21st Annual Report

of the

Securities and Exchange

Commission

Fiscal Year Ended June 30, 1955

UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON I 1956

For we by the Superintendent of DocUDlent8, U. S. Governnaent Printing OfJice

W""hington 25, D. C. - Price 50 centll (Paper cover)
II

SECURITIES AND EXCHANGE COMMISSION

Headquarters Office

425 Second Street NW.

Washington 25, D. C.

COMMISSIONERS

March 30, 1956

J. SINCLAIR ARMSTRONG, Chairman

CLARENCE H. ADAMS

ANDREW DOWNEY ORRICK

HAROLD C. PATTERSON

EARL F. HASTINGS

ORVAL L. Dulsors, Secretary
LEITER OF TRANSMITTAL

SECURITIESANDEXCHANGECOMMISSION,

Washington, D. C., March 30, 1956.

SIR: I have the honor to transmit to you the Twenty-first Annual

Report of the Securities and Exchange Commission, covering the

fiscal year July 1, 1954 to June 30, 1955, 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; section 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.

Respectfully,

J. SINCLAIRARMSTRONG,

Chairman.

THE PRESIDENTOF THE SENATE,

THE SPEAKEROF THE HOUSE OF REPRESENTATIVES,

Washington, D. C.

In

TABLE OF CONTENTS

Page

ForewordL________________________________________________________ XI

Commissioners and staff offieers., _____ ____ ___ __ _________ XII

Regional and branch offices__ __________ _ _ _________ XIU

Biographies of commissioners , ______ _________________________ XIV

PART I

REVISIONS OF RULES AND FORMS

Rule 154_____________________________________________________ 1

Changes in rules to conform to Public Law 577, 83d Congress_______ 2

Rule N-24E-l .__ 2

Rule 461_______________________________________________ 3

Rule 133_____________________________________________________ 3

Rules 134 and 135_____________________________________________ 4

Rules 423, 428 and 404___ ___________ ________ ___________ 4

RegulationA_________________________________________________ 4

Form 9-K and related rules_____________________________________ 4

Form lo-]{___________________________________________________ 5

Regulation BVV___________________________________________ 5

Revisions under consideration__ _ __ ___ _____ ___ 5

PARTH

ADMINISTRATION OF THE SECURITIES ACT OF 1933

Description of the registration process____________________________ 7

Registration statement and prospectus , ___ _______________ 7

Examination proeedure.L, , __ _ _ _ 7

Time required to complete registration_______________________ 8

Volume of securities registered__________________________________ 8.

Registration statements filed;., _ __ __ _ __ ______ 10

Exemption from registration under the act________________________ 11

Regulations A and D_ ____ 11

Regulation B_ _____ ____________ ____ _______________ 14

Formal action under Section 8_ ___ _ 14

Results obtained by the registration process_______________________ 17

Litigation under the Securities Act______ _____ __________ 19

Injunctive actions 19

Enforcement of Commission subpenas________________________ 22

Participation as amicus curiae__ ____ _____ ____ _________ 23

Disclosure of Commission's confidential files., _ _ __ 23

PART III

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF

1934

Regulation of exchanges and exchange trading ____________________ 26

Registration and exemption of exchanges_____________________ 26

Disciplinary action by exchanges., ____ ____ __ ______ _ _ 26

Registration of securities on exchanges___________________________ 27

Statistics of securities registered on exchanges_________________ 27

Disclosure obtained by the registration process________________ 27

Market value of securities traded on exchanges____________________ 28

Comparison with market value of securities traded over the

counter_________________________________________________ 29

v

- ____ __ ______ ______
VI TABLE OF CONTENTS

Page

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF

1934-Continued

Unlisted trading privileges on exchanges__________________________ 30

Volume of unlisted trading in stocks on exchanges _____________ 30

Application for unlisted trading privileges____________________ 3Q

Delisting of securities from exchanges , _________ __ _________ 31

Block distributions reported by exchanges________________________ 31

Manipulation and stabilization , __ ______ _ __ ____ _ 32

Manipulation; _______________________________ __ 32

Stabilization , ______ _ _ ______________ _ _ 33

Insiders security transactions and holdings________________________ 34

Recovery of insiders' profits by company _____________________ 35

Regulation of proxies , _ _ ____ ____ _______ ____________ ____ 35

Scope of proxy regulation___________________________________ 35

Statistics relating to proxy statements________________________ 36

Regulation of brokers and dealers in over-the-counter markets; __ ___ 37

Registration_ _________ _ ____ _ __________ __ 37

Administrative prooeedings., _____ _ _______________________ 37

Broker-dealer inspections , , ___ _ _ _ 41

Financial statements., ___________ _ 42

Net capital rule , ______ __________ __ __ _ ____ ___ 43

Supervision of activities of National Association of Securities Dealers,

Inc________________________________________________________ 43

Disciplinary actions_____ __________________________ __ ___ 44

Commission review of NASD disciplinary aotions______________ 44

Commission review of action on membership__________________ 47

Litigation under the Securities Exchange Aot of 1934______________ 47

Participation as amicus curiae______________________________ 50

PART IV

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

Composition of registered holding company systems-Summary of

changes_____________________________________________________ 51

Significant developments in and litigation involving holding company

systems____________________________________________________ 53

Revision of rules, ________ ______ __ _ _ 75

Financing of registered public utility holding company systems______ 77

Financing of electric generating companies supplying facilities of the

Atomic Energy Commission___________________________________ 84

Cooperation with State and local regulatory authorttles., ___ _ 85

PART V

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

ACT, AS AMENDED__________________________________________ 89

Summary of aetivitiea.; , _ _ _ _ ___________ _____ 90

Problems in the administration of the debtor's estate___________ 90

Examinations and reports on plans of reorganisation, __________ 90

Fairness of treatment of security holders_____________________ 91

Consummation of plan_____________________________________ 93

Commission's activities under Chapter XL___________________ 93
TABLE OF CONTENTS

PART VI

Page

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939__ 95

PART VII

ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF

1940___________________________________________________________ 96

Companies registered under the Act______________________________ 96

Types of new investment companies registered____________________ 97

Current information , 97

Applications and proceedings_____ ______ ___ 97

Status of The Alleghany Corporation under the Act________________ 101

PART VIII

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT OF

1940

Simplification of forms and rules_________________________________ 103

Registration of foreign investment advisers_______________________ 104

Litigation under the Investment Advisers Act of 1940______________ 105

PART IX

RELATED ACTIVITIES OF THE COMMISSION

Legislative matters_________________ ___ _ 107

Courtproceedings_____________________________________________ 107

Civilproceedings__________________________________________ 107

Criminal proceedings.L L; 108

Extradition proceedings; _ ___ 113

Complaints and investigations___________________________________ 114

Restitution, _ _________ 115

Section of securities violations___________________________________ 116

Activities of the Commission in accounting and auditing____________ 116

Opinions of the Commission , __ 118

Confidential treatment of applications, reports, and documents______ 118

Statistics and special studies____________________________________ 119

Personnel and fiseal; , _ __ ______ __ 121

Publications__________________________________________________ 122

Information available for public inspection________________________ 123

PART X

APPENDIX-STATISTICAL TABLES

Table 1. A 21-year record of registration fully effective under the Securities

Act of 1933____________________________________________ 126

Table 2. Registrations fully effective under the Securities Act of 1933_ 127

Part 1. Distribution by months_________________________________ 127

Part 2. Purpose of registration and type of security________________ 127

Part 3. Industry of registrants__________________________________ 128

Part 4. Use of proceeds________________________________________ 129

Table 3. New securities offered for cash sale in the United States_______ 130

Part 1. Type of offering, __________ __________________ 130

Part 2. Type of security________________________________________ 131

Part 3. Type of issuer______ ___ ________________ __________ 132

Part 4. Private placement of corporate securitles, _________________ 133

_

, __ __ _
VIII TABLE OF CONTENTS

Page

Table 4. Proposed uses of net proceeds from the sale of new corporate

securities offered for cash.;., ____________ _________ __ 134

Part 1. All corporate.cc. , ___________________ _________ ___ 134

Part 2 Manufacturing__ ____________ __________________ 134

Part 3. Miuing.L, , __________ __ _ ____ __ _ 135

Part 4. Electric, gas and water__________________________________ 135

Part 5. Railroad______________________________________________ 136

Part 6. Other transportation____________________________________ 136

Part 7. Communication , ______________ _____ __ ______ _ 137

Part 8. Financial and real estate________________________________ 137

Part 9. Commercial and other__________________________________ 138

Table 5. Summary of corporate securities publicly offered and privately

placed from 1934 through June 1955______________________ 139

Table 6. Brokers and dealers registered under the Securities Exchange

Act of 1934-effective registrations as of June 30, 1955, classified by type of organization and by location of principal offlea, 140

Table 7. Market value and volume of sales effected on securities exchanges in the 12-month period ended December 31, 1954,and

the 6-month period ended June 30, 1955___________________ 141

Part 1. 12 months ended December 31, 1954______________________ 141

Part 2. 6 montJis ended June 30, 1955___________________________ 141

Table 8. Unlisted stocks on securities exchanges______________________ 142

Part 1. Number of stocks as of June 30, 1955_____________________ 142

Part 2. Volume of trading-calendar year 1954____________________ 142

Table 9. Issues and issuers on exchanges_____________________________ 143

Part 1. Number of issues on each exchange as of June 30, 1955______ 143

Part 2. Unduplicated number of issues and issuers on all exohanges, ; 143

Table 10. Companies in active registered public utility holding company

systems as of June 30, 1955______________________________ 144

Table 11. Reorganization proceedings in which the Commission participated during the fiscal year 1955_________________________ 145

Table 12. Summary of cases instituted in the courts by the Commission., , 146

Table 13. 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____________________ 146

Table 14. Injunctive proceedings brought by the Commission which were

pending during the fiscal year 1955_______________________ 147

Table 15. Indictments returned for violation of acts administered by the

Commission and related Federal statutes which were pending

during the fiscal year 1955_______________________________ 150

Table 16. Petitions for review of orders of the Commission which were

pending in courts of appeals during the fiscal year 1955_____ 154

Table 17. Criminal contempt proceedings pending during the fiscal year

1955___________________________________________________ 155

Table 18. Cases in which the Commission participated as intervenor or as

amicus curiae pending during the fiscal year 1955__________ 156

Table 19. Proceedings by the Commission to enforce subpenas pending

during the fiscal year 1955_______________________________ 157

Table 20. Miscellaneous actions involving the Commission or its employees pending during the fiscal year 1955________________ 158
TABLE OF CONTENTS IX

Pap

Table 21. Actions to enforce voluntary plans under section 11 (e) of the

Public Utility Holding Company Act pending during the fiscal

year 1955_____________________________________________ 159

Table 22. Actions under section 11 (d) of the Public Utility Holding

Company Act pending during the fiscal year 1955__________ 161

Table 23. Reorganization cases under Chapter X of the Bankruptcy Act

pending during the fiscal year 1955 in which the Commission

participated when appeals were taken from district court

orders_________________________________________________ 162

Table 24. A 22-year summary of criminal cases developed by the Commission , _ _ _ ___ __ _______ ___________ __ __ 163

Table 25. Summary of criminal cases developed by the Commission which

were still pending on June 30, 1955 '________________ 164

Table 26. A 22-year summary classifying all defendants in criminal cases

developed by the COmmission____________________________ 164

Table 27. A 22-year summary of all injunction cases instituted by the

Commission , ____ _______________ __________ 165

FOREWORD

The 21st Annual Report of the Securities and Exchange Commission

to the Congress for the fiscal year July 1, 1954, to June 30, 1955,

describes the Commission's activities during the year in discharging

its duties under the statutes which it administers. These include

supervision of the registration of securities for sale in interstate

eommeree to the public, the surveillance of the interstate markets in

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

of registered public utility holding company systems and investment

companies, as well as litigation in the courts.

)

In the fiscal year 1955 new issues of securities registered for public

sale totaled almost $11 billion. This represents an increase of $1.8

I billion over the previous fiscal year and compares with a previous

peak of $9.5 billion for the fiscal year 1952.

In addition to this increase in normal workload, the Oommission

has been engaged in a program to simplify forms, eliminate duplicate

filings and relieve those subject to regulation of unnecessary burdens

without prejudicing the interest of investors. Though a reduced

workload should ultimately result from this program, because of the

complexity of such matters, such a program involves a large expenditure of time by high grade personnel. This program is continuing

into fiscal 1956.

The Commission's work may be divided into two general classes.

First, there is the work which usually must be completed within

prescribed short-time limits. Examples of this are the registration

statements relating to the raising of capital, applications of public

utility companies for financing, proxy soliciting material, brokerdealer registrations, and certain types of enforcement activity. Other

work, however, has no fixed time limit and is necessarily performed as

the staff is available to do the work. Examples of this are the review

of annual and periodic reports filed with the Commission, brokerdealer inspections, and certain applications for approval of transactions

subject to the Investment Act of 1940. In allocating personnel, preference must be given 0 the first category of work mentioned above.

Any reduction in personnel, therefore, tends to defer the handling of

other essential work.

During this year the Commission has continued to use every

effort to render an effective administration at a minimum of cost.

Xl
COMMISSIONERS AND STAFF OFFICERS

(As of June 30, 1955)

C Term Expires ornrmssroners June II

J. SINCLAIRARMSTRON"G,1of Illinois, Chairman :_____ 1958

CLARENCEH. ADAMS,of Connecticut___ 1956

A. JAOKSONGOODWIN,JR..2 of Alabama____________________________ 1959

ANDREWDOWNEY ORRICK,3of California__________________________ 1957

Vacancy4_____________________________________________________ 1960

Secretary: ORVAL L. DuBOIS

Staff Officers

EDWARD T. TAIT,5 Executive Director.

FRANK G. UBIELL,e Executive Assistant to the Chairman.

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

ROBERT A. McDoWELL,7 Director, Division of Corporate Regulation.

RAY GARRETT, JR., Associate Director.

HAROLD C. PATTERSON,8Director, Division of Trading and Exchanges.

PHILIP A. LOOMIS, JR., Associate Director.

WILLIAM H. TIMBERS,OGeneral Counsel.

THOMAS G. MEEKER,IOAssociate General Counsel.

EARLE C. KING, Chief Accountant.

LEONARDHELFENSTEIN, Director, Office of Opinion Writing.

I Designated Chairman May 26,1955,to succeed Ralph H. Demmler, resigned May 25,1955

Resigned December 31, 1955. Succeeded by Earl F. Hastings, ofArizona, assumed officeMarch 6,1956.

I Assunted officeMay 26,1955,to fill the vacancy created by the resignation of Ralph H. Demmler.

, Term of office or Paul R. Rowen expired June 5, 1955. Succeeded by Harold C. Patterson, of Virginia,

assumed officeAugust 6, 1956.

, Designated effective June 15,1955,to succeed John V. Bowser, resigned. Mr. Talt resigned Jnne 30,1955.

Thomas G. Meeker designated Acting Director effective July I, 1955, Albert K. Scheldenhelm designated

Executive Director effective November 29, 1955.

Designated June 16,1955,to succeed Edward T. Talt.

7 ResIgned January 6,1956. Ray Garrett, Jr .. designated Direotor effective January 7,1956.

Assumed office as Commissioner August 5, 1956. Phlhp A. Loomis, Jr., designated Director effective

September 26,1955.

Resigned January 30, 1956. Thomas G. Meeker designated General Counsel effective January 31,

1956.

10 Designated Jnne 13,1956,to succeed Myron S. Isaacs, resigned.

XII

"

•

•

•

•

•
REGIONAL AND BRANCH OFFICES

Regional Administrators

Region 1. Francis J. Purcell,' 42 Broadway, New York 4, N. Y.

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,

Ga.

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

Street, Chicago 3, ill.

Region 5. Oran H. Allred, United States Courthouse (Room 301), Tenth

and Lamar Streets, Fort Worth 2, Tex.

Region 6. Joseph F. Krys (Acting),' New Customhouse (Room 573), 19th

and Stout Streets, Denver 2, Colo.

Region 7. Arthur E. Pennekamp (Acting),a 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 4, 425 Second Street NW. (Room 105),

Washington 25, D. C.

Branch Offices

Standard Building (Room 1628), 1370 Ontario Street, Cleveland 13, Ohio.

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

U. S. Post Office and Courthouse (Room 1737), 312 North Spring Street,

Los Angeles 12, Calif.

Main Post Office and Courthouse (Room 1037), 180 East Kellogg Blvd., St.

Paull, Minn.

Post Office Building (Room 42(}-A), Salt Lake City, Utah.

IResJgned July 29,1955. James C. Sargent designated Regional Administrator ettective November 14,

1955

SucceededWilliam L. Cohn who retired May 31,1955. Milton J. Blake designated Regional Administrator effective September 8, 1955

Succeeded Andrew Downey Orrick who was appointed Commissioner May 26, 1955. George A.

Blackstone designated Regional AdmJIDstratoreffectiveAugust I, 1955.

Resigned January lJ, 1956. Daniel J. McCauley, Jr., designated Regional Administrator effective

March 19, 1956.

XIII

•

•

•

•

•
COMMISSIONERS

J. Sinclair Armstrong, Chairman

Chairman 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, Ill., 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 Office of 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, and was designated Chairman of the Commission on

May 25, 1955.

Clarence H. Adams

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

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

he 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 1945 he 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, he took office as a member of the Securities and Exchange

Commission for a term of office expiring June 5, 1956.

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 assistant and aide to Undersecretary of

War Robert P. Patterson and in the European Theater of Operations

XIT
COMMISSIONERS xv

as a Lieutenant Colonel, 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.

Andrew Downey Orrick

Commissioner Orrick was born in San Francisco, Calif., on October

18, 1917. He received his B. A. degree from Yale College in 1940

and an LL. B. degree from the University of California (Hastings

College of Law) in 1947. From 1942 to 1946 he was on active duty

with the United States Army as a captain in the Transportation Corps.

After being admitted to practice in California in 1947 he was associated with the law firm of Orrick, Dahlquist, Herrington & Sutcliffe

in San Francisco until February 1954, when he became Regional

Administrator of the San Francisco Regional Office of the Securities

and Exchange Commission. He served in that capacity until May

24, 1955, when he was appointed a member of the Commission for

a term of office expiring June 5, 1957.

PART I

REVISIONS OF RULES AND FORMS

Progress has been made in the continuous program of revising the

Commission's rules and forms to keep abreast of constantly changing

techniques in the securities industry. Revisions during the 1955 fiscal

year included those made in consequence of the enactment of Public

Law 577, 83d Congress, Chapter 667, 2d session (68 Stat. 683),

approved August 10, 1954 and effective October 10, 1954.1 Certain

of these and various other changes made during the year are outlined

below. Other revisions of ruIes 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.

Rule 154.-Because of the decision in the Ira Haupt & Company

case, 23 SEC 589 (1946), increasing doubts had arisen as to the scope

of the exemption provided by section 4 (2) of the Securities Act for

brokers' transactions effected on behalf of controlling persons. When

the appropriate congressional committees were considering the legislative changes embodied in Public Law 577, 83d Congress, the Senate

Committee on Banking and Currency took note of the fact that the

Commission had under study the adoption of a ruIe that would deal

with this particular problem and expressed its hope that such a rule

wouId effectively solve it.2

After completing its study, in connection with which public hearings

were conducted to obtain the widest possible range of views, the Commission adopted an amendment to ruIe 154 which defines the term

"brokers' transactions" as used in section 4 (2) to include transactions

of sale executed by a broker for the account of any person controlling,

controlled by, or under common control with an issuer where the

broker performs no more than the usual and customary broker's

function and receives no more than the usual and customary commission, where neither he nor, to his knowledge, his principal solicits orders

to buy, and where he is not aware of circumstances indicating that his

principal is an underwriter or engaged in a distribution of securities.

The ruIe contains a definition of the term "distribution" which will

serve as a guide for distinguishing between a distribution and an

1This major change in the Federal securities laws was discussed in the 1954annual report. Also described

therein was the Commlssron's adoption on Jllly 21, 195401Form S-9 which greatly simpillied the procedure

for registration under the Securities Act of non-convertible fixed interest debt secnrlties of American and

Oanadlan companies.

I Senate Report No. 1036,83d Cong., 2d sesston (1954),7.

878413-5G-2 1
2 SECURITIES AND EXCHANGE COMMISSION

ordinary trading transaction entitled to the brokerage transaction

exemption.

Changes in rules made to conform to Public Law 577, 83d Congress.-Rule 433 under the Securities Act was adopted to conform

existing regulations to the statutory amendments. Under this rule

it is now permissible to make written offers to sell and solicitations of

offers to buy during the statutory 20 day waiting period between the

filing date and the effective date of a registration statement by means

of a preliminary prospectus which meets specified corditions and is

filed with the Commission before its use.

Rule 460, concerning the preparation and distribution of preliminary

prospectuses, provides certain standards for the acceleration of the

effective dates of registration statements which theretofore had been

dependent upon administrative practice.

Rule 153,with respect to the delivery of a prospectus in a transaction

in a registered security effected on a national securities exchange was

amended to reduce from 1 year to 40 days the period after the commencement of an offering during which prospectuses must be made

available to the exchange for its members.

Rule 427 permits prospectuses used more than 9 months after the

effective date of a registration statement under the Securities Act to

omit required information insofar as information as of a date within

16 months of its use is provided on the same subject, in place of the

former provisions keyed to intervals of 13 and 12months, respectively.

An exception was made, by the amendment of rule 413 under the

Securities Act, to the requirement that additional securities must be

registered by a separate registration statement. This exception

conforms to section 24 (e) (1) of the Investment Company Act, as

amended, which permits investment companies which engage in

continuous offerings of their shares to increase the number of their

registered shares by post-effective amendments. Corresponding

amendments were made in rules 457 and 470. This simpler procedure

was used by investment companies in 81 instances during the 9

months of the 1955 fiscal year after it became available.

Rule N-24E-1.-Section 24 (e) (3) of the Investment Company

Act, added by Public Law No. 577, 83d Congress, requires that a

prospectus relating to a security issued by a face-amount certificate

company or a redeemable security issued by an open-end management

company or unit investment trust "which varies for the purposes of

subsection (a) (3) of section 10 of the Securities Act of 1933 from the

latest prospectus filed as a part of the registration statement" must

be filed as a post-effective amendment in order to meet the requirements of section 10 of the Act, except to the extent the Commission

otherwise provides by rules and regulations.
TVfE~-FIRST ~AL REPORT 3

The quoted language in section 24 (e) (3) refers to a prospectus

which is prepared for the purpose of providing more current information, in compliance with section 10 (a) (3), after the previous prospectus ceases to comply with that section because the information

therein is no longer sufficiently current to meet the statutory requirements. In practice, investment companies engaged in a continuous

offering of securities had customarily prepared such a revised prospectus at approximately annual intervals, and it was the purpose of

section 24 (e)(3) to require the filingofsuch a revision as a post-effective

amendment. Some apprehension was expressed, however, that the

quoted language of section 24 (e) (3) might be interpreted as including

any prospectus used more than nine months after the original effective

date which differs in any respect from the latest prospectus included

in the registration statement and, therefore, that it would be prudent

to file all such prospectuses as post-effective amendments. Reports

of congressional committees with respect to Public Law No. 577

indicate that section 24 (e) (3) was not intended to require the filing

of every changed prospectus as a post-effective amendment." The

Commission accordingly adopted rule N-24E-14o to make explicit

that section 24 (e) (3) applies only to prospectuses prepared for the

purpose of complying with section 10 (a) (3).

Rule 461.-This rule governs requests for acceleration of the effective date of a registration statement under the Securities Act. It

requires each such request to be made in writing by the registrant, the

managing underwriters, and the selling security holders, if any. It

provides further that the request should state the date upon which it

is desired that the registration statement shall be ordered effective.

Rule 133.-This rule makes clear through certain definitions that

the registration and prospectus requirements of the Securities Act

are inapplicable to certain mergers, consolidations, reclassifications

of securities, and transfers of assets between two corporations. It

was broadened by the adoption of an amendment which also excludes

from these requirements certain cases involving a parent company,

a controlled company, and a third corporation, where the assets of

the third corporation are transferred to the controlled company in

consideration of the issuance of securities of the parent corporation.

The occasion for this amendment arose from the somewhat similar

amendment that had been made in section 368 (a) (1) (c) of the Internal Revenue Code, which defines tax-free "reorganizations"."

a Senate Report NQ. 1036,sad Cong., 2d session (1954),21;House Report No. 1542,sad Oong., 2d session

(1953),30.

a Investment Company Act release No. 2135(April~. 19M).

I Seeurtttes Act release No. 3522(October 26, 1954).
4 SECURITIES AND EXCHANGE COMMISSION

Rules 134 and 135.-Rule 134, adopted shortly after the fiscal year,

is expected to facilitate greatly the dissemination of information about

a security before the sale thereof. Itspecifies the information required

and permitted to be included in a notice, advertisement, letter or

other communication with respect to a security which identifies the

security and states from whom a prospectus may be obtained. Such

a communication may be used prior to or after the effectiveness of

the registration statement and is not deemed to constitute a "prospectus" as defined in section 2 (10) of the Securities Act. It is designed to permit an adequate announcement identifying the existence

of a public offering and the availability of a prospectus. At the same

time the Commission adopted rule 135 which provides that a notice

or other eommunieation sent by an issuer to security holders to inform

them of the proposed issuance of rights to subscribe to additional

securities shall not be deemed to offer any security for sale if the

communication is transmitted within 60 days prior to the record date,

states that the offering will be made only by the prospectus and in

addition contains only certain specified information necessary to inform the security holders of the forthcoming offering. The rule is

in the nature of an interpretative rule and in substance gives specific

authority for a practice which had theretofore been followed without

objection by the Commission."

Rules 423, 428, and 404.-Amendments were made to these

rules so that certain issuers of securities to be offered at competitive

bidding would be permitted to invite competitive bids prior to the

effective date of a registration statement which has been filed under

the Securities Act with respect to the securities. 7

Regulation A.-Rules 216 and 217 were amended to make Regulation A available for a rights offering by a domestic or foreign

majority-owned subsidiary of any resident of the United States having

its principal business in the United States and its securities registered

for trading on a national securities exchange; and to exclude from the

computation of the $300,000 limitation of Regulation A that portion

of a warrant or rights offering pro rata to security holders made

outside of the United States."

Form. 9-K and Related Rules.-After considerable study of the

adequacy of its periodic reporting requirements, the Commission

adopted a new Form 9-K and related Rules X-13A-13 and X-15D-13

to provide for semi-annual reports under the Securities Exchange Act.

These reports will supply investors with important additional information about their securities. A report on the new form is to be filed

o Securities Act release No. 3568 (August 29,1955).

, Sccurltles Act release No. 3536 (March 10, 1955).

• Securities Act release No. 3521 (October 25,1954),
TWENTY -FIRST AN1o;""UALREPORT 5

only once a year, 45 days after the end of the first half of the registrant's fiscal year. Each report is to contain specified items of information with respect to sales and gross revenues, net income before and

after taxes, extraordinary and special items, and charges and credits

to earned surplus. The form does not require formal statements of

profit and loss or earned surplus and is not required to be certified.

Provision is made for any necessary or appropriate qualification or

explanation of the information given. Where registrants otherwise

issue semi-annual statements containing the information called for

by the form, copies of such statements may be filed and incorporated

by reference in the form in lieu of setting forth the information in the

form itself."

Form. lo-K.-Instruction 8 of the instructions as to financial statements in Form 10-K, the principal form for annual reports filed by

listed companies under the Securities Exchange Act, was amended to

provide that financial statements need not be certified if the registrant

is not in production and meets other conditions."

Regulation BW.-This regulation, adopted January 9, 1950, pursuant to section 15 (a) of the Bretton Woods Agreements Act, specifies

the periodic and other reports required to be filed with the Commission

by the International Bank for Reconstruction and Development. In

the light of its experience, the Commission during the 1955 fiscal year

amended this regulation to change certain reports from a monthly to a

quarterly basis, and to eliminate certain information which duplicated

data otherwise available or which, in view of the special character of

the Bank, was no longer necessary for the protection of investors."

Revisions Under Consideration.-The Commission devoted much

study during the 1955 fiscal year to other important changes in its

rules and regulations, the determination of action upon which is in

general awaiting the receipt and study of public comment that has

been invited. Two of the pzincipal proposals under consideration are

revisions of the regulations governing the offering of small issues and

of the proxy rules;

The Commission on July 18, 1955, announced a proposal for revision

and consolidation of Regulation A, relating to domestic offerings, and

Regulation D, covering Canadian offerings, pursuant to which issues

not in excess of $300,000 are exempted from registration, and invited

public comment upon the changes contemplated thereby."

A principal fealture of the suggested revision is the imposition of

special requirements which would apply only to promotional companies .

Securtties Exchange Act release No. 5189(June 23, 1955).

10 Securttles Exchange Act release No. 5130(January 31,1955).

11 Bretton Woods Agreements Act release No.2 (January 19, 1955).

I' Securities Act release No 3555.

•
6 SECURITIES AND EXCHANGE COMMISSION

The proposal to amend the proxy rules relates chiefly to the application of such rules to proxy contests. The proposed changes are designed to make the proxy rules more specific than the existing rules by

incorporating in the regulation certain policies of the Commission

regarding proxy contests previously dependent upon administrative

interpretation and practice.
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 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 the sale or delivery

of the security. The contents of the registration statement are the

primary responsibility of the registrant 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 THE 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, manangement, or control of the issuer's business; their

security holdings and remuneration 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.

Examination Procedure

The Commission is charged with the responsibility of preventing

the sale of securities to the public on the basis of statements which

contain inaccurate or incomplete information. The staff of the Division of Corporation Finance examines each registration statement

7
8 SECURITIES AND EXCHANGE COMMISSION

for compliance with the standards of disclosure and usually notifies

the registrant by an informal letter of comment of any material

respects in which the statement on its face 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. Information about the use of this power during the

1955 fiscal year appears below.

TiJne 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. Congress provided for a lapse of 20 days in the ordinary

case between the filing date of a registration statement or of an amendment thereto and the time it may become effective. This waiting

period is designed to provide investors with an opportunity to become

familiar with the proposed offering. 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 7041 registration statements that became effective during the 1955 fiscal year was 22 days, the same as the corresponding figure in the preceding year. This time was divided among

the three principal stages of the registration process approximately

as follows: (a) from date of filing registration statement to date of

letter of comment, 12 days, 2 days more than in the preceding year;

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

amendment, 6 days, 1 day less than in the preceding year; and (c) from

date of filing first amendment to date of filing final amendment and

effective date of registration, 4 days, 1 day less than the year before.

VOLUME OF SECURITIES REGISTERED

Securities effectively registered under the Securities Act of 1933

during the fiscal year 1955 totalled almost $11 billion, the highest

volume in the 21-year history of the Commission. The previous

record amount of securities registered was $9.5 billion for the fiscal

year 1952. These figures cover all registrations including new issues

sold for cash by the issuer, secondary distributions, and securities

I This number does not take Into account 75reglstratlons In the form of post-effectlve amendments filed

pnrsnant to Section 24 (e) (1) of the Investment Company Act which became effective during the year.
TWENTY-FIRST ANNUAL REPORT 9

registered for other than cash sale, 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 $8.3 billion in the 1955

fiscal year as compared with an average of somewhat over $6 billion

for the five previous years. For the current fiscal year, the volume

of debt securities and the volume of common stock were almost equal,

48 percent and 47 percent, respectively, of the total of new cash issues.

Preferred stock amounted to less than 6 percent. For the fiscal year

1955 more than half of the volume of common stock represented

securities of investment companies.

Figures 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 for each of the fiscal years

1935 through 1955 appear in appendix table 1. More detailed information on registrations for the 1955 fiscal year is given in appendix

table 2.

Of the dollar amount of securities registered in the 1955 fiscal year,

75.5 percent was for account of issuers for cash sale, 21.1 percent for

account of issuers for other than cash sale and 3.4 percent was for

account of others, as shown below. Most of the registrations involving issues not to be sold for cash cover securities offered in exchange for

other securities and securities reserved for conversion of other registered securities.

Registered for account of issuers for cash sale $8,276,811,000

Registered for account of issuers for other than cash sale , _____ 2, 311, 728, 000

Registered for account of others than the Issuers; ___________ 371, 637, 000

TotaL 10,960,176,000

The classification by industries of securities registered for cash sale

for account of issuers in the fiscal year 1955 is as follows:

Percent of In m,lllrms total

~anufacturing----------------------------------------- ~ining

Electric, gas and water

Transportation, other than railroad

Communication

Investment companies .

Other financial and real estate

Trade

Service

ConstructioD

Tot&corporate

Foreign governments

Tot&

$1, 779

106

2, 127

12

837

2,236

789

27

100

160

8, 173

104

8,277

21. 5

1.3

25.7

0.1

10.1

27.0

9.5

O. 3

1.2

1.9

98. 7

1.3

100. 0

_

_

_

_

_

_

_

_

_

_

_
10 SECURITIES AND EXCHANGE COMMISSION

Management open-end companies

Management closed-end companies

Unit and face amount certificate companies

The classification of issues of investment companies according to

type of organization for the last two fiscal years is as follows:

(In mill107l8)

1951, 1955

$1,106 $1,853

5 28

446 355

Total____________________________________________ 1,557 2,236

About 55 percent of the net proceeds of the corporate securities

registered for cash sale for account of issuers in the fiscal year 1955

was designated for new money purposes, including plant, equipment

and working capital. Twelve percent was for retirement of securities

and 33 percent for other purposes, principally the purchase ofsecurities

by investment companies.

REGISTRATION STATEMENTS FILED

During the 1955 fiscal year, 849 registration statements were filed

covering aggregate proposed offerings of $11,009,757,143, compared

with 649 statements covering offerings of $8,983,572,628 in the 1954

fiscal year. This all-time record volume exceeds by nearly two billion

dollars the previous high mark reached in 1952 when 665 statements

were filed covering offerings of $9,045,035,056.

The number of statements filed by companies which had not

previously registered any securities under the Securities Act was 297,

compared with 151 during the previous fiscal year.

Registrants during the 1955fiscal year included 27 uranium exploration or development companies offering an aggregate of $40,415,000,

and 113 companies engaged in some phase of the oil and gas business,

offering an aggregate of $2,153,146,686.

Particulars regarding the disposition of all registration statements

filed are summarized below.

Number and disposition of registration statements filed

Prior to July July I, 1954 to Total aa of 1,1954 June 30, 1955 June 30, 1955

Registratton statements Flled 11,018 1849 11,867

Effective-neL 9,469 1782 "10,248 Under stop or refusal order-net.. W 184 0 184 lthdra wn 1,297 .35 1,332 Pending at June 30,1954 68 ---_ .._-------.- -- .--------- Pending at June 30,1955 103

TotaL 11,018 11,867

Aggregate dollar amount: As f1led $94,982,820, 194 $11,009,757,143 $105,992, 577, 337 As effective 92,080, 110, 494 10, 960, 176, 688 103,040, 287, 182

1 Includes 81 post-effeetrve amendments under which addltonal shares are registered having the effect as provided by section 24 (e) of the Investment Company Act of 1940, as amended.

I Excludes 2 regtstration statements which became effective and were subsequently withdrawn.

I Three registration statements which became effective prior to July 1, 1954 were WIthdrawn and are

counted ill the number withdrawn.

_

_

_

__________________________________•• __• ________

_____________________________________

__________________ _________________________________________

____________________________

____________________________ ---------------- ------ ---------- ----

_________________________• ___• __• ___________ ---------------- _____________________________________________

_________________________________________
TWENTY-FIRST ANNUAL REPORT 11

The 81 statements filed in the form of section 24 (e) (1) post-effective

amendments covered the registration of proposed offerings in the

aggregate amount of $1,245,656,263 of additional securities of investment companies which make continuous offerings of their shares.

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 not exceeding $300,000 for issuers;

Regulation B, the exemption for fractional undivided interests in oil

or gas rights not exceeding $100,000; 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 Regulations A and D.

During the 1955 fiscal year 1,628 notifications were filed under

Regulation A, covering proposed offerings of $296,267,000, compared

with 1,175 notifications covering proposed offerings of $187,153,226

in the 1954 fiscal year. Included in the substantially greater 1955

total were 162 notifications covering stock offerings of $32,335,668

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

509 filings covering offerings of $107,585,913 with respect to mining

companies. These 509 filings by mining companies included 436

by uranium companies with proposed offerings aggregating

$95,804,119.2 In addition to initial offering circulars, 5,326 items of

supplemental sales literature were filed under Regulation A.

, Uranium lssnes were largely concentrated In the Denver Regional Ollice where 376 of these notifications

coverIng $84,415,345 were filed.
12 SECURITIES AND EXCHANGE COMMISSION

Certain particulars regarding these offerings are set forth ill the

following table.

Offerings made under Regulation A in 1955 fiscal year

Desenption Number

SIze:$100,000 or less ._._ 544 Over $100,000 but not over $200,000 312

Over $200,000 but not over $300,000-- ---------. ----._ -._ ---. 772

1,628

Underwriting: Employed _. 785 Not used -_ 843

1,628

Offerors: Issuing companies . ..... _. . ._ .. ._ I, 517 Stockholders _. •.... _. .. •. _. . 109 Issuers and stockholders jomtly . .. ._._. ._. 2

I, 628

Most of the underwritings were undertaken by commercial underwriters who participated in 671 offerings while officers, directors or

other persons not regularly engaged in the securities business, who

received remuneration or commissions therefor, handled the remaining

114 cases.

Notifications filed under Regulation A

Calendar year 1954 First six months of 1955

Month I !'\~r.:ger I

1--

1 January. ._. ._______ 74

February_________________ 72 Mareh., 122 AprIL. . ._____ 104

May .. _. . .. 105 June ... _. .. 143

Totals Cor 6 months, 6ro

July 118

Augustc ,; . . .__ 132

September________________ 118 October ._______________ 139

November._______________ 128 I

Dece:~~l~-f~~-~~~~:~: :: I

T~~~~_C~~_~I:~d~~_ ~I

I Amount I

1

$11,291.000 I

12, 150, 000 I 19,427,000

17,180,000

18,572,000

24,357,000

102, 977,000

19,119,000

26,110,000

so, 236, 000 I

25,280,000

22,190,000

21, 522, 000 I

I

134,457,000 !

237,434,000 I

Month

January _.

K!~:ch"_'?._~~~:::::::::::: I

April, ._ . ._ May .. . .

June ... '-

Totals for 6 months,

Number Amount filed

130 $22, 513, 000 126 21,135,000 171 32,404,000 130 25,773,000 162 29,905,000 155 30,080,000

874 161,810,000

Ten-year period July 1, 1945, to June 30, 1955

[I I

Fiscal year ended June 30 Number Amount Fiscal year ended June 30 I ~~r.:~er Amount filed

1946.. ______________,, _____ 1,348 $181, 600,000 1951______________________ 1,358 $174,278,000 1947 1,513 210, 791, 000 1952 . . 1,494 210,673,000 1948 ._ 1,610 209, 485, 000 1953 ._ 1,528 223, 350, 000. 1949.•• 1,392 186, 783, 000 1954 1,175 187, 153,000 1950. ______________. _. _____ 1,357 171,743,000 1955____. _________________ 1,628 296, 267, 000

____________________________• _____•• __ ••• _• ___• _________________• ______

______• _______• ________________________• __• _________• __

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

_________ • ___•• ___• __• __________________________• ____••• __' __________• _______ ___________________________- _- _-- _ -- __________________• __• ______________• ______

__________________________- _______• ___ _____ ________ ______ _______________________•• _______• ___ __ ____________ ________ ___

__• _______ _____ _______________________ _________

__ ' _

•• •••• •

__ __ _

__•• _ _

__

_______________________ ___•• ___•___ __ ______ _____________________ ______________• _____

____________•• __•• __ ____________• _________
TWENTY-FIRST ANNUAL REPORT 13

During the 1955 fiscal year, 37 notifications were also filed under

Regulation D, covering proposed offerings of $10,004,176, compared

with 46 notifications covering proposed offerings of $11,334,350 in the

1954 fiscal year. Included in the 1955 total were 29 notifications of

companies proposing to explore for uranium and other minerals, 4

intending to engage in the oil and gas business, and 1 each engaged in

finance, the manufacture of porcelain enameled steel products, the

distribution of bottled gas, and the distribution of sewing machines.

Denial or suspension of exemption.-Both Regulation A and

Regulation D provide for the denial or suspension of the exemption in appropriate cases. During the 1955 fiscal year orders were

issued in the following 18 cases.

Denial ordersRegulation A:

Amalgamated Uranium Corporation, Salt Lake City; Securities Act

release No. 3552 (June 23, 1955).

International Dairies, Ine., Miami, Fla.; Securities Act release No. 3526

(December 29, 1954).

San Miguel Uranium Mines, Ino., Grand Junction, Colo.: Securities Act

release No. 3538 (April 4, 1955).

Star Uranium Company, Salt Lake City; Securities Act release No. 3552

(June 23, 1955).

Vandersee Corporation, Hillside, N. J., Securities Act release No. 3551

(June 22, 1955).

Regulation D:

Hawker Uranium Mines Ltd., Edmonton, Alberta, Canada; Securities

Act releases Nos. 3541, 3548 and 3549 (April 22, 1955; May 31, 1955;

and June 3, 1955).

Suspension ordersRegulation A:

Alaska Gulf Oil and Gas Development, Ine., Anchorage; Securities Act

releases Nos. 3513 and 3545 (September 7, 1955; April 29, 1955).

Vacated.

Apollo Oil Uranium Company, Denver, Securities Act release No. 3544

(April 26, 1955)'.

Ebony Petroleum Corp. of Nevada, Inc., Las Vegas, Securities Act

release No. 3524 (November 23, 1954).

Gerald V. Eisenhower, Greeley, Colo.; Securities Act release No. 3510

(August 2, 1954).

Four States Uranium Corporation, Grand Junction, Colo.; Securities Act

releases Nos. 3520 and 3523 (October 12, 1955; October 28, 1955).

Front Range Uranium Mines, Inc., Denver, Securities Act release No.

3550 (June 22, 1955).

General Credit Corporation, Miami, Fla.; Securities Act release No.

3542 (April 26, 1955).

Jewell Oil & Gas Corporation, Los Angeles; Securities Act release No.

3533 (March 1, 1955).

New Mexico Petroleum Co., Inc., Pleasantville, N. J.; Securities Act

release No. 3527 (January 3, 1955).

Sun Valley Mining Corporation, New York, N. Y; Securities Act releases Nos. 3531 and 3534 (January 28, 1955; March 1, 1955).
14 SECURITIES AND EXCHANGE COMMISSION

Regulation D:

North Country Uranium and Minerals Ltd., Edmonton, Alberta,

Canada; Securities Act releases Nos. 3541, 3548, and 3549 (April 22,

1955; May 31, 1955; and June 3, 1955).

Northwest Uranium Corporation, New York, N. Y.; Securities releases

Nos. 3511 and 3517 (August 16, 1954; September 17,1954).

Exempt Offerings Under Regulation B

During the 1955 fiscal year, the Commission received 7I offering

sheets filed under Regulation B. These filings relating to exempt

offerings of oil and gas rights were examined by the 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 Filings under Regulation B

Temporary suspension orders-Rule 340 (a)________________ 6

Orders terminating proceedings after amendment____________ 3

Orders accepting amendment of offering sheet (no proceeding

pending)_____________________________________________ 21

Order consenting to withdrawal of offering sheet (no proceeding

pending)_____________________________________________ 1

Total number of orders; ___ 31

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 reports of actual sales made pursuant

to rules 320 (e) and 322 (c) of that regulation. During the 1955

fiscal year, 1,076 such reports covering aggregate sales of $549,951

were filed.

FORMAL ACTION UNDER SECTION 8

During the 1955 fiscal year three proceedings were instituted under

section S (d) to determine whether to issue a stop order suspending

the effectiveness of a registration statement. In addition, the record

in one private examination under section 8 (e) was made public at

the request of counsel for the registrant.

Multi-Minerals Corporation.-This corporation, of Salt Lake

City, was organized on April 11, 1955, for the purpose of acquiring,

exploring, and developing uranium properties in Colorado, New

Mexico, and Utah. The registration statement proposed the public

offering of 2,250,000 shares of 1 cent par value common stock of which

1,500,000 shares were to be presently offered by the registrant at $1

per share and 750,000 shares were to be offered by certain selling

stockholders at times and prices to be determined. According to the
TWENTY-FIRST ANNUAL REPORT 15

prospectus, the offering was to have been made through the underwriter, M. Raymond & Co., Inc., of New York, on a "best efforts"

basis for which it would receive a selling commission of 25 cents per

share. In addition, the company agreed to reimburse the underwriter

for expenses in an amount not to exceed $75,000 to be withheld from

the gross proceeds of the sale of stock and to pay $25,000 as compensation and out-of-pocket disbursements to counsel for the underwriter

and the company, Crisona Brothers, of New York.

Stanley J. Lake, promoter of the company who received 1,500,000

shares, sold 300,000 shares to the underwriter at $0.001 per share,

and 200,000 shares to counsel at the same price. The 1,500,000

shares were issued to Lake in exchange for mining claims which had

cost him $15,000 and on which he had contracted to pay an additional

$62,000. The $62,000 was to be paid to Lake out of the proceeds of

the stock sale.

The Commission's order for proceedings challenged the adequacy

and accuracy of various statements with respect to such matters as

(1) an estimate pertaining to ore at one property in the amount of

1,250,000 tons, averaging about $20 per ton in uranium oxide, (2) the

use of assays from a loose piece of rock weighing "over 5 pounds"

relating to another property aggregating almost $12,000 per ton of

ore in uranium, titanium, rare earths and other ore constituents and

(3) the selling stockholders and the number of shares being offered

for sale by each, the manner in which counsel proposed to dispose of

his shares and whether they would be sold in competition with the

offering by the issuer, and the full compensation to be paid in connection with distribution of the shares offered.

Following the institution of these proceedings, the registration

statement was withdrawn and the proceedings were thereupon discontinued."

Horton Aircraft Corporation.-The Commission instituted proceedings under section 8 (d) with respect to the registration statement

filed by Horton Aircraft Corporation, of Las Vegas, Nev., which

related to a proposed public offering of 500,000 shares of Horton

Aircraft common stock at an initial public offering price of $1 per

share. Of these shares, 400,000 Were to be offered by the issuing

company and 100,000by William E. Horton, its president. Proceeds

of the sale of company stock were to be used for the purpose of securing a factory or assembly structure in Santa Ana, Calif., and constructing a production model of the "Horton Wingless Aircraft."

The Commission announced that particular consideration would be

given at the hearing to questions as to the adequacy and accuracy of

statements concerning (1) the history and development of registrant's

business, particularly statements concerning the "Horton Wingless

I Securities Act release No. 3554(June Zl, 1955).
16 SECURITIES AND EXCHANGE COMMISSION

Aircraft," the "experimental prototype" and testing thereof, the

"principles" established and embodied in the Horton Wingless Aircraft, and application for Letters Patent :filedby William E. Horton;

(2) the nature of the "wingless" airplane produced and experimentation to be conducted; (3) the amount of securities outstanding, those

held by William E. Horton, and securities previously issued without

registration and the effect of having failed to register such shares, as

well as the plan for distribution of the securities being registered, the

prices at which they were proposed to be offered and the distribution

spread, particularly concerning the extent to which agents of the issuer, officers, directors and promoters would participate in underwriting commissions; (4) the proposed use of proceeds of the stock

sale, and the use to be made of any such proceeds should the entire

issue not be sold; and (5) transactions with promoters of the

registrant.

These proceedings were still pending at the close of the year.'

International Spa, Inc.-This company :fileda registration statement by which it proposed to make a public offering of 12,000 shares

of common stock at $500 per share, and with respect to which the

Commission authorized proceedings to determine whether a stop

order should issue.

International Spa proposed to construct and operate a luxury hotel

together with a shopping center, theater, swimming pool, and other

facilities near Las Vegas, Nev., emphasizing the interracial aspects

of its proposed development. It proposed not only to offer publicly

12,000 common shares at $500 per share, but to issue an equal number

to the promoters "in payment for services rendered and to be rendered

during the sale and distribution of the registered stock."

Among other matters considered at the hearing were questions as

to the adequacy and accuracy of statements concerning (1) the general history and development of the registrant's business including

registrant's relationship to International Village, Inc., another corporation formed for similar purposes; (2) the option to purchase certain

acreage and the price to be paid by the registrant for such acreage,

the cost of such acreage to the seller, the value of such property, and

any commission to be paid in connection with its purchase; (3) the

plan of distribution of the shares, particularly the failure to disclose

any agreements or claimed agreement relating to the issuance of

stock to or for the account of the First National Company of Nevada;

(4) options to purchase securities of the registrant; and (5) the issuance of stock to the promoters, the failure to file financial statements

prepared in accordance with the Commission's requirements, and the

failure to disclose a contingent liability with respect to notes sold by

First National Company of Nevada with stock of International Spa .

• Becurtties Act release No. 3547 (May 18, 1955).

•
TWENTY-FIRST ANNUAL REPORT 17

These proceedings had not been terminated by the end of the

year,"

Cherokee Industries, Inc.-The Commission announced that a

formal examination in progress with respect to the registration statement under the Securities Act filed by Cherokee Industries, Inc.,

Oklahoma City, had been made public at the request of counsel for

the registrant.

The registration statement proposed a public offering of 5 million

shares of Class B Non-voting Common Stock (1 cent par) at $1 per

share. To develop the facts with respect to the question whether

the registration statement and prospectus were complete and accurate and otherwise complied with the applicable disclosure requirements, the Commission instituted a private examination pursuant to

section 8 (e) of the Act. Counsel for the registrant moved that the

examination be converted into a proceeding under section 8 (d) to

determine whether a stop order should issue suspending the effectiveness of the registration statement and that the proceedings be

made public.

The Commission concluded that the section 8 (e) examination may

appropriately be made public, except to the extent that any witness

at the hearing should desire his testimony to remain confidential, but

that it was not appropriate in advance of the development of the

facts to direct the institution of stop-order proceedings. 6

RESULTS OBTAINED BY THE REGISTRATION PROCESS

Results secured by the staff's examination of registration statements during the 1955 fiscal year are illustrated by the following

examples.

Exploratory stage of mining venture clarified.-A company engaged in exploration for iron, which had previously registered securities under the Act, filed during the 1955 fiscal year an additional

registration statement in connection with a proposed offering of common stock. Its stated purpose was principally to finance further

surveys and engineering activity.

Examination showed that, despite previous expenditures of over

$2 million, the existence of commercial bodies of iron ore had not been

established. Nevertheless, for several years promoters and other

persons identified with management had realized substantial trading

profits in a market seemingly influenced by misleading and deceptive

reports emanating from the company. For example, the company's

1954 annual report to stockholders had clearly implied the existence

of known iron-bearing deposits ready for commercial exploitation in

statements such as: "With the necessary exploration and metallurgical

s Securities ~ct release No. 3537(March 18, 19M).

Securities Act release No. 3516(September 14, 19M).

378413-56--3

•
18 SECURlTIES AND EXCHANGE COMMISSION

research completed, negotiations with governmental authorities and

potential markets being pursued, your Directors are concentrating

their efforts toward the final objective of achieving production as

quickly as possible, and on the most favoring terms available."

As a result of the staff's comments in this situation, the current

prospectus was amended to include such disclosures as: (1) "The

properties of the Company are in the exploratory stage and no representation is intended that any commercial ore reserves have been

established;" (2) "The iron bearing material encountered is not direct

shipping ore and if any production is eventually had, it will involve

concentration;" and (3) "The iron ore deposits found to date have

been too low in iron and too high in impurities to produce a marketable product without milling or beneficiation." The registrant also

amended the prospectus to disclose that the company had departed

from its program of exploration of its own properties by making an

investment of $700,000 in another company with which two of its

directors were affiliated, and that this investment had resulted ill a

loss to the registrant in the amount of $345,802.

Statement withdrawn to avoid full disclosure of promoter's

business history.-A prospectus covering a proposed offering of common stock filed by a recently organized corporation engaged in the

merchandising of a proprietary vitamin and mineral tonic stated that

the promoter had previously had 5 years of experience with an earlier

corporation in developing and merchandising a similar proprietary

tonic under a different trade name; and that during this period the

company's sales of the product totaled in excess of $22million and its

net profits totaled approximately $4 million. The prospectus failed

to disclose that almost immediately after the promoter relinquished

control of the earlier corporation, it went into bankruptcy, Federal

income tax liens were filed against it, and proceedings were instituted

by the Federal Trade Commission asserting that the corporation during the period it was under the control of the promoter had violated

the Federal Trade Commission Act by the dissemination of false advertisements of its product. After the staff's letter of comment pointed out these omissions, as well as other material omissions and misstatements, the registration statement was withdrawn.

Significant events after balance sheet date.-Appropriate disclosure of significant events occurring after the date of financial statements required to be included in a registration statement is a recurring

problem. A statement filed during the 1955 fiscal year affords an interesting example in which the significant event was the payment of

cash to officers of the registrant.

In a note to the financial statements it was stated that payments

on certain obligations to affiliated persons, reported as noncurrent

liabilities in the balance sheet, had been accelerated subsequent to
TWENTY-FIRST ANl\TUAL REPORT 19

the balance sheet date. Since the acceleration resulted in a substantial reduction in the working capital indicated in the balance

sheet, the registrant was requested to include in the captions, Total

Current Assets, and Total Current Liabilities, a cross-reference to the

note which was expanded to disclose the source of the funds used in

the acceleration. The disclosure indicated a reduction in working

capital of more than $500,000 in the two months after the balance

sheet date when working capital amounted to approximately $750,000.

In addition, the discussion in the forepart of the prospectus of the

transaction giving rise to the obligation was similarly clarified.

Effect of amortization of intangibles on the determination of

income.-The proper classification of and accounting for intangible

assets presents substantial problems in many cases. An example

from a registration statement for an issue of common stock follows:

The consolidated balance sheets included an item "contracts and

goodwill" in the amount of $7,332,389 which was represented as consisting principally of the excess of cost of acquisition over the cost of

inventories and allocated cost of assets acquired at the inception of

the corporation.

The footnotes to the financial statements disclosed that during the

year 1953 the corporation reached a settlement with the Internal

Revenue Service with respect to the 1946 to 1948 Federal income tax

returns, in which deductions were claimed for amortization of contracts. Under the terms of this settlement, the amount at which

"contracts and goodwill" was stated ($7,332,389) was construed for

Federal income tax purposes to be made up of $2,931,729 subject to

amortization on an agreed basis, and $4,400,660 was considered to be

goodwill and not subject to amortization.

The registrant was advised that the basis of settlement with the

Internal Revenue Service in this case was likewise appropriate in the

accounting for financial statement purposes and that segregation of

the item covering both contracts and goodwill should be made and

retroactive effect should be given to amortization of the contract

portion.

The financial statements were amended to show in the balance

sheet at June 30, 1954, the item of contracts and goodwill (segregated

in a note), after amortization of $1,881,490, at a net amount of

$5,450,899, which resulted in a reduction of earnings reinvested in

the business from $3,959,623 to $2,078,133 at the balance sheet date.

LITIGATION UNDER THE SECURITIES ACT

Injunctive Actions

When it appears that damage to the public is threatened by continued violations of the Securities Act, the Commission may resort

to the courts to obtain injunctions against such conduct.
20 SECURITIES AND EXCHANGE COMMISSION

Typical of the illegal oil and gas and mining promotions requiring

Commission attention was that involved in S. E. O. v. Jess Hickey

Oil Oorporation, Jess Hickey and Loui M. White. 7 The Commission's

complaint charged that individual defendants falsely represented that

they believed they found the greatest undrilled oil field in the United

States, maybe in the whole world, so big that a half dozen oil fields

the size of the famed East Texas Field could be put in it with room

left over; and that all the leases they were offering for sale were on a

wonderful prospective oil structure."

In the case of S. E. O. v . Murma» Drilling 00., Inc., Dean Oook,

and Charles F. Jensen 9 the complaint alleged that the defendant was

selling its capital stock by misrepresentations to the effect that the

company had a "finding device" which had revealed commercial oil

pools under acreage held under lease by the company, that based on

the results of this device the enterprise was a sure thing and that

they could not miss finding commercial quantities of oil. A final

judgment by consent was obtained.

In S. E. C. v. Billings Holding Oorporation,t° a temporary restraining

order and preliminary injunction were obtained following institution

of injunctive action based upon alleged misrepresentations in the

sale of preferred stock concerning the financial status of the corporation, its ability to pay dividends 'On the preferred stock, the riskless

nature of the investment, and the uses to which the proceeds from the

sale of preferred stock would be put.

The Commission also obtained final judgments and decrees permanently enjoining Morris Luster, individually and doing business as

Luster Securities &: 00., and Stanley M. Posner J' from violating the

anti-fraud provisions of the Securities Act. It was alleged in the

complaint that the defendants were effecting sales of stock at prices

bearing no reasonable relationship to the market prices thereof without

disclosing the prevailing market price and were falsely representing

that the issuer of the stock which they were selling would merge with a

nationally known corporation and that still another corporation was

interested in the issuer and buying up its outstanding stock.

Injunctions were also obtained in many other cases to prevent

further violations of the registration provisions of the Securities Act.

Included in such actions were S. E. O. v. Warren Oil and Uranium

Mining Oompany, Inc., et al.;» S.E. O. v. French and Oompany et al.;13

S. E. O. v. Scurlock Gear Corporation et a;» S. E. O. v. John F.

f N. D. Texas No. 3058

The individual defendants consented to the entry or a permanent injunction arter the close or the 1lsca1

year. The Oommlsslon dismissed Its complaint against the defendant corporation.

I D. Idaho No. 3145.

,0 D. Montana No. 1665.

I1D.N.J.No.~.

11 N. D. Tex. No. 2829.

11 S. D. Tex. No 8362.

If N. D. m, No. 540-1159.

•

•
TWENTY-FIRST ANNUAL REPORT 21

McBride, et a;» S. E. G. v. Roland Winburn; 16 S. E. G. v. International

Spa Inc. et al.;17S. E. G. v. Elaterite Basin Uranium Gorporation et

al.;18 S. E. O. v. Gonsolidated Enterprises, Inc. et al.;" S. E. G. v.

Lone Star Mining and Development Gorporation et al.;2OS. E. G. v.

Thunderbird Minerals, Inc. et al.;" S. E. G. v. Plater Gralouise Gold

Mines Ltd. et al.;22 S. E. G. v, Paul Payette et a;» and S. E. G. v .

Ned J. Bowman Oompomu,"

Further proceedings were had in actions which were referred to in

the 19th2S and 20th26 Annual Reports. In S.E. G. v. Thomas W.

MacKenzie and Automatic Telephone Dialers, Inc.,27 the defendants

consented to the entry of final judgment and a permanent injunction

was entered restraining them from further violation of the antifraud and registration provisions of the Act. In S. E. G. v. Kaye Real

&: Oo., Inc. et al.,28a final judgment enjoining further violations of the

anti-fraud and registration provisions of the Act was entered against

the three defendants.

A final injunction against the Horton Aircraft Corporation; William

E. Horton and Armand J. Hanson 29 was also obtained following filing

of a complaint in which it was alleged that the defendants were

violating the registration provisions of the Act and also making

untrue statements in violation of the fraud provisions by representing,

among other things, that the Horton Wingless Airplane can carry

100 percent greater payload over 100 percent greater range than any

other plane, and that a proposed Horton Wingless Jumbo Transport

would carry 4,000 people 25,000 miles nonstop at 60,000 feet altitude

at speeds in excess of 400 miles per hour.

In Leighton v. S. E. G., the petitioner sought review of an alleged

Commission "order" declining to accede to his request that the

Commission take action to prevent the American Express Company

from selling travelers' checks without complying with the registration

requirements of the 1933 Act. The so-called "order" was a letter

written by an Assistant Director of the Commission's Division of

Corporation Finance advising the petitioner that the Commission

did not believe it had jurisdiction in the matter since it did not appear

"S. D. N. Y. No. 95--320.

"D. Colo. No. 4807.

S. D. Calli. No. 17.288BH. 1. D. Utah No. C-137-54.

"D. Colo. No. 4856.

2O N. D. Tex. No. 5743.

J1 N. D. Tex. No. 5783.

.. S. D. Iowa No 2-570.

.. S. D. N. Y. No. 98-364.

,. D. Utah No C-41-55

.. 19 p. 14.

2O20 p. 20.

tI 21 D. N. J. No. 38-53.

2OS. D. N. Y. No. 00-100.

,. S. D. Calif. No. 16,681-T.

"

•
22 SECURITIES AND EXCHANGE COMMisSION

that travelers' checks were "securities" within the meaning of that

Act. The Court of Appeals for the District of Columbia granted the

Commission's motion to dismiss the petition for review for lack of

jurisdiction under either the Securities Act or the Administrative

Procedure Act.30 The Court held that in light of the complete discretion vested in the Commission by the statute respecting the institution of enforcement proceedings in particular cases, the letter in

question, even were it considered an "order", was not an "order"

such as could be reviewed by the courts. A petition for a writ of

certiorari was denied by the Supreme Court after the close of the

fiscal year.

Enforcement of Commission Subpoenas

Litigation also arose in connection with the Commission's investigation of Stardust, Inc., and Anthony C. Stralla. Mter the Commission

had applied to the United States District Court for the Southern

District of California for an order requiring obedience to its subpoena,

the defendants filed a petition with the Court of Appeals for the

Ninth Circuit to set aside the Oommission's order of investigation

and obtained a temporary stay of proceedings. 'They claimed that

the investigation would do them irreparable harm and prevent their

obtaining funds necessary to carryon their building enterprise. The

Commission moved for summary dismissal of the petition and for

dissolution of the stay order. The Commission's motion was granted

in a written opinion entered on July 29, 1955.31 Following this

decision the district court entered an order granting the Commission's

application.

Several questions were litigated in connection with the Commission's investigation to determine whether Edgar Robert Errion, Mt.

Hood Hardboard & Plywood Cooperative, and several other cooperatives may have violated the anti-fraud provisions of the Securities

Act. An attempt was made on the part of the Mt. Hood cooperative

to enjoin the Commission from continuing with its investigation and

it also sought a judgment declaring that the activities of the cooperative had been lawful. The Commission filed a motion to dismiss the

complaint, which was granted." In the meantime, the Commission

had brought subpoena enforcement proceedings against two individuals

associated with the Mt. Hood cooperative. They had refused to be

sworn, basing their refusal upon the contention that the Commission's

investigation was not being conducted in conformity with the requirements for hearing set forth in sections 7 and 8 of the Administrative

Procedure Act. They urged that a subpoena should have been issued

10 221 F. 2d 91 (19.55).

11 225 F. 2d 255.

IJMI. Hood Hardboard &: Plvwood Cooperatioe v, S. E. C., (D. Ore. Civ. No. 8003).
TWENTY-FIRST ANNUAL REPORT 23

by a hearing examiner pursuant to section 11 of the Administrative

Procedure Act, that the testimony should be publicly taken, that the

witnesses should be advised in advance that they could receive a copy

of their transcript of testimony and that the same lawyers might

represent the various witnesses subpoenaed. The Commission argued

that the sections of the Administrative Procedure Act respecting

hearings were not applicable to an investigation. The court granted

the Commission's applications for enforcement of the subpoenas."

Other cases in which the Commission was obliged to resort to court

action for enforcement of its subpoenas were S. E. O. v. John F.

McBride, Wyoming-Gulf Sulphur Oorporation, ei ol., 34 S. E. O. v. Larsco

Dr-Wing Oompany and Dick Riggs, 35 and International. Vilhz,ge,Inc., and

Hugh E. MacBeth.36

Participation as Amicus Curiae

The Commission filed a memorandum of law as amicus curiae in

Kinsey v. Knapp.37 It was charged inter alia in that action that the

defendants had violated the Securities Act in failing to register an issue

of voting trust certificates. There were also counter charges of violations of Rule X-10B-5 by the plaintiffs in their acquisition of stock

of the company involved. The Commission's memorandum, submitted at the suggestion of the Court, contained a legal discussion of

the private offering exemption from registration provided by section

4 (1) of the Securities Act, the scope of the general anti-fraud provisions of the Federal securities laws and the effect of a violation of

such laws upon the validity of a transaction, and the availability of

the private remedies afforded to the parties in the particular lawsuit.

After the close of the fiscal year, on August 4, 1955, the District Judge

entered a partial final judgment in favor of the plaintiffs.

LITIGATION CONCERNING DISCLOSURE OF COMMISSION'S CONFIDENTIAL FILES

After the close of the fiscal year the Court of Appeals for the Sixth

Circuit handed down a landmark decision upholding the confidential

nature of the Commission's investigation files and internal staff and

Commission deliberations, and sustaining the validity of the Commission's rules which prohibit Commission employees from divulging such

information without specific Commission authorization. Sustained

also was the position of the Commission that its employees who decline

to divulge information of this character in obedience to these rules

aaS. E. C. v. w. W Lock (D. Ore., Clv. No. 8036)and S. E. O. v. Charita E. Goddard(D Ore. Clv. No.

8035)

.. D.N.J.No. 201-55.

.. W. D.Okla No. 6414.

II S. D. Cal. No. 16929-WB.

>f E. D. MICh. No. 13179.

•
24 SECURITIES AND EXCHANGE COMMISSION

cannot be properly held in contempt of court. In re Appeals of S. E. C.

and William H. Timbers, its General Oounsel.38

These questions arose in a private lawsuit in a federal district court

in Detroit to which the Commission was at no time a party." Plaintiffs' allegations of corporate mismanagement included, inter alia, a

charge that the defendant management had violated the Securities.

Act in failing to register an issue of voting trust certificates designed

to prevent the plaintiffs from obtaining control of the company.

Early in the litigation consummation of the voting trust was barred

by stipulation of the parties and by injunctive orders.

After the institution of the lawsuit, the Commission commenced

its own private investigation of the alleged violation. During the

trial the plaintiffs' attorney, at the suggestion of the District Judge,

served a subpoena upon the attorney in charge of the Commission's

Detroit branch office calling for the production of the Commission's

investigation file and for testimony on matters covered by the investigation. In an effort to cooperate and on the representation of

plaintiffs' counsel that this would fully satisfy his needs, the Commission released its correspondence with the parties to the litigation

and authorized the subpoenaed Commission employee to testify on

interviews and conversations which he may have had with the parties

or their representatives. Thereafter, upon the further request of

plaintiffs' counsel, the Commission voluntarily sent to Detroit two

staff officials from its Washington office for the limited purpose of

testifying on other conferences held in Washington with defendants'

attorneys. The questioning of Commission employees in Detroit,

however, went far beyond these conferences. Information was

sought on intra-agency communications, reports, recommendations

and internal administrative determinations with respect to the investigation and the action to be taken as a result thereof. Also sought

were the identities of, and information obtained from confidential

informants other than the parties to the litigation. The staff witnesses, obeying the Commission's rules and specific Commission

instructions, declined to divulge the information. The District

Judge having indicated that he might hold the staff witnesses in

contempt, the Commission's General Counsel, William H. Timbers,

went to Detroit to represent them. After several days of examination of Commission employees, the District Judge summarily

ordered Timbers himself, over his protest, to take the witness

stand. When Timbers refused to produce unconditionally a preliminary report of investigation in the Commission's file, he was

summarily held in contempt, committed to the custody of the

United States Marshal, and sentenced to 60 days imprisonment

II C. A. 6, No. 12. 503, October 19,1955.

II Kimev v. Knapp, E. D. Mich., Civil Action No. 13.179.
TWENTY-FIRST AN1\'UAL REPORT 25

unless he sooner purged himself of the alleged contempt. An appeal

was filed immediately and a stay of execution obtained from the

Court of Appeals.

In reversing and setting aside the contempt order and in directing

that Timbers be "completely absolved" from any "alleged contempt,"

the Court of Appeals also held that the District Judge had "overstepped appropriate judicial bounds" in seeking to conduct "a

searching inquisition" into the way in which the Commission was

carrying out its statutory responsibilities in the particular matter.

The appellate court also ruled that the District Judge had abused

"all justifiable discretion" in his conduct of the case and in his

treatment of the Commission's General Counsel.

The Department of Justice supported the position of the Commission and presented the matter to the appellate court.
PART III

ADMINISTRATION OF mE 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, 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 enforcement of these rules and

the administration of the other provisions of the Act is vested in

the Commission.

REGULATION OF EXCHANGES AND EXCHANGE TRADING

Registration and Exemption of Exchanges

At the close of the 1955 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

Chicago Board of Trade Exchange

Cincinnati Stock Exchange Pittsburgh Stock Exchange

Detroit Stock Exchange Salt Lake City Stock Exchange

Los Angeles Stock Exchange San Francisco Mining Exchange

Midwest Stock Exchange San Francisco Stock Exchange

New 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

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, 7 exchanges reported 34 cases of disciplinary

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

The actions included fines ranging from $25 to $3,000 in 19 cases,

with total fines aggregating $13,400; expulsion of one individual and

26
TWENTY-FIRST ANNUAL REPORT 27

one firm from exchange membership; suspension of two individuals

from exchange membership; and censure of individuals and firms for

infractions of exchange rules. The rules violated included those pertaining to conduct inconsistent with just and equitable principles of

trade, commission rates, capital requirements, floor trading and specialists, and the handling of orders.

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 whether the fair and adequate disclosure

required by the statute has been made.

Statistics of Securities Registered on Exchanges

At the close of the 1955 fiscal year, 2,219 issuers had 2,645 stock

issues and 1,013 bond issues registered on national securities exchanges.

During the year, securities of 90 new issuers became registered on

exchanges while the registration of all securities of 75 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 that

supplied with respect to securities registered on an exchange, under

section 15 (d) of the Securities Exchange Act:

Applications for registration of classes of securities on exchanges_____ 210 Annualreports 3,073

Current reports 3,827

Information concerning the number of securities traded on each

stock exchange is shown in the appendix.

Disclosure Obtained by the Registration Process

As suggested by the following illustration, the process of examining

the applications and various periodic reports filed under the Securities
28 SECURITIES AND EXCHANGE COMMISSION

Number 0/ '88lU8 Market oallU Dec. ~1,196ft

1,532 $169,148,544,000

824 22,132,853,000

693 3, 642, 997, 000

3,049 194,924,394, 000

Exchange Act often presents problems of disclosure analogous to

those arising under the Securities Act.

A registrant acquired during its fiscal year over 5'0 percent of the

stock of another company. According to a periodic report filed with

the Commission the acquisition was for investment and not for resale.

During the same year the acquired company paid a dividend exceeding

its entire earnings for that year. In its annual report for that year

the registrant reported its investment as a current asset and the entire

dividend received as income. When the staff objected to these procedures, the registrant sought to justify the accounting on the basis

that, between the time its fiscal year ended and its annual report to

shareholders was completed, the registrant had abandoned its original

plan to acquire additional shares of the company and eventually to

merge it. On this basis, it was urged that the shares held, being listed

securities, could properly be classified as a current asset and that

dividends received on the shares should be treated as income from

marketable securities without regard to the fact that those dividends

exceeded registrant's proportionate share in the earnings since the

date of acquisition. The staff noted, however, that the abandonment

of the original plan was only temporary, and that the plan was carried

out substantially in its original form. The financial statements were

amended to exclude the investment from current assets in the balance

-sheet, and to reduce that investment and the registrant's previously

reported income by the amount of dividends paid out of earnings

accumulated prior to the date of acquisition by the registrant. The

effect of the exclusion of the investment from current assets was to

reduce current assets from $5,900,000 to $2,800,000. Exclusion of

dividends paid from earnings prior to acquisition reduced net income

as reported from $352,000 to $189,000.

MARKET VALUE OF SECURITIES TRADED ON EXCHANGES

The unduplicated total market value on December 31, 1954, of all

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

exchanges in the United States was $302,466,207,000.

Stocks:

New York Stock Exchange

American Stock Exchange -_

All other exchanges exclusively

TotaL

Bonds:

New York Stock Exchange_________________ 1,014 106,517,243,000

American Stock Exchange__________________ 82 899,880,000

AIl other exchanges exclusively 2_9_ 124,690,000

TotaL__________________________________ 1,125 107,541,813,000

Total stocks and bonds___________________ 4, 174 302,466,207,000

_

_

- - _-- - -- - - - - -- - - - --
TWENTY-FIRST ANNUAL REPORT 29

The New York Stock Exchange and American Stock Exchange

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

issues between them. The figures for all other exchanges are for the

net number of issues appearing only on such exchanges, excluding the

many issues on them which are also traded on one or the other New

York exchange. The number of issues as shown includes a few which

are not quoted by reason of suspension or otherwise.

The bonds on the New York Stock Exchange include United States

Government and New York State and City issues with an aggregate

market value of $83,353,859,000.

The stocks quoted may be divided into categories as follows, with

market value as of December 31, 1954, in millions of dollars:

I

Preferred stock Common stock

Issues Values Issues Values

Listed on registered exchanges 630 $9,671.4 2, 012 $169,106.1 UnliSted on all exchanges 55 606 3 245 15,170.2 Listed on exempted exchanges 11 15.3 63 355.1

Total stocks. ______________________ 696 10,293.0 2,320 184,631.4

Excluding issues also traded 00 registered exchanges.

The market value of all stocks on the New York Stock Exchange on

June 30,1955, was $194,405,700,000. Reports as of that date are not

available for the other exchanges.

Comparison With Market Value of Securities Traded Over the Counter

Comparable figures for securities traded over the counter and not on

any exchange are not available since the Commission has limited

jurisdiction over such securities. However, the following estimates

concerning stocks traded over the counter in various categories have

been developed by the Commission. At the close of 1952, it was

estimated that some 3,500 domestic issuers whose stocks 'were traded

over the counter and who reported that they had or appeared to have

more than 300 stockholders had over-the-counter stocks with an aggregate market value of approximately $28 billion.' The Commission's

estimate for the close of 1954 is around $38 billion for approximately

the same number of domestic issuers. The $28 billion at the close of

1952 compared with $140.5 billion on the stock exchanges, while the

$38 billion at the close of 1954 compares with $194.9 billion on the

stock exchanges. There thus appears to be little change in the ratio

of these over-the-counter stocks to exchange stocks during the period,

despite the considerable number and amount of values transferred from

the over-the-counter to the exchange markets by new listings and by

mergers and absorptions into listed companies.

I See 19th Anoual Report, page 26.

•• ___________________________ _________•________________________ •____________________________

____•• •____________

•
30 SECURITIES AND EXCHANGE COMMISSION

UNUSTED TRADING PRIVILEGES ON EXCHANGES

Volume of Unlisted Trading in Stocks on Exchanges

Upon application to the Commission, exchanges may admit issues to

trading even though the issuer has not listed them on the particular

exchange, if one of the three conditions specified in section 12 (f) of

the Act is satisfied. Securities so admitted consist primarily of issues

listed on other exchanges and issues which were admitted to unlisted

trading when the statute was enacted.

The reported volume of shares traded on an unlisted basis on the

stock exchanges during the calendar year 1954 included approximately

32.5 million shares in stocks admitted to unlisted trading only and

30 million shares in stocks listed and registered on exchanges other

than those where the unlisted trading occurred. These amounts were

respectively about 3.25 percent and 3 percent of the total share

volume reported on all exchanges. The volumes in individual issues

as reported by the stock exchanges or other reporting agencies are

less than complete in some cases, particularly with respect to American

Stock Exchange figures, which exclude odd lots and other items not

reported on the stock tickers. Volumes of trading in short- term

rights are not included. Appendix table 8 shows the distribution of

share volumes among the various categories of unlisted trading

privileges on exchanges.

Applications for Unlisted Trading Privileges

Pursuant to applications filed by the exchanges with respect to

stocks listed on other exchanges, unlisted trading privileges were

extended during the fiscal year as follows:

Stook exohange: Boston

Detroit

Los Angeles

~idwest

Philadelphia-Baltimore

Pntsburgh

San Franoffioo

Number

0/81001<8

21

1

19

2

9

1

5

During the fiscal year there were three applications by the American

Stock Exchange and one by the Boston Stock Exchange for a determination that new securities were the substantial equivalent of old

securities previously admitted to unlisted trading privileges within

the meaning of paragraph (b) of rule X-12F-2. All of such applications were granted by the Commission.

_

_

_

_

_

_

_
TWENTY-FIRST ANNUAL REPORT 31

DELI STING OF SECURITIES FROM EXCHANGES

During the fiscal year ending June 301 1955, the Commission

granted 23 applications filed by exchanges or issuers to remove securities from exchange listing and registration pursuant to section

12 (d) and rule X-12D2-1. The applications included 7 by exchanges,

covering 1 bond issue and 6 stocks, and 16 by issuers, covering 16

stocks, 2 of which were removed from 2 exchanges. The applications

by exchanges were based on the reduction of public holdings to

amounts insufficient for further exchange trading. The applications

by issuers included 7 for delisting from some exchanges of stocks

which remained listed on other exchanges, 6 based on insufficient

amounts available for exchange trading, 2 where the proposition to

delist was made the subject of proxy statements and put to a vote of

shareholders, and 1 where the applicant. at the direction of the Commission, notified all of its stockholders by sending them a copy of its

application.

BLOCK DISTRIBUTIONS REPORTED BY 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 a security 011 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, filed by a national securities exchange and declared effective

by the Commission, authorizing the payment of such compensation

in connection with a distribution of securities.

At the present time two types of plans are in effect to permit a

block of securities 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.

These plans have been designated the "Special Offering Plan" and

the "Exchange Distribution Plan."

In addition to these two methods of distributing large blocks of

securities on national securities exchanges, a third method is commonly employed to distribute blocks of securities listed on exchanges

to the public over the counter. This method is commonly referred

to as a "Secondary Distribution" and such a distribution generally

takes place after the close of exchange trading. It is generally the

practice of exchangesto require members to obtain the approval of the

exchange before participating in such secondary distributions.
32 SECURI'rIES .A1'W EXCHANGE COMMISSION

More complete details concerning these three types of plans are

contained in previous Annual Reports of this Commission (see e. g.,

pages 29-30 of the 20th Annual Report). 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

12 MONTHS ENDED DECEMBER 31, 1954 1

Shares in Value

Number Original Shares (thou.

made sold sands of offer dollars)

SpecIal offerlngL. .. . -. -. _- 14 181,999 189,772 6, 670 Exchange distnbuttons, 57 726,364 705,781 24,664 Secondary dlstrlbutlons -_. 84 6,624, 313 5,738,359 218,489

6 MONTHS ENDED JUNE 30, 19551

~~c1~~~d~fbutjons--~============::=::==::::::::=:=:1IiI i~:m I i~},~~I Secondary dlstrlbutlOns .• .. __. ._____ 63 4, 076, 973 4, 082, 804

1 DetaJls of these dtstrrbutlons appear In the Commlsston's monthly Statistical Bulletin.

MANIPULATION AND STABILIZATION

Manipulation

4,849

5,988

194,207

The Securities Exchange Act prohibits manipulative practices in

the securities markets. The Commission's analysts 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. Over-..

the-counter surveillance is maintained by the examination of the bid~"

and offers appearing in the sheets of the national quotation services.

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,

which are generally conducted by the Commission's regional offices,

take two forms. The "quiz" or "preliminary" investigation is

designed to discover rapidly evidence \of unlawful activity. If B:

quiz discloses no evidence of violations it is closed. If the quiz indicates that more intensive investigation is necessary, a formal order

may be issued by the Commission. 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. If violations are discovered, the appropriate action is

________•_ __ __• ___' ____ __-__

______•____________ •__•_________ ___• _________-______ ----- ____
TWENTY-FIRST ANNUAL REPORT 33

taken by the Commission. In some cases the information obtained

may be referred to other Federal or state authorities.

The following table shows the number of quizzes and formal investigations initiated in the fiscal year 1955, the number closed or

completed during the same period, and the number pending at the

ending of the fiscal year:

Trading inoestiqaiions

i Formal

I

I QUlzzes mvesugations

-jlll-e~-~-fe-~-Jdun-ur-~-3~-'l-s:-I--Y-ea-r:-:-::-::-::-::-::-:-::-::-::-::-::-:--_:-::-::-::-::-::-:-::-::-::-::-::-::-:-::-:: /---1Cf'-6 -J---1 g

Total to be accounted for--------------------------------------------------1 212 13

Closed or completed during fiscal year___________________________________________ 101 4 Changed to formal during fiscal year_____________________________________________ 4

Total disposed oL --- _I 105 4

Pending at end of fiscal year ---------- ------------- 1 107 \I

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 or during the distribution. All registered offerings and

all offerings made under Regulations A and D (in all some 2,372

offerings having a value exceeding $11,264,000,000) 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

Stabilization involves open market purchases of securities to prevent

or retard a decline in the market price in order to facilitate a distribution, It'- is permitted subject to restrictions designed to confinestabilizing activity to that necessary for purposes of the distribution

and to require proper disclosures.

All stabilizing operations are very carefully observed. During the

fiscal year, stabilizing was effected in connection with stock offerings

aggregating 23,774,940 shares having an aggregate public offering

price of $542,972,719. Bond issues having a total offering price of

$39,575,000 were also stabilized. To accomplish this stabilization,

428,057 shares of stock were purchased by the offerors at a cost of

$8,055,188. 'Bonds costing $345,475 were also bought by stabilizers.

In connection with these operations more than 6,000 stabilizing

reports which show purchases and sales of securities effected hy persons

conducting the distribution were received and examined during thefiscal year.

378413-56--4

-

_
34 SECURITIES AND EXCHANGE COMMISSION

During the fiscal year further progress was made in the formulation

of rules relating to the stabilization of securities under the Securities

Exchange Act. Following a public hearing on the proposed rules in

July 1954,frequent conferences were held by the staff with a committee

formed by persons represented at the hearing, and further study was

given to the suggestions and proposals submitted by interested persons.

A revised draft of the proposed rules was released for public comment

in April 1955,setting forth three comprehensive rules, one restricting

trading activity by persons participating or expecting to participate in

a distribution, a second setting forth principles governing stabilizing,

and the third dealing with the peculiar problems arising in offerings of

securities through rights. By the end of the fiscal year the final recommendations of the staff had been submitted to the Commission, and

shortly thereafter the proposed rules were formally adopted."

INSIDERS' SECURITY TRANSACTIONS AND HOLDINGS

Every person who is an owner of more than 10 percent of any class

of equity security which is registered on a national securities exchange

or an officer or a director of the issuer of any such security is required

by section 16 (a) of the Securities Exchange Act to file with the Commission and the exchange a report disclosing his direct and indirect

ownership of each class of the issuer's equity securities and additional

reports showing subsequent changes in such ownership. The Public

Utility Holding Company Act and the Investment Company Act

contain similar requirements.

These reports are available for public inspection at the Commission's office and at the exchanges, but in order to make the information contained therein more readily available to interested persons 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. A-pproximately 3,000 copies of this summary are circulated each month.

There was a sharp increase in the number of insiders' reports filed

with the Commission during the 1955 fiscal year, 28,975 as compared

with 23,199 during the 1954 fiscal year and 22,333 during the 1953

fiscal year. The following tabulation shows details concerning the

reports filed during the 1955 fiscal year.

2 Securities Exchange Act release No. 5194, (July 5, 1955). In connection with the formulation of the

stabilization rules, see also previous Annual Reports, particularly 20th Annual Report, p. 35.
TWENTY-FIRST ANNUAL REPORT 35

Number of ownership reports of officers, directors, principal security holders, and

certain other affiliated persons filed during the fiscal year ended June 30, 1955

Deserlptron of report I

Origmal

I

Amended Total reports reports

. Securities Exchange Act of 1934:I

Form 4 24,086 867 24,953 Form 5_________________________________________________________577 5 582 Form 6 2,469 6 2,475

Total _________________________________________________________ 27,132 878 28,010

Public Uttlity Holding Company Act of 1935:2

Form U-17-1. _________________ _________________ 37 1 38 Form U-17-2 ___________________________________________________492 2 494

Total. ________________________________________________________529 3 532

Investment Company Act of 1940.• Form N-30F -1. 86 86 Form N-1l0F-2__________________________________________________343 4 347

Total. ________________________________________________________429 4 433

Grand total. _._________________ 28, 090 885 28,975

I Form 41s used to report changes in ownership; Form 5 to report ownership at the time an equity security

of an Issuer is first listed and registered on a national seounttes exchange; and Form 6 to report ownership

of persons who subsequently become officers, directors or prlneipal stockholders of thc Issuer.

, Form U-17-11Sused for imttal reports and Form U-17-2 for reports of changes of owncrbsip .

Form N-30F-l is used for initial reports and Form N-30F-2 for reports of changes of ownership.

Recovery of Insiders' Profits hy 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

by the proper parties.

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

__•______________________________________________________

•• __________________________ •_________________________

___• •__________•

___________________________ ------------ •_____________________

' ______________________________

•
36 SECURITIES AND EXCHANGE COMMISSION

91

233

60

80

24_

12.

466-

'3Q8.

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 preliminarv form prior to the date of the proposed solicitation.

Where preliminary material fails to meet the prescribed disclosurestandards, 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 stockholders.

Statistics Relating to Proxy Statements

During the calendar year 1954 1,887 solicitations were made pursuant to Regulation X-14, of which 1,846 were conducted by management and 41 by non-management groups. The 1,846 solicitations by

management related to 1,695 companies, more than one solicitation

having been made with respect to some of the companies.

The purpose for which proxies are most often sought is the voting

for nominees for directors. In 1954 this was an item of business in

1,705 stockholders' meetings, while at 161meetings it was not involved.

The remaining 21 solicitations, which did not involve any meeting of

stockholders, sought consents or authorizations from stockholders with

respect to certain proposals other than the election of directors.

During the 1954 calendar year 22 companies were subject to proxy

contests for control or for representation on the board of directors

compared to 14 such contests during the 1953 calendar year. Apart

from those filed by management, 28 proxy statements were filed in

1954 by interested non-management groups, compared with 17 in

1953, in connection with these contests.

In addition to the election of directors, stockholders' decisions were

sought in the calendar year 1954with respect to -the following types of

matters:

Number of

Nature OfbU8inu3 other prOX1J tOOn election of director« euuemenu.

Mergers, eonsolidatdons, acquisition of businesses, and purchase and sales ofproperty

Issuance of new securities, modifications of existing securities, and recapitalization plans other than mergers and consolidations

~mployeepension plans

Employee stock purchase and stock option plans

Bonus and profit-sharing plans - --

Indemnification of officers and directors

Approval of independent auditors -_

Amendments to by-laws and other matters

_

~------- _

_

_

-

- _
TWENTY-FIRST ANNUAL REPORT 37

While mergers and related combinations reflected in this tabulation

increased from 66 in 1953 to 91 in 1954, the total of the three categories

of compensation plans enumerated, pension, stock purchase and bonus,

decreased from 223 to 164.

REGULATION OF BROKERS AND DEALERS IN OVER-rnE-COUNTER

MARKETS

Registration

Section 15 (a) of the Securities Exchange Act requires registration

-of brokers and dealers using the mails or instrumentalities of interstate

commerce to effect transactions in securities on the over-the-counter

market except those brokers and dealers whose business is exclusively

intrastate or exclusively in exempt securities. The following tabulation reflects certain data with respect to registration of brokers and

.dealers and applications therefor during the fiscal year 1955.

Statistics relating to registrations of brokers and dealers-fiscal year ending

June 30, 1955

Effective registrations at close of preceding fiscal year 4,132

Applications pending.at close of preceding fiscal year___________________ 47

Applications filed during fiscal year_ __ ________________________ __ 715

Total 4,894

Applications denied__ ______________________________ _____ 0

Applications withdrawn, ____ _______ ________ _ 15

Applications canceled__________________________________ 0

Registrations withdrawn______ __ ______ ___ _ _ __ 416

Registrations canceled______ __ _____ _____ 58

Registrations revoked during year __ __ _______________ _ ____ 22

Registrations effective at end of year 4,334

Applications pending at end of year__________________________________ 49

Total 4,894

Administrative Proceedings

Registration as a broker and dealer may be denied or revoked pursuant to section 15 (b) of the Act by reason of criminal convictions,

or civil injunctions involving securities transactions; for willful violations of the Federal Securities laws or the Commission's regulations

thereunder; and for certain other specified types of misconduct on the

part of the firm or its partners, officers, directors or persons controlling

or controlled by it. In addition brokers and dealers may be suspended

or expelled by the Commission from membership in the National

Association of Securities Dealers Inc. and in stock exchanges for

participating in violations of the Federal Securities laws or the

regulations thereunder.
38 SECURITIES AND EXCHANGE COMMISSION

Statistics of administrative proceedings to deny and revoke broker-dealerregistration,

to suspend and expel from membership in the National Association of Securities

Dealers or an exchange

Proceedings pending at start of fiscal year to:

Revoke registration_______ _ ___ 10

Revoke registration and suspend or expel from N ASD 1 or exehanges; 7

Deny registration to applicant__________________________________ 3

Total proceedings pending____________________________________ 20

Proceedings instituted during fiscal year to:

Revoke registration

Revoke registration and suspend or expel from NASD or exchanges __ Deny registration to applicant

Cancelregistration

Total proceedings instituted

42

13

5

2

62

Total proceedings current during fiscal year_____________________ 82

Disposition of proceedings

Proceedings to revoke registration: , Dismissed on withdrawal of registration., 11

Dismissed-registration permitted to continue in elfect_____________ 2

Registration revoked__________ ______ _ 17

Total______________________________________________________ 30

Proceedings to revoke registration and suspend or expel from NASD or

exchanges:

Registration revoked and firm expelled from NASD________________ 5

Dismissed on withdrawal of registration., 1

Dismissed-registration and membership permitted to continue in

elfect______________________________________________________ 1

Suspended for a period of time from NASD_______________________ 3

Total______________________________________________________ 10

Proceedings to deny registration to applicant:

Dismissed on withdrawal of application__________________________ 4

Dismissed-c-registration permitted to become elfective______________ 1

Total______________________________________________________ 5

Total proceedings disposed oL________________________________ 45

Proceedings pending at end of fiscal year to:

Revoke registration.; ___ __ __ __ ______ _ ___ _ 22

Revoke registration and suspend or expel from NASD or exehengea.; 10

Deny registration to applicants__________________________________ 3

Cancel registration - - 2

Total proceedings pending at end of fiscal year__________________ 37

Total proceedings accounted for_______________________________ 82

1A substantial number of registered brokers and dealers are not members of the National Association

of Securities Dealers, Inc , or of a national securities exchange.

_

_

_

_

=

=
TWENTY-FIRST ANNUAL REPORT 39

Among the proceedings disposed of during the year were the

following:

In the case of Charles M. Weber, doing business as Weber-Millican

and Company,3 involved findings that the respondent in connection

with the sale of the common stock of Inland Oil Company, made

false and misleading statements and omitted to state material facts

concerning the expenses of distribution of the stock, the extent and

results of oil-well drilling operations, and the purposes for which the

proceeds from the sale of the stock would be used, and that the

respondent in connection with selling of common stock of Magma

King Manganese Mining Co. made false representations concerning

the current market price of the stock and the availability of the stock

in the market and effected sales at prices averaging 38.9 percent in

excess of the prevailing market prices without disclosing to the

purchasers such market prices. The Commission found that Weber

willfully violated the anti-fraud provisions of the Securities Acts, and

revoked his registration and expelled him from the National Association of Securities Dealers, Inc.

In the Shaver and Company 4 case, the Commission revoked the

respondent's registration and expelled it from the National Association of Securities Dealers, Inc. upon the findings that the respondent

and Stanley C. Shaver, who dominated and controlled the respondent,

made false and misleading statements of material facts in connection

with the sale of securities and employed a scheme to defraud customers of their funds and securities. Shaver, a director of the Florida

Telephone Corporation, induced the respondent's customers to

purchase that corporation's stock upon the false representation that

the corporation would merge with another telephone company and

that the stock would appreciably increase in value. On the pretext

of having the stock available when the merger took effect, Shaver

induced-the customers to turn over to him 2,883 shares in negotiable

form. More than half of these shares were subsequently converted

by Shaver and Company to the use and benefit of Shaver and the

respondent, without the knowledge or consent of the customers.

In proceedings instituted against Pioneer Enterprises, Inc.6 the case

was based in part upon the fact that the respondent in selling its own

stock sent a telegram which referred to "the many favorable developments in corporations in which Pioneer is interested and which are

reflected in a greatly improved financial structure of Pioneer," when

in fact such a representation was not justified. The three companies

in which Pioneer owned sizable amounts of stock had paid no dividends or any other form of income to the respondent, and the activities

I Securities Exchange Act release No. 5087 (September 14, 1954)

BecuritIes Exchange Act release No. 6116 (December 6, 1954).

, Seeurlties Exchange Act release No. 6143 (March 1, 1955).

•

•
40 SECURITIES AND EXCHANGE COMMISSION

of the companies in the period preceding were not of a kind justifying

a description of "favorable developments." Also the telegram failed

to reveal certain material facts detrimental to Pioneer's financial

structure. On these facts the Commission found Pioneer had violated

the anti-fraud provisions of the Securities Act of 1933, and revoked

Pioneer's registration and expelled it from membership in the NASD,

Inc.

Proceedings against Aim and Company 6 involved the obtaining

of secret profits by respondent and by Henry O. AIm, president,

director and controlling stockholder, in securities transactions with an

estate and trust of which AIm was executor and trustee. AIm, as

executor, sold through another broker-dealer 15 of the 27 securities in

the estate to respondent, which used some of the securities to cover

short sales and resold the remainder to customers at a profit. Another

security of the estate was purchased directly by AIm, who within a

short time sold it to respondent at an appreciably higher price. Respondent then resold the security realizing additional profit. The

Commission found that the respondent and AIm had willfully violated

the anti-fraud provisions of the Securities Exchange Act of 1934 and

suspended AIm from membership in the National Association of

Securities Dealers, Inc. for 9 months. Registration was not revoked

under the circumstances, including the fact that AIm had made

restitution to the estate and had never been charged with other

securities violations.

The extensive series of administrative and court proceedings discussed in the prior Annual Reports of the Commission were finally

terminated by the Commission's dismissal of the broker-dealer proceedings against Otis &1 Co. and, as mentioned elsewhere in this report,

its dismissal at the request of the NASD of the review petition filed in

connection with the disciplinary action by the Association against

Otis & Co., Cyrus S. Eaton and William R. Daley." Following the

Commission's successful defense of the action brought by certain

witnesses who sought to have the United States District Court for the

Eastern District of Pennsylvania quash the Commission's subpoenas

which had been served upon them, resumption of the broker-dealer

proceedings was delayed pending completion of the Commission's

further public investigation into the offering of Kaiser-Frazer stock.

Thereafter, a stipulation incorporating into the record of the brokerdealer proceeding certain testimony taken in prior proceedings was

entered into and, based upon that testimony and the remainder of the

record, Otis & Co. filed a motion to dismiss the broker-dealer proceeding. In granting the motion to dismiss, the Commission, among

Securities Exchange Act release No. 5177 (May 25, 1955).

•• See 15th Annual Report, pp. 73-77; 16th Annual Report, PP. 58-59; 18th Annual Report, PP. 79-80; 19th

Annual Report, pp. 50-51.

•
TWENTY-FIRST ANNUAL REPORT 41

its other conclusions, found that in view of the fact that no harm came

to public investors to whom the Kaiser-Frazer stock was offered, it

would not be in the public interest to take any action with respect to

the registration of Otis & Co. as a broker-dealer and its membership in

the NASD because of the alleged acts charged against it in this

proceeding." The public investigation of the offering of KaiserFrazer stock was later terminated.

Broker-Dealer Inspections

The program of the Commission includes periodic and other examinations of the books and records of registered brokers and dealers,

conducted pursuant to section 17 (a) of the Securities Exchange Act

of 1934. The inspectors ascertain the financial condition of the firm

and review its practices as to pricing, treatment of customers' funds

and securities, and the making of proper disclosures to customers.

Compliance with other Commission rules, including those relating to

the maintenance of proper records, is also examined.

, During the fiscal year the Commission's Regional Officesreported

on 822 such inspections. As in former years these inspections uncovered many violations of the statutes, rules and regulations, including

non-compliance with the Commission's capital and hypothecation

rules, and with the margin and other requirements of Regulation T

prescribed by the Board of Governors of the Federal Reserve System.

The following summary table shows the various types of violations

disclosed in broker-dealer inspection reports during the last fiscal

year.

Tt!pe

Financial difficulties

Hypothecation rules

Unreasonable prices for securities purchased

Regulation "T" of the Federal Reserve Board

"Secret profits"

Confirmation and bookkeeping rules

Miscellaneous

Total indicated violations

Total number of inspections

Number

o/l1Id •• cated VIOtenons

27

17

212

90

3

429

39

817

822

The Commission does not necessarily take formal action against a

broker-dealer who appears from these inspections to have violated

the acts or the rules thereunder. The character of improper activity

and the public interest are considered in determining which, if any, of

the. Available types of action is appropriate. Where it appears that

the violations are inadvertent or the result of misunderstanding, and

tb Securities Excbange Act release No. 5078 (August 24, 1954).

_

_

_

_

_

_

_

_

_
42 SECURITIES AND EXCHANGE COMMISSION

where wilfulness is not established, the Commission affords the brokerdealer an opportunity to correct his practices or to offer satisfactory

assurances that they will not continue.

Where the facts indicate activity inconsistent with the Rules of

Fair Practice of the National Association of Securities Dealers, Inc.,

but not necessarily violative of the anti-fraud provisions of the Commission's statutes, the Commission at times refers such cases to the

Association for consideration and whatever action it deems appropriate. During the fiscal year nine such cases were referred to the

Association.

Certain of the brokers and dealers registered with the Commission

are inspected by other agencies such as certain stock exchanges, the

National Association of Securities Dealers, Inc., and certain State

authorities having inspection programs. The Commission and these

agencies cooperate in a program designed to obtain the broadest coverage in routine inspection of brokers and dealers by interchanging

information as to the dates of inspection of particular firms by each of

the various parties. Information that a particular firm had recently

been inspected by one agency permits others to concentrate their

activity on other firms. The program is flexible to a degree sufficient

to permit immediate action by any agency for a good cause regardless

of inspections by others. The results of inspections are not interchanged due primarily to variations in inspection programs and in the

jurisdiction of the inspecting agencies.

During the year the Philadelphia-Baltimore Stock Exchange

substantially expanded the scope of its examinations and became a

participant in the coordination program. Other cooperating agencies,

each of which is in some way subject to the Commission's jurisdiction,

include the American Stock Exchange, the New York Stock Exchange,

the Midwest Stock Exchange, the San Francisco Stock Exchange and

the National Association of Securities Dealers, Inc. These parties

reported having made nearly 1,700 inspections of firms, and the availability of this information permitted the Commission, as well as each

of the other parties, to avoid duplication of routine inspections and

to increase the number of different firms inspected by some inspecting

organization. In addition, many States also participate to the extent

of their jurisdiction and inspection facilities, including particularly,

California, Connecticut, Illinois, Michigan, Minnesota, Oklahoma,

Oregon, Washington and Wisconsin.

Financial Statements

One of the Commission's rules, X-17A-5, requires brokers and

dealers to file financial reports each calendar year. During the fiscal

year 1955, 3,945 such reports were filed. By examining these reports

the staff is afforded an opportunity to determine whether, as of the
TWENTY-FIRST ANNUAL REPORT 43

date of the report, a broker-dealer is in compliance with the capital

requirements prescribed by rule X-15C3-1. If it is found that he is

not in compliance, he is given a reasonable opportunity, if consistent

with the public interest, to .bring his financial condition into compliance. If he does not promptly comply, the Commission takes appropriate action.

Net Capital Rule

During the year the Commission adopted an amendment designed

to increase the safeguards to customers afforded by its rule X-15C3-1

relating to capital requirements for brokers and dealers. Under this

rule, no broker or dealer may permit his aggregate indebtedness to

exceed 20 times his net capital. "Net capital," "aggregate indebtedness," and other terms are defined in the rule. These definitions

were revised, effective May 20, 1955/ to increase from 10 percent

to 30 percent the deduction from market value of common stock forming a part of the capital of a broker or dealer, which is required to be

made in computing his net capital and otherwise to clarify and improve the principles under which net capital and aggregate indebtedness are determined for purposes of the rule. These revisions included

modified deductions from market values of bonds and preferred stocks

in computing net capital, revised treatment of certain secured obligations in calculating aggregate indebtedness and provision for the

inclusion in capital of borrowings under "satisfactory subordination

payments. "

The rule was also amended in June 19558 to add the PhiladelphiaBaltimore Stock Exchange to the list of exchanges whose members

are exempt from the Commission's net capital rule because the rules

and settled practices of these exchanges have been found to impose

capital requirements more comprehensive than those of the Commission's rule.

SUPERVISION OF ACTIVITIES OF NATIONAL ASSOCIATION OF

SECURITIES DEALERS, INC.

Section 15A of the Securities Exchange Act of 1934 (the "Maloney

Act") provides for the registration with the Commission of national

securities associations whose rules are designed to promote just and

equitable principles of trade and who otherwise meet the requirements

of the statute. The National Association of Securities Dealers, Inc.

(NASD) is the only association which has registered under the Act.

Membership in the association is important to brokers and dealers

engaged in underwriting or trading with other brokers and dealers

since, as contemplated by section 15A (i) of the Act, the rules of

, Securities Exchange Act release No. 5156 (April 11, 1955).

I Securities Exchange Act release No. 5191 (June 24,1955).
44 SECURITIES AND EXCHANGE COMMISSION

the association preclude members from dealing with non-members

except upon the same terms as are accorded to the general public.

Its membership stood at 3,350 at June 30, 1955. This represented

an increase of 259 during the year as a result of 442 admissions to,

and 183 terminations of, membership. At the same date there were

registered with the NASD, as registered representatives, 41,066

individuals, including generally all partners, officers, salesmen, traders

and other persons employed by or associated with member firms in

capacities which involved their doing business directly with the public.

The number of registered representatives increased by 5,387 during

the fiscal year as a result of 8,761 initial registrations, 2,333 re-registrations and 5,707 terminations of registration.

Disciplinary Actions

The Commission received from the NASD, during the fiscal year,

reports of final action in 28 disciplinary proceedings in which formal

complaints had been filed against members alleging violations of

specified provisions of the Association's Rules of Fair Practice.

Eighteen of these complaints were directed solely against members,

while ten other complaints contained allegations against members

and also against registered representatives of the members.

In three of these proceedings members were expelled, in six members

were fined and in six members were censured. One complaint was

withdrawn prior to consideration of the merits and after such consideration four others were dismissed on findings that no violations had

occurred. One member involved in three related complaints was

suspended for 2 years.

Five complaints aimed at both members and their representatives

resulted in the revocation of the registration of the registered representatives on findings that they had misappropriated, or otherwise

misused, customers' or firms securities or funds. In each of these

cases the firms were found not to have acted improperly and the complaints were dismissed as to them. There were no losses to investors

in these cases. In other cases involving registered representatives

there were two revocations, suspensions of 30 and 90 days, respectively,

and two fines. In some of the cases mentioned above more than one

type of sanction was imposed on the disciplined member of representative. In several cases the penalty imposed included an assessment to cover, in whole or in part, the cost of the proceeding. The

fines imposed by the National Association of Securities Dealers, Inc.,

ranged from $50 to $2,000 and aggregated $3,800.

Commission Review of the NASD Disciplinary Action

As provided in section 15A (g) of the Act, disciplinary actions by

the NASD are subject to review by the Commission on its own motion
TWENTY-FIRST ANNUAL REPORT 45

or on application of any aggrieved person. Four such petitions,

described in earlier Annual Reports, were pending at the close of the

last fiscal year. In addition, two other petitions were filed during

the year. Five of these cases were disposed of during the year and

one was pending at the year end."

The Commission affirmed findings by the NASD that Earl L.

Combest, president and chief executive officer of Prugh, Combest and

Land, Inc., had, among other things, violated specified provisions of

the Association's Rules of Fair Practice, particularly section 27, by

failure to exercise proper supervision over officer-salesmen who overcharged customers and held that this failure to supervise was conduct

inconsistent with just and equitable principles of trade within the

meaning of the Act and the Association's rules. Combest had been

fined $2,500 and his registration as registered representative had been

suspended for 2 years by the Association. The Commission found,

in the light of all surrounding circumstances, including the sanctions

imposed on other persons connected with the activities in question,

that this penalty imposed on Combest was excessive or oppressive

and affirmed the fine but canceled the suspension."

As described in earlier Annual Reports, Otis & Co. and its registered

representatives, Cyrus S. Eaton and William R. Daley, had appealed

to the Commission an NASD decision finding them in violation of

particular Association rules for refusing to supply certain information

concerning the activity of Otis & Co. in a common stock offering of

Kaiser-Frazer Corporation in 1948. This decision imposed a 2-year

suspension of Otis & Co. from Association membership. In view of

the Commission's action in granting the motion of Otis & Co. to

dismiss the broker-dealer revocation proceedings and the outcome of

Federal Court proceedings in which the NASD was involved with

Otis & Co., the Association revoked its order of suspension and dismissed the underlying complaint against Otis & Co. and its representatives. The Association thereafter requested the Commission to

dismiss the review petition as moot and the Commission granted the

request. 11

The Commission also dismissed a review petition filed by Thomas

G. Wylie Co. who had been expelled by and from the Association on

findings that he had violated applicable Rules of Fair Practice by

selling non-producing oil royalties to customers at 212 percent over

the current market as indicated by contemporaneous cost. Prior to

Commission determination, applicant's membership as a sole proThe pending case consisted of 8 petition lIIed by Mitchell Securities, Ine., from 8decision which resulted

in the expulslon of the firm,.on the findillg that customers had been charged unfair prices inlow priced seenJUles. The appeal automatteally stayed the effectiveness of the decision. J. SecurIties Exchange Act release No. 5064(July 13, 1964).

11 Securities Exchange Act release No. 5110(November 4,1954).

•
46 SECURITIES AND EXCHANGE COMMISSION

prietor had automatically terminated by death and the Commission

dismissed the proceedings as moot."

R. V. Klein Company brought before the Commission, on appeal, a

decision in which the NASD held that his sales of producing oil

royalties to customers at a uniform mark-up of 50 percent over the

firm's cost involved doing business at unfair prices under the rules

and in the circumstances of the case. The penalty of expulsion had

been applied. On consideration, the Commission concluded that the

firm's pricing practices were unfair and inconsistent with just and

equitable principles of trade. In considering the severity of the

penalty, the Commission held that it was not oppressive or excessive

and on this basis dismissed the review proceeding thus confirming the

action of the NASD. 13 This decision by the Commission was subsequently reversed by the Court of Appeals as described later in this

report.

A review petition filed by Royal Securities Corporation and its

president and sole stockholder, John B. Milliken, raised a novel

question. The NASD through its District Business Conduct Committee, which has initial jurisdiction, had expelled the firm and revoked

Milliken's registration on findings that they had violated specified

rules by misrepresenting to customers that they were purchasing

securities for them as agent without any commission being charged

when, in fact, they were selling their own securities to such customers

at mark-ups ranging from 20 percent to 75 percent over their contemporaneous costs, and in making false and fictitious entries on the

books of the corporation. The NASD rules provide that a disciplinary

action by a District Business Conduct Committee is subject to review

by the Board of Governors on application by an aggrieved party

filed within 15 days after the date of notice of the decision, or upon

the Board's own motion within 30 days after such notice. The rules

also provide for review by the Commission, in accordance with the

statute, upon application of a party aggrieved by disciplinary action

taken or approved by the Board of Governors. In this case, review

by the Board of Governors was not sought within the specified period

and the Board of Governors refused to review the decision on its

own motion. Thereupon applicant applied directly to the Commission

to review the decision of the District Business Conduct Committee

and the refusal of the Board of Governors to review that decision or

to hear the untimely appeal. The NASD moved to dismiss the

petition on the assertion that the Commission had no jurisdiction

because applicant had failed to comply with the rules relating to

review within the NASD. The Commission concluded that applicants'

failure to exhaust their remedies of review within the NASD, pursuant

"No release published. Flle HI-lA-53.

"SecurIties Exchange Act release No. 5123(December 28, 1954).
TWENTY-FIRST ANNUAL REPORT 47

to its rules, precluded Commission review of the disciplinary action

and that applicable rules which specified procedural steps to be

observed as a condition to a review were not in contravention of the

statute. On this basis the Commission dismissed the review proceedings."

Commission Review of Action on Meruberahtp

During the fiscal year the Commission had no occasion to exercise

its jurisdiction under section 15A (b)(4) of the Act by which it may,

with due regard to the public interest, approve or direct the admission

to or continuance in membership of a member subject to any of the

disabilities specified in that section of the statute. There was no

change in the status of two such cases pending at the beginning of the

fiscal year and no new cases were brought before the Commission

during the year."

LITIGATION UNDER THE SECURITIES EXCHANGE ACT OF 1934

In order to afford immediate protection to public investors, it is

necessary at times for the Commission to apply to the courts for

injunctive relief against continuing violations of the Securities

Exchange Act.

In S. E. C. v. Kelleher Securities Corporation and William H.

Eynon 16 the defendant corporation, a registered broker-dealer, and

its controlling stockholder, consented to entry of a final judgment

permanently enjoining them from further violations of the registration

and anti-fraud provisions of the Securities Act of 1933 and the antifraud provisions of the Securities Exchange Act of 1934. The defendants were charged, among other things, with selling securities by

making false statements to the effect that the price of such securities

would double, that dividends would soon be paid and that the securities were no longer a speculation. In addition, it was alleged that the

defendants concealed the fact that they were selling personally owned

stock while falsely representing that the issuing corporation would

receive the proceeds of such sales.

Injunctive proceedings were also instituted against Carl J. Bliedung,17 a registered broker-dealer. By consent, the court issued a

permanent injunction enjoining further violations of the Securities

Exchange Act resulting from the defendant's failure to maintain and

keep current the books and records required under the Commission's

rules and regulations.

II Secunties Exchange Act release No 5171 (May 20, 1955).

IIThe pending cases concerned petitions flied on behalf of Franklin Distributors, Ine. (~eurlt1es Exchange

Act release No. 4818); and a member firm seeking approval of Its eontmuance as a member with WflUam A.

Spanier as an employee and controlled person (Securltres Exchange Act release No. 4811).

liD. D. C. No. 2017-55 (May 20, 1955).

" D. D. C. No 920-55 (March 16. 1955).
48 SECURITIES AND EXCHANGE COMMISSION

In S. E. O. v. Shaver &: 00., Stanley O. Shaver, Sr. and Stanley O.

Shaver, Jr.,18 the complaint alleged that the defendants permitted the

firm's aggregate indebtedness to exceed 2,000 percent of its net capital

in violation of the Commission's rules. The defendants filed an

answer admitting the allegations of the complaint and consented to

the entry of a permanent decree of injunction.

A permanent injunction was also issued against George lJlcKaig/9

a registered broker-dealer, doing business as George McKaig &: Company, as a result of a complaint filed during the previous fiscal year

which, as discussed in the Twentieth Annual Report.f charged the

defendant with violating the Commission's net capital rule, failure

to keep required books and records, and failure to file a certified

report of his financial condition.

In S. E. O. v. Gordon Keith Proctor." the Commission obtained a

final judgment by consent enjoining the defendant from further

violations of the broker-dealer registration provisions. The complaint charged that he was engaged in a broker-dealer business

without being registered with the Commission in accordance with

section 15 (b) of the Securities Exchange Act.

In addition to its actions against broker-dealers the Oommission

had occasion to file a complaint against Donald Graham Hamilton 22

for violations of the anti-fraud provisions of the Securities Exchange

Act. It was alleged that the defendant placed orders with various

brokers for the purchase of certain securities and the short sale of

other securities, for execution on the New York Stock Exchange,

knowing that he could not provide margin to cover short sales effected

for his account on the due dates. It was also charged that the

defendant issued checks on non-existent bank accounts and bank

accounts having insufficient funds to pay brokers for transactions

effected for his account. The defendant consented to the entry of

judgment and a permanent injunction was issued by the court.

In S. E. O. v. LaVere Redfield,23the Commission's complaint sought

to enjoin the defendant from further violations of the anti-fraud

provisions of the Securities Exchange Act. It was alleged that the

defendant, a director of a certain corporation, in offering to purchase

from stockholders of that company their stock at $12.50 per share,

had failed to disclose to them that the corporation was then considering s cash purchase offer of $14.50 per share from another company

and a proposal of merger with still another corporation. Following

the filing of the complaint, the defendant agreed to refrain from

I' S. D. Fla. No. 2603-T (August 20, 19M).

D. Nev. No. 1132 (May IS, 1955).

.. Pp. 4&-49.

II N. D. Ga. No. 5192 (June 1,1955).

OJ D. Mass. No. 54-705W (September 17, 1954).

OJ D. Mass. No. ~W (February 16,1955, Stipulation).

"
TWENTY-FIRST ANNUAL REPORT 49

further violations and also agreed to offer to rescind the purchases

which he had made under the above-mentioned circumstances.

In 1952, a NASD District Business Conduct Committee instituted

proceedings against a member for conduct violative of the NASD

Rules of Fair Practice and inconsistent with just and equitable

principles of trade. It was alleged, among other things, that the

member had sold oil royalties at prices which were unfair and not

reasonably related to the current market price, in violation of sections

1 and 4 of Article III of the Association's Rules of Fair Practice,

namely at a mark-up of 50 percent over cost. The Association

rejected his contentions that 50 percent was the customary mark-up

in the sale of producing oil royalties, that therefore the KASD was

under a duty to notify its members that it considered such a charge

violative of its rules, which notice had not been given, and that, in

any event, the propriety of his prices should have been determined

on the basis of the intrinsic value of the royalties rather than on

mark-up over cost and circumstances pertinent to the mark-up.

After expulsion by the Association, he applied to the Commission

for review of the expulsion order. The Commission affirmed."

A petition for review of the Commission's order was filed in the

Court of Appeals for the Second Circuit. In its opinion, the Court,

noting that there is no established market price for oil royalties, accepted the Commission's ruling that the cost to the dealer of an oil

royalty was the equivalent of a market price. In addition, the Court

adopted the Commission's position that the NASD could properly

determine what conduct was in violation of its rules on a case-to-case

basis. However, in the present instance, the NASD a year before

the instant transactions occurred had examined an account of the

member in which there were two transactions in oil royalties with

50 percent mark-ups over cost. Since no action was taken or warning

given by the NASD with respect to those transactions, the Court

held that, although the inaction did not constitute an estoppel, the

failure to discipline or to warn the member for the previous transactions justified his belief that a 50 percent mark-up was permissible

under the Association's rules and constituted an interpretation of the

rules on which the member reasonably relied. The case was therefore

reversed and remanded to the Commission."

In Weber v, Securities and Exchange Commiseion." the Court of

Appeals for the Second Circuit affirmed an order of the Commission

revoking a broker-dealer's registration and expelling bim from membership in the National Association of Securities Dealers. The action

"R. IT. Klein Campanu, Securities Exchange Act release 1\0 5123 (December 28.1954).

2.1 Rudolph IT.Klein v, S. E C.,224 F. 2d. 861 C. A. 2, June 16, 19M, petttum for reheorm» dell fed, July 13,

1955.

2f 222 F. 2d. 822 (1955).

378413-56-5
50 SECURITIES AND EXCHANGE COMMISSION

was based on fraudulent diversion of an issuer's funds in connection

with an underwriting, on sales of "penny" stock at prices not reasonably related to its current market price, and on misrepresentations

relating to such market price. .Among other things, the Court reaffirmed a previous holding that the National Daily Quotation Sheets

of the National Quotation Bureau are admissible as evidence of overthe-counter market prices.

Participation as Amicus Curiae

In Beury v. Beury, the United States District Court for the Southern

District of West Virginia held that a civil action under rule X-10B-5

would not lie in those cases where an action for fraud and deceit at

common law existed. The court accordingly held that as to two of

the defendants the extra-territorial service of process pursuant to section 27 of the Securities Exchange Act of 1934 was unavailable."

On appeal the Commission filed a brief, amicus curiae, urging that

the concept of fraud under section 10 (b) of the Act and rule X-10B-5

thereunder includes causes of action cognizable at common law. In

a per curiam opinion, the court held that the order was not appealable,

and without passing upon the question, expressed its disagreement

with the construction given by the court below to rule X-10B-5.28

11127 F. SuPP. 786 (1954).

II Beurv v. Beury, 222 F. 2d 464 (0. A. 4, 1955).
PART IV

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING

COMPANY ACT OF 1935

The Public Utility Holding Company Act of 1935 provides for

three 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, principally those in section 11 (b) (1),

which require physical integration of the public utility and related

properties of holding company systems, and those, principally contained in section 11 (b) (2), which require 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 accounting 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 those provisions of the Act

regulating the right of a person who is affiliated with a public utility

company to acquire securities resulting in a second such affiliation.

COMPOSITION OF REGISTERED HOLDING COMPANY SYSTEMSSUMMARY OF CHANGES

On June 30, 1955, there were 25 public utility holding company

systems which were subject to the regulatory provisions of the Act

as registered holding company systems. In these systems there were

23 registered holding companies which function solely as holding

companies, 7 registered holding companies which were also operating

companies, 171 electric and gas utility subsidiaries and 137 IlOIlutility subsidiaries, a total of 338 companies. In each of 3 systems

there were 2 registered holding companies, and in a third system there

were 3 registered holding companies. For convenience of discussion

these systems are referred to as active systems, and a table showing

their composition as of June 30, 1955, appears in appendix table 10.

The aggregate assets of these 25 active registered systems totalled

approximately $9,972 million, less valuation reserves, as at December

31, 1954. Included in these totals are 63 non-utility companies in

the Cities Service system with total assets of approximately $1,039

million. Also included are 62 subsidiaries of American & Foreign

Power, Inc. with total assets of approximately $630 million, most of

which operate properties in foreign countries, which have not been

51
52 SECURITIES AND EXCHANGE COMMISSION

included as components of active registered systems in previous

annual reports since American & Foreign Power and its subsidiaries

have been exempted from the Act by orders of the Commission under

Sections 3 (a) (5) and 3 (b). In addition there were 7 other registered

holding companies which no longer hold any electric or gas utility

subsidiaries

On June 30, 1954, there were 29 active registered holding company

systems aggregating 386 companies with total assets of approximately

$10,151 million, less valuation reserves, as at December 31, 1953.

Four systems acquired exempt status under the Act during the

fiscal year 1955, namely, Eastern Gas and Fuel Associates, Northern

States Power Co. (Minn.), 'Wisconsin Electric Power Co., and

New England Gas and Electric Association. The first three of

these are operating-holding companies and the last is solely a holding company. These four systems contained a total of 15 electric

and gas utility subsidiaries and 28 non-utility subsidiaries. In

addition, The North American Company, w-hichwas the top registered

holding compauy in the North American system, was dissolved

during the year and its subsidiary, Union Electric Company of

Missouri, a registered operating-holding company, continued as

the top company in au active registered system.

One new holding company registered under the Act during the year

as a result of its purchase of another utility company, which was

merged into the parent shortly thereafter. Active registered systems

added three public utility subsidiaries during the fiscal year.'

During the fiscal year 1955, 5 public utility subsidiaries with net

assets aggregating more than $372 million and 5 non-utility subsidiaries with assets of $513 million 2 were divested by their respective

holding company parents and as a result were no longer subject to

the Act as components of registered systems." In addition one

company was absorbed by a merger, 5 were eliminated by dissolution,

and 37 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.

, These include Missrsstppr 'alley Generating Company, which IS jomtly owned by MIddle South

Utrlitres, Inc and The Southern Company, and LOUISIana Gas SCInee Company, a newly organized

subsidiary in the Middle Soutb system. Tbese two oompames are classified for statlstieal purposes berem

as publie utrlity companies,

J Tbe assets of public utilrty snbsidianos divested do not mclude ill\ est ments m oonsolidated subsldiartes

of United Gas Corporation, a gas utility with 4 non-utility subsrdlanes, drvestod by Eleernc Bond and

Share Company The assets of one of the non-utihty subsrdraries at the ume of divestment were not

reported.

J Durmg the 2O-year period from December 1, 1935, to June 30, 1955, registered holding eompnmes have

divested themselves of 839 subsidrarres with aggregate assets of approxunately $12,905,000,000WbICh, as a

result of such divestments, ceased to be subject to the Act as of June 30, 1955, as assoelates of regtstered

systems. These companies included 260 oleetne utilrty compames WIth assets of approxunately

$9,213,000,000, 162 gas utrhty companies WIth assets of approximately $1,484,000,000, and 417 non-utrhty

companrcs with assets of approvimatolv $2,206,000,000 The dollar aggregates of assets of divested companies

mclnded herem represent the totals of the assets of such companies as at their respective dates of final divestment. No adjustments have been made to reflect subsequent growth of the assets of these eompames

following their drvestrnont,
TWENTY-FIRST ANNUAL REPORT

Summary of changes in the composition of active registered public utility

holdmg company systems

12 NIONTHS ENDED JUNE 30, 1955

53

I I

Active

Active register- Electric

I register- ed hold- and gas

l

ed hOld-llllg oper- utrhty

ing com- atmg compan- pames cornpan- res

ies

Total Non-unl- compan- rty com- ies in

panics active

systems

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

3

10

Companies III active registered holding company systems-June 30,1954_____________________________ 25 10

Additions- Compames acquired dunng fiscal year 1955

Total companies associated WIth active sys- tems durmg nscal year 1~55 1 25

DeductionsCl~~~~~~b~~~~~eic~:-_~_O_I~'~~_~~~pa~':;,_n~_ _ _

g~~~~~~ _~~~~~~~: :Ine~g~rs:~r:c~~s~Ii~a~: I. :::::: ~:

Companies converted from status of registered I

holding comparues or subsrdiaries thereof to status of exempt holding company systems or other status not associated with registered sys- tems

Companies m active registered holding company

systems-June 30,1955-----------------------------1

133

3

136

15

1

11

118

156

156

15

J

20

128

324

3

327

110

5

35

276

I Includes the United Gas Corporation group of compames (1 gas utrlity and 4 non-utihty comparues) ill

which Elecruc Bond and Share Company, a i egrstered holdmg company, reduced Its interest m votmg

securities to less than 10 percent during the fiscal year 1955.

SIGNIFICA:"\T DEVELOPMENTS IN AND LITIGATION INVOLVING

HOLDING COMPANY SYSTEMS

American Gas and Electric Company

American Gas and Electric Company is a holding company controlling the largest electric utility system subject to the Act. As at

December 31, 1954, consolidated assets of the system, less valuation

reserves, aggregated $1,035 million. During the fiscal year the Commission approved a proposal filed pursuant to section 11 (e) of the

Act providing for the merger of two system operating companies,

The Ohio Power Company and The Central Ohio Light & Power

Company. 4 The plan provided that Central Ohio's public stockholders would receive $50 per share in cash upon surrender of their

stock at any time not later than December 31, 1959. The surviving

company, The Ohio Power Company, assumed all of Central Ohio's

indebtedness, including $4,998,000principal amount of first mortgage

bonds and $2,900,000 principal amount of notes payable to banks.

Two other system transactions approved by the Commission during"the fiscal year were sales of certain electric facilities to nonaffiliates for an aggregate of $1,336,836.5

Holding Company Act release No. 12730 (December 14, 1954), enforced, (N. D. 01110, CIvIl ACtlO1I No.

7308, January'21, 1955, unreported)

Holding Company Act release :\0. 12833 (March 29, 1955); Holding Company Act release No. 12749

(December 17, 1954).

_

1 ~ ~1

_

•

•
54 SECURITIES AND EXCHANGE COMMISSION

American Natural Gas Company

.American Natural Gas Company controls one of the four registered

gas utility holding company systems subject to the Act. As at December 31, 1954, consolidated assets of the system, less valuation reserves,

aggregated $416 million.

During the fiscal year the Commission approved the transfer of

35,000 shares of common stock of Milwaukee Solvay Coke Company,

a non-utility subsidiary of Milwaukee Gas Light Company, from the

latter company to the parent company, American Natural Gas

Company." It was proposed to effectuate the transfer by means

of not more than six quarterly dividends on Milwaukee Gas Light

Company's common stock in shares of Solvay common stock.

At the close of the fiscal year the Commission had pending a joint

financing proposal 7 by .American Natural and .American Louisiana

Pipe Line Company, a non-utility subsidiary, involving, among other

things, the issuance and sale by .American Louisiana of $97,500,000

principal amount of First Mortgage Pipe Line Bonds and the issuance

and sale by American Louisiana to American Natural of 200,000 additional shares of $100 par value common stock. The purpose of the

proposed financing was to provide a major portion of the funds required

to construct a natural gas pipe-line system extending from southern

Louisiana to Detroit, Michigan, to supplement the gas supply of

Michigan Consolidated Gas Company and Michigan-Wisconsin Pipe

Line Company, subsidiaries of American Natural. After public hearings on the proposed transactions, the Commission issued an order

of approval, including an exemption from the competitive bidding

requirements of rule U-50 so as to permit the sale of the bonds to

two insurance companies which entered into commitments to take

the bonds down over the period of construction.

Subsequently, the Commission issued a detailed findings and

opinion." Therein it was pointed out that the pipeline bonds proposed to be issued and sold were redeemable for purposes of refunding

at a lower interest rate at redemption prices beginning at 115 for the

period to and including January 1, 1962, and at declining premiums

thereafter. This high redemption premium in the event of a refunding

presented the Commission with a problem in the light of its established

policies under which it has almost uniformly required that senior

securities be fully redeemable at the option of the issuing company

upon the payment of a reasonable premium.

e Holding Company Act release No. 12762 (December 30,1954).

'Holdmg Company Act release No 12931 (June 22, 1955)

• Holdmg Company Act releases Nos. 12953 and 12991 (July 29 and September 20, 1955).
TWENTY-FIRST ANNUAL REPORT 55

In approving the terms of the bond financing the Commission

determined that, under the circumstances of the case, it would not

regard the bond redemption premiums, which make refunding unlikely

for a period of years, as a basis for the imposition of a condition

requiring renegotiation of such premiums with institutional investors.

The Commission accorded appropriate weight in this regard to the

position of the Federal Power Commission, which had approved the

.terms of the financing, and to the views of the affected State and

municipal regulatory authorities. The city of Detroit and the

Michigan Public Service Commission urged the Commission to

approve the financing as proposed and not to jeopardize the future

gas supply in their territory by requiring a further renegotiation of the

redemption premiums. They took the position that any action which

might imperil the prompt construction of the pipe line would have an

adverse effecton a great number of consumers in urgent need of natural

gas. The Public Service Commission of Wisconsin opposed the high

redemption premiums on the bonds but took the position that the

proposed issuance should be approved if the redemption premiums

could not be reduced without undue delay or without serious impairment of progress of construction of the pipeline. However, the

Commission reaffirmed its policy against nonredeemable features in

senior securities, pointing out, as it has in previous cases, that such

features violate the policy of the Act as set forth in section 1 proscribing "lack of economiesin the raising of capital."

Central and South West Corporation

Central and South West Corporation and its four domestic electric

utility subsidiaries were divested by the Middle West Corporation in

1947 and have operated since that time as a separate holding-company system. As at December 31, 1954, consolidated assets of the

system, less valuation reserves, amounted to $455 million. At the

time it was divorced from the Middle West system, the Central and

South West system was subject to an outstanding order pursuant to

section 11 (b) (1) which required the divestment from Central and

South West of certain ice and water properties. This was done by

th:e latter part of 1950. In the past year the system took steps to

dispose of its remaining ice properties although the Commission had

previously found them retainable under section 11 (b) (1). In part

'payment for these ice properties, Central Power and Light Company,

a subsidiary of Central and South West, requested authority to acquire

certain debt securities from the purchaser, Southern Texas Ice &

Service Inc., a non-affiliated non-utility company. The Commission

approved Central Power's request on June 28, 1955.9

• Holding Company Act release No. 12934.
56 SECURITIES AND EXCHANGE COMMISSION

Central Public Utility Corporatiou

Central Public Utility Corporation ("Cenpuc") is solely a holding

company whose only public utility investments are in subsidiaries

with electric and gas utility properties located exclusively in foreign

countries. Cenpuc also has indirect interests in domestic non-utility

properties. As at December 31, 1954, consolidated assets of the

system, less valuation reserves, amounted to $24 million.

On June 1, 1955, Cenpuc filed with the Commission an application

requesting modification of an outstanding section 11 (b) (2) order so

that it would no longer require the dissolution of The Islands Gas and

Electric Company, an intermediate holding company in the Cenpuc

system. Cenpuc also requested an exemption pursuant to section

3 (a) (5), pursuant to which a holding company may be entitled to

an exemption if it is not, and derives no material part of its income

from any subsidiary company which is, a domestic public utility

company. In an amendment to this application filed after the end

of the fiscal year, Cenpuc disclosed that The Equity Corporation, a

registered investment company, had acquired indirectly approximately

28 percent of the outstanding common stock of Cenpuc. This acquisition poses possible problems under section 11 which may have to be

resolved before the requested exemption can be granted.

Cities Service Cornparry

Cities Service Company, although primarily engaged in the oil and

gas business, is a registered holding company, and is under a section

11 (b) order directing it to dispose of all of its utility interests. Pursuant to this order, Cities requested approval during the fiscal year of

a sale of its holdings of 51.5 percent of the common stock of Arkansas

Louisiana Gas Company to W. R. Stephens Investment Company,

Inc. ("Stephens"). Problems presented by the proposal included

whether it was appropriate to grant Cities an exemption from the

competitive bidding requirements of rule V-50; whether the acquisition by Stephens, which was subject to section 9 (a) (2), met the

standards of section 10; and whether Stephens should be given an

exemption as a holding company under section 3 (a) (4) on the basis

of its contention that it was acquiring the stock temporarily with a

view to distribution. The Commission approved the sale, acquisition

and exemption in consolidated proceedings after public hearings."

Appearances were made by various consumer interests, including

Reynolds Metals Company. Reynolds Metals opposed the transaction, principally because Stephens proposed to "spin off" the production-extraction properties of Arkansas Louisiana Gas prior to distribution of the Arkansas Louisiana Gas stock, and Reynolds Metals

considered that this would adversely affect the public interest and the

10 Holdmg Company Act releases Nos. 12742 (December 14, 1954) and 12748 (December 17, 1954).
TW-ENTY-FIRST ANNUAL REPORT 57

interest of investors and consumers. The sale by Cities of the Arkansas Louisiana Gas stock and the acquisition thereof by Stephens was

consummated on December 27, 1954. On January 6, 1955, Reynolds

Metals :fileda petition for review pursuant to section 24 (a) of the Act

in the Court of Appeals, District of Columbia Circuit. The case has

been briefed and argued and was awaiting decision at the end of the

fiscal year.

Following the sale of the Arkansas Louisiana Gas stock, Cities Service :filedan application for exemption under section 3 (a) (5) of the

Act. The Commission ordered that proceedings on this application

be consolidated with section 11 proceedings pertaining to Arkansas

Fuel Oil Corporation, formerly Arkansas Natural Gas Corporation,

and ordered hearings thereon." The questions presented are whether

the granting of the exemption is detrimental to the public interest

or the interest of investers or consumers prior to the resolution of any

problems presented by the existence of a 48.5 percent publicly held

minority interest in Arkansas Fuel Oil Corporation and whether the

continued existence of such minority interest complies with the provisions of section 11 (b) (2) of the Act and is fair and equitable to the

persons affected thereby. Public hearings have been completed in

this proceeding but oral argument of the issues before the Commission had not been held prior to the end of the fiscal year.

During the fiscal year, the Commission gave the approvals required

for the liquidation and dissolution of Gas Advisers Inc., a former

mutual service company in the Cities Service system."

As of December 31, 1954, the Cities Service Company system reported total consolidated assets of $1,054 million, less valuation

reserves. However, all of these assets were devoted to petroleum

and other non-utility operations with the exception of Cities' Canadian

gas utility subsidiary, Dominion Natural Gas Company, Ltd., which

had assets of $15 million as at December 31, 1954.

The Columbia Gas System, Inc.

The Columbia Gas System, Inc., is a holding company controlling

14 operating subsidiaries and a subsidiary service company, which

conduct natural gas transmission, distribution and production operations. As at December 31, 1954, consolidated assets of this system,

less valuation reserves, amounted to $674 million. During the fiscal

year the Commission approved a joint proposal by Columbia and its

subsidiary, Central Kentucky Natural Gas Company, authorizing

Central to acquire all the assets of Frankfort Kentucky Natural Gas

Company," a non-affiliated company, in exchange for 33,050 shares

1I Holding Company Act release No. 12809 (March 3, 1955).

U Holding Company Act release No. 12775 (January 10, 1955).

u Holding Company Act release No. 12891 (May 16, 1955).
58 SECURITIES AND EXCHANGE COMMISSION

of newly issued common stock of Columbia and the assumption by

Central of Frankfort's outstanding 3%percent bonds and its current

and miscellaneous liabilities.

On June 10, 1955, a motion was filed with the Commission on behalf

of Columbia for the release of jurisdiction reserved in an order of the

Commission dated November 30, 1944, and for a finding and determination that the system gas properties as presently constituted can

be retained under the standards of section 11 (b) (1) of the Act.

No action had been taken on the motion at the close of the :fiscalyear.

Consolidated Natural Gas Company

Consolidated Natural Gas Company is a holding company controlling four gas utility subsidiaries, and a gas transmission subsidiary. As at December 31, 1954, consolidated assets of this system,

less valuation reserves, amounted to $459 million. During the year

a subsidiary, The East Ohio Gas Company, was given authorization

to acquire the assets of a non-affiliate, Lake County Gas Company;

in consideration for shares of capital stock of Consolidated and the

assumption by East Ohio of the liabilities of Lake County; 14 and The

Peoples Natural Gas Company, another subsidiary, was given authorization to transfer the Jeannette Compressor Station and appurtenant

facilities located in Pennsylvania to New York State Natural Gas

Corporation, an affiliated non-utility company, and to Texas Eastern

Transmission Corporation, a non-affiliated non-utility eompany.P

Eastern Gas & Fuel Associates

Koppers Company, Inc.

Koppers Company, Inc., which is primarily an industrial corporation, formerly was a holding company controlling Eastern Gas &

Fuel Associates. This relationship no longer exists, Koppers having

disposed of all but 13,000 shares of the common stock of Eastern

which is less than 1 percent of the shares outstanding. In the :fiscal

year 1954 Koppers obtained a section 5 (d) order terminating its

registration as a holding company.

Eastern is also a holding company, since, in addition to various

subsidiaries engaged principally in the production, transportation,

sale and conversion of coal, it owns all of the outstanding voting

shares of Boston Consolidated Gas Company, a gas utility company

operating in the City of Boston. As at December 31, 1954, consolidated assets of this system, less valuation reserves, amounted to $170

million. In 1950, when the Commission approved a section 11 (e)

plan of Eastern, the Commission's findings and opinion 16 contemplated that Eastern would apply for exemption under section 3 (a) (1),'

l< Holding Company Act release No. 12835 (March 31, 1955).

II Holding Company Act release No. 12789 (January 26,1955).

10 Holding Company Act release No. 9633 (February 3,1950).
TVVE~-FIRST ~AL REPORT 59

pursuant to which a holding company may be entitled to an exemption from the Act if the holding company and every subsidiary thereof

which is a public-utility company are predominantly intrastate in

character and carryon their business substantially in a single State

in which the holding company and the subsidiary are organized.

The proceedings pursuant to sections 11 (b) and 11 (e) involving

Koppers and Eastern are described in the 17th Annual Report, p. 83,

and Koppers' section 5 (d) order is described in the 20th Annual

Report, p. 58.

Eastern's application under section 3 (a) (1) was pending before

the Commission at the beginning of the fiscal year 1955. During the

year Eastern filed an amendment to its application, and on February

28, 1955, after public notice, the Commission issued an order granting

the requested exemption."

During the past fiscal year the Dumaine case 18 was concluded.

This involved two questions, first, whether Dumaine, a stockholder

who acted as a committee member in the section 11 proceedings pertaining to Eastern, was barred from the receipt of any fee by reason

of a sale by his wife during the reorganization of shares of the class

of securities which Dumaine represented; and, second, whether

Koppers was entitled to a fee from the estate of Eastern for its participation in Eastern's reorganization. The Commission denied any

fee to Dumaine but permitted reimbursement of his expenses and

denied the claim of Koppers. In enforcement proceedings the

District Court reversed the Commission as to Dumaine, but affirmed

as to Koppers. The Court of Appeals reversed the District Court

as to Dumaine and sustained the Commission's decision as to both

Dumaine and Koppers. A petition for certiorari was denied by the

Supreme Court on May 16, 1955.

Electric Bond and Share Company

Electric Bond and Share Company ("Bond and Share") no longer

owns as much as 5 percent of the voting securities of any publicutility company operating in the United States. At the end of the

fiscal year 1955, its assets consisted principally of 53.53 percent of

the common stock of American & Foreign Power Company, Inc.,

which is an exempt holding company controlling a large number of

public-utility companies operating exclusively outside the United

States; complete ownership of Ebasco Services Incorporated, a service

company rendering substantial services to public-utility companies

in the United States; 4.97 percent of the common stock of United

Gas Corporation, which constitutes the largest single stockholding

II Holding Company Act release No. 12807 (February 28, 1955).

lB Holding Company Act release No. 11954 (May 29, 1953); enforced in part and reversed ill part In re

Eastern. GM &: Fuel Assoclales, 120 F Supp. 460 (D. Mass 1953); atI'd in part and reversed in part 218 F.

2d 308 (C. A. I, 1954); eert, denied Dumaine v, S. E. C., 349 U. S. 929 (1955).
60 SECURITIES AND EXCHANGE COMMISSION

in United Gas; investments in a number of industrial enterprises;

and a substantial amount of current assets available for investment.

The corporate assets of Bond and Share, less valuation reserves,

amounted to $108 million.

Section 11 (e) proceedings involving Bond and Share, including

the company's Final Comprehensive Plan, provided for, among other

things; the reduction of Bond and Share's holdings in United Gas to

less than 5 percent, which has now been accomplished; transformation

of Bond and Share into an investment company registered under the

Investment Company Act of 1940; and the prosecution of an application for a section 3 (a) (5) exemption from the Act upon completion

of the required reduction of its holdings of United Gas stock. Under

section 3 (a) (5) a holding company may be entitled to an exemption

from the Act if it is not, and derives no material part of its income

from any subsidiary company which is, a domestic public-utility

company.

During the past year the Commission authorized Bond and Share

to make distributions of United Gas common stock in accordance

with the Plan." Bond and Share also notified the Commission, as

required by the Plan, that it intended to sell 75,000 shares of American

& Foreign Power common stock, which is slightly in excess of 1 percent

of the shares outstanding. The sales of American & Foreign Power

common stock were for the purpose of realizing tax losses, and Bond

and Share stated tha.t it expected to purchase shares of American &

Foreign Power common stock on the market before the end of calendar

year 1955 in amounts sufficient to replace the shares sold. These

sales and purchases of American & Foreign Power common stock were

contemplated by the Plan.

On June 6, 1955, Bond and Share filed with the Commission an application for exemption as a holding company pursuant to section

3 (a) (5). This application, which was pending at the end of the

fiscal year, presents the Commission with several problems, among

which is the possible necessity of imposing terms and conditions to

ensure that Bond and Share, directly or indirectly through Ebasco

or otherwise, does not exercise a controlling influence over any publicutility or holding company in the United States or stand in such

relationship to such a company that there is liable to be an absence

of arm's-length bargaining between Bond and Share or Ebasco and

such company. Hearings on this application commenced on September 14, 1955.20

Electric Power & Light Corporation

The fee litigation in connection with the reorganization and dissolution of Electric Power & Light Corporation, formerly a subsidiary

It Holding Company Act release No. 12767 (January 4,1955).

JO Holding Company Act release No 12946 (July IS, 1955).
TWENTY-FIRST ANNUAL REPORT 61

registered holding company in the Electric Bond and Share system,

referred to in the 20th Annual Report, p. 57, was terminated in the past

year. The Supreme Court of the United States reversed the Court

of Appeals for the Second Circuit and on April 18, 1955 denied a

petition for rehearing." Modification and remand orders were requested and were entered by the Court of Appeals and by the District

Court for the Southern District of New York. Subsequently, pursuant to a stipulation of settlement entered into between the Commission and Drexel and Company, the fee applicant, the Commission

issued an order approving the payment by Bond and Share to Drexel

of $80,000, which was $30,000 more than the amount which the Commission had previously approved but $20,000 less than the amount

which has been requested by Drexel and which Bond and Share was

willing to pay."

The Supreme Court's decision affirmed the Commission's position

that its jurisdiction to pass upon fees and expenses in the section 11 (e)

reorganization of a subsidiary extends to any fees to be paid by the

parent registered holding company for services performed for it in

connection with such reorganization.

Engineers Public Service Company

The appeal pending at the close of fiscal year 1954 in connection

with the allowance and denial of fees and expenses claimed by participants in the proceedings for the reorganization of Engineers Public

Service Company," referred to in the 20th Annual Report, p. 57, was

decided on April 5, 1955.24 The Court of Appeals affirmed the decision of the United States District Court of Delaware which refused

to approve the order of the Commission denying the full amounts

requested for fees and expenses to counsel for certain dissenting common stockholders of Engineers and granted such counsel amounts

larger than had been allowed by the Commission. In upholding the

District Court's determination to grant these allowances, the Court

of Appeals held that although a District Court, acting pursuant to

section 11 (e), could not rewrite a plan approved by the Commission,

it did have power, by analogy to the appeal provisions of section 24

(a) of the Act, to modify Commission determinations with respect to

fees. Pursuant to this decision of the Court of Appeals, the Commission on June 14, 1955 issued an order amending its Findings and

Opinion and Order dated March 26, 1952, approving, among other

things, the payment by Engineers to the claimants of $85,892 for

fees and $8,252 for expenses."

21 S E. c.....Drexel and Company. 34&U S. 341 (1955); amended 349 U. S 910 (1955); rehearing denied 349

U. S. 913 (1955) .

.. Holding Company Act release No 12980 (September 9, 1955).

.. Holdlng Company Act release No. U096 (March 26, 1952).

.. S. E. C. v. Guggenhe,mer & Untermuer, et al , 221 F. 2d ;08 (C. A 3, 1955).

26 Holding Company Act release No. 12921
62 SECURITIES AND EXCHANGE COMMISSION

General Public Utilities Corporation

General Public Utilities Corporation ("GPU") is a holding company

with seven domestic and two foreign public utility subsidiaries. One

of the domestic subsidiaries and the two foreign subsidiaries are

owned through a wholly owned subholding company. GPU's integrated public utility system lies in New Jersey and Pennsylvania.

As at December 31, 1954, consolidated assets of the system, less

valuation reserves, amounted to $653 million.

GPU has not yet complied with that part of a section 11 (b) order

entered against it on December 28, 1951 directing GPU to divest

itself of its foreign public utility subsidiaries, which are located in the

Philippines, and of Northern Pennsylvania Power Company, and

the latter's subsidiary, The Waverly Electric Light & Power Company,

which are located in northern Pennsylvania and Waverly, New York.

The 20th Annual Report, p. 57 describes the hearings held on a request

by GPU that the Commission modify the outstanding section 11 (b)

order so as to permit GPU to retain Northern Pennsylvania

Power Company and Waverly Electric as part of its integrated public

utility system. This matter remained undecided at the end of the

fiscal year 1955. During the fiscal year legislation was introduced

(H. R. 4370, 84th Cong.) designed to permit the retention by GPU of

its Philippine subsidiaries. No committee hearings were held before

the close of the fiscal year on this bill. In comments submitted to

Congress the Commission set forth its views on the bill but took no

position either in support of or in opposition to the measure.

International Hydro-Electric System

International Hydro-Electric System ("IHES"), a Massachusetts

business trust, is a registered holding company, which at the close of

fiscal year 1955 had no domestic public-utility subsidiaries. Its

assets at that time consisted of 18.8 percent of the outstanding common stock of Gatineau Power Company, a Canadian public utility,

4.6 percent of the outstanding common stock of New England Electric

System, a registered holding company, 100percent of the outstanding

stock of Eastern New York Power Company, an inactive company

and approximately $9,250,000 in liquid assets. As at December 31,

1954, the total assets of IHES amounted to $56 million and the

consolidated assets of Gatineau Power and its subsidiaries, less valuation reserves, aggregated $115 million. For several years IHES has

been operated by a Trustee appointed by the District Court for

Massachusetts pursuant to section 11 (d) of the Act. The reorganization of IHES has involved several steps taken pursuant to section

11 (d) plans filed by the Trustee which have been described in previous Annual Reports, see 15th Annual Report, page 106, 16th

Annual Report, page 74, 17th Annual Report, page 82, 18th Annual

•
TWENTY-FIRST ANNUAL REPORT 63

Report, page 95, 19th Annual Report, page 60, 20th Annual Report,

page 58. The plan before the Commission since June 1953 has contemplated a modification of the dissolution order entered in 1942

by the Commission against IRES, the exemption of IRES as a

holding company pursuant to section 3 (a) (5), and the registration

of IRES as a closed-end, non-diversified investment company under

the Investment Company Act of 1940.

In the spring of 1954, pursuant to the section 11 (d) plan, there was

an election of directors of IRES, whose function, according to the

section 11 (d) plan, was to represent the Olass A stockholders in all

proceedings before the Commission and the Court, and pending the

reorganization of IRES as an investment company, to have such other

powers as the Commission and the Court might approve. This

election was the occasion for a proxy contest between two groups

seeking control of IRES. The election developed a controversy over

the legality of certain of the proxies and certain of the votes cast,

which was presented to the District Court for Massachusetts. The

Court provisionally resolved the controversy by entering an order on

December 8, 1954, approving nine specified persons as interim directors for the purpose of representing the stockholders in all proceedings

before the Oommission and the Court involving proposals for the

consummation of the final part of the Trustee's section 11 (d) plan.

The nine interim directors included five members of the Todd-Jacobs

slate of candidates in the 1954 election, and four members of the

opposing Johnson-Romney slate, these being the individuals who, on

the face of the returns, received the highest number of votes cast at

that election.

On December 30, 1954, the Commission issued a notice and order

reconvening the section 11 hearings for the purpose of considering the

last part of the Trustee's section 11 (d) plan and any other plans

which might be :filed by persons having a bona fide interest in the

reorganization." Pursuant to this notice three plans were filed, as

follows: (1) Interim Board Plan which undertook to implement with

definitive details the outline proposed in the Trustee's section 11 (d)

plan, and which was accompanied by an application for an order modifying the 1942 dissolution order and granting IRES an exemption

under section 3 (a) (5); (2) the Johnson-Romney Plan, sponsored by

Central-Illinois Securities Corporation, Christian A. Johnson, and

Alfred Romney, Class A stockholders, which proposed the continuation

of the enterprise through two independent investment companies, one

to be controlled by the Todd-Jacobs group and the other by the

Johnson-Romney group, with division of the assets in accordance with

the number ofshares owned by or electing to go along with each group;

(3) a plan sponsored by the Class A Stockholders Protective CommitII Holding Company Act release No. 12763.
64 SECURITIES AND EXCHANGE COMMISSION

tee, which provided for the conversion of IRES into a corporation and

its continuance as an investment company. Both the JohnsonRomney Plan and the Protective Committee Plan provided that

stockholders should vote on the plan, and that if it should fail to receive the approval of at least two-thirds of the outstanding shares,

IRES should be liquidated and dissolved; and that in any event dissenting stockholders should be allowed to retire from the enterprise

with their ratable share of the assets. The Interim Board Plan did

not provide for a vote by the stockholders, or for the withdrawal of

dissenters." These several plans and modifications thereof and an

additional proposal made by The Equity Corporation, another lager

stockholder of IRES, were considered in nine days of public hearings.

After the hearings, the various participants filed recommended findings and opinions, and thereafter exceptions, and briefs in support

thereof, to the recommended findings and opinions of the other parties.

On July 6, 1955, the Commission heard oral argument of the issues.

During the past year the Commission disposed of various applications for fees and expenses in connection with the IRES proceedings.

In connection with the plan relating to the retirement of IRES' debentures the Commission approved and released jurisdiction over fees

and expenses aggregating $102,750 and $6,341, respectively." These

payments were subsequently approved by the reorganization court.t"

Early in fiscalyear 1955the various participants in the reorganization

of IRES (other than representatives of debenture holders, the Trustee

and his counsel) were advised to file with the Commission any claims

for fees not later than September 30, 1954. Fee applications aggregating approximately $1,700,000 were received and on January 13, 1955,

the Commission directed the Trustee to negotiate with the several

applicants and to report what payments he had agreed upon or was

prepared to recommend with respect to them." The Trustee's report

was filed late in the fiscal year. Thereafter the Commission directed

its staff to conduct further negotiations with the applicants, and these'

negotiations were continuing at the end of the fiscal year.

On June 17, 1955, the Commission issued an order pursuant to rule.

U-63 authorizing the Interim Board of Directors of IRES to make.

certain interim disbursements to defray the reasonable and necessary

costs and expenses in performing its duties; and on June 24, 1955, the'

Commission denied a request for reconsideration of its order." Subsequently, the Court approved the payment by the Trustee of the fees.

and expenses of the Interim Board in the aggregate amount of

$19,468.13 with respect to services already rendered, but refused to

authorize in advance periodic payments for services yet to be rendered

Holding Company Act releuse No 12792 (February 4, 1955)

"Holdmg Company Act release ,,"0 12773 (January 11. 1955l.

In re Internatumul Hydro-Eteetnc Sy.tern, unreported (D Mass., Civil Action No. 2430, AprJl12, 1955).

Holding Company Act release No 12780 (January 13,1955).

II Holding Company Act release Nos. 12928 (June 17, 1955) lind 12933 (June 24,1955).

"

"

'"
TWENTY-FIRST ANNUAL REPORT 65

on the ground that a continuing authorization by the Court of compensation prior to the actual rendition of the services was a departure

from normal procedure."

Middle South Utilities, Inc.

Middle South Utilities, Inc., is solely a holding company. Its

operating subsidiary companies are Arkansas Power & Light Company,

Louisiana Power & Light Company, Mississippi Power & Light Company, and New Orleans Public Service, Inc. Middle South also owns

10 percent stock interest in Electric Energy, Inc., which supplies power

to the Atomic Energy Commission, and its subsidiary, Arkansas.

Power & Light owns a 34 percent interest in Arklahoma Corporation,

a jointly owned transmission facility. As at December 31, 1954, the

consolidated assets of this system, including Middle South's investment in Electric Energy, Inc. and Arkansas Power & Light's investment in Arklahoma Corporation, less valuation reserves, aggregated

$570 million. The electric properties of the four operating companies.

have been found by the Commission to constitute an integrated

electric utility system, but certain gas and other non-utility properties.

owned by two subsidiary companies are subject to a divestment order

issued under section 11 (b).

Steps taken during the past year to dispose of the non-retain able'

properties included the organization by Louisiana Power of a subsidiary company, Louisiana Gas Service Corporation, for the purpose

of transferring to that company all of Louisiana Power's non-electric

properties." As part of the proposal, Louisiana Power requested au

order of this Commission declaring, pursuant to section 3 (a) (4) ,.

that Louisiana Power was only temporarily a holding company, the'

filing indicating that, while no definitive program to dispose of thecommon stock of Louisiana Gas had been developed, it was the intent

to effect divestment within 18 months of the acquisition. The Louisiana Public Service Commission requested a public hearing on the

proposal and also filed a petition to reopen the record in the proceedings leading to the related divestment order of March 20, 1953.

The Public Service Commission urged that the gas properties be

permanently retained. It contended that all consumers of Louisiana

Power would best be served by the continued operation by that company of the gas and electric properties. On May 16, 1955, the Commission published a notice of the petition filed by the Public ServiceCommission and its offer of proof and brief in support thereof.t':

Statements and briefs in support of and in opposition to the position

of the Public Service Commission were filed and oral argument was.

In re Internatirmat Hydro-ElectrIC System. supra, order dated July 14, 1955, as modified July 'l:7, 19~

(unreported).

as Holding Company Act release No 12740 (December 13,1954)

.. Holding Company Act release No. 12892.

378413-56-6

"

•
66 SECURITIES AND EXCHANGE COMMISSION

held. On September 13,1955, the Commission issued its order denying

the Public Service Commission's petition to reopen the section 11

(b) (1) divestment proceedings."

During the fiscal year, Middle South proposed to acquire 79 percent

of the common stock of Mississippi Valley Generating Company" a

new corporation organized by Middle South and The Southern Company, for the purpose of constructing a generating plant and supply

electricity under a power contract with the Atomic Energy Commission. The acquisition was approved by the Commission." The details

of the creation and financing of Mississippi Valley Generating Company are discussed under the caption "Financing of Electric Generating Companies Which Supply Electricity to Facilities of the Atomic

Energy Commission" hereafter in this report.

New England Electric System

New England Electric System ("NEES") is a holding company

eontrolling 26 subsidiaries which furnish electricity and gas at retail

in the States of Massachusetts, Rhode Island, New Hampshire, and

Connecticut. As at December 31, 1954, the consolidated assets of

this system, less valuation reserves, amounted to $474 million.

There are minority stock interests in several of these subsidiaries

and the Commission and its staff over the years have urged NEES

to reduce the number of its subsidiaries and to reduce or eliminate the

minority interests. Steps have been made in this direction through

a series of mergers and offers of cash for the minority stock. Discussions are continuing between the staff and representatives of NEES

with a view to further reduction in the number of subsidiaries and

reduction or elimination of the minority interests.

During the past fiscal year the Commission approved a joint proposal by three system companies authorizing, among other things, the

sale and transfer by Connecticut River Power Company of its properties to New England Power Company, the principal system generating company, for an aggregate consideration of $38,646,924.37 This

and related transactions, including the liquidation of Connecticut

River Power Company, were consummated on January 26, 1955.

During the year a new company, Yankee Atomic Electric Company,

was formed by 12 sponsoring New England utility companies, the

leader of which was New England Power Company. Yankee proposes

to build a 134,OOO-kw.generating station using atomic energy.

During the fiscal year an application-declaration was filed with the

Commission seeking approval of the initial financing of this proposed

project. Public hearings on the application-declaration were held

on September 13, 1955.

II Holding Company Act release No. 12978.

It Holding Company Act release No. 12794 (February 9,1955).

Jl Holding Company Act release No. 12768 (January 4, 1955).
TWENTY-FIRST ANNUAL REPORT 67

North American Company, The

Union Electric Company of Missouri

During the past fiscal year the final steps were taken by The North

.American Company to liquidate and dissolve pursuant to its section

11 (e) plan. This plan and the interim steps taken pursuant to it are

described in the 18th .Annual Report, page 122, 19th Annual Report,

page 66, and 20th Annual Report, page 62.

Union Electric Company of Missouri is the surviving holding company in North American's integrated electric system, located in

Missouri, illinois, and Iowa. Union is both an operating company and

-a holding company, and in addition to its electric properties owns

directly and indirectly some gas utility properties and some nonutility assets. As at December 31, 1954, consolidated assets of Union

Electric and its subsidiaries, less valuation reserves, amounted to $448

million. Upon the completion of the merger of Union Electric

Power Company, an illinois subsidiary, into Union, which was approved by the Commission after the end of the fiscal year 1955,38

Union continued to have three public utility subsidiaries, including a

40 percent interest in Electric Energy Inc., an electric generating company whose output is under contract to the Atomic Energy Commission. This merger was made possible by a recent amendment of the

illinois corporation laws which permits a foreign corporation under

certain circumstances to own and operate utility properties in Illinois.

On January 20, 1955, North American made the final liquidating

distribution to its stockholders of the common stock of Union. Subsequently a request was made to the Commission for the release of

jurisdiction previously reserved over a contract between North

American and Union providing for the transfer by North American to

Union of all of North American's remaining assets, including the

30,256 shares of Union common stock not needed for the final Iiquidating distribution, and for the assumption by Union of all of North

.American's remaining liabilities. The Commission entered an order

on February 10, 1955, granting the requested release of jurisdiction

and the contract was consummated that same date." Union received

from North American under this contract all of the outstanding

capital stock of North American Light and Power Company, which was

then an inactive company whose assets consisted solely of a small

amount of cash and a claim for tax refunds. In June 1955, Union,

with the Commission's approval, took steps to liquidate and dissolve North American Light and Power." Union is subject to a

section 11 (b) order requiring it to dispose of its water properties

in Mexico, Mo. The date for compliance has been extended from

It Holding Company Act release No. 12957 (August 5, 1955).

It Holding Company Act release No. 12797 (February 10, 1955)

...,Holding Company Act release No. 12922 (June 14, 1955).

•
68 SECURITIES AND EXCHANGE COMMISSION

time to time, and most recently has been extended to December 31,

1955.41 Pursuant to the contract mentioned above Union received

from North American certain shares of preferred stock of Muzak Corporation, and all of the common stock of Hevi-Duty Electric Company,

both of which are non-utility corporations. Union is subject to >UJl

order of the Commission which originally required it to dispose of

these securities before August 10, 1955. On August 5, 1955, at the

request of Union, the Commission extended the compliance date toAugust 10, 1956.'2

During the last fiscal year two subsidiaries of Union acquired 26.7

miles of transmission lines and related electric properties from a POWel~

cooperative, which acquisition the Commission approved on January

11, 1955.43

Northern States Power Company (Del.)

Northern States Power Company (Del.), formerly a holding company, has been in the process of liquidation, pursuant to a section

11 (e) plan approved on January 30, 1948, which is described in the

15th Annual Report, p. 111. The liquidation has been completed

except that holders of securities in Northern States (Del.) who have

not yet turned in their securities for a liquidation distribution continue

to have certain rights under the plan. The Commission recently approved an amendment to the section 11 (e) plan of Northern States

(Del.) so as to provide that the remaining rights attaching to unexchanged stocks in Northern States (Del.) would expire on December30, 1956, 8 years after the effective date of the plan."

Pennsylvania Gas & Electric Corporation

North Penn Gas Company

The proceedings leading to the corporate simplification and dis->

solution of Pennsylvania Gas & Electric Corporation pursuant to

section 11 (e) of the Act are described in the 18th Annual Report,

page 98, and the 19th Annual Report, page 67. North Penn Gas

Company, formerly a subsidiary of Pennsylvania Gas & Electric

Corporation, and formerly a registered holding company, became an

independent holding company, following the dissolution of Pennsylvania Gas. Until recently John Fox owned directly or indirectly 93

percent of the outstanding stock of North Penn. On June 16, 1955

this stock was offered to the public through underwriters with theresult that North Penn is now a publicly held corporation.

Pursuant to the section 11 (e) plan filed by Pennsylvania Gas and

calling for dissolution of that company, North Penn was required;

Holding Company Act release No, 12766 (December 31,1954)

.. Holding Company Act release No. 12963(August 10, 1955).

.. Holding Company Act release No. 12778 (January 11, 1955»

.. Holding Company Act release No 12983 (September 9, 1955).

" •
TWENTY-FIRST ANNUAL REPORT 69

to divest itself of its entire interest in Crystal City Gas Company,

and in anticipation of that divestment the plan sought an order of

the Commission under section 5 (d) of the Act declaring that North

Penn had ceased to be a holding company. This order was denied

at the time of approval of the plan since North Penn had not yet

divested itself of this interest. North Penn completed divestment of

its interest in Crystal City Gas and renewed its request for a section

5 (d) order. The Commission issued the requested order on Novem-

.ber 2, 1954.45

The Southern Company

The Southern Company is a holding company over four publicutility subsidiaries which furnish electricity in the States of Alabama,

Florida, Georgia, and Mississippi. The system also includes a nonutility subsidiary and a mutual service company. As at December

31, 1954, consolidated assets of the system, less valuation reserves,

amounted to $829 million.

During the fiscal year, Southern proposed to acquire 21 percent of

the common stock of Mississippi Valley Generating Company, a

corporation organized by Southern and Middle South Utilities, Inc.,

for the purpose of constructing a generating plant and supplying

electricity under a power contract with the Atomic Energy Commission. The acquisition was approved by the Commission." The

details of the creation and financing of Mississippi Valley Generating

Company are discussed, under the caption "Financing of Electric

'Generating Companies Which Supply Electricity to Facilities of the

,Atomic Energy Commission", hereafter in this report.

'Southwestern Development Company

Sinclair Oil Corporation

The steps taken by Southwestern Development Company and its

subsidiaries to comply with the integration and simplification provisions of section 11 (b) of the Act are described in the 18th Annual

Report, page 99, and the 20th Annual Report, page 65. Southwestern

itself is no longer in existence, having merged into Pioneer Natural

Gas Company, which is now publicly held and owns gas production

and distribution properties. An integral part of Southwestern's 11

(e) plan related to the program of Sinclair Oil Corporation, a partially

exempt registered holding company, to dispose of its shares in Westpan

Hydrocarbon Company, formerly a non-utility subsidiary of Southwestern, which shares were received by Sinclair under the provisions

of Southwestern's plan. In the past fiscal year Sinclair requested

and the Commission approved a further 6-month extension of the

~IHolding Company Act release No. 12692.

.. Holding Company Act release No. 12794(February 9,1955).
70 SECURITIES AND EXCHANGE COMMISSION

period within which to dispose of its Westpan holdings to December

21, 1955.47 Prior to the issuance of this extension order Sinclair filed

with the Commission a notice of intention pursuant to rule U-44 (c)

to sell its holdings of Westpan stock (52.88 percent of the shares outstanding) to Jalco, Inc., which is not affiliated with either Westpan

or Sinclair, pursuant to a contract between the parties dated March

31, 1955, at a base price of $4,618,330. Under the terms of the contract minority stockholders in Westpan are to have the opportunity

to receive for their shares an amount per share not less than the

amount per share to be received by Sinclair. After a study of the

material in the notice and after requesting and receiving additional

information about the proposed transactions the Commission advised

Sinclair that it need not file a declaration with respect to the proposal,

since the proposed sale price and other terms and conditions of the

proposed sale were deemed to be fair and reasonable and the sale

would enable Sinclair to consummate the divestment of the stock in

accordance with the terms of the Southwestern section 11 (e) plan.

The sale of Westpan stock to Jalco has not yet been consummated.

Standard Power and Light Corporation

Standard Gas and Electric Company

Philadelphia Company

These three companies are solely holding companies. They are

subject to outstanding section 11 (b) orders which require their liquidation and dissolution. In order to satisfy these orders the companies

have filed various plans under section 11 (e), and pursuant to these

plans have disposed of sufficient shares of all but one of their former

public utility subsidiaries so as to reduce their present holdings in such'

companies to less than 5 percent of the outstanding voting securities,

and eliminated all of their previously outstanding senior securities and

except for short-term bank loans, and intra-system debt, have reduced

their respective capitalizations to a single class of stock. Standard

Power presently owns approximately 45.6 percent of the outstanding

stock of Standard Gas; Standard Gas owns 100 percent of the outstanding stock of Philadelphia; and Standard Power, Standard Gas

and Philadelphia together own approximately 15 percent of the common stock of Duquesne Light Company, which is the only remaining

public utility subsidiary in the system. In addition Philadelphia owns

approximately 51 percent of Pittsburgh Railways Company, a nonutility company. As at December 31, 1954, the corporate assets of

Standard Power were stated at $134 million, after deducting valuation

reserves. A restatement of the company's investments at the market

values thereof would reduce the total asset figure to $32 million. The

consolidated assets of Standard Gas and its wholly owned subsidiaries,

less valuation reserves, were stated at $393 thousand as at December

"Holding Company Act release No. 12935 (June 29, 1955).
TWENTY-FIRST ANNUAL REPORT 71

31, 1954. However, the combined market values of Standard Gas'

investments exceeded the stated values thereof by more than $35

million.

Unresolved tax questions and substantial fee claims have in the

past held up compliance by Standard Power, Standard Gas and

Philadelphia with the Commission's section 11 (b) orders. The tax

questions remain unresolved but, as indicated below, substantially all

of the fee claims were disposed of during fiscal year 1955. It is the

present desire of the management of Standard Power to have the

Commission modify the dissolution order directed against Standard

Power and to keep Standard Power in existence as a closed-end,

non-diversified investment company registered under the Investment

Company Act of 1940. This program envisages the reduction of

Standard Power's holdings in Duquesne to less than 5 percent of the

common stock before such time as Standard Power would seek a section 5 (d) order declaring that it had ceased to be a holding company,

whereupon registration would be effected under the Investment Company Act. In the interim, a restricted investment program would be

embarked upon for the purpose of profitably investing the liquid

assets of Standard Power. In March 1955 Standard Power filed a

section l1(e) plan and a petition for modification of the section 11(b)

dissolution order outstanding against it. These filings are designed to

carry out the present desires of the management as described above,

except that they do not include any application for a section 5 (d)

order. In May 1955 a public hearing was held on these filings, and the

Commission took the matter under advisement.

During the past fiscal year a settlement was made of the claims and

cross-claims existing between Standard Power and H. M. Byllesby

and Company. Byllesby formerly held 18.75 percent of Standard

Power's common stock, and in 1940 surrendered this stock to Standard

Power for cancellation pursuant to a contract which gave Byllesby the

right to share proportionately upon liquidation of Standard Power

in the latter's assets. Standard Power's cross-claims were based on

alleged wrongful profits received by Byllesby in connection with the

acquisition by Standard Power of control of Philadelphia in the

1924-26 period, and on alleged wrongful profits and fees received by

Byllesby in connection with subsequent transfers of securities, underwriting contracts, and service and management contracts. Under

the settlement Byllesby gave up approximately 20 percent of its claim,

and full releases were exchanged by the parties. A section 11 (e) plan

embodying the settlement was filed and was approved by the Commission on October 29, 1954.48 The Commission's order of approval was

enforced by the District Court in December 1954.49 The settlement

Holding Company Act release No. 12695(October 29, 1954).

<0 In re Standard Power and Light Corporation,unreported (D. Del., Civil Action No. 1658).

"
72 SECURITIES AND EXCHANGE COMMISSION

was consummated on January 31,1955 by Standard Power's delivering

to Byllesby $209,800 in cash, 174,000 shares of Standard Gas common

stock, 18,500 shares of Duquesne common stock, and 18,000 shares of

Oklahoma Gas and Electric Company common stock. As a result of

these transactions, Standard Power's holdings of Standard Gas common stock was reduced from 54 percent to 45.6 percent. The cash

equivalent of the settlement was approximately $4,750,000.

As stated in the 20th Annual Report the Commission approved

payment of approximately $2 million of fees and expenses during the

fiscal year 1954 for services rendered by various fee applicants in the

reorganization of Standard Gas. There remained for determination at

the commencement of fiscal year 1955the application of Guggenheimer

& Untermyer and associated counsel for a fee of $3,500,000 for services

rendered in the reorganization of Standard Gas, and in addition another

small claim for expenses. An allowance of $6,000 in satisfaction of the

small claim was approved by the Commission on February 14, 1955.50

Public hearings on the Guggenheimer & Untermyer claim were completed in December 1954, after preliminary litigation in the District

Court for the District of Delaware over the question of whether the

Court or the Commission had primary jurisdiction to approve a fee

for these claimants. Although the Court permitted the claimants to

file their claims with the Court, it stayed proceedings thereon until

the Commission had had an opportunity to hear and determine a

similar claim filed with the Commission.51 During the Commission's

hearings, a settlement was reached under which the company would

pay an aggregate fee to Guggenheimer & Untermyer and associated

counsel of $861,000 plus expenses of $9,327.52. This settlement was

approved by the Commission on May 13,1955/2 and the Commission's

order of approval was enforced by the District Court on June 10, 195Q.53

As noted above, the complete liquidation and dissolution of Standard

Gas continues to be subject to delay as a result of unresolved tax

questions. The tax situation, however, did not prevent a partial

liquidating distribution of one-tenth of a share of Duquesne common

stock for each share of Standard Gas, which was made in December

1954, pursuant to a section 11 (e) plan which was approved by the

Commission, and enforced by the District Court for the District of

Delaware." The section 11 (e) plan covering the distribution provided also for the amendment of Standard Gas' certificate of incorporation so as to change its no par common stock (with a stated value

on the books of $10 per share) into an equal number of shares of

common stock of the par value of $1 per share .

.. Holding Company Act release No. 12799 (February 14, 1955).

II In re Standard Gas amt Electric OiJmpanvet al.,16 F. R. D. 221 (D. Del 1954).

IJ Holding Company Act.release No. 12878 (May 13, 191>5).

IJ In re Standard Gas and Electric Campanu rl al., unreported (D. Del. Civil Action Nos. 489-and ~4ll7,

June 10, 1955).

.. Holding Company Act release No. 12735 (December 10, 1954); In re Standard Gas and Electric Companu and Standard Power and Light CorparatUm, unreported (D. Del., Civil Action No. 1497).
TWEJ:\TTY-FIRST ANNUAL REPORT 73

The guarantees by Philadelphia of Duquesne's contractual obligation to pay to Monongahela Light and Power Company, a non-affiliate,

certain lease-rental payments on properties leased by Monongahela to

Duquesne for a term of 900 years were eliminated on March 18, 1955,

after approval by the Commission and enforcement by the District

Court of a section 11 (e) plan providing for such elimination." Philadelphia also guaranteed the performance of Duquesne's obligation

under the contract of lease to keep the leased premises insured and to

surrender them at the end of the lease "in the same good order and

condition in which they now are". These guarantees were a complexity in the system and their elimination was a necessary step toward

ultimate liquidation and dissolution of Philadelphia. The lease-rental

was $85,300 per annum, plus such amounts as were necessary to cover

the interest on Monongahela's outstanding bonds in the principal

amount of $1,698,000, all of which were owned by Duquesne, and all

taxes imposed on Monongahela.

The United Corporation

The United Corporation is a registered holding company but no

longer has any public-utility subsidiaries. During the fiscal year it

filed an application for a section 5 (d) order declaring that it has ceased

to be a holding company. If this order is granted, it proposes to

register as a non-diversified, closed-end investment company under

the Investment Company Act of 1940.

In the fiscal year 1955 two orders of the Commission involving

United were upheld in the courts. In one proceeding, which was

pending during the previous fiscal year, the Court of Appeals affirmed

a decision of the District Court enforcing the Commission's order

denying recovery by United of fees and expenses from its former

subsidiary, Niagara Hudson Power Corporation, in connection with

the latter's plan of reorganization." In the other proceeding the

District Court approved the Commission's application for enforcement

of its order regarding certain provisions of United's Final Comprehensive Plan under section 11 (e) relating to charter and by-law provisions

and for the cancellation of United's outstanding option warrants

without any compensation. 57 Appeals taken from this decision were

pending at the close of the fiscal year.

Proceedings before the Commission were in progress during the past

fiscal year with respect to applications for fees and expenses aggregating approximately $848,800 for services rendered in connection with

United's 1944Exchange Plan and its 1951Amended Investment Company Plan. After public hearings on these applications, the Commission issued an order fixing the post-hearing procedure and disposed

-.~---

15 Holdmg Company Act release No. 12693 (November 4,1954); In. re Philadelphia CQmJ-anll and Standard

OatJand Electric Campanll, unreported (W. Pa., Civil Action No. 10781, January 10, 1955).

II 'J he United Oorporauon v. S. E. C., 219 F. 2d 859 (C. A. 2, 1955).

17 In re 'J he United Corporatil>n, 128 F. Supp, 725 (D. Del. 1955).
74 SECURITIES AND EXCHANGE COMMISSION

of certain procedural motions." Oral argument was held on October

4, 1955, and the Commission took the matter under advisement.

On February 14, 1955, the Commission issued an order approving

an additional allowance for fees incurred by counsel for a Pr-eference

Stockholders' Committee." The additional allowance was made in

compliance with a District Court order which considered that the

Commission's original allowance of $2,000 was too low, and which

directed the Commission to approve a fee of $5,000.60

After United's section 5 (d) application was filed, a stockholder

requested that a hearing be held on it. The Commission treated the

request as an offer of proof insofar as it contained factual allegations,

and after giving United and the staff an opportunity to file answers

to it, held oral argument after the end of the fiscal year.

Western Kentucky Gas Company

Western Kentucky Gas Company filed a notification of registration

under the Act on July 9, 1954. It was then a holding company by

reason of its acquisition 2 days earlier of all the outstanding common

stock of Shelbyville Gas Company. As at December 31, 1954, consolidated assets of Western Kentucky and its subsidiary, less valuation reserves, amounted to $10 million. A merger of these companies

was approved by the Commission on March 7, 1955.61 The merger

has been consummated except for the filing of a certificate of dissolution of Shelbyville Gas Company. Western Kentucky has advised the Commission that as soon as this filing is made, it will apply

pursuant to section 5 (d) for an order declaring that it has ceased to

be a holding company.

Wisconsin Electric Power Company

Wisconsin Electric Power Company is a holding company and an

operating public-utility company. It has two public-utility subsidiaries, Wisconsin Michigan Power Company and Wisconsin Natural

Gas Company, and one non-utility subsidiary, The Milwaukee Electric

Railway & Transport Company, which in turn owns Badger Auto

Service Company, also a non-utility. All companies in the system

are incorporated in the State of Wisconsin. The Wisconsin Electric

system generates and distributes electricity in Wisconsin and Michigan

and distributes gas in Wisconsin. As at December 31, 1954, consolidated assets of the system, less valuation reserves, amounted to $302

million.

On February 15, 1955 Wisconsin Electric filed an application for

exemption pursuant to section 3 (a) (2) under which a holding com68Holding Company Act release No. 12826 (March 21, 1955)

.. Holding Company Act release No. 12798 (February 14, 1955).

!O See In re The United Corporallon, 119 F. Supp. 524 (D. Del. 1954).

Holdmg Company Act release No. 12813 (March 7, 1955).

•

"
TWENTY-FIRST ANNUAL REPORT 75

pany may be entitled to an exemption from the Act if it is predominantly a public-utility company whose operations as such do not

extend beyond the State in which it is organized and States contiguous thereto. At the time this application was filed there was

pending a proceeding instituted by the Commission in 1950 under

section 11 (b) (1) of the Act for the purpose of determining whether

it was consistent with the standards of the Act for Wisconsin Electric

to own and operate an electric utility sy,atem and at the same time

to carry on gas utility operations and own non-utility properties.

By an order dated June 3, 1955, the Commission granted the requested

exemption and dismissed the pending section l1(b) (1) proceeding."

Wisconsin Southern Gas Company, Inc.

Wisconsin Southern Gas Company, Inc. (formerly Wisconsin

Southern Gas and Appliance Corporation) filed a Notification of

Registration under the Act on May 28, 1952, at which time it had

one public utility subsidiary, Wisconsin Southern Gas Company.

Both companies are "\Visconsincorporations supplying propane and

natural gas to customers in the State of Wisconsin. As of December

31, 1954, consolidated assets of the system, less valuation reserves,

amounted to $3 million.

Since Wisconsin Southern registered in 1952it has made substantial

improvement in its capital structure, which at that time was unbalanced. During the past fiscal year Wisconsin Southern proposed a

statutory merger with its subsidiary pursuant to Wisconsin law. In

connection with the proposal, and to permit its effectuation under

State law, Wisconsin Southern requested an exemption pursuant to

section 3 (a) (1) of the Act, under which a holding company may be

entitled to an exemption from the Act if it is predominantly a public

utility company whose operations as such do not extend beyond the

State in which it is organized and States contiguous thereto. The

Commission granted the exemption shortly after the close of the fiscal

year." Upon consummation of the merger Wisconsin Southern will

cease to be a holding company.

REVISIONS OF RULES

The results of a program initiated by the Commission early in fiscal

1954 to reexamine the rules and forms adopted pursuant to the Act

were reported in the 20th Annual Report, p. 70. In the past fiscal

year the Commission adopted three amendments to existing rules

under the Act.

On December 10, 1954, the Commission adopted an amendment to

rule U-48. The amendment provides an exemption from sections 9 (a)

62Holding Company Act release No. 12917 (June 3, 1955).

03 Holding Company Act release No. 12900 (August 9,1955).
76 SECURITIES AND EXCHANGE COMMISSION

and 6 (a) of the Act with respect to loans to officers and employees

made pursuant to a personnel policy of general application by registered public utility holding companies or their subsidiaries." Previously, the rule provided exemptions for these companies in connection with appliance sales only. The amendment was proposed in a

petition filed by Columbia Gas System, Inc., a registered holding

company. Columbia was interested in adopting as part of its personnel

policy provisions for personal loans to employees so as to assist them in

purchasing new homes whenever they were relocated within the

system.

On January 12, 1955 the Commission adopted an amendment to

rule U-45 (b) (6) under section 12 of the Act.65 This rule regulates the

allocation of consolidated income taxes among the several members of

a registered holding company system. The amendment provides an

alternate method of tax allocation. Holding companies may now

choose between the methods prescribed in sections 1552 (a) (1)

("source of income" method) and 1552 (a) (2) ("separate return tax"

relationship) of the Internal Revenue Code of 1954. The amendment

also provides that the tax allocated to a subsidiary shall not exceed

the amount of tax that would have been payable by such subsidiary

on a separate return basis and that any such "excess" shall be apportioned among the other members of the consolidated group, including

the parent company, in proportion to their tax savings by reason of the

consolidation. Previously, the rule required that the top company

allocate the tax on a separate return tax relationship basis among all

members of the consolidated group in amounts not exceeding, as to

any company, that percentage of the consolidated tax liability which

the income tax liability of such company if paid on a separate return

basis would be of the aggregate income tax liability of the individual

companies based upon separate returns.

An amendment to rule U-70, subparagraph (b) (2), was adopted on

March 21, 1955.66 Subparagraph (b) (2) limits financial transactions

between registered holding companies and their subsidiaries, on the

one hand, and financial institutions having common directors with

such holding companies or subsidiaries, on the other. The amendment

clarifies the authority of holding companies and their subsidiaries to

borrow from certain local commercial banks which have common

directors with the holding company or subsidiaries.

After the close of the fiscal year the Commission adopted minor

amendments of rules U-104 and U-105 promulgated under the Act

relating to the confidential treatment. of information filed with the

Commission." The purpose of the amendments was to make these

.. Holding Company Act release No. 12138.

.. Holding Company Act release No. 12776.

.. Holding Company Act release No. 12825.

17 Holding Company Act release No. 12977 (September 8, 19M).
TWENTY-FIRST ANNUAL REPORT 77

rules consistent with Executive Order No. 10501, 18 F. R. 7049,

which withdrew from this Commission any power to classify information in the interest of national defense. The amendments are intended to minimize any confusion between the use of the word

"confidential" in the national defense classification and its use elsewhere.

FINANCING OF REGISTERED PlJBLIC lJTILITY HOLDING COMPANY

SYSTEMS

Security sales reported by the entire electric and gas utility

industries for the fiscal year 1955 amounted to approximately $2,750

million as compared with approximately $3,450 million for the fiscal

year 1954, a decrease of nearly 21 percent. Among the factors which

appeared to affect the 1955 totals were the sharp increase in the rate

of utility financing in the last half of the fiscal year 1954, which

provided in advance a considerable portion of the funds required for

1955 needs, and a moderate decline of industry construction expendiHITes beginning early in the fiscal year 1955.

The seasonally adjusted annual rate 0'£ expenditures for plant

and equipment by privately owned electric, gas and water utilities

declined from about $4.35 billion in the last half of the fiscal year

1954 to $4.01 billion in the second and third quarters of the fiscal year

1955. The adjusted annual rate of expenditures for plant and equipment increased to $4.09 billion in the last quarter of 1955 and estimates for the first and second quarters of the fiscal year 1956 place

the rates at $4.64 billion and $4.68 billion, respectively." The

level of such expenditures estimated for fiscal 1956 indicates a significant reversal of the downward trend of such expenditures predicted

by the industry in 1954,69and if these expectations are borne out the

volume of utility financing may also register an important increase

in coming months.

The volume of external financing by registered systems, which

includes both public offerings and private placements of securities

with institutions, declined 26 percent to $667.8 million in the fiscal

year 1955 from the $902.9 million reported for 1954. The volume for

the fiscal year 1953 totaled $712.3 million. The 1955 decline is

attributable in part to the general contraction in security sales by

the entire electric and gas utility industries in the fiscal year 1955 and

in part to divestments of utility subsidiaries by registered holding

company systems over the past several years and exemptions of certain

systems from the provisions of the Act. In addition to passing upon

the external financings of registered holding company systems, the

Commission also passes upon sales of securities by subsidiaries in

registered systems to their parents.

"s. E. C. Statistical Series release No. 1330 (September 13,1955),

.. 20th Annual Report, p, 81.
78 SECURITIES AND EXCHANGE COMMISSION

The following table shows the number and dollar volume of the

issuance of securities for cash or pursuant to exchange offers passed

upon by the Commission pursuant to the Holding Company Act

in the fiscal years 1955 and 1954.

Issuance and sale of securities for cash or pursuant to exchange offers authorized

pursuant to sections 6 and 7 of the Public Utility Holdinq Company Act of 1935for

the fiscal years ended June 30, 1955 and June 30, 1954-

[Dollar figures ill mlliions]

For fiscal year endedJune 30, 1955 June 30, 1954

Type of sales

Totals Totals Sales to Private Sales to public placements parents

Gross Num- Gross Num- Gross Num- Gross Num- Gross Num- sales ber of sales ber of sales ber of sales ber of sales ber of value Issues value Issues value ISSues value ISSUes value Issues

-- -- ---- ---- -- -- -- Electric and gas uttlities: Bonds _______________ $209.5 16 $174. 0 11 $113.5 18 $497.0 45 $550 4 49 Debentures _________ .------ 25 2 1 Notes 28.0 8 43.7 35 71.7 43 68.3 58 Preferred stock ______ 116.5 9 -------- --.---- 116.5 9 79 7 II Common stock ______ 15.9 1 -------- ------- 38.5 35 54.4 36 215.3 54

TotaL --- --- -- -- -- 341. 9 26 202.0 19 195.7 88 739.6 133 938.9 173

Holding companies: -- -- -- = -- -- -- -- -- -- Bonds 7.5 1 --.---- ... --.---- 7.5 1 7.0 1 Debentures 25.2 1 .. ...---- 25.2 1 132.0 4 Notes 12 0 1 --.---- ...---- 12 0 1 Common stock ______ 79.2 6 -------- ------- -------- --...---- 79.2 6 22.5 3

TotaL -- -- -- -- -- -- -- -- -- -- 123.9 9 ... --.---- -------- --.---- 123 9 9 161. 5 8

NonutUity companies: -- -- -- ---- -- -- -- -- -- Bonds

Debentures -...------ ...------ -----_ ... ------- --...----- --...---- --..----- ...-.---- --..._--- -----_ ... --.---- 10.0 1 Notes ._------ 43 7 4.3 7 19.5 15 Common stock 23.9 14 23.9 14 24.6 9

TotaL -- -- ---- ---- -- 28.2 21 28.2 21 54 1 25

-- -- -- -- 223.91 109 Orand totals ______ -- 465.8 35 202.0 19 891.7 163 1,154.5 206

External financing of registered holding company systems accounted for 23 percent of the total volume of financing by the entire

electric and gas utility industries in the fiscal year 1955 as compared

with 26 percent in 1954. This decline was due in part to divestments

of non-retainable utility subsidiaries by registered holding company

systems over the past several years and exemptions of certain systems

from the provisions of the Act.

Common and preferred equity financings by registered systems was

at a higher level in the year 1955 than in 1954. External sales of

common stocks by registered systems in 1955 amounted to 14 percent

of their total outside financing and preferred stock offerings amounted

_______________ --------

____________ -- -- -- -- --

______________ -------- ---- --- _________ _______________ -------- ------- ---- --- -- -------- -------- --

____________ ------ -

_______________ - _________ -------- - _______________ -------- ------- ------- ______ -------- ------- ~------- -----~- ____________ -- -- -- -------- ~-----~ -------- -----~- -- =
TWENTY-FIRST ANNUAL REPORT 79

to an additional 17 percent, the comparable 1955 percentages for the

entire electric and gas utilities industry being 14 percent and 11

percent, respectively. In 1954 external sales of common stocks by

registered systems amounted to 12 percent of their total outside

:financing and preferred stock offerings amounted to an additional 9

percent; the comparable 1954 percentages for the entire electric and

gas utilities industry were 18 percent and 12 percent, respectively.

Rights offering to stockholders have continued during 1955to be the

most popular method of effecting sales of common stocks not only

among registered holding company systems but throughout the

electric and gas utility industries. Of the seven common-stock issues

totaling $95 million sold externally by registered systems in 1955, five

issues with sales value of $59 million, amounting to 62 percent of the

total dollar volume, were offered to stockholders by means of rights.

Sixty-four percent of the dollar volume of common stocks sold in 1955

by all other electric and gas utilities were offered through rights.

Common equity financing during the fiscal year 1955 by registered holding company

systems and by all other electric and gas utility companies, including holding

companies, and gas transmission companies. Secondary offering and intercompany transactions excluded

[Dollar figures In millions!

Registered holding All other electric and Total electric and gas company systems gas utlhties utility industries

Type of ofiertng

Number Volume Number Volume Number Volume of issues of issues of ISSUes

Rights ________________________ 5 $59 26 $180 31 $239 Public ________________________ 2 36 15 102 17 138

Totals __________________ 7 95 41 282 48 377

The trend in the direction of non-underwritten rights offerings for

common stock financing in the electric and gas utility industries, which

was in evidence in the fiscal years 1953 and 1954,was reversed in 1955,

although registered holding companies continued to show a preference

for this method of fund raising. There was also a pronounced

tendency in 1955for electric and gas utilities to omit the over-subscription privilege from their underwritten rights offering. The sole

underwritten rights offering by a registered holding company during

the year was set up in this manner. Non-underwritten rights offerings

by companies not subject to the Act were about equally divided between those with an oversubscription privilege and those without.

Registered holding companies showed greater preference for use of the

privilege.
80 SECURITIES AND EXCHANGE COMMISSION

Rights offerings of common stocks during the fiscal year 1955 by all electric and gas

utility companies, including holding companies and gas transmission companies.

Secondary offerings and intercompany transactions excluded

[Dollar figures in millions]

Underwritten offerings Non-underwrittan offermgs

With over- Without over- With over. Without oversubscription subscription subserrptlon subscription

privileges privileges prrvileges privileges

Issues I Volume Issues Volume Issues Volume Issues Volume

Companies in registered holding 1-1--1--

company systems 1 1 $137 3 $22.5 1 $22 9 AU other eleetric and gas utilities and gas transnnssron compames ___ __ 6_1~1 __ 16_~ __ 2_~ 2 9.7

Totals __________________. ______ 61 34.7/ 17 I 131. 9 5/ 38 9 3 32. 6

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 in accordance

with the provisions of rule U-50, which requires competitive bidding

unless an exemption is available. 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. In any

application for exemption pursuant to paragraph (a) (5) of rule U-50,

the seller must show that competitive conditions have been maintained by discussing the proposed sale of securities with a reasonable

number of possible purchasers or underwriters.

The following table shows the volume of securities sold at competitive bidding pursuant to rule U-50 in the fiscal year 1955 by

registered holding companies and their subsidiaries, including portfolio sales. Cumulative totals from May 1, 1941, the effective date

of the rule, are also shown.

Sales of securities at competitive bidding pursuant to rule U-50

[Dollar amounts in nnlhons]

I July 1, 1954, to June 30, May 7, 1941, to June 30,

1955 191;5

Number Volume I Number Volume I of issues of issues

Bonds., _____________ ._________. ____.. _________.___._ 17 $217 387 $5,851 Debentures ___. _________________. ____. ____. ___. ______._ 1 21; 41; 1,131 N otes _. _. ., . •. . 9 75 Preferred stock ___________. __________. ________________._ 7 71 III 956 Common stock _____________________. ___________________ 4 52 101; 1,060

Total. 29 361; 657 9,073

I Amounts shown represent prmeipal amounts of bonds, debentures and notes, par or stated values of preferred stocks, and proceeds of sales of common stocks.

_____________-____ _______ ______ --

_____• _____' ___ ______________ _________ __ ------------ ----- ----~--

________________________________• __________
TWENTY-FIRST ANNUAL REPORT 81

The number of issues sold at competitive bidding is lower than in

prior years due to the reduction in the volume of financing by companies in registered holding company systems referred to above.

Only two issues of securities were exempted from competitive

bidding requirements pursuant to paragraph (a) (5) of rule U-50,

as a consequence of orders entered by the Commission in the fiscal

year 1955. Neither of these issues were sold for the purpose of

raising new money. Cities Service Company was granted an exemption in connection with its proposal to dispose of its holdings of 51.5

percent of the outstanding common stock of its subsidiary, Arkansas

Louisiana Gas Company, pursuant to the plan of reorganization

approved by the Commission under section 11 (b) (1) of the Act.

This involved the sale of 1,958,189 common shares of Arkansas

Louisiana for a total of $24,479,363 to W. R. Stephens Investment

Company, Inc., for purposes of subsequent reorganization and disposal to the public.

Georgia Power Company, a subsidiary of The Southern Company,

was granted an exemption for a proposal to make an offering of $43

million to $4.60 preferred stock in exchange for outstanding $6

preferred stock." The company based its application for exemption

on the exceptionally large size of the offering and the fact that it

desired to have as much as possible of the stock held ,in its operating

territory.

While these two issues were the only issues sold under exemption

orders entered in the fiscal year 1955, bonds and notes totalling

$198 million were sold by Ohio Valley Electric Corporation and

Electric Energy, Inc., during the year pursuant to orders of exemption

'entered by the Commission in 1951 and 1953 as described in the 20th

Annual Report, pages 84 and 85.

Shortly after the close of the fiscal year American Louisiana Pipeline was ~anted an exemption from the competitive bidding requirements of Rule U-50 pursuant to paragraph (a) (5) thereof in connection with the proposed sale of its construction bonds. In this

case the Commission considered the effect upon the consumer and

public interests as well as the prevailing state of the money market

and the possibility th rt there would be an increase rather than a

decrease in the cost of money to the issuer if a renegotiation of the

sale of the bonds was required. Although granting the exemption,

the Commission expressed concern over the extent to which competitive conditions had been maintained in negotiations for the sale of

the bonds, since the pipeline company had entered into the bond

purchase agreement with the Metropolitan Life Insurance Company

and the Mutual Life Insurance Company of New York without

discussing the proposed sale with any other possible purchasers. The

10 Holding Company Act release No. 12651(September a, 1954).

878413-56-7
82 SECURITIES AND EXCHANGE COMMISSION

Commission's opinion stated that it recognized the activity of Metropolitan in the field of pipeline construction bond financing, but it

felt that more than one source of funds for a sound pipe line enterprise might be found and pointed out that: " ... in the future we

shall expect, as a condition to obtaining an exception from Rule U-50,

that an issuer give evidence that it has discussed its issue with a

reasonable number of prospective purchasers." 71

In comparison with the 657 issues of securities totalling $9,073

million sold by registered holding companies and their subsidiaries

at competitive bidding from the effective date of rule U-50, May 7,

1941, to the close of the fiscal year 1955, 217 issues with dollar volume

of $2,095 million were sold through other channels in accordance

with orders of the Commission granting exemptions from competitive

bidding requirements pursuant to paragraph (a) (5) of the rule. The

following table sets forth the cumulative totals of issues and dollar

volume of each type of security sold pursuant to these exemptions.

Sales of securities exempted from competitive biddtng 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 30,1955

[Dollar amounts m rmlhons]

Underwritten N onunderwritten Total

Number of Amount I Number of Amount I Numherof Amount. Issues ISSues ISSues

Bonds ________________________ 4 $27 7~ 2 $989 79 2 $1, 016 Debentures ___________________ 3 83 b 37 8 120 Notes 29 283 29 283 Preferred stock ________ 12 109 2..'i 265 37 374 Common stock _____ .... :::::: 33 279 51 223 84 502

TotaL ....• _____________ 52 498 185 1,597 237 2,095

I Proceeds before expenses.

2 These amounts include $420 million of bonds and $48 milhon or notes sold up to June 30, 1955, by Eleetne

Energy, Ine., and OhIO Valley Electric Corp. pursuant to long-term eonstruction loan commitments authorized by the Comnnssion. The entire amounts or these commitments were exempted from coIUpetitlve biddmg requirements by orders of the Commission pursuant to rule U-50 (a) (5). The total authorizations

are. Electric Energy, Inc ,$195 million of mortgage bonds, all of which have been taken down; Ohio Valley

Electne Corp, $360 milhon of mortgage bonds, of WhICh $225 million have been taken down; and $60 nnlhon

of notes, of WhICh $18 nnlhon have been taken down.

The granting of exemptions from the competitive bidding requirements of rule U-50 in respect of all of the security sales included in

the above table were based upon unusual circumstances which did not

favor public offerings through competitive underwriting channels.

To illustrate, it will be noted from the above table that only 52 of the

exempted issues with an aggregate dollar value of $498 million were

sold through underwriters. Of the $989 million of bonds sold in nonunderwritten transactions exempt from competitive bidding, $954

million represented private placement of bonds and the remainder of

$35 million were miscellaneous other types of nonunderwritten sales.

71 Holdmg Company Act release No. 12991 (September 20, 1955).

_________________________ ------------ ------------
TWENTY -FIRST ANNUAL REPORT 83

Included in the private placements were $420million of bonds sold pursuant to the construction loan commitments made by Ohio Valley Electric Corp. and Electric Energy, Inc., described in footnote 2 of the preceding table. Two subsidiary natural gas pipe line companies sold

$94 million of bonds during the period under similar agreements.

Also included among the private placements were $100 million of

collateral trust bonds issued as part of a reorganization settlement

under section 11 of the Act. All of the $83 million of notes sold pursuant to exemption orders during the period and more than half of the

$37 million of debentures sold without underwritings were also in the

nature of private placements. Of the 37 issues of preferred stock

issues totaling $374 million, 17 issues aggregating $286 million exempted from competitive bidding were refunding exchange offerings,

14 of which, with total volume of $227 million, were initiated prior to

the announcement by the Commission of its general policy requiring

competitive bidding in such cases." Of the 84 issues of common

stock amounting to $502 million which were exempted from competitive bidding, 16 issues, totaling $83 million, represented sales of

equity investments in subsidiaries by registered holding companies

to other public utility or holding companies. Seventeen other issues,

aggregating $43 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.

Another financing development occurring during the year was the

refunding of several high dividend-bearing callable preferred stocks.P"

This development was the continuation of a financial trend which

started with a preferred stock refunding of this nature in the latter

part of fiscal 1954.73 Northern States Power Company (Minn.) refunded $20 million par value of $4.80 preferred stock by means ofthe

sale of 200,000 shares of new $4.11 preferred stock of $100 par value

at competitive bidding without an exchange offer." Georgia Power

Company, a subsidiary of The Southern Company, offered 433,869

shares of new $4.60 no par value preferred stock in exchange for its

outstanding $6 preferred stock. This exchange offer was carried out

on a negotiated underwritten basis pursuant to an exception granted

by the Commission from the competitive bidding requirements of

rule U-50.75 Interstate Power Company sold $10 million of new 4.36

percent $50 par value preferred stock to the public at competitive

bidding, without an exchange offer, and used part of the proceeds to

refund $5 million par value of outstanding 4.70 percent preferred

,. Holding Company Act release No. 6449 (March 5, 1946).

7Ja In such cases the Comnusslon follows Its established policy requmng that senior securitles be fully

redeemable at the option of the ISSuer upon the payment of a reasonable premium See Holding Company

Act releases Nos 12991 (September 20,1955) and 12140 (September 21,1953).

73West Texas Utility Compauy, Holdmg Company Act release No. 12439 (March 31,1954),

7, Holding Company Act release No. 12620 (August 16, 1954).

7& Holding Company Act release No. 12651 (September 14, 1954).
84 SECURITIES AND EXCHANGE COMMISSION

stock." Arkansas Power & Light Company, a subsidiary of Middle

South Utilities, Inc., issued $9,350,000 par value of 4.72 percent

preferred stock pursuant to an underwritten exchange offer made to

the holders of that company's outstanding $7 and $6 preferred stocks.

This financing was done at competitive bidding."

FINANCING OF ELECTRIC GENERATING COMPANIES WHICH SUPPLY

ELECTRICITY TO FACILITIES OF THE ATOMIC ENERGY COMl\USSION

Three large generating companies, Electric Energy, Inc., and Ohio

Valley Electric Corporation and its subsidiary Indiana-Kentucky Electric Corporation, were organized to furnish power to facilities of the

Atomic Energy Commission. They are subject to the Act because

they are subsidiaries of registered holding companies. The organization and financing arrangements of these companies are described

in the 17th, 18th, and 20th Annual Reports of the Commission. In

the fiscal year 1955Electric Energy completed its financing by selling

the remaining $30 million of its total authorization of $195million

mortgage bonds. Ohio Valley Electric sold an additional $144 million

of mortgage bonds out of its total authorization of $360 million,

leaving $135 million remaining to be taken down. The company also

issued and sold $24 million of notes in 1955 under previous authorizations. On May 10, 1955 the sponsors of Ohio Valley were authorized

by the Commission to postpone the purchase of $10 million of the $20

million of common shares of the company which they were obligated

. to purchase, and Ohio Valley was authorized to sell in lieu thereof $10

million of interim notes-due 90 days after demand." Six million

dollars of these notes were issued and sold on June 17,1955.

On November 9, 1954, Middle South Utilities, Inc., and The

Southern Company, both registered holding companies, jointly filed

an application-declaration for approval of the issuance and sale of

common stock of a new generating company, Mississippi Valley

Generating Company, and for the acquisition thereof by Middle

South and Southern. Mississippi Valley was organized under the

laws of Arkansas for the purpose of constructing and operating a

generating station to furnish power pursuant to a power contract

dated November 11, 1954, between Mississippi Valley and the United

States of America acting by and through the Atomic Energy Commission. The power would have been delivered to the Tennessee

Valley Authority for or on account of the Atomic Energy Commission.

Middle South and Southern proposed to purchase 79 percent and

21 percent, respectively, of a total of 55,000 shares of $100 par value

.. Holding Company Act release No. 12705 (November 16,1954).

n Holding Company Act release No 12829 (March 23, 1955).

n Holding Company Act release No. 12909 (May 25, 1955).
TWENTY-FIRST ANNUAL REPORT 85

common stock of Mississippi Valley. After notice," public hearings

were held before the Commission sitting en bane, and the State of

Tennessee and various municipalities and electric power cooperatives

located in the Tennessee Valley area appeared in opposition to the

application. The Commission approved the issuance and acquisition

of the securities on February 9, 1955.80 On March 14, 1955, the State'

of Tennessee, et al., filed a petition for review in the United States

Court of Appeals for the District of Columbia requesting that the

case be remanded to the Commission 'with directions to disapprove

the companies' joint application.

On April 22, 1955, while the appeal was pending, Middle South,

Southern, and Mississippi Valley filed a joint application-declaration

for approval of the issuance and sale by Mississippi Valley of

$77,362,000 principal amount of first mortgage bonds and $22,553,000

principal amount of notes for the purpose of financing the construction

of its proposed generating plant. After notice," public hearings were

held commencing May 16, 1955, before a trial examiner and the

State of Tennessee and others again appeared in opposition.

On July 11, 1955, the Government announced that the Power

Contract would be cancelled since the city of Memphis had indicated

that it would construct a municipal power plant to take care of its

needs after expiration in 1958 of its existing power arrangements

with the Tennessee Valley Authority. As a result of this announcement, the Commission on July 14, 1955, suspended post-hearing

procedures on the bond and note financing. On August 11, 1955, the

applicants filed amendments to their application-declaration in the

two proceedings, which stated, among other things, that on July 30,

1955, the President of the United States had directed the Atomic

Energy Commission to take the necessary steps to bring to an end the

relationship between Mississippi Valley and the United States.

Thereafter, upon motion by the Commission, the Court of Appeals on

September 12, 1955, remanded the case before it to the Commission

with directions to take such action as appeared appropriate in view

of the changed circumstances."

COOPERATION WITH STATE AND LOCAL REGULATORY AUTHORITIES

The Commission has continued to pursue its policy of cooperation

with State public utility commissions and municipal regulatory bodies

on all matters of mutual interest. In addition to day-to-day contacts,

most of which were informal in nature, there were several instances

11Holding Company Act release No. 12711 (November 19, 1954).

.. Holding Company Act release No. 12794 (February 9,1955); rehearing denied, Holding Company Act

r«!lease No. 12802 (February 19, 1955).

11 Holding Company Act release No. 12857 (April 27, 1955).

n Stak 01Tenne.l8u, et 01., v. S. E. C (C A. D C., CIvil Action No. 12(07).
86 SECURITIES AND EXCHANGE COM:MISSION

during the fiscal year 1955 where State public authorities took part

in proceedings under the Act before the Commission.

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.

Some examples of cooperation with State and local authorities

are described below.

On January 12, 1955, the Commission adopted an amendment of

rule U-45 (b) (6) under the Act which regulates the allocation of consolidated income taxes among the several members of a holding company system.sa This amendment was preceded by nearly 2 years of

study of the operation of the rule and its possible inequities. The

Commission, after invitation for comments on a proposed amendment

of the rule, received comments from the various companies affected,

from various State and local regulatory authorities, and from the

National Association of Railroad and Utilities Commissioners. After

considering these comments, the Commission issued an announcement

on December 30, 1953, that the proposed revision previously promulgated would not be adopted but that further studies of tax allocations

in registered holding company systems would be carried out." During

the last fiscal year the Commission invited comments on a further

revision based in part upon the provisions of the Internal Revenue

Code of 1954.85 Comments were received from various persons, including one municipal regulatory authority, and these comments as

well as those received on the revision proposed in the previous fiscal

year were taken into consideration by the Commission in finally

amending the rule in January 1955.

During the fiscal year 1955 applications for exemptions of various

registered holding company systems from the Act pursuant to section

3 thereof were passed upon by the Commission. In a proceeding

granting an exemption to Northern States Power Company (Minn.r"

the Public Service Commissions of Wisconsin and North Dakota and

the city of St. Paul, Minn., appeared and made statements in support

of the exemption. On June 3,1955, the Commission entered an order

exempting Wisconsin Electric Power Company from the Act,87and in

that proceeding the Public Service Commissions of Wisconsin and

IS Holding Company Aet release No. 12776.

If Holding Company Act release No. l2288.

II Holding Company Act release No. 12722(December 3, 1954).

It Holding Company Act release No. 12655(September 16, 1954).

17 Holding Company Act release No. 12917(June 3, 1955).

•
TWENTY-FIRST ANNUAL REPORT 87

Michigan and the city of Milwaukee each wrote letters to the Commission supporting the exemption.

Immediately after the close of fiscal year 1955 the Commission had

occasion in three other instances to consider the positions of state or

regulatory authorities. One of these involved Wisconsin Southern

Gas Company, Inc., a holding company over a single operating company whose operations were confined to the State of Wisconsin. The

Commission first granted Wisconsin Southern an exemption from the

Act in the light of a proposed merger between the company and its

subsidiary," and then, after the merger, issued an order pursuant to

section 5 (d) declaring that Wisconsin Southern had ceased to be a

holding company." These steps were taken in consultation with the

Public Service Commission of Wisconsin. The second instance involved Louisiana Power & Light Company, a subsidiary of Middle

South Utilities, Inc. Pursuant to a prior section 11 (b) (1) order of the

Commission, Louisiana Power proposed to create a new subsidiary and

transfer to it gas and water properties which Louisiana Power had

been ordered by the Commission to dispose of. The Louisiana Public

Service Commission filed a petition with the Commission seeking a

reopening of the proceeding which had led to the issuance of the outstanding section 11 (b) (1) order. Jefferson Parish in Louisiana, on

the other hand, opposed the petition of the Louisiana Commission.

After careful consideration of an offer of proof made by the Louisiana

Commission, the Commission denied the petition on September 13,

1955.90 The proposal by Louisiana Power to form a new subsidiary

and transfer its gas and water properties to it was pending at the

close of the fiscal year.

On June 9, 1955, the Georgia Public Service Commission filed a

petition for the reopening of the section 11 (b) proceedings pursuant

to which Florida Power Corporation, an exempt holding company,

became the parent of Georgia Power & Light Company, an electric

utility company operating in Georgia. The Georgia Commission was

of the view that the retail rates being charged by Georgia Power &

Light were too high and that this was due to excessive wholesale rates

charged to Georgia Power & Light by its parent, Florida Power. In

August 1955 the Commission decided that since the electric properties

of Florida Power and its subsidiary constituted an integrated publicutility system, and since there was no substantial change in the facts

in this regard between January 25, 1945, the date of the Commission's

previous order, and August 1955, there was no basis for reopening

the section 11 (b) proceedings.

88 Holding Company Act release No. 12ll6O(August 9, 1955).

.. Holding Company Act release No. 13015 (October 20, 1955).

to Holdmg Company Act release No. 12978 (September 13, 1955).
88 SECURITIES AND EXCHANGE COMMISSION

On July 29, 1955, the Commission approved a joint financing proposal by American Natural Gas Company and its new subsidiary,

American Louisiana Pipe Line Company, designed to provide monies

for the construction of a new pipe line from southern Louisiana to Detroit, Michigan. The State of Wisconsin, the Michigan Public Service

Commission and the city of Detroit appeared in this proceeding.

The State of Wisconsin opposed the proposal, but the other public

bodies supported it. The Commission accorded appropriate weight

to the views of these parties in approving the proposal."

'I Holding Company Act releases Nos. 12953 (July 29, 1955) and 12991 (September 20, 1955).
PART V

PARTICIPATION OF mE 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.

In connection with a reappraisal of its functions under Chapter X,

the Commission, with the approval of the Judicial Conference and

with the assistance of the Administrative Office of the United States

Courts, sought the comments of the federal judiciary. Comments

have been received which reflect a wide variety of views. Particularly

significant was a comment from Chief Judge Charles E. Clark written

on behalf of all of the active judges (as of March 21, 1955) of the

Court of Appeals for the Second Circuit, which court sits in a review

capacity over a large proportion of all Chapter X proceedings. Judge

Clark stated:

We regard the service being rendered by the Commission to the Courts in

connection with the reorganization of corporations to be most valuable, if not

indispensable, for the proper disposition of this vital segment of court business

according to the Congressional intent. The Commission affords the necessary

expert knowledge, the skill, and the uniform approach which individual judges

cannot have; and to the district judges in particular, the assistance is unique in

its usefulness, and not otherwise to be obtained. The judge is not bound to observe all suggestions of the Commission, but the very fact that he has them

before him is assurance of his complete preparation for adjudication, with the

public interest adequately protected. We regard it as peculiarly unfortunate if

considerations of economy (which must be of small and petty character as compared to the value of the interests protected) are allowed to curtail such worthwhile activities.

89
90 SECURITIES AND EXCHANGE COMMISSION

SUl\fMARY OF ACTIVITIES

The Commission participated during the 1955 fiscal year in 38 proceedings involving the reorganization of 61 companies with aggregate

stated assets of $671,596,000 and aggregate stated indebtedness of

$478,050,000. During the year the Commission, with court approval,

filed notices of appearance in two new proceedings under Chapter X

involving six companies with aggregate stated assets of $112,769,000

and aggregate stated indebtedness of $113,230,000. Proceedings involving 11 principal debtor corporations and 4 subsidiary debtors

were closed during the year. At the end of the year the Commission

was actively participating in 27 reorganization proceedings involving

46 companies with aggregate stated assets of $494,783,000 and aggregate stated indebtedness of $433,089,000.

Problems in the Administration of the Debtor's 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 and

generally renders assistance in connection with the varied problems

that arise in the administration of the estate.

Examinations and Reports on Plans of Reorganization

Section 172 of Chapter X of the Bankruptcy Act provides that the

judge may, if the scheduled indebtedness of the debtor does not

exceed $3 million, and shall, if such indebtedness exceeds $3 million,

submit to the Commission for examination and report a plan or

plans of reorganization which the judge regards as worthy of consideration.

During the fiscal year 1955 a plan of reorganization proposed by

the trustees of Muntz TV Inc., and its subsidiaries, Tele- Vogue, Inc.,

and J.Vuntz Industries, Inc., was submitted to the Commission for

examination and report. The Commission concluded that the plan

was fair to all classes of creditors and security holders. However, it

found that the plan was not feasible since the total amount of the

proposed debt estimated to be assumed by the reorganized company

was too high in relation to the indicated value of the company's assets.

The Commission, therefore, recommended that consideration be given

to amending the plan to provide for the issuance of common stock to
TWENTY-FIRST A1\'NUAL REPORT 91

the creditors for some portion of their claim, and to provide for an

appropriate extension of the period within which the remaining debt

could be paid without imposing a handicap on management in its

operation of the business.

Amendments to the plan submitted by the trustees provided in

substance for the issuance to the unsecured general creditors of

promissory notes for 75 percent of the allowed amounts of their

claims, with full payment thereof to be made within 8 years after

confirmation of the plan, and for the issuance at par to the unsecured

general creditors of a new class of preferred stock, of the par value of

$1 per share, for the remaining 25 percent of the allowed amounts of

their claims. Although the amendments to the plan provided for the

issuance of a new class of preferred stock to the unsecured general

creditors for some portion of their claim, instead of common stock as

suggested by the Commission in its advisory report, and although

the terms and provisions of the preferred stock did not conform in

all respects to those which the Commission would normally recommend

for a preferred stock, the Commission concluded in a supplemental

advisory report that the amendments substantially met the objections

which it had raised as to the feasibility of the plan, particularly since

the unsecured creditors were merchandise or trade creditors with a

special interest in the reorganized debtor.

During the fiscal year 1955the Commission issued two supplemental

advisory reports in the consolidated reorganization proceedings involving Inland Gas Corporation, Kentucky Fuel Gas Corporation, and

American Fuel and Power Company. These supplemental reports

were required as a result of the submission to the Commission by the

Court of various alternative amended or revised plans for the reorganization of these debtors. The various plans were predicated upon

a sale procedure with an upset price for the physical properties of the

debtors. A novel aspect- of two of the plans was an arrangement

whereby a bid could be made on behalf of the reorganized company

and, if it were the successful bid, security holders would then have

the election to take stock in the reorganized company or a cash

distribution upon the basis of the amount of the successful bid. None

of the plans, however, was approved by the court because they were

conditioned upon a favorable tax ruling which was not obtained.

Proceedings are still pending.

Fairness of Treatment of Security Holders

During the fiscal year an important issue involving the treatment

of security holders was decided in the Third Avenue Transit Corporation case 1 in which the Commission participated.

I In r« Third Aoenue Tranrit Corporation, 222 F. 2<1. 466 (C. A. 2, May 5, 1955).
92 SECURITIES AND EXCHANGE COMMISSION

An involuntary petition under Chapter X was filed in 1948 against

Third Avenue. Prior thereto, the debtor had acquired, and there

were delivered to the trustee, approximately $5,600,000 of First

Refunding Mortgage Bonds out of a total of about $20,500,000 of

outstanding bonds. In the course of the administration of the estate

of the debtor, the reorganization trustee petitioned the District

Court for an order determining that the bonds held by him were

enforceable against the mortgaged property on a parity with the

bonds which were publicly held. The effect of granting the trustee's

petition would have been to free certain of the debtor's mortgaged

property for the benefit of general creditors.

The Commission joined with the indenture trustee under the mortgage and a bondholders committee in opposing the granting of the

reorganization trustee's petition on the grounds that it would violate

the rule of "absolute priority" which had been upheld in Oonsolidated

Rock Products 00. v, DuBois, 312 U. S. 510 (1941), and other cases.

The district judge felt bound by two equity receivership precedents

and entered an order declaring that the bonds held by the reorganization trustee were enforceable against the debtor's property and constituted "free" assets for the benefit of general creditors. On appeal

the Court of Appeals for the Second Circuit upheld the Commission's position and reversed the decision of the District Court.

During the past fiscal year, the Commission actively participated

in negotiations leading to a settlement approved by the District

Court of the complex and lengthy litigation involved in the Pittsburgh Terminal Ooal Oorporation case." Under the settlement, public

stockholders of the reorganized company received $40 per share as a

final distribution for their stock out of a cash fund created by respondents in the litigation. The amount paid to stockholders, including prior distributions during the reorganization and thereafter, aggregated $130.50 per share of old preferred stock of the debtor. The

issues existing prior to the settlement included the accountability of

members of a reorganization committee, their near relatives and

friends, for profits made on the purchase of preferred stock of the

debtor prior to and during the reorganization and of stock of the

reorganized debtor directly after the reorganization plan was consummated, the accountability of the management of the reorganized

debtor for profits allegedly made in contravention of the terms of the

plan limiting salaries and other remuneration, and the liability of

the reorganization trustee for allegedly failing to collect rents and to

administer the estate properly in other ways. The facts and law on

these and other issues were being vigorously disputed by all parties

when the settlement was reached.

, Matter of Pilt8burQh Terminal Coal Corporatl(fll, W. D PR., Docket No. 20,716.
TWENTY-FIRST ANNUAL REPORT

Consummation of Reorganization Plan

93

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 5 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 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.

Commission's Activities Under Chapter XI

A problem that has come up with increasing frequency in recent

years involves the question of whether Chapter X or Chapter XI is

the appropriate statutory procedure for the financial rehabilitation of

a corporation under the Bankruptcy Act in a particular case. It

has been the Commission's position that the provisions of Chapter

XI were intended for the relief of debtors desiring to enter into an

arrangement with their unsecured creditors where there are no public

investor interests concerned which require the protective measures

and safeguards afforded under Chapter X. The Commission has

argued that Chapter X alone provides the necessary investigative

and analytical procedure which can deal effectively with the financial

and rehabilitation problems of a corporation having securities widely

held by the public. Section 328 of Chapter XI of the Bankruptcy

Act, as amended in 1952, confirmed the Commission's status, as determined by the Supreme Court in S. E. C. v. United States Realty

and Improvement Company, 310 U. S. 434 (1940), as a proper party

to apply to the court for dismissal of a Chapter XI proceeding where

it believed the case properly belonged under Chapter X.

In the Transoieion. case 3 the Court of Appeals for the Second Circuit disagreed with the Commission's contention and refused to dismiss a Chapter XI proceeding although some 425 public investors

held a portion of the common stock of the company acquired through

a public offering and representing an investment of about $350,000.

The court in that case indicated that the nature of the plan which

was relatively simple, and the absence of evidence of irregularities by

IIn re Tramvition, Inc, 217 F. 2d 243 (1954) eert, denied, 348 U. S. 952 (1955).
94 SECURITIES AND EXCHANGE COMMISSION

the management made Chapter XI appropriate, and within the discretion of the District Court. A petition for certiorari filed by the

Commission, which believed this decision inconsistent with the

United States Realty case, was denied.

During the pendency of the Transvision appeal, the Commission

moved to dismiss a proceeding instituted by General Stores Corporation under Chapter XI of the Bankruptcy Act, joining a stockholder who had made a similar motion. The Commission contended

that Chapter X was the appropriate statutory remedy for this corporation which had outstanding $2,232,422 par value of common

stock in the hands of over 7,000 widely scattered stockholders.

The District Court entered an order dismissing the Chapter XI

petition 4 and the Court of Appeals for the Second Circuit affirmed

the District Court's order." Both Courts distinguished the Transvision case, holding that the debtor was the kind of company, referred to in the United States Realty case, as belonging under Chapter

X because of the large and widespread public investor interest. After

the close of the fiscal year the United States Supreme Court granted

a petition for a writ of certiorari filed by the corporation.

Two other cases are pending involving generally the same question.

In Wilcox-Gay Oorporation." the Commission's motion to dismiss the

Chapter XI proceedings involving this corporation and its subsidiary

was denied by the District Oourt. The Oourt, relying upon the

Trameoision. case, determined in the exercise of its discretion that the

Chapter XI procedure was justified and advisable under the particular circumstances of the case. An appeal is pending from this

decision. In another case, Liberty Baking Corporation, the question

is pending before the District Court."

, In re General Sioru Corporation, 129 F. Supp, 801 (1955).

Shltmku v. General Store« Corporation, 222 F.2d 234 (1955).

In re The Wiloox-Gau Corporation, W. D. MICh., So. DIV., No. 12735.

, In re LibertU Baking Corporation, 8. D. N. Y., No. 91173.

•

•
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 Commission. The Act requires 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, 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.

Number of Indentures filed under the Trust Indenture Act of 1939

Number Aggregate

amount

Indentures pending June 30,1954 ____________________________________________ 12 $387, 750, 000 Indentures filed during fiscal year ___________________________________________ 163 3,674, 783, 637

TotaL _________________________________________________________________ 17~ 4, 062,ssa 637

Disposition during fiscal year: 3, 721. 108,837 Indentures qualified 157 Indentures deleted by amendment or withdrawn ________________________ 6 M,972,8OO Indentures pending June 30,1955 ________________________________________ 12 275,452,000

TotaL ________________________________________________________________ 175 4, 062, ~, 637

95

_______________________________________________-- ----
PART VII

ADMINISTRATION 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, holding 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, 1955,387 investment companies were registered underthe Act, and it is estimated that on that date the aggregate value of

their assets was approximately $12 billion. This represents an increase

of approximately $3.3 billion over the corresponding total at the

beginning of the 1955 fiscal year.

Since the Commission's rules no longer require investment companies to report sales data to the Commission, statistics regarding public

sales of shares issued by investment companies comparable to those

which have appeared in the previous annual reports are not available.

However, substantially similar information is reported to the National

Association of Investment Companies by its members and published

by that association. It appears therefore that during the entire 1955

fiscal year about 116 open-end management investment companies

sold to the public $1,089,769,000 of their shares, redeemed $455,980,000

of such securities, and thus realized net sales of $633,789,000. For the

last 6 months of the fiscal year additional information published by

the association shows that 29 closed-end management investment

companies had corresponding sales of $29,136,000, acquisitions of

$25,704,000, and net sales of $3,432,000.

96
TWENTY-FIRST ANNUAL REPORT 97

Investment companies registered at the end of the 1955 fiscal yearwere classified as follows:

~anageDlent open-end

Management closed-end

1Jnit

Face aDlount

Totm

182

112

80

13

387

TYPES OF NEW INVESTMENT COMPANIES REGISTERED

During the 1955 fiscal year 37 new investment companies were

registered under the Act, of which 22 were open-end management

companies (which redeem their shares on presentation by the shareholder) and 13 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 21 management companies of which 15.

were open-end and 6 were closed-end, and with respect to 11 unit and

2 face-amount companies.

The new management investment companies registered under the

Act during the year subscribed to a wide variety of investment objectives. Several among them were organized for the purpose of emphasizing investments in securities of industrial corporations engaged

in some phase of the development of atomic energy or electronics and

five which were incorporated in Canada secured authority under section 7 (d) of the Act to make public offerings of their shares in the

United States. Rule N-7D-l, which was adopted to provide especially for the registration of Canadian investment companies, is

discussed in the 20th Annual Report, at pages 94-96. Each of the

two unit investment companies registered during the year were organized to operate periodic payment plans for the purchase of the common stock of a single specified industrial corporation.

CURRENTfflFORMATION

The basic information disclosed in notifications of registration and

registration statements is required by statute to be kept up to date.

During the 1955 fiscal year the following current reports and documents were filed:

Annual reports; ____ ___________________________ 260

Quarterly reports 197

Periodic reports to stockholders (containing financial

statements) 674

Copies of sales Iiterature.Lc , , _______________________ 1, 829

APPLICATIONS AND PROCEEDINGS

One of the functions of the Commission in its regulation of investment companies is to determine whether applications for exemption

378413-56---8

_

_

_

_

_

-

- __-
98 SECURITIES AND EXCHANGE COMMISSION

filed under various provisions of the Act meet the statutory standards.

Under section 6 (c) of the Act, the Commission is empowered, either

upon its own motion or by order upon application, to exempt any

person, security or transaction from any provision of the Act if and to

the extent such exemption is necessary or appropriate in the public

interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Various

other sections, such as 6 (d), 9 (b), 10 (f), 11 (a), 17 (b) and 23 (c)

contain specific provisions and standards pursuant to which the Commission may grant exemptions from particular sections of the Act or

may approve certain types of transactions.

During the fiscal year 1955 a total of 177 applications of various

types were pending before the Commission, of which 133were disposed

of, leaving 44 pending on June 30, 1955. Thirty-one of the 141 applications filed during the fiscal year were for general exemptions, 36 for

orders terminating registrations, 23 for orders under section 17 of the

Act permitting transactions between investment companies and

affiliates, and 51 for other relief. The various sections of the Act

under which these applications were filed, and their disposition during

the fiscal year, are shown in the following table:

Sections Subject involved

A pplications filed with and acted upon by the Commission under the Investment

Company Act of 191,.0dunng fiscal year ended June 30, 1955

Pending I Pending July I, Filed Closed June 30,

19M 1955

------j-------------I----------'---

2,3,6 Status and exemption_________________________ 11 31 30 12

7 (d) Registration of foreign investment compantes; 2 6 7 1

8,35_ Compliance with registration requtrements.c.; 1 3 0

8 (0--------------- Termination ofregistratlon____________________ 10 36 134 12

9,10,16 Regulation of atIiliatlons of directors, ollicers, 0 19 18 1

employees, Investment advisers, underwriters and others.

11,25 Regulation of security exchange olIers and reorgantzatton matters.

12,13,14 (a), 15.. Regulation of functions and activities of in- 0 8 6 2

vestment companies.

17__ Regulation of trsnsaettons with allillated per- 9 23 21 11

sons.

18,111,21,22,23 Requirements as to capital structures, loans, 12 9 4

distributions and redemptions, and related

matters.

30 Reports and other documents reviewed for 0 2 2 0

26 (a) (2) (C)_______ T=te':ll:,:c;~nsatlOu------------------------- 0 1 I 0 32 Accounting supervlslon_______ 0 5 5 , 0

Total --36-I~I--;;-i---4-4

1 Excludes 5 section 8 (0 orders entered by the Commission on its own motion Without apphcatton.

In passing upon applications under the Investment Company Act,

the endeavor is made so far as possible to resolve any problems on

•
TWENTY-FIRST fu"N"UAL REPORT 99

an informal basis, by discussion and correspondence rather than by

formal hearing procedure. In the past fiscal year only four applications were set down for a formal hearing, namely, Northeast Capital

Oorporation.» Newmont j\lining Corporation,2 Government Employees

]JI[utual Fund, Inc.,a and Atomic-Electronics Fund, Inc.4 The first

two of these cases involved requests for orders pursuant to section

.3 (b) (2) of the Act declaring applicants not be investment companies.

Newmont was granted the requested order,' but the questions raised

by Northeast's application remained undecided at the close of the

fiscal year. The latter two of these cases each involved the question

whether, in view of the substantial identity in name of two corporations registered under the Act, the Commission should find, under the

provisions of section 35 (d), that the name of one of such corporations

was "deceptive or misleading." In each case, before the hearing was

completed, the matter was settled by the deregistration of one or both

'companies voluntarily.

Of the matters considered by the Commission pursuant to formal

applications filed under a particular section of the Act, those requiring

a determination of the fairness of transactions between affiliates are

generally the most difficult and complex. Examples of these include

a loan to an affiliated company by an investment company," the

optional receipt of portfolio securities of an investment company by an

affiliated person in exchange for his stock of the company,' the sale of

securities by an affiliated person to an investment company," the

.acquisition of cash and other assets of one controlled company for a

-portion of its stock held by another controlled company," and a

merger."

Some transactions involving investment companies, while important

and complicated, do not require a filing under the statute by the investment company or any affiliated person. Nevertheless, these

matters are examined carefully by reason of the Commission's respon-

.sibilities under sections 25 and 36 of the Act to bring court proceedings

if it believes that proposed reorganizations are grossly unfair or that

management has committed a gross abuse of trust. An example is

the case of Home and Foreign Securities Oorporation and Oils &:

Industries, Inc., two registered investment companies. This matter

involved a plan of reorganization proposed in settlement of a proceedI Investment Company Act release No. 2084 (January 19, 1955).

Investment Company Act release No. 2159 (June 8,1955) .

• Investment Company Act release No. 2026 (October 26,1954) •

• Investment Company Act release No. 2076 (December 30,1954) •

Investment Company Act release No 2248 (October 24, 1955).

IBrae! E1iUrpnsu, Inc., Investment Company Act release No 2016 (September 27,1954).

, Detroit and C1erJe!andNavigatimJ Companu, Investment Company Act release No. 2029 (November I,

1954)

Crum.to FOT8terSecUTltie8 Corp, Investment Company Act release No 2Oi2 (Decemher2i,1954) .

E. I. DuPont de Nemours and Companu, Investment Company Act release No. 2208 (August 5, 1955).

10 Unrted State,,!: Foreign Securttle« Corp., Investment Company Act release No 2173 (June 24, 1955).

•

•

•

•

•

•
100 SECURITIES AND EXCHANGE COMMISSION

ing brought by the Commission in December 1952 under section 36

alleging gross abuse of trust by certain officers and directors of theinvestment companies. The plan of reorganization was regarded by

the Commission as a satisfactory basis for settlement. It involved

three steps: (1) acquisition by Chesapeake Industries, Inc., of the

publicly held preferred and common stocks of Home and Foreign,

Oils & Industries, and certain subsidiaries in exchange for common and

preferred stocks of Chesapeake, through invitation for tenders; (2) themerger of Home and Foreign, Oils & Industries, and an oil company

subsidiary into a wholly owned subsidiary of Chesapeake, subject to.

appraisal rights of dissenters; and (3) the dissolution of a subsidiary

of Home & Foreign and distribution of its cash assets. Certain

protective provisions for the preferred stockholders in the event of

default in payment of six quarterly dividends were included in theplan.

Changes in the ownership of stock of a corporation acting as under--

writer or investment adviser often present questions under sections

15 and 36 of the Act. Under sections 2 and 15 the assignment of an,

investment advisory or underwriting contract necessarily results in itsautomatic cancellation; and the transfer of a controlling block of stock

of a corporation having such a contract is deemed to constitute such,

an assignment. In a 1942 opinion 11 the Commission's General

Counsel stated that in general the purported transfer of an investment

advisory contract for a consideration would constitute a gross abuse

of trust and be the subject of Commission action under section 36 of

the Act. A serious question is raised where there is a proposal to sell'

a controlling block of stock in a corporation rendering underwritingor investment advisory services to an investment company and the

sale is to be made at a figure above book value or at book value with.

other collateral promises on the part of the purchaser, and where.

consummation of the transfer is conditional upon the effectiveness.

of a new underwriting or investment advisory contract with the same'

investment company. Such questions arose with increasing frequency

during the fiscal year.

Another important segment of activity under the Investment Company Act relates to questions and proceedings arising under sections3 and 6 which pertain to the status of a company under the Act, i. e.,

whether it is required to register under the Act, or, whether- it is en~

titled to an exemption from any or all the provisions of the Act.

Much of this work is accomplished by correspondence and by conference. An example of a case where a complete exemption was

granted is United Steel Works Oorporation 12 where the Commission

considered that a fund created by the deposit of certain mortgage'

IIInvestment Oompany Act release No. 354 (May 11, 1942).

12 Investment Company Act release No. 21:)2.'; (October 14, 1954).
TWENTY-FIRST ANNUAL REPORT 101

bonds of German companies, formerly part of the United Steel Works

Corporation, Germany, and the issuance of Participation Certificates

(representing an interest in such bonds) to American holders of the

-old bonds of United Steel were entitled to a complete exemption under

the Act. The application pointed out that few if any of the substantive provisions of the Act could sensibly be applied to the situation.

Status of The Alleghany Corporation Under the Act

The Alleghany Corporation registered under the Investment Company Act on November 1, 1940. The Commission, on the basis of

.an ?rder of the Interstate Commerce Commission dated June 5, 1945,

ordered Alleghany's registration terminated on October 4, 1945 (20

S. E. C. 731). The ICC order had approved Alleghany's then existing

'Control of the Chesapeake & Ohio Railway Company and subjected

.Alleghany to certain regulatory provisions of the Interstate Commerce

Act involving, primarily, reporting requirements and supervision of

security issues. A company subject to regulation under the Interstate

Commerce Act is excepted from the definition of an "investment

'Company" by section 3 (c) (9) of the Investment Company Act. At

that time, about 86 percent of Alleghany's assets were invested in

:railroad securities including 38 percent in the Chesapeake & Ohio.

On January 19, 1954, Alleghany disposed of its control of the

Chesapeake & Ohio. Thereafter the ICC instituted a proceeding to

determine whether its 1945 order should be terminated. This proceeding was joined with a subsequent proceeding by Alleghany seeking

a new order declaring Alleghany to be a "carrier" subject to the

above-mentioned provisions of the Interstate Commerce Act. The

latter proceeding was predicated upon the asserted control by Alleghany of the New York Central Railroad Company. Alleghany,

under a separate application, also sought approval by the ICC of the

issuance of new preferred stock under a voluntary exchange offer to

its existing preferred stockholders.

This Commission intervened in the proceedings before the ICC to

determine the status of Alleghany and suggested (1) that Alleghany's

investment picture had almost reversed itself so that on September

14, 1954, only 16 percent of its assets were invested in railroad securities and the balance almost entirely in investment securities; (2)

that it would be in the public interest under both the Interstate

Commerce Act and the Investment Company Act for Alleghany to

be regulated under the Investment Company Act in view of the investment activities of Alleghany and that such regulation would be

consistent with the purposes of the Interstate Commerce Act; and

(3) that the ICC should exercise the discretionary powers granted it

under section 5 (3) of the Interstate Commerce Act to permit such

regulation under the Investment Company Act by this Commission.
102 SECURITIES AND EXCHANGE COMMISSION

On March 2, 1955, Division 4 of the ICC entered an order declaring

Alleghany to be a carrier subject to the Interstate Commerce Act

and stated among other things that it had "no discretionary power

to yield [its] jurisdiction to any other statutory agency". In view of

the importance of the issue raised, this Commission filed a petition

for reconsideration by the entire ICC of the Division 4 order. The

entire ICC affirmed the action of Division 4 on May 24, 1955,stating

"that unless Congress amends either or both of the statutes involved

herein, the results the SEC desires to achieve are not within our

powers under the Interstate Commerce Act." This Commission

sought no review of this determination. By separate order the ICC

approved Alleghany's voluntary exchange offer. .

On July 26, 1955, a three-judge court of the United States District

Court for the Southern District of New York, upon complaint of

certain stockholders of Alleghany, entered a preliminary injunction,

which, so far as here relevant, enjoined, pending final judgment, any

action pursuant to the foregoing ICC orders. The Court also noted

that the ICC's denial of any discretionary powers under the Interstate

Commerce Act "was without foundation" but stated that it was

premature for it to determine whether the ICC action in this connection was "reviewable as an abuse of discretion."

In its opinion of November 18, 1955, issued after a full hearing on

the merits, the three-judge court determined that the ICC was without jurisdiction over Alleghany at the time it issued the new preferred

stock, or that if such jurisdiction existed, the necessary findings in

support thereof were not made. The court also held in the absence

of proper jurisdiction over Alleghany by the ICC, Alleghany was an

investment company subject to regulation under the Investment

Company Act of 1940 and the issuance of the new preferred stock was

unlawful because of section 7 of that statute. A final decree was

issued by the Court in December 23, 19.55,13

As amicus curiae, the Commission filed a memorandum and

participated in the oral argument before Justice Harlan of the United

States Supreme Court on Alleghany's application for a stay pending

appeal from the preliminary injunction.

13SeeBrtSlOlck .to Co v. United Staie«, st aI, S. D N. Y., Olvrl Action No. 101-114.
PART VIII

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT

OF 1940

The Investment Advisers Act of 1940 requires the registration as

investment advisers 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 in connection with securities transactions or to have

made false statements in his application for registration. The Act

makes it unlawful for investment advisers to engage in practices

which constitute fraud or deceit, requires investment advisers to disclose the nature of their interest in transactions executed for their

clients, prohibits profit-sharing arrangements, and prevents assignment of investment advisory contracts without the client's consent.

Statistics of inoestmen: adviser regLstratLons-1955 fiscal year

Effective registrations at close of preceding fiscal year 1, 134

Applications pending at close of preceding fiscal year-__________________ 11

Applications filed during fiscal year __________________________________ 199

Total 1,344

Registrations canceled or withdrawn during yearRegistrations denied or revoked during year

Applications withdrawn during year

Registrations effective at end of year

Applications pending at end of year

124

o

3

1,203

14

Total 1,344

SIMPUFICATION OF FORMS AND RULES

Effective July 1, 1954, the Commission substantially revised forms

and rules pertaining to the registration of investment advisers.' 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 the protection of investors.

In adopting the new forms for registration as an investment adviser

and in revising applicable rules the Commission acted on the view

that, wherever possible, an application for registration should be

1Investment Advisers Act of 1940release No. 73 (lune 25,1954).

103

_

_

_

_

_
104 SECURITIES AND EXCHANGE COMMIBSION 

limited generally to information necessary to determine whether a 

registrant, or an applicant for registration, or any controlling person 

is subject to a statutory disqualification. 

Form ADV adopted during the year, applicable to investment 

advisers, is an all purpose form to be used as the form of application 

for registration; as the form to amend such an application and as the 

form of supplemental report to he Hed by a registered person. The 

new six-page Form ADV contains only 16 items or questions wherew 

Form 1-R previously used as an application for registration consisted 

of twenty pages and required information under 38 items. Adoption 

of Form ADV made it possible to rescind the single purpose Forms 

1-R, 2-R and 3-R formerly used by investment advisers. The 

Commission also rescinded the rule providing that registered investment advisers file semi-annual reports and amended applicable rules. 

The current rules require that information contained in the application 

for registration of investment advisers be kept current by amendments 

to the original application. By providing that the new form may be 

used as a ~upplement to the old forms, persons registered before 

adoption of the new form are now required to furnish only current 

information with respect to the information in the abbreviated and 

simplified new form. 

REGISTRATION OF FOREIGN INVESTMENT ADVISERS 

/ 

~hkproblem of registration of investment advisers with principal 

offices outside the United States raises important questions with 

respect to the enforcement of civil liabilities arising out of violations of 

the Act and with reference to the enforcement of sanctions which the 

Commission may invoke against such violations. Rights arising 

because of violations may be unenforceable against non-resident 

investment advisers and non-resident' individual partners in such firms 

where it is impossible to obtain service upon such persons. In order 

to afford to the Commission and others the same opportunity to enforce 

rights or duties against such persons as they have in the case of resident 

investment advisers and resident partners in such firms, the Commission promulgated rule R-2 under the Investment Advisers Act of 

1940.2 This rude which became effective on August 2, 1054,requires 

each non-resident iuvestment adviser, general partner, and managing 

agent to file with the Commission n written irrerocable consent and 

power of att'orney, designating the Commission as an agent upon 

whom may be served any process, pleadings or other papers in certain 

civil suits or actions brought in t'he United Stat,es. Tlle Commission 

also adopted four forms, designated as 4-R, 5-R, 6-R, and 7-R, to 

be used for the filing of irrevocable consents t,o service by persons 

subject to the rule. 

3 Investment Advisers Aot of laM release No.74 (June30, 1964). 
TWENTY-FIRST ANNUAL REPORT 105 

LITIGATION UNDER THE INVESTMENT ADVISERS ACT OF 1940 

The Commission filed a complaint in the United States Dist,rict 

Court in San Francisco against J. Henry Helser & Co., an Oregon 

corporation, and J. Henry Helser, its president, to enjoin them from 

violations of the anti-fraud provisions of the Investment Advisers Act 

of 1940. J. Henry Helser 8: Co., doing business as a registered investment adviser had some 6,000 clients whose accounts with carrying 

brokers contained approximately $62 million in cash and securities. 

The complaint described the Helser Plan of Investment Management as one whereby Helser clients were induced to give the Helser 

Company unlimited power of attorney authorizing it to purchase, sell 

and trade in securities on a cash and margin basis for the accounts of 

such customers. The defendant corporation charged a fee of $1 per 

share for each purchase and sale of stoclr. 

The commission alleged, among other things, that in soliciting and 

maintaining clients' accounts defendants falsely represented safety of 

principal, 100 percent capital appreciation in from 7 to 10 and 

net earnings from 9 percent to 15 percent pe.r annum. The Commission also alleged that the defendants induced their clients to deposit 

all available cash, securities and other resources under defendant's' 

management, to mortgage homes and other real estate and to borrod on 

or surrender life insurance and annuity policies in order to make such 

deposits; that clients were not informed that "Credit Arrangements" 

were in fact margin agreements, and that defendants customarily 

made immediate use of such margin agreements t,o margin clients' 

accounts almost fully; and that clients were not informed that it was 

necessary for the Hclser corporation to t,rade more than 1 million 

shares of stock in clients' accounts each year to meet defendants' 

annual hed operating expenses, which equaled or exceeded $1million. 

After a 3 week trial, the court issued an int,erlocutory order which 

stated in part: 

After consideration of the entire matter, it is the Court's uien- and opinion that 

the evidence and facts support the allegations of the Complaint, and are sufficient 

to warrant the issuance of an injunction for violation of the Investment Advisers 

Act of 1940. However, t,he Court hdieves that the issuance of an injunction at 

this time nwld he a harsh remedy under the circumstances of this case, and that 

the defendants should be given an opportunity to bring themselves into compliance 

with the statute. The dofondants hnvc submitted a written document undertaking to refrain from certain practices, and to make ohanges in their practices and 

procedures to bring themselves into compliance with the statute. The Court 

approves the Undertaking and orders that it he filed in this action. 

The undertaking which becamc a part of the court's order provided 

that the company will make no representations that it has a special 

individual investment program for each client; that it will accuintcly 

describe operations of the company and thc trading done with clients' 

. 

106 SECURITIES AND EXCHANGE COMMISSION

accounts; that it will not encourage the borrowing of money on insurance policies or homes; that it will amend its reports to clients

so that they will accurately describe the performance, the status

and the liquidating value of each client's account and be easily

understood; that it will eliminate fees based upon the number ofshares

of stock purchased or sold and will substitute a fee system based on

the percentage of clients' net equity; that it will describe the possible

hazards of accounts which are opened as margin accounts; and that it

will not represent that safety of principal is assured or that accounts

will appreciate or produce income in any particular amounts.
PART IX

RELATED ACTIVITIES OF THE COMMISSION

LEGISLATIVE MATTERS

The Commission devoted a substantial amount of time to matters

pertaining to proposed legislation and Congressional inquiries. Ten

legislative proposals were analyzed and reports submitted on them

to the appropriate Congressional committees, at their request. Apart

from specific legislative proposals, the Commission compiled much

background material for the Senate Committee on Banking and

Currency in connection with its "Stock Market Study", and testified

in its hearings. Senate Report No. 376, 84th Congress (May 26,

1955). Additional information and testimony was furnished to that

Committee ill connection with its hearings on corporate proxies.

Information was made available to the Anti-Monopoly Subcommittee

of the Senate Committee on the Judiciary in connection with its

investigation concerning Middle South Utilities, Inc. and Mississippi

Power and Light Company. The Commission provided skilled

personnel to assist the Committees in some of these matters.

An extensive study relating to amendments of various statutes

administered by the Commission culminated in the approval on

August 10, 1954 of Public Law 577, 83d Congress, amending the

Securities Act of 1933,the Securities Exchange Act of 1934, the Trust

Indenture Act of 1939 and the Investment Company Act of 1940.

Towards the end of the fiscal year work was commenced, and testimony given on a bill to extend those provisions of the Securities

Exchange Act of 1934 which now apply to securities listed and registered on national securities exchanges, to unlisted companies in

which there is a substantial public interest.

In addition, numerous Congressional inquiries were received and

answered relating to matters other than specific legislative proposals.

COURT PROCEEDINGS

Civil Proceedings

At the beginning of the 1955 fiscal year there were pending in the

courts 16 injunctive and related enforcement proceedings instituted

by the Commission to prevent fraudulent and other illegal practices

in the sale or purchase of securities. During the year 31 additional

proceedings were instituted and 33 cases were disposed of, leaving 14

of such proceedings pending at the end of the year. In addition the

Commission participated in a number of reorganization cases under

107
108 SECURITIES AND EXCHANGE COMMISSION

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 11 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 29 civil

appeals. Of these, 6 came before the courts on petition for review

of an administrative order, 9 arose out of corporate reorganizations

in which the Commission had taken an active part, 3 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 3 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

Indictments were returned against 2,259 defendants in 533 cases

developed by the Commission prior to June 30, 1955.1 These figures

include 14 defendants in 8 cases in which indictments were returned

during the past fiscal year. At the close of the year, convictions of a

total of 1,223 defendants had been obtained in 433,2or 86 percent, of

the 501 cases disposed of as to one or more defendants. Convictions

of 27 defendants in 15 cases were obtained during the fiscal year." In

addition, two defendants in two cases were convicted of criminal

contempt for violation of injunctive decrees previously entered

against them." An appeal is pending in one of these cases.

In the six appellate cases decided during the fiscal year 5 judgments

of conviction were affirmed in five cases as to all six defendants who

appealed." The remaining case, in which the conviction of a single

defendant was reversed for trial errors, was remanded for a new trial.

At the close of the fiscal year one case involving two defendants was.

pending on appeal.

I A condensed statistical summary of all criminal cases developed by the Commission from the fiscal year

1934 through the tiscal year 1955 is set forth m appendix table 24. The status of criminal cases developed by

the Commisslon WhICh were pending at the end of the fiscal year is set forth m appendix table 25.

The 6S remaining cases, which resulted ill aequlttals or dismissals as to all defendants, included a number

where the indictments were dismissed because 01 the death of defendants

One oi these cases is stlll pending as to one defendant .

• See Criminal Contempt Proceedings, appendix table 17•

• An appeal ill an addmonal case was dismissed •

Petitions for certlorarr were denied after the fiscal year in one of these cases and are pending in two other

cases.

•

•

•

•
TWENTY-FIRST ANNUAL REPORT 109

As in past years, the criminal cases developed and prosecuted during

the year, covered a wide variety of fraudulent practices. They

included fraudulent activities on the part of securities broker-dealers

and their representatives, frauds in the sale of securities relating to

oil and gas and mining ventures, and fraudulent securities promotions

with respect to alleged inventions and a variety of business enterprises. In addition to fraud charges, the defendants in a number of

cases also were charged with violating the registration provisions of

the Securities Act.

The first criminal prosecution and convictions for the "churning"

of customers' securities brokerage accounts were obtained during the

past year in U. S. v. J. Arthur Warner, et al. (D. Mass.),? "Churning"

is the term commonly used in the securities field to describe the

fraudulent practice of inducing customers to engage in excessive

securities trading for the purpose of obtaining commissions, fees, and

profits. In this case it was charged, among other things, that the

defendants, for the purpose of facilitating and increasing the excessive

trading, arranged collateral bank loans for the accounts of their

customers and concealed from them the risks inherent in these loans,

purchased for the accounts of customers securities on which dividends

were about to be declared, and falsely represented that the dividends

were additional income and part of the increased yield to customers

who traded through the defendants, and charged substantial overriding commissions and markups, in addition to the usual stock

exchange commissions, on listed securities purchased for the accounts

of customers, without sufficiently disclosing to customers the nature

or amount of these overriding commissions and markups,"

In U. S. v. Albert J. Rich (S. D. Fla.), the defendant plead guilty

and was sentenced to a 3-year prison term for having defrauded his

customers by inducing them to sell securities held by them and to

purchase other securities from him at prices greatly in excessof their

current market prices and for operating as a securities broker-dealer

without having registered with the Securities and Exchange Commission.

Other fraudulent practices on the part of broker-dealers are charged

in U. S. v. James J. MacKnight, et al. (D. Mass.), and in U. S. v.

Stanley C. Shaver, Sr. (S. D. Fla.), in which indictments are pending.

In the AlacKnight case the defendants are charged with employing

a scheme to defraud investors in the operation of a so-called "Collective Trading Fund", an investment trust solely created and controlled

7 Varying sentences ranging from 2 year; probation and a $5,000 fine to 1 year's probation and a $1,000 fine

were imposed on the defendants who were eonvieted in this case upon pleas of guilty entered after commencement ot the trial.

, A final injunctive decree enjoining similar practices was entered against the Warner firm and certain of

it~ representatives during the year. For additional details concerning the injunctive case, see 18th Annual

Report. page is. .
110 SECURITIES AND EXCHANGE COMMISSION

by the defendants." In the Shaver case the defendant is charged,

among other things, with having converted customers funds and

securities.

Oil and gas promotions were involved in convictions obtained during

the fiscal year in U. S. v. Homer J. Cox (D. N. M.); U. S. v. D. W.,

Crawford et al (D. S. D.) and U. S. v. Thomas H. Carney (D. Utah).

In the Cox case the' defendant was found guilty and sentenced to 5

years imprisonment for fraud and registration violations in selling

interests in carbon dioxide gas wells by false representations concerning the number of wells on the property in question, the purported

returns to be received on the investment and similar matters. In

the Crawford case, defendants were convicted for fraudulent conduct

in procuring fractional mineral deeds from landowners in North and

South Dakota. A probationary sentence of 2 years and a $750 fine

was imposed on each of the defendants. In the third case, Carney

received a 2-year prison sentence upon his plea of guilty to an indictment charging fraudulent representations in the sale of oil and gas

interests and misappropriation of funds solicited to operate the properties involved.

An indictment has been returned in the Eastern District of Wisconsin against William F. Horsting, Sr., and his son, charging fraud

in the sale of fractional undivided oil, gas, and mineral rights by means

of false representations concerning the alleged investments made by

the defendants in the properties, their success as oilmen, and similar

matters. After the close of the fiscal year, an indictment wasreturned

against Ben E. Young at Spokane, Wash.,. charging fraud violations

in the solicitation of funds to be paid to the United States as rental

and filing fees for its Oregon oil leases, which funds it is charged the

defendant appropriated to his own use, while informing investors that

the applications had been filed.

Fraud violations resulted in a conviction in U. S. v. Oliver O.

Kendall (W. D. Tex.) and registration violations in convictions in

U. S. v. Charles A. Howe et al. (S. D. Ohio), both cases involving

mining promotions. Kendall plead guilty to an indictment charging

him with making false representations concerning a Mexican lead

mine, purported investment returns and the like, and was sentenced

to a 3-year term.'? In the Howe case, registration violation charges

were sustained in the sale by the defendants of investment contracts

covering alleged gold properties and a purported process for extracting gold from fine deposits. Howe received a prison term of a year

and a day and the corporate defendants were fined $1,000 each." In

Upon facts simIlar to those charged in the indictmcnt, a permanent injunction was previously entered

against the defendants m this case, see 20th Annual Report 46-47

10 Kendall also was sentenced to a concurrent 3-year term upon a plea of guIlty to a previous perjury

indictment returned as a result of his testuuony in an mvestigation in 1943.

11 The defendants were acquitted on the fraud charges included ill this case.

•
TWENTY-FIRST ANNUAL REPORT 111

another mining venture, an indictment was returned in the Southern

District of New York against Standard Tungsten Corporation, its

president and its secretary, charging fraud in the sale of the company's

stock by means of alleged false representations including offering

circulars and press releases relating to the purported value and prior

development of the mining claims involved, the identity of investors,

funds available for operations and other matters.

Cases involving corporate and other miscellaneous business promotional enterprises include U. S. v. Pierre P. Pattyn (E. D. Mich.),

U. S. v. Giles H. Florence et al. (E. D. Wash.), U. S. v. James Robert

Palmer et al. (D. Colo.), U. S. v. George L. White (N. D. Ill.), all of

which resulted in convictions for registration, fraud violations or both.

Pattyn plead nolo contendere to an indictment charging fraud and

registration violations in the sale of unregistered securities of a

corporation misrepresented as successfully manufacturing and marketing ingenious electronic gadgets enabling the blind to see, creating

wireless lights and similar devices." Sentence was suspended for

a 2 year probationary period. Palmer was convicted of fraudulently

misrepresenting the :financial integrity and value of stock of the

:finance company being promoted by him." He was sentenced to a

prison term of 6 years."

Defendant Florence and co-defendants 15 entered pleas of guilty

to an indictment charging fraud and registration violations in the

sale of stock in a certain furniture company by false representations

as to the company's :financialcondition and future business prospects.

Florence and co-defendant Druke received 1 year prison terms and

:finesof $1,000 and other co-defendants were placed on 3 years probation and :fined$500. George S. White plead guilty to fraud violations

in the sale of stock of a motor products company involving false

representations as to the identity of the corporation whose stock was

being sold, its value, and other matters."

In U. S. v. Osceola GrovesInc. et al. (S. D. Fla.) the corporation was

convicted of fraud and :fineda total of $42,000 for employing a scheme

to defraud investors in the sale of citrus groves by means of misrepresentations as to the -operating condition of the properties involved,

:financialreturns potential and related matters."

Indictments have been returned in the District of Montana against

Charles A. and Arthur V. Donaldson alleging fraud violations in the

sale of stock of Billings Holding Corporation and the issuance of

For additional details, see 18th Annual Report 173.

13 For additronal details, see 20th Annual Report 103.

Palmer and hISWife, were also convicted ill the same case of mail fraud III connection With the assignment of automobile chattel mortgages. Mrs. Palmer's sentence was suspended for a 3-)'ear probationary

period

16 Certain co-defendants plead guilty only to registration vlolauons.

16 For addttional details, see 18th Annual Report 174.

11 The president ofthe corporation, who was a co-defendant, was acquitted,

"

"
112 SECURITIES AND EXCHANGE COMMISSION

insurance policies by a company alleged to be non-existent. Two

Chicago architects, Henry K. and William T. Holsman have been

indicted in the Northern District of Illinois for allegedly making

fraudulent representations in the sale of trust certificates relating to

$ large scale cooperative apartment house project. Mter the fiscal

year, an indictment was returned at Spokane, Wash., charging

Richard W. Bo,vler with fraud violations involving alleged misrepresentations in the sale of his personally owned stock in a warehouse

company, whose precarious financial condition was allegedly concealed

by him.

Violations of Injunctive decrees previously obtained by the Commission led to the convictions for criminal contempt in the William

E. Horton (S. D. Cal.) and Homer O. Mills (D. Nev.) cases. Horton

was found guilty of criminal contempt of court for selling unregistered

securities of the Horton Aircraft Corporation in violation of court

orders previously entered against him restraining him from violating

the registration requirements of the Securities Act of 1933. He was

fined $1,000 and placed on probation for a 5-year period. Similarly

Mills, who was also placed on probation for 3 years, was convicted

of criminal contempt for selling unregistered securities to residents of

southern California in violation of the terms of preliminary and final

injunctive decrees previously entered against him in the District of

Nevada. He has appealed his conviction.

In the criminal appellate cases decided during the year, judgments of

conviction were affirmed in U. S. v. Vasen, 222 F. 2d 3 (C. A. 7, 1955),

cert. denied, 350 U. S. 834 (1955); Henderson v. U. S., 218 F. 2d 14

(C. A. 6, 1955), cert. denied 349 U. S. 920; Estep v. U. S., 223 F. 2d 19

(C. A. 5,1955)18;Owens v. U. S., 221 F. 2d 351 (C. A. 5, 1955); Thomas

v. U. S., 227 F. 2d 667 (C. A. 9,1955)18;and reversed in Frank v. U. S.,

220 F. 2d 559 (C. A. 10, 1955). The latter case, which involved an

oil and gas lease promotion", was remanded for a new trial because of

certain trial errors. The Vasen conviction, which also arose out of

an oil promotion, involved the sale of fractional undivided interests

in a well that reached a depth of 20,450 feet, said to be the second

deepest well in existence." In the Henderson case, in which a prior

conviction on the same charge of mail fraud violation previously had

been reversed upon appeal and a new trial granted," the conviction

also resulted from the sale of fractional interests in oil and gas rights.

The defendant in the Estep case, who has variously held himself out

as an atomic scientist, an inventor, a doctor of medicine, and a spiritualistic healer, was convicted of fraud and registration violations

in connection with the sale of stock of Atomotor Manufacturing

18 Petitions for certlorar r are pendmg In these cases.

l' For addlttonal details, see 20th Annual Report 102.

,. For additional details, see 20th Annual Report 102.

• 1 See 20th Annual Report 101, 19th Annual Report 104, 17th Annual Report 151.
TWENTY-FIRST ANNUAL REPORT 113

Company, Inc., which was fraudulently represented as being about

to market a fuelless self-energizing motor or, in effect, a claimed

perpetual motion machine." The convictions of the defendants in

the Owens case, resulted from a scheme which included, among other

things, an alleged romance with an investor, the setting up of dummy

corporations and the obtaining of money by means of a variety of

representations and promises calculated to deceive investors into

believing that the defendant "Owens was a powerful and clever

magnate". The Thomas case involved the sale, by means of misrepresentations and concealment of material facts, of stock of Thomascolor Incorporated, a company organized for the purpose of exploiting

an allegedly new color photography process and a company for which

a registration statement covering the sale of its stock had previously

been the subject of stop order proceedings under section 8 (d) of the

Securities Act.23

Extradition Proceedings

In an effort to meet the important and recurrent enforcement problem arising out of the fraudulent sale of securities by mail and telephone to United States residents by promoters operating out of

Canada, a Supplementary Extradition Convention between Canada

and the United States was ratified on July 11, 1952, which was

designed to broaden the existing extradition arrangements so as to

permit the extradition of persons engaging in such activities." In

the fall of 1954 in the first case, U. S. v. Link and Green,253 D. L. R.

386 (1955), brought under the new extradition arrangements, extradition was denied. After an extensive five weeks hearing, the Extradition Judge announced that he was satisfied that a prima facie case

of fraud had been made out against the defendants involved, but

nevertheless denied the extradition request because he did not approve

of the extent of the evidence which might be admissible in the prosecution of these defendants in the United States. Because of the adverse

effect this judgment would have upon future extradition cases,

application was made to the Supreme Court of Canada for leave to

appeal the decision. However, the application was denied by the Court

for lack of jurisdiction, U. S. v. Link and Green [1955] S. C. R. 183.

It is possible that an advisory opinion in this important area may

still be obtained from the Supreme Court of Canada. The Canadian

Government, should it deem it appropriate, may refer the questions

involved to the Court under special jurisdictional provisions contained

in the Canadian Supreme Court Act .

.. For additional details, see 20th Annual Report 103.

osSee 18th Annual Report 173,14th Annual Report 13-15and In the Matter of Thomascolor InMrP0rated.

27 S. E. C. 151 (1947)

:ll For additional details, see 17th Annual Report 15!H60, 18th Annual Report 17!H80.

.. Defendants in the T. M. Parker case, see 20th Annual Report 103-104.

378413-56-9

_
114 SECURITIES AND EXCHANGE COMMISSION

COMPLAINTS AND INVESTIGATIONS

Specific authority for the Commission to conduct its own investigations to determine whether violations of law have occurred is contained

in each of the Acts administered by the Commission. These investigations are conducted primarily by the regional offices under the

general administrative supervision of the principal office.

Most Commission investigations originate from direct complaints

by members of the investing public and, with respect to registered

broker-dealers, from the Commission's broker-dealer inspection

program. The number of such complaints and inquiries amounts

to many thousands every year. Each complaint and broker-dealer

inspection report is examined and considered to determine whether

possible violations of the Acts are involved. If it then appears that

a violation may have been committed, a preliminary investigation

is made.

Preliminary investigations may take the form of an examination

of the Commission's files, correspondence with persons who have

information on the subject and telephone inquiries or, when believed

advisable, may extend to personal interviews with a limited number

of persons. In many instances this preliminary investigation will

be sufficient to disclose that no violation has been committed or that

an inadvertent violation has taken place because the offender has

either misunderstood or been unaware of the law. Under the latter

circumstance, the violator is appropriately advised of the requirements of the law and the preliminary investigation serves to bring

about compliance with the law before serious damage or loss befalls

the investing public,

If a matter cannot be 'disposed of satisfactorily after a preliminary

investigation, a case is docketed and a full and detailed investigation

is made. In connection with such investigation, the Commission

may utilize its power, through officers it may appoint for such purpose

from its staff, to issue subpoenas requiring the appearance of witnesses

to testify under oath and the production of documents. This power

is used only when the necessary evidence cannot otherwise be obtained

and the exercise thereof islimited to the persons specifically designated

by order of the Commission and to the subject matter of a particular

investigation. During the fiscal year 35 such orders were issued.

When an investigation has been completed, a report is submitted

by the investigators to the Regional Administrator who, after review,

makes a recommendation that the Commission institute appropriate

action or close the investigation. In each instance, these reports

are analyzed by the staff in the Commission's principal office and

presented to the Commission for disposition.

Action of the Commission may take the form of a reference of

evidence to the Attorney General in cases that appear to call for crimi-
TWENTY-FIRST ANNUAL. REPORT 115

nal prosecution, a civil proceeding for injunctive relief, or administrative proceedings against broker-dealers and investment advisers.

In addition, the Commission also refers evidence of violations of other

Federal statutes and State laws to appropriate federal or state

authorities.

The following table reflects the investigative activities of the

Commission during the fiscal year:

Investigations of possible violations of the acts administered by the Commission

Prellmmary Docketed Total

Pending .Tune 30, 19M_______________________________________________ New 198 5Zl 725 cases_. ________________________________________________________ 164 194 358 Transferred trom preliminary _______________________________________ -.---------- 34 34

Total 362 755 1,117

Closed. 165 Zl4 439 Transferred to docketed _____________________________________________ 34 ---_ ..__ ... --.- 34 Pending at .Tune 30,1955 ____________________________________________ 163 481 644

Restitution

One of the most important results of the investigative activities

of the Commission is the restitution to investors and others of amounts

obtained from them by practices which violate the securities laws.

Although it is impossible to compute the total so restored through the

rescission of purchases and sales and otherwise it is estimated that the

aggregate amounts to several million dollars annually.

In one case investigated during the year it appeared that an

insurance company had sold 57 percent of its stock to promoters and

other insiders for $265,000 and the remaining 43 percent to the public

for $3,913,000. The insiders then resold part of their stock, realizing

a profit of $496,000. Investigation showed that the public sales had

been effected on the basis of incomplete disclosure regarding, among

other things, the issuance of the promoters' stock. Acting on advice

of their counsel, the insiders turned over their profits to the company

and transferred large amounts of their personally owned stock to other

stockholders. The cash and the estimated value of the stock so

restored amounted to over $1 million.

In another case it was found that the president of a company

had purchased stock direct from stockholders at $28 a share when the

stock was being quoted at a much higher figure by dealers in the overthe-eounter market. During the course of the investigation the president sold the stock in the over-the-counter market for $108 a share

and remitted the excess over $28 received to the stockholders who had

sold him the stock.

The amounts actually returned to investors in cases of this nature,

large as they are, are only a small part of the amounts that are saved

by the prevention of fraudulent transactions before they can be

consummated.

____• ____________________________________________________

__• _________________________________________________________•
116 SECURITIES AND EXCHANGE COMMISSION

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

provide 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 cooperation of the United States Post Office Department, the Federal Bureau of Investigation, parole and probation

officials, state securities commissions, Federal and State prosecuting

attorneys, police officers, Better Business Bureaus, and the United

States Chamber of Commerce. By the end of the 1955 fiscal year

these records contained data concerning 58,187 persons against whom

Federal or State action had been taken in connection with securities

violations. During the past year items of information relating to

3,867 persons were added to the records of this Section, including information concerning 1,585 persons not previously identified therein.

Extensive use is made of this clearing house of information. During

the past year in connection with the maintenance and preventive use

of these records, the Commission received 2,995 "securities violations"

letters or reports and dispatched 1,601 communications to cooperating agencies.

ACTIVITIES OF THE COMMISSION IN ACCOUNTING AND AUDITING

Recognizing the importance to investors of dependable financial

statements which disclose the financial status and earnings history

and potentialities of a corporation or other commercial entity, the

various Acts administered by the Commission deal extensively with

financial statement presentation and the accounting concepts and

principles upon which they are based. These Acts grant the Commission broad authority to prescribe, among other matters, the form and

content of financial statements required to be filed by registrants

subject to the Securities Act of 1933 and the Securities Exchange Act

of 1934, to prescribe uniform systems of accounts for companies subject to the Public Utility Holding Company Act of 1935, and to provide for a reasonable degree of uniformity in accounting principles and

policies to be followed by registered investment companies in maintaining their accounting records and in preparing financial statements

required by the Investment Company Act of 1940.

The principal accounting requirements prescribed by the Commission under these Acts are contained in Regulation S-X, which

governs the form and content of most financial statements required to

be filed with the Commission. Implementing this regulation are 77
TWENTY-FIRST ANNUAL REPORT 117

Accounting Series Releases which have been issued from time to time

since 1937 for the purpose of contributing to the development of uniform standards and practice in major accounting questions. In addition, uniform systems of accounts have been prescribed for certain

public utility holding companies and for public utility mutual and

subsidiary service companies, and, under the Securities Exchange Act,

rules have been adopted governing record keeping, financial reporting,

and the auditing of the books and records of exchange members,

brokers and dealers.

These requirements, except for the uniform systems of accounts,

pertain to the accounting to be followed only in certain basic respects,

and in those areas not covered reliance for the protection of investors

is placed upon the determination and application of accounting principles and standards which are recognized as sound and which have

attained general acceptance.

The various Acts also give recognition to the desirability of obtaining independent review of financial statements made available to

investors or prospective investors through filing with the Commission,

and the Commission requires that such statements be certified by

independent public accountants. The Commission's standards of

independence are stated in rules 2-01 (b) and (c) of Regulation S-X

which provide among other things that an accountant will not be

considered independent with respect to any person, or any affiliate

thereof, in whom he has any financial interest, direct or indirect, or

with whom he is connected as a promoter, underwriter, voting trustee,

director, officer, or employee. In determining whether an accountant

is in fact independent with respect to a particular registrant, the

Commission will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between

the accountant and that registrant or any affiliate thereof.

In order that the Commission may be kept informed as to whether

financial statements filed with the Commission are based upon sound

and generally accepted accounting principles the Commission's accounting staff engages in continuing study and research. These activities, primary responsibility for which rests with the Chief Accountant of the Commission, require close contact and cooperation

between the staff and accountants both individually and through such

representative groups as, among others, the American Accounting

Association, the American Institute of Accountants, the Controllers

Institute of America, the American Petroleum Institute, the National

Association of Railroad and Utilities Commissioners, and the National

Federation of Financial Analysts Societies, as well as with other governmental agencies. During the year matters which required consideration and discussion with one or more of these groups included

the appropriate accounting for corporate mergers and acquisitions;
118 SECURITIES AND EXCHANGE -COMMISSION

the effect accounting-wise of the repeal of section 452 of the Internal

Revenue Act of 1954 which permits the deferment, until earned, of

income collected in advance, and section 462 which provides for deductions for certain reserve provisions (e. g., cash and quantity discounts, vacation pay, product guarantees) in lieu of actual expenditures therefor; and the requirement of filing of semi-annual income

and surplus statements."

OPINIONS OF THE COMMISSION

Findings and opinions are issued by the Commission in all cases

where the matter to be decided, 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 principle embodied in the Administrative Procedure Act requiring a separation

between quasi-prosecutory functions and quasi-judicial functions, the

personnel of the Office of Opinion Writing 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, opinions and orders in 77matters.

With minor exceptions, all findings, opinions and orders are publicly

released and constitute a source of information for the bar and other

interested persons.

CONFIDENTIAL TREATMENT OF APPLICATIONS, REPORTS, AND

DOCUMENTS FILED WITH THE COMMISSION

The Commission is empowered under various of the Acts administered by it to grant upon application confidential treatment with

respect to certain types of information 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 rule 485 providing that information as to material contracts, or portions thereof, filed as a part of

a registration statement will be given confidential treatment where it

determines that disclosure would impair the value of the contracts

and is not necessary for the protection of investors. Circumstances

under which other rules provide for holding non-public information

contained in filings with the Commission include cases where the

information may require classification in the interests of national

defense, and in such cases the Commission may protect such informal!Bee securities Act release No.1i189 (June 23,1955).

-
TWENTY-FIRST ANNUAL REPORT 119

tion pending determination by an appropriate department or agency

as to whether such information should be classified.

The number of applications granted, denied or otherwise accounted

for during the year may be noted below.

Application8 for confidential treatment-1955 fi8cal year

Number Number Number peuding Number Number denied pending

July I, received granted or with- June 30, 1954 drawn 1955

--- Securities Act of 1933 '. ________________________ 1 Z7 23 2 3 Secuntles Exchange Act of 1934'. _____________ 1 14 10 2 3 Investmeut Company Act of 1940 0 4 4 0 0

TotaL ___________________________________ 2 45 37 4 6

, Flied under rules 485 and 171. Filed under rule X-24B-2.

, Flied under rule N-45A-1.

The total of 45 applications filed during the year compares with 93

in the 1954 fiscal year and 121 in the 1953 fiscal year. The revision

of Form N-30A-1 which became effective May 6, 1954, eliminated

the requirement for open-end investment companies to file a list of

its dealers under rule N-45A-1 as an exhibit to its annual report.

This revision accounts almost entirely for the sharp drop in the total

number of applications filed during the 1955 fiscal year.

STATISTICS AND SPECIAL STUDIES

The Commission prepares and publishes regularly a number of

statistical series relating to the capital markets, saving and investment, which are briefly described below. There are also prepared

from time to time special studies for the Commission's own use in

formulating its rules and regulations, data for use by the Congress,

and special surveys for improving the regular statistical series of the

Commission. The Commission's activities in these respects are

coordinated with the overall government statistical program.

During the fiscal year 1955, several studies concerned with stock

market activity and practices were prepared for internal use, and

data in this connection were also furnished the Senate Committee on

Banking and Currency for its study of the stock market. Some of

the data prepared for this Committee regarding institutional purchases

of stock in recent years were published in Chapter V of the Committee's staff report entitled "Factors Affecting the Stock Market."

One new survey relating to corporate pension funds was undertaken

during the latter part of fiscal year 1955, and is expected to be conducted annually. This report, which covers the assets and income

items of all corporate pension funds, is based on sample data obtained

from companies registered with the Commission.

•____________

•
120 SECURITms AND EXCHANGE COMMISSION

..All of the statistical series described below are published regularly

in the Commission's Statistical Bulletin. In addition, press releases

presenting current figures and analyses of the data are published

quarterly (and may be obtained upon request) for the following series:

securities offerings, working capital of U. S. corporations, individuals'

saving, plant and equipment expenditures and financial report for

manufacturing companies. The stock price index is released weekly,

together with data on round-lot and odd-lot trading.

The various statistical series are as follows:

Issues Registered Under the Securities Act of 1933.-Monthly

and quarterly statistics are compiled on the number and volume of

registered securities, classified by industry of issuer, type of security,

and use of proceeds. Data for the 1955 fiscal year appear at page 8

and in appendix tables 1 and 2.

New Securities Offerings.-This is a monthly and quarterly series

covering all new corporate and non-corporate issues offered for cash

sale in the United States. The series includes not only issues publicly

offered but also issues privately placed, as well as other issues exempt

from registration under the Securities .Actsuch as intrastate offerings

and railroad securities. The offerings series includes only securities

actually offered for cash sale, and only issues offered for account of

issuers. .Annual statistics on new offerings since 1950, as well as

monthly figures from January 1954 through June 1955, are given in

appendix tables 3 and 4. A summary of the data is shown annually

from 1934 through June 1955 in appendix table 5.

Corporate Securities Outstanding.-Estimates of the net cash

flow through securities transactions are prepared quarterly and are

derived by deducting from the amount of estimated gross proceeds

received by corporations through the sale of securities the amount of

estimated gross payments by corporations to investors for securities

retired. Data on gross issues, retirements and net change in securities outstanding are presented for all corporations and for the principal

industry groups.

Stock Market Data.-8tatistics are regularly compiled 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 non-members, odd-lot stock

transactions on the New York exchanges, special offerings and secondary distributions. Indexes of stock market prices are compiled,

based upon the weekly closing market prices of 265 common stocks

listed on the New York Stock Exchange. The indexes are composed

of 7 major industry groups, 29 subordinate groups, and a composite

group.

Saving Study.-The Commission compiles quarterly estimates of

the volume and composition of individuals' saving in the United

-
TWENTY-FIRST ANNUAL REPORT 121

States. The series represents net increases in individuals' financial

assets less net increases in mortgage and consumer debt. The

study shows the aggregate value of saving 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.

Financial Position of Corporations.-The series on working capital position of all United States corporations, excluding banks and

insurance companies, shows the principal components of current

assets and liabilities, and also contains an abbreviated analysis of the

sources and uses of corporate funds.

The Commission, jointly with the Federal Trade Commission,

compiles a quarterly financial report for all United States manufacturing concerns. This report, an outgrowth of the working capital

series, gives complete balance sheet data and an abbreviated income

account, data being classified by industry and size of company.

Plant and Equipment Expenditures.-The Commission, together

with the Department of Commerce, conducts quarterly and annual

surveys of actual and anticipated plant and equipment expenditures

of all United States businesses, exclusive of agriculture. Shortly

after the close of each quarter, data are released on actual capital

expenditures of that quarter and anticipated expenditures for the

next two quarters. In addition, a survey is made at the beginning of

each year of the plans for business expansion during that year.

PERSONNEL AND FISCAL

The personnel of the Commission as of June 30, 1955, consisted of

the following:

Commissioners _________________________ __ ______ _ 4

(1 vacancy)

Staff:

Headquarters Office 411

Regional Offices 251

662

Total_______________________________________________ 666

Although the Commission's appropriation for fiscal 1955 permitted an

average employment of 699 persons, it was necessary to reduce the

staff to 666 by the year's end in order to stay within the appropriation.

This was accomplished principally by not filling vacancies and by

lending employees to other agencies on a reimbursable basis.
122 SECURITIES AND EXCHANGE COMMISSION

$1,101,337

1,800

583,135

16,535

483

In comparison to the Commission's peak employment of 1,723 in

fiscal 1941, employment infiscal 1955 represented a reduction of 61%.

Even when compared to fiscal 1951 employment of 1,040, it represents

a reduction of over 32%. In contrast to these severe reductions in

personnel, the statutory duties of the Commission remained unchanged, and during the fiscal year 1955 practically all of the Commission's responsibilities were increased in view of the great activity

in the securities markets.

The Commission's appropriations and employment for fiscal years

1951 through 1955 are shown in the following table.

"Includes $93,180 for salary increases authorized under Public Law 114-84th Congress.

The amount of public financing undertaken in fiscal 1955 exceeded

that of any year in the Commission's history, and as indicated elsewhere in this report, there is every indication that economic activity

will continue at a high level. Although funds appropriated by the

Congress for fiscal 1956 will permit an average employment of 717,

a further increase in staff is essential if the Commission is to continue

to protect the public in the manner and to the extent directed by

statute.

Fees.-The following fees were collected in fiscal 1955:

Registration of securities issued

Qualification of trust indentures

From registered exchanges

Sale of copies of documents or portions thereofMiscellaneous collections

Total 1,703,290

Fees are turned over to the General Fund of the Treasury and are

not available for expenditure by the Commission. Approximately

35% of the Commission's appropriation for fiscal 1955 was offset by

these fees.

PUBLICATIONS

Publications issued during the fiscal year include:

Statistical Bulletin. Monthly.

Official Summary-of Securities Transactions and Holdings of Officers, Directors

and Principal Stockholders. Monthly.

_

_

_

_

_
TWENTY-FIRST ANNUAL REPORT 123

Twentieth Annual Report of the Commission.

Securities Traded on Exchanges under the Securities Exchange Act of 1934,

as of December 31, 1954.

Companies Registered under the Investment Company Act of 1940, as of

December 31, 1954.

Financial Report, U. S. Manufacturing Corporations. (Jointly with Federal

Trade Commission.) Quarterly, 1954.

Regulation S-X as of January 10, 1955.

Rules and Regulations under the Securities Exchange Act of 1934, January 3,

1955.

Rules and Regulations under the Investment Company Act of 1940, May 1,

1955.

Statement of Policy amended January 31, 1955.

Working Capital of United States Corporations. Quarterly.

Volume and Composition of Saving. Quarterly.

New Securities Offered for Cash. Quarterly.

Plant and Equipment Expenditures of U. S. Corporations. (Jointly with

Department of Commerce.) Quarterly.

INFORMATION AVAILABLE FOR PUBLIC INSPECTION

The Commission maintains Public Reference Rooms at the headquarters office in Washington, D. C., and at its Regional Offices in

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 Wasbington. During the fiscal year 2,805 persons made

personal visits to the Public Reference Room seeking public information and an additional 20,01l 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, 2,029 orders involving a total of 80,810

page units were :filledand 524 certificates attesting to the authenticity

of copies of Commission records were prepared. The Commission

also mailed 425,327 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 statements under the Securities Act of 1933. During the

fiscal year 12,291 persons visited this Public Reference Room and

more than 8,842 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.
124 SECURITIES AND EXCHANGE COMMISSION

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.
PART X

APPENDIX

STATISTICAL TABLES
126 SECURITIES AND EXCHANGE COMMISSION

TABLE I.-A 21-year record of registrationJJ fully effect~ve under the

Securities Act of 1933

1935-1955

[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 1955 , 779 10,960 8,277 3,951 462 3,864

1 For 10 months endeliJune 30,1935 . Of these, 75 represent amendments by Investment companies registermg additional secunties as pro- vided by section 24 (6) (1) of the Investment Company Act of 1940.

_______________---- -- ______ ________________- __- _______

________________- _- _- ______

________________- --- - -- ---- ________________-- - -- _- ___- ________________- __________

________________- -- ________

•
TWENTY-FIRST ANNUAL REPORT

TABLE 2.-Registrations fully effective under the Securities Act of 1933

PART I.-DISTRIBUTION BY MONTHS, FISCAL YEAR ENDED JUNE 30, 1955

[Amounts inthousands of dollars I]

127

All registrations Proposed for sale for account of Issuers

Year and month

Number of Number of Amount Number of Number of Amount statements Issues statements issues

1951, July __________________________

August. ______________________ 47 63 949,049 43 57 931,083 43 47 507,949 36 36 452,529 September ____________________ 56 83 742,756 51 73 625,372 October _______________________ 71 88 1,609,644 62 71 622,082 N ovem ber ____________________ 54 88 444,169 42 69 305,937 December ____________________ 53 92 515,775 40 72 405,405

1955 January

February _____________________ 63 105 &\0,065 55 92 693,707

March 51 62 880,639 49 57 837,414 ________________________ 82 121 1,229,158 74 108 1,063,650

tis':_::::::: :::::::::: :::::::: 82 112 1,078.091 78 96 935,628 94 120 1,487,717 85 94 976,733 J une __________________________ 83 108 655,164 63 75 427,277

Total, fiscal year 1955 779 1,089 10,960,177 I 678 900 8,276,811

PART 2.-PURPOSE OF REGISTRATION AND TYPE OF SECURITY, FISCAL YEAR ENDED

JUNE 30, 1955

[Amounts In thousands of dollars I]

Type of security

Purpose of registration Bonds, de- \ I Preferred

\

Common All types bentures, stock stock' and notes'

All registratlons ________________________________________ 10,960,177 3,966,389 683,131 6,310,657

For account of issuers for cash sale __________________ 8,276,811 3,950,768 462,053 3,863,990

Corporate ______________________________________ 8,172,448 3,846,405 462,053 3,863,990

Offered to: General pnblic _________________________ 6.279.166 3,455,729 366,562 2,456,875 Security holders ________________________ 1,512,441 314,543 92,655 1,105,243 Other special groups ___________________ 380,841 76,133 2,836 301,873

Foreign governments ___________________________ 104,363 104,363 --_._------- -----------.

For account of issuers for other than cash sale ______ 2,311,728 13,170 198,827 2,099,731

For account of others than Issuers __________________ 371,637 2,450 22,251 346,936

See footnotes at end of table.

__•• __________________

___ •

•

1
128 SECURITIES AND EXCHANGE COMMISSION

."

0..,

l<1

Z

P..., "0

4> 0 ;:l

0

Z l':: l<1 0

0 -<1

l<1

e:. >t

,;, ...... -<1

'c' 0

l7.l

<3 ....

"" ..

'" z ." -<1 .~ =' I- p:

;:s f-o ... <.> l7.l :3 sc .... 0

CIJ 0 '0

., I'il ...

0

'S '0

I-

"" <l

'" 0 1J! "l:3 >t " l:: 0

;:s ,s ., s- ::. I1l .s

P <.> 0 <J

Z "

0 ., .... s ;::r, 0

:i z

-<1

.. Z l::

0 0 ." .... e f-o

-<1 .t;

.:-g f-o

l7.l

....

0

I l<1

ci "" fiI 0 ..:l l7.l III

-< I'il

E-i ell

0

Po<

P

Po<

I

cO

...

III

...

Po<

.., co 18 :18 . . 0 . , S

~E!l co .., :~- . . , .... <0 '" ....- ..... . 0 ",,-

cPQs S S 0

:S . , 0

... . . 0

~~S . . . . . . . . 0

, . . . . . . :2 .., ." ... .... .... , t- o",",, c;I; "''0 t- S g( '" . co 0 ......,

e~~ 0 0 ."

..."'''' co

,..: 0 ,,; ,,; ., 0; C'i~ .... 0

S-:5 '" t- g( co . co.., 0.$ 0 .... .... "" "" , ... . 0" . I~<:' <Ji t- o

"" . "" "'...... c:::e:-:;; 0 0 "" ... , ." 00 .... .... ... '" 0 .... .... , 0 ..."'0 co

...~- 00 cO 00 18 .... ..;r-:o'" C'i r-, ." co . 0 "''''' "" o~i co co e-, t- o

, 0:'"

.13", ., .. ... ... . ... ... , . g g . ,0

0 l'l .... .... "" '" r ee , ~g~ ... .... .... '" '" :0:. ... ...- 00 ",' ",' ..... . :~ , >_<'1 gj gj . ." ... . 0:0:'"

...... "" ",' '" """,,' ",,' C'i . . s . . "" 0 ... 0

'" , e-, ,""." tO:O: . ec '" lO t- '" '" . .. ..,,"" '" EoS co 0 0 . t- :t: .. g ..,- .. ,..: ~- '0 o' .., . !... GO co co co . 0 .. " , , '0 0: S S 0 .. 0 0 e-, t- .0

.:l :J~~-g '" '" '" . ee ee '0

'" co 0 0 e-, co ,'" ~.g~ £

"" "" ;:j' ",' , . 0"

~:s~:a ... "" r "" 8 b'"'

'" "" co ::: co co ee ""..... t-

~'g8 :s 0 0 S ... "''''' 0

'" co co ......, ... -"'- <:5 00 ,,; ,,; 0; r-:ail:'i g gene: .~g( :s t-..,,,,,

iilgJ,~ '"",,' ",,' ",,' cO

... '" :;; e- 0 ...."'0 0

E <0 co ." ee ... ..."'''' '" .., . ... "''''' o' .... ,,; ,,; .,,' oO<:rJ"'t-"' 00 .E 0 S ,

"" ." ... "" . b :s ... "" 0

'" '" , "',",0

"" es <0 <0 .... '" 0

.!l." "" "" 0 0 0 0 . 0 "' .... ." 0

=='.5 :::' ",' ",' ",,' ~.t:',fco .. <:5 0: ... '" .. .. ee """'." "" "''' .. ." e- e-, . r-- 0"'''' ~- ",' ",' .... .... "" . .... .... . '" '" .... $ ... ec ee

"" ""<00 .... .... eo l::; .... <0

"" <0",,,, ee -'" .... 0 ." ... '" t- ... .,,0 0 bll_ .... <:5 Ii 0' ~-...; ... a5~M ;:i' eo .. ~S ... .,"''''' '" .., "" '" "'.."" :<- 00 ",,- ",,' .... '"

, , - , . , . . . . . . . , . . . , . , . . . . . . , . . . . ,

. . . . . . , . , . -

, , . , . . , . , . , . . . . . . . , . , ;::; . . ... , . . , " . " , , " !'1 :3 . . . , " . "'0: ., . Q;' . . , . ~"*: " . , . ;:;, . . 7il . . 0:

e , , > ~g& '" , . . , '0 . .;; :5 , . '0 . .s , .. !'1 ~~t:i , :~ 13 j , ee ~.9o. 0: 0

.E ,,; "0 ee .g-g~ E- , -"" :5 0 o I! ...

" S -3 ... 00 ><>OZ ... gj 0 c.S ... 0

$

""

.0 "

"" ... - g 00 :5 0"0

.s " oZ 0 ""p:~ " 0 ... ... 0

'0 ...

0 "

e 0 0 " ... " a ee "" "" '" " ;:;, ... ... .0 .0 0 0

s S 1: "'" "'" z z"

~ ~

'"

~

~ ~ ~

~~~

~ ~ '" '" ~ '" '"

~ '" ~ '

~ ~~ '" '"

~

~ '" ~ ~ ~

'"

~ '" ~

~ ~ ~ '"

'" '"

'" ~ ~ ~ '"

~ ~ ~ ~ '"

~ ~ '" '" "' ~

'" ~

~ ~~ ~ ~ ~

~

~

~

~ ~ ~ ~~~

" ~

~

'" ~ ~ ~ ~ ~~~ ~ ~ ~

~

~
TWENTY-FIRST ANNUAL REPORT 129

00

00

<5.,

-e

CD

Z ::l p

.5 ... ...,

I'l 00

Z

l);> Pl 0:> -< ..... l>< C ..:l

-<0 .., lZl

.... '" ""

..,

.~

8 ::;-

...

..,

Z .. -< =a ., III ., Eo< ""c;

-s ....

lZl .. c "" ... <l .,

"tl III

""

0

.,

0 .. .a l>< :::t .., .s III

Eo<

lZl

0 ., p a

:s

z .;:. .... .., z c.., -<

lZl

.l:;

.s

t:>o .,

0

f

0

Pl

Po< c<i "" Fl 0 ..::l < lZl

E-4

pI

..

..

'"-<

Po<

3

a ....

- '<\:?l ee- ....... "" cs :::; "" ., 00 ...... "'''' 00 .... 00co .., f:"" .,,' eON ..... oo"oz:.- o' "'- g 80 lrl - '" :!: "'... ..,

8"" o<l

0"

~1i ;:l 00

-.... r-, g; "'." "" ."

8 r-, ., ... ....00 ... .... 0'"

'" ." _00 00 <l"'''' 00' :!:. :=cq'" ..... ..; ~su) ",'

'l'l""-

...~s 00 r-,

.., ... :!: ... c- e- .., '" ""

00

-a~

0 00 000 00 00

"" le

-... "'-a ce -."

ll~ ",'- "":-ql- .... .... '" :::; 8 ec

""

0

~8 ",,' ",,' ",,'

,s8

I 00 "'00 ;1; ., ...'" ;!S '" :!: 8[:) ~gs O3<l 0 00 ... I

:;;' ..; a6"CQ- gj' ",,' ",,'

8.s 00 00 00 00 ... ca-0

,

0. ""

00 ~l::

0 ec .... 00 r-, ....... '" ee ., 00 0'" r-,

l>. ~5,g

0 ... "'- e>

"" ""0

l:;

- '" .c;~ ,..;

gj ~~e "" .. o<l

, <l ...-.. .... 8+=>-S

a1il '" ec e> :3

0 ""00

'" ec

'" ...

- 00 "'0 00 ... 00

"" ...'" 00

-... ...

0

.'OJ <Ii .,. g~'" ..... :!if ~s ",' <0 ;:l '" '" i2 ... 0 00 00

-g-g ",' ",,' -" -' .. e- 00 ....., :::; "''''' 00 r-, 00 8 ee ee lrl 00"" :!: .. "" ee ..,.., "" 00 ... 00

<l <Ii :!:. ..C'i ",,' ",,' t~ g- ] ::: '" ... ::a

.:. '" '" .,,""

0

"" "'." ::: 00

"" ... ~;:'; "" ""0 ... 0

'" 00 ....

- "" ee

",'

- "';0 ,,: .,; ~g

- <0 -all' ... ... ""- 00 ... ... .... <l- -'" ,..; -' ,..; .. - ::a ., _00 "" - ...... ... ;:; .s I;; "'- :::; ... OX> ..,'" 0

.. ",,' .... c5"": 00 <0 ~-it" '"<0 00 =::; :::; ~"" ... ... 00 r-;

-<~ 00

"" 00...

... 00 .... .... ",,' ",' 0

'"

,

. '" , ,, . -0 ,

iO

,,,

"

,

0 .. '"

'" ;:; .. " iO "" " ... 0

'" '" oS s .. 8 +l '"

'" i~ ;a Or 8 -a~

",,8 "" "" O'~ '" c; ol '" 3 "'13 "'''' .. 8 "0 'g .. ... so 8 0 P ... <l <l l>. dol - c, .8~ 0 .s, -:l<1 ffi a "'0 ffl[5 " ... 8 :5& s~ " '" a dO 0 il:~ 1; ~"'O 'l'l E~ "" ._'" - 0>< '" -0 "'6 '" ",- 0 _d 0", c, Z Pl 0

ES- Po 0 >< 0- 0

... o~'" 0

378413-5H--10

~~~~~~~~~~~~

~

~

~-

~

~~~

~

~

~

~

~~

~ '" '" '"

~

~

~~~ '" ~~ ~ ~~~ ~ '" ~ ~ ~~ ~ ~ ~ '" '" ~ ~ ~ ~~ ~~ ~ '" '" ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ '" '" "' ~ ~ ~ ~ ~ ~ ~ ~

'" ~~

~
130

.,

.,

-.:l

...

s

sc

-s ;;

'"

0

0 ... 'C

., Z 'S .... ., ,,; 'C'" r;il

ii ... <::l "

0

.., 0 ,s ... ... £1 0

"l::l r;il '" ., il< ... >< e 8

"" Q I Zl co ..; e .~ ... .~ !;j 'C"" ;:l il< '" .., .E .,

co

r::.

I.

J:il

!Xl

E-1

SECURITIES AND EXCHANGE COMMISSION

~gg~~::: E~H~~~s:g~g~:g~ Qu ......,._t--Q:!

f'.""~""c;::) ~~~~8~

"=" CQ.. .. ..g~.. ?io~oor:t:J-o..,.-'<tto-Ct'J-cOCfJ" ~gfJ-~8gf Ze lQlC:H.oO)~ o~~;;:;f2gg~~:::~~m O~T""'4O..,."""

0 Ct':J-CQ-t-=CIJ"'O ..... ...;,..;Cl'S'........ .-4-10- ........ e;a- r Ct'J-_- 0 .-4 .......... _~

~~~C"IlQ ~~fa~~~~~~~~~COC"lOCl_Ct'J"'lfl

'" - ~Q:I..,.r-C"I co r-oooo '<t'o

~g~ co lQ 10..,. C'QlO_"'lf1C",)CO

~:!:-b-~-~ ~-g:g-~-8"~f~-ga:f:e"e-f 00 oo"'eDctS co'"

~-aE co..,.o:otO .-4_C"IC"IC"I..,...,.C"ICQCt'JC"!:1O

CN-Ct'J-..,.-~Ct'J-

- 0_0«)0 ~~ct~l::~~~~~~:S ~o_C:OCOC"l

..~'" ce sc r-, 000 "'I1'IOOlQC"ICQ

co.b.O tOt--ooo..,. C!':ll'-o..,.t-..,.Q:lOOtO..,...,.t--LO O ......c:qOIOCQ

.<:lS£1 r-:r-:C"l-~CfJ- r.o-_-C"I'" 0-_-..::re;a-IQ-~""- ".r ,...j' ""-lXrOC'Q"'aJ'N-

~"' .. ..-41 ....00"'" LO ...... S.......... .-4C"1..-4 Ct'JC"I

O~~

........... C"I

0

-< 0

ee gHi~~S~E~~~~~ ~~~~~g '"" ~Q.~-; Q:lC"l"d'lOOIO

__ r-O<OOO

"13,,,_ CO-CQ-Q:l-Q:l-"'<tl- 00-0> ;!:-:s-;::-~~~-~-g~-~ ~~~-~-~-~- .. fnd)C)tf) _CfJo:DlOQ:I

0 ~S~'O

_T""'4 __ r-I

'C

""

<l g 'C G'lt-t-Ct'JC"I ('t)1.Oc:lo:._oC?_eqOOlQc:I

'C eqQ:leq_lO ~of2g~~ ~~g;;~~gs~~~~~ f "'''' OO~~1""""l ['._1""""10

0

g:, 00 e-f_"'eq-t.ci'o cfo.qo.-o:.... ~:tiC? ...OlQ ...o..... i.. _... eq-l""""l-cfotS

>l '0 .s =~ cqC?-_ -.tl1""""l~~tQco co cqO)I""""l..-t

£1 2l "'''' ... '" "" ,,;- .. 0. :;; .. ll:l '"

.. 0 ..., 0 .. oS e ""-o~~ C"f:Ioe-1t--lX)CO_cq"<14oo .....cq g;s:J~t!~~ .. .0 ~~~~S ~C1)~~g~g;~~~~~ 0 :0 Z Oi CQcqooe-1CQcq

<> 'C ss...~~...; OO"'I""""l"'I""""l-Cf':j"'e"'CQ-rnt--~~""Q:l-cq'" ......t ar.,"'ao"'oot:) oQ 0

" C'l:)lOC"f:I"Ilfl_CQl-C?LONfXJQ:l Ol~&O::;r--.r--. !l il< ...'"

6 'C CQCOQ:lcq_ O(OOCQOOt-t-_OlO .....CQ <o:t!lQCOOOCO'"<14

..... '" 0 ~~~?2~ ~CQ:::~::;~~~~~&;&; ~~8;!:~~ .s~< ~"'~"'t-"'"O:tl"'~- :~f~gft~:2 c1f~fgi::fg "<14"~Cf'J-cq"'o)otS

2l=,"" g~~8~ gsC':l_lOfXJCO

:=~ CQ~C"f:ICQlOLOt- .....L01Q_C"f:I ~OC'QC:OCQ

,,; ... cq-Cf'J"'~"'lQ"'''fIt'''' ....

_t-0)'"O:!lC':l ~~~~~~a~~fJ~~ e-1CO~~""ItI~

'"O:!lO_C"t~ fXJ~_~I""""I~

o;~~ "'tl~co~t- Q:l~00"flt't-0)

o~r: ....rco-~ ...o-t-- ...g~-~fgf~;fgr;igr~ ~~~~~gs' ~C"tC':lOO~

8",,~ C?lOLQOO CQ~~""ltllOlOOOeqCO['._~ <o:t!C"lO<o:t!['."fIt'

0 C';)-"fIt'- &0-10-&0'" ... .s ~g~~~ CO'"<14oet)IQCOc=::f)~t--lOOO 0000 OC':l coco

Oi'" 00_0) ..... ~~!Qgsst::~O;::;~~~ c:;06g~:gf2

e8, _-_"'<o:t!"'r::co"

CO'"1l C?CJ 1""""1 tr!E~-~~~ ...~~~r!ggi!~r~- 8 ... C'l)t--&O 00 &0 COIO"'IlfltOCJt--

0 ttSt--O;oo-O; ..... -1""""1 .............. _- .... 0

f:J~=s C':)l-OlOC'I:I C"':lOOOOOt--"'IlflC"lOC"')IO_C'Q

~5S~~~ t3Od~~:gf!~~~8~~ ~~~gH~* =£1 .. 000

-< .. 8.=5

...-e PI ~itg~i ~g~~i~~~~;t~:g~5~ff~~

o.?-ilg ~'c::'ligf~ 9'""4"'~ .....-...;"'Ilfl-eq ...C"l...,..j~ ...ttS ........ eo1.. c:q...........c:q- ........<o:t!- .......

, , , , , , , , ,

, , , , , , , , , , , . , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , .<:l , , , , , , , , , , d , , , , , , , , , , , , 0 , , 13 , , , , , , , , , , ... , , , , , , , , , , 0 , , , , .. , ,

i

, , :g , ,

'" , , , , , , , , , ., , , , , , e:: , ;>, , , , ;; , , , , , , , ,

'C , , , ,

s , . , , , , , , , , , Oi , , , , , , 0 , , . , . ,

, , , , , . , . , ,

.: ::,: I :

, ,

, , ~& : : : ; : ,$ J~.8 :;>, , , ,

. , , , ~a I : : :

, , : ;;g.d : : : :~eC)aa cs::s-ad I I I I I I

::sZ E~ >.~ >.gr~.g 8 ~~~;g~ ::Sl; t! ...

~~~~~g~~~8ZA

~ ~ ~

- •••

~-~- ~~~~~~

_ - ~

~~~~~ ~

~ ~ ~ ~~~~~ ~ ~

~ ~

'" " ~ ~ ~

~ ~ ~ ~ ~

~ ~ '" ~ ~-~

~

~ _

~ ~

~ ~

~

~

~

~ ~

•

~ ~~

~~~~~ ~~~~~
TWENTY-FIRST ANNUAL REPORT 131

:d~~g~:g

O&Q"d'lCbOCi.tfi~-~f2£:g"

.

,

, ,

,

,

. .

.t-OOO .....f,O.t- (Oooo=>_r-..

_0 """I1'_'O:tI

~~-gifigg

1.0 1:"1 0"" OCO

cr...;ci...; ...;

~~8~:ga

~-~~gt~ ....

~!r2i8~

g;ffif2-~~"

.(-.""l.Ot:::l~O

ci_-ei ....-..,.-_-

,

,

, ,

, , , , ,

,

,

,

. , ,

,. , . , , , ,

. ,

,

, , . , , , I I I I

I I I I I I

: e. : : : :

~d.d : : : "El:::::l!»QJ

ijl{l 1';.'" ..,i>t::'l..;::'l..,

~~H~~~s:g~~~~~

g~~-~~-~-~~-=-~~&f

.-i" .-r_-('l:;J-_- .....iao... ...;

f2~g~:t;~~S&5:g~i2

co 00"" 0) lQ.t-..,. a..";l Q) CbC'l""

~"i~~~;f~~~-si~-ef

COC?Q)OC'Q""_~_I.O('/"JIQ

.....,...;_- ....;e-ici....icq-t:J:)-_ ..C\I..

~~g~~af2~ie8gj~ CDC"l'-QMlO&Qa-Ot- ..... Q:ll'-

("'I-ld'O;l-OrOO ...~-~"'aQ ric5('/"J-

%1~~;;:~~~~~;j~gs ,.;

~~OOOlOtOCOCJ..,..t-lCOO

8~~gsSit~~~~~~

f;5-~r:-~~~~~-~~-~~

-- -- .....

~$~8~~~~~~~~

~-tO-lt:l- ooac"'e-i ~-d"C'fe:')-cr....: ..,.aoC":l('/"J<Xla-ooo~..,.oo 1OC"la-a- __ O~O~~('/"J

"';"':";";~ci....i"";C'i~"';C'I-

,

,

, ,

,

, 'I

,

,

,

,

, ,

, ,

~~~f2~ ~OQ:lOO ---""" .....

~~~~F2 100=>_ ..... 1.0

~-~-g~-~-

"<fI-a6r...:r--:....:

o

Eo

g

o

Z

21

o

o

~

_

~

•

- _

~

"

'" ~
132 SECURITIES AND EXCHANGE COMMISSION

OOIQOOO 0>-0 00"''' ....-

COC"lC'lC"lOO ....

OC'QoOou:l

O ..... C":ItO ..... lQ

Q:I-ricr)"o-l.O-""'-

.... T"'4~C':)_ClO

0000 oC':) CO CO ""'1'_ootQCf:I

1:':l000O'JO~

~ggtf~g

COtQ"lt'COCDl"-

...-

""'_C":IICO_

C'lCQO_C"IOO

.t-oC"lCl) .....a

cQO.....locq."IflC'QCl)l.O_C'I:I ....

ffi:OOOOO

." 8 ao"' r:S ;:::: .,

~og8~5S

to 0)010 ....

<III:tl- ~lQ- .... ..

., ...

-.:tlOC"lC"lC"lO

~~~:g~8

C'l-e-;i~"",,-oU)"

.O_CQ_Cl)

t--COCClIOO"lfl

cO

~~~:::~H~&;gg~~~

1-- -e- CCO co 0')10<0 Cl) co co .....

.. _- ,..;,...;cti..... ...rlO........

C"I('QC'I)lOCl:lt--OO"Ot' ..... CQ ..... C"I

.CtI .........O,...N 00""'0000 to_o:OOO ..... OO._ ............... OO

«S00":;00 00 or OrQOO"eQ ":co" .... CQ('Q .... co .........:::'t""fCO

~8~OgO~S~g~~

Y""l-....i' ....... "'fffI- cq..........r~.. ..q$

... ...

oooggo~oogoo 00""" .....

Q:lCOO.e"IOOtO'Oif'IC'I:IQ:llOtO

C"IOIOr-- .......... C"I-.:t'O Cl)l.O

....roOOOIOl'-"1!ceOO O

ar.-=aQC"I- ...,j4oo_-.o00"'CO" ~~~~~~~~~<O~&

co .... 000 IQ co coo "Ofl ..... lQ 00

~~~ggSit~(ji~~~~

cq"-.:t4cq..otO"OC"l-et-fo6' 0 _"00

fO:1:r::~~~~~g~~E _ ..... -- .....-

..... COC":lO OHQ"'fl_l.O

"IfI_""'tOe"I

r-:~r-:cOe-:a'"

OO ..... ,...U:Ot:o:l

u:a .. IO~1Q

aroc.fe,j~" .........

~gfJ8~

00-0)-

"";_"'~"':o'"

~it~~~

f$~oiooar

..... C'I:I~_O

8~~~~

O"";OOcQoo"

OC"lC'f:llOtO

C"I_OC'lC"l

....;~..~ciC"l ..

,. , I I I I I

I I I I

, . , . I I I I

I I I I

,

I I I I I

S5~fJ~:;;

~CDCD~CD

.........................

ocooooooo

..... 1'-""'- t-CC_OOO

t£-.:t<-t.O eO 10"

-.:t'C"I-r---t--

r;-..IOIOIOO

,...;......

2

e

o

Eo

o

't:l

Q)

::l

.s...,

:::

o

o

J

_

-

~~ ~ ~

~

~~~~~~~~~~ ~~

"
TWENTY-FIRST ANNUAL REPORT 133

...-lClO:llCt'-.e,:)

I..':l0000 t-eq"'<!"I

C'I_OOMlQQ

00 O~l.O~ocj

~~c::>OOOO..,.

r.oOC'lOOC::>

1.C ':l~0100 Cl CI~"o:t'~

~-...;O-.:reioo

-

~~~-

'"
134 SECURITIES AND EXCHANGE COMMISSION

TABLE 4.-Proposed uses of net proceedsfrom the sale of new corporate securities

offeredfor cash in the United States

PART I.-ALL CORPORATE

[Amounts In thousands of dollars I]

Proceeds New money

Calendar year and Retirement Other of month' Total gross Total net Total new Plant and Working securitles purposes

proceeds' proceeds' money equipment capital

1950______________________ 6,361,043 6,261,444 4,006,480 2,965,598 1,040,881 1,271,230 983,734 195L _____________________ 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, 73~ 1954______________________ 9,516,168 9,365,090 6,780,196 5,110,389 1,669,806 1,875,398 709,496

195~ January . _________________ 572,956 564,362 516,161 475,870 40,292 17,173 31,028

r:~r~~:: ::::::::::: ::: 444,404 437,087 391,911 322,760 69,151 11,118 34, 059 712,370 698,332 553,117 441,415 111,702 63,492 81,723

tfa~:::::::::::::::::::: 639,388 626,935 483,272 406,118 77,155 129,738 13,925

850,915 836,918 595,670 447,318 148,351 181,299 59,949 J une _____________________1,040,746 1,024,678 788,628 598,356 190,272 182,646 53,404 July _____________________ August 1,252,886 1,237,302 827,954 642,722 185,231 328,768 80,58(l ___________________423,849 416,566 303,771 194,632 109,140 81,834 30,961 September _______________ October 1,008,074 994,215 705,050 591,248 113,802 246,946 42,219 __________________1,130,257 1,112,065 856,393 477,663 378,730 109,239 146,433 November _______________ 421,585 412,546 243,670 145,074 98,596 122,708 46,168 December ________________1,018,738 1,004, 084 514,599 367,214 147,385 400,437 8\1,047

1955 January __________________ 672,348 659,814 465,105 325,492 139,613 113,956 80,754

r:~r~:::::::::::::::: 500,818 492,131 362,099 176,881 185,218 56,309 73,7231,420,000 1,396,221 1,190,246 759,427 430,819 135,076 70,899

tfa~:::::::::::::::::::: 674,903 658,596 444,337 259,832 184, 505 164,600 49,659998,056 977,004 790,943 566,548 224,395 73,631 112,429 June _____________________ 795,636 778,146 634,763 440,289 194, 474 81,375 62,008

PART 2.-MANUFACTURING

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______________________ 1953______________________ 4,038,794 3,973,363 3,421,892 2,179,563 1,242,329 260,850 290,621

2,253,531 2,217,721 1,914,853 1,324,675 590,178 90,115 212,753 1954______________________ 2,268,040 2,234,016 1,838,907 1,009,495 829,413 189,537 205,571

195~ January __________________ 135,310 133,869 110,408 87,159 23,249 16,792 6,669 February ________________ March 48,140 46,968 35,318 11,694 23,624 2,090 9,561 ___________________ 108,733 105,526 75.731 48, 176 27,556 6,898 22,897

tfa~::::::::::::::::::::: 86,127 83,868 72,860 40,930 31,930 7,992 3,016209,314 204,965 185,480 62,802 122,678 6,060 13,425 lune _____________________ 300,644 295,072 237,707 136,768 100,939 22,555 34, 810 1uly ______________________ August 530,074 525,208 501,749 389,949 111,800 5,463 17,996 ___________________117,986 116,256 94,126 13,089 81,037 9,586 12,544 September _______________ October 151,016 149,084 82,477 24,681 57,796 40,196 26,412 __________________ November 281,438 277,819 266,899 131,008 135,891 4,911 6,009 _______________ 110,129 108,100 89,125 20,530 68,595 2,794 16,181 December ________________ 189,127 187,281 87,028 42,710 44, 318 64,201 36,051

1955 lanuary __________________ February 190,063 186,027 105,225 69,648 35,578 23,128 57,674 ________________ March 85,653 84, 156 52, 976 16,323 36,653 15,682 15,498 ___________________ 643,760 632,277 514.577 438,526 76,051 85,493 32,207

tfa~:::::::::::::::::::: 171,612 167,447 125,942 50,579 75,364 26,447 15,057

435,018 424,084 332,345 245,654 86,691 48,148 43,592 1une _____________________ 179,586 174,065 135,510 60,871 74, 639 9,864 28,692

Bee footnotes at end of table.

_______• _____________
TWENTY-FIRST ANNUAL REPORT 135

TABLE 4.-Proposed uses of net proceeds from the sale of new corporate securities

offered for cash in the United Slates-Continued

PART 3.-MINING

[Amounts In thousands of dollars 1]

Proceeds New money

Calendar year and Retire- Other month' ment of purposes Total gross Total net Total new Plant and Working securities proceeds' pioeeeds 3 money equipment capital

1950______________________ }

1951______________________ (I) (I) (I) (I) (I) (I) (I) 1952______________________ 1953______________________ 235,368 222,051 199,151 113,104 86,048 1,912 20,988 1954______________________ 538,597 513,596 334,704 215,758 118,946 45,624 133,268

1954

January __________________34, 608 32,996 13,501 12,527 974 0 19,495 February ________________

March 19,473 17,900 17,306 15,194 2,112 0 594 ___________________ 33,137 32,567 30,435 17,341 13,094 0 2,132 AprIL ____________________ May _____________________ 40,615 38,317 24,689 15,659 9,030 12,340 1,288

35,272 33,907 11,362 7,587 3,775 0 22,545 June, __________ 76,095 73,890 61,825 35,138 26,688 0 12, 065 1uly 72,321 70,938 12,645 5,065 7,580 22,435 35,858 August _________________._ 14,377 13,153 11,694 5,051 6,643 0 1,459 Beptamber _______________ 42,637 40,670 38,708 31,728 6,980 109 1,853 October __________________ 35,564 31,880 21,146 6,716 14,431 9,100 1,634 Novem ber _______________ 59,573 56,745 39,593 32,580 7,013 0 17,152 December 74,924 70,633 51,799 31,172 20,627 1,640 17,194

1955

1anuary _. ________________ 19,906 18,547 16,573 11,579 4,994 139 1,835 February . March 13,132 12,093 10,453 3,385 7,068 604 1,036 _. 49,302 46,695 44,952 36,776 8,176 70 1,673 AprlL

May 30,602 27,995 25,310 11,192 14,118 474 2,210

1une _____________________ 15,108 13,419 11,594 4,289 7,306 20 1,805

81,554 78,337 72,867 55,248 17,618 1,508 3,963

PART 4.-ELECTRIC, GAS AND WATER

1950 2,648,822 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 67.034 149.0"..5 1954. 3,713,311 3,664,922 2,597,651 2, 582, 366 15,285 989,799 77,473

1954

January __________________279,341 275,478 274,946 273,206 1,740 133 399 February 268,293 265,566 254,502 251,392 3,109 0 11,064 March ___________________ AprlL 368,277 362,703 301,551 300,922 628 46,403 14, 749 ____________________ May _____________________ 313,817 309,456 236,878 236,035 843 72,498 80 508,634 502,339 328,630 328,499 131 172,612 1,097 1une _____________________ 437,210 431,215 372,170 370,857 1,313 57,800 1,244 luly ____________________._ 324,899 320,739 176,745 176,700 45 132,415 11,578 August ___________________ 160,738 158,465 102,029 101,708 320 54,535 1,902 Septamber _______________ October 251,193 247,493 161,458 160,886 572 73,938 12,097 __________________ 275,324 271,779 192,568 190,019 2,548 59,659 19,552 November _______________ Decem 62,214 61,149 45,406 43,564 1,843 14,676 1,067 her 463,371 458,541 150,770 148,576 2,193 305,128 2, 643

1955

lanuary __________________ 241,908 239,070 193,325 193,325 0 41,040 4,705 February ________________

March 110,596 108,263 100,390 100,121 269 7,739 134

226,285 223,657 196,171 195,373 797 27,249 238

tf:--:::::::::::::::::::: 217,900 213,808 175,631 173,640 1,991 36,207 1,970

249,351 246,744 226,151 223,236 2, 915 16,568 4, 025 1 une _____________________ 279,714 275,445 242,266 238,589 3,677 14,974 18,204

See footnotas at end of table.

•_________ •___________•___• _____

______•_________

___________•• __ _________• _______ ____•_______________ ____• _________• ______

__________________• ___

___• __• _______________

___• ______________• __

_________• ______

____________•___

________• __________
136 SECURITIES AND EXCHANGE COMMISSION

TABLE 4.-Proposed uses of net proceeae from the sale of new corporate securities

offered for cash in the United States-Continued

PART 5.-RAILROAD

[Amounts In thousands of dollars I]

Proceeds New money

Calendar year and Retire- Other ment of month. Total gross Total net Total new Plant and Working securities purposes

proceeds 3 proceeds 3 rooney equipment eaprtal

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 1954 479,322 474,180 209,585 202,441 7,144 261,345 3,250

195~ J annary 47,973 47,703 47,703 47,703 0 0 0 February ._

March_ 30,205 29,858 22,517 22,517 0 7,340 0

ApriL 16,402 16,274 14,483 14,432 51 1,791 0

May _____________________ 31,049 30,834 18,890 18,890 0 11,944 0

June 971 964 964 964 0 0 0 7,379 7,310 7,310 7,310 0 0 0 Juiy ______________________ 43,383 42,848 18,247 18,247 0 24,600 0 August 13,351 13,213 9,963 8,283 1,680 0 3,250 September _______________ 130.432 128,696 5,834 5,834 0 122,862 0 October .. 45,038 44,515 19,905 14,818 5,088 24,610 0 November _______________ 51,315 50,757 325 0 325 50,432 0 Deeember ________________ 61,822 61,208 43,443 43,443 0 17,765 0

1955 J annary 63,575 62,814 26,847 25,612 1,235 35,967 0 February

March_ 1,400 1,396 1,396 1,396 0 0 0 24,783 24,551 24,551 24,533 18 0 0 ApriL ____________________ May 93,299 91,545 4.414 4,414 0 87,131 0 _____________________ 12,718 12,644 12,644 12,644 0 0 0 June 18,286 18,143 18,143 18,143 0 0 0

PART6.-0TB:ER TRANSPORTATION

1950 ._ 259,057 257,182 242,902 241,500 1,303 3,421 10, 860 1951______________________ 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 1953 293,036 289,859 264, 880 260,568 4, 312 3,949 21,031 1954 299,432 296,907 270,342 267,042 3,300 9,073 17,493

195~ J annary 17,227 17,038 17,038 16,971 66 0 0

r:~~-________ ::::::::::::14,269 14,128 13,633 13,559 74 0 495 30,093 29,803 27.625 27,471 154 1,985 198 ApriL ._. May _____________________ 39,530 39,318 39,268 39,268 0 0 50 19,588 19,482 4,602 4,564 38 420 14,460 June ._. 33,178 32,933 32.8!i9 32, 622 237 0 74 July 48,229 47,928 40,909 40,249 660 6,346 673 August .. 33,470 33,062 33,062 32,644 418 0 0 September _____._. _______ October 34,330 34, 198 34,017 33,639 378 0 180 _. ________________ 2,391 2,316 2,266 1,528 739 25 25 November _____ .. ___._._. 18,544 18,209 16,724 16,380 344 223 1,262 December 8,583 8,489 8,340 8,147 192 75 75

1955 J annary 17,384 17,226 10,296 10,230 67 6,930 0 February 6,730 6,696 6,409 6,091 318 100 187 March. ._ 11,758 11,642 11,006 5,664 5,341 25 612

tf;~:::::::::::::::::::: 15,495 15,187 4,730 2,972 1,759 1,790 8,666

42,983 42,645 42,609 40,101 2,508 36 0 June _____________________ 39,132 38,821 34,084 30,315 3,769 4,737 0

See footnotes at end of table.

_________________• ____

_____•• ____• _____•

_•• ____ •_______ • _________• _______ _____• ______________

____________________•

___________• _______

____ ___________•

__________•_______

____• ____________

• _________________

__________________• __

___________ •• __•• ___

____• _________________

_________________• ___• ______________•_______

__________•_______

__• ___• ___ _______

_________ ___••• ___ ___•• __• ___• __•_______

__• ______•__•• ___

_••• ____________

________• ___• _____ •__•_____________

______ ••• _______
TWENTY-FIRST ANNUAL REPORT 137

TABLE 4.-Proposed uses of net proceeds from the sale of new corporate securities

offered. for cash in the United States-Continued

PART 7.-COMMUNIOATION

[Amounts In thousands of dollars ')

Proceeds New money

Oalendar year and I Retire- Other

month' ment of purposes Total gross Total net Total new Plant and Working securities proceeds 3 proceeds' money equipment capital

1950. 399,391 395,172 304,006 300, 2M 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 8,151 1953 881,853 873,726 860,967 841,600 19,367 3,164 9,596 1954. _. 720,102 710,819 641,487 639,376 2,ll1 60,089 9,243

1954 January ________________ 27,178 26,739 25,025 24,572 453 228 1,487 February

March 7,192 6,880 6,670 6,641 28 210 0

ApriL 29,100 27,947 23,803 23,758 45 0 4, 143 ____________________ May 25,947 25,635 25,151 25,100 50 0 484 _____________________ 41,267 40,391 40,341 39,986 355 0 50 1une 9,655 9,332 7,921 7,901 20 985 426 July 2,040 1,956 1,956 1,956 0 0 0 Angust . 26,867 26,540 24,605 24,538 68 1,494 441 September 332,218 329,211 326,391 325,593 799 2,730 90 October 99,713 98,351 98,001 97,893 108 0 350 November 74,535 73,895 20,302 20,220 82 53,593 0 December ________________ 44,389 43,943 41,321 41,217 104 850 1,773

1955 January _________________ 7,362 7,208 4,857 4,796 61 1,691 860

~~r~r::.:: =====:::: .: .:

44,546 43,914 25,647 25,602 45 18,267 0

26,863 26,703 20,188 19,777 411 6,144 371 A priL ____________________ 19,006 18,158 12,1l5 12,081 34 6,014 30 May 24, 989 24,199 23,593 23,516 76 485 121 1une ___________________i: 70,532 69,940 31,330 28,344 2,986 38,549 60

PART 8.-FINANCIAL AND REAL ESTATE

1950 746,740 739,263 480,154 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 32,1l6 1,420,162 24,225 84,168 1954______________________ 1,075,818 1,061,015 619,155 29,547 589,608 273,043 168,817

1954 January 12,677 12,185 11,320 105 11,214 0 865 February ._. 48,639 47,739 36,449 67 36,382 0 11,290 Mareh., , _________________ 89,985 88,047 54,111 100 54,011 224 33,712 AprIl

May 63,488 62,763 29,923 ll,222 18,702 24,895 7,944 _____________________ 27,165 26,561 18,768 539 18,229 830 6,963 une. 156,708 155,676 55,569 2,481 53,088 97,716 2,391 uly ______________________ 201,512 199,086 6O,711 2,454 58,258 128,334 10,041 ugust 13,875 13,698 10,630 77 10,553 1,870 1,198 September 47,476 47,155 39,909 82 39,828 6,592 653 October __________________ 277,086 273,682 212,359 10,783 201,576 3,92J 57,400 November 27,569 26,644 17,408 1,058 16,349 669 8,567 ecember 109,640 107,780 71,998 580 71,418 7,990 27,792

anuary __________________ 1955 98,426 97,095 90,951 138 90,813 210 5,935 February _. ______________ March 148,729 147,610 125,594 110 125,484 2,347 19,669 ___________________ 386,047 380,996 332, 910 189 332,720 13,310 34,776

tfa~~::====:=:=:===== :===

116,073 114,340 87,431 211 87,220 6,397 20,512

185,160 181,177 119,658 3,015 116,643 4,659 56,861 une. 81,851 80,376 73,389 1,567 71,821 2,137 4,850

1

D

1

J

A

1

See footnotes at end of table.

_________________• ___

__________• _______

__________________• ___

______•• ____• ______

•

___ • _________• __ ________• __________

___________• _________

_______________•______

___• _____• ________ • ______________

___________• ______

__• ____________

•

____________________•

________________• _____

__• ____________• ______

_______•__________

________• ____

________________• ____

_______• ____________

____•___•__________ _•• _______• ____

__• _________• __ _____• __________

______•• ___• __•••• __
138 SECURITIES AND EXCHANGE COMMISSION

TABLE 4.-Prop08ed uses of net proceedsfrom the sale of new corporate securities

offeredfor cash in the United States-Continued

PART 9.-COMMERCIAL AND OTHER

[Amounts In thousands of dollars I)

Proceeds New money

Calendar year and Retire- Other mont oC month Totsl gross Total net Total new Plant and Working securities purposes

proceeds' proceeds money equipment capital

l:15(L 552, 916 537,606 261,559 93,516 168,043 63,139 212,008 195L ._. 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, ll60 93,441 151,519 37,745 37,172 1954 421,547 409,635 268,364 164, 365 104, 000 46,889 94,382

195. lanuary _._ 18,642 18,355 16,221 13,626 2,595 20 2,113 February ._. ._ 8,193 8,049 5,517 1,694 3,823 1,477 1,055 March 36,643 35,460 25,378 9,215 16,163 6,191 3,891 A pril, ._ 38,815 36,745 35,613 19,014 16,599 69 1,063 May 8,703 8,309 5,523 2,377 3,146 1,377 1,409 rune, ._ 19,877 19,251 13,267 5,279 7,987 3,590 2,394 luly ._ 30,428 28,599 14, 991 8,102 6,889 9,175 4,434 August ._ 43,184 42,180 17,662 9,242 8,421 14,349 10,168 September ._._ 18,771 17,708 16,255 8,805 7,450 519 934 October ._ 113,703 111,723 43,249 24,900 18,349 7,011 61,463 November ._ 17,707 17,048 14,788 10,742 4,046 322 1,938 December ._ 66,882 66,209 59,901 51,368 8,532 2,788 3,520

1955 January 33,724 31,825 17,030 10,165 6,865 4,851 9,945 February 90,031 88,003 39,234 23,851 15,382 11,570 37,200 March ._._ 51,203 49,700 45,893 38,588 7,305 2,786 1,021 A pnL . _. . May 10,915 10,117 8,764 4,743 4,021 140 1,214

32,729 32,091 22,349 14,093 8,256 3,716 6,026 1une_. 44,981 43,018 27,174 7,212 19,962 9,605 6,239

I Slight 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 seenrrties by investors, while total

estimated net proceeds represent the amount received by the issuer after payment of compensation to distrfbutors and other costs of 1I0tation.

'Included WIth "Commercial and other."

•

•

_______••• _______••

_____• ___• ___________• _______•• _________ __• ________•

__

____ ____

________

__________

_____________••

___ • ____

• ________••

___

________

__________________

___________________••

•_____•___________ •• _____

•

•• ______ ___• ________•

• __________

_____________

________ ________

___ ___

__

______________

_____•

____•• ______

•• ________

____________ __••

_____

___ _______ ______ ________•• __________•

___• _•• ____________

•

•
0)

,..,

.,

s::

;:!

..::

"";:l 0

...

':S

"t0)

,.., 0

..,!:;,

...

tl

.,

."

<.>

tl

.,

.::

-e.,

..,

,g

E'l.

."

tl

'"... 'Cl

...

E'l.

-0

., .", <l

s:: .s e a .", a .,

... .s 0 ij0a

;:!

E'l. ]

...

...

;:l

..,

.,

DO

.se

... 0

E'l.

... 0

<.>

't;;>

."

...

<::l.

:::

;:lr

aO

Iil

..:l

III

TWENTY-FIRST ANNUAL REPORT

:3_

I

~~~~~~~=oo~~~~~~~o~~~~~

g:s .0"'

..., ~~Q~~~~~~~~~~~gs~~~~~~

as <>'"

~'O A1:l

<e ..

.,

I

~~~~_~~~~oo~oooo~~_~o~~~ ..... -<> ~~oo~~~~~~~~~~~~~~~~~~~ .::;'" "''''

... ., <~ Po<'"

I

o~~~-~~~~M~~~~~~~~~8~g

"'" .... ....:J agj s ~- a

I <> <->., ~~~~~a~~~g~~a~~~g~~~~~ '" .0'" ~M~~~~OC~M~OOO_O~~MO~~~

<>'" ":_~Ci-ri~-eiMMM~"'''''''' AJ!J

.,

I Po< -<> ~~~~g~~~~~~g~~~g~~g~~g <j ..... .-t-"f~e-iC"f-~-"'<trCfiC"'J-""-

:>.'"

I ;::'" ",,,, ~~~~~~~~~~~~~~g~~~~~~~ ..-i~~.-1~.-1"';.-1": ..... a'"

gj, Wl!l

.. ",

I '= .0" ~~g~~~~~S~~~8~~a~~~~gi 0 .." ~~~..:..:~..: ":~M~ei~ei~MM~~

oS Ala

:g

Po< .,

I =:~ g~e~~~g~~~~~~~~~~~~~!~

<J!J ...;~,..;....r_-_-.... cf~--.ti~CfJ-MM~-r.J-~-&tiCf'J-

~gj

I

~OOCfJ __ ~_~~O~~OO_~_~O~~~~

~S~~~~~~~~~~8~S~~~a~~~ ",,,, rlC".t-"';_-.-4 ....r~-,..;...:C'f, .•.i" C'gj

1'iI3 ..,.,

I .c'" ~~g~~~~~sg~~~a~~~g~~!~

0

",,,, ~.,..;ri,..;~~ ~~-.ti~~~~~~~~~ Eo< AJ!J I

~~~~~.~~~o~_o~oo~~_~oc~~ ., g~~~~S~~~~~o~~~2~~~~~g

<$j ~~~~~~~~~~~~O~Q~~~OO~~ , , , , , , ,

,

,

,

,

,

,,

,

,

,,

,,,

,

,

,

,

,

,

,

,

,

,

.

,,

,

.

,

,,

.

.

,

,

,

.

,

,

,

,

,

,

,,

,

,

,

,,

,

.

,

.

,

,

,

,

..

,

,

,

,

.

,

,

.

,,,

,,

,,

,

.

,

,

,

,

,

.

.

,,

,

,,

,

,

,

r

,

.,

,

,,,

,

,

,

.

,,

,

,

,

.

,

.

,

,,

,

.

!

,

,

,

,

,

,,

.

.

,

,

,

,

,,

,

.

,

.

,

,

.

,

,

.

.

,

,

.

.. ... , , . , , . . , , .@ , . , , , , . . , . , , , , , , . ., , , ,, ,, , , ,, , ., , . , , , , , , , . , , , , , 0 , , , , , , , , . , , , , , , , , . . , , , , , , , , , . , , , , , , , , , , . , , , . , , , , . , , , , , , , ,, ., ,, , , ,, ,, , :~ , , , , , , . , , . , , ,'" , , , , , , 'M , , , , . , , , , . :>. . , , . , . . , ... , . , , , , , , , . 'co , , , . , :E , , , , . , , , , , , .co , , It:;.

.~~~~od~~~~~~~~~~~N~~~

s~~~~a~~~~~~~~~~~~~~~~

~_M

139

~ ~~ ~ ~~ ~ ~ ~ ~

-

~

~

~

~

~

~

"

~~

~

~

=~

~~

~

''

~

'

___________~ ______~
L40 SECURITIES AND EXCHANGE COMMISSION

TABLE 6.-Brokers and dealers registered under the Securities Exchange Act of

1934 L-effective registrations as of June 90, 1955, classified by type of organization

and by location of principal office

Number of registrants Number of proprietors, partners,

officers, etc. I I

Location of principal otllce Sole Sole propri- Part- Oorpo- propri- Part- Oorpo- Total ner- Total ner- etor- ships rations' etor- ships rations' ships ships

--------------------- Alabama ____________________________

Anzona 25 8 6 11 75 8 20 47 _____________________________ Arkansas 24 9 9 6 70 9 23 38 ____________________________ 19 10 2 7 38 10 4 24 Oahfornra ___________________________ 271 106 82 83 1,050 106 449 495 Colorado ____________________________ 106 61 12 33 262 61 43 158 Connecticut. ________________________ Delaware 44 16 14 14 174 16 61 97 ____________________________ 6 0 3 3 41 0 28 13 District of Columbla ________________ 87 34 19 34 305 34 74 197 Florida ______________________________ 58 34 10 14 119 34 24 61 Georgia ______________________________ 31 13 5 13 107 13 20 74 Idaho _______________________________ 13 7 4 2 24 7 10 7 Ilhnois ______________________________ 191 50 65 76 837 50 296 491 Indiana _____________________________ 49 21 6 22 149 21 11 117 Iowa ______________________________ ._ 32 10 5 17 94 10 10 74 Kansas. _____________________________ 37 17 5 15 123 17 11 95 Kentucky ___________________________ 16 5 4 7 52 5 13 34 Louisiana ___________________________ Maine 58 35 17 6 124 35 59 30 _______________________________ 30 13 2 15 81 13 7 61 Maryland ___________________________ 36 14 16 6 122 14 82 26 Massachusetts _______________________ Miehigan 211 94 39 78 835 94 242 499 ____________________________ 52 9 17 26 236 9 90 137 Minnesota _______________. ___________ 51 6 9 36 268 6 32 230 MISSISSIPPi. _________________________ MISSOurI. 15 6 6 3 30 6 14 10 ___________________________ 88 18 26 44 421 18 140 263 Montana _______________. ____________ 10 3 3 4 27 3 6 18 N ebraska ___________________________. 29 10 1 18 111 10 2 99 Nevada _______ . _____________. _______ 10 6 1 3 18 6 2 10 New Hampshire _____________________ 11 8 0 3 27 8 0 19 New Jersey __________________________ 149 92 29 28 311 92 70 149 New Mexico _______. _________________ 16 10 2 4 31 10 5 16 New York State (excluding New York Oity) ________________________ 261 178 28 55 497 178 86 233 North Carolina ______________________ 29 11 6 12 107 11 13 83 North Dakota _______________________ 5 3 1 1 13 3 5 5 Ohio ______ . _________________________ 133 33 40 60 499 33 176 290 oklahoma ___________________________ 45 30 10 5 71 30 22 19 Oregon ______________________________ 23 8 6 9 60 8 14 38 Pennsylvania ________________________ 202 62 81 59 775 62 358 355 Rhode Island ________________________ 27 14 10 3 55 14 31 10 South Carolina ______________________ 29 13 6 10 74 13 14 47 South Dakota _______________________ 9 6 0 3 17 6 0 11 ennessee ___________________________ 40 13 9 18 149 13 27 109 exas _______________________________ 216 123 25 68 527 123 69 335 tah ________________________________ 85 26 24 35 260 26 71 163 ermont, ___________________________ 2 1 0 1 10 1 0 9 irginia. ___________________________. 37 15 12 10 121 15 53 53 ashmgton _________________________ 85 45 9 31 232 45 21 166 est VIrginia _______________________ 12 8 3 1 24 8 9 1 isconsln ___________________________ 49 13 5 31 194 13 24 157 yoming __________________________ . 8 7 0 1 13 7 0 6

--------- --- --- --- --- --- Total (excluding New York City) ________________________ 3,072 1,334 694 1,044 9,860 1,334 2,841 5,685 ow York City _____________________ 1,188 32'> 587 276 5,006 325 3,274 1,497

--- --------- --- --- --- --- 4,260 1,659 1,281 1,320 14,956 1,659 6,115 7,182

T

T

U

V

v

W

W

W

W

N

I Domestic registrants only, excludes 74 outside continental limits of the United States.

I Includes directors, otllcers, trustees, and all other persons occupying similar status or performing sImllar

functions. I Allocations made among States on the basis of location of principal ol!lees of registrants, not actnalloeatlon of persons. Information taken from latest reports filed prior to June 30, 1955.

, Includes all forms of organizations other than sole proprietorships and partnerships.
TWENTY-FIRST ANNUAL REPORT 141

TABLE 7.-Mar:ket value and volume of sales effected on securities exchanges in the

12-month period ended December 31, 1954, and the 6-month period ended June 30

1955 ' [Amounts in thoussnds]

PART 1.-12 MONTHS ENDED DEC. 31,1954

Stocks 1 Bonds S RIghts and warrants Total

market

value Market Number Market Principal Market Number (dollars) value of value amount value of (dollars) shares (dollars) (dollars) (dollars) unlts

--- --- --- --- Registered exchanges 29,156,725 28,075,114 993,876 1,026,317 1,121,048 55,294 56,897

Amerlcan 1,.931,564 1,872,549 169,875 21,085 29,678 37,930 7,969 Boston., 249,038 249,036 5,278 2 18 Chicago Board ----28:083- ----27:70i- Cinclnnatl ._--- ---------. ._ .... _. 623 183 322 199 109 Detroit 110,901 110,626 4,827 275 717 Los Angeles ._. 267,268 266,730 17,072 121 112 417 720 Midwest 681,337 680,927 19,971 48 41 362 1,117 New Orleans.; 3,793 3 793 87 (3) 1 New York. 25,267,128 24,249: 100 703,072 1,003,293 1,089,390 14,735 45,533 Philadelphia- Baltlmore 266,571 265,260 7,177 915 960 396 2,074 Pittsburgh . 40,279 40,278 1,410 1 5 Salt Lake 4,353 4,353 26,243 _.--._.--- _.-.-.---- ---------- San Francisco Mining 3,320 3,320 20,579 San Francisco Stock ----.----- ---.------ ---------- --.----634 302,416 300,767 15,669 672 545 977 Spokane 674 674 1,993 -.--------

Exempted exchanges._. 9,775 9,575 1,054 66 70 134 14

--- --- ---- Colorado Springs 92 92 132 Honolulu ---------- ----.----. --------i4 8,644 8,444 875 66 70 134 Richmond

Wheellng 465 465 16 ----.-_.-- --------_ ... 574 574 31 ----------

PART 2.-6 MONTHS ENDED JUNE 30, 1955

509

28

Registered exchanges 20,981,233 20,329,555 674, 297 567,256 612, 601 84,422 54,351

American --- 1,490,097 1,437,353 136,283 12,296 17,711 40,448 5, Boston . ._ 156,862 156,653 3,056 209 1 Chicago Board

----i7;898- CmcinnatL -----.229- -------33- -.------27

17,733 365 132 Detroit 75,664 75,579 2.906 ---------- 85 78 Los Angeles 171,987 171,140 10,000 26 22 821 784 Mid west ._. ._ 478,191 476,285 13,293 1 1 1,905 1,053 New Orleans, 5,111 5,111 83 (3) 4 New York ._ 18, 170, 477 17,576,966 454,025 554,429 594,290 39,082 43,731

Philadelphia-Balilmore 179,525 178,114 4,339 147 173 1,264 1,223 Pittsburgh 25,419 25,417 743 2 4 Salt Lake 6,303 6,299 25,049 4 7 San Francisco Mining 2,822 2,822 13,867 ------009- -----i;803 San Francisco Stock 200,433 199,639 9,105 225 175 Spokane ._ 444 444 1,181

Exempted exchanges 5,274 5,253 554 21 22

--- --- --- --- Colorado Springs 29 29 77 Honoluiu 4,596 4,575 455 21 22 ---------- ---------- Richmond 443 443 13 Wheeling ---------- ---------- 206 206 9

1 "Stocks" include votmg trust certificates, American depositary receipts, and certifirates of deposit.

S "Bonds" melude mortgage certIficates and certificates of deposit for bonds. Since Mar. 18, 1944, United

States Government bonds have not been included in these data.

a Less than $500.

NOTE.-Value and volume of sales effected on registered securities exchanges are reported in connection

witb fees paid nuder 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 Statistical Bulletin due to revisions of data by exchanges.

___

--- ____________________

_____________________ ------~--~ ---- ------ _______________ ---------- ---------- - ---- ---------- ___________ ____________• ___• ______ ---------- ---------- ___ ____________ _____________________

_______________ __________________ ---------- ----------

______ ______• ___ __••• ___ ____________________ ---------- ----------

---------- _____• __

________• ______ •• ______• ______ ---------- ---------- ---------- --- ---

______•• _____•• __________________ ---------- ______• • __________• ___• ____________ ____ ---------- ---------- ---------- ---------- ----------

___

__________• _________

_______ _____________ ---------- ---------- _______________ ----------- _______________• __

___•_______• ___________ ---------- __________• ___• ___ _____ ___________ ••__________•___ ---------- ---------- _________________

______ ___________________ ---------- ---------- ____________________ ---------- ---------- ________ ---------- ---------- __________ _________ • _________ ---------- ---------- ---------- ---------- --- --- __• ---------- ----------

______•• _____

• ---------- ---------- ---------- ---------- ________________ ___

_____ • _______• __• • ___________•• __ ____ __ ---------- ---------- ---------- ---------- ---------- ----------
142 SECURITIES AND EXCHANGE COMMISSION

TABLE 8.-Unlisted stocks on securities exhanges 1

PART I.-NUMBER OF STOCKS ON THE EXCHANGES IN THE VARIOUS UNLISTED

CATEGORIES I AS OF JUNE 30, 1955

Unlisted only I Listed and registered on another

Exchanges

exchange

Clause 1 Clause 3 Clause 1 Clause 2 Clause 3'

American __________________________________

Boston 235 2 50 3 1 ____________________________________ I 0 156 176 0 Chicago Board of Trade ___________________ Olneinnatl, 3 0 2 0 0 ________________________________ Detroit 0 0 0 84 0 ____________________________________ HonoluI u __________________________________ 0 0 14 103 0 2i 0 0 0 0 Los Augeles _______________________________ Mldwest.,., 1 0 38 168 0 ________________________. _______

New Orleans 0 0 0 93 0 ______________________________ 9 0 4 2 0 Philadelphla-Baltimore ____________________ • Plttsburgh ________________________________ 0 249 146 0 0 0 16 59 0 Salt Lake ______________________________. ___ 3 0 0 0 1 San Francisco Stock _______________________ Spokane ___________________________________ 34 0 63 85 0

Wheellng __________________________________ 5 0 1 1 0 0 0 0 3 0

Total' ______________________________ 319 2 593 923 2

PJ.RT 2.-UNLISTED SHARE VOLUME ON THE EXCHANGES-CALENDAR YEAR 1954

Unlisted only Listed and registered on another

Exchanges

exchange

Clause 1 Clause 3 Clause 1 Clause 2 Clause 3

AmerIcan __________________________________29,619,873 14,890 5,4W,095 1,261,000 11,910 Boston ____________________________________ 8,7M 0 2,282,824 I, -i38, 642 0 ChIcago Board of Trade ___________________ 0 0 0 0 0 Ctneinnatr, ________________________________ DetroIt ________________________________. ___ 0 0 0 348,536 0

Honolulu 0 0 190,803 1,678,346 0 __________________________________ 66,789 0 0 0 0 Los Angeles _______________________________

MIdwest. 2,032 0 1,132,681 2,411,358 0 _________. _______________________ 0 0 0 5,771,380 0 New Orleans ______________________________ 75,647 0 6,6« 1,656 0 Phtladel phia- Balttmore ____________________ 6,286 0 2,883,101 1,505,236 0 Plttsburgh ________________________________ 0 0 315,628 256,432 0 Salt Lake __________________________________ 0 0 0 0 254 San Francisco Stock _______________________ 2,540,823 0 I, -i86, 315 1,559,208 0 Spokane ___________________________________ Wheeimg __________________________________ 117,027 0 3,600 20 0 0 0 0 883 0

TotaL _______________________________32,437,241 14,890 13,705,691 16,232,697 12,164

I Refer to text under heading "Unlisted Trading Prtvlleges on Exchanges."

I The categorles are according to clauses I, 2, and 3 of Section 12 (I) of the Securities Exchange Act.

I None olthese issues has any llsted status on any domestic exchange, except that 9 olthe 34 San Franclsco Stock Exchange Issues are also listed on an exempted exchange.

f These Issues became listed and registered on other exchanges subsequent to their admlsslon to unIlsted

trading on the exchanges as shown.

, Duphcatlon of Issues among exchanges brings the figures to more than the actual number of Issues involved.
TWENTY-FIRST ANNUAL REPORT

TABLE 9.-Issue8 and issuers on exohanqe«

PAllT I.-NUMBER OF ISSUES ON EACH EXCHANGE AS OF JUNE 30, 1955

143

Stocks Bonds

Exchanges

~I~ R X U XL XU Total R XL Total

-- ------ American _______________________ 524 291 ------ 815 20 55 75 Boston 82 1 333 ------ ------ 416 16 ------ ----.- -..---- 16 Chicago Board of Trade 7 .----- 5 12 ----5- ----.- ----_. CincInnatL 52 .----- 84 136 1 6 Colorado Springs __________. ____ --ii2- Detroit. .----- 13 13 .- ...- ----_. 117 229 Honolulu ------ ---_ ...

--i79- 55 24 79 ------ 8 8

Los Angeles 4 207 ----.- ----.- 3S9 5 5 Midwest . 396 2 93 ----.- 492 13 13

New Orleans 3 15 18 1 1 -.---- 2

New York Stock 1,538 5 --300' ----.- ------ 1,543 968 7 ------ -.---- 975 Philadelphla-Baltimore ________ 150 9 ------ ----.- 558 53 ------ ------ ------ 53 Pittsburgh 52 .----- 75 ---28- ----.- 127 Richmond ______________________ -.---. ------ .----- ----4- 28

Salt Lake 96 100 ... San Francisco Mining 50 50 ---20- ----2ij San Francisco Stock ____________ 205 3 182 390 Spokane -.---- . 24 7 31 Wheeling ------ ------ 15 3 18 ------ ..-

Symbols: R-registered; X-temporarJ1y exempted from registration; U-admitted to unlisted trading

pnvJ1eges on a registered exchange; XL-lISted on an exempted exchange; and XU-adnntted to unlisted trading privileges on an exempted exchange.

PAllT 2-UNDUPLICATED NUMBER OF STOCK AND BOND ISSUES ON ALL

EXCHANGES, AND ISSUERS INVOLVED, AS OF JUNE 30, 1955

Total Issuers in. Status under the act Stocks Bonds stocks and volved bonds

Registered . 2,645 1,013 3,658 2,219 Temporarily exempted from registration ___________________ 17 7 24 14

Admitted to unlisted trading privileges on registered ex264 changes _____________ 284 53 337 Listed on exempted exchanges _____________________________ 75 8 83 63

Admitted to unlisted trading privileges on exempted ex.

23 21 changes _______________________________ 23 ---------- Totals_ ---3,044 1,081 4,125 2, 581

__________________________ ------ ------ ------ ------ ________ ____________________ ------ ------ ------ ------ ------ ------ ------ ------ ________________________ ------ ---~ ------ ------ ------ ---- _______________________ ------ ------ ------ - _____________________ ------ ------ _______________________ ------ ------ ------ ____________________ ------ ------ ------ ________________ ------ ------

______________________ ------ ------ ------ _______________________ ------ ------ ------ ------ ------ ------ ------ ------ ------ ---~-- ------ ------ ------ ---- __________ ------ ------ ------ ------ ------ ------ ------ ___________ ____________ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ _______________________------ ------ ------ ------ ------ ------ ----

_____________________•__________________________

0 ____________________________________

0 __________________

0 _____________________________________________
144 SECURITIES AND EXCHANGE COMMISSION

TABLE 1O.-Classification of companies in active registered holding company systems

as of June 30, 19551

Register. Register. Electric Total edholding ed opera. and gas Nonutn- eompa- Actl ve systems compa- tlng-hold- utility ity eom- niesln nies2 mg eom- eompa- pames system pames 3 Ules

---------------- I. American Gas and Electric Co •••.....••........•. 1 --------.- 12 9 22 2. Amencan Natural Gas Co..........•.•••......•.. 1 ---------- 2 4 7 3. Central Public Utility Corp .•.••.••...••...••..•. 1 _._-----~- 4 7 12 4. Central and South West Corp .....•...•••........ 1 --- .._---- 6 0 7 5. Cities Service Co ..•.......•........••.•.....••.. 1 ---------- 1 63 65 6. Columbia Gas System, Ine., The ....••.•...••.... 1 --------.- 10 5 16 7. Consolidated Natural Gas Co •..•..•...•..•...... 1 ---------- 4 1 6 8. Delaware Power & Light Co ....••..••..•...••..•. ---------- 1 2 0 3

9. Eastern Utilities ASSOCIates..••.....•..•...••.... 1 -------_.- 4 0 5 10. Electnc Bond and Share Co..••........•...•..... 1 -------_.- 53 14 68

II. General Public Utilities Corp ................... 2 ---------- 9 4 15 12. Granite City Generating Co. (Voting Trust) ....•. 1 ---------- 1 0 2 13. International Hydro-Electric System (Trustee) .•. 2 2 2 6 14. Interstate Power Co ..........•.......••••....•... 1 1 0 2

15. Middle South Utihtles, Inc .•.•....•...••......... 1 --------.- 8 0 9 16. Nl\.~lonal Fuel Gas Co ......••.•.•......•.....•••. 1 5 6 12 17. New Enllland Electnc System .....•.••....••.•.• 1 26 2 29 18. Ohio EdISOn Co ....••........•....•.....•..•..... 1 3 0 4

19. Philadelphia Electric Power Co ..............•... 1 1 0 2

20. Southern Co., The .•.........•.......••....•••... 1 5 2 8 21. Standard Power and Light Corp ........•..•••..•• 3 1 3 7 22. Umon Electnc Co. of Missouri ..•.•.•............ 1 4 6 11 23. Utah Power& Light Co ........•..............•.. 1 1 0 2 24. West Penn Electnc Co., The .........•••......•.. 1 1 12 11 25 25. WISconsin Southern Gas Co., Inc .• ••••....•..... 1 1 0 2

-------------------- Total companies all systems ••..••••••.••••...•• 23 7 178 139 347 Correction [or duplieatron: Five companies which are subsidiaries in two systems •..••..••.••• 0 0 3 2 5 Two companies whlchar"Eisul;sl<ilarleilti.-ihreesys:.

tems ..•••...•.••••.•••••••••...•...•••....•..•• 0 0 4 0 4 ---- ---------------- Total companies inactive systems .•••..••...••• 23 7 171 137 338

I In addition, there were 7 other companies which have registered as holding companies but whlch no longer have any public utility subsidlaries. The Middle West Oorp., New England Public Bervlee-Oom- pany, Northern New England Oo., Pennsylvania Gas & Electric Corp., and Umted Public Serviee Corp.

are in final stages or lrquidatlon, but had not completed all necessary distributions at the close o[ the fiscal

year. The Mission Oil Co. was wanted an extension or time within which to effect disposal of its non utility

subsidiary, Westpan Hydrocarbon Co. The United Corp. has filed an application under section 5 (d) of the

Act [or an order declaring that It has ceased to be a holding company.

, These companies function solely as holding companies . UtilIty or nonutihty operating companies, which are also registered holding companies deriving other

Income from investments in public utility subsidlanes .

Beech Bottom Power Co ,Inc.; Wmdsor Power House Coal Co.; The Arklahoma Corp.; Electric Energy

Inc.; and MISSISSIPPI VaHey Generating Company .

OhIO Valley Electnc Corp. and Indiana-Kentucky Electric Corp.

~---------

_

'

•

•

•
TWENTY-FIRST ANNUAL REPORT 145

TABLE n.-Reorganization proceedings in which the Commission participated during

the fiscal year 1955

I ,

Petition Securities

and Ex.

Debtor DIStrict court change

Commission

Fued Approved notice of appearance

filed

American Bantam Car Co .•............. W.D.Pa ...... Apr. 19,1950 Apr. 19,1950 May 29,1950

American Fuel & Power Co .............. 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. Oarbreath Gas Co ................... ..... do .......... ..... do ....... ..... do .. Do. Inland Gas Dtstributmg Co ......... ..... do .......... ..... do ....... ..... do ....... Do. Blackhawk Brewmg Co .................. S. D. Iowa ...... Jan. 4,1952 Jan 7,1952 Mar 7,1952

Central States Electric Corp ............. E. D Va ........ Feb. 26, 1942 Feb. 27,1942 Mar 11,1942

Chlca~ & 'Vest Towns Railways, Inc ... N. D. IlL. ...... June 30, 1947 July 1,1947 July 24,1947

Conso 'dated 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 22,19.\0 Oct. 26,1950

Federal Facilrties Realty Trust ....... . ..... do .......... Dec. 26, 1934 Apr. 25,1935 Oct. 29,1940

Ferry Station Post Office. Inc ........... .. ... do .......... June 18,1953 Dec. 2,195a Jan. 29,1954

Franklin County Coal Corp ............. E. D. TIL ...... Oct. 3,1952 Oct. 3,1952 Oct. 3,1952

General Public Utilitles Corp ............ S. D. N. L ..... Jan. 10,1940 Jan. 19,1940 Jan. 15,1940

Associated Gas & ElectrIC Corp ...... ..... do .......... ..... do ..... . .... do .. .. Do.

Adolf Gobel, Inc ........................ D. N.J. ........ July 23,1953 Sept 8,1953 Dec 28,1953

Eastern Edible Refinery Corp ....... .... . do .......... June 28,1954 June 28.1954 Oct 14.1954

Gobel's Q. F. Distributors ........... ..... do .......... .. ... do ....... . .... do ....... Do.

Gobel Pharmaceuticals, Inc .......... ..... do .......... ..... do ....... ..... do ....... Do. Metropolitan Shortenmg Corp ....... ..... do .......... ..... do ....... ..... do ....... Do.

Hudson & Manhattan Railroad Co ...... S D. N. Y ...... Aug. 11,1954 Aug 20,1954 Sept. 3,1954

Inland Gas Corp ......................... E. D. Ky ....... Oct. 14,1935 Nov 1,1935 Mar. 28,1939

International Power Seeurlties Corp ..... D. N 1......... 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 Fre~t Lines, Inc ............... N. D. TIL....... Jan. 31,1946 Jan. 31,1946 Apr. 25.1949

Keeshin otor Express Oo., Inc ..... .... . do .......... ..... do ....... ..... do ....... Do.

Seaboard Freight Lines, Inc .......... ..... do .......... ..... do ....... ..... do ....... Do.

National Freight Lines, Inc .......... ..... do .......... . .... do ..... . .... do. Do.

Kentucky Fuel Gas Corp ................ E. D. Ky ....... Oct 25,1935 Nov. 1,1935 Mar 28 1939

Las Vegas Thoroughbred Racing ASSOCI' D. Nev ......... Jan. 22,1952 Mar. 1,1952 Feb. 27.1952

ation.

Momence Milk Cooperative ASSOCIation. E. D. TIL ...... June 18,1949 June 18,1949 Sept. 12, 1949

Muntz TV, Inc ........ ................ N. D. I1L....... 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

Norwalk Tire & Rubber Co., The ....... D. Conn ........ May 20,1949 May 20.1949 June 8,1949

Pittsbur~h Railways Co ................. W. D. Pa ....... May 10,1938 May 10.1938 Jan. 4,1939

PItts urgh 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 Oil 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 Manufacturing Corp ........... ... D. N.J. ........ Dec. 14,1948 Dec. 14.1948 Dec. 27,1948

South Bay Consolidated Water Co., Inc. S. D. N. Y ...... Apr. 26,1949 Apr. 26,1949 May 23,1949

Tele-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

Tele.Tone New York Corp .. ...... ..... do. ........ . .... do ....... ..... do .... Do

Rico Television Corp ................. ..... do ...... . June 3,1952 June 3,1952 July 7.1952

Texas Gas Utilrtres Co ................... W.D Tex ...... Sept. 4,1951 Sept. 21,1951 Sept 11 1951

'I'hird 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 St. Transportation Co., ..... do .. .do....... ..... do ....... Do.

Inc. Westchester Electnc Railroad Co .... ..... do .......... . .... do ....... ..... do ...... Do.

Warontas Press, Inc ................. ..... do .......... Sept. 8,1949 Sept. 8,1949 Oct. 24,1949

Yonkers Railroad Co ................ ..... do .......... June 21,1949 June 21,1949 July 7 1949

Trinltfi Buildinr Corp. of New york .... ... .. do .. ....... Jan. 18,1945 Jan. 18,1945 Feb. 19,1945

U. S. ealty'" mprovement Co ........ ..... do ........... Fub. 1,1944 Feb. 1.1944 Feb. 7.1944

Warner Sugar Corp ..................... ..... do .......... June 7,1940 July 9,1940 July 9,1940

WIlloughby Tower Building Corp •. N. D. Ill ........ Jan. 10,1955 Mar. 3.1955 June 24,1955

378413-56-11

__

'"''

__

__

__ ______

__

_0 ........

__ __

_ __

__""'"''''

_

__ __

__

_

__

_ ___

________ ____

__

__

__ __
146 SECURITIES AND EXCHANGE COMMISSION

TABLE 12o-S1tmmary of cases instituted in the courts by the Commission under the

Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility

Holrling Company Act of 1935, the Investment Company Act of 1940, and the

Investment Admsers ACL of 1940

Total Total Cases Cases Cases In- Total Cases cases In. cases pending pending stituted cases closed stituted closed pending

'I'ypes of cases up to end up to end at end at end during during durmg of 1955 of 1954 1955 1955 of 1955 of 1955 fiscal fiscal fiscal 1955 fiscal fiscal fiscal fiscal year year year year year year year

---- -------- ---- -------- Actions to enjoin VIOlations of the above acts ________________ 679 667 12 lG 26 42 30 Actions to enforce subpenas

under the Securrties Act and

the SeCUrItlCS Exchange AcL_ 62 60 2 0 5 5 3 Actions to carry out voluntary

plans to comply With section

U (b) of the Holdmg Com- pany Act _____________________ U5 112) 3 8 5 13 10 Miscellaneous ac.tlons 21 18 3 2 2 4 1

TotaL -------- 877 857 20 26 38 64 44

TABLE 13o-Summary of cases inetuutea agauMt the Commission, cases in which the

Commission particrpated as interoenor or amicus curiae, and reorganization cases on appeal under ch, X in which the Commission participated

Total Total Cases Cases CasE'>SIn. Total Cases cases in- cases pending pending stituted cases closed stituted closed pending

Types of cases up to end up to end at end at end during durmg during of 1955 of 1954 1955 1955 or 1955 of 1955 fiscal fiscal fiscal 1955 fiscal fiscal fiscal fiscal year year year year year year year

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

Actions to enjoin enforcement

of Secuntres Act, Seeurlties

Exchange Act and Publie

Utility Holding Company

Act WIth the exception of

subpenas Issued by the Com. mission 64 64 0 0 0 0 n Actions to enjoin enforcement

of or compliance WIth subpenas Issued by the Commls0 510n __________________________ 8 8 0 0 0 0 Petrtlons for review or Com- mission's orders by courts of

appeals under the various

acts admmistered by the Commission _________________ 180 175 5 1 5 6 1 Miscellaneous actions against the Comnnssion or officers of

the Commission and cases In

which the Commtssion participated as intervenor or amiCUS curiae ___ ._. __________ 177 173 4 6 8 14 10 A ppeal cases under en. X In

which the Commission par9 ttclpated 140 138 2 4 5 7

-------- TotaL ____________._._._. -1- ------------ 569 558 U 11 18 29 18

____• _____

______________• ____

___________ • __________

________•_______• ____
TWENTY-FIRST ANNUAL REPORT 147

c

c

Ci

eo

o

6

g ...:

,

il 8

.:.J

c; .. 05;::

A

a ~ ~ g

J: ~ ~

.... ....

gf gf

>.

2 ~

,

.s

....

C'i lci"r-: "'- d

0> a ;;~

A

I '"

I't:l

c;

I

'0

S

z'"

'" "' ~ ~~ ~ ~ ~~

~ ~~ ~ ~ ~

~

~

~

~ ~

~ ~
148 SECURITIES AND EXCHANGE COMMISSION

r

,

,

,

d

.:l

00 ...

":l

::::

::!:- r:

c .g i

f« 0

M ... '" ...

Eo

o

~ ~

~ ~

~-

~

'"
TWENTY-FIRST ANNUAL REPORT

,-,0

149

,

, ,

,

,

o

g .c

o

'8 ~

~1rn

,

,

,

,

,

....;

o

o .:; 0(1 >:

.c <::

rn

~ ~

~ ~

~ ~

'" '"
150 SECURITIES AND EXCHANGE COMMISSION

o

g.

s:::l ~'" ,,-

;a .: t:o:>

-.;."g;:s

~t:

, ~s I ...

I ",-< I ~et3 I s~

:5"0

I

I t:~

I '* 8 I~I

I

I

I

I

I

I

I

I

~

~~

~

f

~~

\

~
TWENTY-FIRST ANNUAL REPORT 151

..

o

:::

....

<>0

.c- _.c

go

oo

"0 '0 '0

,

,

00

, ,

,

o -tlP

00 <~ ::i 1:5$

.....:: .........

b~

~ '2;; C'l :::'13

'"":8 8 g- oo oo

-

c

...

oo

,

,

Eo<

E S

~rbD

13 -E '* E

,

,

,

,

,

00

AA

o

o

::::

o

'C

'0

..

g

~~ ~

~

~

~~

~

~ ~ ~

~ ~

~ ~
152 SECURITIES AND EXCHANGE COMMISSION

000

~III

,

,

g

I-<

00'

..

0'

0' ::i :

8

.. 00

AAA

l'<

M

,

,

.,

,

o

"'l

.

,

.

,

,

,

.

.

'"

Q

g

:-

"

e.

,

, o : D

o(!:d'

",;:i

"S";-:

0.,9 : ::S::s : "C 0

::S'OQ .0

[il

s_ ;:: M'"

l5.

-<

"

-o

w

I

~

~

~

o

o

o

~ ~

~

o

o

o

o

o

o

o

o

o

o

o

o

o

'"

•

~
TWENTY-FIRST ANNUAL REPORT 153

..

.

..

.

.

.

ci

~,.;

£~ ~ ,,-0 -< "'~ . ~g i p.,

.

...

.

J

.

.

.

.

...

(D

ti

'"j

'",,;

.<l

'"

.

.

.

...

f%<

s

c

!

878418-ll6-a

~ ~ ~

~ ~
154 SECURITIES AND EXCHANGE COMMISSION

s:fU-;"=" -!.'t:ltt-lt:l Oa>~"CD "'0 '~'CO-:>a l:I .....!. ~""t1) ~~~g ~~O£~~O~~S ~8~~~~~£~~ EQ~ ~~~S -~~~S~~~~ ~~~e~~~d~~ ~~£

8~uj g gta~~-g CO ... .s~::tin:; . -aco-go e~~

.a>S~~o~ ~e~~8~a ~~a ~~8

<g~s $~~~~~~wo~ ~a>~~8~~ S~~ ~.~ ~~a>~ 8~~a> .e8~~ ~g$=o~~ a>~~ ~OO

g~ge g~~~~~~S~~~cs~~~g S~~ ~~a>

~<~a OE;a::.-l.s;bDa~ ~~::E~o~t:: 't:S63:g .goo-:9

Z~~~ ~8sa~og~~~ ~~_S~~8 f~~ ~~5

I a>o~~ ~~~c~~Hoa> S>O~g't:SS ~~E ~l:I~~ oOl:ll:l8~~~ ~-~~~Q"'O 00 0"" _O::sP"'C CDJ-.;;;;;:SC11op.6- l:Ip.~ .g-j:::i= s:1""~ r;I'J S

- 0E~~~~Oi~P.~~ ~~~8~a>~ ;.~ ~~C11 0 gc..s-e gr:q~c.g~~'g~tD ~SO -t!~ ~EIO- i ~o~~ ~Q~~~0~~0' g~~~~P~ g<~~Oa~ (;) U)"3 COClSl:l - ... S=CP - ,J:llQe>O 0.. - -

.. ~ci~"" ~~~i~~~~~~~~o~~~E ~~~~~~o

'" 0- a> !=l cD 0. ::s ... 1-0_ s:l:

lil ~'E'5"a .9 8g Sg-~ :8~.s C;::.o a5~S 8. 'g C.f0:3"O

S ~$~~ ~~~~d~~e 2 ~S~~~~8 :~~~~l:I~

,g f~~8 J."

~~~~i~~~~S 0- s::: U)g:~~<~~ 0 ... ~~B~~~~ s.. s.. Q co 'd

., ~88~-~~~~Q~!~~A_~~~OO~ OSO~~b<

... ~~~s~i~es..~ ~<~de~~:~~:~~~

;;:;~'O~ C>0E! "S'000go- "'i»"".s$-~ gl:Q_C>~<o 0- Q~~d ~~Q~o~go S~~ ~oa 8 ~o~_~ ~.s co Q) 0 g~~o ~rn .g!'d ui.s"(D~ <D"O~ .. e. co.9

~d~ -~g=~sgS~~ COE~~m~ ~_~~~8~

1l ~~~~jEf~~~~~~. N8~~g~~ ~~~g~~~ ~Esi ~g-~~~~Q)~ ~~~p~~o __ .9'dQZ I:l ~~8Q) Q za~S-m~'d~COC~~a~~ fd~~~Q)~ 0

] ~e8~ ~~~O .giEij~S~~~1s~~~~~S~a .23 c: ;t~~~~ co o-g~~Eoo_~ ~g~~.!d.s- ~~.c.s ~cf~~~~~~O~~>.S:::~~ ~_~8~e.g 0 co ....'dO~_ .._p"C~ ~!=%U) ~-'t'j

0 oog~~~~~~_~ .~S~~~~~.~~e~~~s ~~~m ~~< '~~>.~f8~'dp-~o~a~o~e-~<D~. =",'0.$ ='dg;o.~..~bD<D_-~ :;j ..~.2i .E-~o ...o~<DtlO ~~~S ~~~., ~~~..,~~~£oo SOl'" ,oo~~S~~

~A~8 ~~_w~~~~.E~~~~ooo .~.98~>.~~~a'd~ . ~£ 0 :» ~o a:;~! e.g.s~.g ='~ bO~"d $~ ~:sg- ~a

~E bOO bO"EE ~A &3! ~f:4~:g:a~.s 8 .g~.s'd~a

~g~~~~g~~~~~~~~~~5~~OO8~~~E~a~g~. s..~~~~Q)<D~~os..=~~~-~O"d8~~o-s..~ =s..

~~e~~~E~~S~~~~!~~S;o~s~~~~~~~~~~ 0<0 0 0 0

I ...'" OQ OQ OQ

OQ OQ OQ 12

.EloSl ..,~ - ",' <:S £ ..= ;i ~r:

::8, i ..: .. s! I ci oi P

m ..!; < Z .. . . . . . .$ . . . 0 .. . .a .a

ii . E! S S P P P

.s8: '0 '0 '0

m< 0 0 0

"'- ::: -0 ::: $0 .., I -'l :s 0 6 b b .!:l .!:l C> $ C> C>

"'" c Cl -e ... ee

. t . ., . . m

C> . . . . s . , . . P . e:<- ... :0 a; 0:: . .., s 0 ~. 0 .,; ~--:-

:> E! 0..., ., <::.. l'< "" .$I il ~z a <::. :3 Q 0_

'0 1i s '0': '" $0- ..c:l :;j a 0 Eo< 0

s -e -as

.:i '0 DO i "" s ~8 .a s ..<::-

..:l m Eo<

•

~ ~ ~~~~ ~~~

~~~ ~

~

~~~

- ~ - ~ ~ ~ ~

~

~ - -

~~~~ ~ ~ ~ ~~

~

~

~ ~ ~~ ~ ~ ~ ~- ..

~~~~

~

~~ ~ ~ ~~

~~

-

~ ~ ~ ~ ~ ~ ~ ~

~

~ ~

~

~ ~ ~

~ ~ ~

~ ~ ~ ~ ~ ~ ~ ~

~ ~ ~ ~ ~ ~ ~ ~

~ ~

~ ~ ~

~ ~ ~ ~ ~ ~
TWENTY-FIRST ANNUAL REPORT

.. '0 01:: $

,g.!!l ""

... ..,«< ci- ..,r .!!Ie

'i .,

Po 13 0 ....

i; ,

, 0 ,

.l!l -

0 .;

'0

2~ d

l>

.!!l ., .so z ",0

'0 S' -

0

.., S .,.!!I

£ i .<oS

g~

'" fil",!J I

... ... '8'0 ",_'0

zo~ , ,

. j . .. . . d ,

i r.i 0 <l j ... s ., 5 e

0

:::

155

~

~~

~

~ ~

~

~

~

~ ~ ~ ~ ~ ~

~ ~
156 .SECURlTIES AND EXCHANGE COMMISSION

,

,

,

.,

,

.....,

.,

i

r.:

I

,

.,

,

.

..

e

e

!

r.:

,

,

..,

g

.!:l

o

o

a

z

~

~

~

~
TWENTY-FIRST ANNUAL REPORT 157

-o

""

,

o

o

..

.9

a

A

8

~
158 SEcuRITIES AND EXCHANGE COMMISSION

... ;:!.; ... ;:!.; 1:5 '" '"

CO> g: g: g: g: g: ...

o' -' e.- o t." "" ee

i ,ci l» l» .: '5 co co

'" '" rn .., '" .., ::E ::E

. , gs , :c . . 1;; . . .s . ::E . , . ,

.$ .$ ,

0 .c -0 co .c d <ll 8 ., 6 E 0

:5d '" " '" .. '0 :s -0 '0 f ",0 0

1l 0 0~]j -0 '0 '0 0 ., ... 8 .,

~= fS 0 :9 00 B rn E b 430 2l gjgl,

p:j ::i . , , . '0 . . , . 0 . . . , . . , 0

. . . , . . . , . . l» . p:: , . , , . . . . , . . -<l <ll

.. . '0 , :- .s .. '" ...; 0 ...; . co .c 0. c p,; S '0 '0

S .. e 10' 15 0

'" c

0 .. '0 1Il'; .c 1Il ..,

'" ",' 'de

..; 0 8B. .c .s <ll .s " lIlo .. '" II .. l:. ..;8 :! co

<ll <ll

-< ::E

'" '"

~

~ ~

~ ~

~

~ ~ ~ ~

~

~ ~

~ ~ ~ ~ -=-

~ ~ ~ ~
TWENTY-FIRST ANNUAL REPORT 159

.... 0" 00 N N

>. .!.:' .,: E " ,

'" g ,:; ;;; N

."

'0 '2 '0 c

I'l I'l c "'cO a~ ~fA e: 0.",

00> 00> 00> e:

p

0 "'~ "'~ "'~ Q , ,

.s ;0 , o

.J:; z Z 0 '0 .... '0 . 0

., c e>

E .E <-

"' i:i & A ::l

.g s:l e ~.'< '" '" . 5 iJl i< ... .'<

£e: 0'"

'" .,0 ...0 g>< gJ>-

Z u: fi:

0

0 0

0 0

0

... C- o 0 s 0 0 t.-

'" P; :c :;: v o(i -0 13 ec

o: ,g .J:;

'0 -<: e> .J:;

'" ... :s .!:!'

0 ee c> ,.::

:a gj

" p:: '0 0

P. 0 e, e

E E .£ 0 ,... .;; I'l .. ;:; 0iJ I'l

'" '" I'l 0

0 r.1 fi: ,.::

'&o

o

j

A

1---+-------------------- ----- "

'"

~ ~ ~ '" '"

~ ~ ~

~

~

~

~

~ ~

~

~ ~

~

~ ~ ~ '"

'"

~ ~ ~

~

~ '" ~ ~

~
160 SECURITIES AND EXCHANGE COMl\USSION

,

,

.

,

,

'0

A

--..;

<>

o

~

~
TWENTY-FIRST ANNUAL REPORT

~~s~ti~~j~~~ .... o=.,tj o::S~ .,hc; Ol g e "~8:¥l~a-gt2~ :Ei~ a-ggQ),""op.~"08~ .c:1<D

c:a-"E3 ~~'8

a;~QfJ-<~m~~.s.g"tcnc13

~-=~~;~::=&~~~~~$

~~'d ....Q .o"'.~o:= "d e- ~54)g~~l:Q ..rJ),.QasbOeo'"' :3=B~ t;a,,~ $~..;.si::.;..ol8

~;a- rt\oo~s::g~.s~~ ~o1E .9.-4Zt:;100.-fO£:ltr.l.9

s.sa1.5s~8<eO~':s~ OIQ"'4).5 6>::S~ rJ)C'li1; 0 S'~

gj!; &~~oaSb~~:d

a~mP.o~ c:;lO~et5'oOO

I'l .... '~I» ...."'El'

I o~.e~c;8~Cf.l..ofDg~~,",

o~"Cl~cooo""o~'E~dS~

'a 0)1""48 CD .'Oco...-;:::.80 L. ~~..d

5"de.Bf5~.-4~g '~"-~'"" ~a~~Q)~ .$:.= C So."d,.oS .orS~~~«>~~~£oa.5~

'd ..-~Zg0. -"'"

e CI"''''' "Cl't1 !=l'CtI}8 ....,.,t

'd -E~.:3~~a~b1~~~i"gcf s o .. S T..o S~ gJ.5C58 to Ol gjO~.:la~I>o>-'; ", .. 15",.8 i .~ .~-.o CD '0-: g bJJ::;I-:t'S Z ",":,,=aorrjZ a <D~ d Q)

!iai~g ~tid g:g ~:gP-i 1:'4.-4 ~'CSC'orJ)o ;::;-o.c s,...~ ...... l5.~~8,o 8,8_ 8 .t-l~~t::IPldQ_Op.,ooo

bLl~-g 3'C1~ cl3.;5S 0.Ed :t~

.9< etce f~~o~rtJ as'E~ :gJje~e~.scn~c:;l'g~>OA ,g:s ~i:8:fa coS 0 .g.E~ ~ :0 m_uoS"ij 'CI5 f'i!3~ C1.o..E'O :a~CV')-tr.Icp,",-::sQ)o:J c:scP"" ~-~A ~'E~~ s:> ~~.sg

"Oe6r:ri~Of~-<.5~~.8~

=..-tZ j~p.!'J Ot;.B;g1'""'! f.s

$il..-tcPP0 cP;1;-j:;d C'I-:;3 Egi1}ii.,~c:=e~B~i~ OI1l'a~.oO&3°":H:a'd~..c.s

~s~.s~!i1'lE::::::::: 3.~~~S

l~ 18

'"

.... .l!!IJ ..:

I'.0,

A

ia

i ;!t3

'l:l

.B -5I

::s

dt

!JJ

I

i

r<l

'a

Ol I»

Gl

c:l e

. OlE!

j:j$

....

161

~~

~~ ~~ ~~ ~~ ~ •

~

~

~

~~ '"

'~~

~

~~~~

~~~

~~~

~~

~

•

~

~~

~

~~

~~

~

~
162 SECURITIES AND EXCHANGE COMMISSION

TA.BLE 23.-Reorganization cases under eh, X of the Bankruptcy Act pending during

the fiscal year ended June 30, 1955, in which the Commission participated when

appeals were taken from district court orders

Name of case and United Stetes Court of Appeals

General Stores Corporation debtor;

Securities and Exchange Commission and Max Shlenslry, stock.

holder, appellants (2d circuit).

Inland Gas Oorp., et al., debtors; Vanston Committee, Green Com- mittee, Paul E. Kern and Clinton M. Harbison, Trustee, appellants

(6th circult).

Inland Gas Oorp., et al, debtors;

Alfred Howel1 Edward D. Spil- man, Elmo Jj;. Allen, Paul W.

Kautz and Georl:e H. Greenwald,

appellants (6th elreutt).

Pittsburgh Rallways Company,

debtor; Estete of Joseph Nemerov

and Pnchard, Lawler, Malone &

Geltz, appellants (3d CIrCUit).

Pittsburgh Terminal Coal Oorp.,

debtor; Securities and Exchange

Commission, appellant (3d etreutt).

Slleslan-Amer1can Oorp., debtor; Francis X. Conway, Trustee, et al.,

appellants (2d circult).

Bolar Manufacturing Oorp., debtor; Samuel Marlon, Milton M. Unzer and Edward Endelman, and Mor- ton Stavls, appellants (3d circuIt).

Third Avenue Transit Corp., et al.,

debtors; The Hanover Bank, Aaron A. Melnlker, Wlli1am Mel.

n1ker, Clarence E. Pyll!!. O'Connell Committee, Harry H. Amott,

Ralph H. Haas and Wadsworth Garfield, appellants (2d circuIt).

Transvls1on, Inc~ debtor; Securities and Exchange Oornmlsslon, appal.

!ant (2d oircuIt).

Nature and stetus of case

Appeal frOIDorder of Feb 4, 1955, grsntmg motions of Commission

and Max Shlensky, a stockholder, for dlsmissal of debtor's

Chapter XI petition, Appellant's brief filed Mar. 18, 1955

Oommtssion filed brief, Mar 18, 1955 Debtor's motion for stay

pending appeal granted Mar. 21, 1955. Opinion of CA-2, Apr.

14, 1955, holding that relief should he sought under Chapter X. Petition for Writ of certiorari flied by debtor, June 22, 1955. Pending.

Appeals from order of Feb 12, 1953, approving the amended plan of reorganization. Commission filed brief Oct. 5, 1953, m support of plan. Decision of CA~, Mar. 18, 1954, affirming the plan of reorganization. Order Apr. 7, 1954, denying petition for rehearing. Petition for wnt of certiorari flied July 3, 1954. Briefs by the Green Committee on July 30 1954, and by the Oomnnssion

on Aug. 5, 1954, m opposltion CertIOrari denied Oct. 14, 1954.

Closed. Appeal from order of Oct 7, 1954, denying the petition of stockholders of American Fuel and Power Company WhICh requested that the plan of reorganization he modified Petrtion of Green Committee to dIsmISS appeal, Nov. 16, 1954. Reply of Inland Gas Corp to petition of Green Oommittee. Oommtssion flied

response Nov. I, 1954, urging the dismissal of the appeal. Judg- ment by CA-6, Dec. 15,1954, dismisslng appeal. Closed.

Appeal from order of June 8, 1954, amended June 22, 1954, denying

the petition for approval of agreement to share In compensation Brief of appellant filed July 9, 1954. Oommission filed memorandum in opposition to appeal, July 22, 1954. Order Aug. 6,

1954, denying petition for leave to appeal. Closed.

Appeal from order of Nov. 29, 1954, directing the Commission to

pay one-half of the cost of the transcription of the record of court

proceedings. Brief of Commission flied Mar. 2, 1955. Order by

CA-3, Apr. 6, 1955, directing that District Court enter an appro- priate order. Order May 2, 1955, upon Commission motion,

dtsrmsslng the appeal, following withdrawal by District Court of order from which appeal was taken. Clcsed.

Appeals from order of June 17, 1952, dismissing petition of Trustee

for an accounting and other relief against the Swiss Banks. Com- mission flied briefs Jan. 23 and Mar. 3, 1953, supporting appeals

and contending court had jurrsdlctfon over claims against the

banks. Oplmon Apr. 13, 1953, affirming the order of the district

court. Petitron for rehearing denied June 8, 1953. Petltlons for

writ of eertrorart supported by Oommisslon filed in Nov. 1953. Brief for respondents in opposition, Nov. I, 1954. Consideration of petittons for certiorari deferred by Supreme Court. Pending.

Appeals from order of Dec. 11, 1953, fixing allowances for services

rendered. Briefs flied in April 1954. Commission's brief took

position that overall fees were too high whUe fees awarded certain

creditors' representatives were too low. Judgment Aug. 2, 1954

vacating the District Court order and remanding for a new order.

Amended opinion flied Sept. I, 1954. Petition for rehearing

denied Sept. 2, 1954. Closed. Appeals from order of May 28, 1954,finding and declaring the status of cerlaln Treasury Bonds, flied June I, 10, 14and IS, 1954. Briefs

for appellants and appellees tiled. Commission tiled brief Feb. 24, 1955 In support of appeals. Reply bnefs flied during March 1955. Decision of CA-2, May 5, 1955, reversing and holding that

required bonds reduced pro rata the lien of the bondholders.

Closed. Appeal from order of Jan. 12, 1954, denying the CommIssIon's

motion to dismiss the Chapter XI proceedings for Transvlslon, Inc. on ground that Chapter XI was inappropriate since debtor has a substantial number of public investors. Brief for Commission Apr. 26, 1954, in support of appeal, and appellees brief

flied June 30, 1954. Opinion Nov. 9, 1954, a,ffirmIng the order wlilcb denied motion to dismiss and reversing order wlilch deuled intervention. Order Dec. 15, 1954,denying petition for reheartng,

Petition by Oomtnlssron for writ of cerllorarl, Jan. 14, 1955.

Brief for respondent in oppositton, Feb. 9, 1955and memorandum

for Commission In reply, Feb. 21, 1955. Certiorari denied, Feb.

28, 1955. Closed.
TWENTY-FIRST ANNUAL REPORT 163

TABLE 24.-A SS-year summary of criminal cases developed by tne Commission-s191J/,.through 1955 by fiscal year

[See table 26 for classification of defendants as broker-dealers, etc.)

Number

Number Number of these

Number of persons of such defendof cases as to cases m Number ants as to Number

referred whom which of de- Number Number wbom of these

to De- proseeu- indict. Iendants of these of these proceed. defend.

Fiscal year partment non was ments indicted defend. defend. mgs were ants as to

ofJustICe recom- were ob- ants con. ants eo- dismissed whom

tained by in such vieted quitted on motion cases are in each mended cases 1

year in eacb Umted of pending' States United 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 30 144 178 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•••.•• ••.• M 150 47 145 94 15 36 0 1942•••.••.•••• .•. 50 144 46 194 108 23 48 16 1943.••.• •..••••••.• 31 91 28 108 62 10 33 3 1944. .,._._ .•. 27 69 24 79 48 6 20 5 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 15 5 1948 •.• 16 32 15 29 20 3 6 0 1949•••.• ••.••• 27 44 25 57 17 13 25 2 1950.• _. , •. 18 28 15 27 21 1 5 0 1951 _.,. 29 42 24 48 37 5 6 0 1952 _._ _. '_"'" 14 26 13 24 16 4 3 1 1953 _. 18 32 15 33 17 6 5 5 19M_ _._ 19 44 19 52 11 3 0 38 1955 ._ '8 12 5 9 1 0 2 6

---- TotaL ••••. 638 2,107 , 533 2,259 1,223 279 '660 97

I The number of defendants in a case Is sometimes Increased by the Department of Justice over the num- ber against whom prosecution was recommended by the Commission. For the purpose of this table, an individual named as a defendant in 2 or more indictments In the same case Is counted as a single defendant.

See table 25 for breakdown of pending cases Three of these references as to 4 proposed defendants were still being processed by the Department of

1ustlce as of the close of the fiscal year. , 501 of these cases have been completed as to 1 or more defendants. Oonvlctlons have been obtained In

433or 86 percent of such cases. Only 68or 14 percent of such cases have resulted In acquittals or dismissals as to all defendants, this includes numerous casesm which Indictments were dismlssed WIthout trial because

of the death of defendants or for other administrative reasons. See note 5, Infra.

'Includes 50 defendants who died after Indtctment.

•••••••••••••••••

••• __•••• _•••••••

_•• _•• _••••• _

_•••• __ ••• _••••••• _••

•••• _••• •• ••• •••••••••••

_•• _•• _

___

_ _••• __ _ ••• __ _

_ __•••• •• __•••• _ __ __••• _••• __•• _

_•• __ _ __•• ••• __ _

•••••• _•• _•••

••• •• •• __•••••• _•••• •• _•• •••••• __ ____

---- ---- ---- ---- ---- ---- ---- __••

• • •
164 SECURITIES AND EXCHA...-\rGECOMMISSION

TABLE 25.-S1Immary of criminal cases tleuelopea by the Commission which were

sttU pendmg at June 30, 1955

I I Number Number of such defendants as to

Number of of such whom cases are still pending and

reasons therefor

Cases defendants defendants in such as to whom

cases cas~~~: ve Not yet Awaitmg Awaiting

completed appre- trial appeal hended

Pending, referred to Department

of Justice in the fiscal year: 1938___________________________ 1939___________________________ 1 2 1 1 0 0 0 0 0 0 0 0 1940___________________________ 1941.__________________________ 0 0 0 0 0 0 0 0 0 0 0 0 1942___________________________ 1943___________________________ 2 18 3 14 1 0 1 5 2 2 1 0 1944___________________________ 1 7 2 5 0 0 1945___________________________ 1 1 0 1 0 0 1946___________________________ 1947___________________________ 4 16 1 15 0 0 2 6 1 5 0 0 1948___________________________ 0 0 0 0 0 0 1949___________________________ 2 2 0 1 1 0 1950___________________________

1951___________________________ 0 0 0 0 0 0

1952___________________________ 0 0 0 0 0 0

1953___________________________ 1 2 1 0 0 1

1954___________________________ 5 15 10 1 3 1

1955___________________________ 11 38 0 8 27 3 3 6 0 0 6 0

Total _______________________ 134 1118 21 53 39 5

SUMMARY Total cases pending 1___ 37

Total defendants 1_ ____ _ 122

Total defendants as to whom cases are pending 1____________________________________________________ 101

I Except for 1955, indictments have been returned In all pending cases. As of the close of the fiscal year.

mdictments had not yet been returned as to 4 proposed defendants ill 3 cases referred to the Department of Justice in 1955. These are reflected only in the recapitulation of totals at the bottom of tho tab10.

TABLE 26.-A £2-year summary classifying all defendants in criminal cases developed

by the Commission-1934 to June 30,1955

Number as

to whom

cases were Number as Number Number Number dismissed to whom indicted convicted acquitted on motion cases are

of United pending

States

attorneys

Registered broker-dealers 1(inclUding prtn- cipals of such flrms} _____________________ 343 210 24 99 10

Employees of such registered broker-deal- ers _______________________________________ 123 64 16 42 1

Persons m general securities business but

not as registered broker-dealers (Includes prmelpals and employees) _______________ 716 357 57 257 45 All others , ________________________________ 1,077 592 182 262 41

Total ________________________________ 2,259 1,223 279 660 97

IIncludes persons registered at or prior to time of Indictment.

, The persons referred to ill this column, whlle not engaged In a general business In securities, were almost

without exception prosecuted for violations oflaw involving securities transactions.

•

_
TWENTY-FIRST ANJ\TUAL REPORT IG5

TABLE 27.-A 22-year summary of all injunction cases instituted by the Commission,

193J,.to June 30, 1955, by calendar year

I

I

Number of casesinstituted Number of cases in which by the Commission and miuneuons were granted the number of defend. and the number of de- Calendar year ants IIIvolved, fendants eniotned.i

Cases Defendants Cases Defendants

1934. .. 1935 7 24 2 4 1936 36 242 17 56

1937 .. 42 116 36 108

1938 96 240 91 211

1939 70 152 73 153

1940 57 154 61 165 1941. 40 100 12 99

1942.. 40 112 36 90

1943 21 73 20 54

1944. 19 81 18 72

1945 18 80 14 35

1946 21 74 21 57

1947 21 45 15 34

1948 .. 20 40 20 47

1949 19 44 15 26

1950 25 59 24 55

1951 ._ 27 73 26 71

1952 ... 22 67 17 43

1953 27 103 18 50

1954 20 41 23 68

22 59 22 62 1955 (to June 30) 9 22 8 20

TotaL , _. 679 2,001 619 1,580

SUMMARY

Cases Defendants

Actions tnstltuted, 679 2, 001

Injunctions 0htalned. .. 612 1,580 Actions pending .. 6 • 16 Other dispositions 61 405

TotaL ........... .......... .. 679 2,001

IThese columns show disposition of cases by year of disposttlon and do not necessarily reflect the dlspo- sttron of the cases shown as having been Instituted III the same years . Includes 7 cases which were counted twiee III this column because mjunettons against different defend. ants In the same cases were granted Indifferent years. Includes 4 defendants In2 cases Inwhich Injunctions have been obtamed as to 13co-defendants . Includes (a) actions disrnlssed (as to 339 defendants); (b) actions diseontmued, abated, vacated, abandoned, or settled (as to 52 defendants); (c) actions Inwhich judgment was denied (as to 11 defendants); (d) actions In which prosecution was stayed on stipulation to discontinue misconduct charged (as to 3

defendants).

o

_________________ _______________• ________ ____________________________________________

____________________________________________

__________ ________________________________ ____________________________________________

____________________________________________

____________• _____________• ___________• __• __ ___________________________________________

__________________________________________ ___________•_______________• _____• ____• _____ _________________________• _________________ ___________________________________• ________

___• __________________________________• _____ ____________________________________________

_____________________________ _____________ ___________•________________________________

_____•• _____________________________________

_________________________________• ________

_________________________________ ________ ____________________________________________

____________ •________ • ___

_____••••• ____•_________________

••••••• ••••• •••• ______ _ _ _________ •

•• _••••••••• ___•_______•_______________•____________

________•_____________•____ ________•_______________• _________________ •______________________________•• _________ •____•• _______•___•_________________________________ -______

______ __ __________________________________

•

•

•