954 of 1953 1954 1954 HIM

. fiscal fiscal fiseal fiscal fiscal fiscal fiscal

ycar year year year year year -yeer

------- ---- ------------ Actions to enjoin enforcement of Securrties Act, Securrties

Exchange Act and Public

Utility Holding Company

Act With the exception of

subpenas ISSued by the Com- mISSIon ______________________ 64 64 0 0 0 0 0 Acnons to enjoin enforcement of or compliance With subpenas ISsued by the Commts- slon , _________________________ 8 8 0 0 0 0 0 Petrtions for review of Com- mISSIOn's orders by courts of appeals under the various acts admtmstered by the Commlssron _________________ 175 174 1 4 4 8 7 Miscellaneous acnons against

the CommISSion or officers of

the Commission and cases in

whreh the CommISSIOn participated as intervenor or amICUS curiae 169 163 6 \) 4 13 7

Appeal cases under ch, X III

which the CommISSIOn par- tieipated _____________________ 135 131 4 7 3 10 6

TotaL _____________: _____ ---------------------------- 551 540 Jl 20 Jl 31

______~_________

~
140 SECURITIES .AND EXCHANGE CO~SSION

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TWENTIETH A1\'1'<'"UALREPORT 153

TABLE 22.-Reorganization cases under ch, X of the Bonkru ptri, Act pendino during

the fiscai year ended June 30, 1954, in uhicb the Commission partrcrpated when

appeals were taken from district court orders

Name of case and United States

Court of Appeals

Central States Electric Corp., debtor; Sidney S. Henis, et al, v.

Thomas C. Egan, et al. Joseph L.

O'Brien, petitioner (4th circuit),

Industrial Office Building Corp,

debtor; Howard Grad and Bernard

J. Grad, appellants (3d Circuit).

Inland Gas Oorp., et al , debtors;

Paul E. Kern, appellant (6th circuit).

Inland Gas Corp., et al., debtors;

Vanston Committee, Green Committee, Paul E. Kern and Clinton

M. Harbison, Trustee, appellants

(6th circuit).

Pittsburgh Railways Company,

debtor; Seeuntles and Exchange

Commission, appellant (3d circuit).

Silesian-AmerIcan Corp., debtor;

Francis X. Conway, Trustee, et al.,

appellants (2d circuit).

Solar ManufacturlngTCorp., debtor;

The Manne Midland Trust oo.,

appellant (3d circuit).

Solar ManufacturingTCorp.,'debtor; Samuel Manon, Milton M. Unger

and Edward Endelman, and Morton Stavis, appellants (3d Circuit).

Solar Manufacturing Oorp., debtor;

Samuel Marion, Milton M. trriger

and Edward Endelman, and Morton Stavis, appellants (3d circuit).

Transvislon, Inc:z. debtor; Securities and Exchange Commlssron, appellant (2d circuit),

Nature and status of case

Appeals from order of Apr. 23, 1953. authrmzina allowances to

certain persons and firms and denying a fee to O''Brten. Statement of Commission, May 22 aud May 28, 1953, In response to

motions for leave to appeal. Supplementary statements of

Commission, June 30 and July 9, 1953, In response to briefs flied

by Kelly Committee. Opinion, July 16, 1953, denying motions

for leave to appeal Petition by Hems for writ of eertiorari Oct

10,1953. Certiorari denied Nov 30,1953 Closed.

Appeal from order of Feb 11, 1953, disallowmg the claims of the

appellants. Brief by Comrmssion Sept. 15, 1953, In support of

distnct court order. Judgment of CA-3, Oct 29, 1953, affirrrung

order of district court. Closed. Appeal from order of Oct. 6, 1952, dismissing appellant's petition

for Instructions to Trustee to file a claim against Inland Gas

Corp. and denying motion to appoint an independent trustee

or in the alternative to appoint independent counsel for Trustee

of Kentucky Fuel Gas Corp. Cotnnussron flied brief June 26,

1953, m support of distnet court order. Order affirmed Dec. 4,

1953. Closed.

Appeals from order of Feb 12, 1953, approving the amended plan

of'reorgaruzation. Comrrnssiou filed brief Oct 5, 1953, m support of plan Declsion of CA-6, Mar, 18, 19M, affirming the plan

of reorganization. Order Apr. 7, 1954, denying petitron for rehearing, Pending.

Appeal from order of Jan. 28, 1954, granting counsel for the Estate

of W. D. George, Deceased, access to records of the Comrmssion

for the purpose of mspection. Appeal dismissed May 5, 1954, on

stlpulatron of parties. Closed.

Appeals from order of June 17, 1952, disrmssmg petition of Tmstee

for an aeeounting and other relief against the SWISSBanks. Com.

mission flied bnefs Jan. 23 and Mar 3, 1953,supporting appeals

and contending court had [unsdiction over claims against the

banks. Opinion Apr. 13, 1953, affirming the order of the distnct

court. Petition for rehearing denied June 8, 1953. Petitions

for writ of certiorari supported by Commission filed In Nov. 1953. Time to answer petitions extended by stipulation. Pending.

Appeal from order of l\lar. 3, 1952, denying 2 motions of appellant

to dismiss oounter-elaims asserted bv Trustee of Debtor to claims

flied by appellant as creditor and to aoeountmg by appellant

as fonner Indenture trustee for debtor's debenture holders. ComIIUSSionflied brier Sept. 17, 1952, In support of district court order.

Order atllrmed Dec. 3, 1952. Petition for writ of oertiorarl filed

Mar. 2, 1953, by The Marine Midland Trust Co. of New York.

Commission's brief In OPPOSItIOnflied Apr. 10, 1953. Certiorari

demed Apr. Zl, 1953. Closed. Appeals from order of Mar. 17, 1953, flxmg final allowances. Com- misston's brief filed May 28, 1953, III support of appeals. Order

of CA-3 vacating order and remanding for further proceedings

pursuant to opmlon, Closed.

Appeals.from order of Dec. 11, 1953, fixing allowances for services

rendered. Bnefs flied m April 19M. Comnnssion's bnef took

position that overall fees were too high while fees awarded certain

creditors' representstives were too low. Pending.

Appeal from order Jan. 12, 1954, denying the Oommissron's motion

to dismiss the Chapter XI proceedmgs for 'I'ransvision, Inc.,

on ground that Chapter XI was inappropriate since debtor

has a substantial number of public investors. Brief for Comnnssion Apr. 26. 1954. in support of appeal, and appellees bnet

flied June 30, 19M. Pending.
154 SECURITIES AND EXCHANGE COMMISSION

TABLE 23.-A 21-year eummaru of-criminal caiuwdeuel1ip-etl, by tne Commission-r1934- through 1954- by fi6cal year

[See table 25 for classification of defendants as broker-dealers, ete.]

Number I Number

Number

of these

Number of persons ~:1~ defend.

of cases Number ants as to Number as to which Number Number whom of these referred whom . di t of de- of thesc 01 these proceed. defend. Fiscal year to De- proseeu- ~e;~ fendants defend- defend- ings were ants as to partment ti:o~~ were ob- Indicted of Justice mauch ants con- ants ac- dismissed whom

meach mended tamed by cases I victed quitted on motion cases are

year in each ¥~~d of pending s

Umted year attorneys States attorneys

---------------------------- 1934_. ._. 7 36 3 32 17 0 15 0 1935 29 177 14 149 84 5 60 0 1936 43 379 34 368 164 46 158 0 1937 ., ._ _. _. 42 128 30 144 78 32 34 0 1938_ ._ 40 113 33 134 75 13 45 1 1939._ ._._. 52 245 47 292 199 33 60 0 1940 ._. 59 174 51 200 96 38 66 0 1941._ ._. 64 150 47 145 94 15 36 0 1942. ._._ 50 144 46 194 108 23 48 15 1943 31 91 28 108 62 10 33 3 1944. ._ Z7 69 24 79 47 6 19 7 1945. 19 47 18 61 36 10 14 1 1946 16 44 14 40 13 8 4 15 1947 ,,, , 20 50 13 34 9 5 14 6 1948. ._. 16 32 15 29 20 3 6 0 1949 ._. 27 44 25 57 17 13 15 12 1950 18 28 15 Z7 20 1 5 1 1951. ._ ._. 29 42 24 48 33 5 5 /}

1952_ 14 26 13 24 15 4 1 4 1953_ 18 32 15 33 8 4 2 19 1964 _. '19 44 16 47 1 2 0 44

--- ---- --- -------------------- TotaL ._. 630 2,095 525 2, 245 1,196 271> '640 133

1 The number of defendants in a case IS sometimes increased by the Department of Justice over the number against whom prosecution was recommended by the Commlsslon. For.the.purpose of this table, an indio

vidual named as a defendant in 2 or more mdictments in the same case is colilited-as a single defendant

See table lor breakdown of pending cases. '.

S Three of these references as to 5 proposed defendants were still bemg processed by the Department of

Justice as of the close of the fiscal year.

'481 of these cases have been completed as to 1 or more defendants. Convictions have been obtained in

418 or 87 percent of such cases. Only 63 or 13 percent of such cases have resulted ill acquittals or dISmissa1ll

as to all defendants.

I Includes 48 defendants who died after indletrnent,

___ ______• __

•• ___• ________• __ •••• __• ______• ___

__ ___ •• __ •• ___ •• _______

• _____ ___•

__• _•• _••• __ __ ___•• ___• ___

_• ___ •••• ___ __• _____________•

_• _____ •••• ___ ____• ______• ____

____ • ____••• _____

____ " ___ __ __ ___• ___ ______

___• ___• ____ __ __• _______• ___• __

___ •• ______ •• __•• ______•• __ •• __•• ___• __• ___ __•• _____• __•• _

• _____

•

'

•
TWENTIETH ANNUAL REPORT 155

TABLE 24.-Sllmmary of criminal cases develapea by the Commiesion which were still pending on June 90, 1954

Number I Number of such defendants as to

Number of of such whom cases are still pending and

defendants reasons therefor

Cases defendants as to whom In sueh

cases cases have Not Yet been Awatting Awaiting

completed appre- trial appeal hended

Pending, referred to Department

of 1938 Justice___________________________ in the fiscal year. 1 2 1 1 0 0 1939___________________________ 1940___________________________ 0 0 0 0 0 0 0 0 0 0 0 0 1941- __________________________ 0 0 0 0 0 0 1942___________________________ 2 18 3 14 1 0

t~~~~:: ::::::::::::::::~::::: 1 5 2 2 1 0 2 8 1 6 1 0 1945___________________________ 1946___________________________ 1 1 0 1 0 0

1947___________________________ 4 16 1 Hi 0 0 3 9 3 6 0 0 1948___________________________ 0 0 0 0 0 0 1949___________________________

1950___________________________ 4 12 0 3 9 0 1 3 2 0 0 1 1951- __________________________ 3 6 1 0 5 0 1952___________________________ 3 7 3 0 3 1 1953___________________________ 8 21 2 0 14 /; 1954___________________________ 14 44 0 8 35 1

Total. ______________________ '47 '152 19 56 69 8

Total cases pending 1_ _ _ SuMMARY _ 50

Total defendants 1 157 Total defendants-as to whom. C3SCl\ are pending 1____________________________________________________ 138

I Except for 1954, indictments have been returned In all pending cases. As of the close of the fiscal year,

indictments had not yet been returned as to 5 proposed dcfendants III 3 cases referred to the Department of

J,:stIce in 1954. Thes~ are reflect~.R,o}}ly in the reeapttulatton of totals at the bottom of-the table •.

TABLE 25.-A 21-year summary classifying all defendants in criminal cases developed

by the Commission-1934 to June 30, 1954

Number as

to whom

cases were Number as Number Number Number dtsrnissed to whom

mdieted convicted aequitted on motion cases are of United pending

States

atlafneys

Registered broker-dealers I(lneluding prln- etpsls of such firms) _____________________ 339 209 24 96 10 Employees of such registered broker-deal123 ers _______________________________________ 59 16 38 10

Persons in general securities business but not as regtstered broker-dealers (Includes prtneipals and employees) _______________ 715 356 57 257 45 All others 1,068 572 179 249 68

TotaL 2,245 1,196 276 6401

133

, Includes persons registered at or prlor to time of indictment

The persons referred to in this column, while not engaged in a general business IIIsccurities, were almost

wIthout exception prosecuted for violations of law Involving seeunnes transactions.

• • • _______ ___ ____ _______

• ________________________________

______________________________•

•

•
156 SECURITIES AND EXCHANGE COMl\PSSION

TABLE 26.-A 21-year summary of all injunction cases mstituted,by the Commission,

1931 to June 30, 1954, by calendar ypar

Number of cases instituted Number 01 cases In which by the Commlssron and injunctions were granted the number 01 defend- and the number of deCalendar year ants involved. fendants enjomed.!

Cases Defendants Cases Defendants

1934 7 24 2 4 1935____________________________________________ 36 242 17 56 1936____________________________________________ 42 116 ~6 108 1937____________________________________________ 96 240 91 211 1938____________________________________________ 70 152 -73 153 1939 57 154 61 165 1940____________________________________________ 40 100 42 99 1941____________________________________________ 40 112 36 90 1942____________________________________________ 21 73 20 54 1943____________________________________________ 19 81 18 72 1944 . 18 80 14 35 1945 . . . _. 21 74 21 57 1946 . 21 45 15 34 1947 .. 20 40 20 47 1948. _. . . . 19 44 15 26 1949 ... 25 59 24 55 1950 . 27 73 26 71 1951. ._ . 22 67 17 43 1952 . 27 103 18 50 1953_. . . 20 41 23 68 1954 (to June 30) 5 12 3 5

Total .. 653 1,932 , 592 1,503

SUMMARY

Cases Defendants

Actions Institu ted, .. . .. . _. 653 1,932

Injunctions obtamed _____________________________________________________ 585 1,503

Actions pending ____ ______________ ______________ 12 ,42

Other dispositions I .. -- - - 56 387

TotaL . . 653 1,932

IThese columns show dlsposttron of cases by year of disposition and do not necessarily reflect the dlspostnon of the cases shown as having been mstituted ill the same years.

, Includes 7 cases whleh were counted twice ill this column because mjunetlons against different defendants ill the same cases were granted In different years. a Includes 3 defendants ill 1 case ill wbich injunctions have been obtained as to 3 co-defendants. I Includes (a) actions dismissed (as to 322 defendants); (b) actions diseonttnued, abated, vacated, abandoned, or settled (as to 51 defendants), (c) actions in which J\ldgment was denied (as to 11 defendants);

(d) actions ill which prosecution was-stayed on stipulation to discontinue misconduct charged (as to 3

defendants).

o

_______•__• _________________________________

_______________•______________________• _____

____________________•• ____• ______ __________

__• ________ ____ ___________ _____________

_______• ___________________________________ _________• ____________________________ ____

__ ___•_____ ___________________________

__•• ____•• ______•• ___________ ____________

____•__•______• _____ _______________________ ________ •________________ _______________

__•• ____• ___________•• __________ ___________ _____________• _____ ___________ __________

_____•________• _________________

__ _____•__•___• _______________•____

_______________ •_______ __" ____________• _____•__• •

___________________ • • •____•

---- --------- -------_ ------- --- ---- ----- --- ----- --

_____________• _______• _________________• __________ ____ _________ -