1993 

Annual Report 

United States 

Securities and Exchange Commission 
SECURITIES AND EXCHANGE COMMISSION 

Mission 

Under the Securities Exchange Act of 1934, Congress created the Securities and 

Exchange Commission (SEC). The SEC is an independent, nonpartisan, quasijudicial regulatory agency. The agency's mission is to administer the federal 

securities laws that seek to provide protection for investors. The purposes of these 

laws are to ensure that the securities markets are fair and honest and to provide the 

means to enforce the securities laws through sanctions where necessary. 

Under the direction of the Chairman and Commissioners, the staff ensures that 

publicly held entities, broker-dealers in securities, investment companies and 

advisers, and other participants in the securities markets comply with federal 

securities laws. These laws were designed to facilitate informed investment 

analyses and decisions by the investing public, primarily by ensuring adequate 

disclosure of material information. 
Table of Contents . . Chairman's Transmittal Letter ............................................................................... vli 

Commission Members and Principal Staff Officers ........................................ ix 

Biographies of Commission Members ................................................................. xi 

Arthur Levitt + Mary L. Schapiro + Richard Y. Roberts + 

J. Carter Beese, Jr. 

Regional and District Offices ................................................................................. xv 

Enforcement 

Key 1993 Results ...................................................................................................... 1 

Enforcement Authority + Enforcement Activities 4 Sources for Further 

Inquiry 

International Affairs 

Key 1993 Results ........................................................................................................ 18 

Arrangements for Mutual Assistance and Exchanges of Information + 

Enforcement Matters + Technical Assistance + International 

Organizations and Multilateral Initiatives + International Requests for 

Assistance 

Regulation of the Securities Markets 

Key 1993 Results ........................................................................................................ 24 

Securities Markets, Trading and Significant Regulatory Issues + 

Examination and Oversight of Brokers, Dealers, Municipal Securities 

Dealers, and Transfer Agents + Oversight of Self-Regulatory 

Organizations 

Investment Companies and Advisers 

Key 1993 Results ........................................................................................................ 37 

Program Overview + Regulatory Policy + Significant Applications and 

Interpretations 

Full Disclosure 

Key 1993 Results ........................................................................................................ 51 

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

Conferences 
Accounting and Auditing Matters 

Key 1993 Results ..................................................................................................... 58 

Accounting Related Rules and Interpretations + Oversight of Private 

Sector Standard Setting + Oversight of the Accounting Profession's 

Initiatives + International Accounting and Auditing Standards 

Other Litigation and Legal Activities 

Key 1993 Results ...................................................................................................... 63 

Significant Litigation Developments + Significant Adjudication 

Developments + Task Force on Administrative Proceedings + 

Counselling and Regulatory Policy Services + Significant Legislative 

Developments + Foreign Technical Assistance + Corporate 

Reorganizations + Ethical Conduct Program + Workload Increases 

Economic Research and Analysis 

Key 1993 Results .................................................................................................. 75 

Economic Analysis and Technical Assistance 

Policy Management and Administrative Support 

Key 1993 Results ................................................................................................... 77 

Policy Management + Administrative Support 

Endnotes ............ 84 

Appendix ...................... 93 

Enforcement Cases Initiated by the Commission During Fiscal Year 

1993 in Various Program Areas + Fiscal 1993 Enforcement Cases 

Listed by Program Area + Investigations of Possible Violations of 

the Acts Administered by the Commission + Administrative 

Proceedings Instituted During Fiscal Year Ending September 30, 

1993 + Injunctive Actions + Right to Financial Privacy + Types of 

Proceedings + Foreign Restricted List + Self-Regulatory 

Organizations: Expenses, Pre-tax Income and Balance Sheet 

Structure + Consolidated Financial Information of Self-Regulatory 

Organizations + Self-Regulatory Organization<Iearing 

Corporations, 1992 Revenues and Expenses + Setf-Regulatory 

Organizations-Depositories, 1992 Revenues and Expenses + 

Certificate Immobilization + Exemptions + Corporate Reorganizations + The Securities Industry: Revenues, Expenses, and Selected 

Balance Sheet Items + Unconsolidated Financial Information for 

Broker-Dealers + Unconsolidated Annual Revenues and Expenses 

for Broker-Dealers Doing a Public Business, 1988-1992 + 

Unconsolidated Balance Sheet for Broker-Dealers Doing a Public 
Business Year-end, 1988-1992 + Carrying and Clearing Firms + 

Securities Industry Dollar in 1992 for Carrying/Clearing Firms + 

Unconsolidated Revenues and Expenses for Canying/Clearing 

Broker-Dealers + Unconsolidated Balance Sheet for Carrying/ 

Clearing Broker-Dealers + Securities Traded on Exchanges: Market 

Value and Volume + NASDAQ (Share Volume and Dollar Volume) 

+ Share and Dollar Volume by Exchanges + Market Value of 

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

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

Exchanges + Dollar Volume by Exchanges + Securities Listed on 

Exchanges + Value of Stocks Listed on Exchanges + Appropriated 

Funds vs. Fees Collected + Budget Estimates and Appropriations + 

Securities and Exchange Commission Organizational Chart 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549 

THE CHAIRMAN 

The Honorable Albert Goye, Jr. The Honorable Thomas S. Foley 

President of the Senate Speaker of the House 

Washington, D.C. 20510 Washington, D.C. 20515 

Gentlemen: 

I am pleased to submit the annual report of the Securities and 

Exchange Commission for fiscal year 1993. The report has been prepared 

in accordance with the provisions of Section 23@) of the Securities Exchange 

Act of 1934, as amended; Section 23 of the Public Utility Holding Company 

Act of 1935; Section 46(a) of the Investment Company Act of 1940; Section 

216 of the Investment Advisers Act of 1940; Section 3 of the Act of June 29, 

1949 amending the Bretton Woods Agreement Act; Section Il(b) of the 

Inter-American Development Bank Act; and Section 11@) of the Asian 

Development Act. 

Sincerely, 

klnn 

Arthur Levitt 

Chairman 

Commissionen Term Expires 

Arthur Levitt, Chaiman 

Mary L. Schapiro 

Richard Y. Roberts 

J. Carter Beese, Jr. 

Principal Staff Officers 

Colleen P. Mahoney, Executive Assistant 

Linda C. Quinn, Director, Division of Corporation Finance 

Elisse B. Walter, Deputy Director 

William E. Morley, Senior Associate Director 

Abigail Arms, Associate Director 

Teresa E. Iannaconi, Associate Director 

Richard M. Kosnik, Associate Director 

Howard F. Morin, Associate Director 

Mauri L. Osheroff, Associate Director 

Robert A. Bayless, Chief Accountant 

David A. Sirignano, Senior Legal Advisor 

William R. McLucas, Director, Division of Enforcement 

Joseph I. Goldstein, Associate Director 

Bruce A. Hiler, Associate Director 

Thomas C. Newkirk, Associate Director 

Vacant, Associate Director 

Joan E. McKown, Chief Counsel 

Barry R. Goldsmith, Chief Litigation Counsel 

Stephen J. Crimmins, Deputy Chief Litigation Counsel 

George H. Diacont, Chief Accountant 

James A. Clarkson, 111, Director of Regional Office Operations 

Barry Barbash, Director, Division of Investment Management 

Barbara J. Green, Deputy Director 

Matthew A. Chambers, Associate Director 

Gene A. Gohlke, Associate Director 

C Gladwyn Goins, Associate Director 

William C. Weeden, Associate Director 

Thomas S. Harman, Chief Counsel 
Brandon Becker, Director, Division @Market Regulation 

Robert L.D. Colby, Deputy Director 

Larry E. Bergmann, Associate Director 

Mark D. Fitterman, Associate Director 

Jonathan Kallman, Associate Director 

Howard Kramer, Associate Director 

Michael A. Macchiaroli, Associate Director 

Catherine McGuire, Chief Counsel 

Mary Ann Gadziala, Senior Advisor 

Vacant, Special Assistant to the Director 

Simon M. Lome, General Counsel, Office of the General Counsel 

Paul Gonson, Solicitor and Deputy General Counsel 

Phillip D. Parker, Deputy General Counsel (Legal Policy) 

Anne E. Chafer, Associate General Counsel 

Richard M. Humes, Associate General Counsel 

Diane Sanger, Associate General Counsel 

Jacob H. Stillman, Assoahte Gmal CatnseI 

William S. Stern, Counselor for Adjudication 

Walter P. Schueke, Chief Accountant, Ofice of the Chief Accountant 

John P. Riley, Deputy Chief Accountant 

Warren E. Blair, Chief Administrative Law Judge, Officeof the Administrative Law Judges 

Susan E. Woodward, Chief Economist, mce of Economic Analysis 

Jeffry L. Davis, Director, Economic and Policy Research 

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

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

Vacant, Deputy Executive Director 

Fernando L. Alegria, Jr., Associate Executive Director 

Wilson A. Butler, Jr., Associate Executive Director 

Lawrence H. Haynes, Associate Executive Director 

John J. Lane, Associate Executive Director 

Michael D. Mann, Director, OJJlce of lnternatianal Affairs 

Kathryn Fulton, Director, Office of Legislative Affairs 

Jennifer Kimball, Director, Ofice of Public Affairs, Policy Evaluation and Research 

Jonathan G. Katz, Secretary of the Commission 
Chairman 

Following his nomination by 

President Clinton and his confirmation 

by the Senate, Arthur Levitt, Jr. was 

sworn in as the 25th Chairman of the 

Securities and Exchange Commission 

on July 27, 1993. 

Before being nominated to the 

Commission, Mr. Levitt served as the 

Chairman of the New York City 

Economic Development Corporation 

and, from 1978 to 1989, the Chairman 

of the American Stock Exchange 

(Amex). 

Throughout his career, Mr. Levitt has been called upon to serve on 

many governmental task forces and boards of directors. At the federal 

level, he has served on four executive branch commissions, including 

chairing the White House Small Business Task Force from 1978 to 1980. 

Most recently, he was a member of the President's Base Closure and 

Realignment Commission and the Defense Department Task Force on the 

National Industrial Base. In addition to heading the New York City 

Economic Development Corporation, he chaired the Special Advisory Task 

Force on the Future Development of the West Side of Manhattan and the 

Committee on Incentives and Tax Policy of the New York City Mayor's 

Management Advisory Task Force. 

Mr. Levitt has served on 10 corporate and philanthropic boards, 

including those of the Equitable Life Assurance Society of the United 

States, East New York Savings Bank, First Empire State Corporation, the 

Revson Foundation, the Rockefeller Foundation, the Solomon R. Guggenheim 

Foundation and Williams College. 

Mr. Levitt founded Levitt Media Company in 1990. Its primary 

holding is Roll Call, the Newspaper of Congress. 

Prior to accepting the Amex chairmanship, Mr. Levitt worked for 16 

years on Wall Street. From 1969 to 1978, he was President and Director 

of Shearson Hayden Stone, Inc. (today Smith Barney Shearson) whose 

predecessor firm he joined as a partner in 1962. It was during this period 

that Mr. Levitt first invoIved himself with Amex, becoming one of its 

governors in 1975 and in 1977 accepting the additional position of Vice 

Chairman. 

From 1959 to 1962, Mr. Levitt worked at the Kansas-based agricultural 

management firm Oppenheimer Industries, where he rose to the position 

of Executive Vice President and Director. From 1954 to 1959, Mr. Levitt 

was assistant promotion director at Time, Inc. 
Mr. Levitt, 62, graduated Phi Beta Kappa from Williams College in 

1952 before serving two years in the Air Force. Married since 1955 to the 

former Marylin Blauner, Mr. Levitt has two children, Arthur 111 and Lauri. 

Commissioner 

Mary L. Schapiro was sworn in as 

the 67th member of the Securities and 

Exchange Commission on December 19, 

1989 by the Honorable Sandra Day 

O'Connor, Associate Justice of the United 

States Supreme Court. Ms. Schapiro was 

nominated to the Commission on 

November 8, 1989 by President George 

Bush and confirmed by the United States 

Senate on November 18, 1989. Her term 

expires in June 1994. Ms. Schapiro had 

prkviously-been appointed by president 

Ronald Reagan for a one year term. She was designated Acting Chairman 

of the SEC by President Clinton in May 1993 and served in that capacity 

until the confirmation of Chairman Arthur Levitt. 

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

Administrative Process in 1990, with responsibility for comprehensive 

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

The Task Force Report was published in March 1993. Ms. Schapiro also 

serves on the Developing Markets Committee of the International 

Organization of Securities Commissions. 

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

Counsel and Senior Vice President for the Futures Industry Association. 

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

issues, including extensive liaison with foreign government officials and 

analysis of state and Federal legislation. 

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

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

as a Trial Attorney in the Manipulation and Trade Practice Investigations 

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

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

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

matters pending before the Commission and on legislation. She also 

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

the futures industry, in addition to other duties. 

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

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

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

Richard Roberts was nominated to the 

Commission by President Bush and 

confirmed by the Senate on September 27, 

1990. He was sworn in as a Commissioner 

on October 1,1990 by the Honorable Stanley 

Sporkin, Judge for the United States District 

Court of the District of Columbia. His term 

expires in June 1995. 

Before being nominated to the 

Commission, Mr. Roberts was in the private 

practice of law with the Washington office 

of Miller, Hamilton, Snider &-0dom. Before joining the law firm in April 

1990, Mr. Roberts was administrative assistant and legislative director for 

Senator Richard Shelby (D., Ala.), a position he assumed in 1987. Prior 

to that, Mr. Roberts was, for four years, in the private practice of law in 

Alabama. From 1979 to 1982, Mr. Roberts was administrative assistant 

and legislative director for then-Congressman Shelby. 

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

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

a Master of Laws in taxation from the George Washington University 

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

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

Bar Association and the District of Columbia Bar Association. 

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

Virginia with their son and two daughters. 

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

Commissloner 

J. Carter Beese, Jr. was nominated to the 

U.S. Securities and Exchange Commission in 

October 1991 by President George Bush and 

confirmed by the U.S. Senate on February 27, 

1992. Mr. Beese was sworn in as the 71st 

member of the Commission in a private 

ceremony held on March 10, 1992, by the 

Honorable Stanley Sporkin, Judge for the 

U.S. District Court for the District of 

Columbia. On April 20,1992, Mr. Beese was 

formally sworn in at the White House by Vice 

President Dan Quayle. Mr. ~eese's- term expires in June of 1996.. 

During his tenure at the Commission, Commissioner Beese has been 

particularly active in the areas of investment management, the derivatives 

markets and cross-border capital flows. Commissioner Beese's focus on 

these areas is centered on his belief that the transformation of savers into 

investors through mutual funds, the development of new financial 

instruments to reallocate risk, and the globalization of the world's capital 

xiii 
markets are fundamentally remaking our markets. Commissioner Beese

is committed to maintaining the competitiveness of U.S. capital markets

and readying the securities markets and securities regulators for the

challenges of the next century.

Before joining the Commission, Mr. Beese was a partner of Alex.

Brown & Sons, the oldest investment banking firm in the United States.

Mr. Beese's corporate responsibilities included business development in

the areas of corporate finance, investment management, and institutional

brokerage. Mr. Beese joined Alex. Brown in 1978, became an officer in

1984, and was named partner in 1987. Mr. Beese was also active in the

founding of the Carlyle Group, a Washington based merchant bank, and

served as an advisory director from 1986 1989.

Mr. Beese has also served in other capacities in government, each

related to enhancing the competitiveness of U.S. industries and markets.

In 1990, Mr. Beese was appointed by President Bush, and confirmed by

the U.S. Senate, as a Director of the Overseas Private Investment

Corporation (OPIC). OPIC is a U.S. government agency that assists

American private business investment in over 120 countries by financing

direct loans and loan guarantees and by insuring investments against

a broad range of political risks. OPIC plays a vital role in the effort

to gain access to new markets for U.S. products and businesses.

Mr. Beese also served as a member of the Securities and Exchange

Commission's Emerging Markets Advisory Committee. As part of his

responsibilities, Mr. Beese provided technical assistance on the formation

and regulatory oversight of financial markets. Further, during 1991 Mr.

Beese also served as a member of the Committee on Financing Technology

in the U.S., a joint project between the Treasury and Commerce

Departments initiated to study the adequacy of investment in the

technology needed by U.S. companies to meet the challenges of global

competition.

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

the American Center for International Leadership (ACIL), of which he

is a director. AClL brings young American leaders together with their

counterparts in various foreign countries. Mr. Beese participated in

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

Soviet Union in 1990. He is a committee member of CHILD HELP USA,

and serves on the boards of Preservation Maryland, the Palm Beach

Maritime Museum and Ocean Engineering Institute, and the Advisory

Board of National Rehabilitation Hospital. Mr. Beese resides in Baltimore,

Maryland with his wife, Natalie, and three children, Courtney, John

Carter and Wilson.

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~~
Cenhal Regional Office Pacific Regional Office 

Robert H. Davenport, Regional Director Elaine M. Cacheris, Regional Director 

1801 California St., Suite 4800 5670 Wihire Blvd, 11 th Floor 

Denver, CO 80202-2648 Los Angeles, CA 9W36-3648 

(303) 391-6800 (213) %5-3998 

Fort Worth District Office San hcisco Dkhict Office 

T. Christopher Browne, District Administrator Vacant, District Administrator 

801 Cherry Sh.eet, 19th Floor 44 Montgomery Street, 11 th Floor 

Fort Worth, TX 76102 San Francisco, CA 94104 

(81 7) 334-3821 (415) 762500 

Salt Lake Dishict Office 

Vacant, District Administrator 

500 Key Bank Tower 

50 S. Main Skeet, Suite 500 

Box 79 

Salt Lake City, UT 84144-0402 

(801) 5245796 

Midwest Regional Office 

William D. Goldsberry, Regional Director 

Northwestern Atrium Center 

500 W. Madison St., Suite 1400 

Chicago, K 60661-251 1 

(312) 35X7390 

Northeast Regional Office 

Richard H. Walker, Regional Direaor 

7 World Trade Center, Suite 1300 

New York, NY 1W 

(212) 7488000 

Boston Did Office 

Juan M. hlino, District Administrator 

73 Tremont Sh.eet 

Sixth Floor, Suite 600 

Boston, MA 02108 

(61 7) 424-5900 

Philadelphia District Office 

Donald M. Hoerl, District Administrator 

The Curtis Center, Suik 1005 E. 

601 Walnut Street 

Philadelphi* PA 191Uf5-3322 

(215) 597-3100 

Seattle District Office 

Jack H. Bookey, District Administrator 

3040 Jackson Federal Building 

915 Second Avenue 

Seattle, WA 98174 

(206) 220-7500 

Southeast Regional Office 

Vacant, Regional Director 

1401 Brickell Avenue, Suite 2W 

Miami, FL 33131 

(305) 536-5765 

Atlanta Wct Office 

Richard P. Wessel, District Administrator 

3475 Lenox Road, N.E. 

Suite 1000 

Atlanta, GA 30326-1232 

(404) 842-7600 
The Commission's enforcement program is designed to protect investors 

and foster investor confidence by preserving the integrity and effzciency ofthe 

securities markets. The enforcement program's principal legislative mandates 

contain explicit authority for the agency to conduct investigations and 

prosecute violations ofthe securities laws by bringing enforcement actions in 

a federal court m instituting administrative proceedings before the Commission. 

Last year, as in prior years, the Commission maintained a strong presence in 

all areas within its jurisdiction. 

Key 1993 Results 

In 1993, the Commission instituted a significant number of enforcement 

actions in response to a wide range of securities law violations. In its 

administrative and judicial proceedings, the Commission sought and 

obtained relief from a broad and flexible array of remedies designed to 

protect investors and the public interest. 

The Commission obtained court orders requiring defendants to 

disgorge illicit profits of approximately $225 million. This included 

disgorgement orders in insider trading cases requiring the payment of 

approximately $12 million. Civil penalties authorized by the Securities 

Enforcement Remedies and Penny Stock Reform Act of 1990 (Remedies 

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

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

over $29 million. 

In Commission-related cases, criminal authorities obtained 67 criminal 

indictments or informations and 58 convictions during 1993. The 

Commission granted access to its files to domestic and foreign prosecutorial 

authorities in 205 instances. 

Total Enforcement Actions Initiated 

Total 310 304 320 394 416 

Civil Injunctive Actions 140 186 172 156 172 

Administrative Proceedings 155 111 138 226 229 

Civil and Criminal Contempt 

Proceedings 15 7 9 11 15 

Reports of Investigation 0 0 1 1 0 
Enforcement Authority 

The Commission has broad authority to investigate possible violations 

of the federal securities laws. Informal investigations are conducted on 

a voluntary basis, with the Commission requesting persons with relevant 

information to cooperate by providing documents and testifying before 

Commission staff. The federal securities laws also empower the Commission 

to conduct formal investigations, in which the Commission has the authority 

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

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

are conducted on a confidential, nonpublic basis. 

Traditionally, the Commission's primary enforcement mechanism for 

addressing violative conduct has been the federal court injunction, which 

prohibits future violations. In civil actions for injunctive relief, the 

Commission is authorized to seek temporary restraining orders and 

preliminary injunctions as well as permanent injunctions against any 

person who is violating or about to violate any provision of the federal 

securities laws. Once an injunction has been imposed, conduct that violates 

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

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

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

accounting and disgorgement of illegal profits. When seeking temporary 

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

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

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

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

the exception of insider trading violations for which penalties are available 

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

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

as corporate officers or directors. 

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

to institute several types of administrative proceedings. The Commission 

may institute administrative proceedings against regulated entities, in 

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

activities, and suspension or revocation of registration. The Commission 

may impose similar sanctions on persons associated with such entities and 

persons affiliated with investment companies. In addition, individuals 

participating in an offering of penny stock may be barred by the Commission 

from such participation. In administrative proceedings against regulated 

entities and their associated persons, the Remedies Act also authorizes 

the Commission to impose penalties and order disgorgement. 

The Remedies Act further authorizes the Commission to institute 

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

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

violating the federal securities laws, and may require disgorgement of 

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

and desist orders (if necessary, on an ex parte basis) against regulated 

entities and their associated persons, if the Commission determines that 
the violation or threatened violation is likely to result in significant 

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

substantial harm to the public interest prior to thecompletion of proceedings. 

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

Commission to institute proceedings to suspend the effectiveness of a 

registration statement that contains false and misleading statements. 

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

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

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

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

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

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

Rules of Practice, administrative proceedings can be instituted against 

professionals who appear or practice before the Commission, including 

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

proceedings include suspensions and bars from appearing or practicing 

before the Commission. 

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

or local authorities or self-regulatory organizations (SROs) such as the New 

York Stock Exchange (NYSE) or the National Association of Securities 

Dealers (NASD). The staff often i rovides substantial assistance to criminal 

authorities, such as the Department of Justice, for the criminal prosecution 

of securities violations. 

Enforcement Activities 

Set forth below are summaries of significant enforcement actions 

initiated in various program areas in 1993. Defendants or respondents 

who consented to settlement of actions did so without admitting or denying 

the factual allegations contained in the complaint or order instituting 

proceedings. See Table 2 for a listing of all enforcement actions instituted 

in 1993. 

Violations Relating to the Government Securities Markets 

During the year, the Commission continued its focus on violations 

affecting the conduct and fairness of the market for government securities. 

The Commission instituted administrative proceedings against three 

members of the senior management of Salomon Brothers Inc., alleging that 

they had become aware that Paul W. Mozer, head of the firm's government 

trading desk, had submitted a false bid in an auction of U.S. Treasury 

securities (In the Matter of John H. Gutfreund'). The Commission found that 

the respondents, Gutfreund, Salomon's former chairman and chief executive 

officer, Thomas W. Strauss, Salomon's former president, and John W. 

Meriwether, Salomon's former vice chairman, failed adequately to supervise 

Mozer in that they took no action to investigate the matter, to discipline 

him, or to report the matter to the government for a period of several 

months, during which time Mozer committed additional violations. The 

respondents consented to the entry of the order by which Gutfreund was 

barred from holding the positions of chairman or chief executive officer 
with any regulated entity and was required to pay a civil penalty of 

$100,000. Strauss was suspended from association with any regulated 

entity for a period of six months and ordered to pay a civil penalty of 

$75,000. Meriwether was suspended from association for a period of three 

months and ordered to pay a civil penalty of $50,000. The order also 

included a report of investigation under Section 21(a) of the Exchange Act 

with respect to the responsibilities of legal and compliance officers, 

addressing the activities of Donald M. Feuerstein, Salomon's chief legal 

officer. 

The Gutfreund matter was related to the Commission's injunctive and 

administrative proceedings previously initiated against Salomon in 

connection with the firm's activities in the market for U.S. Treasury 

securities, and to SEC v. Paul W. MozerI2 a pending action against Mozer 

and Thomas F. Murphy, a former managing director of the firm, arising 

from the defendants' submission of false bids in Treasury auctions. 

The Commission also instituted cease and desist proceedings against 

Daiwa Securities America, Inc., a registered broker-dealer and governmentdesignated primary dealer in U.S. Treasury securities (In the Matter of 

Daiwa Securities, I~c.~). The Commission found that Daiwa submitted a 

false bid in an auction for U.S. Treasury securities in August 1989. While 

the tender form indicated that the bid was for Daiwa, the bid was in fact 

for Salomon Brothers Inc., and permitted Salomon to circumvent Treasury 

regulations regarding, among other things, the maximum amount that any 

person could purchase in the auction. The respondents, Daiwa and William 

M. Brachfeld, an executive vice president of the firm, consented to the 

entry of the cease and desist order. In addition, Daiwa consented to the 

entry of an order censuring the firm and ordering it to pay disgorgement 

and prejudgment interest of $249,340, and Brachfeld consented to the entry 

of an order suspending him from association with any regulated entity 

for a period of three months and requiring him to pay disgorgement and 

prejudgment interest of $41,918. 

In the administrative proceedings In the Matter of Donaldson, Lufkin 

I3 jenrette Securities C~rp.,~ theCommission found violative conduct with 

respect to bids in U.S. Treasury auctions. Purportedly to avoid paperwork 

burdens, Donaldson Lufkin caused bids to be filed that did not accurately 

reflect the identity of customers seeking to purchase Treasury securities. 

In addition, bids were submitted in a form that permitted Donaldson 

Lufkin to purchase approximately $107 million in Treasury securities for 

its own account in excess of permitted amounts. Donaldson Lufkin 

consented to the entry of a cease and desist order, and an order requiring 

the firm to pay disgorgement and prejudgment interest of $100,000 and 

a civil money penalty of $50,000. In a related action, In the Matter of Carroll 

McEntee I3 McGinley Securities, I~c.,~ a government-designated primary 

dealer through which Donaldson Lufkin had placed its bids consented to 

the entry of a cease and desist order and an order requiring it to pay a 

civil penalty of $30,000. 
The Commission alleged that Daniel 0. Teyibo and his company, JFM 

Government Securities, Inc., defrauded broker-dealer firms in transactions 

in U.S. Treasury notes and bonds by engaging in free-riding, i.e., the 

fraudulent practice of ordering securities without the ability or intent to 

pay (SEC v. Daniel 0. Teyibo6). In the course of soliciting numerous brokerdealer firms to engage in such transactions, Teyibo, among other things, 

provided phony financial statements, and falsely represented that JFM had 

accounts with the firms being solicited and that JFM was a registered 

government securities dealer. Teyibo and JFM also used more than two 

dozen aliases in connection with the scheme. While Teyibo and JFM 

accepted profits of approximately $165,000 from successful trades, they 

reneged on transactions that resulted in losses, defaulting on at least 

$550,000 owed to 27 broker-dealer firms. The Commission obtained a 

preliminary injunction, an asset freeze and other emergency relief in this 

matter, which was pending at the end of the year. 

Violations Relating to Financial lnstitu twns 

The Commission continued to investigate possible securities law 

violations by financial institutions and persons associated with them. 

The Commission filed an action against Bruce Dickson, formerly the 

chief lending officer and president of Lincoln Savings and Loan Association 

and senior vice president and director of Lincoln's parent, American 

Continental Corporation (ACC) (SEC v. Bruce Dickson7). This case was 

related to the Commission's earlier action against Charles H. Keating and 

other persons associated with Lincoln and ACC. Dickson allegedly aided 

and abetted ACC in inflating its reported earnings in connection with two 

real estate transactions that were improperly treated as sales. Dickson 

consented to the entry of an injunction. 

The Commission instituted cease and desist proceedings arising out 

of violations by Amfed Financial Corporation, a savings and loan holding 

company which was the parent of American Federal Savings and Loan 

Association of Colorado (AFS) (In the Matter of Paul K. Cl~rkin;~ In the Matter 

of Douglas R. Gulling9). Amfed's report on Form 10-K for the fiscal year 

ended December 31,1987, and its reports on Forms 10-Q for the first three 

quarters of 1988 contained misrepresentations, and omitted material 

information regarding, among other things, Amfed's financial condition, 

the adequacy of AFS's loan and real estate loss reserves, transfers of 

interests in real estate improperly recorded as sales, and the status and 

value of assets that had been foreclosed in substance. Four of Amfed's 

former officers and directors consented to the entry of cease and desist 

orders. 

The defendant in SEC o. Joseph Zilberlo was a major shareholder in 

Federated Bank, S.S.B. Senior officers of Firstar Corp. and its subsidiary, 

First Wisconsin National Bank of Milwaukee, told Zilber of negotiations 

to acquire Federated, on the assumption that he was already aware of the 

discussions. Although Zilber allegedly agreed to treat the material 

nonpublic information as confidential, he nonetheless purchased 26,000 
shares of Federated common stock while in possession of the information. 

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

to pay disgorgement of $184,500 and an ITSA penalty of $92,250. 

Insider Trading 

Insider trading occurs when a person in possession of material 

nonpublic information engages in securities transactions or communicates 

such information to others who trade. Insider trading encompasses more 

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

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

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

also may arise from the transmission or use of material nonpublic 

information by persons in a variety of other positions of trust and confidence 

or by those who misappropriate such information. 

In addition to permanent injunctions, the Commission often seeks 

ancillary relief, including disgorgement of any profits gained or losses 

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

authorize the Commission to seek a civil penalty, payable to the United 

States, of up to three times the profit gained or loss avoided, against 

persons who unlawfully trade in securities while in possession of material 

nonpublic information, or who unlawfully communicate material nonpublic 

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

persons who control insider traders. During 1993, the Commission brought 

34 cases alleging insider trading violations. 

In SEC v. C. Robert Dudgeon," the Commission alleged that the 

defendant, while employed in the corporate strategy and development 

department of AT&T, obtained material nonpublic information about his 

employer's plans to make a tender offer for NCR Corporation, and, 

subsequently, to pursue an acquisition of Teradata Corporation. Dudgeon 

earned a profit of approximately $186,000 from his transactions in NCR 

call options, and over $76,000 from his transactions in Teradata call 

options. Dudgeon consented to the entry of an injunction and an order 

by which he was ordered to disgorge $262,314, to pay prejudgment interest 

of $44,454 and to pay an ITSA penalty of $262,314. 

Insider trading in the shares of The Foxboro Company was alleged 

in SEC v. Purnendu Chatterjee.12 The Commission alleged that Chatterjee, 

a former director of Foxboro, communicated material nonpublic information 

concerning possible tender offers for Foxboro to Sukumar Shah and Anjan 

Chatterjee. The defendants consented to the entry of injunctions and 

orders requiring them to disgorge a total of $643,855 plus prejudgment 

interest of $170,362 and to pay total ITSA penalties of $1,287,710. 

The prohibition against insider trading applies to relatives and friends 

of traditional insiders who trade or tip in breach of a relationship of trust 

and confidence. The Commission alleged in SEC v. Jonathan J. Sheinberg13 

that Sheinberg overheard his father, the president of MCA Inc., talking 

about acquisition discussions concerning MCA. Despite his father's 

instructions to keep the information confidential, Sheinberg tipped the 

information to others who traded MCA securities. The defendants consented 
to the entry of injunctions, and Sheinberg consented to the entry of an 

order requiring him to pay an ITSA penalty of $417,988. The three other 

defendants in the action consented to pay disgorgement plus prejudgment 

interest totalling $491,088 and civil penalties totalling $417,988. 

The controlling person liability provisions of ITSFEA were applied 

for the first time in SEC v. Lee A. Haddad.I4 In that case, it was alleged 

that Haddad, a former financial analyst with Morgan Stanley & Co., tipped 

material nonpublic information to a friend who, in turn, tipped others, 

including a registered representative at Jeffrey Brooks Securities. The 

salesman's supervisors at Jeffrey Brooks failed to inquire into his purchases 

prior to the announcements of two takeovers for which Haddad had 

provided tips, but instead made trades of their own that followed the 

salesman's trading patterns on transactions arising from three subsequent 

tips. The defendants consented to the entry of injunctions. In addition, 

Haddad consented to the entry of an order imposing an ITSA penalty of 

over $2 million, and the salesman consented to pay disgorgement and 

penalties totalling over $800,000. Jeffrey Brooks and its principals consented 

to the payment of a civil penalty of $405,000 as controlling persons. 

A Commission action was filed against an attorney retained by 

Minnetonka Corporation to provide advice regarding a possible sale of 

the company (SEC v. Dean Ambrose Olds15). While in possession of material 

nonpublic information, Olds purchased 6,000 shares of Minnetonka common 

stock, which he sold for a profit of approximately $40,909 after Minnetonka's 

public announcement of its retention of an investment adviser to explore 

alternatives including possible sale of the company. Olds consented to 

the entry of an injunction and an order requiring him to pay $40,909 as 

disgorgement, plus prejudgment interest, and a civil penalty of $40,909. 

Financial Disclosure 

Actions involving false and misleading disclosures concerning matters 

that affect the financial condition of an issuer or involving the issuance 

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

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

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

The Commission brought 36 cases containing significant allegations of 

financial disclosure violations against issuers, regulated entities, or their 

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

and records and internal accounting control provisions of the Foreign 

Corrupt Practices Act. The Commission also brought 17 cases alleging 

misconduct by accounting firms or their partners or employees. 

The Commission filed an action against four former officers of Financial 

News Network Inc. (FNN), C. Stephen Bolen, Earl W. Brian, Gary A. Prince 

and Mitchel H. Young, alleging that they participated in a scheme to inflate 

FNN1s reported revenues and earnings for fiscal year 1989 and the first 

three quarters of 1990, and to conceal and perpetuate the fraud during 

FNN1s 1990 audit (SEC v. C. Stqhen Bolen16). The inflation of revenues 

was primarily accomplished through the manipulation of revenues from 

two companies related to FNN, United Press International, Inc., and 
Institutional Research Network, Inc. Among other things, the Commission 

alleged that Bolen caused FNN to pay approximately $800,000 in 

unauthorized compensation to a company under his control, and sold FNN 

stock while in possession of material nonpublic information concerning 

the inflation of FNN's financial results. In addition to injunctive relief, 

the Commission is seeking disgorgement and ITSA penalties from Bolen 

and an order prohibiting him from acting as an officer or director of a 

public company. Brian consented to the entry of an injunction. This case 

was pending at the end of the year as to the remaining defendants. 

The Commission's complaint in SEC v. The Software Toolworks, Inc.,17 

alleged that Software Toolworks misled investors in connection with an 

$82 million secondary offering. The company made misrepresentations 

and omissions regarding, among other things, the deterioration in sales 

of software for Nintendo Entertainment Systems, the offer of $3.9 million 

in price concessions to Nintendo customers, and the shipment of $5.2 

million of Nintendo product to certain customers as conditional or fictitious 

sales. Software Toolworks also overstated its revenues and gross profit 

for the quarter ended June 30, 1990 by approximately $7 million and $2.6 

million respectively. Four corporate officers also sold a total of 

approximately 1.35 million shares of Software Toolworks stock while in 

possession of material nonpublic information concerning the 

misrepresentations and omissions in the company's filings. Software 

Toolworks and three of the individual defendants consented to the entry 

of injunctions. Software Toolworks also consented to implement certain 

accounting procedures and measures to prevent insider trading by its 

employees. In addition, individual defendants consented to the entry of 

orders requiring them to disgorge over $2 million, and one consented to 

the entry of a bar from acting as an officer or director of a publicly-held 

company. At the end of the year, this case was pending as to one remaining 

individual defendant. 

In SEC v. Larry E. Leslie,l8 the Commission alleged violations of Section 

13(b)(5) of the Exchange Act, which explicitly prohibits circumvention of 

a public company's internal accounting controls. The defendant, a former 

executive of a subsidiary of the American Express Company, allegedly 

delayed the write-off of uncollectible Optima credit card accounts, thereby 

causing the overstatement of American Express's pretax income by $36.3 

million for three quarterly periods. Leslie consented to the entry of an 

injunction and an order requiring him to pay a civil penalty of $10,000. 

In SEC v. Harold S~hlen,'~ the Commission alleged that Harold Sahlen, 

the chairman and chief executive officer of Sahlen and Associates, Inc. 

(SAI) determined, prior to the end of each fiscal quarter from June 1985 

to February 1989, the amount of fictitious revenue to report in SAI's 

financial statements. Other defendants implemented the scheme by, among 

other things, recording on SAI's books fictitious revenue attributed to work 

in process and accounts receivable. The scheme created the appearance 

that SAI was profitable when, in fact, it was consistently losing money. 

On the basis of its false financial statements, SAI raised millions from 
public and private offerings of debt and equity securities and through bank 

loans. Four defendants consented to the entry of injunctions. This case 

was pending as to Sahlen and one other defendant at the end of the year. 

The Commission filed an action against an accountant based on his 

improper 1991 audit of College Bound, Inc. (SEC v. Gordon K. Goldman, 

C.P.A20). The Commission alleged that Goldman's deficient audit resulted 

in a failure to discover that the principals of College Bound had, among 

other things, materially inflated College Bound's income by counting the 

proceeds of note offerings as revenues, and that the principals also had 

materially inflated College Bound's fixed assets. This case, which was 

related to an action against College Bound and its principals filed the 

previous year, was pending at the end of the year. 

Securities Offering Cases 

Securities offering cases involve the offer and sale of securities in 

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

the issuers attempt to rely on exemptions from the registration requirements 

that are not available under the circumstances. Offering cases frequently 

involve material misrepresentations concerning, among other things, use 

of proceeds, risks associated with investments, disciplinary history of 

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

of prior offerings, and the financial condition of issuers. 

In SEC v. Towers Financial C~rp.,~' the Commission alleged an illegal, 

unregistered offering of over $215 million of promissory notes issued by 

Towers Financial. Among other things, the principal defendants allegedly 

overstated Towers' collection receivables and fee income, and 

misrepresented the use Towers would make of the proceeds from its sales 

of debt to the public. The Commission further alleged that activities by 

the principal defendants were in violation of an injunction entered against 

them in 1988. The Commission's complaint was amended to name five 

subsidiaries of Towers as additional defendants, and to name three other 

entities as relief defendants. This case was pending at the end of the year. 

The Commission alleged that Premium Sales Corp. and Kenneth 

Thennen, the president and a director of Premium Sales, raised 

approximately $515 million from investors by falsely representing that they 

were engaged in a form of arbitrage intended to take advantage of variations 

in grocery prices in different regions of the country (SEC v. Premium Sales 

C~rp.~~). Among other things, it was represented that the business could 

make upwards of a 60 percent annualized return on investments. The 

complaint alleged that a material portion of the claimed transactions were 

shams or overstated, and that Premium Sales never made the large profits 

reported to investors. The court entered a temporary restraining order, 

and imposed an asset freeze and other emergency relief. 

In SEC v. International Quarter the Commission alleged that 

the defendants raised approximately $10 million from more than 3,000 

investors through the sale of unregistered securities in the form of interests 

in coin-operated pay telephones. The complaint alleged misrepresentations 

concerning, among other things, the profitability and business prospects 
of International Quarter Phones, contracts with third parties, the use or 

application of investor proceeds, and the financial condition and results 

of operations of International Quarter Phones. The court entered a temporary 

restraining order and an asset freeze. This case was pending at the end 

of the year. 

The Commission alleged the fraudulent sale of over $2 million in 

securities in at least three unregistered offerings of securities in SEC v. 

Sam S. Brown.24 One offering raised more than $1.2 million from investors 

by promising returns of $2 million to $10 million per $1,000 invested, 

purportedly to be paid from the profits of a European financier whose 

fortune was variously claimed to be worth between $1.2 trillion and $157 

trillion. This case was pending at the end of the year. 

The Commission filed an action against Bosque Puerto Carrillo, a 

Costa Rican corporation, and two of its officers, Ralf Stefan Jaeckel and 

Terence James Ennis (SEC v. Bosque Puerto Carril10~~). The complaint alleges 

that the defendants placed advertisements for unregistered securities 

issued by Bosque in in-flight magazines published by two airlines, and 

sold such securities to at least forty investors in the United States. Among 

other things, the defendants failed to disclose that Costa Rican law prohibits 

the export of unprocessed wood, Bosque's sole product. This case was 

pending at the end of the year. 

Market Manipulation 

The Commission is charged with ensuring the integrity of trading on 

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

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

surveillance to detect possible violations of the federal securities laws. 

Among other things, market surveillance looks for signs of possible stock 

manipulation, such as purchases or sales intended to affect the price of 

a security. 

The Commission filed an action against Ramon DIOnofrio, eleven 

other individual defendants, and four corporate entities, alleging a scheme 

to inflate the price of the stock of Kinesis, Inc., in the over-the-counter 

market and to create the appearance of an active market through 

manipulative trading practices (SEC v. Ramon D'Onof~io~~). Among other 

things, the complaint alleged a series of prearranged trades through 

Canadian brokerage accounts designed to inflate the price of Kinesis stock 

from $5.00 to $22.00 per share. As a result of the scheme, over 100,000 

shares of Kinesis stock were sold for profits to D1Onofrio and others of 

approximately $1.6 million. The complaint also alleged, among other 

things, that DIOnofrio and others sold Kinesis stock without filing a 

registration statement with the Commission. This case was pending at 

the end of the year. 

In cease and desist proceedings, the Commission alleged that Bruce 

B. Bowen, a registered representative associated with PaineWebber, Inc., 

and Thomas Q. Canon, a registered representative associated with WilsonDavis, Inc., aided and abetted a scheme by Richard Warner, the chairman 

of the board of Alpnet, Inc., to manipulate the price of Alpnet stock (In 
the Matter of Bruce B. Bowen2'). Warner's scheme involved marking the 

close, specifically, the purchase of Alpnet stock at or near the end of the 

trading day to affect the closing price. Bowen and Canon were account 

executives for certain nominee accounts through which Warner executed 

illegal transactions. This case was pending at the end of the year. 

The Commission instituted administrative proceedings against Harry 

S. Pack, the former president and chairman of Jefferson National Bank, 

and his brother, Philip Pack, in which it was found that they engaged in 

the practice of marking the close to manipulate the price of Jefferson 

National stock and thereby prevent margin calls in certain accounts in 

which they held Jefferson National stock (In the Matter of Harry S. Pack2*). 

The Packs consented to the entry of cease and desist orders. 

In SEC v. The Cooper C~mpanies,~~ the Commission alleged, among 

other things, a manipulation by The Cooper Companies and Gary Alan 

Singer, Cooper's former co-chairman, of the trading price of certain 

convertible subordinated reset debentures to avoid an interest rate reset 

that would otherwise have been required. This case was pending at the 

end of the year. 

Corporate Control 

The Commission's enforcement program scrutinizes corporate mergers, 

takeovers and other corporate control transactions, and the adequacy of 

disclosure made by acquiring persons and entities and their targets. The 

Commission brought cases involving Sections 13 and 14 of the Exchange 

Act, which govern securities acquisition, proxy, and tender offer disclosure. 

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

authority under the Remedies Act to respond to violations in this area. 

The Commission instituted administrative proceedings to remedy 

violations found by the order, arising from the 1990 tender offer by Kelso 

& Company, an investment banking firm, for the shares of Earle M. 

Jorgensen Company (In the Matter of Kelso 6 Company, I~c.;~O In the Matter 

of William A. Wilson3'). At the time of the tender offer, Kelso's chairman 

and chief executive officer, Joseph S. Schuchert, was engaged in a business 

relationship with William A. Wilson, an outside director of Jorgensen. 

Wilson served on the committee formed by Jorgensen to evaluate the Kelso 

offer and a competing offer, but the relationship between Schuchert and 

Wilson was not disclosed to the public or in filings with the Commission. 

Kelso, Schuchert and Wilson consented to the entry of cease and desist 

orders. 

In SEC v. Furr's/Bishopfs I~C.,~~ the Commission alleged that Furrrs/ 

Bishop's, the successor holding company to Furrrs/Bishop's Limited 

Partnership, made false and misleading statements in certain filings relating 

to its conversion from limited partnership to corporate form. According 

to the complaint, filings made with respect to the conversion indicated 

that Furr1s/Bishop's would commence a self tender offer, to be financed 

by a stock subscription agreement with Michael Levenson, the corporation's 

chairman. The defendants failed to disclose that Levenson had not obtained 

sufficient financing to satisfy the maximum amount needed under the stock 
subscription, that Furr's/Bishop's might have to provide some of the 

financing, and that the self tender offer might not be concluded on schedule 

because Furr's/Bishop's recent operating results had been poor. FurrJs/ 

Bishop's and Levenson consented to the entry of injunctions, and Levenson 

consented to the entry of an order requiring him to pay a civil penalty 

of $50,000. 

The Commission concluded administrative proceedings that had been 

instituted at the end of the previous year against Leslie T. Livingston and 

two entities under his control, including a registered broker-dealer firm 

(In the Matter of Leslie T. Li~ingston~~). The proceedings arose out of the 

change of control of Comprehensive Care Corporation (CompCare). The 

order instituting proceedings found that the respondents failed to promptly 

disclose their beneficial ownership of CompCare securities, as well as the 

existence and share ownership of various partnerships in which they had 

an interest, at a time when Livingston was leading efforts by a shareholder 

group to effect a change in control. The Commission further found that 

the respondents failed promptly to amend the group's Schedule 13D to 

reflect changes in the intent of the group with respect to CompCare. The 

respondents consented to the entry of the cease and desist order. 

The Commission also instituted and settled cease and desist 

proceedings alleging failure to make adequate or timely disclosure of 

changes in beneficial ownership of securities as required by Section 13(d) 

of the Exchange Act. These included In the Matter of Bettina Ban~roft,~

in which the Commission found that a director of Dow Jones & Company, 

Inc., failed promptly to file seventeen Forms 4 reporting her sales of Dow 

Jones' stock totalling over $16.8 million. The reports were filed from over 

one year to over five and one half years late. The respondent consented 

to the entry of the cease and desist order. 

The Commission filed administrative proceedings against Harry 

Hagerty, Jr., an officer, director and holder of at least ten percent of the 

stock of CCAIR, Inc., and a director and holder of at least ten percent 

of the stock of Air Transportation Holding Company (In the Matter of Harry 

E. Hagerty, JT.~~). Hagerty failed in thirty-three instances to make timely 

filings on Forms 4 and 5 to reflect his transactions in the stock of CCAIR 

and Air Transportation. The transactions involved more than $2.76 million 

of those issuers1 stock. Hagerty consented to the entry of a cease and 

desist order. In a related civil proceeding for imposition of a civil penalty, 

Hagerty consented to the entry of an order requiring payment of a $15,000 

penalty (SEC v. Harry E. Hagerty, Jr.36). 

Broker-Dealer Violations 

Each year, the Commission files a significant number of enforcement 

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

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

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

and records provisions. The Commission also takes action against brokerdealer firms and their senior management for failure to supervise employees 

with a view to preventing violations of the federal securities laws. 
In October 1993, the Commission filed a civil action and instituted 

administrative proceedings against Prudential Securities, lnc., in which 

it was alleged that Prudential had defrauded investors in connection with 

the offer and sale of limited partnership interests between January 1, 1980 

and December 31,1990; in addition, Prudential allegedly failed to reasonably 

supervise its sales personnel (SEC v. Prudential Securities ln~.~'). Materially 

false and misleading statements and omissions were made in connection 

with Prudential's sale of about $8 billion in limited partnership interests. 

The Commission further alleged that Prudential failed to comply with a 

Commission order entered in 1986 arising from its failure to adequately 

supervise certain former registered representatives. Prudential consented 

to the entry of an order requiring the payment of all valid investor claims 

presented through a court-supervised claims resolution process, the 

payment of $330 million to establish a fund for the benefit of defrauded 

investors, and the payment of all additional valid claims in excess of that 

amount. Prudential also consented to the entry of a cease and desist order 

in the administrative proceedings, in which the Commission imposed a 

$10 million penalty and ordered Prudential to adopt remedial measures 

designed to prevent future violations. In addition to the penalty to be 

paid in the Commission's action, Prudential agreed to pay $26 million in 

fines to various states, and a $5 million fine to the NASD. 

In In the Matter of PaineWebber I~c.,~' the Commission found that 

various registered representatives employed at four PaineWebber branch 

offices engaged in sales practice abuses, including unsuitable and excessive 

trading, and misappropriated funds from customer accounts. The 

Commission found that PaineWebber had failed to supervise the registered 

representatives. PaineWebber consented to the entry of an order by which 

it was censured and required to comply with several undertakings, including 

a prohibition against opening new accounts for thirty days at the offices 

involved in the sales practice violations and the hiring of an independent 

consultant to review procedures relating to sales practices and sales of 

restricted securities. 

In In the Matter of Frederick H. ]0seph,3~ the Commission found that 

the respondent, a former chief executive officer and vice chairman of 

Drexel Burnham Incorporated, failed to supervise Michael Milken, the 

former manager of Drexel's high yield and convertible bond department, 

with a view to preventing Milken's violations (1) in a scheme to manipulate 

prices and to cause misrepresentations, through Milken-controlled entities, 

in connection with eighteen new issues of Drexel underwritten securities, 

and (2) in a scheme to cause a fund manager to use client assets to make 

improper payments to Drexel. Edwin Kantor, a former senior executive 

vice president and director of Drexel, also was charged in separate 

proceedings with failure to supervise Milken with a view to preventing 

the same violations (In the Matter of Edwin Kantor40). Both Joseph and 

Kantor consented to the entry of orders by which they were barred from 

association in a supervisory capacity. 
In the Matter of The Nikko Securities Co. International, I~c.,~' arose from 

Nikko's undisclosed loss of $18 million through speculative foreign exchange 

trading. Nikko's foreign exchange trader concealed the losses by making 

repeated false entries in the firm's accounting books and records. Three 

former executives named as respondents in the proceedings learned of the 

loss, but decided to restrict knowledge of the loss to a select group of 

Nikko employees and Nikko's parent corporation in Japan. For 

approximately five months, Nikko failed to disclose the loss to its own 

legal or compliance department or its outside auditors, and concealed the 

loss from the Commission, the NYSE and the public. The respondents 

consented to the entry of cease and desist orders. Nikko also consented 

to the entry of orders by which it was censured and required to undertake 

a compliance review. In addition, two of the individual respondents 

consented to bars from association, and the third individual respondent 

consented to a suspension for a period of one year. 

A number of cases involved violations arising from the sale of penny 

stocks. In SEC v. Leslie Mer~ky,~~ the Commission alleged that thirteen 

individuals and four corporate entities engaged in a fraudulent scheme 

to sell approximately $3.4 million of worthless securities issued by two 

public shell corporations, Amglo Industries, Inc., and Amglobal Corporation. 

Certain defendants utilized a fraudulent broker-dealer network and 

manipulated the market to sell Amglo and Amglobal securities at a 

substantial profit. The complaint also alleged that certain defendants 

prepared false and misleading information about the companies that was 

disseminated through a series of high pressure sales campaigns. Two of 

the corporate entities consented to the entry of injunctions. Two of the 

individual defendants also consented to the entry of injunctions and orders 

requiring them to disgorge a total of $50,167, plus prejudgment interest 

totalling $21,907. In addition, these two defendants consented to the entry 

of bar orders in related administrative proceedings. Two other individual 

defendants consented to the entry of bar orders in related proceedings. 

The injunctive action was pending at the end of the year. 

The Commission alleged in SEC v. Midwest In~estrnents,~~ that the 

defendants engaged in a scheme to charge excessive undisclosed markups 

and to manipulate the price of the stock of Reitz Data Communications, 

Inc. Using high pressure, "boiler room" sales techniques, the defendants 

solicited purchases of Reitz stock at arbitrarily inflated prices with markups 

as high as 215 percent. The defendants also violated the Commission's 

cold-calling and penny stock disclosure rules in connection with their sales 

of Reitz stock. The Commission obtained a preliminary injunction, an asset 

freeze and other ancillary relief in this action, which was pending at the 

end of the year. 

The Commission also instituted actions against other regulated entities 

involved in the settlement of securities transactions. In SEC v. Midwest 

Clearing C~rporation,~~ the Commission filed an action against Midwest 

Clearing Corporation (MCC), a registered clearing agency, and the Midwest 

Securities Trust Company (MSTC), a registered clearing agency for which 

the Board of Governors of the Federal Reserve System is the primary 
regulatory agency. The complaint alleges that MCC and MSTC created 

false securities positions in their integrated computer records that were 

transferred to contra clearing corporations before MSTC had actual 

possession of the securities. As a result, MCC obtained substantial amounts 

of cash, at times as much as $35 million, that could be invested for its 

own benefit. The defendants consented to the entry of injunctions and 

an order requiring the payment of a civil penalty of $2 million. MCC also 

consented to the entry of an order in related administrative proceedings 

by which it was censured and required to comply with certain remedial 

undertakings. MSTC consented to the entry of a cease and desist order 

in related administrative proceedings instituted by the Federal Reserve 

Board. 

investment Adviser and Investment Company Violations 

The Commission instituted several significant cases involving 

investment advisers and investment companies. 

In October 1993, the Commission instituted administrative proceedings 

against Kemper Financial Services, Inc., in which it was found that a 

Kemper portfolio manager had delayed designation of the account for 

which certain trades were being conducted until after the trades were 

effected (In the Matter of Kemper Financial Services, ln~.~~). The more 

favorable trades were allocated to a private profit-sharing plan for Kemper's 

employees, while less favorable trades were allocated to two public mutual 

funds managed by Kemper. The Commission also found that Kemper 

failed to reasonably supervise the portfolio manager with a view to 

preventing violations. Kemper consented to the entry of the cease and 

desist order and an order by which it was censured. Kemper also consented 

to pay $9.2 million into an escrow account for distribution to investors, 

and to retain an independent consultant to review its policies and procedures 

related to trading in connection with its investment adviser and investment 

company operations. 

The Commission instituted proceedings against USAA Investment 

Management Company, the investment adviser for USAA Tax Exempt 

Fund, Inc., a registered investment company (In the Matter of USAA 

Investment Management CO.~~). The Commission found that the Tax Exempt 

Fund sold, redeemed or repurchased securities issued by one of its series, 

the Tax Exempt Money Market Fund, without calculating its net asset value 

in a manner permitted by rules under the Investment Company Act. In 

particular, the board of directors of the Tax Exempt Fund did not make 

the required minimal credit risk and comparable quality determinations 

required by the Investment Company Act with respect to $177 million in 

unrated securities. The respondents consented to the entry of orders by 

which they were censured and USAA was ordered to certify that Tax 

Exempt Fund's board had undertaken certain measures, policies and 

procedures. In addition, USAA consented to an order requiring it to pay 

a civil penalty of $50,000, and respondent Steven D. Harrop, an officer 

and portfolio manager, consented to the entry of a cease and desist order. 
The Commission found violations arising from undisclosed 

compensation arrangements in In the Matter of Aetna Capital Management, 

Between 1983 and 1991, Aetna Capital Management, Inc. (ACM) and 

Aetna Life Insurance Company (Aetna Life) paid approximately $1 -8 million 

in sales commissions and consulting fees to a broker-dealer who provided 

Aetna with advice regarding the public pension market and product 

development. The broker also solicited purchasers for Aetna Life's group 

annuity contracts and ACM's investment advisory service; entities solicited 

eventually invested approximately $240 million with Aetna Life and ACM. 

The fees paid to the broker were not disclosed to investors or in reports 

filed with the Commission. Aetna Financial Services, Inc., also offered 

and sold one of Aetna Life's securities products without disclosing to 

investors that Aetna paid the broker in part for soliciting purchasers for 

the product. The respondents consented to the entry of cease and desist 

orders. In addition, ACM consented to pay a civil penalty of $500,000. 

The Commission alleged that Corporate Capital Resources, Inc., a 

business development company, issued false and misleading financial 

statements that materially overstated the value of its holdings of restricted 

securities (SEC v. Corporate Capital Resources, I~C.~~). The resulting 

overvaluation of Capital Resources net asset value allegedly ranged from 

7 percent to 53 percent over an eighteen month period. The overvaluations 

were contained in periodic reports filed with the Commission that were 

used by the defendants in connection with a public offering of Capital 

Resources' stock. Among other things, the Commission alleged that 

Capital Resources' valuation committee did not follow the company's 

valuation procedures, and knew or were reckless in not knowing that the 

proposed valuations were insupportable. Capital Resources and the four 

individual defendants consented to the entry of injunctions. 

In administrative proceedings, the Commission found that The Bank 

of California had improperly calculated the net asset value per share of 

the Tax-Free Fund, a money market fund and a series of The HighMark 

Group. The bank served as accountant and investment adviser to the fund 

(In the Matter of The Bank of Calif~rnia~~). While determining the value of 

the fund's holdings on July 25, 1991, the bank received from the fund's 

pricing service a market price of 70 for a tax-exempt bond originally 

purchased for $1 million. The bank treated the reduced price as a 

transmission error, and valued the bond at par, for a number of weeks, 

even though the pricing service continued to quote a price of 70. When 

the error was finally recognized, the bank purchased the bond from the 

fund at par plus interest. The bank consented to the entry of a cease and 

desist order. 

The Commission instituted administrative proceedings, In the Matter 

of Merrill Lynch, Pierce, Fenner b Smith,50 alleging that Merrill Lynch 

repurchased hundreds of thousands of units issued by 570 unit investment 

trusts (UITs) sponsored by the firm at a price not based on the current 

net asset value of such securities. Merrill Lynch's formula for calculating 

the unit price did not include certain sums of cash held by the trustees 

accumulated in the UITs' income accounts as a result of bonds that were 
called, sold, or had matured from the UITs' portfolios. Merrill Lynch 

consented to the entry of a cease and desist order, and an order requiring 

it to comply with certain undertakings, including an undertaking to 

compensate customers whose securities were repurchased at less than net 

asset value. 

Sources For Further Inquiry 

The Commission publishes the SEC Docket, which includes 

announcements regarding enforcement actions. The Commission's litigation 

releases describe civil injunctive actions and also report certain criminal 

proceedings involving securities-related violations. These releases typically 

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

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

information. The SEC Docket also contains Commission orders instituting 

administrative proceedings, making findings and imposing sanctions in 

those proceedings, and initial decisions and significant procedural rulings 

issued by Administrative Law Judges. 
International Affairs

The Office ofInternational Affairs (alA) has primary responsibility for

the negotiation and implementation of information-sharing arrangements,

and for developing legislative and other initiatives tofacilitate international

cooperation. alA coordinates and assists in making requests for assistance

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

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

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

under various international conventions, freezing assets located abroad, and

enforcing judgments obtained by the SEC in the United States against

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

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

divisions and offices. Since August 1993, alA has been responsible for

coordinating the SEC's technical assistance program for training and advice

in countries with developing securities markets. alA also consults with and

provides technical assistance to other Federal agencies regarding traderelated issues relevant to the regulation of securities markets in the United

States.

Key 1993 Results

In 1993, the SEC signed comprehensive Memoranda of Understanding

(MOUs) for consultation and cooperation in enforcement-related matters

with the Commissione Nazionale per le Societa e la Borsa (CONSOB) of

Italy and the Superintendencia de Valores y Seguros (SVS) of Chile.

Significant progress was made in the second annual meeting of the

Council of Securities Regulators of the Americas (COSRA), which promotes

cooperation and communication among securities regulators in the Americas.

Agreement was reached on important principles relating to regulation of

the secondary markets and investment advisers.

Arrangements for Mutual Assistance and Exchanges of Information

The increasing internationalization of the world's securities markets

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

enforce federal securities laws. For example, because of the

internationalization of the markets, it is critical that the SEC be able to

collect information located abroad. Ordinarily, this is not possible using

the SEC's domestic investigative authority. The SEC has attempted to

resolve this problem by developing information-sharing arrangements on

a bilateral basis with various foreign authorities.

18

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The information-sharing arrangements allow the SEC to obtain 

information located abroad while avoiding the conflicts that may result 

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

various arrangements with foreign authorities from nearly 20 nations. 

These relationships are effective means for obtaining information and 

developing cooperative relationships between regulators. In addition, the 

staff works closely with the parties to these information-sharing 

arrangements to develop ways to implement and improve the arrangements. 

The SEC also cooperates on an informal basis with foreign authorities with 

whom it does not have explicit information-sharing arrangements. 

In May 1993, the SEC signed an MOU with the Italian securities 

regulator, CONSOB. On June 3, 1993, the SEC entered into an MOU with 

the SVS of Chile. These MOUs concern consultation and cooperation in the 

administration and enforcement of United States and Italian and Chilean 

securities laws. The MOUs declare the intent of the SEC and the CONSOB 

and SVS to provide extensive mutual assistance on a broad range of securities 

matters to secure compliance with their respective laws and regulations. 

The MOUs cover matters relating to enforcement and market surveillance, 

and provide that the SEC and the foreign authorities will utilize their 

compulsory powers to assist one another. The MOUs also provide for 

consultations between the parties on all matters relating to the operation 

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

of the MOUs. The MOU with the CONSOB built on an earlier Communique 

that had been signed by the SEC and the CONSOB on September 20,1989. 

Examples of the mutual assistance and cooperation provided for by 

the MOUs include: assistance in securities matters involving insider trading 

and other fraudulent or manipulative practices; disclosure requirements 

for issuers, persons and regulated entities; and the financial or other 

qualifications of those involved in the securities industry. Each party also 

represents its intention to engage in consultations to enhance the coordination 

of their respective market oversight functions. The MOUs identify the type 

of mutual assistance contemplated by the SEC and the CONSOB and SVS. 

For example, the parties will provide access to agency files; take testimony 

and obtain information and documents from persons; and conduct 

compliance inspections or examinations of investment businesses. Such 

assistance is intended to facilitate the investigation, litigation or prosecution 

of securities matters where information needed by one authority is located 

in the territory of the other. 

Enforcement Matters 

Some of the more significant matters in which OIA provided assistance 

to the Division of Enforcement during 1993, listed with the countries that 

provided substantial assistance to the SEC, were SEC v. Antar, et al., 89 

Civ. 3773 (D.N.J.)(Switzerland, Canada, France, Israel and the United 

Kingdom); In the Matter of Bosque Puerto Carillo, S.A., Civ. No. 33-685 (S.D. 

Fl.)(Costa Rica); SEC v. D'Onofrio et al., Civil Action No. 93-2628 

SVW(Ex)(C.D. Cal.)(Canada, Andorra, Spain, and the United Kingdom); 
SEC v. Pacific Waste Management, Inc. et al., Civ. No. CV-N-93-232-ECR (D. 

Nev.)(Guernsey); SEC v. Premium Sales Corp. et al., Case No. 93-1092-Civ. 

(S.D. Fla. 1993)(Switzerland); SEC v. Southwest International Exchange, et al., 

Civil Action No. 93-1285 AAH (SHx)(C.D. Cal.)(Switzerland). 

Of particular importance to the SEC's international program are the 

SEC's recent efforts to freeze and obtain repatriation of funds from abroad. 

In Antar, for example, $32 million was frozen in Switzerland through the 

cooperation of the Swiss authorities, and authorities in Canada, France, 

Israel and the U.K. have assisted in either freezing or obtaining information 

about the location of assets in those countries. In particular, in May 1993, 

the SEC was successful, with the assistance of the Quebec Securities 

Commission, in having over $1.1 million of Antar's ill-gotten gains 

repatriated to the United States for eventual distribution to defrauded 

investors. In another example of extraordinary cooperation, Pacific Waste 

Management, the SEC obtained key information through the assistance of 

criminal authorities in Guernsey which led to the discovery of a bank 

account in Guernsey holding some of the defendants' ill-gotten profits. The 

SEC successfully froze that money through an ancillary proceeding filed 

in the Royal Court of Guernsey. 

Technical Assistance 

The SEC has an active technical assistance program, utilizing various 

means to provide both United States-based and overseas technical assistance 

to emerging market countries. Such technical assistance is intended to 

develop a regulatory infrastructure to promote investor confidence in 

developing markets. 

The SEC International Institute for Securities Market Development 

(the SEC Institute) is the SEC's flagship technical assistance program. The 

SEC Institute is a two-week, management-level training program covering 

a full range of topics relevant to the development and oversight of securities 

markets. The third annual SEC Institute was held in the spring of 1993. 

Over 265 persons from 62 emerging market countries have participated in 

the first three SEC Institutes. The SEC's technical assistance efforts in 

Eastern Europe have included sending SEC staff as advisers to several 

countries in the region under a program funded by the United States Agency 

for International Development. The SEC has also participated in a number 

of short-term assistance projects for the countries of Latin America and the 

Caribbean, as well as several countries in other regions. In addition, the 

SEC's MOUs with developing countries include provisions whereby the 

SEC may agree to provide technical assistance to a signatory country's 

securities regulatory or self-regulatory authorities. The SEC also invites 

foreign securities regulators to participate in the SEC's Annual Enforcement 

Training Program held in the fall. This year, there were 45 foreign participants 

from 26 countries, including 18 representatives from 11 emerging market 

countries. 
international Organizations and Multilateral Initiatives 

During 1993, the SEC contributed to the work of the following 

international organizations and multilateral initiatives: 

The International Organization of Securities Commissions (IOSCO). The 

SEC is an active participant in IOSCO. IOSCO is an international forum 

created to promote cooperation and consultation among regulators 

overseeing the world's securities markets. IOSCO has over 100 members, 

including most of the world's securities regulators. 

During 1993, IOSCO made substantial progress toward the development 

of international accounting standards. IOSCO passed a resolution 

recommending that its members take all steps that are necessary and 

appropriate in their respective home jurisdictions to accept cash flow 

statements prepared in accordance with International Accounting Standard 

(IAS) 7, as amended, in connection with cross-border offerings and 

continuous reporting by foreign issuers. IAS 7, which would bean alternative 

to statements prepared in accordance with a country's domestic accounting 

standards, is the first such standard developed by the International 

Accounting Standards Committee to be endorsed by IOSCO. 

IOSCO working groups prepared several significant documents which 

were issued during the IOSCO Annual Conference in October 1993. 

Significant topics studied by the working groups during the year include 

communication between regulators of related cash and derivative markets 

during periods of market disruption and protecting investors against 

international retail securities fraud. 

During 1993, the IOSCO Working Party on Enforcement and the 

Exchange of Information prepared a report entitled Protecting the Small 

Investor: Combatting Transnational Retail Securities and Futures Fraud, which 

was released at the IOSCO Annual Conference. The SEC made significant 

contributions to this report. Based on the report, IOSCO adopted a resolution 

defining a number of measures that should be taken by IOSCO members 

to enhance protection against international retail securities and futures 

fraud. The report considers problems and challenges that regulators face 

in the investigation and prosecution of transnational boiler-room fraud. It 

reviews various domestic measures that countries have adopted to protect 

investors from boiler-room fraud. Further, it explores the role of international 

cooperation in combatting transnational boiler-room fraud and identifies 

additional measures that may assist regulators in their efforts to combat 

the problem. 

The IOSCO Working Party on Regulation of Securities Markets prepared 

a report entitled Mechanisms to Enhance Open and Timely Communication 

Between Market Authorities of Related Cash and Derivative Markets During 

Periods of Market Disruption, which was released at the IOSCO Annual 

Conference. The report completes the work of the Working Party on the 

coordination between cash and derivative markets. On the basis of the 

report issued this year and related reports issued previously, IOSCO adopted 

a resolution to enhance the effective oversight of related cash and derivative 

markets. This resolution identifies issues which should be considered in 

the design of derivative product contracts based on stock indices, defines 
ways to implement measures to minimize market disruption and establishes 

a number of voints of consensus concerning - communications between 

market authorhies of related cash and derivative markets during periods ' 1 

of market disruption. 

Council of Securities Regulators of the Americas (COSRA). On June 3-4, 

1993, the members of COSRA held their Second Annual Meeting in Buenos I 

I Aires, Argentina. The meeting was chaired by then Acting SEC Chairman 

Mary Schapiro. During the meeting, COSRA broke new ground by reaching 

agreement on important principles for the regulation of secondary markets 

and international cooperation in the supervision of investment advisers. 

These principles focus on the development of programs and marketstructures 

that will foster the growth and openness of the securities markets of the 

Americas, and will advance market consistency within the Americas. 

The principles considered and adopted by the membership were in 

four areas vital to the functioning of securities markets. These are 

transparency in transaction reporting;audit trails; clearanceand settlement; 

and cross-border surveillance of investment advisers. Each of these principles 

is intended to promote and enhancemarket integrity and investor confidence, 

while advancing market development within an international market 

economy. 

The COSRA principles on market transparency focus on the 

development of systems that provide for the full and immediate 

dissemination to investors of transaction and quotation information and 

other essential trading information in individual securities markets. The 

principles on audit trails focus on the development of systems that monitor 

market activity, including the market surveillance activities of self-regulatory 

organizations. The principles on clearance and settlement focus on the 1 

development of systems that provide for the rapid and efficient transfer, I 

recordation, and custody of securities that are traded. The COSRA principles 

on surveillance of investment advisers identify as a priority the need to 

develop methods for joint information-sharing and surveillance programs. 

The Organization for Economic Cooperation and Development (OECD). The 

SEC staff, in conjunction with representatives of the Departments of State 

and Justice, participated in OECD discussions regarding the establishment 

of international standards to combat illicit payments to government officials 

and other practices that may affect foreign investment. The SEC also 

provided technical assistance to other Federal agencies with respect to 

various work programs of the OECD. 

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

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

establish a multilateral framework of principles and rules for trade in 

financial services. Throughout 1993, the SEC has consulted and coordinated 

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

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

with the GATT negotiations. 

22 

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1 
The North American Free Trade Agreement (NAFTA). As with GATT, 

the SEC provided Federal agencies with technical assistance in connection 

with NAFTA. Among other things, the agreement contains a Financial 

Services Chapter, which will encompass activities (including cross-border 

activities) of financial service providers, such as broker-dealers and 

investment advisers, within NAFTA countries. This Chapter sanctions a 

strong "prudential carve-out," which enables the SEC to adopt or modify 

measures for the protection of investors or the securities markets, 

notwithstanding any other provision of NAFTA. 

The Wilton Park Group (The Group). Her Majesty's Treasury of the 

United Kingdom sponsors this informal meeting which includes securities 

regulators from 12 countries. During this year's meeting in May the SEC 

raised the issue of problems created by underregulated, offshore entities. 

The Group agreed to begin discussing approaches to addressing these 

problems. In addition, participants agreed to create a compendium of their 

experiences in enforcing judgments and provisional measures abroad. 

International Requests for Assistance 

The table below summarizes the international requests for assistance 

made and received by the SEC. 

Fiscal Year 

Type of Request 1988' 1989l 1990 1991 1992 1993 

SEC Requests to 

Foreign Governments 

Enforcement Assistance 

Enforcement Referrals 

Technical Assistance 

Total 

Foreign Requests to 

the SEC 

Enforcement Assistance 

Enforcement Referrals 

Technical Assistance 

Total 

Figures are approximate. 

'Separate totals for enforcement referrals and technical assistance requests were 

not maintained. 
The Division of Market Regulation, together with regional and district 

ofice examination staff, oversees the operations of the nation's securities 

markets and market professionals. In calendar year 1992, the Commission 

supervised over 8,200 broker-dealers with 34,000 branch ofices and 427,000 

registered representatives, 8 active registered securities exchanges, the overthe-counter markets, and 16 registered clearing agencies. Broker-dealers 

filing FOCUS reports with the Commission had approximately $1 trillion in 

assets and $62 billion in capital in 1992. The division also monitors market 

activity, which has experienced significant growth and volatility. In 1992, 

equity market capitalization stood at $4.8 trillion in the U.S. and $11.1 

trillion worldwide. The average daily trading volume grew to over 200 

million shares on the Nm York Stock Exchange with volume on the 

NASDAQ stock market nearing that number. The fastest growing area has 

been derivatives activities, where theapproximate notional amount for major 

U.S. broker-dealers and their afiliates is $4 trillion with an aggregate 

replacement cost of approximately $18 billion. 

Key 1993 Results 

The division undertook significant efforts to strengthen and stabilize 

market segments. For example, the division issued a comprehensive report 

concerning the issuance and sale of municipal securities that made 

recommendations regarding a variety of aspects of the municipal market. 

The division also conducted significant research and analyses as it moved 

towards completing the Market 2000 study. This study seeks to provide 

an understanding of how the equity markets have changed over the past 

20 years. It will explore how market participants and the rules governing 

them have served the interests of fairness, efficiency, and competitiveness 

in the equity markets. 

The division also oversaw a number of self-regulatory organization 

(SRO) initiatives to enhance the stability and integrity of the options 

market. Further, the division studied and monitored derivative activities 

through analysis of holding company risk assessment data, examinations 

and inspections, and discussions with other regulators and industry 

participants. The Commission issued a concept release relating to treatment 

of derivatives under the net capital rule. 

The Commission bolstered efforts to reduce abuses in the penny stock 

market with the adoption of amendments proposed by the division. Also, 

in addition to its usual inspection program, the division coordinated the 

1993 penny stock examination sweep involving the examination by the 

SEC, SROs, and 40 state jurisdictions of 129 broker-dealers. 
Securities Markets, Trading and Significant Regulatory Issues 

Municipal Securities Market 

The division issued a comprehensive report to Congress concerning 

the adequacy of current laws and regulations governing the issuance and 

sale of municipal ~ecurities.~' Specifically, the report reviews the current 

status of the municipal securities markets and provides discussions and 

recommendations with respect to: (1) political contributions made by 

broker-dealers to influence the award of municipal securities underwritings; 

(2) abusivc sales practices; (3) transparency of the municipal securities 

market; (4) issuer disclosure; and (5) the adequacy of the current regulatory 

structure. The staff concluded that the regulatory structure of the municipal 

securities market did not warrant a comprehensive restructuring; however, 

the report recommended improved coordination between regulatory 

agencies. In addition, the staff conducted a study of the underwriting, 

secondary trading and pricing of municipal bonds. The study was initiated 

in response to congressional concerns and customer complaints. The staff 

reviewed surveillance techniques and made recommendations for 

transactional reporting to the SROs for market surveillance purposes. 

Market 2000 

The division continued its work on the Market 2000 study. The study 

is exploring the role that SEC and SRO rules play in maintaining the 

fairness, efficiency, and competitiveness of the equity markets. In 

conducting the study, the division is examining equity market issues such 

as market fragmentation, fair competition between markets, payment for 

order flow, transparency, and proprietary trading systems, among others. 

The division collected relevant data, analyzed the 58 comment letters 

received on the study, issued a rule proposal on payment for order flow, 

and began preparation of the final report. 

National Clearance and Settlement System 

The Commission continued to work to enhance all components of the 

national clearance and settlement system. For example, the Commission 

adopted Rule 15c6-1 under the Securities Exchange Act of 1934 (Exchange 

Act) which establishes three business days as the standard settlement time 

frame for broker-dealer trades.52 The rule becomes effective on June 1, 

1995. Generally, Rule 15c6-1 covers broker-dealer trades in corporate and 

investment company securities and excludes trades in firm commitment 

underwritings and trades in municipal securities. In adopting the rule, 

the Commission called on the Municipal Securities Rulemaking Board 

(MSRB) to implement earlier settlement for trades in municipal securities 

by June 1, 1995. Rule 15c6-1 is designed to diminish risk in the national 

clearance and settlement system by reducing the number of unsettled 

trades in the system at any given time. 
Net Capital Concept Release 

The Commission issued a concept releases3 soliciting public comment 

on a broad range of issues relating to the appropriate capital treatment 

of derivative products under the agency's net capital rule. In examining 

the treatment of derivative products, and particularly over-the-counter 

(OTC) derivative products, the Commission's concept release focused 

primarily on the market and credit risk to which participants in the 

derivative products market are exposed and presented several alternatives 

to the current treatment of those instruments under the net capital rule. 

The purpose of the Commission's release is to explore and evaluate 

whether the net capital rules4 should be modified with respect to the 

derivative products markets and, in particular, OTC derivative products. 

Optical Storage Technology 

The Commission proposed for comment amendments to its brokerdealer records preservation rule that would permit broker-dealers to 

employ, under certain circumstances, optical storage technology to maintain 

records under Rule 17a-4.55 The Commission also authorized the division 

to issue a no-action letter permitting broker-dealers to employ optical 

storage technology for record preservation purposes pending final action 

on the proposed rule.56 The comment period closed September 13, 1993. 

Risk Assessment 

The Commission adopted its risk assessment recordkeeping and 

reporting rules in 1992. Pursuant to those rules, broker-dealers are required 

to maintain information concerning affiliated entities whose business 

activities are reasonably likely to have a material impact on the financial 

and operational condition of the broker-dealer and to file summaries of 

that information in quarterly reports with the SEC.57 The staff is now 

tracking financial reports from approximately 250 broker-dealers and 700 

affiliated entities. 

Automation Review 

The staff fully implemented the agency's automation review guidelines 

as they pertain to the exchanges and the National Association of Securities 

Dealers, Inc. (NASD).58 The primary purpose of the automation review 

program is to monitor and inspect the electronic data processing (EDP) 

activities of the SROs. Specifically, the staff's inspections have focused 

on computer security, system development, capacity, testing, and 

contingency planning to promote the safety and soundness of individual 

SRO EDP trading and information dissemination systems and the national 

market system. The staff completed 7 on-site inspections of the SRO EDP 

systems and issued 4 reports with recommendations for improvements, 

including the need for improvements to SRO internal audit procedures, 

enhancements of contingency planning efforts, and better use of capacity 

planning tools. 
As part of its EDP oversight role, the staff also held eight meetings 

with the SRO EDP organizations to ascertain recent and planned SRO 

changes and improvements in automated systems. The staff also tracked 

the ability of SROs to respond to systems malfunctions and examined SRO 

measures to prevent system outages and maintain stable markets. 

Government Securities Market 

In October 1993, the U.S. House of Representatives (House) passed 

H.R. 618 to permanently reauthorize the Secretary of the Treasury's 

rulemaking authority under the Government Securities Act of 1986. This 

bill reflects an agreement reached between the Commission, Department 

of the Treasury, House Energy and Commerce Committee, and House 

Banking Committee. Under the bill, the SEC would be required to monitor 

the transparency in the government securities market and report its findings 

to Congress. In addition, the bill would grant the Commission authority 

to obtain records of government securities transactions in electronic form 

from all government securities brokers and dealers. The bill also would 

authorize the NASD to make sales practice qualification and other rules 

applicable to the activities of its members effecting transactions in 

government and other exempted securities. 

Inlernationalization 

The staff provided information and technical assistance to several 

emerging market countries, including Mexico, China, Thailand, Taiwan, 

Nigeria, and Argentina. Pursuant to the SEC's membership in the 

International Organization of Securities Commissions (IOSCO), the staff 

participated in the Working Party on the Regulation of Secondary Markets, 

which discussed issues concerning regulation of screen-based trading 

systems and transparency of markets. The working party also produced 

a paper discussing mechanisms to enhance communication among market 

authorities during periods of market disruption. This paper was approved 

by the IOSCO Technical Committee and endorsed by IOSCO at its 1993 

annual meeting. 

Net Capital Rules 

The Commission issued two releases regarding the minimum amount 

of net capital required of registered broker-dealers. The first release 

adopted final amendments to Rule 15c3-1, the net capital rule, which 

gradually increase the minimum net capital requirements for certain 

registered broker-dealers.59 The second release proposed for comment 

additional amendments to the net capital rule that, among other things, 

would gradually raise the $5,000 minimum applicable to introducing 

brokers that do not receive customer securities to $25,000.60 
Passive Market Making 

The Commission adopted Rule lob-6A under the Exchange Act to 

permit "passive" market making by NASDAQ market makers in connection 

with certain distributions of NASDAQ securities during the period when 

Rule lob-6 otherwise would prohibit such a~tivity.~' Rule lob-6A balances 

concerns about decreased liquidity during distributions of OTC securities 

and potential manipulation activity. Among other things, the rule limits 

a passive market maker's bids to the level of bids of market makers who 

are not participating in the distribution. 

Multinational Distributions 

The Commission granted a variety of relief under anti-manipulation 

Rules lob-6, lob-7, and lob-8 for multinational offerings. These actions 

were taken to permit customary market activities in foreign jurisdictions 

subject to conditions designed to prevent a manipulative impact on United 

States markets. For example, the Commission granted exemptions to 

facilitate distributions in the United States of actively-traded securities 

of highly capitalized German issuers, subject to conditions relating to 

security eligibility, notice, disclosure, recordkeeping, and transaction 

reporting.62 As part of this relief, unconditional exemptions were granted 

for transactions effected in securities markets that account for less than 

10 percent of aggregate world-wide published trading volume in the 

German security being distributed. Also, the Commission granted expanded 

class exemptions to permit London Stock Exchange (LSE) market makers 

to make markets on a "passive" basis when Rule lob-6 otherwise would 

require the cessation of trading on the LSE's SEAQ and SEAQ International 

systems." In connection with multinational rights offerings by United 

Kingdom issuers, the Commission granted exemptions to permit U.K. 

distribution participants to conduct transactions with customers and to 

continue trading activities6' 

The Commission adopted amendments to permit transactions in all 

jurisdictions without compliance with the trading practices rules during 

distributions of Rule 144A-eligible securities of a foreign government or 

a foreign private issuer, if such securities are offered or sold in the United 

States solely to QIBs or persons reasonably believed to be QIBS.~~ 

Penny Stock Disclosure Rules 

The Commission adopted amendments to Rule 15c2-6 of the Exchange 

Act and redesignated it as Rule 15g-9 in order to conform it to the other 

penny stock disclosure rules, Rules 15g-2 through 15g-6.66 These 

amendments became effective on August 11, 1993. By conforming Rule 

15c2-6 with the penny stock rules, the Commission eliminated confusion 

regarding the operation of the rules and lessened the burden of compliance 

for broker-dealers subject to the regulatory regime governing transactions 

in penny stocks. In addition, the Commission amended Rule 15g-2 and 

Schedule 15G to require broker-dealers to obtain, prior to effecting a 
hansaction in a penny stock, a written acknowledgement from a customer 

showing that the customer received a risk disclosure document required 

by Rule 15g-2.67 

SRO Qualification Standards 

The Commission adopted Rule 15b7-1 of the Exchange Act, which 

prohibits registered broker-dealers from effecting a securities transaction, 

unless an associated person of that broker-dealer is in compliance with 

the qualification requirements established by rules of the SRO of which 

the broker-dealer is a member or to whose oversight it is subject.68 Rule 

15b7-1 allows the Commission to proceed directly against broker-dealers, 

as necessary, in part, because in some cases the Commission is the sole 

regulatory authority initially investigating a case alleging violations of 

SRO qualification standards. Accordingly, Rule 15b7-1 will strengthen the 

self-regulatory system and enhance investor protection by ensuring 

adequate competency among securities personnel. 

Examination and Oversight of Brokers, Dealers, Municipal Securities 

Dealers, and Transfer Agents 

Broker-Dealer Examination Program 

The SEC completed a total of 681 examinations consisting of 424 

oversight and 257 cause examinations. The total number of completed 

examinations is an all time record for the examination program and 

represents a 24 percent increase over 1992. In addition, the number of 

cause examinations conducted in 1993 represents an increase of 96 percent 

over 1992. The increase in cause examinations is consistent with the 1993 

objective of conducting a greater number of examinations of major wirehouse 

branch offices, firms selling low-priced securities and franchised branch 

offices. Findings from 84 examinations were referred to regional office 

enforcement staff representing 13 percent of all completed examinations. 

Referrals to SROs were made in 60 examinations. In addition, the number 

of referrals to the Division of Enforcement increased 15 percent from 1992. 

A significant accomplishment in the broker-dealer examination 

program involved firms selling low-priced securities. On July 12, 1993, 

the SEC, NASD, New York Stock Exchange (NYSE) and 40 state securities 

regulators began a nationwide examination sweep of 129 broker-dealers 

to determine compliance with Exchange Act Rules 15g-2 through 15g-6 

and 15g-9 (formerly 15c2-6). The 1993 penny stock examination sweep 

represents the largest, most ambitious joint SEC, SRO and state examination 

project ever undertaken. 

The staff also conducted oversight examinations at 10 of the largest 

NYSE member firms. The staff conducted comprehensive financial and 

operational reviews at each of the firms. Examination field work regarding 

a special initiative undertaken in 1992 to review the hiring and supervisory 

practices at large NYSE member firms with respect to certain salespersons 

was completed. 
The staff continued to meet quarterly with senior staff from the NASD 

and NYSE to discuss their examination programs and other regulatory and 

enforcement issues. The SEC's regional and district offices also separately 

communicated examination results directly to SROs in writing and during 

periodic meetings. 

Training Programs for Examiners 

The Division of Market Regulation planned, developed, and conducted 

four major training programs for headquarters, regional and district office 

staff. The training programs consisted of: (1) a two-week course for new 

broker-dealer examiners which emphasized the financial aspects of brokerdealers, (2) a one-week course for new examiners which emphasized the 

regulation of sales activities of broker-dealers, (3) a one-week course for 

experienced examiners which addressed topical issues, and (4) a massive 

training effort in the new penny stock rules. The division obtained national 

accreditation of the training courses from the National Association of the 

State Boards of Accountancy. 

Money Laundering 

The division continued to work closely with the Department of the 

Treasury and other government offices to pursue effective policies to 

combat money laundering. For example, the staff actively participated 

in the United States delegation to the Financial Action Task Force on Money 

Laundering, the independent group of major financial center countries and 

regions, and domestic working groups. 

Transfer Agent Examinations and Regulation 

The SEC's regional and district offices conducted 170 examinations 

of registered transfer agents, including 15 federally regulated banks. The 

division conducted on-the-job training in the agency's field offices and 

assisted several regions in their inspections. The program resulted in 106 

deficiency letters, 8 cancellations or withdrawals, 10 referrals to the Division 

of Enforcement, 4 staff conferences with delinquent registrants, and 5 

referrals to federal bank examiners. 

Lost and Stolen Securities 

Rule 17f-1 of the Exchange Act sets forth participation, reporting, and 

inquiry requirements for the SEC's Lost and Stolen Securities Pr~gram.~

Statistics for calendar year 1992 (the most recent data available) reflect 

the program's continuing effectiveness. As of December 31, 1992, 23,744 

institutions were registered in the program, a 1.4% increase over 1991. 

The number of securities reported as lost, stolen, missing, or counterfeit 

increased from 876,519 to 2,500,521, a 185% increase. The dollar value 

of these securities increased from $2.3 billion to $71 billion, a thirtyfold 

increase. The aggregate dollar value of the securities contained in the 

program's data base increased from $20.1 billion in 1991 to $90.2 billion 
in 1992, a 350% increase. In 1992, the number of inquiries from participating

institutions that matched previous reports as lost, missing, stolen, or

counterfeit securities was 22,538, a 98% increase from 1991. The dollar

value of these matches decreased from $192 million in 1991 to $135 million

in 1992, a 30% decrease. The total number of certificates inquired about

through the program rose from 3,876,519 in 1991 to 5,281,185 in 1992, a

36% increase.

Oversight of Self-Regulatory Organizations

National Securities Exchanges

As of September 30, 1993, there were eight active securities exchanges

registered with the SEC as national securities exchanges: American Stock

Exchange (AMEX), Boston Stock Exchange (BSE), Chicago Board Options

Exchange (CBOE), Cincinnati Stock Exchange, Chicago Stock Exchange

(CHX, formerly the Midwest Stock Exchange), NYSE, Philadelphia Stock

Exchange (PH LX), and Pacific Stock Exchange (PSE). The agency granted

exchange applications to delist 97 debt and equity issues, and granted

applications by issuers requesting withdrawal from listing and registration

for 49 issues. In addition, the SEC granted 1,934 exchange applications

for unlisted trading privileges.

The exchanges submitted 255 proposed rule changes during 1993. A

total of 212 pending and new filings were approved by the Commission

and 39 were withdrawn. Notable rule filings approved by the Commission

included proposals to:

amend the NYSE's priority rules to allow a member who has an

order to buy and an order to sell 25,000 shares or more of the same

security, where neither order is for the account of a member or

a member organization, to cross those orders at a price that is at

or within the prevailing quotations without being broken up at the

cross price, irrespective of preexisting bids and offers at that

price:"

adopt NYSE Rule 410B which requires members to report to the

exchange transactions in exchange-listed securities that are not

otherwise reported to the consolidated tape:" and

extend the NYSE, AMEX BSE,CHX, PSE, and PHLX pilot programs

for off-hours-trading until January 31, 1994.72

National Association of Securities Dealers. Inc.

The NASD, with over 5,200 member firms, is the only national securities

association registered with the SEC. It is the operator of NASDAQ, the

second largest stock market in the United States, and the second largest

in the world (after the NYSE).

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The NASD submitted 72 proposed rule changes to the Commission

during the year. The Commission approved 71 proposed rule changes,

which included many of the proposed rule changes submitted during the

year and several proposed rule changes submitted in prior years. Among

the significant changes approved by the Commission were:

implementation of a Fixed Income Pricing System establishing an

automated trading marketplace with 90 second transaction reporting

for trading of certain non-investment grade debt securities:"

a requirement of reporting within 90 seconds of transactions of 99

bonds or fewer for convertible bonds listed on NASDAQ/4 and the

establishment of requirements for 90 second transaction reporting

of OTC transactions in equity securities that are not currently

reportable on a real-time basis." and

expansion of a toll-free telephone listing service plan to provide,

with respect to NASD members and associated persons, Central

Registration Depository information regarding all pending formal

disciplinary proceedings initiated by federal, state or foreign

securities agencies and SROs, criminal indictments or informations,

civil judgments, and arbitration decisions in securities and

commodities disputes involving public customers."

Arbitration

In response to the Commission's recommendation to improve arbitrator

training programs and in light of a report issued by the General Accounting

Office,'? arbitration departments of SROs expanded and improved their

arbitrator training programs."

The Commission approved proposed rule changes by the NASD and

national securities exchanges that were designed to strengthen the

arbitration rules governing disputes among broker-dealers and between

broker-dealers and investors. In particular, the Commission approved

amendments to NASD arbitration rules that (1) enhance the NASD's ability

to discipline members that fail to pay an arbitration award:" (2) make all

arbitration awards and their contents public information." and (3) clarify

that employment-related disputes may be arbitrated at the NASD and that

arbitration panels deciding discrimination claims will consist of a majority

of arbitrators with no ties to the securities industry."

The Commission approved other SROrules designed to enable investors

to pursue class actions in courts and clarify discovery procedures for small

claim cases."

SRO Rules on Options and Other Derivative Products

The Commission approved several significant SRO proposals to

strengthen market stability and integrity, including extending the use of

quarterly expiration Friday auxiliary opening procedures to monthly

expiration Fridays on the NYSE.83 In addition, the Commission approved

several proposals by the SROs to trade new financial instruments, including

the following:

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Standard & Poor's (S&P) 500 Depository Receipts (SPDRs) to trade

on the AMEX;84

Flexible Exchange Options, large-size, index options cleared by

Options Clearing Corporation and which can be customized as to

strike price, expiration, and settlement procedures to trade on the

CBOE and AMEX;8S

quarterly expiration index options to trade on the AMEX, CBOE,

and NYSE;86

Equity Linked Notes'" and Debt Exchangeable for Convertible

Securities," hybrid debt securities whose principal is linked to the

performance of a highly capitalized, actively traded common stock;

Global Telecommunications Market Index Target Term Securities

to trade on the NYSE;89and

options on American Depositary Receipts to trade on the NYSE,

AMEX, PSE, CBOE and PHLX.90

The Commission also addressed several futures-related matters

regarding the Commodity Futures Trading Commission's hybrids and

swaps proposals," the designation of certain boards of trade as contract

markets for stock index futures and stock index futures options on certain

indexes, and the Chicago Mercantile Exchange's listing for trading on

GLOBEX stock index futures and stock index futures options on the S&P

500 Stock Price Index, the MidCap 400 Stock Price Index, and the Russell

2000 Stock Price Index."

Clearing Agencies

Sixteen clearing agencies were registered with the SEC at year-end.

In addition, the Commission extended the temporary registration as a

clearing agency for the Government Securities Clearing Corporation;"

lntermarket Clearing Corporation;" Delta Government Options

Corporation;" MBS Clearing Corporation," and Participants Trust

Company."

Registered clearing agencies submitted 119 proposed rule changes to

the SEC and withdrew 3. The Commission approved 116 proposed rule

changes, including the following:

implementation of the Depository Trust Company's (DTC) Honest

Broker Program, which facilitates the liquidation of securities held

for DTC participants experiencing financial or operational

difficulties;" and

implementation of National Securities Clearing Corporation's new

comparison system for fixed income securities."

Municipal Securities Rulemaking Board

The SEC received 10 new proposed rule changes from the MSRB. A

total of 11 new and pending proposed rule changes were approved by the

Commission. Of particular note, the Commission approved an amendment

to the MSRB's arbitration code to reflect recent amendments to the Uniform

Code of Arbitration.t'"

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Securities Investor Protection Corporation (SIPC) 

The SIPC Fund amounted to $778.4 million on September 30, 1993, 

an increase of $64.9 million from September 30, 1992. Further financial 

support for the SIPC program is available through a $1 billion confirmed 

line of credit established by SIPC with a consortium of banks. In addition, 

SIPC may borrow up to $1 billion from the Department of the Treasury, 

through the SEC. 

Inspections of SRO Surveillance and Regulatory Compliance 

The staff completed oversight inspections of the advertising programs 

of NASD, CBOE, and AMEX. The staff also conducted oversight inspections 

of the NYSE and AMEX, focusing on the sales practice review performed 

by NYSE Regulatory Review examiners and the sales practice review 

conducted by AMEX examiners. 

The staff completed an inspection of the PHLX Arbitration Department 

and continued its comprehensive inspection of the arbitration programs 

administered by the NASD's arbitration department at the NASD. These 

inspections were designed to evaluate the effectiveness of these SRO 

programs in processing and resolving disputes between SRO members and 

their customers. In particular, the staff reviewed the adequacy and 

thoroughness of case documentation, the efficiency of the case management 

systems, and the role each department played in processing its cases. In 

addition, consideration was given to whether major rule changes, adopted 

by the NASD in 1989 and by the PHLX in 1991 in response to Commission 

concerns regarding the rules and procedures governing SRO-administered 

arbitration, were successful in improving the documentation and fairness 

of cases administered by these SROs. 

With respect to the PHLX arbitration inspection, the staff recommended 

that the PHLX establish procedures to improve its efficiency and to provide 

a more concrete basis for reviewing the PHLX's Arbitration Department 

by senior management. The inspection of the NASD arbitration department 

is still in progress and a report is expected in the near future. 

The staff conducted an inspection of AMEX's Emerging Company 

Marketplace (ECM) as a result of congressional inquiries regarding the 

screening process undertaken by AMEX for companies seeking to gain 

listing privileges for their securities on the AMEX's new ECM market. The 

staff concluded that the AMEX's screening process generally was 

satisfactory, but indicated that several deficiencies still existed in the 

administration of the program. The staff's recommendations focused on 

the AMEX's application of the mandatory quantitative criteria and subjective 

qualitative criteria of ECM candidates. 

The staff also conducted an inspection of the PSE option and equity 

surveillance, investigatory and disciplinary programs. The staff found that 

the investigations conducted by the options and equity surveillance 

departments were timely, thorough, and adequately documented. However, 

the staff questioned the handling of some enforcement matters because 

the sanctions stipulated by the PSE's disciplinary committees were not 

always commensurate with the severity of the violations and may not 
discourage future violations. An inspection of PHLX equity and foreign 

currency options, and equity surveillance, investigatory and disciplinary 

programs conducted in October and November 1992 found these programs 

to be functioning satisfactorily. The staff made several recommendations 

to the PHLX regarding certain deficiencies found during the inspection. 

The staff conducted an inspection of the surveillance and investigatory 

programs of the NASD's Market Surveillance Department in November 

1992. The staff found that the programs' procedures were operating 

effectively and that the NASD had significantly improved its automation 

and enhanced its surveillance procedures. In December 1992, the staff 

conducted an inspection of the regulatory programs of the BSE and the 

settlement and financial monitoring procedures of the Boston Stock 

Exchange Clearing Corporation (BSECC). Overall, the staff found that the 

BSE programs for surveillance and investigation were satisfactory, and 

that the BSE compliance and the BSECC financial surveillance programs 

were adequate but in need of improvement. An inspection of the CBOE 

surveillance, investigatory and disciplinary programs for trading violations 

conducted in February 1993 found these programs to be functioning 

satisfactorily and that the CBOE had made several improvements since 

the previous inspection. However, the staff did raise questions regarding 

the adequacy of staffing levels. 

The staff conducted an inspection of the surveillance, investigatory 

and disciplinary programs for upstairs trading at the NYSE. The staff 

reviewed the NYSE's automated surveillance systems administered by its 

Division of Market Surveillance, investigations of member firm trading 

conducted by its Department of Market Trading Analysis, and disciplinary 

actions by its Division of Enforcement. The staff found that the NYSE 

continues to maintain effective programs in each of these areas. In 

addition, the staff conducted an inspection of the NYSE's Options and 

Special Product unit's surveillance, investigatory and disciplinary functions 

for program trading and related intermarket trading strategies. The staff 

found significant improvement in the NYSE's surveillance and investigatory 

operations for program trading and that the surveillance and investigatory 

programs for options trading were functioning adequately. 

The regional offices conducted routine oversight inspections of 

regulatory programs administered by 7 of the NASD's 11 districts. 

Inspections of NASD district offices included evaluations of districts' 

broker-dealer examinations, their financial surveillance and formal 

disciplinary programs, as well as investigations of customer complaints, 

terminations of registered representatives for cause, and members' notices 

of disciplinary action. Although the inspections disclosed minor deficiencies 

involving a variety of issues, overall, the NASD districts conducted effective 

regulatory programs for member firms. 
SRO Final Disciplinary Actions 

Section 19d-1 of the Exchange Act and Rule 19d-1 thereunder require 

all SROs to file reports with the SEC of all final disciplinary actions. Rule 

19d-1 reports filed with the SEC were as follows: the AMEX filed 42; the 

CBOE filed 98; the NYSE filed 172; the PHLX filed 38; the PSE filed 9; 

the CHX filed 3; the registered clearing agencies, BSE, and CSE filed none; 

and the NASD filed 703. 

SRO Final Disciplinary Actions 

Exchanges 624 639 594 568 498 362 

NASD: 

District Committees 542 794 893 781 966 646 

NASDAQ and Market 

Surveillance 

Committees 1 70 75 118 141 160 75 

Totals 1,336 1,508 1,605 1,490 1,624 1,083 

Applications for Re-entry 

Rule 19h-1 under the Exchange Act prescribes the form and content 

of, and establishes the mechanism by which the SEC reviews, proposals 

submitted by the SROs to allow persons subject toa statutory disqualification 

to become or remain associated with member firms. In 1993, the number 

of SRO filings pursuant to Rule 19h-1 processed by the staff decreased 

33 percent, from 79 in 1992 to 53 in 1993. Of the 53 filings, the NASD 

made 33 and the NYSE made 20. One application was denied, and the 

staff declined to take a no-action position in another. 
The Division of Investment Management oversees the regulation of 

investment companiesand investment advisers under two companion statutes, 

the Investment Company Act of 1940 (Investment Company Act) and the 

Investment Advisers Act of 1940 (Investment Advisers Act),and administers 

the Public Utility Holding Company Act of 1935 (Holding Company Act). 

Key 1993 Results 

In 1993, the Commission required mutual funds to discuss in their 

prospectus, or annual report to shareholders, those factors, strategies, and 

techniques that materially affected fund performance during the most 

recently completed fiscal year and to provide a line graph comparing a 

fund's performance to that of an appropriate securities market index. The 

Commission also permitted closed-end funds to make repurchase offers to 

their shareholders at net asset value either periodically, pursuant to a 

fundamental policy, or not more than once every two years, ona discretionary 

basis. Amendments to Rule 482 under the Securities Act of 1933 (Securities 

Act), which would allow investors the option of purchasing mutual fund 

shares directly from special "off-the-page prospectuses" containing order 

forms, were proposed for public comment. 

Concerning the jurisdictional reach of the Investment Advisers Act 

with respect to foreign investment advisers, the staff stated that it would 

not recommend enforcement action if foreign affiliates of an adviser that 

is registered under the Investment Advisers Act gave investment advice 

to United States clients through the registered adviser without the foreign 

affiliates themselves registering under the Investment Advisers Act. With 

regard to a foreign investment adviser that has registered under the 

Investment Advisers Act, the staff made clear that it does not interpret the 

Investment Advisers Act as being applicable to the foreign investment 

adviser's relationships with its foreign clients so long as they do not involve 

conduct in the United States, or have effects on United States clients. 

Program Overview 

The tables below show the number of registered investment companies 

and investment advisers and the amount of assets under management. All 

figures are reported for fiscal year-end. 
Number of Active Registrants 

lnvestment 

Companies 3,544 3,535 3,660 3,850 4,300 21.3% 

lnvestment 

Company 

Portfolios N A NA 16,000* 18,700 21,200 N A 

lnvestment 

Advisers 16,239 17,386 17,500 18,000 20,000 23.2% 

Estimate 

Assets Under Management 

($ in billions) 

% Change 

1989 1990 1991 1992 1993 1989-93 

lnvestment 

Companies $1,200 $1,350 $1,400 $1,800 $2,400 100.0% 

lnvestment 

Advisers $4,400 $4,900 $5,400 $8,100 $9,600 118.2% 

The number of registered investment companies increased by 12 percent 

during 1993. Many investment companies combine several separate 

portfolios or investment series in one investment company registration 

statement. The number of portfolios generally ranges from three to ten. 

However, some unit investment trusts group as many as 900 separate 

portfolios under one investment company registration. The number of 

portfolios increased by about 13 percent during 1993. In addition, the 

Commission was responsible for regulating 20,000 investment advisers at 

the end of 1993, a 23 percent increase since 1989. 

Investment Company and Adviser Inspection Program 

During 1993, program resources were focused on inspections of funds 

in the largest 100 investment company complexes, all money market mutual 

funds, and investment advisers with assets under management in excess 

of $1 billion. The 100 largest investment company complexes managed $1.6 

trillion in assets, which represented 67 percent of total investment company 

industry assets of $2.4 trillion. The total assets under management of the 

over 1,000 money market portfolios were $562 billion, which represented 

23 percent of all investment company assets. 
Results Achieved by the Program 

The division and regional office staff conducted inspections of funds 

within the 100 largest investment company complexes as well as limited 

inspections of 156 smaller complexes and stand-alone funds. These 

inspections focused on portfolio management activities. Each of the 1,044 

money market funds was reviewed for compliance with Rule 2a-7, which 

specifies the quality and maturity of permissible instruments that may be 

held by investment companies and requirements for portfolio diversification. 

The staff inspected 711 investment advisers, of which 181 managed more 

than $1 billion. These inspections focused on the portfolio management 

and trading activities of advisers. As a result of all inspections during 1993, 

the staff sent 1,073 deficiency letters to registrants requiring that they 

eliminate violative activities. In 75 inspections where the registrant appeared 

to be engaged in serious misconduct, the staff referred the inspection results 

to the enforcement program for further investigation. 

Regulatory Policy 

Significant Investment Company Developments 

The Commission implemented a number of recommendations made 

by the division in its 1992 report, Protecting Investors: A Half Century of 

Investment Company Regulation (Protecting Investors).'O1 In September 1993, 

the Commission adopted amendments to Rules 10f-3, 17a-7, 17e-1, 17f-4, 

and 22c-1 under the Investment Company Act to eliminate the requirement 

that directors of investment companies annually review certain procedures 

and arrangements, and to require instead that directors make and approve 

certain changes only when neces~ary.'~~ The amendments are intended to 

enhance the effectiveness of investment company boards. 

Also in September 1993, the Commission adopted amendments to Rule 

12d3-1 under the Investment Company Act to simplify the conditions under 

which registered investment companies are permitted to acquire securities 

issued by securities-related busines~es.'~~ The amendments remove the 

margin security requirement and the requirement that investment company 

boards of directors determine whether debt securities of securities-related 

businesses are investment grade. The amendments will permit registered 

investment companies to pursue a broader range of investment objectives 

consistent with shareholder interests. 

In April 1993, the Commission adopted Rule 23c-3 under the Investment 

Company Act to allow closed-end management investment companies to 

make repurchase offers to their shareholders at net asset value.'04 The 

repurchase offers may be made either periodically, pursuant to a fundamental 

policy, or not more frequently than once every two years on a discretionary 

basis. Periodic repurchase offers will allow investors in closed-end 

companies a limited opportunity to resell their shares in a manner 

traditionally available only to shareholders in open-end companies. Closedend investment companies making discretionary repurchase offers will be 

able to do so with an exemption from some of the requirements of the 
Securities Exchange Act of 1934 (Exchange Act). In a companion release, 

the Commission also proposed rule amendments under the Securities Act 

to permit funds that make periodic repurchase offers to offer their stock 

on a continuous or delayed basis, and to obtain automatic registration 

effectiveness for additional securities.lo5 

In March 1993, the Commission proposed for public comment 

amendments to Rule 482 under the Securities Act to allow investors the 

option of purchasing mutual fund shares directly from special "off-the-page 

prospectuses" containing order forms.lo6 An "off-the-page prospectus" 

would be required to contain critical information about the fund and would 

be subject to various liability provisions under the Securities Act and the 

Exchange Act. The amendments would give investors in direct marketed 

funds the same purchasing option that investors now have through 

commissioned salespersons. 

Also in March 1993, the Commission proposed for public comment 

amendments to Rule 0-5 under the Investment Company Act and to Rule 

30-5 to establish an expedited procedure for certain exemptive applications 

relying on precedent, and to expand the delegated authority of the Director 

of the Division of Investment Management.lo7 The amendments are intended 

to streamline the review procedure for exemptive applications. 

In addition to implementing the recommendations in the Protecting 

Investors report as discussed above, the Commission undertook two other 

rulemaking initiatives. In August 1993, the Commission adopted Rules 

2a19-2 and 2a3-1 under the Investment Company Act to except general and 

certain limited partners of limited partnership investment companies from 

the definitions of "interested person" and "affiliated person," respe~tively.'~~ 

The new rules enable limited partnership investment companies to register 

under the Investment Company Act without first obtaining start-up 

exemptive relief for their general and limited partners. 

In July 1993, the Commission proposed for public comment Rule 3a-8 

under the Investment Company Act to provide a non-exclusive safe harbor 

from investment company status for bona fide research and development 

companies meeting certain requirements.lW The rule would allow eligible 

companies to invest their cash reserves in securities that present limited 

investment risk without subjecting the companies to regulation under the 

Investment Company Act. 

Significant Disclosure Program Developments 

In April 1993, the Commission adopted amendments to Form N-IA, 

the registration form used by open-end management investment companies 

under the Investment Company Act and the Securities Act, and related rules 

and forms."O The amendments require a mutual fund to include in its 

prospectus or, alternatively, its annual report to shareholders: (1) a 

discussion of those factors, strategies, and techniques that materially affected 

its performance during its most recently completed fiscal year; and (2) a 

line graph comparing its performance to that of an appropriate securities 
market index. The amendments also require a mutual fund to identify its 

portfolio manager and revise the summary financial information in the 

prospectus. 

In September 1993, the Commission proposed amendments to Rule 

485, which, among other things, sets forth standards for the filing of posteffective amendments to registration statements filed by open-end 

management investment companies and unit investment trusts and permits 

certain amendments to become effective aut~matically.~~' The proposed 

revisions would simplify the operation of the current rule and expand the 

conditions under which post-effective amendments filed by investment 

companies are permitted to become effective automatically. In addition, 

insurance company separate accounts would be permitted to use Rule 485, 

and Rule 486 (the current rule governing post-effective amendments filed 

by separate accounts) would be rescinded. 

Amendments to Form N-2, the registration form used by closed-end 

investment companies under the Investment Company Act and the Securities 

Act, became effective on January 1,1993. The revisions incorporated certain 

new features not previously included in closed-end fund registration 

statements, such as disclosure of the identity of the fund's portfolio manager 

and a tabular presentation of expenses. The revised form also permits, but 

does not require, closed-end funds to use a simplified, two-part disclosure 

document, similar to that used by mutual funds registering on Form N-IA. 

Approximately one-third of the closed-end registrations filed during 1993 

used the new, simplified format. Overall, the number of closed-end offerings 

increased 44 percent over the previous year. Municipal stock offerings, 

rights offerings, and funds concentrating in foreign countries were three 

of the more commonly filed types of closed-end registrations. 

Considerable staff time and attention were devoted to new products 

and methods of distribution and the related disclosure and policy issues. 

For example, funds were seeking incrementally greater returns by engaging 

in the use of derivative and other instruments. These derivatives, and other 

relatively new financial instruments, presented regulatory and other issues, 

including how to ensure that they are not used to create excessive leverage, 

how to elicit meaningful disclosure about their effect on performance, and 

how they should be reflected in fund financial statements and records. 

Funds continued to look for ways to tailor their distribution and shareholder 

services for particular dealers and investors. A new rule issued by the 

National Association of Securities Dealers (NASD) concerning asset-based 

sales charges and service fees became effective July 7, 1993 and has had 

a significant effect on the way these fees are charged, accounted for, and 

disclosed. 

The number of bank proprietary mutual funds increased during the 

year to a total of over 900 portfolios. Staff concerns about the names used 

by mutual funds affiliated with banks and the potential confusion by 

investors of mutual fund shares with insured deposits were communicated 

to investment companies in two staff letters during 1993. 
In 1993, the staff received 1,194 new open-end fund portfolios, 9,345 

existing open-end portfolios, 264 new closed-end portfolios, 564 existing 

closed-end fund portfolios, 2,043 new unit investment trust portfolios, and 

12,833 existing unit investment trust portfolios. These figures include 

portfolios that exist in connection with insurance products. 

Section 13(f)(l) of the Exchange Act and Rule 13f-1 require "institutional 

investment managers" exercising investment discretion over accounts 

holding certain equity securities with a fair market value of at least $100 

million to file quarterly reports on Form 13F. For the quarter ended June 

30,1993,1,100 managers filed Form 13F reports, for total holdings in excess 

of $2.3 trillion. Under Rule 13f-2T, these managers may elect to file the 

report on magnetic tape submitted to the SEC's Electronic Data Gathering, 

Analysis, and Retrieval (EDGAR) system. 

Form 13F reports are available to the public at the agency's Public 

Reference Room promptly after filing. Two tabulations of the information 

contained in these reports are available for inspection: (1) an alphabetical 

list of the individual securities showing the number held by the managers 

reporting the holding; and (2) an alphabetical list of all reporting managers 

showing the total number of shares of securities held. These tabulations 

are generally available two weeks after the date on which the reports must 

be filed. 

Significant Insurance Products Developments 

The staff devoted considerable effort in developing a new registration 

form to be used by separate accounts offering variable life insurance contracts. 

Currently, separate accounts register as unit investment trusts under the 

Investment Company Act on Form N-88-2 and also register their securities 

under the Securities Act on Form S-6. The new Form N-6 will replace this 

procedure with a single, three-part form that will integrate registration 

under both Acts. The new form also will introduce simplified prospectus 

disclosure and standardized illustrations for use in prospectuses and 

supplemental sales literature. 

In letters to the NASD, the staff set forth its position on the use of 

fund performance data in advertisements or supplemental sales literature 

for variable life insurance (VLI) product^."^ The staff stated that, because 

contract owners cannot obtain the benefit of the underlying fund without 

incurring the charges assessed at the separate account level, it is misleading 

for a VLI issuer to show fund performance without also disclosing separate 

account performance. 

Significant Public Utility Holding Company Act Developments 

Under congressional direction to adopt rules to protect the domestic 

public utility subsidiaries of registered holding companies and their 

consumers from the risk of new ventures in exempt wholesale generators 

(EWGs) or foreign utility companies, the Commission adopted Rules 53, 

54 and 57 under the Holding Company Act.l13 Rule 53 creates a partial 

safe harbor with respect to the issue and sale of a security by a registered 

holding company to finance the acquisition of an EWG, or the guaranty 
by the parent of the securities of an EWG. Rule 54 provides that, in 

determining whether to approve the issue or sale of a security by a registered 

holding company for purposes other than the acquisition of an EWG or 

a foreign utility company, or other transactions by such registered holding 

company or its subsidiaries other than with respect to EWGs or foreign 

utility companies, the Commission will not consider the effect of the 

capitalization or earnings of any EWG or foreign utility company subsidiary 

on a registered system if the conditions of the safe harbor under Rule 53 

are satisfied. Rule 57 and Forms U-57 and U-33-S address notification and 

reporting requirements for foreign utility companies and their associate 

public utility companies. The Commission also amended Forms U5S and 

U-3A-2 to add reporting requirements concerning EWG and foreign utility 

company activities. The Commission decided to defer action on proposed 

Rules 55 and 56, regarding foreign utility companies, pending further 

consideration.ll' 

In view of the Energy Policy Act of 1992, the new legislation concerning 

EWGs and foreign utility companies, the Commission also proposed an 

amendment to Rule 87 under the Holding Company Act.l15 The present 

rule allows subsidiaries of a registered holding company, subject to 

compliance with certain requirements, to perform services for associate 

non-utility companies without the need to apply for, or obtain, prior 

Commission approval. The proposed amendment would specifically exclude 

services rendered to EWGs and foreign utility companies. The Commission 

believes the amendment is necessary to ensure that utility personnel are 

not improperly diverted to EWG or foreign utility company activities, to 

the detriment of the operations of the integrated public utility system. 

As of September 30, 1993,14 public utility holding company systems 

were registered with the SEC. The 14 registered systems were comprised 

of 93 public utility subsidiaries, 158 non-utility subsidiaries, and 33 inactive 

companies, for a total of 298 companies and systems operating in 26 states. 

These holding-company systems had aggregate assets of approximately 

$111.2 billion as of June 30,1993, an increase of $12.1 billion over September 

30,1992. Total operating revenues for the 12 months ended June 30,1993 

were approximately $40.2 billion, a $2.1 billion increase from the 12 months 

ended September 30, 1992. 

During 1993, the SEC authorized registered holding-company systems 

to issue $4.0 billion in short-term debt, $3.3 billion in long-term debt, and 

$712.6 million in common and preferred stock. Long-termdebt authorization 

decreased by over $5 billion in 1993 from the previous fiscal year, as a result 

of an increase in the amount of internally generated cash available, a 

decrease in construction expenditures, a decrease in interest rate charges, 

and the continued effects of Rule 52, which exempts certain financings by 

public utility subsidiary companies, if solely for the purpose of financing 

the business of the public utility company and expressly authorized by the 

relevant state commission. The SEC approved pollution control financings 

of $1.4 billion, an increase of 424 percent over fiscal year 1992. Refinancings, 
made in order to capture substantial reductions in interest rates, were the 

primary cause of the increase in these financings over 1992. The SEC 

approved $409 million of investments in cogeneration facilities that were 

"qualifying facilities" under the Public Utility Regulatory Policies Act of 

1978 and rules thereunder. The SEC also approved $114.5 million of 

investments in EWGs and foreign utility companies, and $65.1 million in 

enterprises engaged in demand-side and energy management. Total 

financing authorizations of approximately $10.1 billion represented an 

approximately 42 percent decrease over such authorizations in 1992. 

The SEC examines service and special purpose subsidiary companies 

of registered holding company systems. During 1993, seven examinations 

were completed, six of special purpose corporations and one of a service 

company. The SEC continued to review the accounting policies, cost 

determination, intercompany transactions, and quarterly reporting 

requirements of all service companies and special purpose corporations. 

Through the examination program, and by uncovering misapplied expenses 

and inefficiencies, the agency's activities during 1993 resulted in savings 

to consumers of approximately $8.7 million. 

Two bills were introduced in 1993 that would transfer the administration 

of the Holding Company Act from the SEC to the Federal Energy Regulatory 

Commission. The two bills, S. 544 and S. 635, which contain substantially 

the same language, would also amend the Holding Company Act and the 

Federal Power Act to address concerns arising from the decision in Ohio 

Power Co. v. FERC.l16 Among other things, the bills amend Sections 13(b) 

and 13(d) of the Holding Company Act by substituting "at a price not to 

exceed cost" for the current "at cost" language. 

The Commission submitted written testimony regarding S. 544 on May 

25, 1993. In its testimony, the Commission explained its understanding 

of the implications of the Ohio Power decision and expressed its willingness 

to provide further assistance to the Senate Committee on Energy and 

Natural Resources. In addition, the Commission stated that the pricing 

of the coal purchased by Ohio Power from a captive coal subsidiary is the 

subject of a request for investigation filed by the municipal wholesale 

electric customers of Ohio Power. 

Significant Applications and Interpretations 

Investment Company Act Matters 

The Commission issued an order under Section 3(b)(2) of the Investment 

Company Act declaring that ICOS Corporation (ICOS), a research and 

development company, is engaged primarily in a business other than that 

of investing, reinvesting, owning, holding, or trading in securities.l17 Because 

virtually all of ICOS' capital is invested in securities pending its use in 

funding the company's research and development programs, a question 

arose whether ICOS is an investment company under Section 3(a). Under 

the Commission's traditional Section 3(b)(2) analysis, an issuer generally 

is deemed to be engaged primarily in the business of investing in securities 

if most of its assets are securities and most of its income is derived from 
such securities. Given the unique nature of research and development 

companies, the Commission determined that it was appropriate to modify 

the analysis for determining the primary business of such companies. If 

a company demonstrates that it is engaged actively in bona fide research 

and development activities, the Commission will consider the use, rather 

than simply the composition, of the company's assets and income. Under 

this revised analysis, ICOS qualified for a Section 3(b)(2) order. 

The Commission issued a conditional order under Section 17(d) of, 

and Rule 17d-1 under, the Investment Company Act to the Fidelity family 

of funds amending a prior order that allowed the funds to invest jointly 

in repurchase agreements with maturities of seven days or less.n8 By 

investing jointly, the funds reduce transaction fees and ticket errors, receive 

higher rates of return, and avoid the administrative time and expense of 

investing in many small repurchase agreements. To expand the savings 

and the potential for enhanced yield, the new order allows joint investment 

in repurchase agreements with maturities of up to sixty days, and in certain 

short-term money market instruments and tax-exempt obligations. The 

new order also allows certain non-investment company entities associated 

with Fidelity to participate in the joint investments. 

The Commission issued a conditional order to allow certain open-end 

investment companies (Public Funds) advised by American Capital Assets 

Management to invest in a specially created investment company-the 

American Capital Small Capitalization Fund (Small Cap Fundhn9 The Small 

Cap Fund is intended to serve as an efficient way for the Public Funds to 

invest in small capitalization stocks and also achieve further diversification. 

Most significantly, the order provides an exemption from Section 12(d)(l) 

of the Investment Company Act, which limits an investment company's 

ability to invest in the securities of other investment companies. Section 

12(d)(l) is designed to protect investors in fund holding companies from 

two layers of expenses and to prevent fund holding companies from 

exercising undue influence over portfolio investment companies by the 

threat of large scale redemptions. To address these concerns, the order 

requires that the Small Cap Fund not charge an advisory fee or a sales 

charge, and that American Capital Asset Management, as adviser to the 

Public Funds and the Small Cap Fund, develop procedures to prevent large 

scale redemptions from disrupting the Small Cap Fund. 

The staff continued to receive and respond to requests for no-action 

relief involving the status of foreign entities as eligible foreign custodians 

under the Investment Company Act. In twelve no-action letters under 

Section 17(f) and Rule 17f-5, the staff stated that it would not recommend 

enforcement action if various entities acted as eligible foreign custodians 

for registered investment companies. Ten of the letters involved foreign 

securities depositories or clearing agencies seeking assurances concerning 

their status as an operator of "the central system for the handling of 

securities or equivalent book-entries" in a particular country under 

subparagraph (c)(2)(iii) of the rule.120 Two of the letters involved foreign 

banks and their ability to satisfy the shareholders' equity requirement in 

subparagraph (c)(2)(i) of the rule.121 
The staff stated that it would not recommend enforcement action under 

Section 18(f)(l) of the Investment Company Act if mutual funds borrowed 

from certain foreign banks that conduct banking activities in the United 

States. While Section 18(f)(l) permits a mutual fund to borrow from a bank, 

foreign banking institutions generally do not fall within the Investment 

Company Act's definition of bank. The relief was limited to treating these 

foreign banks as banks for purposes of Section 18(f)(l), not for any other 

purpose under the Investment Company Act.lZ2 

The staff granted conditional no-action relief to a foreign investment 

company that proposed to register with the Commission under the 

Investment Company Act without first conforming its capital structure to 

the requirements of Section 18 of the Act. The foreign company had longterm warrants outstanding. Section 18(d) of the Investment Company Act 

prohibits a registered closed-end fund from issuing warrants unless they 

expire within 120 days of issuance. The staff agreed that Section 18 does 

not require the company to conform its preregistration capital structure, 

but conditioned the relief on the warrants being listed on a United States 

stock exchange, so that members of the public would be aware of their 

existence before purchasing common stock that was subject to dilution.lu 

The staff stated that it would not take enforcement action if a mutual 

fund treated an investment in municipal bonds refunded with escrowed 

United States Government securities as an investment in United States 

Government securities for purposes of Section 5(b)(l) of the Investment 

Company Act. Section 5(b)(l) limits the extent to which a diversified 

investment company may invest in any one issuer, but excludes from this 

limit investments in United States Government se~urities.'~~ 

The staff declined to grant no-action assurance under Section 17(e) 

of the Investment Company Act to permit a fund's custodian, which was 

also a sub-adviser to one of the fund's portfolios, to enter into a securities 

lending arrangement with some of the other portfolios of the fund (Portfolios). 

Section 17(e)(l) makes it unlawful for any affiliated person of an investment 

company, or any affiliated person of such person (second-tier affiliate), 

acting as agent, to accept any compensation from any source for the purchase 

or sale of any property to or for the investment company. Since the 

Portfolios and the portfolio for which the custodian served as sub-adviser 

were under common control, the custodian was a second-tier affiliate of 

the Portfolios. In denying relief, the staff stated that where a second-tier 

affiliate of an investment company negotiates and accepts a fee for arranging 

a loan of a fund's securities, the transaction presents the potential for a 

conflict of interest that Section 17(e) was designed to address. The staff 

took the position that a loan of a Portfolio's securities involves a sale of 

property of a Portfolio for purposes of Section 17(e).125 

The staff granted no-action relief to a transfer agent that proposed to 

store on an optical disk system certain investment company records, in a 

manner consistent with the requirements of Rule 31a-2(f) under the 

Investment Company Act. Rule 31a-2(f) permits records to be maintained 
and preserved on magnetic tape, disk or other computer storage medium. 

The staff required that the information be stored on a non-rewritable, nonerasable optical disk, and that adequate backup copies be maintained.126 

lnvestment Advisers Act Matters 

The staff continued to develop its interpretation regarding the 

jurisdictional reach of the Investment Advisers Act with respect to foreign 

advisers. In one no-action letter, the staff stated that it would not recommend 

enforcement action if foreign affiliates gave investment advice to United 

States clients through a United States registered adviser, without the foreign 

affiliates themselves having to register under the Investment Advisers 

Act.l2' The staff's response permits a United States registered adviser to 

draw on the personnel and expertise of its multinational affiliates as long 

as the persons and entities providing advice consent to United States 

jurisdiction, are under the supervision of the registered entity, and maintain 

certain records. In addition, the staff granted no-action relief to certain 

foreign advisers to permit them to give advice directly to United States 

clients without subjecting the foreign advisers' relationships with their 

foreign clients to the Investment Advisers Act.128 The staff's response makes 

clear that a registered foreign adviser's relationships with foreign clients 

would not be subject to the Investment Advisers Act so long as its acts do 

not involve conduct, or have effects, in the United States, or have effects 

on United States clients. This position allows multinational advisory 

complexes to register under the Investment Advisers Act and give advice 

directly to United States persons without having the Investment Advisers 

Act apply with respect to the foreign adviser's foreign clients. 

Insurance Company Matters 

The Commission issued an exemptive order permitting the College 

Retirement Equities Fund (CREF) to invest in the College Credit Trust 

(Tr~st).'~~ The Trust was created by the Teachers Insurance and Annuity 

Association of America (TIAA) and the College Entrance Examination 

Board to make educational loans, most of which will be guaranteed student 

loans. The Student Loan Marketing Association will administer the Trust 

and the loans, and provide related services. The order permits certain 

transactions between TIAA and CREF by which CREF would acquire an 

interest in the Trust directly or indirectly from TIAA. Hearing requests 

were received by the Commission during the notice period. The issues 

raised in the hearing requests, however, did not bear on the determination 

of whether to grant the requested relief under the Investment Company 

Act. The requests, therefore, were denied by the Commission. 

The division, pursuant to delegated authority, issued three exemptive 

orders under the Investment Company Act permitting certain variable life 

insurance issuers to deduct a charge related to tax changes in the Omnibus 

Budget Reconciliation Act of 1990 (Budget Act).'" The Budget Act requires 

insurance companies to capitalize and amortize certain policy acquisition 

expenses over a ten year period rather than continuing to deduct these 
expenses in the year in which they are incurred. Applicants obtained relief 

to deduct a charge to recover the increased expense associated with the 

new tax treatment. 

The division, pursuant to delegated authority, exempted an insurance 

company from various sections of the Investment Company Act to permit 

the sale of certain variable annuities with an asset allocation feature.l3I In 

general, holders of these annuities will receive asset allocation advice from 

an investment adviser unaffiliated with the insurance company. The adviser 

will be compensated by deducting a charge from the assets of the separate 

account funding the contracts. 

The staff stated that it would not recommend enforcement action to 

the Commission if, without first obtaining an exemptive order, an insurance 

company collected an asset allocation fee from investors in certain variable 

annuity contracts through the periodic cancellation of units attributable to 

an investor's participation in a unit investment trust.I3* The staff's response 

noted, among other things, that a variable annuity holder would receive 

advice as to allocating his or her contract values among the separate 

account's various subaccounts only if he or she affirmatively opted for that 

service. The staff noted, however, that a mandatory fee deducted in this 

manner would require an exemptive order because the fee would be 

indistinguishable from an asset-based fee under Section 26 of the Investment 

Company Act. 

The staff declined to grant no-action assurance in connection with 

proposals by two insurance companies to legally segregate the assets of 

non-unitized separate accounts used in connection with the offer and sale 

of certain market value adjustment annuity contracts (MVA Contracts) 

without registering the separate accounts under the Investment Company 

Act.lJ3 The staff took the position that legally insulated non-unitized 

separate accounts that support liabilities under MVA Contracts are issuers 

for purposes of Section 3(a) of the Investment Company Act, and possibly 

investment companies. 

Holding Company Act Matters 

The Commission au thorized Entergy Corporation (Entergy), a registered 

holding company, and Entergy Enterprises, Inc. (Enterprises), its wholly 

owned non-utility subsidiary company, to organize and acquire a new 

wholly owned non-utility subsidiary of Enterprises (NEWCO) which 

provides energy management services to commercial, industrial and 

institutional ~ustorners.'~~ NEWCO would acquire 9.95 percent of Systems 

and Service International, Inc., a closely-held company whose principal 

product to date is a monitoring device anticipated to improve the efficiency 

of fluorescent lighting fixtures by up to 50 percent. State and local regulators 

initially had intervened in the matter in opposition to SEC authorization 

of the transaction, arguing that consumers would not be protected from 

the detrimental effects, if any, of the proposed activities. All but one of 

the intervenors subsequently withdrew their interventions pursuant to a 

settlement agreement with En tergy. The withdrawal of the interventions 

was contingent upon the SEC's incorporation in its order of certain conditions 
designed to insulate core utility operations from the unregulated businesses. 

The Commission denied the request for a hearing by the remaining 

intervenor, Louisiana Public Service Commission, on the grounds that the 

transaction presented no dangers to consumers and that NEWCO's provision 

of energy services was an appropriate non-utility business under the Holding 

Company Act that would primarily serve the integrated public utility 

system. 

The Commission authorized The Columbia Gas System, Inc. (Columbia), 

a registered holding company and a debtor-in-possession under Chapter 

11 of the Bankruptcy Code, to engage in intrasystem financing with its 

subsidiaries. Columbia and i ts wholly owned subsidiary company, Columbia 

Gas Transmission Corporation (Transmission), filed for protection with the 

Bankruptcy Court for the District of Delaware on July 31, 1991, after 

financial difficulties relating to the obligations of Transmission under 

certain "take or pay" gas purchase contract^.'^^ Prior to the filing by 

Columbia of a plan of reorganization, the bankruptcy court authorized 

Columbia to continue the financing of its non-debtor subsidiaries "in the 

ordinary course of business [as] ... necessary to maintain business 

operations," subject to approval of the Commission. The Commission 

found that sufficient cash and income was available for Columbia and the 

lenders to the Columbia money pool to make the proposed investments, 

and for the subsidiary companies to service the proposed debt, subject to 

certain reservations of jurisdi~ti0n.l~~ 

The Commission considered a proposal by Entergy Corporation, a 

registered holding company, to acquire Gulf States Utilities Company (Gulf 

States) in a stock and cash exchange valued at approximately $2.3 bi1li0n.l~~ 

Entergy has four public utility subsidiaries that provide retail electric 

service to approximately 1.7 million customers in an approximately 45,000 

square-mile area in Arkansas, Louisiana, and Mississippi. Gulf States is 

a public utility company that provides retail electric service to approximately 

583,000 customers in a 28,000 square-mile area in southeast Texas and 

central Louisiana. In addition to its principal electric business, Gulf States 

distributes natural gas at retail to approximately 84,000 customers in the 

Baton Rouge area. State regulators, consumer groups and business 

competitors have intervened in the matter and have requested a hearing, 

arguing that the purchase price is excessive, the acquisition will not result 

in benefits to the utility systems, and that the merger could have 

anticompetitive effects. 

The Commission issued orders authorizing registered holding 

companies to invest in demand-side and energy management. Demandside and energy management are measures that, among other things, enable 

utility customers to use energy more efficiently. The Commission authorized 

HEC Inc., a subsidiary company of Northeast Utilities, a registered holding 

company, to expand the types of demand-side and energy management 

services it provides, and to provide consulting services without limi tati~n.'~~ 

The Commission authorized American Electric Power Company, Inc., a 

registered holding company, to provide, through a subsidiary, additional 

funding to Intersource Technologies, Inc., which is developing electronic 
light bulb technology and new lighting products that are anticipated to use 

substantially less electricity and have substantially longer lives than 

traditional light b~1bs.l~~ The Commission also authorized Arkansas Power 

& Light Co., an electric public utility subsidiary company of Entergy 

Corporation, a registered holding company, to institute a demand-side 

management program for its customers.140 

The Commission authorized Unitil Corporation, a registered holding 

company, to create a new subsidiary company that would engage in 

consulting services to non-associate companies on a variety of energy 

related matters, including serving as brokering agent for electric power and 

serving as purchasing agent for a utility or other bulk power p~rchaser.'~' 

The Commission authorized Eastern Utilities Associates (EUA) and 

certain of its subsidiaries to engage in transactions under a settlement 

agreement with bondholders of EUA Power Corporation (EUA Power), a 

wholly owned subsidiary of EUA.142 EUA Power filed for protection under 

Chapter 11 of the United States Bankruptcy Code on February 28, 1991, 

in the Bankruptcy Court for the District of New Hampshire and has since 

been operating its business as a debtor-in-possession. Under the settlement 

agreement, EUA Power would redeem its outstanding shares of common 

and preferred stock from EUA, after which EUA Power would be a standalone company. 

The Commission granted an exemption under Section 3(a)(5) to National 

Power Company, a closely-held California corporation, and an exemption 

under Section 3(b) to Power Barge Impedance, L.P. (Partnership), a California 

limited partner~hip.'~~ The Partnership would own and operate a 28- 

megawatt barge-mounted electric generating plant. The barge will operate 

and sell power exclusively outside of the United States, primarily to foreign 

countries or U.S. territories or possessions in Latin America, Central America, 

and the Caribbean, which may be experiencing seasonal power shortages. 
Full Disclosure System

Thefull disclosure system isadministered by theDivision ofCorporation

Finance (Division). The system is designed to provide investors with

material information, foster investor confidence, contribute to the

maintenance of fair and orderly markets, facilitate capital formation, and

inhibit fraud in the public offering, trading, voting, and tendering of

securities.

Key 1993 Results

The decline in interest rates, the burgeoning need for capital for

businesses, small and large, and investor demand helped to fuel a record

level of offerings filed for registration in 1993. More than $868 billion

in securities were filed for registration, including over $112 billion of

initial public offerings, equity and debt, and over $46 billion by foreign

companies.

Foreign companies' participation in the United States markets

continued to show dramatic growth in 1993. In addition to a record

high level of offerings filed for registration, 88 foreign companies from

21 countries, including Daimler Benz, Shanghai Petrochemical,

Corporacion Bancaria de Espana ("Argentaria"), Venezuelan Petroleum

Inc. and YPF, Inc., entered the United States public market for the first

time. At year-end, there were more than 550 foreign companies from

40 countries filing reports with the SEC.

REGISTRATION STATEMENTS FILED

DOLLAR VALUE (SBIWONS)

cmtEREQ

35.1

1992

TOTAL - $702.1

1993

TOTAL - $868.1

51
The 1993 proxy season was the first in which companies were subject 

to the Commission's new executive compensation disclosure rules. The 

Division undertook a special review of approximately 1,000 proxy statements 

to evaluate compliance with the new rules and, on the basis of that review, 

the Commission published a release providing further disclosure guidance 

and proposing several refinements to the rules. Those refinements were 

adopted in November 1993 in time to be effective for the 1994 proxy season. 

Early in 1993, the Commission implemented initiatives to facilitate 

capital raising and the securitization of assets. Those initiatives included 

expansion of short form and shelf registration to an estimated additional 

450 reporting companies and the introduction of unallocated shelf 

registration. Unallocated shelf registration, intended to facilitate equity 

offerings, allows eligible companies to file one registration statement 

covering the sale of all the company's securities without requiring a 

specific allocation among classes of securities. More than $66 billion of 

securities were registered on an unallocated shelf basis in 1993. 

A streamlined transitional disclosure system for small business issuers 

first entering the Commission's disclosure system was added to the 

Commission's new integrated disclosure system for small business issuers. 

In the first 14 months of the new small business disclosure system, 335 

registration statements covering over $4 billion worth of securities were 

filed. In addition, during the first full year under the new rules 78 Regulation 

A filings were made, covering a total of approximately $206 million in 

securities, an increase of approximately 5 times the amount of Regulation 

A offerings filed in the same period prior to the new rules. 

The Commission proposed to expand the multijurisdictional disclosure 

system (MJDS) for Canadian issuers by decreasing the size of companies 

eligible to participate and recognizing investment grade ratings by Canadian 

securities rating organizations. More than $10 billion in MJDS offerings 

have been filed with the SEC since the introduction of the process in 1991. 

Review of Filings 

The staff conducted a record 3,474 reporting issuer reviews. The 

reporting issuer reviews were accomplished through the full review of 

1,218 registration statements and post-effective amendments to registration 

statements filed under the Securities Act; 1,826 annual and subsequent 

periodic reports; 149 merger and going private proxy statements; and 1,155 

full financial reviews of annual reports. The number of documents reviewed 

exceeded the number of reporting issuer reviews because in many cases 

more than one document filed by the same issuer received a full review 

during the year. 

The following table summarizes filings reviewed during the last five 

years. The increases and declines in reviews of new issuer filings, tender 

offers, contested solicitations, and going private transactions, all of which 

are subject to review, reflect the increases and decreases in the number 

of filings received. 
FULL DISCLOSURE REVIEWS

1989 1990 1991 1992 1993

Reporting Issuer

ReviewsgJ 2,734 1,907 2,660 3,058 3,474

Major Filing Reviews

Securities Act Registrations

Home Office

New Issuers 684 568 465 831 863

Repeat Issuers 564 635 758 970 967

PIE Amdts. J2/ 320 203 308 210 251

Regions

Registrations 533 327 183 158 189

PIE Amdts.1lI 609 505 275 137 103

Annual Reports

Full Reviews 1,949 1,129 1,557 1,450 1,826

Full Financial

Reviews 388 292 712 1,126 1,153

Tender Offers

(140-1)fJI 188 95 37 27 56

Going Private

Schedules 176 108 68 61 61

Contested Proxy

Solicitations 84 75 65 58 35

Proxy Statements

MergerlGoing Private 291 240 188 141 149

Other 428 351 374 395 1,292

gj Includes (l) reporting Securities Exchange Act of 1934 (Exchange Act) issuers

whose financial statements and Management Discussion and Analysis disclosures

were reviewed in Securities Act registration statements, (2) post-effective (PIE)

amendments to Securities Act registration statements, and (3) Exchange Act

annual reports and merger and going private proxy statements. The number of

documents reviewed exceeded the number of reporting issuer reviews because in

many cases more than one document filed by the same issuer received a full review.

hi Includes only PIE amendments with new financial statements.

d Includes reports reviewed in connection with other filings.

Q/ Reflects limited partnership roll-up transactions as single filings regardless of the

number of Schedules 14D-1 filed or the number of issuers involved in the roll-up.

gJ Excludes reviews of revised and additional preliminary proxy material.

53

~

~
Rulemaking, Interpretive, and Legislative Matters 

Executive Compensation 

In 1992, the Commission adopted amendments to its proxy rules to 

make executive compensation disclosure clearer, more concise, and more 

useful to shareh01ders.l~~ Specific provisions were made for small businesses 

to minimize costs of compliance with the disclosure requirements where 

consistent with shareholder interests. 

Based on the review of approximately 1,000 proxy statements, the 

Commission issued a release reporting on the first year's experience with 

the new compensation r~1es.l~~ In the release, the Commission identified 

common issuer mistakes in complying with the new rules and discussed 

several questions of general application. In addition, the requirements 

of the compensation committee report were reviewed using examples 

drawn from actual filings. The Commission also proposed for comment 

several refining and technical amendments to the executive compensation 

rules. These amendments would (1) expand the persons covered by the 

rules to include chief executive officers and top paid executive officers 

who left the company during the year, (2) require disclosure of the 

assumptions underlying any option values reported, (3) require disclosure 

of the named executive officers' restricted stock holdings, and (4) change 

the weighting of any issuer constructed peer group from the end to the 

beginning of the measurement period. The proposals were adopted in 

November 1993. 

Simplification of Registration Procedures for Primary Securities Offerings 

The Commission adopted amendments to Form 5-3 to expand the class 

of issuers eligible to use short-form registration and primary delayed shelf 

offerings pursuant to R~le415.l~~ The amendments shortened the minimum 

issuer reporting period from 36 to 12 months for offerings of non-asset 

backed securities, reduced the public float requirement for primary offerings 

of non-investment grade securities from $150 million to $75 million, and 

eliminated the trading volume test. Investment grade asset-backed 

securities, including small business loans, are now eligible for shelf 

registration on Form S-3 regardless of the issuer's reporting history. 

Additional amendments provide for same-day, automatic effectiveness of 

dividend or interest reinvestment plan registration statements and permit 

changes in the offering price and decreases in the amount of the securities 

to be reflected after effectiveness without the need to file a post-effective 

amendment if the changes would not materially change the disclosure in 

the registration statement at effectiveness. 

The amendments also permit registration of debt, equity and other 

securities on a single shelf registration statement, without having to specify 

the amount of each class of securities to be offered. Since these amendments 

were adopted in October 1992, there have been 85 unallocated shelf 

registration statements filed, registering a total of approximately $64 

billion in securities. 
Multijurisdictional Disclosure System 

The Commission proposed amendments to the MJDS to amend the 

eligibility requirements for use of Forms F-9, F-10 and 40-F to shorten the 

reporting history requirement from 36 months to 12 months, to eliminate 

the market capitalization requirements under such forms and to change 

the minimum public float requirement to U.S. $75 million.14' The Commission 

also proposed amendments to Form F-9 that would recognize investment 

grade ratings by those rating organizations which are accepted by Canadian 

securities regulators in addition to those which are accepted under the 

SEC1s rules. The Commission also adopted amendments to Forms F-10 

and 40-F in order to continue the requirement that financial statements 

included in filings on such forms include a reconciliation to U.S. generally 

accepted accounting prin~ip1es.l~~ 

Survey of Financial Statement Reconciliations by Foreign Registrants 

The Division conducted a survey of the reconciliations included in 

the filed reports of 528 foreign companies. Subsequently, a report analyzing 

the nature and size of the reconciling items by home country of the foreign 

companies was prepared and issued on May 1, 1993. 

Blank Check Offerings 

The Commission proposed to revise the "penny stock" definition for 

purposes of its rules relating to the registration statements filed by blank 

check companies under the Securities Act.149 The proposal would make 

the exclusion from the penny stock definition for securities priced at $5 

or more inapplicable to securities offerings subject to Section 7(b) of the 

Securities Act and Rule 419. The rule was effective on October 29, 1993. 

Trust Indenture Act 

The Commission adopted amendments to Rules 4d-9 and IOa-5 under 

the Trust Indenture Act of 1940 that rescinded the exclusion of British 

Columbia trust indentures and trust companies from exemptions presently 

available in MJDS offerings of debt sec~rities.'~~ Pursuant to Rule 4d-9, 

as amended, a British Columbia obligor may offer its debt securities in 

a MJDS offering pursuant to a trust indenture that complies with the 

Company Act of British Columbia (Company Act). Further, the amendments 

to Rule 10a-5 generally permit any Canadian trust company, including 

those regulated under the Company Act, to act as sole trustee. The 

amendments followed amendment of the Company Act and issuance of 

a contemporaneous "blanket order" exempting United States obligors from 

the requirements of the Company Act, including the residency requirement 

for institutional trustees, by the British Columbia Securities Commission. 

Section 16 

The Commission extended the phase-in period for compliance with 

the substantive conditions of new Rule 16b-3 regarding employee benefit 

plan transactions under the Exchange Act pending further notice and 
rulemaking under that pro~ision.'~~ The phase-in period was extended 

until September 1, 1994, or such earlier date as set in further rulemaking 

under Section 16. 

Additional Small Business Initiatives 

In response to favorable comment on its small business initiatives and 

the use of the question-and-answer disclosure format, the Commission 

adopted revisions to the rules and forms under the Securities Act and the 

Exchange Act to provide a transitional disclosure system for small business 

issuers first entering the reporting system.'52 This system allows small 

business issuers to make the transition from non-reporting to reporting 

status using the Regulation A disclosure format, with the added requirement 

of audited financial statements. The transitional disclosure forms may 

be used for registering offerings of up to $10 million under the Securities 

Act and for registration and reporting under the Exchange Act. The 

transitional system includes: (I) new Securities Act registration statement 

Form SB-I; (2) modified disclosure formats in periodic report Exchange 

Act Forms 10-QSB, 10-KSB and 10-SB; (3) modified disclosure formats for 

annual reports to shareholders and proxy and information statements; and 

(4) a provision for graduating from the transitional disclosure forms if 

more than $10 million is raised in any continuous 12-month period or a 

non-transitional disclosure form (other than for proxy purposes) is used. 

The Commission also adopted two changes to the financial statement 

requirements for small business issuers. These revisions provide an 

automatic waiver of the audited financial statements requirements with 

respect to specified business acquisitions where such financial statements 

are not otherwise available. The revisions also permit small business initial 

public offerings to use the same rule as reporting companies in determining 

whether they may use prior year's audited financial statements in the 90 

days following the end of the fiscal year. 

The Commission adopted revisions to the non-financial statement 

disclosure requirements of Regulation D which base those requirements 

upon both the offering amount and the issuer's eligibility for the small 

business issuer disclosure system. In addition, the Regulation A "testthe-waters" procedure was amended to exclude a "test-the-waters" 

document that complies with applicable requirements from the definition 

of prospectus. 

Electronic Data Gathering Analysis and Retrieval System 

The Commission adopted rules and amendments to implement the 

operational phase of the EDGAR system, through which most filings and 

related correspondence are to be submitted ele~tronically.'~~ The 

Commission also published a list identifying approximately 14,000 

companies whose filings are processed by the Division that will become 

subject to the electronic filing requirements over a three-year period, 

together with their respective phase-in dates. The first mandated electronic 
filings were received on April 26,1993. At the end of 1993, approximately 

925 non-investment company issuers had become EDGAR filers. Phasein of the remaining issuers is expected to be completed by mid-1996. 

Conferences 

SEC Government-Business Forum on Small Business Capital Formation 

The twelfth annual SEC Government-Business Forum on Small Business 

Capital Formation was held in Washington, D.C. on September 9 and 10, 

1993. Approximately 150 small business representatives, accountants, 

attorneys, and government officials attended the forum. Numerous 

recommendations were formulated with a view to eliminating unnecessary 

governmental impediments to small businesses' ability to raise capital. A 

final report setting forth a list of recommendations for legislative and 

regulatory changes approved by the forum participants was prepared and 

provided to interested persons, including Congress and regulatory agencies. 

SECINASAA Conference Under Section 19(c) of the Securities Act 

On April 26, 1993, approximately 60 SEC senior officials met with 

approximately 60 representatives of the North American Securities 

Administrators Association in Washington, D.C. to discuss methods of 

effecting greater uniformity in federal and state securities matters. After 

the conference, a final report summarizing the discussions was prepared 

and distributed to interested persons. 
Accounting and Auditing Matters

The Chief Accountant is the principal advisor to the Commission

on accounting and auditing matters arising from the administration

of the various securities laws. The primary Commission activities

designed to achieve compliance with the accounting and financial

disclosure requirements of the federal securities laws include:

rulemaking and interpretations that supplement private-sector accounting

standards, implements financial disclosure requirements, and establishes

independence criteria for accountants;

review and comment process for agency filings directed to improving

disclosures in filings, identifying emerging accounting issues (which may

result in rulemaking or private sector standard-setting), and identifying

problems that may warrant enforcement actions;

enforcement actions that impose sanctions and serve to deter improper

financial reporting by enhancing the care with which registrants and their

accountants analyze accounting issues; and

oversight of private sector efforts, principally by the Financial Accounting

Standards Board (FASB) and the American Institute of Certified Public

Accountants (AlCP A), which establish accounting and auditing standards

designed to improve financial accounting and reporting and the quality

of audit practice.

Key 1993 Results

The Commission continued its involvement in initiatives directed

toward reducing differences in accounting and auditing standards that

currently exist between countries. During 1993, significant progress was

achieved by international accounting standard-setting bodies toward the

acceptance of cash flow statements prepared in accordance with

International Accounting Standard 7 (lAS 7). In November 1993, the

Commission proposed a rule for comment that would not require a

reconciliation of a cash flow statement prepared in accordance with lAS

7 to United States standards. This was the first time that the Commission

proposed accepting an international standard for cross-border offerings

and filings.

Accounting-Related Rules and Interpretations

The agency's accounting-related rules and interpretations supplement

private-sector accounting standards, implement financial disclosure

requirements, and establish independence criteria for accountants. The

agency's principal accounting requirements are embodied in Regulation

S-X, which governs the form and content of financial statements filed with

the SEC.

58

•

•

•

•
Loss Contingencies. The staff issued interpretive guidance regarding 

the appropriate accounting and disclosures relating to loss contingencie~.'~~ 

The guidance was issued to narrow diversity in practice among public 

companies of reporting the effects of significant loss contingencies such 

as environmental liabilities. 

Oversight of Private-Sector Standard-Setting 

The SEC monitors the structure, activity, and decisions of the privatesector standard-setting organizations, which include the FASB. The 

Commission and its staff worked closely with the FASB in an ongoing effort 

to improve financial accounting and reporting, including the need to 

respond to various regulatory, legislative, and business changes in a timely 

and appropriate manner. A description of FASB activities in which the 

staff was involved is provided below. 

The FASB continued a joint project with standard-setters in Canada 

and Mexico to compare accounting standards in the three countries. The 

goal of this project is to develop recommendations for consideration by 

standard-setters in the United States, Canada, Mexico, and the International 

Accounting Standards Committee (IASC) concerning actions that can and 

should be taken to move towards greater comparability. 

As part of its consolidations project, the FASB intends to consider 

the current reporting requirements under Statement of Financial Accounting 

Standards No. 14, "Financial Reporting for Segments of a Business 

Enterprise." This effort has been undertaken jointly with the Accounting 

Standards Board of the Canadian Institute of Chartered Accountants 

(CICA). An invitation to comment was issued in May 1993 as part of the 

first phase of a standard-setting project that will seek to develop common 

standards on disaggregated disclosures. As a result of an FASB Research 

Report issued in February 1993 and CICA Research Study published in 

August 1992, an invitation to comment was issued in May 1993 as part 

of the first phase of a standard-setting project. This standard-setting 

project will seek to develop common standards on disaggregated 

disclosures. 

The FASB adopted a final standard to establish the appropriate 

accounting for certain investments in debt and equity securitie~.'~~ Under 

the final standard, debt securities for which an entity has the positive intent 

and ability to hold until maturity should be classified as being held to 

maturity and reported at amortized cost. Debt and equity securities held 

for current resale are to be classified as trading securities and reported at 

fair value with unrealized gains and losses included in earnings. Other 

debt and equity securities should be classified as securities available for sale 

and reported at fair value, with unrealized gains and losses shown as a 

separate component of shareholders1 equity. The new FASB standard is 

effective for fiscal years beginning after December 15, 1993. 
The new standard is part of a larger FASB project initiated at the 

Commission's request in 1985 to address accounting for financial 

instruments. This project will ultimately address the comprehensive use 

of market value accounting for all securities and other financial instruments 

and related liabilities. The project is continuing, and the FASB is considering 

whether certain liabilities should also be marked to market. 

The FASB adopted a final standard on accounting for loan impairment 

by ~redit0rs.l~~ Under its provisions, a loss on impairment of a loan should 

be recognized when it is probable that a creditor will be unable to collect 

all principal and interest when due under the terms of the loan agreement. 

The FASB issued an exposure draft (ED) requesting public comment 

on a proposed standard on accounting for stock c~mpensation.'~~ Under 

the ED'S approach, compensation cost arising from awards of stock or 

options under both fixed and performance stock compensation plans 

would be measured as the fair value of the award at the date it is granted. 

The estimated value at the grant date would be subsequently adjusted, 

if necessary, to reflect the outcome of performance conditions and servicerelated factors such as forfeitures before vesting. No adjustment would 

be made for changes in the market price of the stock. The comment period 

on the ED expires on December 31, 1993. Public hearings are scheduled 

for early 1994 and a field test will be conducted. 

Oversight of the Accounting Profession's Initiatives 

The Commission and its staff continued to be active in overseeing 

the audit standard-setting process and other activities of the accounting 

profession. A discussion of the activities in which the SEC staff was 

involved follows. 

AICPA. The SEC oversaw various activities of the accounting 

profession conducted primarily through the AICPA. These included (1) 

the Auditing Standards Board (ASB), which establishes generally accepted 

auditing standards; (2) the Accounting Standards Executive Committee 

(AcSEC), which provides guidance through its issuance of statements of 

position and practice bulletins and prepares issue papers on accounting 

topics for consideration by the FASB; and (3) the SEC Practice Section 

(SECPS), which seeks to improve the quality of audit practice by member 

accounting firms that audit the financial statements of public companies 

through various requirements, including peer review. 

ASB. The staff continued to work closely with the ASB to enhance 

the effectiveness of the audit process. he ASB adopted a revised auditing 

standard that, among other things, governs the availability of comfort 

letters, which are provided to underwriters in relation to the underwriters' 

due diligence reviews pertaining to securities offering^.'^^ The standard 

as adopted was responsive to the staff's concern that such letters continue 

to be available in private securities' offerings. The ASB also issued a series 

of annual Audit Risk Alerts to provide auditors with an overview of recent 

economic, professional, and regulatory developments that may affect 1993 

year-end audits. 
SECPS. The SECPS, through its Peer Review Committee and Quality 

Control Inquiry Committee (QCIC), administers two programs that are 

designed to ensure that financial statements of SEC registrants are audited 

by accounting firms with adequate quality control systems. A peer review 

of member firms by other accountants is required every three years and 

the QCIC reviews, on a timely basis, the quality control implications of 

litigation against member firms that involves public clients. 

The SECPS peer review and QCIC programs are monitored by the 

Public Oversight Board (POB), which is independent of the AICPA (except 

for funding). The SEC continued its oversight of the activities of the SECPS 

during 1993. This oversight has shown that the peer review process 

contributes significantly to maintaining the quality control systems of 

member firms and, therefore, enhances the consistency and quality of 

practice before the Commission. 

The staff also reviewed closed-case summaries of the QCIC and 

related POB files. This review and discussions with the POB staff provide 

the staff with enough information to allow the staff to conclude that the 

QCIC process provides added assurances, as a supplement to the SECPS 

peer review process, that major quality control deficiencies, if any, are 

identified and addressed on a timely basis. Therefore, the Commission 

believes that the QCIC process benefits the public interest. The Commission 

understands that improvements suggested by the SEC staff have been 

implemented by the QCIC and the POB, and believes that such ongoing 

improvements will provide greater assurance of the efficacy of the QCIC. 

AcSEC. The AcSEC issued three separate statements of position on 

accounting issues unique to investment companie~.'~~ The AcSEC also 

substantially completed statements of position on (1) the appropriate 

treatment of operating results relating to foreclosed assets, (2) the 

appropriate accounting for advertising costs, and (3) revisions to the 

existing guidance on accounting for employee stock ownership plans. 

Also, the AcSEC solicited public comment on a proposal calling for enhanced 

disclosures about risks and uncertainties by entities generally.I6O 

International Accounting and Auditing Standards 

Significant differences in accounting and auditing standards currently 

exist between countries. These differences are an impediment to 

multinational offerings of securities. The SEC, in cooperation with other 

members of the International Organization of Securities Commissions 

(IOSCO), actively participated in initiatives by international bodies of 

professional accountants to establish appropriate international standards 

that might be considered for use in multinational offerings. For example, 

the staff worked with the IASC to reduce accounting alternatives as an 

initial movement toward appropriate international accounting standards. 

The SEC staff also monitored the IASC's projects to address issues relating 

to the extent of implementation guidance, adequacy of disclosure 
requirements, and the completeness of international accounting standards. 

In November 1993, the IASC adopted a package of ten standards constituting 

its project on comparability and improvement^.'^' 

In August 1993, the IOSCO Working Party on Disclosures and 

Accounting informed the IASC that the IOSCO Technical Committee would 

recommend that IOSCO endorse IAS 7 (revised 1992), Cash Flow Statements, 

for use in cross-border offerings and listings. Subsequently, the IOSCO 

Presidents Committee recommended that IOSCO members take all steps 

that are necessary and appropriate in their respective home jurisdictions 

to accept cash flow statements prepared in accordance with IAS 7, as 

amended, as one alternative to statements prepared in accordance with 

their domestic accounting standards relating to cash flow statements in 

connection with cross-border offerings and continuous reporting by foreign 

issuers. In November 1993, the Commission proposed a rule for comment 

that would not require a reconciliation of a cash flow statement prepared 

in accordance with IAS 7 to U.S. standard^.'^^ The Working Party also 

informed the IASC of the necessary core accounting standards that would 

comprise a comprehensive body of principles for enterprises (not in a 

specialized industry) undertaking cross-border offerings and listings. 

The staff also continued working with the International Federation 

of Accountants (IFAC) to revise International Standards on Auditing (ISA). 

Auditors in different countries are subject to different independence 

standards, perform different procedures, gather varying amounts of 

evidence to support their conclusions, and report the results of their work 

differently. The staff, as part of an IOSCO working group, worked closely 

with IFAC to expand and revise ISAs to narrow these differences, and 

significant progress was made. Most notable was the issuance of a final 

standard addressing an auditor's responsibilities when a client is suspected 

of committing an illegal act.163 
The General Counsel represents the SEC in all litigation in the United 

States Supreme Court and the courts of appeals. The General Counsel defends 

the Commission and its employees when sued in district courts, prosecutes 

administrativedisciplinary proceedings agains t certain securities professionals, 

appears amicus curiae in significant private litigation involving the federal 

securities laws, and oversees the regional oficesf participation in corporate 

reorganization cases. The General Counsel serves as the Commission's 

principal legal adviser on issues arising from all of its regulatory and 

enforcement activities. The General Counsel analyzes legislation that would 

amend the federal securities laws, drafts congressional testimony, and 

prepares legislative comments. In addition, the General Counsel advises the 

Commission in administrative proceedings under various statutes. 

Key 1993 Results 

Issues of major importance were litigated by the Commission in 1993. 

As urged by the Commission in an amicus curiae brief, the U.S. Supreme 

Court recognized the right of contribution in private actions brought under 

the Securities and Exchange Act of 1934 (Exchange Act) Section 10(b) and 

Commission Rule lob-5 in Musick, Peeler & Garrett v. Employers Insurance 

of Wa~sau.'~~ In Central Bank of Denver v. First Interstate Bank of Denver,'65 

the Commission filed an amicus curiae brief urging the U.S. Supreme Court 

to hold that there is an implied private right of action for aiding and 

abetting violations of Section 10(b) and Rule lob-5. In SEC v. Rind,'66 the 

Court of Appeals for the Ninth Circuit agreed with the Commission that 

no statute of limitations binds Commission enforcement actions. 

Significant progress was made in the adjudicatory program. The staff 

submitted to the Commission a record 64 draft opinions, a 23 percent 

increase from 1992. Moreover, the number of opinions issued by the 

Commission increased by 69 percent over 1992, from 48 to 81. The task 

force on administrative proceedings issued its report, Fair and Efficient 

Administrative Proceedings Report of the Task Forceon Administrative Proceedings 

of the United States Securities and Exchange Commission (Report of the Task 

Force on Administrative Proceedings). 

Significant Litigation Developments 

Liability in Private Actions 

In Musick, Peeler 1.3 Garrett v. Employers Insurance of Wa~sau,'~' the U.S. 

Supreme Court, as urged by the Commission in an amicus curiae brief, 

recognized the right of contribution in private actions brought under the 

Exchange Act Section 10(b) and Commission Rule lob-5. Holding that 
federal courts have the power to continue to flesh out the right of action 

judicially implied under the statute and the rule, the U.S. Supreme Court 

agreed with the Commission that a right of contribution should be 

recognized to conform the implied right of action to the analogous express 

rights of action contained in the Exchange Act. 

In Central Bank of Denver v. First Interstate Bank of Denver,168 the 

Commission filed an amicus curiae brief urging the U.S. Supreme Court 

to hold that aiding and abetting liability is encompassed within the 

established implied private right of action under Section 10(b) and Rule 

lob-5. The Commission also urged that recklessness is sufficient to satisfy 

the knowledge element of aiding-and-abetting liability under Section 10(b) 

where the defendant's substantial assistance of the primary wrongdoing 

is accomplished through some affirmative action, even if the defendant 

owes the plaintiff no independent duty. 

Statictes of Limitation 

The Commission as amicus curiae defended the recently enacted Section 

27A of the Exchange Act against constitutional attack in numerous cases. 

Section 27A eliminated the retroactive application of the one-year/threeyear statute of limitations for Section 10(b) private actions announced by 

the U.S. Supreme Court in Lampf, Pleva, Lipkind, Prupis & Petigrow v. 

Gilberts~n'~~ by preserving the application of the statutes of limitation then 

in effect for all cases filed before Lampf was decided. The constitutionality 

of Section 27A has been upheld by the U.S. Courts of Appeals for the First, 

Second, Fourth, Seventh, Ninth, Tenth and Eleventh Circuits as applied 

to cases which were pending when the statute was enacted.'" In addition, 

the U.S. Court of Appeals for the Fifth Circuit held as urged by the 

Commission, that the reinstatement pursuant to Section 27A of cases which 

had been finally dismissed when the statute was enacted does not violate 

separation of powers principles or due process.'71 The U.S. Court of 

Appeals for the Sixth Circuit in contrast, held that such reinstatement 

violates separation of powers principles,'" and the U.S. Court of Appeals 

for the Tenth Circuit held that reinstatement violates due process and 

separation of powers prin~ip1es.l~~ 

The Supreme Court has granted a writ of certiorari to the U.S. Court 

of Appeals for the Fifth Circuit in First Republicbank Coy., et al. v. Pacific 

Mutual Life Insurance Co. to resolve the issue.174 

In SEC v. Rind,175 the U.S. Court of Appeals for the Ninth Circuit 

agreed with the Commission that no statute of limitations binds Commission 

enforcement actions which are brought to vindicate public rights pursuant 

to an express right of action that contains no limitations period. The 

defendant had asserted that the Commission's disgorgement action was 

time-barred by the one-year/ three-year statute of limitations established 

in Lampf. 
Inclusion of Shareholder Proposals in Proxy Materials 

In ACTWU v. SEC,176 the U.S. Court of Appeals for the Second Circuit 

agreed with the Commission that a Commission affirmation of a staff noaction letter declining to recommend enforcement action if a company 

omitted a shareholder proposal from its proxy statement is not a reviewable 

order under the Exchange Act, because it does not bind anyone involved. 

In NYCERS v. SEC,'" the U.S. District Court for the Southern District 

of New York held that the Commission had engaged in rulemaking without 

notice and comment, in violation of the Administrative Procedure Act, 

when it affirmed a staff no-action letter agreeing with a company's decision 

to exclude a shareholder proposal. The court found the no-action letter 

applied an interpretation of the ordinary business exception that differed 

from an interpretation contained in a 1976 Commission release issued in 

conjunction with the adoption of amendments to the shareholder proxy 

proposal rule. The court enjoined the Commission from issuing no-action 

letters inconsistent with the 1976 interpretation. 

Disgorgement 

In SEC v. H~ffrnan'~~ andSEC v. AMX International, l~zc.,'~~ the US. 

Court of Appeals for the Fifth Circuit held, as the Commission had urged, 

that a disgorgement order is not a debt as defined in the Federal Debt 

Collection Procedures Act of 1990.180 Thus, the defendants were not 

entitled to use the exemptions contained in that act to avoid paying 

disgorgement. 

Insider Trading 

The U.S. Supreme Court has denied petitions for certiorari seeking 

review of two decisions of the U.S. Court of Appeals for the Second Circuit 

affirming convictions for insider trading. 

In United States v. Teicher,lsl the court of appeals, in dicta, indicated 

its agreement with the Commission's longstanding position that a defendant 

may be liable for trading while in possession of misappropriated inside 

information, whether or not he trades on the basis of such information. 

The court's holding, however, was that on the facts of this case, any alleged 

error in the jury instructions on this point was harmless. The government's 

brief in opposition to certiorari argued that this holding is correct. The 

brief also noted that, in any event, a possession test would be correct. 

In United States v. Liber~,'~~ the defendant argued that the 

misappropriation theory of liability for insider trading, which prohibits 

trading while in possession of wrongfully obtained material nonpublic 

information, should not apply where, as in this case, the owner of the 

information is a business publication with no interest in the securities 

traded. The government's brief in opposition to certiorari argued that 

there is no statutory or case law basis for such a distinction. 
Regulatwn of Securities Professionals 

In F.B. Horner & Associates, Inc. v. SEC,'83 the U.S. Court of Appeals 

for the Second Circuit affirmed a Commission decision in which the 

Commission affirmed sanctions imposed by the National Association of 

Security Dealers (NASD) on a broker-dealer after finding that the dealer 

charged unfair markups on sales of a debt security. The court approved 

the Commission's reliance on the firm's contemporaneous cost as evidence 

of the inter-dealer price on which to calculate the markups. 

Market Regulation 

In Timpinaro v. SEC,lS4 the U.S. Court of Appeals for the District of 

Columbia Circuit upheld the Commission's approval of an NASD rule 

change that gave market makers a 15-second period after executions on 

the NASD's Small Order Execution System to update their quotations, 

during which time they could decline to accept unpreferenced orders. 

However, the court remanded without vacating the Professional Trader 

Rule, which expanded the definitions of professional trading account and 

day trade. While finding that the Commission had proceeded on a sound 

theory of market behavior in approving the Professional Trading Rule, the 

court expressed concern over the lack of data demonstrating that the 

benefits of the rule exceed its costs. The court directed the Commission 

to address this issue on remand and to determine whether the rule comports 

with the constitutional proscription against vagueness. 

Requests for Access to Commission Records 

The SEC received approximately 100 subpoenas for documents and 

testimony in 1993. In some of these cases, the SEC declined to produce 

the requested documents or testimony because the information sought was 

privileged. The SEC's assertions of privilege were upheld in every decided 

case when the party issuing the subpoena challenged the assertion in court. 

The SEC received 1,837 requests under the Freedom of Information 

Act (FOIA) for access to agency records and 4,382 confidential treatment 

requests from persons who submitted information. There were 53 appeals 

to the SEC's General Counsel from initial denials by the FOIA Office. Three 

of these appeals resulted in district court litigation, all of which are now 

pending.lB5 

One FOIA case filed against the Commission in 1992 was decided 

favorably to the Commission. In Alexander 6 Alexander Services, Inc. v. 

SEC,lS6 plaintiff brought an action against the Commission under the 

Administrative Procedure Act, 5 U.S.C. 701-06, seeking to enjoin the 

Commission from disclosing certain of its documents in response to a FOIA 

request. Alexander claimed that the documents were exempt from disclosure 

by 5 U.S.C. 552(b)(4) because they contained confidential commercial 

information, the disclosure of which would allegedly harm Alexander's 

competitive position. Alexander alleged that the Commission did not 

afford it an adequate opportunity to substantiate its claim for confidential 
treatment. The court ruled in favor of the Commission in all material 

respects. Most importantly, the court found that the SEC's procedures 

afforded Alexander a more than adequate opportunity to substantiate its 

confidential treatment request. The court further held that, both in its 

original request to the agency's FOIA Office and in its appeal to the Office 

of the General Counsel, Alexander failed to meet its burden of substantiating 

its claim. 

The SEC also was successful in obtaining a reversal of a district court 

order sealing a portion of the record in an SEC injunctive action, including 

the permanent injunction and the transcript of the hearing in open court 

in which the injunction had been entered. In SEC v. Van W~egenberghe,'~~ 

the court of appeals adopted the SEC's reasoning that there had been an 

abuse of discretion in sealing the records as there is a strong public interest 

in making injunctions entered in SEC enforcement proceedings public. 

Actions Under the Right to Financial Privacy Act 

Seven actions were filed under the Right to Financial Privacy Act to 

quash SEC subpoenas for customer information from financial institutions. 

Four of these challenges were dismissed by district courts after the courts 

found, in each case, that the records were relevant to legitimate law 

enforcement inquires,lB8 one of these challenges was withdra~n,'~~ and 

two remain pending.lgO 

Actions Against Professionals Under Commission Rule 2(e) 

During 1992, the SEC issued a ruling under Rule 2(e) affirming the 

decision of an Administrative Law Judge that two partners of a major 

accounting firm had engaged in improper professional conduct during five 

audits of Savin Corp~ration.'~' That decision was appealed to the Court 

of Appeals for the District of Columbia, where the accountants argued 

that the Commission lacked authority to promulgate Rule 2(e) and to 

sanction accountants. The Commission's brief argues that Rule 2(e) 

represents a valid exercise of the Commission's general rulemaking authority 

and that the authority for agencies generally to discipline professionals 

is well established. Petitioners also argue that a showing of knowledge 

is required before receiving a sanction for improper professional conduct 

under Rule 2(e). The Commission's brief argues that negligent conduct 

is a sufficient basis for imposing discipline for improper professional 

conduct because of the significant potential impact of negligent or 

incompetent accountants upon the investing public. The appeal is pending. 

The staff also prosecuted certain other Rule 2(e) disciplinary 

proceedings. In In re Robert 1. l~mmazzo,'~~ theCommission accepted a 

settlement barring a public accountant from practicing before the 

Commission as an auditor for 10 years because he had material unsecured 

loans from his client bank during the course of three audits. In In re Gregory 

Mel~ort,'~~ the engagement partner on the audit of Kahler corporation 

consented to a Commission Order finding he had engaged in improper 

professional conduct during the 1988 and 1989 audits of Kahler Corporation. 
The Commission suspended Melson for nine months. Proceedings continue 

against the concurring partner. In In reMartin G. B~owne'~~ the Commission 

suspended an engineer under Rule 2(e) on the basis of a prior injunction 

finding he had prepared a false and misleading engineering report which 

was incorporated into a filing made with the Commission. 

Significant Adjudication Developments 

Significant progress was made in the adjudicary program in 1993. The 

staff submitted to the Commission a record 64 draft opinions, a 23 percent 

increase from 1992. The post-briefing age of the staff's case inventory 

remained at approximately 170 days. Moreover, the Commission issued 

a record 81 opinions (an increase of almost 69 percent over the prior year's 

48). However, the Commission received 65 new adjudicatory cases in 1993, 

a 16 percent increase over 1992. 

Significant Adjudicatory Decisions involving Broker-dealers and Market Professionals 

As in 1992, a number of the most significant opinions issued by the 

Commission in 1993 involved the setting of prices charged to customers 

for securities. In Investment Planning, I~c.,'~~ the Commission expressly 

found excessive markups as low as 4 percent in high-quality zero-coupon 

municipal securities and interest-bearing corporate bonds. Building on 

the decision in lnvestment Planning, I~c.,'~~ the Commission held in First 

Honolulu Securities, Inc. and Charles lac~bson'~~ that markups on thinlytraded and volatile municipal debt securities below even four percent may 

be unfair. 

Ordinarily, the fairness of retail prices is determined vis-a-vis the 

inter-dealer market. The market for the securities at issue in Bison Securities, 

I~C.,'~~ however, had long periods of no inter-dealer activity, during which 

the firm sold the securities to customers. The Commission's opinion in 

this matter therefore described the appropriate method for determining 

prevailing market price in the absence of inter-dealer transactions and the 

propriety of using historical cost to determine markups. 

In Patten Securities Corp. and John L. patter^,'^^ the Commission was 

presented with an unusual method of manipulating a security's market 

price. The Patten firm had been the sole underwriter of an offering of 

securities, all of which it then sold to firm customers. Using the firm's 

power over market price resulting from exclusive control over supply, the 

firm and its president caused a sharp and unwarranted rise in the market 

price of the securities through sales to other dealers, not, as is usual with 

a manipulation, by activity on the purchase side. The firm also furthered 

the manipulation by absorbing excess securities into its inventory. Reasoning 

that the respondents had attempted to conduct a one-sided market at an 

artificial level, the Commission found that the price of the securities had 

been manipulated during a two-week period in which respondents raised 

the price they charged other dealers to twice the offering price. The 

Commission concluded, however, that the evidence was insufficient to find 

a manipulation for the remainder of the period charged in the NASD's 
complaint. Market conditions for the security had improved, and the 

firm's sales of the security substantially exceeded its purchases during that 

period. 

A number of the Commission's opinions involved issues of procedural 

fairness. In Allan Mace LeavittIzo0 the Commission found that the American 

Stock Exchange had failed to invoke its jurisdiction over a former employee 

of a member firm within the time period prescribed by that exchange's 

rules, and therefore set aside the disciplinary action. Another matter, Datek 

Securities C~rp.,~~' involved an NASD expedited remedial proceeding 

concerning transactions in the Small Order Execution System of NASDAQ, 

many of which involved firms that employed two of the three members 

of the NASD panel that heard the proceeding. The Commission found 

that, under the circumstances, the two members of the hearing panel had 

a fundamental conflict of interest that was not curable by the Commission's 

de novo review. Accordingly, the Commission set aside the NASD1s 

findings and sanctions. 

Task Force on Administrative Proceedings 

In March 1993, the Report of the Task Force on Administrative Proceedings 

was issued. The task force found the Commission's adjudicatory program 

to be both fair and effective. At the same time, though, the task force 

noted areas where the program could be improved, and recommended new 

procedures, policies and rules. The task force recommended that the Office 

of the General Counsel be given the responsibility for coordination of all 

staff duties with respect to adjudicatory matters, including implementation 

of the recommended procedures, policies and rules. The office has assumed 

this role. As the result of implementation of interim steps recommended 

by the task force in 1991 and 1992 as well as the adoption of recommendations 

made with publication of the final report, the Commission's pending 

adjudicatory case backlog was substantially brought up to date. Subsequent 

to publication of the report, the Commission issued proposed new Rules 

of Practice. 

Counselling and Regulatory Policy Services 

The dynamic nature of the U.S. capital markets continues to present 

the Commission with novel and complex legal and regulatory issues. The 

General Counsel is the principal legal advisor to the Commission, and 

provides independent analysis and advice to the Commission and its 

Divisions and Offices on the merits and risks of proposed action in all 

areas of agency practice. During 1993, as a result of developments in 

such areas as market structure, capital formation, and mutual fund 

investment, the General Counsel advised the Commission and its staff on 

a range of significant issues relating to federal securities, administrative 

and Constitutional law. In connection with the Commission's enforcement 

program, the General Counsel provided advice on complex legal issues 
and significant litigation risks. Resolution of these issues facilitated 

achievement of the Commission's statutory goals, with particular attention 

to promoting balanced, consistent and cost-effective regulatory action. 

Significant Legislative Developments 

By the close of 1993, only one securities bill (H.R. 616, regarding 

managed accounts) had been enacted into law. In addition, the House 

and Senate had each passed separate versions of legislation in the areas 

of government securities and limited partnership roll-ups. The House also 

had passed an investment advisers bill, and legislation providing for 

Commission self-funding as part of the Commission's 1994-1995 

authorization. Notably, many of the securities bills actively considered 

during the first session of the 103rd Congress, including those relating 

to government securities, limited partnership roll-ups, and investment 

advisers, were reintroduced from the 102nd Congress. 

Managed Accounts 

H.R. 616, signed by the President in August 1993 (P. L. No. 103-68), 

repeals provisions in Exchange Act Section ll(a) restricting the ability of 

certain institutional investors (including investment company affiliates) 

to execute trades on the floor of an exchange for managed accounts without 

the involvement of an independent floor broker. The advent of negotiated 

commission rates and open access to exchange memberships in the years 

since enactment of Section 1 l(a) greatly reduced competitive concerns that 

were grounds for the managed account restrictions. Accordingly, in 1991, 

the Commission testified in support of legislation to exempt managed 

accounts from Section I l(a), subject to disclosure requirements designed 

to limit conflicts of interest. H.R. 616, as enacted in the 103rd Congress, 

contained such provisions. 

Government Securities 

Important legislation involving the regulation of the government 

securities markets was considered in 1993 but not enacted during 1993. 

H.R. 618, the Government Securities Reform Act, was introduced in January 

1993. The Commission testified in support of H.R. 618 in March 1993, 

advocating in particular its provisions relating to recordkeeping and 

reporting, sales practices, and transparency. 

H.R. 618, as introduced, was very similar to a bill that failed to pass 

in the 102nd Congress due to jurisdictional disagreements between the 

House Banking and Energy and Commerce Committees. Anticipating a 

renewal of these differences, the Commission worked with the U.S. Treasury 

(Treasury) and the committees and succeeded in reaching a compromise 

position on H.R. 618. The compromise included, among other important 

features, permanent reauthorization of Treasury's rulemaking power, large 

position reporting, sales practice and anti-fraud provisions. 

By contrast, the Senate in July 1993 passed a narrower bill, S. 422, 

to reauthorize Treasury's rulemaking authority and provide more limited 

reforms for the government securities market. Together with the roll-ups 
bills (discussed below), the different versions of the government securities 

legislation were being considered by House and Senate staff in conference. 

Limited Partnership Roll-ups 

In March 1993, the House passed H.R. 617, a bill intended to combat 

certain inequities perceived as associated with limited partnership rollup transactions. On the Senate side, S. 424 was passed in August 1993, 

subject to a Dodd-Gramm compromise limiting the scope of the legislation. 

The two roll-ups bills were being considered by House and Senate staff 

in conference at the close of 1993. 

lnves tment Advisers 

In 1993, the House (but not the Senate) passed legislation to provide 

for enhanced Commission inspection of investment advisers. Among other 

things, H.R. 578 would establish a fee schedule for investment advisers 

to cover the cost of such an inspection program, a suitability requirement, 

Commission authority to designate a self-regulatory organization to examine 

investment advisers, enhanced disclosure requirements and fidelity 

bonding. A narrower Senate bill, S. 423, also would provide for new fees 

to cover the costs of enhanced Commission inspections, although it omits 

the suitability requirements and certain other substantive provisions 

included in H.R. 578. While S. 423 was reported out of Committee, it was 

not passed by the Senate until after the close of 1993. 

SEC Authorization 

The House, but not the Senate, has also passed legislation providing 

for Commission self-funding. On May 24,1993, Chairman Dingell introduced 

H.R. 2239, the Commission's authorization bill for fiscal years 1994-1995. 

As introduced, H.R. 2239 contained only the Commission's appropriation 

request. The Energy and Commerce Committee subsequently approved 

an amendment providing for a form of Commission self-funding, and the 

House ultimately passed H.R. 2239 with the self-funding provision. 

Other Legislative Initiatives 

Finally, other legislative initiatives of interest to the Commission in 

the first session of the 103rd Congress included: (1) a Congressionallyrequested review of regulation of the municipal securities market, including 

issues such as repeal of the Tower Amendment and disclosure of political 

contributions related to municipal and state securities issuers; (2) several 

bills designed to increase the flow of capital to small businesses; (3) a 

House bill and Senate hearings regarding litigation reform under the 

federal securities laws; (4) a bill to transfer jurisdiction over the 

administration of the Public Utility Holding Company Act of 1935 from 

the Commission to the Federal Energy Regulatory Commission; (5) a bill 

to merge the Commodity Futures Trading Commission with the Commission; 
and (6) a series of oversight hearings relating to issues raised by the 

Commission's Market 2000 Study, including hearings on soft dollars, 

payment for order flow and proprietary trading systems. 

Foreign Technical Assistance 

The agency received a three-year grant in 1992 from the U.S. Agency 

for International Development totalling $2.8 million to support technical 

assistance programs related to the development and regulation of capital 

markets in Central and Eastern European countries. Under the grant, 

Robert Strahota, an SEC attorney, served as an adviser to the Polish 

Securities Commission in Warsaw from June 1992 to June 1993. Mr. 

Strahota advised the Polish Securities Commission on revising the Polish 

securities law and in developing securities regulations and systems. During 

1993 other SEC attorneys advised on securities regulation questions arising 

in Bulgaria, Costa Rica, Czechoslovakia, Thailand and Uzbekistan. 

Corporate Reorganizations 

The Commission acts as a statutory advisor in reorganization cases 

under Chapter 11 of the Bankruptcy Code to see that the interests of public 

investors are adequately protected. Commission participation is generally 

limited to cases involving debtors with publicly traded securities. In 1989, 

the Commission authorized a review of its role in reorganization cases. 

The staff review is complete and awaits Commission consideration. 

Committees 

Official committees negotiate with debtors on reorganization plans 

and participate generally in all aspects of the case. The Bankruptcy Code 

provides for the appointment of an official committee for stockholders 

where necessary to assure adequate representation of their interests. During 

1993, the Commission moved for appointment of investor committees in 

two caseszoz and opposed dissolution of a committee in one case.203 

Estate Administration 

The Commission protects the interests of public investors by 

participating in selected matters involving administration of the debtor's 

estate. In In re National Convenience Stores, I~C.,~~~ the Commission argued 

that the bankruptcy court is required to find that an indenture trustee's 

fees are reasonable before they can be paid from plan distributions to 

bondholders. In another matter involving indenture trustees, the 

Commission successfully argued In re MCorp Financial, I~C.,~~~ that a trust 

indenture is not an executory contract that can either be rejected or 

accepted. Requiring the debtor to accept the indenture would result in 

an unwarranted priority for indenture trustee fees; rejection could leave 

bondholders unrepresented. In In re Master Mortgage Investment Fund, 

the Commission argued, as it has previously,207 that the Bankruptcy 

code only allows discharge of the liabilities of a debtor-not of third parties 

like officers and directors-unless there is separate consideration or unless 

the discharge of liability is voluntary. This issue is of significance because 
in many cases debtors seek to use the Chapter 11 process to protect their 

officers and directors from personal liabilities for various kinds of claims, 

including liabilities under the federal securities laws. 

Disclosure StaternentslP1an.s of Reorganization 

A disclosure statement is a combination proxy and offering statement 

used to solicit acceptances for a reorganization plan. Such plans often 

provide for the issuance of new securities pursuant to a Bankruptcy Code 

exemption from registration under the Securities Act of 1933. The 

Commission prevented the unlawful issuance of securities in two cases.208 

The Commission reviews disclosure statements of publicly-held companies 

or companies likely to be traded publicly after reorganization. During 

1993, the staff reviewed 104 disclosure statements and commented on 83. 

Most of the Commission's comments were adopted by debtors; formal 

objections were filed in two cases.209 

Ethical Conduct Program 

The General Counsel is the Designated Agency Ethics Official for the 

SEC. In 1993, the demand for ethics counseling services continued to 

increase due to issues relating to new areas of inquiry by the Commission 

(e.g., issues related to bank holding companies, insurance companies, the 

government bond market); significant turnover in senior staff; and the 

implementation of new government-wide Standards of Ethical Conduct 

for Employees of the Executive Branch and the new government-wide 

confidential disclosure system. Routine or repetitive inquiries were handled 

by ethics liaison officers and deputies located within each division and 

office, consistent with the field system established in 1992. Unique or novel 

issues were directed to the Ethics Counsel. In 1993, the Ethics Counsel 

and staff responded to requests for counseling at the rate of approximately 

20 new matters per week. 

The staff conducted a two-day training workshop in January 1993 to 

acquaint ethics liaison officers and senior staff with new ethics provisions. 

In addition, major portions of the review of the Commission's rule on 

securities holdings and transactions of members and employees and their 

families were completed. Training materials (video and written) were 

prepared and procedures were put in place to complete both initial ethics 

training for all employees and annual training for senior and mid-level 

employees. Procedures were established for implementing the new 

government-wide program for confidential disclosure of financial interests. 

Workload Increases 

The General Counsel's Office has experienced substantial increases 

in productivity and workload in recent years. In 1993, workload in the 

office continued to experience substantial increases or leveled off at the 

already heightened 1992 levels. 
INCREASE IN WORKLOAD 1990 1993

1.992 .1993.

Adjudicatory Cases

Cases Received 22 30 56 65

Cases Completed 18 39 52 64

Litigation Matters Opened 185 263 264 262

Litigation Matters Pending 232 248 245 293

Legislative Matters 111 187 145 180

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The Oficeof Economic Analysisprovides technical support and analysis 

to the Commission's regulatory program. The economics staff provides the 

Commission with research and advice on rule proposals, policy initiatives, 

and enforcement actions. The staff also monitors dmelopments in capital 

markets around the world and major program initiatives afecting the United 

States financial services industry, markets, and investors. 

Key 1993 Results 

In 1993 the Office of Economic Analysis directed its efforts in a number 

of areas including enforcement cases, executive compensation, and market 

structure issues. The staff provided technical assistance to the Division 

of Enforcement, helped to develop executive compensation disclosure rules, 

provided economic analysis in connection with the Market 2000 study, and 

reported on the financial health of the securities industry. For the third 

consecutive year, the staff coordinated the International Institute for 

Securities Market Development. 

Economic Analysis and Technical Assistance 

The staff provided technical assistance to the Division of Enforcement 

in approximately 40 cases of insider trading, market manipulation, and 

fraudulent financial reporting. This support role has become increasingly 

important in establishing violations based on statistical evidence and 

determining materiality in many cases. The staff uses financial theory and 

event analysis to provide the empirical support key to numerous enforcement 

cases. In such instances, the staff advises the Division of Enforcement 

regarding materiality and/or the amount of disgorgement that should be 

sought. The staff assisted the U.S. Attorney's Office in the successful 

prosecution of a bribery case involving an investment manager. 

In recent years, public and shareholder concern over senior executive 

and director compensation has intensified. Thus, the matter has become 

a policy issue with significant economic implications. Consequently, the 

staff studied the function of options in corporate compensation and helped 

to develop the Commission rules that require disclosure of the value of 

executive options. Following the adoption of the rule, the staff applied 

options pricing models to the valuation of executive stock options to monitor 

compliance with the Commission's disclosure rules. 

The staff provided advice, technical assistance, and analyses in 

connection with the Market 2000 study. Specifically, the staff examined 

the economic effects of market fragmentation and analyzed the effects of 

payment for order flow on retail customers. The staff also studied the effect 
of active Small Order Execution System (SOES) trading on NASDAQ bidask spreads and prepared an analysis of the empirical evidence submitted 

by experts on the impact of the SOES on spreads, volatility, and liquidity. 

The staff continued to monitor the securities industry and developments 

in the domestic and international securities markets. The staff produced 

quarterly reports on the financial health of the securities industry, reported 

on trends in the composition of bank asset portfolios, analyzed trends in 

the capital and profitability of New York Stock Exchange specialists, and 

reported on the financial condition of penny stock dealers. The staff also 

prepared capital market briefing reports that assessed economic, 

institutional, and regulatory developments outside the United States, and 

provided technical support to the SEC's international regulatory program. 

In addition, the staff provided advice on the effects of market value 

accounting on banks, monitored developments in the markets for hybrid 

products and derivative securities, analyzed data from the 1993 penny stock 

examination sweep, and used economic models to value derivative securities 

for purposes of determining regulatory jurisdiction of certain equity-linked 

securities. The staff also analyzed 90 rule proposals to assess their potential 

effects on small entities, as required by the Regulatory Flexibility Act of 

1980. 

The staff coordinated the third annual SEC International Institute for 

Securities Market Development (Institute) conference, which provided 

training and technical assistance on the formation and operation of securities 

markets and related regulatory systems. The Institute, held April 26 to 

May 7, 1993, was attended by 94 senior level capital market officials from 

47 countries with new and emerging securities markets. After the twoweek Institute program, 61 of the attendees participated in internships with 

various securities organizations, including self-regulatory organizations, 

securities firms, and clearing organizations. 
Policy Management and Administrative Support

Policy management and administrative support provide the Commission

and operating divisions with the necessary services toaccomplish the agency's

mission. Policy management is provided by the executive staff, including the

Office of Legislative Affairs; the Office of the Secretary; the Office of Public

Affairs, Policy Evaluation and Research; the Office of the Executive Director;

and the Office of Equal Employment Opportunity. The responsibilities

and activities of policy management include developing and executing

management policies, formulating and communicating program policy,

overseeing the allocation and expenditure of agency funds, maintaining

liaison with the Congress, disseminating information to the press, and

facilitating Commission meetings.

Administrative support includes services such as accounting, financial

management, fee collection, information technology management, data

processing, space and facilities management, human resources management,

and consumer affairs. Under the direction of the Office of the Executive

Director, these support services areprovided by the Offices of the Comptroller;

Information Technology; Administrative and Personnel Management; and

Filings, Information and Consumer Services.

Key 1993 Results

The Commission held 61 meetings and considered 322 matters. Major

activities of the Commission included adoption of comprehensive revisions

of the Commission's shareholder communications rules, adoption of

regulations on disclosure of executive compensation, and adoption of rules

improving mutual fund disclosure of performance and changes in the

portfolio's manager.

The agency collected fees for the United States Treasury in excess

of its appropriation for the eleventh consecutive year. The SEC's total

fee collections in 1993 were $517 million and the net gain to the Treasury

was $248 million.

Policy Management

Commission Activities. The Commission held 61 meetings in 1993,

during which it considered 322 matters, including the proposal and adoption

of Commission rules, enforcement actions, and other items that affect the

stability of the nation's capital markets and the economy. Significant

regulatory actions taken by the Commission included:

adopting comprehensive amendments to shareholder communications (proxy) rules;

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adopting revisions to Commission Rule 144A providing a safe

harbor exemption from registration requirements under the

Securities Act of 1933 (Securities Act) for resales of restricted

securities to qualified institutional buyers;

adopting amendments to rules governing disclosure of compensation

for corporate executive officers and directors;

adopting amendments to improve disclosure of open-end

management companies' performance and portfolio managers;

adopting a rule enabling closed-end management companies to

repurchase shares at periodic intervals at net asset value; and

adopting amendments to the Commission's net capital rule for

broker-dealers.

Congressional interest in the agency's activities and initiatives

remained high. The Commission and staff members testified at 12

congressional hearings during the year. In addition, the Congress actively

considered a number of important issues under the Commission's

jurisdiction. These were most notably:

proposed amendments to the Investment Advisers Act of 1940,

including fee provisions to fund more frequent Commission

inspections of investment advisers;

possible reforms in the government securities and municipal

securities markets;

limited partnership "roll-ups" and their impact on limited partner

investors;

securities litigation reform;

reforms relating to accountants' responsibilities;

legislation to facilitate improved access to capital for small

businesses, including the Small Business Investment Incentive Act

that was originally proposed by the SEC;

the state of the investment company industry and the adequacy

of the SEC's inspection program for investment companies;

proposals to curtail frivolous securities litigation; and

the SEC's budget authorization and appropriation.

Public Affairs. The Office of Public Affairs, Policy Evaluation and

Research (OPAPER) communicated information on agency activities to

those interested in or affected by Commission actions, including the press,

regulated entities, the general public, and employees of the agency.

The OPAPER staff published daily the SEC News Digest, which provided

information on rule changes, enforcement actions against mdividuals or

corporate entities, registration statements, acquisition filings, interim

reports, releases, decisions on requests for exemptions, Commission

meetings, upcoming testimony by Commission members and staff, lists

of Section 16 letters, and other events of interest. Information on

Commission activities also was disseminated through notices of

administrative actions, litigation releases, and other materials.

Many of the agency's actions are of national and international interest.

When appropriate, these actions are brought to the attention of regional,

national, and international press. A total of 52 news releases on upcoming

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events, agency programs, and special projects were issued. Additionally,

congressional testimony, speeches, opening statements and fact sheets

presented by Commissioners and senior staff were maintained on file and

disseminated in response to requests from the public and the press. The

staff responded to over 62,000 requests for specific information on the

agency or its activities.

The staff provided support for activities related to the International

Organization of Securities Commissions, the SEC's International Institute

for Securities Markets Development, and meetings of the Market

Transactions Advisory Committee. In addition, programs for 586 foreign

visitors were coordinated during the year.

Management Activities. The Office of the Executive Director coordinated

special projects, such as the restructuring of the regional offices, and

initiated an assessment of the agency's operational efficiency. The staff

also coordinated the agency's compliance with and response to actions

under the National Performance Review and the Government Performance

and Results Act of 1993. Working closely with other senior officials, the

staff formulated the agency's budget submissions to the Office of

Management and Budget and the Congress, and prepared and submitted

the agency authorization request for fiscal years 1994 and 1995 to Congress.

Equal Employment Opportunity. The Office of Equal Employment

Opportunity (EEO) provided the agency with support for compliance with

Title VII of the Civil Rights Actof 1964, as amended; the Age Discrimination

in Employment Act of 1967; the Rehabilitation Act of 1973; and Equal Pay

Act of 1963. This support was provided through the EEO Office's compliance

and affirmative employment programs.

The primary services provided by the compliance program included

counseling and alternative dispute resolution, investigating complaints of

employment discrimination, and issuing final agency decisions based on

the investigations. The affirmative employment program developed

databases and monitored statistics for mandatory reports to the Equal

Employment Opportunity Commission and for self-evaluation of the

Commission's success in attracting, retaining, and promoting a diverse

work force. Significant accomplishments included:

improving the EEO counseling process by providing training in

alternative dispute resolution to EEO counselors;

improving the quality of investigations of EEO complaints due to

the use of in-house attorney /investigators for 89% of the complaints

investigated;

training Senior Executive Service employees in new procedures for

resolving disputes and processing complaints under the EEO system;

completing an agency-wide mandatory training program designed

to prevent sexual harassment;

implementing better procedures for informing all new SEC

employees of their rights under federal civil rights statutes;

providing in-house EEO training to new supervisors; and

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expanding the EEO special emphasis programs to include a Disability

Issues Advisory Committee sponsored in cooperation with the

Office of Administrative and Personnel Management.

Freedom of Information Act and Privacy Act. The Office of Freedom

of Information Act (FOIA) and Privacy Act Operations responded to

requests for access to information pursuant to FOIA, the Privacy Act, and

the Government in the Sunshine Act, and processed requests under the

agency's confidential treatment rules. Confidential treatment requests

were generally made in connection with proprietary corporate information

and evaluated in conjunction with access requests to prevent the

unwarranted disclosure of information exempt under the FOIA.

The agency received 1,893 FOIA requests and appeals, 21 Privacy Act

requests, 35 Government in the Sunshine Act requests, 9 government

referrals, and 4,391 requests and appeals for confidential treatment. All

FOIA/Privacy Act requests were responded to within the statutory time

frame.

Administrative support

Financial Management and Operations. For the eleventh straight year,

the SEC collected fees in excess of its appropriation. The SEC's total fee

collections in 1993 were $517 million, 204 percent of the agency's

appropriated spending authority of $253 million (which consisted of $127

million in appropriated funds, $96 million in current year offsetting fee

collections, and $30 million from a carry-over of prior year offsetting fee

collections). The $517 million in total fee collections, minus the SEC's

current year spending authority of $223 million ($253 million less the $30

million from prior year offsetting fee collections) and $46 million in

additional offsetting fee collections, resulted in a net gain of $248 million

to the United States Treasury.

The SEC's total fee revenue in 1993 was collected from four basic

sources: registrations of securities under Section 6(b) of the Securities Act

of 1933 (comprising 83 percent of total fee collections); transactions of

covered exchange listed securities (IS percent); tender offer and merger

filings (I percent); and miscellaneous filings (I percent). Offsetting fee

collections were generated from an increase in the fee rate under Section

6(b) of the Securities Act from one-fiftieth of one percent to one-thirtysecond of one percent.

The most significant financial management accomplishment was an

upgrade of the agency's mainframe accounting system, the Federal Financial

System. This upgrade greatly expanded the system's security functions

and facilitated the decentralized input and on-line review of data allowing

direct input of employee travel orders and vendor obligations. Staff also

continued work on the design of various new and improved financial

management systems affecting agency-wide time and attendance, payroll,

filing fee, and inventory processes.

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In other financial areas, the staff developed a frequent flyer program 

and a salary offset policy. Due to the mandatory use of direct deposit, 

the number of paper salary checks was reduced to less than one percent 

of the SEC's total employee population. In addition, a pilot credit card 

4 system was developed for the agency's library and small procurement 

acquisitions to facilitate the prompt delivery of materials and reduce the 

number of purchase orders written and vouchers processed. 

Information Resources Management. The Office of Information 

Technology (OIT) made progress in the development and enhancement of 

SEC information resources. Notably, Electronic Data Gathering Analysis 

and Retrieval (EDGAR) software development continued on schedule, and 

a system upgrade resulted in additional functionality and improved 

performance. In October 1992, a memorandum of understanding with the 

EDGAR contractor was executed which transferred responsibilities for 

management, operation, and implementation of the EDGAR local area 

network to the Commission's automation staff. This initiative will save 

an estimated one million dollars over the life of the contract, as well as 

facilitate the Commission's efforts to fully integrate data communications 

services. 

Special emphasis was placed on restructuring within OIT to better 

recognize and respond to users' needs. An End User Advisory Committee 

was formed, consisting of senior representatives from each of the program 

divisions. The Committee reviewed the development of the agency's 

strategic automation plan, external data service funding requirements, and 

other automation issues. Also, a quality assurance and system design 

function within OIT was established to ensure that systems developed meet 

the specifications of the system design. 

A disaster recovery plan was developed to provide the agency with 

automation backup capabilities in the event a disaster occurs at either of 

its computer facilities-the main Operations Center in Alexandria or at 

the Headquarters building. An initial backup capability will be in place 

by January 1994. 

Development continued on the Large Trader and the Market Risk 

Assessment systems, as mandated by the Market Reform Act of 1990. Once 

completed the systems will monitor the activity of large traders in the 

markets and enable the SEC to monitor the financial health of broker-dealer 

parent firms and minimize the market risks associated with broker-dealer/ 

affiliate relationships. Phased development of the systems will continue 

through 1996. 

Administrative and Personnel Management. In July 1993, the Office of 

Administrative and Management Support and the Office of Human 

Resources Management were consolidated into the new Office of 

Administrative and Personnel Management (OAPM). OAPM provided a 

wide range of office support services and personnel functions, including 

space acquisition, lease administration, procurement and contracting, 

facilities management, printing, mail services, desktop publishing, property 

management, recruitment and staffing, employee compensation and 
benefits, training, performance management, labor relations, counseling,

disciplinary actions, personnel security and suitability, and maintenance

of official employee records.

The agency executed a IS-year lease for the headquarters building

in July 1993. The new lease included renovations of the entire building.

However, on November 22, 1993, the landlord of the building notified the

Commission that it was exercising the termination clause in the new

IS-year lease as a result of the unavailability of non-recourse financing

and various other reasons. The Commission reverted to the five-year

option on its original lease.

An annex building in Virginia was acquired under a IS-year lease

and houses the Office of Filings, Information, and Consumer Services

(OFICS). Additional space and improved working conditions were obtained

for the district offices in Boston and San Francisco. The agency administered

16 leases for an approximate total of 800,000 square feet of office and

related space.

The agency awarded contracts and purchase orders in excess of $36

million during 1993. Printing production increased from 67 million units

to 71 million units, incoming mail increased by 10 percent, and outgoing

mail increased by 15 percent.

The staff recommended specific strategies for increasing workforce

diversity, and continued to monitor turnover rates to assist in formulating

hiring strategies to avoid personnel shortfalls. The SEC's recruitment

program continued to emphasize active participation in job fairs, oncampus recruitment interviews at law schools, and the use of various

available hiring programs and authorities.

Twelve new or revised policies were published in the Personnel

Operating Policies and Procedures Manual to provide managers and employees

with updated human resources program guidance. Policies were developed

on: the use of experts and consultants; special hiring authorities for

veterans and persons with disabilities, including veterans and disabled

veterans; position classification; appeals of classification decisions; approval

of pre-appointment interview expenses; and implementation of Office of

Personnel Management regulations under the Federal Employee Pay

Comparability Act of 1990.

During the year, employees attended a total of 5,772 training courses

which included half-day sessions for 2,651 employees in an agency-wide

mandatory training course in preventing sexual harassment. Fourteen SEC

training programs were granted approval for awarding Continuing

Professional Education Credits by the National Association of the State

Boards of Accountancy.

Consumer Affairs. OFICS was responsible for:

responding to 34,713 investor complaints and inquiries;

screening information received for referrals to SEC operating

divisions, self-regulatory agencies, states, or other federal agencies;

preparing educational materials to assist investors in protecting

their interests; and

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developing and implementing the agency's consumer protection

program.

Of the 34,713 contacts by letter, telephone call, or walk-in visit, 16,550

were complaints and 18,163 were inquiries. Approximately 42 percent of

the complaints involved broker-dealers, while the remainder involved

issuers, mutual funds, banks, transfer agents, clearing agents, and

investment advisers. The two most frequent complaints against brokerdealers involved allegations of unauthorized transactions executed in

customer accounts and recommendations by the broker-dealers of unsuitable

investments. Over 1,300 complaints were referred to SEC operating

divisions, self-regulatory agencies, or other regulatory entities for review

and / or action.

Public Reference. OFICS also was responsible for making available

to the public all company filings and Commission rules, orders, studies,

and reports. These documents (dating from 1933 through the present) were

available in the public reference room and could be obtained by writing

the agency or contacting the agency's dissemination contractor.

The public reference staff provided assistance to 44,820 visitors to

the headquarters reference room, responded to 5,296 written requests for

documents, 444 formal requests for certifications of filings and records,

and 121,370 telephone inquiries. A total of 25,374 electronic filings received

via EDGAR were available for requestors. In addition, the agency added

a total of 380,445 paper documents and 458,154 microfiche records to its

existing library of publicly available information.

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'In the Matter of John H. Gutfreund, Exchange Act Release No. 31554 

(Dec. 3, 1992), 52 SEC Docket 4370. 

2SEC v. Paul W. Mazer, Litigation Release No. 13453 (Dec. 2, 1992)) 

52 SEC Docket 4530. 

31n the Matter of Daiwa Securities, lnc., Exchange Act Release No. 31924 

(Feb. 25, 1993), 53 SEC Docket 1693. 

41n the Matter of Donaldson, Lufkin 6 Ienrette Securities Corp., Exchange 

Act Release No. 32827 (Sept. 2, 1993), 54 SEC Docket 2402. 

51n the Matter of Carroll McEntee 6 McGinley Securities, Exchange Act 

Release No. 32828 (Sept. 2, 1993), 54 SEC Docket 2407. 

5EC v. Daniel 0. Teyibo, Litigation Release No. 13530 (Feb. 24, 19931, 

53 SEC Docket 1790. 

7SEC v. Bruce Dickson, Litigation Release No. 13570 (Mar. 18, 19931, 

53 SEC Docket 2617. 

*1n the Matter of Paul K. Clarkin, Exchange Act Release No. 32672 (July 

26, 1993), 54 SEC Docket 1740. 

91n the Matter of Douglas R. Gulling, Exchange Act Release No. 32673 

(July 26, 1993), 54 SEC Docket 1745. 

1°SEC v. Joseph Zilber, Litigation Release No. 13586 (Apr. 1, 19931, 53 

SEC Docket 3550. 

llSEC v. C. Robert Dudgeon, Litigation Release No. 13556 (Mar. 10, 

19931, 53 SEC Docket 2526. 

12SEC v. Purnendu Chatterjee, Litigation Release No. 13491 (Jan. 13, 

1993), 53 SEC Docket 945. 

13SEC v. Jonathan J. Sheinberg, Litigation Release No. 13465 (Dec. 10, 

1992), 52 SEC Docket 4708. 

I4SEC v. Lee A. Haddad, Litigation Release No. 13473 (Dec. 17, 1992), 

53 SEC Docket 221. 

15SEC v. Dean Ambrose Olds, Litigation Release No. 13595 (Apr. 8, 

1993), 53 SEC Docket 3702. 

I6SEC v. C. Stephen Bolen, Litigation Release No. 13684 (June 28, 1993), 

54 SEC Docket 1322. 

I7SEC v. The Software Toolworks, Inc., Litigation Release No. 13813 

(Sept. 30, 1993)) 55 SEC Docket 411. 

"SEC v. Larry E. Leslie, Litigation Release No. 13651 (May 26, 1993), 

54 SEC Docket 540. 

I9SEC v. Harold Sahlen, Litigation Release No. 13480 (Dec. 21, 1992)) 

53 SEC Docket 544. 

'OSEC v. Gordon K. Goldman, C.P.A., Litigation Release No. 13501 (Jan. 

28, 1993), 53 SEC Docket 1227. 

"SEC v. Towers Financial Corp., Litigation Release No. 13514 (Feb. 8, 

1993), 53 SEC Docket 1481. 
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22SEC v. Premium Sales Corp., Litigation Release No. 13668 (June 9,

1993), 54 SEC Docket 860.

23SEC v. International Quarter Phones, Litigation Release No. 13661

(June 3, 1993), 54 SEC Docket 735.

uSEC v. Sam S. Brown, Litigation Release No. 13413 (Oct. 22, 1992),

52 SEC Docket 3228.

25SEC v. Bosque Puerto Carrillo, Litigation Release No. 13600 (Apr. 12,

1993), 53 SEC Docket 3885.

26SECv. Ramon D'Onofrio, Litigation Release No. 13627 (May 6,1993),

54 SEC Docket 97.

27Inthe Matter of Bruce B.Bowen, Exchange Act Release No. 31938 (Mar.

2, 1993), 53 SEC Docket 2213.

28Inthe Matter of Harry S. Pack, Exchange Act Release No. 32374 (May

27, 1993), 54 SEC Docket 486.

29SECv. The Cooper Companies, Litigation Release No. 13432 (Nov. 10,

1992), 52 SEC Docket 3750.

30In the Matter of Kelso & Company, Inc., Exchange Release No. 31639

(Dec. 23, 1992), 53 SEC Docket 314.

31In the Matter of William A. Wilson, Exchange Act Release No. 32392

(June I, 1993), 54 SEC Docket 656.

32SEC v. Purr'slbishop's Inc., Litigation Release No. 13461 (Dec. 7,

1992), 52 SEC Docket 4704.

33In the Matter of Leslie T. Livingston, Exchange Act Release No. 31785

(Jan. 28, 1993), 53 SEC Docket 1070.

34In the Matter of Bettina Bancroft, Exchange Act Release No. 32033

(Mar. 23, 1993), 53 SEC Docket 2886.

35Inthe Matter of Harry E. Hagerty, [r., Exchange Act Release No. 32657

(July 19, 1993), 54 SEC Docket 1623.

36SEC v. Harry E. Hagerty, [r., Litigation Release No. 13714 (July 19,

1993), 54 SEC Docket 1701.

37SEC v. Prudential Securities Inc., Litigation Release No. 13840 (Oct.

21, 1993), 55 SEC Docket 830.

38In the Matter of Paine Webber Inc., Exchange Act Release No. 31889

(Feb. 18, 1993), 53 SEC Docket 1526.

39In the Matter of Frederick H. Joseph, Exchange Act Release No. 32340

(May 20, 1993), 54 SEC Docket 282.

4°In the Matter of Edwin Kantor, Exchange Act Release No. 32341 (May

20, 1993), 54 SEC Docket 293.

41In the Matter of The Nikko Securities Co. International, Inc., Exchange

Act Release No. 32331 (May 19, 1993), 53 SEC Docket 264.

42SEC v. Leslie Mersky, Litigation Release No. 13812 (Sept. 30, 1993),

55 SEC Docket 409.

43SEC v. Midwest Investments, Litigation Release No. 13605 (Apr. 15,

1993), 53 SEC Docket 3889.

«SEC v. Midwest Clearing Corp., Litigation Release No. 13427 (Nov.

6, 1992), 52 SEC Docket 3746.

45In the Matter of Kemper Financial Services, Inc., Investment Advisers

Act Release No. 1387 (Oct. 20, 1993), 55 SEC Docket 783.

85
461n theMatterof USAA Investment Management Co., Investment Advisers 

Act Release No. 1359 (Jan. 22, 19931, 53 SEC Docket 1085. 

471n the Matter of Aetna Capital Management, Inc., Investment Advisers 

Act Release No. 1379 (Aug. 19, 1993), 54 SEC Docket 2209. 

48SEC v. Corporate Capital Resources, Inc., Litigation Release 13460 (Dec. 

7, 1992), 52 SEC Docket 4704. 

491n the Matter of The Bank of California, N.A., Investment Company 

Act Release No. 19545 (June 28, 1993), 54 SEC Docket 1300. 

501n the Matter of Merrill Lynch, Pierce, Fenner 6 Smith, Investment 

Company Act Release No. 19425 (Apr. 22, 19931, 53 SEC Docket 4031. 

51The Division of Market Regulation, Securities and Exchange Commission, Staff 

Rqwrt on the Municipal Securities Market, (Sept. 1993). 

52Securities Act Release Nos. 33-7022,34-33023, and IC-19768 (Oct. 6,1993), 58 FR 

52891 (Oct. 13,1993). 

"Exchange Act Release No. 32256 (May 4,1993), 58 FR 27486 (May 10,1993). 

5417 C.F.R. 240.154-1. 

55E~~hange Act Release No. 32609 (July 9,1993), 58 FR 38092 (July 9,1993). 

56Letter to Mr. Michael D. Udoff, Chairman, Ad Hoc Record Retention Committee, 

Securities Industry Association, Inc. from Michael A. Macchiaroli, Associate Director, 

Division of Market Regulation, dated June 18,1993. 

qxchange Act Release No. 30929 (July 16,1992), 57 FR 32159 (July 21,1992). 

58Exchange Act Release Nos. 27445 and 29185 (Nov. 16,1989 and May 9,1991). 

59Exchange Act Release No. 31511 (Nov. 24,1992), 57 FR 56973 (Dec. 2,1992). 

bOExchange Act Release No. 31512 (Nov. 24,1992), 57 FR 57027 (Dec. 2,1992). 

61Exchange Act Release No. 32117 (Apr. 8,1993), 58 FR 19598 (Apr. 15,1993). 

62Letter regarding Distributions of Certain German Securities, Exchange Act 

Release No. 33022 (Oct. 6,1993), 58 FR 53220 (Oct. 14,1993). 

QLetter regarding Distributions of Certain SEAQ and SEAQ International 

Securities, dated July 12,1993. 

64Letteregarding British Airways PLC, dated May 19,1993 and Letter regarding 

Saatchi & Saatchi Company PLC, dated May 19,1993. 

65Exchange Act Release No. 33137 (Nov. 3,1993), 58 FR 60324 (Nov. 15,1993). 

&Exchange Act Release No. 32576 (July 2,1993), 58 FR 37413 (July 12, 1993). 

67 ~d. 

68Exchange Act Release No. 32261 (May 4,1993), 58 FR 27656 (May 11,1993). 

6917 C.F.R. $j 240.17f-1 (1992). 

70Exchange Act Release No. 31343 (Oct. 21,1992), 57 FR 48645 (Oct. 27,1992). 

;lExchange Act Release No. 31358, International Series Release No. 479 (Oct. 26, 

1992), 57 FR 49736 (Nov. 3,1992). 

RExchange Act Release Nos. 32362 (May 25,1993), 58 FR 31565 (June 3,1993) 

(NYSE);32363 Way 25,1993),58 FR31558 (June3,1993) (AMEX);32365 (May25,1993), 

58 FR 31560 (June 3,1993) (BSE); 32368 (May 25,1993) 58 FR 31563 (June 3,1993) (CHX); 

32367 (May 25,1993),58 FR 31570 (June 3,1993) (PSE), and 32364 (May 25,1993), 58 FR 

31574 (June 3,1993) (PHWO. 

73Exchange Act Release No. 32019 (Mar. 19,1993), 58 FR 16428 (Mar. 26,1993). 

74Exchange Act Release No. 32517 (June 25,1993), 58 FR 35995 (July 2,1993). 
75Exchange Act Release No. 32647 (July 16,1993), 58 FR 32962 (July 22,1993). 

Currently, transactions effected by NASD members in equity securities are not 

required to be reported on a real-time basis if those securities are not included in ' NASDAQ or traded on a national securities exchange. 1 76Exchange Ad Release No. 32568 (July 1,1993), 58 FR 36723 (July 8,1993). The 

NASD toll-free telephone listing service plan previously reported past and present 

employment history of NASD members, all final disciplinq actions taken by federal, 

f I state or SROs which relate to securities or commodities transactions and all criminal 

convictions reported on Form BD or Form U-4. 1 

1' =General Accounting Office, Securities Arbitration: Huw Investors Fare, GGD-92-74 

i (May 1992). 

78Letter from Deborah Masucci, Vice-President, Arbitration, NASD, to William 

f H. Heyman, Director, Division of Market Regulation, SEC, dated November 4,1992. 

1 79Exchange Act Release No. 31763 (Jan. 26,1993), 58 FR 6829 (Feb. 2, 1993). 

BOExchange Act Release No. 32740 (Aug. 12,1993), 58 FR 43968 (Aug. 18,1993). 

"Exchange Act Release No. 32802 (Aug. 25,1993), 58 FR 45932 (Aug. 31,1993). 

BZExchange Ad Release Nos. 32702 (July 30,1993), 58 FR 42588 (Aug. 10,1993) 

i (Pacific Stock Exchange); 32780 (Aug. 20,1993), 58 FR 45365 (Aug. 27,1993) (MSRB); 

; and 32864 (Sept. 10,1993), 58 FR 48680 (Sept. 17,1993) (AMEX). 

83Exchange Act Release No. 31733 (Jan. 14,1993), 58 FR 6034 (Jan. 25,1993). 

84Exchange Ad Release No. 31591 (Dec. 11,1992), 57 FR 60253 (Dec. 18,1993). 

SPDRsare securities issued by a uni tinvestment trust holding the securities comprising 

the S&P 500 Index. 

=Exchange Act Release Nos. 31920 (Feb. 24,1993), 58 FR 12280 (Mar. 3,1993); 

32694 (July 29,1993), 58 FR41814 (Aug. 5,1993) (CBOE); and 32781 (Aug. 20,1993), 

58 FR 45360 (Aug. 27,1993) (AMEX). Currently, the CBOE lists and trades FLEX 

Options based on the S&P 100 and 500 Stock Indexes, and the Russell 2000 Index, 

while the AMEX trades FLEX Options based on the Major Market Index (XMI), the 

Institutional Index (XII), and S&P MidCap Index (MID). 

86Exchange Act Release Nos. 31844 (Feb. 9,1993), 58 FR 8796 (Feb. 17,1993) 

(AMEX); 31800 (Feb. 1,1993), 58 FR 7274 (Feb. 5,1993), and 32693 (July 29,19931, 

58 FR 41817 (Aug. 5,1993) (CBOE); and 32793 (Aug. 24,1993), 58 FR 46260 (Sept. 

1,1993) (NYSE). The AMEX trades QKs on the XMI, XII, and MID Indexes; the 

CBOE trades QIXs on the S&P 100, S&P 500, and Russell 2000 Indexes; and theNYSE 

trades QIXs on the New York Composite Index. 

qxchange Ad Release No. 32343 (May 20,1993), 58 FR 30833 (May 27,1993). 

88Exchange Act Release No. 32950 (Sept. 23,1993), 58 FR 50985 (Sept. 29,1993). 

ELNs trade on the AMEX and DECS trade on the NYSE. 

ssExchange Act Release No. 32840 (Sept. 2,1993), 58 FR 47485 (Sept. 9,1993). At 

maturity, a holder of a MCIT is entitled to receive from the issuer 90% of the principal 

amount plus an amount based upon an increase in the market value of the Global 

Telecommunications portfolio. 

%Exchange Act Release Nos. 31528 (Nov. 28,1992), 57 F'R 57256 (Dec. 3,1992) 

(NYSE);31529 (Nov. 28,1992),57FR57248 (Dec.3,1992) (AMEX);31530(Nov. 28,1992), 

57 FR 57262 (Dec. 3,1992) (PSE); 31531 (Nov. 28,1992), 57 FR 57250 (Dec. 3,1992) 

(CBOE); and 31532 (Nov. 28,1992), 57 FR 57264 (Dec. 3,1992) (PHWO. 

'?'Letter from Jonathan G. Katz, Secretary, SEC, to Jean A. Webb, Secretary, CFTC, 

dated January 4,1993. 
Yxtter from William H. Heyman, Director, Division of Market Regulation, SEC, 

to Stephen A. Sherrod, Chief, Financial Instruments Unit, Division of Economic 

Analysis, CFTC, dated January 22,1993 (futures only). Letter from Brandon Becker, 

Director, Division of Market Regulation, SEC, to Stephen A. Sherrod, Financial 

Instruments Unit Chief,CFTC, dated August5,1993 (futuresoptionsonly). Letter from 

Brandon Becker, Acting Director, Division of Market Regulation, SEC, to Stephen A. 

Sherrod, Chief, Financial Instruments Unit, Division of Economic Analysis, CmC, 

dated June 18,1993. 

93Exchange Act Release No. 32385 Uune 3,1993), 58 FR 32405 Uune 9,1993). 

94Exchange Act Release No. 32098 (Apr. 2,1993), 58 FR 18277 (Apr. 8,1993). 

'j5Exchange Act Release No. 31856 (Feb. 11,1993), 58 FR 9005 (Feb. 18,1993). 

%Exchange Act Release No. 31750 (Jan. 21,1993), 58 FR 6424 (Jan. 28,1993). 

?Exchange Act Release No. 32040 (Mar. 23,1993), 58 FR 16902 (Mar. 31,1993). 

%Exchange Act Release No. 32759 (Aug. 17,1993), 58 FR 44865 (Aug. 25,1993). 

wExchange Act Release No. 32747 (Aug. 13,1993), 58 FR 44530 (Aug. 23,1993). 

'ooExchange Act Release No. 32780 (Aug. 20,1993), 58 FR 45365 (Aug. 27,1993). 

'OIDivision of Investment Management, SEC, Pratecting Imestors: A Half Centu y 

of Investment Company Regulation (May 1992). 

'02Securities Act Release No. 701 3 (Sept 17,1993),54 SEC Docket0004; Investment 

Company Act Release No. 19719 (Sept. 17,1993), 54 SEC Docket 0004. 

'031nvestrnent Company Act Release No. 19716 (Sept. 16,1993), 54 SEC Docket 

2190; International Series Release No. 582 (Sept. 16,1993), 54 SEC Docket 2190. 

104Securities Act Release No. 6990 (Apr. 7,1993), 53 SEC Docket 3569; Exchange 

Ad Release No. 32116 (Apr. 7,1993), 53 SEC Docket 3569; Investment Company Act 

Release No. 19399 (Apr. 7,1993), 53 SEC Docket 3569. 

'05Securities Act Release No. 6989 (Apr. 7,1993), 53 SEC Docket 3565; Investment 

Company Act Release No. 19391 (Apr. 7,1993), 53 SEC Docket 3565. 

'06Securities Act Release No. 6982 (Mar. 19,1993),53SEC Docket 2847;Investment 

Company Act Release No. 19342 (Mar. 19,1993), 53 SEC Docket 2847. 

'O'Investment Company Act Release No. 19362 (Mar. 26,1993), 53 SEC Docket 

2124. 

'Einvestment Company Act Release No. 19658 (Aug. 25,1993), 54 SEC Docket 

1848. 

'OQInvestment Company Act Release No. 19566 (July 9,1993), 54 SEC Docket 1553. 

"OInvestmentCompanyActReleaseNo. 19382 (Apr.6,1993),53 SEC Docket3555. 

"'Investment Company Act Release No. 19722 (Sept. 21,1993), 55 SEC Docket 

001 3. 

''*Letters to R. Clark Hooper,National Associationof Securities Dealers, Inc. from 

Clifford E. Kirsch, Assistant Director, Office of Insurance Products, Division of 

Investment Management, SEC, dated March 5 and September 23,1993. 

"17 C.F.R. 250.53,25054,250.57. 

"4Holding Company Act Release No. 25886, International Series Release No. 583 

(Sept. 23,1993), 58 FR 51488 (Oct 1,1993). 

"5Holding Company Act Release No. 25887, International Series Release No. 584 

(Sept. 23,1993), 58 FR 51508 (Oct 1,1993). 

"60hio Pawer Co. v. FERC, 954 F.2d 779 (D.C. Cir. 1992), cert. denied, 113 S. Ct. 483 

(1992) (on remand, holding that SEC orders should be read as requiring Ohio Power 

to pay a price "equal to cost" for Southern Ohio coal). 
ll?nvestment Company Act Release Nos. 19274 (Feb. 18,1993),53 SEC Docket 10 

(Notice) and 19334 (Mar. 6,1993), 53 SEC Docket 14 (Order). 

119nvestment Company Act Release Nos. 19594 (July 26,1993), 54 SEC Docket 13 

(Notice) and 19647 (Aug. 23,1993), 54 SEC Docket 17 (Order). 

"gInvestment Company Act Release Nos. 19660 (Aug. 26,1993), 54 SEC Docket 

17 (Notice) and 19730 (Sept. 21,1993), 55 SEC Docket 0166 (Order). 

120Bolsa devalores de Sao Paulo (pub. avail. Oct. 28,1992), Camara de Liquidacao 

ecustodia S/A(pub.avail. Oct. 28,1992),AustraclearLimited (pub. avail. Apr. 6,1993), 

Custody of B Shares Tradingon theshenzhen and Shanghai Securities Exchanges (pub. 

avail. Apr. 26,1993), Jardine Fleming China Region Fund, Inc. (pub.avail. Apr. 26,1993), 

Korean Securities Depository Corporation (pub. avail. May 14, 19931, Malaysian 

Central Depository Sdn. Bhd. (pub. avail. May 19,1993), Reserve Bank of New Zealand 

(pub. avail. May 24,1993), The Stock Exchange of Thailand (pub. avail. Aug. 26,1993), 

and Japan Securities Depository Center (pub. avail. Aug. 31,1993). 

I2'Union Bank of Norway (pub. avail. Nov. 30,1992) and Pictet & Cie (pub. avail. 

Sept. 8,1993). 

'=Alliance Capital Management L.P. (pub. avail. Apr. 7,1993). 

'qe South America Fund N.V. (pub. avail. Sept. 2,1993). 

lz4T. Rowe Price Tax-Free Funds (pub. avail. June 24,1993). 

lZ5United Services Funds (pub. avail. Apr. 17,1993). 

'26DST Systems, Inc., et al. (pub. avail. Feb. 2,1993). 

'Wercury Asset Management (pub. avail. Apr. 16,1993). 

I2The National Mutual Group (pub. avail. Mar. 8,1993). 

129College Retirement Equities Fund, Investment Company Act Release Nos. 18630 

(Mar. 24,1992) (Notice) and 19463 (May 6,1993) (Order). 

lmPruuident Mutual Life Insurance Company af Philadelphia, Investment Company 

Act Release Nos. 19515 (June 4,1993) (Notice) and 19552 (July 1,1993) (Order);Merrill 

Lynch Life Insurance Company, Investment Company Act Release Nos. 19476 (May 17, 

1993) (Notice) and 19521 (June 9, 1993) (Order); The ManuJacturm Life Insurance 

Company $America, et al., Investment Company Ad Release Nos. 18891 (Aug. 11,1992) 

(Notice) and 18942 (Sept. 10,1992) (Order). 

'31American Skandia Life Assurance Corporation, Investment Company Act Release 

Nos. 19787 (Oct. 13,1993) (Notice) and 19850 (Nov. 10,1993) (Order). 

132The Travelers Insurance Company et al. (avail. Sept. 3,1993). 

133Fortis Benefits (avail. June 8,1993); The Travelers T-Mark Annuity (avail. May 13, 

1993). 

134Entergy Corporation, et al., Holding Company Act Release No. 25718 (Dec. 28, 

1992), 53 SEC Docket 620. 

'%e cases have been consolidated for procedural purposes and are jointly 

administered under the caption In re Thz Columbia Gas System, Inc. and Columbia Gas 

Trans. Corp., No. 91-803 (Bankr. D. Del.). 

'36The Columbia Gas System, Inc., et al., Holding Company Act Release No. 25896 

(Sept. 24,1993), 55 SEC Docket 296. 

13'Entergy Cwporarion, et al., Holding Company Act Release No. 25669 (Nov. 6, 

1992), 52 SEC Docket 3721. 

138Nurtheast Utilities, et al., Holding Company Act Release No. 25900 (Sept. 30, 

1993), 55 SEC Docket 347. 
'39American Electric Power Company, Inc., et al., Holding Company Act Release No. 

25871 (Aug. 25,1993), 54 SEC Docket 2347. 

lrnArkansas Power E?' Light Co., Holding Company Act Release No. 25761 (Mar. 16, 

1993), 53 SEC Docket 2568. 

14'Unitil Corporation, et al., Holding Company Act Release No. 25816 (May 24, 

1993), 54 SEC Docket 502. 

'"Eastern Utilities Assockztes, et al., Holding Company Act Release No. 25719 (Dec. 

29,1992), 53 SEC Docket 634. 

'43ESI Energy, Inc., et al., Holding Company Act Release No. 25654, International 

Series Release No. 474 (Oct. 16,1992), 52 SEC Docket 3163. 

'44Securities Act Release No. 6962 (Oct. 16,1992), 52 SEC Docket 2980. 

'45Exchange Act Release No. 32723 (Aug. 6,1993), 54 SEC Docket 1979. 

'46Securities Act Release No. 6964 (Od. 22,1992), 52 SEC Docket 3014. 

147Securities Act Release No. 6997 (Apr. 28,1993), 53 SEC Docket 6775. 

'%Securities Ad Release No. 7004 (June 28,1993), 54 SEC Docket 1121. 

149Securities Act Release No. 7006 (July 2,1993), 54 SEC Docket 1339. 

'50Securities Act Release No. 7002 (June 10,1993) 54 SEC Docket 759. 

15'Exchange Ad Release No. 32574 (July 2,1993), 54 SEC Docket 1341. 

'52Securities Act Release No. 6996 (Apr. 28,1993), 53 SEC Docket 4129. 

153Securities Act Release No. 6977 (Feb. 23,1993),53 SEC Docket 1798. 

ls4Staff Accounting Bulletin No. 92 (June 8,1993), 54 SEC Docket 864. 

'55Statement of Financial Accounting Standards No. 115, "Accounting for Certain 

Lnvestments in Debt and Equity Securities" (May 1993). 

'56Statementof Financial Accounting StandardsNo. 1 14, "Accountingby Creditors 

for Impairment of a Loan" (May 1993). 

'5'Proposed Statement of Financial Accounting Standards, "Accounting for 

Stock-based Compensation" (June 30,1993). 

'58Statement on Auditing Standards No. 72, "Letters for Underwriters and 

Certain Other Requesting Parties" (Feb. 1993). 

159StatementofPosition93-1, "Financial Accountingand Reportingfor High Yield 

Securities by Investment Companies" (Jan. 28, 1993); Statement of Position 93-2, 

"Determination, Disclosure, and Financial Statement Presentation of Income, Capital 

Gain, and Return of Capital by Investment Companies" (Feb. 1,1993); and Statement 

of Position 934, "Foreign Currency Accounting and Financial Statement Presentation 

for Investment Companies" (Apr. 22,1993). 

'@Proposed Statement of Position, "Disclosure of Certain Significant Risks and 

Uncertainties and Financial Flexibility" (Mar. 31,1993). 

1611AS 2 (revised 1993), Inventories; IAS 8 (revised 19931, Net Profit or Loss for the 

Period, Fundamental Errors and Changes in Accounting Policies; IAS 9 (revised 1993), 

Research and Development Costs; IAS 11 (revised 1993), Construction Contracts; IAS 

16 (revised 1993), Property, Plant and Equipment; IAS 18 (revised 1993), Revenue; IAS 

19 (revised 1993), Retirement Benefit Costs; IAS 21 (revised 1993), The Effects of 

Changes in Foreign Exchange Rates; IAS 22 (revised 1993), Business Combinations; and 

IAS 23 (revised 1993), Borrowing Costs. 

16ZRelease No 33-7029 (Nov. 3,1993),55 SEC Docket 979. 

'631SA 31, "Consideration of Laws and Regulations in an Audit of Financial 

Statements" (July 1993). 

164M~sick, Peeler E?' Garrett v. Employers Insurance of Wassau, 113 S. Ct. 2085 (1993). 
1 '&First Interstate Bank of Denver v. Pring, 969 F2d 891 (10th Cir. 19921, petition for 

9 cert. granted sub nom. Central Bank of Denver v. First Interstate Bank of Denver, 11 3 S. Ct. 

3 2927 (1993). 

i 

5 16'SEC v. Rind, 991 F2d 1486 (9th Cir. 1993), cert. denied, 114 S. Ct. 439 (1993). 

f '67Supra note 1. 

$ 168Supra note 2. 

169Lampf, Pleva, Lipkind, Prupis 6. Petigrow v. Gilbertson, 111 S. Ct. 2773 (1991). 

3 170Cooperativa de Ahorro y Credito Aguada v. Kidder, Peabody & Co., 993 F.2d 

3 269 (1st Cir. 1993), pdtion for cert. fled, (U.S. Oct. 12,1993) (No. 93-564); Axel Johnson, 

1 Inc. v. Arthur Andenen 6 Co., 6 F.3d 78,1993 WL 379533 (2nd Cir. Sept. 27,1993); Cooke 

d v. ManufacturedHomes, Inc., 998 F.2d 1256(4th Cir. 1993); Berning v. A.G. Edumrds b Sons, 

Inc., 990F2d272 (7th Cir. 1993); Gray v. First Winfhrop Carp., 989 F2d 1564 (9th Cir. 1993); f Anixter v. Home-Stake Production Co., 977 F2d 1533 (I 0th Cir. 19921, cert. denied sub m. 

3 

t Cross v. Thorner, 1 13 S. Ct. 1842 (1 993); Henderson v. Scientific-Atlanta, Inc., 971 F.2d 1567 

i (11th Cir. 1992), cert. denied, 114 S. Ct. 95 (1993). 

InPacific Mutual Life Insurance Co. v. First Republicbank Corp., 997 F.2d 39 (5th Cir. 

1993), petition far cert. filed, 62 U.S.L.W. 3165 (U.S. Aug. 26,1993) (No. 93-313). 

i lRPlaut v. Spendthrift Fann, Inc., 1 F.3d 1487 (6th Cir. 1993). 

lnJohnston v. Cigm Corp., Slip op., No. 92-1186 (10th Cir. Dec. 7,1993). 

174S~a note 8. 

l73EC v. Rind, 991 F2d 1486 (9th Cir. 1993), cert. denied, 114 S. Ct. 439 (1993). 

176ACTWU v. SEC, No. 93-4120 (2nd Cir. Jan. 13,1994). 

lnNYCERS v. SEC, 93 Civ. 1233 (S.D.N.Y., Oct 15,1993), appeal pending, No. 93- 

6314 (2nd Cir.). 

17%EC v. Hujjinan, 996 F.2d 800 (5th Cir. 1993). 

179SEC v.AMX International, Inc., No. 92-1376 (5th Cir.). 

'8028 U.S.C. 3001 et seq. 

18'United States v. Teicher, 987 F.2d 112 (2nd Cir. 19931, cert. denied, 114 S. Ct. 467 

(1 993). 

182United States v. Libera, 989 F.2d 596 (2nd Cir. 1993), cert. denied sub nom., Sablone 

v. United States, 114 S. Ct. 467 (1993). 

lS3F.B. Homer b Associates, Inc. v. SEC, 994 F.2d 61 (2nd Cir. 1993). 

lB4Timpinaro v. SEC, 2 F.3d 453 (D.C. Cir. 1993). 

185Freemon v. SEC, No. C-93-866SAW (D.D.C.); Denardo v. SEC, Civ. No. 93-1757 

(RCL); Weingueter Barn K.S. von Stmuss Erben Trust v. SEC, No. 93-1925 (D.D.C.) 

lE6Alexander & Alexander Seruices, Inc. v. SEC, No. 92-1112 (D.D.C. October 19, 

1993). 

la7SEC v. Van Waegenberghe, No. 92-1080 (5th Cir. May 17,1993). 

lssCreative Investment Services, Inc. v. SEC, No. 93-C-83 (D. Colo.); In the Matter of 

PublicFunding,No.93-336Civ. Atkins (S.D.Fla.1 (presently on appeal tothe 11 th Circuit 

No. 934781);In theMafferof Public Funding, No. 93-337Civ. Davis (S.D. Ha.) (presently 

on appeal to the 11 th Circuit No. 93-4782); SEC v. Jamison, No. 9340639HMF (D. Haw.). 

lB9Mo1er v. SEC, No. 93-21094 (D. Colo.). 

'POAlvarez v. SEC, No. C93-29 VRW Misc. (N.D. Cal.); Whitney v. SEC, No. C93-28 

VRW Misc. (N.D. Cal.). 

lnIn re Checkosky and Aldrich, Exchange Act Release No. 31094 (Aug. 26,1992), 52 

SEC Docket 1389, appeal pending, No. 92-5158 (D.C. Cir.). 
1921n re Robert J. lommazzo, Exchange Act Release No. 31 726 (Jan. 12,1993), 53 SEC 

Docket 870. 

'931n re Gregwy Melson, Exchange Act Release No. 32917 (Sept. 17,1993), 55 SEC 

Docket 38. 

1941n reMartin G. Brm, Exchange Act Release No. 32854 (Sept. 16,1993),54 SEC 

Docket 2542. 

1q51nvestment Planninglnc., Exchange Act ReleaseNo. 32687(July28,1993),54 SEC 

Docket 1770. 

19~1d. 

'97First Hunol~l~ Securities, Inc. and Charles Jacobson, Exchange Act Release No. 

32933 (Sept. 21,1993), 55 SEC Docket 73. 

198Bison Securities, Inc., Exchange Act Release No. 32034 (Mar. 23,1993), 53 SEC 

Docket 2892. 

lWPatten Securities Corpomtiim and John L. Patten, Exchange Act ReleaseNo. 32619 

(July 12,1993), 54 SEC Docket 1472. 

2WAllan Mace Leavitt, Exchange Act Release No. 32441 (June 10,1993),54 SEC 

Docket 813. 

"'Datek Securities Corp., Exchange Act Release No. 32560 (June 30,1993), 54 SEC 

Docket 1 1 196. 

2021n re Leslie Fay Companies, Inc., Case No. 93441724 TLB (Bankr. S.D.N.Y.) and 

In re Wang Laboratwies, Inc., Case No 92-18525 (WCH) (Bankr. D. Mass.). 

2031n re American West Airlines, Inc., Case No. 91-07505-PHX-RGM (Bankr. D. 

Ariz.). 

m41n re National Convenience Stores, Inc., Case No. 91-49816H2-11 (Bankr. S.D. 

Tex.). 

2051n re MCorp Financial, Inc., Case Nos. 8942312-H3-11,8942324-H5-11 and 89- 

02848-H2-11 (Bankr. N.D. Tex.). 

2061n reMastw Mortgagelnvestment Fund, Inc., CaseNo. 9241306-211 (Bankr. W.D. 

Mo.). 

m7See, e.g., In re Prime Motor Inn, In re Seroico Corp., In re The Washington Corp. and 

In re Lomas Financial Corp., 58th Annual report at 77 (1992) (objection to confirmation 

of reorganization plan); In re Amdura Corp. and In re Banyan Corp., 57th Annual Report 

at 82 (1991) (objection to confirmation of reorganizationp1an);In re SouthmarkCorp. and 

In re SIS Corp.,56th Annual Reportat 91 (1990) (objection toconfirmation of reorgdtion 

plan); In re Custom Laboratories, Inc., 53rd Annual Report at 74 (1987) (objection to 

disclosure statement); In re Emgy Exchange Corp. and Vulcan Energy Corp. and In re 

Storage Technology Corp., 53rd Annual Report at 7475 (1987) (objection to confirmation 

of reorganization plan). 

2081n re Bblasty, Inc., Case No. 4-93-02600 (Bankr. D. Minn.) and In re The 

Centennial Gruup, Inc., Case No SA 9-41813 JW (Bankr. C.D. Cal.). 

2"91d. 

Table 1 

ENFORCEMENT CASES INITIATED BY THE COMMISSION 

DURING FISCAL YEAR 1993 IN VARIOUS PROGRAM AREAS 

(Each case initiated has been included in only one category l~sted below, even though 

many cases involve multrple allegations and may fall under more than one category. 

The number of defendants and respondents is noted parenthetcally.) 

Program Area in Which a % of 

Cml Action or Administrative Civil Administrative Total 

Proceedng Was Initiated Actions Y Proceedings ~otal cases 

Securibes Mering Cases 

(a) Non-regulated Entity 46 (180) 10 ( 11) 56 (191) 

(b) Regulated Em 17 (121) 42 ( 50) 59 (171) Total Secunbes Offenno Cases B (301) 115 (362) 28% 

Bmkerdealer Cases 

(a) Fraud Against Customer 19 ( 28) 

(b) Failure to Supe~se 

29 ( 32) 48 ( 60) 

O( 0) 5( 8) 5( 8) (c) Government Wuribes 2( 4) 4( 5) 6( 9) 

(dl Books & Records I( 1) 17 ( 28) 18 ( 29) 

iej other 

Total Broker-dealer Cases 

Issuer Financial Statement 

and Repomng Cases 

(a) Issuer Financial 

D~sclosure 

@) Issuer Repomng Other 

Total Issuer Financlal Statement 

and Reporting Cases 

Other Regulated Enmy Cases 

(a) Investment Advisers 

@) Investment Companies 

(c) Transfer Agent 

Total Other Regulated Enbty Cases 

Market ManipuMon Cases 

Insider Trading Cases 

Contempt Pmceed~ngs 

Delinquent Filings 

(a) Issuer Reporting 

@) Forms 3 L 4 

Total Delinquent Filings Cases 

Corporate Comol Cases 

Fraud Against Regulated Entities 

GRAND TOTAL 187 (598) 229 (289) 416 (887) 100% 

11 This category includes injuncbire actions and civil and criminal contempt pr&ngs. 
Name of Case 

Table 2 

FISCAL 1993 ENFORCEMENT CASES 

LISTED BY PROGRAM AREA 

Broker-dealer: Books & Records 

In the Matter of Gary Frank Granger 

In the Matter of Jay Joseph Buck 

In the Matter of Ma& B. Chasin 

SEC v. Nkko Securitks International lnc. 

In the Matter of Yamakhi International 

Arnen'ca, 11% et al. 

In the Matter of Nomura Sewrities International Inc. 

In the Matter of Robert Ainbinder, et al. 

In the Matter of Daiwa Securities America lnc. 

In the Matter of James T. Weber 

In the Matter of Gary Krarner 

In the Matter of Jones & Ward Sewritles Inc., et a/. 

In the Matter of The Niko SecuritEes Co., 

Internat1 Inc., et al. 

h the Matter of William E, Wehner 

In the Matter of Roy M. Sattorhs 

In the Matter of Jimmy Dale Swink, Sr. 

In the Matter of Jimmy Dale Swink, Jr. 

In the Matter of Louis Jules Pagilb 

In the Matter of Jaime S. Gornez 

Broker-ler: Failure to Supenrise 

In the Matter of John Gutfreund, et a/. 

In the Matter of Jeffrey Bmks, et al. 

In the Matter of Robert A. Gardner 

In the Matter of Robert Abrams 

In the Matter of Tialue Equities Group, lm. 

Bmker-dealer: Fraud Against Customer 

SEC v. Mark S. Greenway 

SEC v. Hebeti L. Gmsby, et el. 

In the Matter of Jkw S. Kantor 

In the Matter of Rdrd Sol Rosen 

In the Matter of Mark L. Rosenm 

In the Matter of James Ead Sunday 

SEC K EN. Wolf & Co., Inc.., et al. 

In the Matter of WEam X Mecca, et al. 

Release No, Date Filed 
Release No, Date Filed 

In the Matter of Benjamin M. Hasho 

In the Matter of Aura Vuono 

In the Matter of Robett B. Yule 

SEC v. Richard Shannon 

SEC v. Donald J. Yott 

SEC v. John M. Cubmtson 

SEC v. Rabert F. Doviak 11, et a/, 

In the Matter of Mark S. Greenway 

In the Matter of Wiliam 0. Schilling Ill 

SEC v. Roy Philllip LaSolle, JL 

SEC v. Shlomo A. S& 

SEC v. John Albtt DeCastm Day, et al. 

In the Matter of Donald J. Yott 

In the Matter of Hennan R. GarcB, Jr. 

In the Matter of Allied Cap$al Group, lnc. 

In the Matter of Matti R. Baren 

In the Matter of Raymond G. Klimenbeg 

In the Matter of Omille L. Sandberg 

In the Matter of Peter F. Mercaldi 

SEC v. Gary lngram 

In the Matter of Jose Luis Hernandez 

In the Matter of Richard T. Kutsman 

In the Matter of James Allan Bauer 

In the Matter of Dad F. N&k 

In the Matter of Gary V. Imram 

SEC v. Hollis Lamar Smith 

SEC v. McCarley & Asxxiates Inc., et a/. 

SEC v. Wilhghby Farr 

In the Matter of Dennis Wilk 

SEC v. Osborne Stern & Co., et a1 

SEC v. Nancy Brandstatter 

In the Matter of Rabeii D. Haramia 

In the Matter of Osbome Stem & Co. 

SEC v. Ilene J. Albert 

In the Matter of Nancy Brandstalter 

SEC v. Michael Langhein& 

SEC v. Robert D. Haramia 

In the Matter of Domink Esposlto 

In the Matter of HaroM C, McC&y, Jr. 

In the Matter of BC Financ121 Corp., etal. 

Brokerxhler: Government Securities 

In the Matter of Daiwa Secu&ies America lnc., eta! 

SEC v. C& W Porffolio Management, Inc., etal. 

SEC v. Robett S. Cutilb. et al. 
In the Matter of Donaklson, Luf?un & Jenrette 

Securities Cop. 

In the Matter of Cmdl McEntee & McGinley 

s~~trrities Inc. 

In the Matter of Howard Crash 

Brokerdealer: Other 

In the Matter of Samuel Comelius Jolly 

SEC v. Paul W. Mozer, eta/. 

In the Matter of Kenneth D. Hetcher 

In the Matter of Painewether Inc. 

In the Matter of Joseph P. Dente 

In the Matter of Scott E. FrtzpatM 

In the Matter of David Jones 

In the Matter of Mayhir Sewdies L LM., Inc. 

In the Matter of Marcus N. Figmifado 

In the Matter of Fredkk H. Joseph 

In the Matter of Edwin Kantor 

SEC v. John F. Nwy 

In the Matter of Paul A. Laude 

In the Matter of Nktwlas Zahareas 

In the Matter of Summit Investment Cop. 

In the Matter of G. James Spinner 

In the Matter of Sha w Tehran; 

In the Matter of Robert M. Buchanan, JJ~. 

Contempt 

U. S. ex re1 SEC v. Walter H. Cushman, et al. 

SEC v. Marc Josqoh 

SEC v. Personal WWea System lnc. 

SEC v. Chrk Sader 

SEC v. Michael Gartner 

SEC v. Rogm Manufacturing Co., et al. 

SEC v. Michael Gartner 

SEC v. Lynn P. Oyler, eta/, 

SEC v. Carl Mattin 

SEC v. Davd T. Levaughn, et al. 

SEC v. One Financial USA Inc. 

SEC v. ChMpher J. Stolee, et a/. 

SEC v. James B. Gilmore 

SEC v. Grant C. Ross, eta/. 

SEC v. lhx&re Navdb 

NONE 

NONE 

LR-13659 

NONE 

NONE 

LR-13721 

NONE 

LR-13720 

NONE 

LR-13746 

NONE 

LR-13770 

NONE 

NONE 

LR-13828 
Release No. Date Filed 

Corporate Control: 

SEC v. Futf~Bishop's Inc., et al. 

In the Matter of Kab & Co., Inc., et al. 

In the Matter of William A. Wilson 

In the Matter of David Shihaach 

In the Matter of Butcher, Venture Management 

Co., etd. 

Delinquent Filings: Forms 3 & 4 

In the Matter of Bettha Bancrofi 

SEC v. Hany E. Hagetty, Jr. 

In the Matter of Hany E. Hagedy, JJ~: 

In the Matter of Dermot F. Rowknd 

Delinquent Filings: Issuer Reporting 

SEC v. Haber Inc. 

SEC v. Gateways To Space Inc. 

SEC v. Attra Group, lnc., et al. 

SEC v. Jerry's Inc, 

Fraud Against Regulated Entities 

SEC v. Frank G. Scardno, el al. 

SEC v. Dantel Teyibo, et el. 

SEC v. Ruth Ann Goiklen 

SEC v. Albert Rossini 

SEC v. Timothy Rafferiy 

SEC v. Howard Baer 

Insider Trading 

SEC v. Thomas L. Duffy 

SEC v. Ettore Pettini 

SEC v The CoqDer Conpanis, et al. 

In the Matter of Thomas L. Duffy 

SEC v. William C. Degam 

SEC v. Jeremy W. Higgns 

SEC v. Jonathan Sheinbeg, et al. 

SEC v. Lee A. Hadad, et al. 

SEC v. Rodney B. Smith, et a1 

In the Matter of Andrew Cohen 

In the Matter of Lee A. Haddad 

SEC v. Pumendlr Chatep, et al. 

SEC v. C. Robert Dudgeon 

SEC v. John Flattery, et al. 
SEC v. John B. Walker 

SEC v. JosephZbler 

SEC v. Dean Ambme Okls 

SEC v. Robert S. Shulman, et a1 

SEC v. Allan G. Milew 

SEC v. Gay Lublner, et al. 

In the Matter of Jason M, Chapnick 

SEC v. Rabert M. Freeman 

In the Matter of William J. Dillon 

In the Matter of Robert M. Freeman 

SEC v. Ratalal K. Patel 

SEC v. I~.ng Alan Win&, et el. 

SEC v. MaMm &zoft: et al. 

SEC v. Edrmnd B. Picwlirw 

SEC v. Sam M. Antar, et a/. 

SEC v. Ann E. Hh, et al. 

SEC v. Aldo Aharez 

Investment Adviser 

In the Matter of Ranclall C. Hutchens, et a/. 

In the Matter of William J. W~es 

In the Matter of Ahrned Mohamed Soliman 

SEC v. Sharon V. Baker 

In the Matter of USAA Investment 

Management Co., et al. 

In the Matter of Finam'al Management Group 

of VA Inc., et al. 

In the Matter of Bonnie Mae White 

SEC v. John B. ODonnell 

SEC v. Angela Chilles 

In the Matter of Angela Chilles 

In the Matter of Sagarn Management Cop, et a/. 

In the Matter of Waren Walter Kennedy 

SEC v. H&/t I. Glass, eta/. 

SEC v. H.I. Glass & Co., etal. 

In the Matter of Hazel B. Canham 

In the Malter of David Levaughn 

SEC v. Joseph Contini 

In the Matter of Alexander V. Stein 

In the Matter of Aetna Cq~ital Management Inc., et al. 

SEC v, Talton R, Embw et al. 

SEC v, Don Kenneth Hanks, JJ~. 

In the Matter of Talton R. Embry 

SEC v. Mkhael H. Weiss 

In the Matter of Khaka Finamid S~M'CRS, lnc., et a1 

SEC v. St& & Qotbns Snobs 1% et al. 

In the Matter of Sharon Van den Beg Baker, et a/. 

ase No. 

LR-13579 

LR-13586 

LR-13595 

LR-13619 

LR-13622 

LR-13638 

34-32361 

LR-13663 

34-32459 

34-32480 

LR-13700 

LR-13710 

LR-13715 

LR-13733 

LR-13776 

LR-13778 

LR-13784 

pate Filed 

03l25193 

04/01/93 

0408193 

0422193 

0422193 

OY 1 7/93 

OY25193 

06/07/93 

06/14/93 

06'1 6193 

07/08/93 

0711 5/93 

0711 6/93 

07129193 

09/08/93 

09/09/93 

09/09/93 
Investment Company 

SEC v. Avellno & Bienes, et al. 

SEC v. Telfran Assochtes, M., et al. 

In the Matter of Paul E. Suckow 

In the Matter of Memll Lynch Piece Fenner & Smith, Inc. 

In the Matter of Patn'cia A. OSimder 

In the Matter of William J. Geebebecker 

In the Matter of Bank of Caliibmia, N.A 

In the Matter of Edwin J. PW, et al. 

SEC v. Mark W Groshans, et al. 

In the Matter of Adon finmeal Senkes Inc., et a/. 

In the Matter of Diane M. Lalash 

In the Matter of Daniel D. Weston 

In the Matter of Uoyd Bbn&r 

lssuer Financial Disclosure 

In the Matter of Dad M. Larmreaux, CPA 

In the Matter of Rqublic Savings Financial Cop., et al. 

SEC v. Corporate C@a/ Resources, 1% et al. 

In the Matter of Barry J. Ki@an 

SEC v. Willliam Uoyd Sahley, et a/. 

SEC v. HamH Sahlen, et al. 

SEC v. Gorobn K. Gddrnan 

In the Matter of The Baston Company Inc. 

SEC v. Zenox Inc., eta/. 

In the Matter of Phil@ R. McEU,aney 

SEC v. Bruce Dkkm 

In the Matter of Gregory J. Melsen, et al. 

SEC v. Pack Waste Management Inc., et a/. 

In the Matter of Phil/@ C. Zmcne, CPA 

In the Matter of Go& H, Flatturn 

SEC v. Larry E. Leslie 

In the Matter of Don& D. HMe, CPA, et al. 

In the Matter of Kahler Ccnp., et al. 

In the Matter of K. Clark ChiHrers, CPA, eta/. 

In the Matter of Martin G. Browne 

SEC v. C. Stephen Bden, et a/. 

In the Matter of lbwnas V. Cutiin, et al. 

SEC v. General Techmkyks Gmup, LM., et al. 

In the Matter of James Bum 

In the Matter of Chak A Haegebn, eta/. 

In the Matter of Camm Cakagrw 

In the Matter of Boston T8chntAgy Inc., et al. 

In the Matter of Robat R. Bevti, CPA 

In the Matter of Bernard Tmw, CPA 

LR-13443 

LR-13463 

IA-1354 

IC-19425 

IC-1371 

IC-19486 

IC-19545 

16-1 9686 

LR-13807 

16-19733 

IC-19736 

AAER 491 

AAER 492 

AAER 429 

AAER 432 

AAER 435 

34-31527 

LR-13464 

AAER 436 

LR-13501 

AAER 439 

AAER 442 

AAER 445 

AAER 447 

AAER 448 

AAER 464 

AAER 450 

AAER 451 

AAER 452 

AAER 453 

34-3291 6 

AAER 455 

AAER457 

LR-13798 

AAER 458 

AAER 460 

AAER 462 

AAER 461 

AAER 463 

AAER 466 

AAER 465 

AAER 467 

pate Filed 
SEC v. Bhck Wambr Wine Corp., et a/. 

In the Matter of Richard G. Eqlish 

In the Matterof Doughs R. Gullirpq 

In the Matter of Paul K Clatkin, et al. 

In the Matter of Michael J. Wakh, CPA 

In the Matter of Charles Feqmson, CPA 

In the Matter of Chak Fevguson 

In the Matter of Elizabeth T. Rwan 

In the Matter of George W Phil@ 

SEC v. Stanley R. Siqel, et al. 

In the Matter of Satvatore Russo 

SEC v. 0li~:k Systems Corp. 

SEC v. John J. Mohalky 

In the Matter of Willlim V. Bumes, et a/. 

In the Matter of Amdd M. GotthiH; et al. 

In the Matter of Fred V. Schiemann, CPA 

SEC v. Jeffrey S. Clark 

SEC v. The Sohwe Toolworks, Inc. et a1 

In the Matter of an J. Mohalley, CPA 

In the Matter o f Awelo P. Danna, et al. 

lssuer Reporting: Other 

SEC v. Thomas H. Fehn, et al. 

In the Matter of Thomas J. Beam 

In the Matter of Clihrd J. LbN 

SEC v. Kenbee Management, 11nc. et dl. 

In the Matter of John L. Vidakovrch 

In the Matter of Stanley Siqel 

Market Manipulation 

In the Matter of Kemilidc Bytheway, et al. 

SEC v. Glenn A. Schuster, eta1 

In the Matter of Rkhard L, Warner, et al. 

SEC v. Thomas Bell, et al. 

In the Matter of Mkhael C. Mo 

In the Matter of B~ce B. Bowen, et al. 

In the Maiter of Pamela R. Monzert 

SEC v. SaM E. Fm 

SEC v. Midvest Investments Inc., et d 

In the Matter of tGt D. Evans 

SEC v. Ram D'Onofrio, et a/. 

SEC v. Ferdinand Russo, et d 

In the Matter of Bernard Deutsd, 

SEC v. Vee Lynn BaUard 

In the Matter of Hany S. Pack, et d 

In the Matter of Rex A. &nm 

£ieka&h 

AAER 470 

34-32665 

AAER 472 

AAER 471 

AAER 476 

AAER 477 

34-32784 

AAER 478 

AAER 480 

AAER 483 

34-32938 

LR-13808 

AAER 502 

AAER 487 

AAER 485 

AAER 488 

AAER 490 

AAER 495 

AAER 489 

AAER 493 

NONE 

34-31 779 

34-31780 

LR-13697 

34-32761 

34-32979 
In the Matter of Neil N. Wn 

In the Matter of James H. FOE 

SEC v. Michael M. Matonis, et id 

In the Matter of Mark Creamer 

In the Matter of Thomas E. Russo 

In the Maiter of Edward N. Lamam 

In the Matter of Dan Mauss 

In the Matter of Thomas Bell 

In the Matter of Charles Hamun 

In the Matter of Michael Montana 

In the Matter of Anthony Martinelti 

In the Matter of Kurt Hemnn 

In the Matter of Wenton White 

In the Matter of Michael M. Matonis 

SEC v. Leonard M. Tucker, et a1 

In the Matter of Jack M. Johnson 

SEC v. 17 N. Wotf & Co., Inc., et a/. 

SEC v. Louis S. Fob' 

Miscellaneous Disclosure/Reporting 

SEC v. Mhivest C-hg Co~p., et al. 

In the Matter of Mdwest Clearing Corp. 

SEC v. Ron Whitten & Associates, Im. et al. 

In the Matter of James Gorcbn Rages 

SEC v. Walter E. Alexander, et al. 

SEC v. AmetiinJst FinancBI Group Inc., et al. 

SEC v. Lawreme S. Siherstein, et al. 

In the Matter of Douglas W&ht 

Offering Violations (By Regulated Entities) 

In the Matter of James Bedcett 

In the Matter of James L. Copley, et el. 

In the Matter of Robert Z Nelson 

In the Matter of Martin R. Frankel 

SEC v. Thornas P. Gilmadin, et al. 

In the Matter of Royce lnvesbnent Group, lnc. 

In the Matter of Mamn Kanofsky, et at. 

In the Matter of Rebecca Mero'enhall 

In the Matter of James A. Rennett 

In the Matter of Michael P. Rennert 

In the Matter of Robed L. Rodc 

In the Matter of Shawn M. Crane 

SEC v. Pecples Financial Resources Cop., eta1 

SEC v. Investameka Financial Sen/& Cop., et al. 

SEC v. Jack Ncholes D'Uva, eta! 

In the Matter of Otvilk Randall Myers, Jr. 

Release No. 

34-32506 

34-32662 

LR-13748 

34-32799 

34-32808 

34-32809 

34-3281 0 

34-32029 

34-32830 

34-32831 

34-32832 

34-32833 

34-32834 

34-32847 

LR-13780 

3432870 

LR-13785 

LR-13825 

Date Fild 

06/24/93 

07/20/93 

08/09/93 

08/25/93 

08/26/93 

08/26/93 

08/26/93 

09/02/93 

09/0m 

09/02/93 

09/02/93 

09/02/93 

09/02/93 

09/08/93 

0908193 

OW1 3/93 

09/13/93 

091 5193 
SEC v. Willliam D. Schilling 111 

SEC v. Salvatore D. Romano, et el. 

In the Matter of Ronald SaMa, et a/ 

In the Matter of SaEvatore D. Romano 

In the Matter of Dim A. Romano 

In the Matter of Anthony P. Delvecchh 

In the Matter of Ek J. Walkga 

In the Matter of Julian R. Sban 

In the Matter of Louise Zabareas 

In the Matter of Gererny Gamer 

SEC v. Bmkets Investment Cop., ei al. 

In the Matter of Bnders Investment Cop. 

In the Matter of Kim W. Gikins 

In the Matter of Michael Keih Howard 

In the Maw of Howard Neil Hochman 

In the Matter of William Jostph Caltabiam, JJ~. 

SEC v. Brent Gundm, eta/. 

In the Matter of Ma& D. Behringer 

SEC v. Emest Leland FrtzgeraM, et al. 

SEC v. Premier Benefit Capital TM, et al. 

In the Matter of Gay Mug 

In the Matter of Lester &e Boynkk, et al. 

SEC v. Nevada Manhattan Mhing, &a/. 

In the Matter of Norman D. Shubefl 

In the Matter of Daniel Steinbetg 

SEC v, Cmg M&ff et al. 

SEC v. Spec& Delivey Systens, Inc., et al. 

SEC v. Robert Johnston, et al. 

In the Matter of Harobt Raphael 

In the Matter of Mark Brecher 

SEC v. Jack M. Johnston 

In the Matter of Davd M, Haber 

SEC v. David A. Kiw, et a/. 

In the Matter of Williard E. May 

In the Matter of Ronaki E. Gilbert 

In the Matter of Auda Men Ashley 

In lhe Matter of Chu& Lockhn bwns 

In the Matter of Gene W. Armsftvrg 

In the Matter of James A. Gates 

In the Matter of John B. Ahired 

In the Matter of Hany Hatvdunian, et al. 

SEC v. Leslie Mew, d el. 

In the Matter of Juan Carlos Sehkibwski 

Offering Violations (By NobRegulated Entities) 

SEC v. Sam S. Brown, Jr., eta/. 

SEC v. Bible Pathways Ministries Inc., et a/. 

Wase No, 

LR-13559 

LR-13578 

34-321 22 

34-321 35 

34-321 36 

34-321 37 

34-321 38 

34321 39 

34-321 51 

34-32219 

LR-13631 

34-32359 

IA-1373 

34-32376 

34-32375 

34-32373 

LR-13411 

34-32469 

LR-13686 

LR-13731 

34-32634 

34-32663 

LR-13737 

34-32689 

34-32690 

LR-13754 

LR-13758 

LR-13766 

34-32782 

34-32783 

NONE 

34-32869 

LR-13792 

34-32970 

34-32972 

34-32973 

3432974 

34-32975 

34-32976 

34-32987 

34-32981 

LR-13812 

34-32985 

Date Filed 

0311 2/93 

03/24/93 

041 2/93 

041 4/93 

04/14/93 

041 4/93 

041 4/93 

041 4/93 

041 5193 

04/26/93 

091 0/93 

05/25/93 

OY25193 

05/27/93 

0327193 

05/27/93 

06/03/93 

06'1 6B3 

06/2m3 

07/01 /93 

0711 5/93 

07/20/93 

07/28/93 

07/29/93 

07129193 

08'1 1 /93 

08/18/93 

08/23/93 

08/23/93 

08/23/93 

09/02/93 

ow1 3/93 

091 5/93 

09/28/93 

09/28/93 

09/2&93 

09/281?33 

09/28/93 

09/28/93 

09/29/93 

OW29193 

09/29/93 

09/29/93 
SEC v. Darrell RRand Eubank 

SEC v. Maurice A. Rappaport, et al. 

SEC v. Joseph Py, et a/. 

SEC v. Glenn Albett, et al. 

SEC v. Benjamin G. Sprecher 

In the Matter of Seahawk Deep Ocean Techmm, Inc. 

In the Matter of Doyce G. Chestnutt 

SEC v. Towers Financial Gorp., et al. 

SEC v. Southwest Intematbnal fichawe, et al. 

SEC v. David Kagel et a/. 

In the Matter of Ray H. Kobayashi 

SEC v. Christopher J. Stdee, eta! 

SEC v. Fortune Phs Management Co., et al. 

SEC v. Nis B. Rudand, et al. 

SEC v. Matybeth Norton 

SEC v. Daniel C. McChin 

SEC v. 1st American Cop, et al. 

SEC v. Bosque Puerto Carilb, et al. 

SEC v. Mitton fityear, et al. 

In the Matter of G. AMed Roensch 

SEC v. Edee America Cop.., et al. 

In the Maw of Louis J. Davis, Esquire 

In the Matter of Jeff/y L. FAcdrnan 

SEC v. Intenink Data Nebwrk of Los Angeles, 

Inc., et al. 

SEC v. Intmnal Charter Phones Inc., et al. 

SEC v. Messina L. Greenberg, et al. 

SEC v. Premhrn Sales Cop., et al. 

SEC v. MotzkMt Funding Cop., et al. 

SEC v. Meredith K. M. Smah 

SEC v. GCP Financial Inc., eta/. 

SEC v. Henry J. Kyle, et el. 

SEC v. N. Edw& Ross, et a/. 

SEC v. Marc W. Gundemn, et al. 

In the Matter of Gaty L. Blatter 

SEC v. Pacitic Forex Invesfment, Inc., et al. 

SEC v. Theron D. Miir:he/l 

SEC v. Jeffrey Navin, et al. 

SEC v. Ron& Stephen Combs, et al. 

SEC v. Frams E. Limmer, et al. 

In the Matter of Air Tech Industries Inc. 

SEC v. KamB E. Jamison 

SEC v. Amekan Capital 117~&ments, Inc., et al, 

SEC v. Dive~itkd Cqoaal Sak & Marketing Inc., el al. 

SEC v. Litas International Inc., et al. 

SEC v. H. Ellis Ragland, JL 

SEC v. U.S. Dairy Cop. 

SEC v. SM Joy Cd,en, et al. 

Release No. 

LR-13415 

LR-13633 

LR-13441 

LR-13462 

LR-13481 

33-6972 

34-3 1 727 

AAER 441 

LR-13672 

LR-13528 

34-31 875 

LR-13537 

LR-13548 

LR-13566 

LR-13658 

LR-13666 

LR-13596 

LR-13600 

LR-13616 

34-32220 

LR-13628 

3432292 

33-7001 

Date Filed 
SEC v. Unititst Cop., et al. 

In the Matter of EMX Corp., et al. 

In the Matter of Robe~t Testa 

SEC v. Mitchell Commnkatbns Carp., eta/. 

SEC v. DonaM R. Moore, et a! 

SEC v. Kinlaw Oil Cop., eta! 

SEC v. Betty-Nina Rote, et al. 

Transfer Agent 

In the Matter of CitbaIJc N.A. 

In the Matter of Liberty Trander Co., et a! 

In the Matter of Philackbhia Registrar 

& Transfer Co., et al. 

SEC v. Fideldy Tmsfer &., et al. 

In the Matter of Lncdn Tel8~0mmnkatbns Co. 

Release Na, 

AAER 499 

33-701 9 

33-701 8 

LR-13867 

LR-13831 

LR-13817 

LR-13814 
Table 3 

INVESTIGATIONS OF POSSIBLE VIOLATIONS OF THE ACTS 

ADMINISTERED BY THE COMMISSION 

Pending as of October 1 . 1992 ............................................................................. 1. 270 

Opened in Fiscal Year 1993 ......................................................................... 377 

Total ....................................................................................................................... 1. 647 

Closed in Fiscal Year 1993 ........................................................................... 232 

Pending as of September 30. 1993 ........................................................................ 1. 415 

Formal Orders of Investigation 

Issued in Fiscal Year 1993 .......................................................................... 184 

Table 4 

ADMINISTRATIVE PROCEEDINGS INSTITUTED 

DURING FISCAL YEAR ENDING SEPTEMBER 30. 1993 

Broker-dealer Proceedings ........................................................................................ 133 

Investment Adviser. Investment Company and Transfer Agent Proceedings ................ 36 

Stop Order Proceedings ................................................................................................ 7 

Rule 2(e) 

. 

Proceedings ................................................................................................. 25 

Suspensions of Trading in Securiiies in Fiscal 

. . . 

Year 1993 ............................................... 8 
Table 5 

INJUNCTIVE ACTIONS 

Fiscal Year Actions Initiated Defendants Named 
Right to Financial Privacy 

Section 21(h) of the Securities Exchange Act of 1934 [15 U.S.C. 78u(h)(6)1 

requires that the Commission "compile an annual tabulation of the occasions 

on which the Commission used each separate subparagraph or clause of 

[Section 21(h)(2)1 or the provisions of the Right to Financial Privacy Act 

of 1978 [12 U.S.C. 3401-22 (the RFPA)] to obtain access to financial records 

of a customer and include it in its annual report to the Congress." During 

the fiscal year, the Commission made one application to a court for an 

order pursuant to Section 21(h)(2)(A)(iv) and (v), (B), and (C)(i) to obtain 

access to financial records of a customer. Set forth below are the number 

of occasions on which the Commission obtained customer records pursuant 

to the provisions of the RFPA: 

Section 1104 (Customer Authorizations) 9 

Section 1105 (Administrative Subpoenas) 431 

Section 1107 (Judicial Subpoenas) 24 
Table 6 

TYPES OF PROCEEDINGS 

ADMlNlSTRATlVE PROCEEDINGS 

Persons Subject to, Acts Constituting, and 

Basis for, Enforcement Action Sanction 

Any person 

Vrolabon of the federal securibes laws Cease-and-desist order, which may also 

require a person to comply or take steps to 

effect complrance with federal securrties laws; 

accounting and d~sgorgement of illegal profits 

(Securrties Act. Secbon 8A, Exchange Ad, 

Section 21C(a); lnvestment Company Act, 

Secbon 9(f); Investment Advisers Act, Secbon 

203(k)) 

Broker-dealer, municipal securities dealer, 

government securities dealer, transfer 

agent, investment adviser or associated 

person 

Willful vrolation of securities laws or rules; 

aiding or abemng such violatron, farlure 

reasonably to supervise others; wrllful 

misstatement or omiss~on In fil~ng with the 

Commlsslon, conwcbon of or injuncbon 

agarnst certarn crrmes or conduct. 

Censure or llmitabon on acbvrties, revocabon, 

suspension or denral of registration, bar or 

suspenslon from assodabon (Exchange Act, 

Secoons 15(b)(4)-(6). 15B(c)(2)-(5), 

15(C)(c)(l)-(2). 17A(c)(3)-(4), Investment 

Advisers Act, Secbon 203(e)-(f)). 

CNII penalty up to $100,000 for a natural 

person or $500,000 for any other person; 

accounting and d~sgorgement of illegal profits 

Penalties are subject to other limrtations 

dependrng on the nature of the violation. 

(Exchange Act, Section 21 B, lnvestment 

Company Act. Secbon 9. lnvestment Advrsers 

Act, Section 203) 

Temporary cease-and-desist order, wh~ch 

may, in approprrate cases, be rssued exparte. 

(Exchange Act, Section 21C). 

Registered securities association 

Violabon of or inability to comply with the Suspension or revocabon of registrabon. 

Exchange Act, rules thereunder, or its own censure or Irrnitation of acbvlbes, functions, or 

rules; unjustified failure to enforce complrance operabons (Exchange Act, Section 19(h)(l)). 

with the foregoing or wrth rules of the 

Municipal Securibes RulemaHng Board by a 

member or person associated with a member 
Member of registered securities 

association, or associated person 

Entry of Comm~ss~on order agalnst person Suspension or expulsion from the assoclabon. 

pursuant to Exchange Act, Sect~on 15(b), bar or suspension from assouabon wlth 

willful v~olatlon of securlbes laws or rules member of assouabon (Exchange Act, 

thereunder or rules of Mun~upal Secur~ties Section 19(h)(2)-(3)) 

Rulemaking Board, effecbng bansacbon for 

other person w~th reason to belleve that 

person was committing violations of securlbes 

laws 

National securities exchange 

Vlolabon of or ~nab~l~ty to comply with Suspension or revocabon of registrabon. 

Exchange Act, rules thereunder or ~ts own censure or l~rnltabon of acbvlbes, functions, or 

rules, unjustified fa~lure to enforce compl~ance operabons (Exchange Act. Secbon 19(h) (1 )) 

w~th the foregoing by a member or person 

associated w~th amember 

Member of national securities exchange, or 

associated person 

Entry of Commlss~on order against person Suspension or expulsion from exchange, bar 

pursuant to Exchange Act. Section 15(b). or suspension from assoclabon wlth member 

willful vlolabon of securlbes laws or rules (Exchange Act, Secbon 19(h)(2)-(3)) 

thereunder, effecbng transaction for other 

person w~th reason to belleve that person was 

comrnlthng violabon of securltles laws 

Registered clearing agency 

Violabon of or inablllty to comply wrth 

Exchange Act, rules thereunder, or ~ts own 

rules, fallure to enforce compl~ance w~th ~ts 

own rules by partlclpants. 

Suspension or revocabon of registrabon, 

censure or Irmitabon of acbvlbes, funcbons, or 

operabons (Exchange Act, Secbon 19(h)(l)) 

Participant in registered clearing agency 

Entry of Comm~ss~on order agalnst part~cipant Suspens~on or expuls~on from clearlng agency 

pursuant to Exchange Act, Secbon 15(b)(4). (Exchange Act, Secbon 19(h)(2)) 

willful vlolabon of clearlng agency rules, 

effecbng transaction for other person wlth 

reason to belleve that person was commlmng 

violat~ons of securrbes laws 

Securities information processor 

Vlolabon of or inab~l~ty to comply wlth Censure or lim~tabon of activ~hes, suspension 

provlslons of Exchange Act or rules or revocabon of reglstrabon (Exchange Act, 

thereunder Section 1 lA(b)(6)). 
Any person 

W~llful vlolabon of Securlbes Act, Exchange Temporary or permanent prohrbrtion agalnst 

Act, Investment Company Act or rules sewing ~n cemn capac~ties mth registered 

thereunder, ad~ng or abett~ng such vrolabon, ~nvestrnent company (Investment Company 

willful misstatement ~n hllng w~th Commlss~on Act, Secbon 9(b)) 

Officer or director of self-regulatory 

organization 

W~llful violabon of Exchange Act, rules Removal from office or censure (Exchange 

thereunder or the organlzabon's own rules, Act, Secbon 19(h)(4)) 

willful abuse of author~ty or unjusbfied falure to 

enforce compl~ance 

Principal of broker-dealer 

Officer, director, general partner, ten-percent Bar or suspension from be~ng or becom~ng 

owner or controlling person of a broker-dealer assoc~ated w~th abroker-dealer (SIPA, 

for whlch a SlPC trustee has been appo~nted Secbon 14(b)) 

- - 

Securities Act registration statement 

Statement materrally inaccurate or ~ncomplete Stop order refus~ng to permlt or suspending 

effecbveness (Securlbes Act. Secbon 8(d)) 

Person subject to Sections 12,13,14 or 

15(d) of the Exchange Act or associated 

person 

Fa~lure to comply wlth such provlsrons or Order dlrect~ng compl~ance or steps effecbng 

hav~ng caused such failure by an act or compl~ance (Exchange Act. Secbon 15(c)(4)) 

omlsslon that person knew or should have 

known would contr~bute thereto 

Securities registered pursuant to Section 

12 of the Exchange Act 

Noncompliance by Issuer w~th Exchange Act Den~al, suspension of effectwe date. 

or rules thereunder suspension or revocation of reglstrabon 

(Exchange Act, Sect~on 12(1)) 

Publrc Interest requlres trad~ng suspension Summary suspension of over-the-counter or 

exchange trad~ng (Exchange Act, Secbon 

12(k)) 

Registered investment company 

Fatlure to file Investment Company Act Suspension or revocabon of reglstrabon 

registrabon statement or requlred report; fillng (Investment Company Act. Section 8(e)) 

materially ~ncomplete or m~sleadrng statement 

or report 

Company has not attarned $100.000 net worth Stop order under Secur~bes Act, suspens~on 

90 days after Securlbes Act registration or revocabon of reglstration (Investment 

statement became effecbve Company Act, Secbon 14(a)) 
Attorney, accountant, or other professional 

or expert 

Lack of requisite qualifications to represent 

others, laclung In character or integrity, 

unethical or improper professional conduct; 

wlllful violabon of securlties laws or rule, or 

adlng and abetting such vlolabon. 

Attorney suspended or disbarred by court. 

expert's llcense revoked or suspended; 

convicbon of a felony or of a misdemeanor 

Invoking moral turpitude. 

securibes vlolabon in Comm~ss~on-~nstituted 

acbon, findlng of securlties vlolabon by 

Commission In admlnistrabve proceed~ngs. 

Permanent or temporary denial of prlvllege of 

appearing or pracbcing before the Commission 

(17 CFR Secbon 201 2(e)(l)) 

Automabc suspension from appearance or 

practice before the Commiss~on (1 7 CFR 

Section 201 2(e)(2)) 

Temporary suspension from pracbclng before 

the Commlsslon. censure. oermanent or . . temporary disqual~ficabon from practicing 

before the Commlss~on (17 CFR Secbon 

Member or employee of Municipal 

Securities Rulemaking Board 

Willful v~olabon of Exchange Act, rules 

thereunder, or rules of the Board, abuse of 

authority. 

Censure or removal from office (Exchange 

Act, Secbon 15B(c)(8)) 

CIVIL PROCEEDINGS IN FEDERAL DISTRICT COURTS 

Persons Subject to, Acts Constituting, and 

Basis for, Enforcement Action 

Sanction 

Any person 

Engag~ng In or about to engage In acts or 

pracbces violating securlbes laws, rules or 

orders thereunder (Including rules of a 

registered self-regulatory organizabon) 

lnjuncbon aganst acts or pracbces 

consbtubng nolabons (plus other equitable 

relief under court's general equity powers) 

(Securlbes Act, Section 20(b), Exchange Act, 

Secbon 21(d); Holdlng Company Act, Section 

18(e), Investment Company Act, Secbon 

42(d), Investment Advlsers Act, Secbon 

209(d), Trust Indenture Act, Secbon 321) 

Noncompl~ance wlth prov~sions of the laws, Wrlt of mandamus. injuncbon, or order 

rules, or regulabons under Securltles, direcbng complrance (Securibes Act, Section 

Exchange, or Holding Company Act, orders 20(c), Exchange Act, Secbon 21(e); Holdlng 

issued by Commission, rules of a registered Company Act, Section 18(f)). 

self-regulatory organlzabon, or undertaking In 

a reglstrabon statement 
Vlolabng the securrbes laws or a cease-anddesist order (other than through insrder 

tradlng) 

Tradlng wh~le rn possession of materlal nonpubllc informabon In a transacbon on an 

exchange or from or through a broker-dealer 

(and transacbon not part of a publlc offering), 

arding and abetting or drrectly or rndlrectly 

controllrng the person who engages In such 

tradrng 

Vrolating Securrtles Act Secbon 17(a)(l) or 

Exchange Act secbon 10(b), when conduct 

demonstrates substantial unfitness to serve as 

an officer or d~rector 

C~rl penalty up to $1 00,000 for a natural 

person or $500,000 for any other person g, 1f 

greater, the gross gain to the defendant 

Penalbes are sub~ect to other l~mltabons 

dependent on nakre of vrolabon (Securlbes 

Act. Secbon 20(d), Exchange Act, Secbon 

21(d) (3), lnvestment Company Act, Secbon 

42(e), lnvestment Advlsers Act, Secbon 

209(e)) 

Max~mum c~rl penalty three bmes profit 

ganed or loss avolded as a result of 

transacbon (Exchange Act, Secbon 21A(a)- 

(b)) 

Prohlblbon from acting as an officer or dlrector 

of any publlc company (Securlbes Act, 

Secbon 20(e), Exchange Act. Section 

21 (d)(2)) 

Issuer subject to Section 12 or 15(d) of the 

Exchange Act; offlcer, director, employee 

or agent of issuer; stockholder acting on 

behalf of issuer 

Payment to foreign offiaal, fore~gn polrbcal 

party or officral, or candrdate for fore~gn 

political office, for purposes of seeking the use 

of rnfiuence In order to assist Issuer In 

obtarning or retaning busrness for or with, or 

drrecbng buslness to, any person 

Maxrmum clvll penalty' $10,000 (Exchange 

Act, Section 32(c)) 

Securities Investor Protection Corporation 

Refusal to commrt funds or act for the 

protection of customers 

Order direcbng drscharge of oblrgabons and 

other appropriate relref (SIPA, Secbon 1 I (b)) 

National securities exchange or registered 

securities association 

Failure to enforce compliance by members or Writ of mandamus, Injuncbon or order drrecbng 

persons associated wrth rts members wrth the such exchange or assocratron to enforce 

Exchange Act, rules or orders thereunder, or compliance (Exchange Act. Section 21(e)) 

rules of the exchange or associabon 

Registered clearing agency 

Farlure to enforce compl~ance by its 

participants with its own rules 

Writ of mandamus, lnjuncbon or order dlrecbng 

dearrng agency to enforce compliance 

(Exchange Act, Sectron 21 (e)) 
Issuer sUbject to Section 15{d) of 1934 Act

Failure to file required mtorrnanon. documents

or reports

Registered Investment company

Name of company or of security issued by it

deceptive or misleading

OffIcer, director, member of advisory

board, adviser. depositor, or underwrller of

Investment company

Engage In act or pracncs consntunnq breach

of nduciary duty involVing personal

misconduct

Forfeiture of $100 per day (Exchange Act,

Section 32(b))

InJuncbon against use of name (Investment

Company Act, Section 35(d)).

lrquncnon against acbng in certain capacibes

for investment company and other appropriate

relief (Investment Company Act, Section

36(a)).

CRIMINAL PROSECUTION BY DEPARTMENT OF JUSTICE

Persons Subject to, Acts Constituting, and

Basis for, Enforcement Action

Any person

Willful Violation of sscurmes laws or rules

thereunder, Willful misstatement In any

document required to be filed by securities

laws or rules, Willful misstatement In any

document required to be flied by selfregulatory orqaruzanon In connection With an

appllcabon for membership or association with

member

Issuer SUbject to Section 12 or 15(d) of the

Exchange Act; officer or director of Issuer;

stockholder acting on behalf of Issuer;

employee or agent subject to the

jurisdiction of the United States

Payment to foreign official, foreIgn polmoal

party or official, or candidate for foreign

pohtical office for purposes of seeking the use

of Influence In order to assist Issuer in

obtaining or retaining business for or With, or

dlrecbng business to, any person

114

Sanction

MaxImum penalbes $1,000,000 fine and ten

years impnsonment for individuals, $2,500,000

fine for non-natural persons (EXchange Act,

Secbons 21(d), 32(a)), $10,000 fine and five

years irnpnsonmsnt (or $200,000 If a public

ubllty holding company for Violations of the

Holding Company Act) (secunnss Act,

Secbons 20(b), 24; Investment Company Act,

Secbons 42(e), 49; Investment Advisers Act,

Secbons 209(e), 217; Trust Indenture Act,

secnons 321, 325, Holding Company Act,

Secbons 18(f), 29).

Issuer $2,000,000, officer, director,

employee, agent or stockholder $100,000

and five years imprisonment (issuer may not

pay fine for others) (Exchange Act, Section

32(c))

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-
Foreign Restricted List 

The Securities and Exchange Commission maintains and publishes 

a Foreign Restricted List which is designed to put broker-dealers, financial 

institutions, investors and others on noticeof possible unlawful distributions 

of foreign securities in the United States. The list consists of names of 

foreign companies whose securities the Commission has reason to believe 

have been, or are being offered for public sale in the United States in 

possible violation of the- registration requirement of Section 5 of the 

Securities Act of 1933. The offer and sale of unregistered securities deprives 

investors of all the protections afforded by the Securities Act of 1933, 

including the right to receive a prospectus containing the information 

required by the Act for the purpose of enabling the investor to determine 

whether the investment is suitable. While most broker-dealers refuse to 

effect transactions in securities issued by companies on the Foreign 

Restricted List, this does not necessarily prevent promoters from illegally 

offering such securities directly to investors in the United States by mail, 

by telephone, and sometimes by personal solicitation. The following foreign 

corporations and other foreign entities comprise the Foreign Restricted 

List. 

1. Aguacate Consolidated Mines, Incorporated (Costa Rica) 

2. Alan MacTavish, Ltd. (England) 

3. Allegheny Mining and Exploration Company, Ltd. (Canada) 

4. Allied Fund for Capital Appreciation (AFCA, S.A.) (Panama) 

5. Amalgamated Rare Earth Mines, Ltd. (Canada) 

6. American Industrial Research S.A., also known as 

Investigation Industrial Americana, S.A. (Mexico) 

7. American International Mining (Bahamas) 

8. American Mobile Telephone and Tape Co., Ltd. (Canada) 

9. Ante1 International Corporation, Ltd. (Canada) 

10. Antoine Silver Mines, Ltd. (Canada) 

11. ASCA Enterprisers Limited (Hong Kong) 

12. Atholl Brose (Exports) Ltd. (England) 

13. Atholl Brose Ltd. (England) 

14. Atlantic and Pacific Bank and Trust Co., Ltd. (Bahamas) 

15. Bank of Sark (Sark, Channel Islands, U.K.) 

16. Briar Court Mines, Ltd. (Canada) 

17. British Overseas Mutual Fund Corporation Ltd. (Canada) 

18. California & Caracas Mining Corp., Ltd. (Canada) 

19. Caprimex, Inc. (Grand Cayman, British West Indies) 

20. Canterra Development Corporation, Ltd. (Canada) 

21. Cardwell Oil Corporation, Ltd. (Canada) 

22. Caribbean Empire Company, Ltd. (British Honduras) 

23. Caye Chapel Club, Ltd. (British Honduras) 

24. Central and Southern Industries Corp. (Panama) 

25. Cerro Azul Coffee Plantation (Panama) 

26. Cia. Rio Banano, S.A. (Costa Rica) 
27. City Bank A.S. (Denmark) 

28. Claw Lake Molybdenum Mines, Ltd. (Canada) 

29. Claravella Corporation (Costa Rica) 

30. Compressed Air Corporation, Limited (Bahamas) 

31. Continental and Southern Industries, S.A. (Panama) 

32. Crossroads Corporation, S.A. (Panama) 

33. Darien Exploration Company, S.A. (Panama) 

34. Derkglen, Ltd. (England) 

35. De Veers Consolidated Mining Corporation, S.A. (Panama) 

36. Doncannon Spirits, Ltd. (Bahamas) 

37. Durman, Ltd. Formerly known as Bankers International 

Investment Corporation (Bahamas) 

38. Empresia Minera Caudalosa de-Panama, S.A. (Panama) 

39. Ethel Copper Mines, Ltd. (Canada) 

40. Euroforeign Banking Corporation, Ltd. (Panama) 

41. Finansbanker a/s (Denmark) 

42. First Liberty Fund, Ltd. (Bahamas) 

43. General Mining S.A. (Canada) 

44. Global Explorations, Inc. (Panama) 

45. Global Insurance, Company, Limited (British West Indies) 

46. Globus Anlage-Vermittlungsgesell-schaft MBH (Germany) 

47. Golden Age Mines, Ltd. (Canada) 

48. Hebilla Mining Corporation (Costa Rica) 

49. Hemisphere Land Corporation Limited (Bahamas) 

50. Henry Ost & Son, Ltd. (England) 

51. Hotelera Playa Flamingo, S.A. 

52. Intercontinental Technologies Corp. (Canada) 

53. International Communications Corporation (British West Indies) 

54. International Monetary Exchange (Panama) 

55. International Trade Development of Costa Rica, S.A. 

56. Ironco Mining & Smelting Company, Ltd. (Canada) 

57. James G. Allan & Sons (Scotland) 

58. Jojoba Oil & Seed Industries S.A. (Costa Rica) 

59. Jupiter Explorations, Ltd. (Canada) 

60. Kenilworth Mines, Ltd. (Canada) 

61. Klondike Yukon Mining Company (Canada) 

62. KoKanee Moly Mines, Ltd. (Canada) 

63. Land Sales Corporation (Canada) 

64. Los Dos Hermanos, S.A. (Spain) 

65. Lynbar Mining Corp. Ltd. (Canada) 

66. Massive Energy Ltd. (Canada) 

67. Mercantile Bank and Trust & Co., Ltd. (Cayman Island) 

68. Multireal Properties, Inc. (Canada) 

69. J.P. Morgan & Company, Ltd., of London, England (not to 

be confused with J.P. Morgan & Co., Incorporated, New York) 

70. Norart Minerals Limited (Canada) 

71. Normandie Trust Company, S.A. (Panama) 

72. Northern Survey (Canada) 
73. Northern Trust Company, S.A. (Switzerland) 

74. Northland Minerals, Ltd. (Canada) 

75. Obsco Corporation, Ltd. (Canada) 

76. Pacific Northwest Developments, Ltd. (Canada) 

77. Pan-Alaska Resources, S.A. (Panama) 

78. Panamerican Bank & Trust Company (Panama) 

79. Pascar Oils Ltd. (Canada) 

80. Paulpic Gold Mines, Ltd. (Canada) 

81. Pyrotex Mining and Exploration Co., Ltd. (Canada) 

82. Radio Hill Mines Co., Ltd. (Canada) 

83. Rancho San Rafael, S.A. (Costa Rica) 

84. Rodney Gold Mines Limited (Canada) 

85. Royal Greyhound and Turf Holdings Limited (South Africa) 

86. S.A. Valles & Co., Inc. (Philippines) 

87. San Salvador Savings & Loan Co., Ltd. (Bahamas) 

88. Santack Mines Limited (Canada) 

89. Security Capital Fiscal & Guaranty Corporation S.A. (Panama) 

90. Silver Stack Mines, Ltd. (Canada) 

91. Societe Anonyme de Refinancement (Switzerland) 

92. Strathmore Distillery Company, Ltd. (Scotland) 

93. Strathross Blending Company Limited (England) 

94. Swiss Caribbean Development & Finance Corporation 

(Switzerland) 

95. Tam O'Shanter, Ltd. (Switzerland) 

96. Timberland (Canada) 

97. Trans-American Investments, Limited (Canada) 

98. Trihope Resources, Ltd. (West Indies) 

99. Trust Company of Jamaica, Ltd. (West Indies) 

100. United Mining and Milling Corporation (Bahamas) 

101. Unitrust Limited (Ireland) 

102. Vacationland (Canada) 

103. Valores de Inversion, S.A. (Mexico) 

104. Victoria Oriente, Inc. (Panama) 

105. Warden Walker Worldwide Investment Co. (England) 

106. Wee Gee Uranium Mines, Ltd. (Canada) 

107. Western International Explorations, Ltd. (Bahamas) 

108. Yukon Wolverine Mining Company (Canada) 
Self-Regulatory Organizations: Expenses, Pre-tax Income and Balance

Sheet Structure

In 1992, the total revenues of all self-regulatory organizations (SROs)

with marketplace jurisdiction rose approximately $107.2million, an increase

of approximately 11.7% from 1991 (1991 recognized a 6.1% increase over

1990; 1990 a 0.7% decline from 1989). The New York Stock Exchange

(NYSE), National Association of Securities Dealers (NASD), American

Stock Exchange (AMEX) and the Chicago Board Options Exchange (CBOE)

accounted for 84.7% of all SRO total revenues, an increase over the 83.8%

in 1991,which was up from 82.3%in 1990. The SROs' revenues were earned

primarily from listing, trading and market data fees. For example:

the NYSE reported total revenue of $418.4 million, an increase of

11.7% from 1991, of which 40% consisted of listing fees, 20%

consisted of trading fees, and 13% consisted of market data fees;

and

the AMEX reported total revenue of $114.5 million, an increase of

13.4% from 1991, of which 12% consisted of listing fees.

Other SROs reporting increases in revenue included:

the NASD, which reported a $48.7 million increase, or 22.6%, to

$264.3 million;

the Philadelphia Stock Exchange (PHLX), which reported a $1.8

million increase, or 8.7%, to $22.5 million;

the Boston Stock Exchange (BSE),which reported a $767,000increase,

or 6%, to $13.6 million;

the Midwest Stock Exchange (MSE),1which reported a $2.7 million

increase, or 3.7%, to $73.8 million;

the Pacific Stock Exchange (PSE), which reported a $2.1 million

increase, or 5.4%, to $41.9 million; and

the Cincinnati Stock Exchange (CSE), which reported an $868,000

increase, or 23.4%, to $4.6 million.

The only SRO that reported a decline in revenue was the CBOE, which

reported a $7.1 million decrease, or 9.1%, to $70.4 million. The largest

percentage increase in total revenues, 23.4%, was experienced by the CSE.

The largest dollar volume increase in total revenues of $48.7 million was

reported by the NASD.

The total expenses of all marketplace SROs were $900.3 million in

1992, an increase of $67.6 million (8.1%) over 1991. The NASD incurred

the largest magnitude increase in expenses-$37.8 million. Six other

exchanges incurred increases in expenses. For example:

the AMEX incurred an $8.5 million increase, or 8.3%;

the BSE incurred a $147,000 increase, or 1.2%;

the CSE incurred a $220,000 increase, or 6.0%;

1The Midwest StockExchangechanged its name in 1993to the ChicagoStock

Exchange.

118

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•

•

•

•

•

•

•

•
the NYSE incurred a $25.7 million increase, or 8.1%;

the PHLX incurred a $1.9 million increase, or 9.0%; and

the PSE incurred a $980/000 increase, or 2.5%.

Two exchanges reported a decline in expenses: the CBOE, $3.9 million

or 5.2%; and the MSE, $3.8 million or 5%. Despite an increase in aggregate

expenses, aggregate pre-tax income of the SROs rose in 1992 by $39.6

million or 47.2%. The NYSE experienced the largest magnitude increase

in pre-tax income of $18.2 million; however, the CSE reported the largest

percentage increase in pre-tax income of 4984.6%.2 The BSE and AMEX

also showed large percentage increases in pre-tax income of 287% and

216.3% respectively. The PHLX and CBOE reported declines in pre-tax

income of $122/000 and $3.1 million, respectively, while all other SROs

reported increases in pre-tax income.

The total assets of all marketplace SROs amounted to approximately

$1.8 billion, an increase of $239 million or 15.5%. The MSE showed both

the largest magnitude and percentage increase in total assets, equalling

$162.7 million or 37.7%. The CSE also reported a large percentage increase

in total assets, equalling $680/000 or 22.2%. The NYSE reported a large

increase in assets of $61.8 million or 11.3%. The NASD also reported a

large increase in total assets, equalling $40.7million or 15.9%.The remainder

of the exchanges reported a decline in total assets with the CBOE reporting

the largest percentage decrease, 18.8%/ and the largest magnitude decline

of $19.6 million.

The total liabilities of marketplace SROs in 1992 increased $167.8

million or 18.7% over 1991 levels. The MSE showed both the greatest

magnitude increase in liabilities of$168.5 million and the greatest percentage

increase of 41.5%. The NYSE also reported a substantial increase in

liabilities of $21 million or 6.9%. The PHLX ($871/000 or 15.6%)/ CSE

($210/000 or 11.8%)/ and NASD ($5.6 million or 8%) also reported increases

in liabilities. The CBOE reported the largest decline in liabilities of $18.7

million (41.5%). In addition, declines in liabilities also were reported by

the PSE (21.2% or $5 million), BSE(18.1%or $3.2 million), and AMEX (6.7%

or $1.6 million).

The aggregate net worth of the marketplace SROs rose $71.2 million

in 1992/ an increase of 11%. The CSE incurred the largest percentage

increase in net worth, 36.6%($470/000)/while the largest magnitude increase

in net worth occurred at the NYSE, $40.8 million or 16.7%. The NASD

also reported a substantial increase in net worth, $35.1 million (19%). The

PSE (6.5%) and the AMEX (1.6%) also experienced positive growth in net

worth. The MSE (22.2%)/ PHLX (3.8%)/ CBOE (1.6%)/ and BSE (0.3%)

experienced declines in net worth.

2Thislarge percentage increaseis primarily attributed to substantialincreasesin

transactionchargesand communicationchargesand servicefees,togetheraccounting

for 98%of the CSE/sincreasein 1992total operating revenues.

119

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Clearing agency results have been presented in two charts by their 

respective types: depositories and clearing corporations. Aggregate 

clearing agency service revenue increased 14%, almost $56 million, in 

calendar year 1992. This increase offset a reduction in interest income 

of 33% or $29 million. All clearing agencies adjust fee structure and 

refunds of fees to provide participants with attractively priced services, 

to meet expenses, and to provide the amount of earnings which they desire 

to retain. 

All service revenues at depositories totaled over $300 million, up 16%. 

This included a $40 million increase by DTC and a $1.6 million increase 

at both the Midwest Securities Trust Company (MSTC) and Philadelphia 

Depository Trust Company (PDTC). Total depository pre-tax income 

increased $6.4 million. MSTC recorded a pre-tax gain of $860,000 in 1992, 

compared to a loss of $3.7 million in 1991. The Participants Trust Company 

reported pre-tax net income of over $4.9 million, as compared to $4.1 

million in 1991. PDTC had a gain of $534,000 in contrast with the yearearlier pre-tax loss of $172,000. 

The depositories continued to expand their base for service revenues 

by increasing the number of shares on deposit and the face value of debt 

securities in custody. This was made possible by the further expansion 

of depository-eligible issues and the desire of participants to avail 

themselves of depository services. The MSTC had 1,068,000 eligible issues 

at year-end, an increase of 8%, and DTC had 1,026,000, an increase of 9%. 

In general, eligibility for all types of securities increased. At the end of 

1992, the total value of securities in the depository system approached 

$6.5 trillion, of which DTC alone held over $3.5 trillion, not including $2.8 

trillion in certificates held by others as DTC's agent. More than 69% of 

the shares of all NYSE-listed U.S. companies, 53% of NASDAQ, and 46% 

of AMEX-listed U.S. companies were in the depository system at the end 

of 1992. In addition, more than 94% of the principal amount of all 

outstanding municipal bonds were in the depository system. 

Service revenue of clearing corporations increased to almost $165 

million, an increase of 10% over 1991. As a group, the clearing corporations 

recorded a net increase in pre-tax income of almost $7 million, an increase 

of 95% over 1991. The National Securities Clearing Corporation's pretax earnings increased over $4.8 million or 271%. The Boston Stock 

Exchange Clearing Corporation had a loss of $308,000, after a gain of $1,853 

the previous year. The Midwest Clearing Corporation's pre-tax loss was 

$1.6 million, half the prior year's loss. The Options Clearing Corporation's 

pre-tax gain was $1.5 million, as opposed to the refund of all of its pretax income in the prior year. The Stock Clearing Corporation of Philadelphia 

had a gain of $402,000, compared to a loss of $313,000 the previous year. 

Total pre-tax income was $14 million for all clearing corporations. 

The aggregate shareholders' equity of all clearing corporations and 

depositories rose to $103 million in 1992, an increase of 2% over 1991. 

Participant clearing fund contributions, which provide protection to the 
clearing agencies in the event of a participant default, increased by $309 

million or 15% to almost $2.3 billion. Should a participant default and 

its losses exceed its deposit, the entire participants' fund of the clearing 

agency may be assessed on a pro rata basis. 
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122

~~~~ - ~~~~ ~~~~ ~~~~

•

-
Table 8 

SELF-REGULATORY ORGANIZATIONS - CLEARING CORPORATIONS 

1992 REVENUES and EXPENSES 11 

($In Thousands) 

-- Barlpn Dolb GW IntMmllmal Nallmal Stock 

Stoc~ExIw,~ Gonmnml %mum lnlsnnahsl Suvritla MBS Miht Suunlles Ovllm Pacllc CleUlnp 

c~ssrinp OPU~J clmnp Clsariq Clmrlng c~winp Clwinp c~mnp Cllnw clrar~np Cwwdlon~l 

lkqwtlrn Cwpmtim Comarafirn Combon Corpont~on Colpmlon bmon CwponWon Cwponfton Corponl~on Phlladelphla 

9,'3@32U 12/31/92Y 12/31/921 12/31/92Y 12/31/92W 12/31/92 12/3lP)2 12/31/92 12n1/92 lUJIP)2 U IUJlP)? Tola1 

I-f 

U Amah eftan Nvt bsn m m nus ms pm01mc mmaaole my s npte I- or mmnw catqov nu, m k umol81err wmplna~r orwen aq ro ~dun~ ~a ~scans d (#I lh wq clau I car on mrhmt em:lopa I, me clear ng aprnc n mrfrom 3 sxs' nc gar, IS 

ad ( I hs Qmup w mamas enow by hs SIC'S sgll m huc 47q WII moon mm Immdol mu us man m me mruI nmm 1m.s as m mndm sun ot a WCID, 9 amu 113 w no1 or 19 almm c >.nu o0 I* WIS 

U f*ws 1.1992. Um Bmmn Sku hnps (BSEl Lmm CaponQnm msrpsd ,"lo 19 @St Clmnp Corn m A dhldad olU 4 m 1l.m .at pa dl0 hs mml @S. Vur lmucoq mnnDn e9. 1Y 01 IM am' R. I mnc a1 Sulrmrnlr am ~n I 0s mr M' ~rsra! ,at sr umr 

urhstmid hm vrsmmd n UM sti~id~q w wraw as M tnd~i~tasd cwmi Y Thc Iklb Cwnmn Wont -urn has 1 suy bond 01 SlW rnlllnn in IIN d a d~~np hnd C~U d $296 WO lor mh ~nm~rm IS 1ncIud8a In heMhcr DPW caW 

Y Ellcdhs In May 1988, he Mnwl Scnrilisr Cl- Corpowlon (MCC) sold 81% of GavmmCnl Scanlla Clsr~q Corponuon (GSCC) lo win 01 IL! pmawk U Ihatllm NSCC mlered ro an agrmnenl w~lh GSCC to vronae raftour wooon sewIces and onice Iac81!1~es NSCC s equh ~dmu In GSCC rr - I~~IL~W ----" In 

,.. in .- -,,I* .-".- v R. W& CI~W *urn r *holly mncd *~ivy of IMOplaN c~alnp cwponnonlrrl smw ovnltmal and om rmcn horn Its ~arm~ U R. INernUiPrPl Smnlnl amlm c-lm #ma rhnllv aMd rhdlrrr 01 IlCW ard miu*l m~lml rd mhrr ?lrnc&r Im 1- mr.m E nwl 1997 ms@&0 dC&&-;b%%; Jloa ~c~np~i~;&&a-kc~~ i<~o%~~mp&~~mmikc]ai&~fic Ssan~aDms~~w Tnnl C-hrn rBDTC1 ArnMr la volen~a ow rrrrssm swa n 1981 1988 aa 1391 lhr PSDlC nl ao~d~n 1991

RFCmc)plpdl~~mtmtmcmm$%m Ths~mun~qmars*~$1~g,masd1kc(mon31,~gg~ PCCS reovcnuhrmasmntnumop(0~m~s~u~ OXOIOIYII~UY~~ *tmlctnf anm,t r Rn t caru ~.ndmm)cr n 1992 B) !no .I onolrnr~oa,~~' COrcM d he BE. Ill 924 I had PCC n mmzm80 0" BE PSE mrmrrr' n rh 01 %XI mtll m 3 ~.~hlr lo. ~kmburymml d ,201 IS lmnm b F?C 

9 mtt D tk t~fulf OI om nd won ms snut 01ha rh16& ri$$~;lipln a c~rannp agmcynis net Income 
Table 9

SELF-R EGULATORY ORGANIZATIONS-DEPOSITORIES

1992 REVENUES and EXPENSES 11

($ in Thousands)

Midwest Philadelphia

DeposilolY Securities Participants DepositolY

Trust Trust Trust Trust

Company Company Company Company

12/31192 12/31192Z1 12/31192 12/31192 Total

DePOSltolYServices $236,226 $28,306 $ 26,623 $ 9.482 S3OO,638

Interest 41,663 806 8,670 820 51,959

Other 2,924 898 3.822

Total Revenues 31 $277.889 S32,036 $ 35,293 $11,201 $356,419

Employee Costs $175.990 $12.591 $ 9,287 $ 5.462 $2D3.33D

Data Processing and

Communications Costs 23,171 2.314 8.760 435 34,680

Occupancy Costs 44.839 4.396 6,756 675 56.666

Contracted Services Cost 1,335 1.335

All Other Expenses $ 33,389 $10,540 $ 5.558 $ 4.095 $ 53,582

Total Expenses $277.389 S31.176 $ 30,361 $10.667 $349.593

Excess of Revenues

Over Expenses $ 500 $ 860 $ 4,932 $ 534 $ 6.826

Shareholders' Equity $ 19,094 $ 4,801 $ 16.993 $ 2.954 $ 43.842

PaltJcipanfs Fund $632.013 $ 6.261 $246.213 $ 830 $885.317

JJ AlthOugh ellorts have been made to make the presen1atiOIlScom_Ie. any single revenue or expense

calegOfY may not be completely com_Ie between any two clearing agencies because of (i) the YaJYing

classification methods emploYed by the cleanng agencies in reporting opemting results and (ii) the grouping

methods employed by the SEC'S stall due to these YaJYingclassification methods. Individual amounts

are shown to the nearest thousand. Totals are the rounded result of the underlying amounts and may not be

the anthmetic sums of the paris.

ZI During 1992. the Midwest Stock Exchange made a $2.000.000 capital contribution.

31 Revenues are net of refunds which haw the ellect 01 reducing a clearing agency's base fee rates.

!i This is the result of opemtions and before the ellecl oIlncorne taxes. which may significantly Impact a clearing agency's net

income.

124

~

~

~
Certificate Immobilization 

Book-entry deliveries continued to outdistance physical deliveries in 

the settlement of securities transactions among depository participants of 

the Depository Trust Company (DTC). This tendency is illustrated in 

Table 10, CERTIFICATE IMMOBILIZATION TRENDS. The table captures 

the relative significance of the mediums employed, in a ratio of book-entry 

deliveries to certificates withdrawn from DTC. The figures include Direct 

Mail by Agents and municipal bearer bonds. In 1992, the ratio of 12.9 

book-entry deliveries rendered for every certificate withdrawn was almost 

six times greater than the 1982 ratio. 

Table 10 

CERTIFICATE IMMOBILIZATION TRENDS 

Depository Trust Company 

(Including Bearer Certificates) 

Book-entry Deliveries 

at DTC (in thousands) 83,300 67,900 62.800 63.800 46,600 35.900 

Total of All Certif~mtes 

Withdrawn (in thousands) 6,467 6.655 9,100 11.600 12.600 15,700 

Book-entry DeiiveneS per 

Certmcates Withdrawn 12.9 102 6.9 5.5 3.7 2.3 
Exemptions 

Section 12(h) Exemptions 

Section 12(h) of the Securities Exchange Act of 1934 (Exchange Act) 

authorizes the Commission to grant a complete or partial exemption from 

the registration provisions of Section 12(g) or from the disclosure or insider 

reporting/ trading provisions of the Act where such exemption is consistent 

with the public interest and the protection of investors. Two applications 

were pending at the beginning of 1993, and four applications were filed 

during the year. Of these applications, two were granted and one was 

withdrawn. 

Exemptions for Foreign Private Issuers 

Rule 12g3-2 provides various exemptions from the registration 

provisions of Section 12(g) of the Exchange Act for the securities of foreign 

private issuers. The most significant of these exemptions is that contained 

in subparagraph (b), which provides an exemption for certain foreign 

issuers that furnish to the SEC on a current basis the material specified 

in the rule. Such material includes that information material to an investment 

decision which the issuer: (1) has made or is required to make public 

pursuant to the law of the country in which it is incorporated or organized; 

(2) has filed or is required to file with a stock exchange on which its 

securities are traded and which was made public by such exchange; or 

(3) has distributed or is required to distribute to its securityholders. 

Periodically, the SEC publishes a list of those foreign issuers that appear 

to be current under the exemptive provision. The most current list contains 

a total of 922 foreign issuers. 
Corporate Reorganizations 

During 1993, the Commission entered its appearance in 32 

reorganization cases filed under Chapter 11 of the Bankruptcy Code 

involving companies with aggregated stated assets of almost $4 billion and 

about 150,000 public investors. Counting these new cases, the Commission 

was a party in a total of 187 Chapter 11 cases during the year. In these 

cases, the stated assets totalled approximately $96 billion and involved 

over one million public investors. During 1993, 32 cases were concluded 

through confirmation of a plan of reorganization, dismissal, or liquidation, 

leaving 155 cases in which the Commission was a party at year-end. 

Table 11 

REORGANIZATION PROCEEDINGS UNDER CHAPTER 1 1 

OF THE BANKRUPTCY CODE IN WHICH 

THE SEC ENTERED APPEARANCE 

Debtor 

F.Y. F.Y. 

District O~ened Closed 

Action Auto Stores E.A. MI 

AD1 Electronics E.D. NY 

AIA Industries, Inc. E.D. PA 

A1 Copeland Enterprises, Inc. W.D. TX 

Alexander's Inc. S.D. NY 

Alleco 1nc.U D. MD 

Allegheny Internatronal, Inc. W.D. PA 

Alliant Computer Systems Corp. E.D. MA 

A.M. International 1nc.y D. DE 

Amdura Corporation D. CO 

American West Airlines, Inc. D. AZ 

Ames Department Stores, Inc., et a1.Y S.D NY 

Anglo Energy, Inc. 

Appletree Markets, Inc. 

Autodie Corporation??/ 

Banyon Corp. 

S.D. NY 

S.D. TX 

W.D. MI 

S.D. NY 

Barton Industries Inc. W.D. OK 

Bay Financial Corp.. et al. D. MA 

Beehive InternationaW D. UT 

Beker Industries Corp. S.D. NY 

Bonneville Paclfic Corporation D. UT 

Branch Industries. Inc. S.D. NY 

Camera Enterprises. Inc., et al. D. MA 

Carter Hawley Hale Stores Inc. C.D. CA 

Casacade International Inc S.D. FL 

C F & l CorporationU D. UT 

C~tywide Securities Corp.4 S.D. NY 

Chyron Corporation E.D. NY 
128

Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

Coated Sales, Inc. S.D. NY 1988

College Bound, Inc. S.D. FL 1993

Columbia Gas System, Inc. D. DE 1991

Conston Corporation E.D. PA 1990

Continental Alfllnes Holdings, Inc.1/ D. DE 1991 1993

Continental Information Systems S.D. NY 1989

CPT Corp. D. MN 1991

Crazy Eddie, Inc., et al S.D. NY 1989

Crompton Co.• Inc. S.D. NY 1985

Dakota Minerals, Inc D. WY 1986

Damson 011Co. S.D. TX 1991

Dest Corp. N.D. CA 1989

Diversified lndustrres, Inc. E.D. MI 1993

Domain Technology. Inc. N D. CA 1989

Drexel Burnham Lambert Group, ltd. S.D. NY 1990

Eagle Clothes, Inc. S.D. NY 1989

Eagle-Pitcher Industries, Inc. S.D. OH 1991

Eastern Air lines, Inc., et al. S.D. NY 1989

Edisto Resources Corporation1/ M D. DE 1993 1993

E.L. Fitzgerald!! N.D. FL 1993

EI Paso Electric Co. W.D. TX 1992

EL Paso Refinery Limited Partnership W.O. TX 1993

Endeyco, Inc. E.D. TX 1993

Enterpnse Technologies, Inc. S.D. TX 1984

Equestnan Ctrs. of Amer.• Inc. C.D. CA 1985

EUA Power Corporalion1/ D. NH 1991 1993

Everex Systems. Inc. N.C. CA 1993

Fairfield Communities Inc. E.D. AR 1991

F & C International, Inc. S.D. OH 1993

Fed. Depart./Allied Stores et al. S.D. OH 1990

Financial News Network, Inc. S.D. NY 1991

First Republicbank Corp. N.D. TX 1989

Forum Group Inc. et al. N.D. TX 1991

Gaylord Container Corp.1/ E.D. LA 1992 1993

General Technologies Group E.D. NY 1990

Greyhound Lines. et al.1/ S.D. TX 1990 1993

Hadson Corporation1/ W.O. OK 1993 1993

Hannover Corporation of America!! M.D. LA 1993

Harry Schrieber!! D. CO 1993

Healthcare International, Inc. W.O. TX 1992

-
Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. EY.

Debtor District Opened Closed

Hellonetics, Inc. C.D. CA 1986

Hills Department Stores S.D. NY 1991

I.M.T., Inc. D. MD 1992

Inlllght Services, Inc. S.D. NY 1967

Infotechnology Inc. S.D. NY 1991

Insllco Corp. W.O. TX 1991

Inlegra-A Hotel and Restaurant Co. O. CO 1993

Integrated Resources. Inc. S.D. NY 1990

Inter. American Homes, lne., et at, D. NJ 1990

Interco Inc.1/ E.D. MO 1991 1993

Ironstone Group, Inc.1/ N.D. CA 1991 1993

Jamesway Corporation S.D. NY 1993

Kaiser Steel Corp. O. CO 1967

Kinder-Care Learning Centers, Inc.1/ M.D. AL 1993 1993

King of Video. Inc. D. NY 1989

Koger Properties, Inc. M.D. FL 1992

Kurzwell Music Systems Inc. D. MA 1990

Laventhol & Horwath S.D. NY 1991

LeIsure Technology, Inc.1/ C.D. CA 1991 1993

Leslie Fay Companies. Inc. S.D. NY 1993

Library Bureau Inc. N.D. NY 1993

Lomas Financial Corp. S.D. NY 1990

Lone Star Industries, Inc. S.D. NY 1991

LTV Corporatlon1/ S.D. NY 1986 1993

MacGregor Sporting Goods. Inc. D. NJ 1989

Mallard Coach Co. W.O. IL 1993

Marathon Office Supply. Inc. C.D. CA 1988

Marcade Group Inc. S.D. NY 1993

Master Mortgage Investment Fund,

Inc. W.O. MO 1993

Max/care Health Plus Inc.1/ C.D. CA 1989

McLean Industries. Inc. S.D. NY 1987

MCorp (MCorp Financial. Inc.

& MCorp Management) S.D. TX 1989

McCroy Corp. S.D. NY 1992

McCrory Parent Corp. S.D. NY 1992

MEl Diversified, Inc.M D. DE 1993 1993

Meridian Reserve, Inc. W.O. OK 1989

Metro Airlines, Inc. et al.1/ N.D. TX 1991 1993

Midland Capital Corp. S.D. NY 1986

Midwest Communications Corp. E.D. KY 1991

Monarch Capitol Corp. D. MA 1991

129

-
130

Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

F.Y. F.Y.

Debtor District Opened Closed

MSR Exploration, ltd.l/ D. MT 1992 1993

National Financial Realty Trust S.D. IN 1990

National Gypsum Company N.D. TX 1991

NBllnc. D. CO 1991

Newmark & lewis S.D. NY 1991

Nutri Bevco, Inc. S.D. NY 1988

N.V.R., lPl/ E.D. VA 1992 1993

Occidental Development Fund 111M C.D. CA 1989

Occidental Development Fund IVM C.D. CA 1989

Occidental Development Fund VM C.D. CA 1989

Oliver's Stores E.D. NY 1987

DlR Development Fund lP C.D. CA 1989

OlR Development Fund HLP C.D. CA 1989

Orion Pi ctures Corp.l/ S.D. NY 1992 1993

Pacific Express Holding, Inc.V E.D. CA 1984 1993

PanAm Corporation S.D. NY 1991

Paul Harris Stores, Inc.1J S.D. IN 1991 1993

Peregrine Entertainment, ltd.1J C.D. CA 1989 1993

Premier 8enefit Capitol TrustM M.D. Fl 1993

Premium Sales CorporationM M.D. Fl 1993

Public Service Co. of New Hampshire D. NH 1988

OMax Technology Group, Inc. S.D. OH 1989

OT&T, Inc. E.D. NY 1987

Oublx Graphic Systems1J N.D. CA 1987

Ramtek Corporation N.D. CA 1989

Rax Restaurants Inc. S.D. OH 1993

Refinemet International, Inc. C.D. CA 1988

Reserve Rent-a-Car D. OH 1993

Residential Resources Mortgage

Investment Corporation D. AI. 1989

Resorts International, Inc. et al. D. NJ 1990

Revco D.S. Inc.M N.D. OH 1988

R.H. Macy & Co. Corp. S.D. NY 1992

Rymer Foods, Inc. N.D. III 1993

Sahlen & Associates S.D. NY 1989

Salant Corporationll S.D. NY 1990 1993

Sam S. Brown Jr.M W.O. GA 1993

Saratoga Standardbreds, Inc. N.D. NY 1990

Schepps Food Stores, Inc. S.D. TX 1992

Seatrain lines, Inc. S.D. NY 1981

Sharon Steel Corp. W.O. PA 1987

-
Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

f.Y. f.Y.

Debtor District Opened Closed

SIS Corporation N.D. OH 1989

Solitron Devices. Inc.1I jJ S.D. fl 1993 1993

Sorg Incorporated. et al. S.D. NY 1989

Southland Corporation N.D. 1)( 1991

Spencer Cos.• Inc. D. MA 1987

SPI Holding. Inc.1I jJ D. DE 1993 1993

Spring Meadows AssociatesjJ C.D. CA 1988

Standard Brands Paint Company1l CD. CA 1992 1993

Standard Oil and Exploration of

Delaware. Inc. W.O. MI 1991

Statewide Bancorp. D. NJ 1991

Sterling Optical Corp. N.D. OH 1992

1993

Swanton Corp. S.D. NY 1985

Systems for Health Care. Inc. N.D. IL 1988

Telstar Satellite Corp. of AmericajJ C.D. CA 1989

TGXCorp. W.O. LA 1990

The Centennial Group. Inc. C.D. CA 1992

The Circle K D. AI 1990

The first Connecticut Small

Business Investments Company D. CT 1991

The Group. Inc. D. NV 1990

The lionel Corp. S.D. NY 1991

The Regina Co. D. NJ 1989

Tidwell Industries. Inc. N.D. AL 1986

Todd Shipyards Corp. D. NJ 1988

Towle ManufactJRosemar Silver S.D. NY 1990

Traweek Investment fund No. 22.

ltd.jJ C.D. CA 1988

Traweek Investment fund No. 21. ltd. C.D. CA 1988

Trump Taj Mahal Funding. Inc. D. NJ 1991

TSl Holdings. Inc. S.D. CA 1993

U.S. Home Corp.1I S.D. NY 1991 1993

Wang laboratories. Inc.1I D. MA 1992 1993

Washington Bancorporation D. DC 1990

Wedgestone financial D. MA 1991

Wedtech Corp. S.D. NY 1987

Westworld Community Healthcare. Inc. C.D. CA 1987

Wheeling-Pittsburgh Steel Corp. W.O. PA 1985

WTD Industries, Inc.1I W.O. WA 1991 1993

lale Corporation, Inc. N.D. 1)( 1992

lenox. Inc. D. NH 1993

131

-
Table 11 continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11

OF THE BANKRUPTCY CODE IN WHICH

THE SEC ENTERED APPEARANCE

Debtor

Total Cases Opened (FY 1993): 32

Total Cases Closed (FY 1993)' 32

District

F.Y.

Opened

F.Y.

Closed

132

jJ Plan of reorganization confirmed.

21 Debtor liquidated under Chapter 7.

3J Chapter 11 case dismissed.

jJ Debtor's securities not registered under Section 12(g) of the Exchange Act.

-
The Securities Industry 

Revenues, Expenses, and Selected Balance Sheet Items 

Broker-dealers that are registered with the Commission earned a pretax profit of $9.1 billion in calendar year 1992. This was $500 million more 

than the previous year and a record amount for the second year in a row. 

Broker-dealers had a pre-tax return on equity capital of 22%, slightly above 

the historical average. 

While activity in most components of the securities business increased 

in 1992, the dealer side was exceptional. Underwriting revenues rose $1.7 

billion to a new high of $8.3 billion. Low interest rates and high price-earnings 

ratios were the driving force behind a record volume of new issues. Low 

interest rates encouraged corporations, municipalities, and individuals 

with callable debt to refinance. Corporations took advantage of a favorable 

equity market to de-leverage by offering additional stock to the public 

and using the proceeds to retire debt. 

Gains from trading and investments of $21.9 billion were down about 

$800 million from last year's record. Trading volume in issues that 

typically are traded over-the-counter and result in trading gains-U.S. 

Government securities, corporate debt securities, and NASDAQ stockwas at a record level. The slight decline in revenues from trading these 

securities likely reflects the small change in equity and debt prices that 

occurred during 1992. Opportunities for generating capital gains on their 

inventories of debt and equity securities were fewer in 1992 than they were 

during the 1991 bull market. 

The agency business also was profitable in 1992. Revenues from 

retailing mutual funds rose, a new record, $1.8 billion to $5.9 billion as 

investors disappointed with low rates on bank savings instruments sought 

out higher returns in bond and stock mutual funds. Transactions in 

exchange-listed securities were at their highest level since 1987, contributing 

to $16.3 billion in securities commissions, a $2.1 billion increase from the 

previous year. Margin interest declined by $100 million to $2.7 billion 

as the record volume of margin debt outstanding was overwhelmed by 

declining interest rates. 

"All other revenues," which are dominated by interest income from 

securities purchased under agreements to resell and fees from handling 

private placements, mergers, and acquisitions, increased by $1.1 billion 

in 1992. The major components of this revenue item increased slightly 

or held constant in 1992. Merger and acquisition activity was flat in 1992, 

remaining well below the levels of recent years. The value of new private 

placements rose by 10%. The value of reverse purchase agreements 

outstanding increased substantially during 1992, but the interest rate paid 

on these instruments declined so the net effect on revenues is unknown. 

Expenses rose 7% to $81.6 billion in 1992. Employee compensation 

increased by $5.2 billion, or 19%. Total assets rose by almost $200 billion 

to $979.7 billion. Equity capital increased by $5.0 billion to $44.0 billion. 
Table 12

UNCONSOLIDATED FINANCIAL INFORMATION FOR BROKER-DEALERS

1988 199211

($ in Millions)

1988 1989 1990 1991' 1992'

Securities Commissions s 11.932.4 $ 13.452.0 $ 12.032.2 $ 14.209.7 $ 16.288.7

Gains (Losses) in Trading and

IlMlSlment Accounts 16.667.0 16,246.6 15,746.5 22.641.3 21.860.3

Profits (Losses) from Underwriting

and Selling Groups 5.606.8 4.536.6 3,728.3 6.592.6 8.301.2

Margin Interest 3.154.6 3.859.7 3.179.4 2.771.1 2.695.4

Revenues from Sale oflllYestment

Company Shares 2.644.0 3.038.1 3,241.6 4.176.3 5.949.4

All Other Revenues 26.095.5 35,731.1 33.428.3 34.498.5 35.579.2

Total Revenues $ 66.100.4 $ 76.864.0 $ 71.356.2 $ 84.889.5 $ 90.694.2

Registered Representatives.

Compensation (Part II Only) 21 $ 9.004.4 $ 8.975.2 $ 8.267.2 $ 9.911.7 $ 12.117.9

OlIIer Employee Compensation

and Benefits 12.150.0 12.497.6 12.512.8 14.444.1 17.0965

Compensation to Partners and

Voting Stockholder Olfi cers 2,263.8 2,267.6 2.150.6 2.560.5 2.9024

Commissions and Clearance Paid

to Other Brokers 2.803.8 3.056.8 2.959.4 3,200.5 3,731.0

Interest Expenses 19.502.0 29.822.5 28.093.1 27.511.8 24.591.7

Regulatory Fees and Expenses 490.0 573.7 564.3 5n.1 641.5

All Other Expenses 21 16.409.2 16.847.8 16.018.6 18,027.9 20.488.9

Total Expenses S 62.623.0 S 74.041.1 S 70.566.1 S 76.233.6 S 81.569.9

Income and profilabtljly

Pre-tax Income $ 3.477.3 $ 2.822.9 $ 790.1 $ 8.655.9 $ 9.124.3

Pre-tax Profit Margin 5.3 3.7 1.1 10.2 10.1

Pre-tax Return on Equity 9.8 7.7 2.2 23.6 22.0

Asse!:; Uabilibes and Gapltal

Total Assets $546,215.7 $652.177.0 $657,226.5 $787,716.3 $979.742.9

liabilities

(a) Unsubordinated Uabililies 495.705.6 600.440.7 607.603.0 $732,290.2 917.542.8

(b) Subordinated Uabllilies 13.974.2 15.354.7 15.090.8 16.347.1 18.165.5

(c) Total Uabililies 509.679.8 615,795.4 622.893.8 748.637.3 935.708.3

Ownership Equity $ 36.535.9 $ 36.381.5 $ 34.332.7 $ 39.079.1 $ 44.034.6

Number of Firms 9,217 8.832 8.437 7,763 7.805

Agures may not add due to roUnding.

r revised

p preliminary

jJ Calendar. rather than fiscal. year daIa is reported in this table.

21 Registered representaliws' compensation for firms that neither carry nor clear Is Included in .other expenses.

as this expense item is not reported sepa!3tely on Part IIA of the FOCUS Report.

Source: FOCUS Report

134

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~

=

=
Table 13

UNCONSOLIDATED ANNUAL REVENUES AND EXPENSES FOR BROKER-DEALERS

DOING A PUBLIC BUSINESS

1988 1992 lJ

($ in Milions)

1988 1989 1990 1991' 1992-

Securities Commissions $11,515.3 $13.012.7 $11,659.7 $13,710.8 $15,460.6

Gains (losses) in Trading and

Investment Accounts 15.296.3 15,048.6 14.869.5 21.371.7 20,724.4

Profits (losses) from UndelWriting

and Selling Groups 5.605.6 4.536.4 3,728.0 6.591.4 8.190.4

Margin Interest 3,135.5 3,813.3 3,158.8 2,732.4 2,645.2

Revenues from S31e of Investment

Company Shares 2,643.2 3.037.8 3,241.6 4.176.2 5.847.5

All Other Revenues 26.039.0 35.189.4 32,578.0 33.746.8 34,681.8

Total Revenues $64.235.0 $74,638.3 $69.235.6 $82.329.3 $87.549.9

Registered Representatives'

Compensation (Part II only) 21 S 8.993.3 $ 8.962.7 $ 8.245.3 $ 9.900.6 $11.756.2

Other Employee Compensation

and Benefits 11,900.9 12,191.4 12,209.2 14,066.5 16,551.3

Compensation to Partners and

Voting Stockholder Officers 2.063.5 2.090.0 1.983.5 2.376.4 2.689.6

Commissions and Clearance Paid

to Other Brokers 2,641.0 2,867.9 2,796.2 3.003.2 3,481.2

Interest Expenses 19,268.1 29,354.6 27,630.6 27,088.1 24.208.3

Regulatol}' Fees and Expenses 451.9 516.0 509.4 511.2 580.5

All Other Expenses 21 15.968.3 16.348.5 15.580.4 17.457.5 19,730.4

Total Expenses $61.287.0 $72.331.0 $68,954.4 $74.403.4 $78.997.6

Income and Profitabilitv

Pre-laX Income $ 2.948.0 $ 2.307.3 $ 281.2 S 7,925.9 S 8.552.3

Pre-laX Profit Margin 4.6 3.1 0.4 9.6 9.8

Pre-laX Retum on Equity 9.0 6.8 0.9 23.3 22.2

Number of Firms 6,005 5,746 5,424 5.115 5,089

Figures may not add due to rounding.

r revised

p prellmin3l}'

jJ Calendar. l31herthan fiscal, year data is reported In this lable.

21 Registered represenlalives' compensation for firms that neilher carl}' nor clear is included in .other expenses"

as this expense Item is not reported separately on Part IIA of the FOCUS Report

Source: FOCUS Report

135

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=

=
Table 14

UNCONSOLIDATED BALANCE SHEET FOR BROKER-DEALERS

DOING A PUBLIC BUSINESS

YEAR-EN D, 1988 19921/

($ in Millions)

1988 1989 1990 1991' 1992'

Cash $ 9,612.2 $ 9,870.8 $ 10.968.1 $ 10,351.2 $ 10,989.2

Receivables from Other

Broker-dealers 67,5982 90,157.3 118.413.1 161.484.4 215,769.5

Receivables from Customers 40,236.3 40,320.4 37,m.8 50.861.1 49.055.4

Receivables from Non-customers 3,061.9 1.362.9 1.157.7 2.126.1 4.266.9

long Positions in Securities

and Commodities 130.758.1 211,232.1 208,166.3 245.164.5 293.410.7

Securities and Investments

not Readily Marketable 618.9 1,247.5 1,1902 1,863.9 2,376.0

Securities PlI'chased Under Agreements

to Resell (Part Ionly) 21 258,034.5 257,235.0 237,235.6 272.226.1 350,083.3

Exchange Membership 363.7 360.5 332.3 313.4 311.9

Other Assets 21 23,424.1 26.356.5 26.014.3 23,5212 26.464.9

TolaI Assets $533,707.8 $638,143.0 S640,655.5 $767,911.8 1952,727.7

liabilities and Equity CaPital

Bank loans Payable $ 22,953.6 $ 22,759.5 $ 18,342.2 $ 24,905.6 $ 33,592.1

Payables to Other Broker-dealers 46,336.5 49.602.0 46,038.9 63,291.9 67,809.1

Payables to Non-customers 4,143.7 4,610.4 7,510.5 13,730.6 6,592.6

Payables to Customers 39,312.9 46,969.3 55,549.7 71.977.5 69,677.9

Short Positions in Securities

and Commodities 92,414.4 93,682.7 104.690.0 113.000.9 156.900.0

Securities Sold Under Repurchase

Agreemenls (Part II only) 21 243,828.7 328.382.8 320,773.3 385,655.1 500,217.8

Other Non-subordinated lIabllities 2J 37,016.5 43,067.2 40.9732 43,738.8 59,452.9

Subordinated liabilities 13,534.5 14,991.9 14,763.0 15.464.1 17.622.4

Total liabilities $499,540.8 S604,065.8 S608,640.8 $731,764.6 $911,864.6

Equity Capital $ 34,166.9 S 34,077.2 S 32,014.6 S 36.147.3 S 40,863.1

Number of firms 6,005 5,746 5,424 5,115 5,089

Figures may not add due to rounding.

r= revised

p prellmlllaIY

1I Calendar, rather IIaIfiscal, year daIa Is reported in Uis labIe.

2J Resale agreemem and repurchase agreemenls for firms that neIlher l3IY nor cIelf are Included in "other

assets" and "other non-subordinated liabilities: respectiYeIy, as these IIems are not reporlBd separaleIy on

Part 11.4ollhe FOCUS Report.

Source: FOCUS Report

136

-

~

=
Carrying and Clearing Firms 

Data for carrying and clearing firms that do a public business is 

presented here to allow for more detail. Reporting requirements for firms 

that neither carry nor clear are less detailed. Data aggregation of these 

two types of firms results in loss of detail. 

Carrying and clearing firms are those firms that clear securities 

transactions or maintain possession or control of customers' cash or 

securities. This group produced 83% of the securities industry's total 

revenues in calendar year 1992. 

Brokerage activity accounted for about 23 cents of each revenue dollar 

in 1992, about the same as the level in 1991. Securities commissions were 

the most important component, producing 15 cents of each dollar of 

revenue. Margin interest generated about 3 cents of each dollar of revenue, 

while revenues from mutual fund sales accounted for about 5 cents. 

The dealer side produced 65 cents of each dollar of revenue, down 

from 68 cents in 1991. Twenty-five cents came from trading and investments, 

a decrease from 27 cents in 1991. Ten cents came from underwriting, up 

from 9 cents in 1991. Twenty-nine cents came from other securities-related 

revenues, a drop from 32 cents in 1991. This revenue item is comprised 

primarily of interest income from securities purchased under agreements 

to resell and fees from handling private placements, mergers, and 

acquisitions. 

Expenses accounted for 90 cents of each revenue dollar in 1992, 

resulting in a pre-tax profit margin of 10 cents per revenue dollar, the 

same as 1991. Employee-related expenses-compensa tion received by 

registered representatives, partners and other employees-displaced interest 

as the most important expense item, accounting for 35 cents of each revenue 

dollar in 1992, compared to 31 cents in 1991. Interest consumed 32 cents 

of each revenue dollar in 1992, compared to 37 cents in 1991. 

Total assets of broker-dealers carrying and clearing customer accounts 

were $934.5 billion at year-end 1992, a 23% increase from 1991. Borrowed 

securities and reverse repurchase agreements accounted for a 

disproportionate share of the increase in assets. These assets are effectively 

collateral for secured loans and can serve to acquire securities to make 

delivery on short sales. A parallel pattern existed on the liability side, 

with virtually all of the $173 billion increase in liabilities representing 

repurchase agreements and short positions. These two items now account 

for 70% of the liabilities of clearing and carrying firms. 

Owners' equity rose 11% from $31.6 billion in 1991 to $35.0 billion 

in 1992. 
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Table 16

UNCONSOLIDATED REVENUES AND EXPENSES FOR

CARRYING/CLEARING BROKER-DEALERS 11

($ in Millions)

1991' 1992'

Percert Percert Percert

ofToIaI ltToIaI Chcr1ge

DoIIcn RtvellJes DoI~ ReveIlJes 1991-1992

SeClJIIJes CommSSlons $10,340.4 14.3% $11,416.4 152% 10.4%

GaJns(losses) m Tradmg and

Investment Accounts 19,771.3 27.3 18,748.0 250 (5.2)

Profrts (losses) From Underwriting

and Sellmg Groups 6,275.5 8.7 7,742.8 103 23.4

Margm Interest 2,732.4 3.8 2,645.2 3.5 (3.2)

Revenues from Sale of Investment

Company Shares 2,710.5 3.7 3,588.0 48 32.4

Miscellaneous Fees 2,702.9 3.7 3,358.0 4.5 24.2

Revenues from Research 25.1 22.5 (10.4)

Other Securities Related Revenues 23,249.2 32.1 21,9754 29.3 (5.5)

Commodities Revenues 881.7 1.2 1,853.7 2.5 110.2

All Other Revenues 3,731.1 5.2 3,718.6 5.0 (03)

Total Revenues $72,420.2 100.0% $75,068.5 100.0% 3.7%

.ExDJmlli

Registered Representabves' Compensabon $ 9,900.6 13.7% $11,756.2 15.7% 187%

Other Employee Compensabon and Benefits 11,215.6 15.5 12,995.1 17.3 15.9

Compensabon to Partners and Votmg

Stockholder Officers 1,569.9 2.2 1,672.1 2.2 6.5

Commissions and Clearance Paid to

Other Brokers 1,974.9 27 2,125.5 28 76

Communications 2,304.2 32 2,449.3 3.3 6.3

Occupancy and Equipment Costs 3,214.2 4.4 3,266.7 4.4 1.6

Data Processing Costs 774.9 1.1 9265 1.2 19.6

Interest Expenses 26,934.3 37.2 24,0125 32.0 (10.8)

Regulatory Fees and Expenses 436.5 0.6 490.6 07 12.4

losses in Error Accounts and Bad Debts 413.3 0.6 432.1 0.6 4.5

All Other Expenses 7,013.5 97 7,816.6 10.4 11.5

Total Expenses $65,751.8 90.8% $67,943.1 90.5% 3.3%

Income and Profitability

Pre-tax Income S 6,668.3 S 7,125.3

Pre-tax Profit Margin 9.2 9.5

Pre-tax Retum on Equity 22.5 21.4

Number of Firms 886 868

Figures may not add due to rounding .

under .05%.

r revIsed

p prelimill3lY

l! Calendar, rather than fiScal, year data is reported in thiS table.

Note. Includes intormalion for firms doing a public business that carry customer accounts or clear seeunnes

transactions.

Source: FOCUS Report

139

~

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=

=
Table 17

UNCONSOLIDATED BALANCE SHEET FOR CARRYING/CLEARING

BROKER-DEALERS 1/

($ In Millions)

Year-end 1991' Year-end 1992-

Percent Percent Percent

oIToIaJ of Total Change

Dollars Assets Dollars Assets 1991-1992

Assets

Cash $ 9.673.7 1.3% $ 10.186.3 1.1% 5.3%

ReceIVables from Other Broker-dealers 159,063.4 21.0 212.463.5 22.7 33.6

(a) SecuritJes FaJledto DelIVer 13.586.0 1.8 11,111.2 12 (18.2)

(b) Securities Borrowed 132,477.1 17.5 186,110.0 19.9 40.5

(c) Other 13,000.2 1.7 15,242.2 1.6 17.2

ReceIVables from Customers 50.861.1 6.7 49,055.4 52 (3.6)

ReceIVables from Non-customers 1,881.8 02 3,930.0 0.4 108.8

Long PositJons in Securities and

Commodrties 240,265.9 31.7 284,118.2 30.4 18.3

(a) Bankers Accep13nces, Cer!lficates

of Deposll and Commercial Paper 10,493.6 1.4 10,597.8 1.1 1.0

(b) U.S. and Canadian Government

Obligations 163.681.6 21.6 194,735.4 20.8 19.0

(c) Slate and MUnicipal Government

Obligations 9,428.1 12 11,304.3 12 19.9

(d) Corporate Obligations 37.192.0 4.9 46,932.1 5.0 26.2

(e) Stocks and Warrants 13,118.5 1.7 13.m.8 1.4 2.7

(f) Options 1,266.4 0.2 883.3 0.1 (30.3)

(g) ArbitJage 3,127.9 0.4 3.875.6 0.4 23.9

(h) Other Securibes 1,5472 0.2 1,824.0 02 17.9

(i) Spot Commodities 196.2 487.8 0.1 148.6

Securrties and Il1YestmentsNot Readily Marketible 1,7582 0.2 2,231.8 02 26.9

Securities Purchased Under Agreements to Resell 272,226.1 35.9 350,083.8 37.5 28.6

Exchange Membership 283.3 279.6 (1.3)

Other Assets 21.325.5 2.8 22.196.4 2.4 4.1

Total Assets $757,339.0 100.0% $934.544.2 100.0% 23.4%

LlilbUijjes and EQuitYCaPItal

Bank Loans Payable $ 24,816.1 3.3% $ 33,405.8 3.6% 34.6%

Payables to Other Broker-dealers 62,122.3 82 63,059.7 6.7 1.5

(a) Securibes Failed to Recetve 13,385.2 1.8 11,493.5 12 (14.1)

(b) Securrlies Loaned 36,794.8 4.9 42,865.8 4.6 16.5

(c) Other 11,942.4 1.6 8,700.4 0.9 (27.1)

Payables to Non-customers 13,360.7 1.8 6,306.7 0.7 (52.8)

Payables to Customers 71,977.5 9.5 69,677.9 7.5 (3.2)

Short Positions in Securities and Commodities 110,5762 14.6 152.528.1 16.3 37.9

Securrties Sold Under Repurchase Agreements 385,655.1 50.9 500,217.8 53.5 29.7

Other Non-subordinated Liabilities 42,366.6 5.6 57,498.2 6.2 35.7

SUbordinated Liabilrties 14,893.8 2.0 16,805.9 1.8 12.8

Totalliabililles $725,768.3 95.8 $899,500.0 96.3 23.9

Eqully Capital $ 31.570.7 42% $ 35,044.2 3.7% 11.0%

Number of Firms 886 868

Figures may not add due to rounding . under .05%

r revised

p prelimlnaIY 11 Calendar. rather !han fiScal'Jrear data is reported In this lab/e.

Note: Includes Information for ums doing a public business that earlY customer accounts or clear securities !lansactions.

Source: FOCUS Report

140

•

=

=
Securities Traded on Exchanges 

Market Value and Volume 

The market value of equity and option transactions (trading in stocks, 

options, warrants, and rights) on registered exchanges totaled $2.1 trillion 

in 1992. Of this total, approximately $2.0 trillion, or 95%, represented the 

market value of transactions in stocks, rights and warrants; $116 billion, 

5%) were options transactions (including exercises of options on listed 

stocks). 

The value of equity and option transactions on the New York Stock 

Exchange (NYSE) was $1.8 trillion, up 15% from the previous year. The 

market value of such transactions on the American Stock Exchange (Amex) 

increased 2% to $70.6 billion and 7% to $320.2 billion on all other exchanges. 

The volume of trading in stocks (excluding rights and warrants) on all 

registered exchanges totaled 65.5 billion shares, a 13% increase from the 

previous year, with 81 % of the total accounted for by trading on the NYSE. 

The volume of options contracts traded (excluding exercised contracts) 

was 202 million contracts in 1992, 2% greater than in 1991. The market 

value of these contracts decreased 5% to $72.2 billion. The volume of 

contracts executed on the Chicago Board Options Exchange was virtually 

unchanged at 121.5 million. Option trading on the Amex and Philadelphia 

Stock Exchanges rose 9% and 3%, respectively. Option trading on the 

Pacific Stock Exchange fell 6%. 
NASDAQ (Share Volume and Dollar Volume) 

NASDAQ share volume and dollar value information has been reported 

on a daily basis since November 1, 1971. At the end of 1992, there were 

4,764 issues in the NASDAQ system, as compared to 4,684 a year earlier 

and 3,050 at the end of 1980. 

Share volume for 1992 was 48.5 billion, as compared to 41.3 billion 

in 1991 and 6.7 billion in 1980. This trading volume encompasses the 

number of shares bought and sold by market makers plus their net inventory 

changes. The dollar volume of shares traded in the NASDAQ system was 

$890.8 billion during 1992, as compared to $693.9 billion in 1991 and $68.7 

billion in 1980. 

Share and Dollar Volume by Exchanges 

Share volume on all registered stock exchanges totaled 65.5 billion, 

an increase of 13% from the previous year. Notably the New York Stock 

Exchange accounted for 81% of the 1992 share volume; the American Stock 

Exchange, 6%; the Midwest Stock Exchange (became the Chicago Stock 

Exchange on June 11, 19931, 5%; the Pacific Stock Exchange, 3%. 

The dollar value of stocks, rights, and warrants traded was $2 trillion, 

14% higher than the previous year. Trading on the New York Stock 

Exchange contributed 86% of the total. The Midwest Stock Exchange and 

Pacific Stock Exchange contributed 4% and 3%, respectively. The American 

Stock Exchange accounted for 2% of dollar volume. All other exchanges 

each contributed less than 2% to the total. 
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Table 20

SHARE VOLUME BY EXCHANGES 11

(In Percentage)

Total Share

Volume

Year (in Thousands) NYSE AMEX MS~ PSE PHLX SSE CSE Others'JI

1945 769,018 65.87 21.31 1.77 2.98 1.06 0.66 0.05 6.30

1950 893.320 76.32 13.54 2.16 3.11 0.97 0.65 0.09 3.16

1955 1,321,401 68.85 19.19 2.09 3.08 0.85 0.48 0.05 5.41

1960 1,441,120 68.47 22.27 2.20 3.11 0.88 0.38 0.04 2.65

1961 2,142,523 64.99 25.58 222 3.41 0.79 0.30 0.04 2.67

1962 1,711,945 71.31 20.11 2.34 2.95 0.87 0.31 0.04 2.07

1963 1,880,793 72.93 18.83 2.32 2.82 0.83 0.29 0.04 1.94

1964 2,118,326 72.81 19.42 2.43 2.65 0.93 0.29 0.03 1.44

1965 2,671,012 69.90 22.53 2.63 2.33 0.81 0.26 0.05 1.49

1966 3,313,899 69.38 22.84 2.56 2.68 0.86 0.40 0.05 1.23

1967 4,646,553 64.40 28.41 2.35 2.46 0.87 0.43 0.02 1.06

1968 5,407,923 61.98 29.74 2.63 2.64 0.89 0.78 0.01 1.33

1969 5,134,856 63.16 27.61 2.84 3.47 1.22 0.51 0.00 1.19

1970 4,834,887 71.28 19.03 3.16 3.68 1.63 0.51 0.02 0.69

1971 6,172,668 71.34 18.42 3.52 3.72 1.91 0.43 003 0.63

1972 6,518,132 70.47 18.22 3.71 4.13 2.21 0.59 0.03 0.64

1973 5,899,678 74.92 13.75 4.09 3.68 2.19 0.71 0.04 0.62

1974 4,950,842 78.47 10.28 4.40 3.48 1.82 0.86 0.05 0.64

1975 6,376,094 80.99 8.97 3.97 3.26 1.54 0.85 0.13 0.29

1976 7,129,132 8005 9.35 3.87 3.93 1.42 0.78 0.44 0.16

1977 7,124,640 79.71 9.56 3.96 3.72 1.49 0.66 0.64 0.26

1978 9,630,065 79.53 10.65 3.56 3.84 1.49 0.60 0.16 0.17

1979 10.960,424 79.88 10.85 3.30 3.27 1.64 0.55 0.28 0.23

1980 15,587,986 79.94 10.78 3.84 2.80 1.54 0.57 0.32 0.21

1981 15,969,186 80.68 9.32 4.60 2.87 1.55 0.51 0.37 0.10

1982 22,491,935 8122 6.96 5.09 3.62 2.18 0.48 0.38 0.07

1983 30,316,014 80.37 7.45 5.48 3.56 2.20 0.65 0.19 010

1984 30,548,014 82.54 5.26 6.03 3.31 1.79 0.85 0.18 0.04

1985 37,187,567 81.52 5.78 6.12 3.66 1.47 1.27 0.15 0.03

1986 48,580,524 81.12 6.28 5.73 3.68 1.53 1.33 0.30 0.02

1987 64,082,996 83.09 5.57 5.19 3.23 1.30 1.28 0.30 0.04

1988 52,665,654 83.74 4.95 5.26 3.03 1.29 1.32 0.39 0.02

1989 54,416,790 81.33 6.02 5.44 3.34 1.80 1.64 0.41 0.02

1990 53,746,087 81.86 6.23 4.68 3.16 1.82 1.71 0.53 0.Q1

1991 58,296,284 82.00 5.52 4.66 3.58 1.60 1.77 0.86 0.01

1992 65,743,023 81.29 5.73 4.62 3.18 1.72 1.57 1.83 0.06

jJ Share volume for exchanges includes stocks, rights and wanants; calendar, rather than fiscal, year dala is

reported In this table.

2/ The Midwest Stock Exchange changed its name in 1993 to the Chicago Stock Exchange.

Includes all exchanges not listed individually.

Source: SEC Form R-31

145

~
Table 21 

DOLLAR VOLUME BY EXCHANGES 11 

(In Percentage) 

TOW Dollar 

Volume 

Year (S in Thousands) NYSE AMM MSEY PSE PHLX BSE CSE OthersY 

- -- 

I/ Dollar volume for exchanges includes stocks, rights and warrants; calendar. rather tttan fiscal, year data is 

reported in thls Mle. 

Y The Midwest Stock Exchange changed its name in 1993 to be Chicago Stock Exchange. 

Y Includes all exchanges not l~sted individually. 

Source: SEC Form A-31 

146 
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Table 23 

VALUE OF STOCKS LISTED ON EXCHANGES 

($ in Billions) 

New York American Exclus~vely 

As of Stock Stock On Other 

Dec 31 Exchange Exchange Exchanges Total 

1938 S 47.5 S 10.8 S ..... S 58.3 

1940 46.5 10.1 ..... 56.6 

1941 41.9 8.6 . ... 50.5 

1942 35.8 7.4 . ... 432 

1943 47.6 9.9 ..... 57.5 

1 944 55.5 112 ..... 66.7 

1 945 73.8 14.4 ..... 88.2 

1 946 68.6 13.2 ..... 81.8 

1947 68.3 12.1 ..... 80.4 

1948 67.0 11.9 3.0 81.9 

1 949 76.3 12.2 3.1 91.6 

1950 93.8 13.9 3.3 111.0 

1951 109.5 16 5 3.2 1292 

1952 120.5 16.9 3.1 140.5 

1953 11 7.3 15.3 2.8 135.4 

1954 169.1 22.1 3.6 194.8 

1955 207.7 27.1 4.0 238.8 

1956 219.2 31 .O 3.8 254.0 

1957 195.6 25.5 3.1 224.2 

1958 276.7 31.7 4.3 312.7 

1959 307.7 25.4 4.2 337.3 

1960 307.0 242 4.1 335.3 

1961 387.8 33.0 5.3 426.1 

1962 345.8 24.4 4.0 3742 

1 963 411.3 26.1 4.3 441.7 

1 964 474.3 28.2 4.3 5068 

1 965 537.5 30.9 4.7 573.1 

1966 482 5 27.9 4.0 514.4 

1967 605.8 43.0 3.9 652.7 

1968 692.3 61.2 6.0 759.5 

1969 629.5 47.7 5.4 682.6 

1970 636.4 39.5 4.8 680.7 

1971 741.8 49.1 4.7 795.6 

1972 871.5 55.6 5.6 932.7 

1973 721.0 38.7 4.1 763.8 

1974 511.1 23.3 2.9 537.3 

1975 685.1 29.3 4.3 718.7 

1976 858.3 36 0 4.2 898.5 

1977 776.7 37.6 4.2 818.5 

1978 822.7 39.2 2.9 864.8 

1979 960.6 57.8 3.9 1.022.3 

1980 1,242.8 103.5 2.9 1.3492 

1981 1,143.8 89.4 5.0 1,2382 

1982 1.305 A 77.6 6.8 1.389.7 

1983 1.522.2 80.1 6.6 1,608.8 

1 984 1,529.5 52.0 5.8 1,5873 

1985 1.882.7 632 5.9 1,951.8 

1 986 2,128 5 70.3 6.5 2.205.3 

1987 2,132.2 67.0 5.9 2.205.1 

1988 2,366.1 84.1 4.9 2,455.1 

1989 2,903.5 100.9 4.6 3.009.0 

1990 2,692.1 69.9 3.9 2.765.9 

1991 3,5475 903 4.3 3.642.1 

1992 3,877.9 86.4 5.9 3,970.2 

Source: SEC Form 1392 

148 
Table 24

APPROPRIATED FUNDS vs FEES. COLLECTED

$ Millions

550

516.8

500

450

400

350

300

253.2

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offsetting collections not In appropriated estimates.

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