!' r'

r; ~T --.J '_ .:

, - - ! !

'749tl1Annual Report

lj.5/-ef-tfle Securities and

-:::;

Exchange Commission

for the fiscal year

ended September 30,-198}

" -~ ~

'
For sale by the Superintendent of Documents. U S. Government Printing Office

Wa.hlngtoll. DC 20402
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

OFFICE OF

THE CHAIRMAN

January 3D, 1984

The Honorable George Bush

President, U.S. Senate

Washington, D.C. 20510

The Honorable Thomas P. O'Neill, Jr.

Speaker, U.S. House of Representatives

Washington, D.C. 20515

Gentlemen:

The fiscal year ended September 30,1983 was another record year, in terms of

the volume and efficacy of the Commission's efforts.

Investor protections and corporations' financing flexibility were increased, and

unnecessary regulatory burdens, paperwork and other expenses were reduced

by over a billion dollars per annum.

As a result of productivity improvements, the Commission's major divisions

have achieved record results, or the highest levels in several years, in each of the

last two fiscal years, despite personnel reductions and budgetary constraints.

By comparison with fiscal 1981, in fiscal 1983:

37% more enforcement cases were brought;

28% more investment company and adviser inspections were conducted;

.16% more broker-dealer reports were processed;

and 15% more full disclosure filings were handled;

than in fiscal 1981, despite a 3% reduction in personnel.

Registration and other fees amounted to 110% of the Commission's fiscal 1983

budget, as compared with 81% and 94% in the two prior years.

iii

•

•

•

•
Securities and Exchange Commission

Fiscal Years

Ended September 30th 1981-3

1981 1982 1983 Change

Enforcement Cases Brought 191 254 261" +37%

Investment Company and Advisor

Inspections Conducted 848 1,065 1,085" +28%

Broker-Dealer Reports Processed 6,106 6,599 7,067" +16%

Full Disclosure Filings Handled 56,919 63,423 65,550 +15%

Total Staff-Years 1,982 1,881 1,921 -3%

Fees Received as a Percent of the

SEC Budget 81% 94% 110%

"-A record or the highest level in several years.

Enforcement

Enforcement is the largest activity at the Commission. It accounts for a third of

the total budget.

Nearly 60% of the 261 cases brought in fiscal 1983 were injunctive actions.

Most concerned broker-dealers, corporate issuers and associated persons, and

involved alleged hard-core fraud, such as misrepresentations in the sale of

securities, conversions of investors' funds and market manipulation.

Eight percent of the 261 were insider trading cases. The 24 brought in fiscal

1983 and 20 in fiscal 1982 amount to 35% of all the insider trading cases that

have been brought by the Commission.

In fiscal 1983, $11 million in disgorgement and $53 million in asset freeze

orders were obtained for the benefit of investors, and $33 and $37 million,

respectively, the year before.

Most of the 261 cases have been settled under consent decrees in which the

defendants have neither admitted nor denied the charges, but have committed

not to engage in such activities in the future.

Insider Trading Sanctions Act

The Commission proposed this bill in fiscal 1983. It has been approved by the

House and is pending in the Senate. It would permit the courts to levy civil fines

equal to three times insider traders' profits (or losses avoided); and would

iv

"
increase criminal fines for certain violations, including manipulation and fraud

in the sale of securities, from $10,000 (established in 1934) to $100,000.

Intermarket Surveillance

At the Commission's initiative, the stock exchanges and the National Association

of Securities Dealers (NASD) are enhancing their electronic inter-market surveillance systems and audit trails, which permit the quick identification of

market manipulation and insider trading. This program is expected to "pay for

itself' by reducing transaction reconciliation costs.

Integration

Corporations' registration and reporting requirements (under the 1933 and 1934

securities acts) were integrated in fiscal 1982. Integration has increased corporations' financing flexibility and reduces their fiscal 1983 expenses (for the benefit

of their shareholders) by over $350 million per annum, as well as the Commission's paperwork, but not disclosures to the investing public.

Shelf-Registration

The revised shelf registration rule, adopted in November 1983, permits the

largest and most creditworthy corporations to file a single registration statement

covering securities they expect to sell from time to time within two years.

Over $70 billion of debt and $13 billion of equity offerings have been filed under

the shelf rule.

Based on an independent economic analysis, the discounted present value of

interest saving to corporate debt issuers to date under the shelf rule has been

hundreds of millions of dollars.

Small Business Financings

For the benefit of smaller businesses, in September 1983, the Commission

increased the ceilIng from $5 to $7.5 million for initial public offerings under

Form 5-18, an abbreviated registration statement.

Financing Exemptions

Certain offerings, up to $5 million to others than the general public, were

exempted from registration in fiscal 1982. In fiscal 1983 several states adopted

similar exemptions, which were the first joint state and federal registration

exemptions. The exemptions for larger private placements were also simplified.

In fiscal 1983, over $20 billion of financings were effected under these new

exemptions at substantial savings to issuers.

Book Entry Delivery System

Expansion of the institutional book-entry delivery system is expected to save

brokers and agent banks over $350 million per annum. This recommendation

by the securities exchanges and the NA5D was approved by the Commission in

November 1983.

Option Clearing Corporation Deposits

The July 1983 Commission approval of updated Option Clearing Corporation

deposit requirements is expected to free-up $300 million of securities industry

v
capital. This is in addition to the $700 million freed-up in fiscal 1982, by

updating the net capital and securities clearing house deposit requirements.

SECO Legislation

In a joint effort with the NASD, legislation was enacted in June 1983, which

abolished the SECO program, under which the Commission staff has been

directly supervising and inspecting 600 over-the-counter firms. These firms are

now subject to the NASD's jurisdiction, under the Commission's oversight.

Investment Companies

In August 1983, investment company prospectuses were simplified and improved. This has reduced expenses ultimately borne by investors and the

Commission's paperwork, but not investor protections.

National Market System

In January 1983, the Commission approved establishment of the Intermarket

Trading System as a permanent electronic linkage of all the exchanges, and the

NASDAQ over-the-counter system. In fiscal 1983, over a billion shares were

traded through the Intermarket Trading System.

Last sales in over 700 national market system over-the-counter stocks are now

being electronically reported throughout the country, as they are executed.

In November 1983, the Commission approved expansion of the New York Stock

Exchange's pilot Registered Representative Rapid Response program, which

permits derivatively priced, instant execution by account executives of orders up

to 599 shares in 200 of the most actively traded NYSE stocks.

The experimental linkage of the markets in listed stocks with the off-board

market has not improved the markets in these stocks. Virtually all of the offboard market makers have dropped out of this market. The Commission has,

therefore, deferred action on an order exposure rule. As a result of 267 new

listings in 1983, 649 issues are now eligible for dual trading on the exchanges

and in the off-board market.

Litigation

There were a number of important court decisions in fiscal 1983. A few of the

many in which the Commission was a party or filed amicus briefs, include the

following appellate cases: Dirks u SEC (insider trading); O'Brien u SEC (right to

notice of subpoenas in Commission investigations); Indiana National Corp. u

Rich (private rights of action); and SEC u Clifton (standards for granting and

dissolving Commission injunctions). Important district court case decisions

included: SEC u Musella (parallel proceedings permitted, absent "special circumstances"); SEC u Micro-Therapeutics (joint and several liability for

disgorgement of misappropriated funds); SEC u Scott (officers of underwriter

liable for failure to amend prospectus); and SEC u Materia (financial printer

liable for misappropriation of information).

Of the district court cases decided in fiscal 1983 in which the Commission was

a party, the Commission prevailed in virtually all; and in 38 of the 44 appellate

and Supreme Court cases.

vi
Financial Reporting

In fiscal 1983, the Commission's accounting related requirements were simplified and improved, and the disclosure guidelines for problem loans of bank

holding companies were revised to solicit better information on these risks. The

activities of self-regulatory organizations-including the Financial Accounting

Standards Board and the American Institute of Certified Public Accountantswere also closely monitored.

Tender Offer Advisory Committee

In July 1983, the SEC Tender Offer Advisory Committee delivered its report to

the Commission and Congress. The Committee's 50 recommendations are

presently being studied by Commission and congressional staffs, with a view to

the proposal of regulatory and legislative initiatives in 1984.

Regulatory Coordination

Firms that engage in securities and commodities brokerage are subject to

supervision by the SEC, the Commodities Futures Trading Commission (CFTC),

the 50 state securities administrators and over 30 self-regulatory organizations.

In fiscal 1983, the following progress was made in simplifying these regulations .

Standardized financial and operational reports (FOCUS reports) can now

be filed with all regulators .

The SEC and CFTC net captial rules were harmonized .

And broker-dealer and associated person registration requirements were

streamlined.

The SEC and CFTC also jointly solicited industry suggestions on the coordination of their regulations. Recommendations under review include:

development of a single associated person registration form;

harmonization of the statutory disqualification provisions of the securities

and commodities laws;

coordination of securities and commodities self-regulatory examinations;

and consolidation of fingerprint processing.

Task Group

During the past two and a half years, in speeches, congressional testimony and

meetings with cabinet members and the chairmen of key congressional committees, the Commission has advocated the formation of a one year task force

to help simplify, rationalize and reduce the costs of the regulatory structures of

the securities, banking and savings and loan industries for the benefit of investors and depositors.

The Commission's specific recommendations included:

Regulation by functional activities, rather than by outmoded industry classifications;

Consolidation of overlapping, duplicative and conflicting regulatory activities;

vii

•

•

•

•

•

•

•

•

•
And elimination of excessive regulations within and between regulatory

agencies.

In January 1983, Vice President Bush formed the Task Group on the Regulation

of Financial Services. The Commission has been an active participant in the

Task Group, which is expected to propose major legislative initiatives in 1984.

Bank Release

In November 1983, the Commission released for public comment a proposed

rule that would, in effect, require banks that offer public brokerage services or

in-house investment advice and brokerage services, to conduct such activities

in separate affiliates, subject to the same rules and regulations as all others who

engage in such activities.

1984

In addition to ongoing programs, major projects in process include the following:

Electronic Aling

In 1983, a staff task force was formed and a feasible contract let, with a view to

commencing a pilot electronic filing, processing and information dissemination

system in 1984. The objectives are to accelerate the dissemination of corporate

information to investors and securities analysts and to reduce investors', issuers'

and the SEC's expenses.

As corporations file such information electronically with the SEC, investors and

analysts will be able to access it instantly on home and business computer

screens. They will be able to display current comparative price-earning, yield

and other data on securities; instantly refine such lists by industry, size, markets

and other criteria; display the latest SEC filings, annual and quarterly reports of

those companies in which they are interested or that appear to be the most

undervalued; retain their portfolios in their data banks; price them to the market

at any time; and maintain running totals of their dividends, realized and unrealized capital gains and losses. They may also be able to enter orders with their

brokers, directly on their computer terminals and receive confirmations. Hard

copy can be obtained on accessory print-out equipment.

The system is also intended to reduce transcription and oral communication

errors and to accelerate the SEC's identification and processing of filings which

require detailed reviews.

The pilot operation will be tested and debugged for a year or more. Industrywide implementation is intended to coordinate with the growth of home

computers-from 5 million today to over 50 million within five years.

Legislation

The Commission will continue to be an active participant in legislative initiatives

expected by the Bush Task Group, the pending Insider Trading Sanctions Act

and major amendments to the Glass-Steagall Act, the Foreign Corrupt Practices

Act and the Public Utility Holding Company Act.

viii

•
In addition to the extensive recommendations of the SEC Advisory Committee

on Tender Offers, the merger proxy and contest rules and the Investment

Company Act are under review. Regulatory and legislative initiatives in these

areas are also expected in 1984.

Conclusion

Progress is being made in improving investor protections and reducing regulatory burdens. The future offers favorable prospects of major improvements in

the regulatory structures of the financial service industries and the exciting

potential of high speed, electronic communication and analysis of corporate

information.

Sincerely,

John S.R. Shad

ix

Commissioners and Principal Staff

Officers

(As of November 1,1983)

Commissioners

John S.R. Shad, Chairman

John R. Evans'

Barbara S. Thomas"

Bevis Longstreth

James C. Treadway, Jr.

Secretary: George A. Fitzsimmons

Executive Assistant to the Chairman: John S. Daniels

Term Expires

1986

1983

1985

1984

1987

Principal Staff Officers

George G. Kundahl, Executive Director

Kenneth A. Fogash, Deputy Executive Director

John J. Huber, Director; Division of Corporation Finance

WIlliam C. Wood, Associate Director

Mary E.T. Beach, Associate Director

Linda C. Quinn, Associate Director

Amy L. Goodman, Deputy Associate Director

John M. Fedders, Director; Division of Enforcement

Theodore A. Levine, Associate Director

Gary G. Lynch, Associate Director

Frederick B. Wade, Chief Counsel

Alexia L Morrison, Chief Litigation Counsel

Douglas Scarff, Director; Division of Market Regulation

Edward Kwalwasser, Associate Director

Richard P. Wessel, Associate Director

Richard G. Ketchum, Associate Director

'Resigned from Commission on December 2, 1983. On December 2, 1983

Charles C. Cox was swom in as Commissioner for the term expiring June 5,

1988.

"Resigned from Commission on November 11, 1983.

xi
Kathryn B. McGrath. Director; Division of Investment Management

Gerald Osheroff, Associate Director

Jeffrey L. Steele. Associate Director

Aaron Levy. Director; Division of Corporate Regulation

Grant Guthrie. Associate Director

Daniel L. Goelzer, General Counsel

Paul Gonson, Solicitor

Russell B. Stevenson. Jr.. Deputy General Counsel

Jacob H. Stillman. Associate General Counsel

Linda D. Fienberg. Associate General Counsel

Andrew L. Rothman. Director; Officer of Public Affairs

Chiles T.A. Larson. Deputy Director

A. Clarence Sampson. Chief Accountant

Edmund Coulson. Deputy Chief Accountant

Jeffrey L. Davis. Director; Directorate of Economic and Policy Analysis

Terry M. Chuppe, Associate Director

Charles W. Bryson. Associate Director

Charles C. Cox. Chief Economist

William S. Stern. Director; Office of Opinions and Review

Herbert V. Efron. Associate Director

R. Moshe Simon. Associate Director

Warren E. Blair. Chief A:1ministrative Law Judge

Lawrence H. Haynes. Comptroller

Herbert S. Silbert. Assistant Comptroller

Richard J. Kanyan, Director; Office of A:1ministrative Services

James C. Foster. Director; Office of Personnel

William E. Ford. II.Assistant Director

Wilson Butler. Director; Office of Applications and Reports Services

Jonathan G. Katz. Director; Office of Consumer Affairs and Information Services

John D. Adkins. Director; Office of Information Systems Management

John Faith. Deputy Director

Ethel Geisinger. Director of Legislative Affairs

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

Phillip H. Savage. Director of Equal Employment Opportunity

xii
Regional and Branch Offices

Regional Offices and Administrators

Region 1. New York, New Jersey.-Donald N. Malawsky, Room 1102,26 Federal

Plaza, New York, New York 10278.

Region 2. Massachusetts, Connecticut, Rhode Island, Vermont, New Hampshire,

Maine-Willis H. Riccio, 150 Causeway Street, Boston, Massachusetts 02114.

Region 3. Tennessee, Virgin Islands, Puerto Rico, North Carolina, South Carolina,

Georgia, Alabama, Mississippi, Florida, part of Louisiana.-Michael K.

Wolensky, Suite 788, 1375 Peachtree Street, N.E., Atlanta, Georgia 30367.

Region 4. Illinois, Indiana, Iowa, Kansas City (Kansas), Kentucky, Michigan, Minnesota, Missouri, Ohio, Wisconsin.-William D. Goldsberry, Room 1204, Everett McKinley Dirksen Bldg., 219 South Dearborn Street, Chicago, Illinois

60604.

Region 5. Oklahoma, Arkansas, Texas, part of Louisiana, Kansas (except Kansas

City).-Wayne M. Secore, 8th Floor, 411 West Seventh Street, Fort Worth, Texas

76102.

Region 6. North Dakota, South Dakota, W}Oming, Nebraska, Colorado, New

Mexico, Utah.-Robert H. Davenport, Suite 700, 410 Seventeenth Street, Denver, Colorado 80202.

Region 7. California, Nevada, Arizona, Hawaii, Guam.-Michael J. Stewart, Suite

500 East, 5757 Wilshire Blvd., Los Angeles, California 90036-3648.

Region 8. Washington, Oregon, Idaho, Montana, A1aska.--Jack H. Bookey, 3040

Federal Building, 915 Second Avenue, Seattle, Washington 98174.

Region 9. Pennsylvania, Maryland, Virginia, West Virginia, Delaware, District of

Columbia.-Paul F. Leonard, Room 300, Ballston Center Tower No.3, 4015

Wilson Blvd., Arlington, Virginia 22203.

Branch Offices

Detroit, Michigan 48226.-231 Lafayette St., 438 Federal Building.

Houston, Texas 77002.-Suite 302, Scanlan Bldg., 405 Main St.

xiii
Miami, Florida 33131.-Suite 1114,DuPont PlazaCenter, 300 Biscayne Boulevard

Way.

Philadelphia, Pennsylvania 19106.-Federal Building, Room 2204, 600 Arch

Street.

Salt Lake City, Utah 84111.-Suite 810, Boston Bldg., Nine Exchange Place.

San Francisco, California 94102.-450 Golden Gate Ave., Box 36042.

xiv
Biographies of Commissioners

John S.R. Shad. Chairman

Vice President Bush swore in John Shad as the 22nd Chairman of the SEC on

May 6,1981. His term expires in 1986.

He was previously Vice Chairman of the E.F. Hutton Group, which he helped

build into a major managing underwriter of corporate financings. He has also

personally assisted scores of corporations in consummating billions of dollars of

financings and mergers; served as a director of 17 domestic and multinational

publicly-owned corporations; taught investment banking at the New York University Graduate School of Business Administration; written articles published in

leading legal and business reviews; and addressed numerous legal, accounting,

business and academic forums.

He resigned from the E.F. Hutton Group and the boards of directors of six other

New York Stock Exchange listed corporations to accept the Chairmanship of the

Commission.

He was born in Utah in 1923; served in the Pacific and China as a naval officer

during World War II; graduated cum laude from the University of Southern California in 1947, the Harvard Business School in 1949 (M.B.A.) and New York University Law School in 1959 (LL.B.). He is a member of Beta Gamma Sigma and Phi

Kappa Phi.

He received the Investment Banker of the Year Award (1972) from Finance

Magazine; the Brotherhood Award (1981) from the National Conference of Christians and Jews; the Distinguished Leadership Award (1982) from the Girls Club of

New York; the Distinguished Service Award (1983) from the National Association

of Investment Clubs; and the Distinguished Alumni Award (1983) from the University of Southern California.

John R. Evans

John R. Evans was sworn in as a member of the Commission on March 3,

1973, and retired from the Commission on December 2,1983. He was a member

of the Professional Staff of the U.S. Senate Committee on Banking, Housing and

Urban Affairs from June 1971 to March 1973, and served as minority staff director

from July 1964 to June 1971.

Mr. Evans was born in Arizona in 1932. He received his B.S. degree in Economics in 1957 and his M.S. degree in Economics and his Secondary Teaching

Certificate in Business in 1959 from the University of Utah.

Mr. Evans came to Washington in February 1963 as Economics Assistant to

Senator Wallace F.Bennett of Utah. Prior to that he had been a Research Assistant

and later Research Analyst at the Bureau of Economics and Business Research at

the University of Utah, where he was also an Instructor of Economics during 1962

and 1963.

xv
Barbara S. Thomas

Barbara S. Thomas was sworn in as the 59th member of the Commission in a

White House ceremony on October 21, 1980. She retired from the Commission

on November 11, 1983.

A corporate and securities lawyer, Ms. Thomas became a partner of Kaye,

Scholar, Fierman, Hays & Handler, a New York law firm, in January 1978. She had

been an associate of the firm since 1973 and an associate of the Paul, Weiss,

Rifkind, Wharton & Garrison firm, also of New York, from September 1969 to

April 1973.

Ms. Thomas has written extensively on the subjects of securities regulation and

corporate law, and has a special interest in issues relating to the internationalization of the world's capital markets, corporate finance, and accounting matters.

Ms. Thomas is the recipient of the 1982 Award for Outstanding Service in

Government presented by The Financial Marketing Council of Greater Washington. In addition, she was named the 1981 Outstanding Young Woman of

America for Washington, D.C. She has also been named one of WETA's Women

of the Year for 1983.

Ms. Thomas is a member of the Securities Regulation Committee of the New

York State Bar Association, the Committee on Federal Regulation of Securities

and the Ad Hoc Task Force on the International Aspects of United States Law of

the American Bar Association, and the International Bar Association. In addition,

prior to joining the Commission, Ms. Thomas was Chairman of the Corporation

Law Committee of the Association of the Bar of the City of New York.

Ms. Thomas is also a member of the Council on Foreign Relations, the Board

of Overseers of the Wharton School of Finance at the Umversity of Pennsylvania,

the University of Pennsylvania Alumni Council on Admissions, the Economic

Club of New York, the Advisory Committee of the Women's Economic Roundtable, and the Financial Women's Association of New York. She also serves as a

Trustee for the University of Pennsylvania Alumni Association of New York City.

Ms. Thomas was born in New York City on December 28, 1946. She is a

graduate of New York University School of Law,J.D. 1969, cum laude, where she

placed second in a class of 323, was a member of the Order of the Coif, and was

an editor of the New York University Law Reiueui A John Norton Pomeroy

Scholar, she received the Jefferson Davis Prize in Public Law and American

Jurisprudence Prizes for Excellence in 15 (out of 28) subjects, and was on the

Dean's List every semester. In 1966, she earned a B.A., cum laude, in history from

the University of Pennsylvania.

Bevis Longstreth

Bevis Longstreth was sworn in as the 60th member of the Securities and

Exchange Commission on July 29, 1981. His current term expires on June 5,

1984.

From 1962 until July 1981, Mr. Longstreth practiced law with the New York law

firm of Debevoise & Plimpton. He was admitted to partnership in that firm in 1970

and specialized in corporate securities and real estate finance law,bankruptcy and

xvi
business work-outs and not-for-profit corporations law.

Mr. Longstreth was a Lecturer at Columbia Law School from 1975 until his

appointment to the Commission, teaching a seminar on the corporation in modern society. He has also lectured on various securities and corporate law topics for

the Practising Law Institute and at other seminars and has written numerous

articles on business-related subjects. Mr. Longstreth has served on the boards of

a number of charitable and educational organizations active In the New York area.

Mr. Longstreth was born in New York City in 1934 and grew up in Princeton,

New Jersey. He graduated from Princeton University in 1956 (B.SE.) and from

Harvard Law School in 1961 (LL.B.). From 1956 to 1958 he served in the U.S.

Marine Corps.

James C. Treadway,Jr.

James C. Treadway,Jr., was sworn in as the 61st member of the Securities and

Exchange Commission on September 13, 1982. His five yearterm expiresJune 5,

1987.

At the time of his appointment, Mr. Treadway,39, was a partner with the Washington and New York law firm of Dickstein, Shapiro & Morin, where he had been a

partner since October I, 1972. During the preceding 15years before his appointment, he was engaged In a broad securities and corporate finance practice,

representing corporate issuers, officers and directors. In addition, he has represented a U.S. and a foreign securities exchange, investment banking firms and

investment companies. He is the author of various articles on the Federal securities laws.

Mr. Treadway,a native of Anderson, S.c., was formerly an associate with the

Washington and Boston law firm of Gadsby & Hannah from 1968 to 1972 and

prior to that, he was an associate of the Atlanta law firm of Candler,Cox, McClain

& Andrews from 1967 to 1968. Mr. Treadway received his undergraduate education from Rollins College and the University of Georgia where he graduated In

1964 with an A.B. degree. He received his LL.B. degree, summa cum laude, in

1967 from Washington & Lee University where he was Editor-in-Chief of the

Washington & Lee University Law Review.He was a member of Phi Beta Kappa,

Order of the COifand Omicron Delta Kappa.

xvii

Table of Contents

Chairman's Letter of Transmittal. . . . . . . . . . . . . . . . . . . . . . . . . .. ..... iii

Commissioner's and Principal Staff Officers . . . . . . . . . . . . . . . . . . . . . . . xi

Regional and Branch Offices xrii

Biographies of Commissoners xv

Enforcement Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Key 1983 Results . . .. 1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Program Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Corporate Reporting and Accounting . . . . . . .. 2

Securities Offering Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Regulated Entities and Associated Persons . 4

Insider Trading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Market Manipulation . . . . . . . . . . . . . .. 6

Changes in Corporate Control . . . . . . . . . . . . . .. 6

Related Party Transactions . . . . . .. 7

Other Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Litigation 7

Cooperation With Other Authorities 7

Sources for Further Inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Full Disclosure System 9

Key 1983 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Computer-Assisted Operations 9

Projects 9

The Proxy Review Program . . . . . . . . . . . . . . . . .. 9

Tender Offer Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Research Forum 11

SEC Government-Business Forum on Small Business Capital

Formation 11

SEC/NASAA Conference on Federal-State Securities Regulation 12

Small Business Rulemaking and Interpretive Initiatives. . . . . . . . . . . . 12

Simplified Registration Form Amended 12

Resales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Interpretive Advice on Exempt Offers Rules .. . . . . . . .. 12

Electronic Filing 13

Foreign Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

American Depositary Receipts 13

Other Rulemaking Initiatives .. 13

xix
Pro Rata Rule , 13

Shelf Registration 14

Electric and Gas Utility Guide 14

Definitional Rule 14

Merger Forms. . . . . . . . . .. 14

Accounting Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Oversight Activities .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SEC Practice Section. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

(1) Peer Review 15

(2) Special Investigative Process. . . . . . . . . . . . . . . . . . . . . . . . . . 16

FASB Activities . 16

(1) Conceptual Framework , . . . . . . . . . . 16

(2) Financial Reporting Practices for Oil and Gas Producers .. 17

(3) Timely Guidance on Emerging Accounting Issues 17

(4) Accountmg for Pensions 17

(5) Other Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

International Accounting and Reporting. . . . . . . . . . . . . . . . . . . . . . 18

Accounting-Related Rules and Interpretations 18

Sunset Review. . . .. 19

(1) Regulation S-X 19

(2) Financial Reporting Requirements for Banks and Bank

Holding Companies 19

(3) Accounting for Computer Software Development Costs. . . 19

Regulation of the Securities Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Key 1983 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Securities Markets, Facilities, and Trading 22

The National Market System 22

National System for the Clearance and Settlement of Securities

Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Options 23

Market Manipulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Issuer Repurchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Issuer Tender Offers 23

Stabilization Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Publication of Quotations by Broker-Dealers . . . . . . . . 23

Exemptions from Short Sale Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Regulation of Brokers, Dealers, Municipal Securities Dealers, and

Transfer Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Broker-Dealer and Transfer Agent Examinations. . . . . . . . . . . . . . . 24

Securities Confirmations 24

Fingerprinting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Transfer Agent Regulation 25

Oversight of Self-Regulatory Organizations 25

National Securities Exchanges 25

Allocation of Regulatory Responsibilities. . . . . . . . . . . . . . . . . . . . . . 25

xx
National Association of Securities Dealers, Inc. . .. 25

Clearing Agencies . . . . . . . . . . . . . . . . . . . . . . . . .. 26

Surveillance and Compliance Inspections 26

SIPC Assessment 27

Clearing Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Applications for Re-Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Market Oversight and Surveillance System 27

Municipal Securities Rulemaking Board . . . . . . . . . . . . . . . . . . . . . . 28

Investment Companies and Advisers 29

Key 1983 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Office of Regulatory Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Disclosure Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Insurance Products . . . . . . . . . . . . . . . . . . . . . . . .. . 30

Significant Applications and Interpretations . . . . . . . . . . . . . . . . . . . . . 30

Fidelity Fund, Inc. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

American Property Mortgage, Inc. 31

Venture Capital 31

Repurchase Agreements 32

PeaveyCommodity Funds I, II and III 32

Institutional Disclosure Program 32

Other Litigation and Legal Work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Key 1983 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Litigation 36

Appeals in Commission Injunctive Actions. . . . . . . . . . . . . . . . . . . . 36

Petitions to Review Commission Orders . . . . . . . . . . . . . . . . . . . . . . 37

Commission Participation in Private Litigation . . . . . . . . . . . . . . . . . 37

Litigation Involving Trading on Nonpublic Information 38

Commission Action Under Rule 2(e) 39

Litigation Involving Requests for Access to Commission Records . 40

Litigation Against the Commission and Its Staff 40

Significant Legislation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Financial Services Industry-Vice President's Task Group and

Glass-Steagall Legislation 41

Mortgage-Related Securities 41

Public Utility Holding Company Act 42

Regulatory Reform 42

Insider Tradmg Sanctions Act 42

Corporate Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Public Utility Holding Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Proposed Legislation 45

Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Nonutility Subsidiary Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

xxi
Fuel Programs and Service Companies . . . . . . . . . . . . . 46

Management, Economic Analysis and Program Support . . . . . . . . . . . . 49

Key Management and Program Developments . . . . . . . . . . . . . . . . . . 49

Economic Research and Statistics 50

Information Systems Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Financial Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Facilities Management 52

Personnel Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Public Affairs . . . . . . . . . . . . . . . . . . . . . . . . . 54

Consumer Affairs and Information Services 54

Equal Employment Opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Footnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Glossary of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

The Securities Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Income, Expenses and Selected Balance Sheet Items . . . . . . . . . . 71

Table l-{lnconsolidated Financial Information for Broker-Dealers

1978-1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Table 2-{lnconsolidated Annual Revenues and Expenses of

Firms Doing a Public Business 1978-1982 73

Table 3-Summary Unconsolidated Balance Sheet for Firms

Doing a Public Business Year-End 1978-1982 , . . . . . 74

Securities Industry Dollar in 1982 for Carrying and Clearing

Firms , . . . . . . .. . .. . . . . .. 75

Chart-Securities Industry Dollar in 1982 for Carrying/Clearing

Firms ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Table 4-Revenues and Expenses of Broker-Dealers Carrying/

Clearing Customer Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Table 5-{lnconsolidated Balance Sheet for Firms Carrying/

Clearing Customer Accounts . . . . 78

Broker-Dealers, Branch Offices, Employees 78

Chart-Broker-Dealers and Branch Offices. . . . . . . . . . . . . . . . . . . 79

Table 6-Brokers and Dealers Registered Under the Securities

Exchange Act of 1934--Effective Registrations as of September

30,1983 Classified by Type of Organization and by Location of

Principal Office 80

Table 7-Applications and Registrations of Brokers and Dealers

and Investment Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Table 8-Applications and Registrations of Municipal Securities

Dealers and Transfer Agents 82

Self-Regulatory Organizations: Revenues, Expenses, Pre-Tax

Income and Balance Sheet Structure . . . . . . . . . . . . . . . . . . . . . . 83

xxii

"

"
Table 9-Consolidated Financial Information of Self-Regulatory

Organizations 84

Table 10-Self-Regulatory Organizations-Clearing Agencies 1982

Revenues and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Table Il-Municipal Securities Rulemaking Board Statements of

Revenue and Expenses and Change in Fund Balance 86

Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Section 12(h) Exemptions. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 87

Exemptions for Foreign Private Issuers . . . . . . . . . . . . . . . . . . . . . . . 87

Rule 10b-6 Exemptions 87

Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Table 12-Companies Registered Under the Investment Company

Act of 1940 as of September 30, 1983 88

Table 13-Companies Registered Under the Investment Company

Act of 1940 89

Table 14-New Investment Company Registrations 90

Table 15-lnvestment Company Registrations Terminated , . 90

Securities on Exchanges 91

Market Value and Share Volume 91

Table 16-Market Value of Equity Sales on Registered Securities

Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

NASDAQ (Volume and Market) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Share and Dollar Volume by Exchange 93

Chart-Market Value of Securities Traded on AllU.S. Stock

Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Table 17-Share Volume by Exchanges ,. 95

Table 18-Dollar Volume by Exchanges..... .. . . . .. . . . . . . . .. . 95

Special Block Distribution 96

Table 19-5pecial Block Distributions Reported by Exchanges .. 96

Value and Number of Securities Listed on Exchanges .. . . . . . . . . 97

Table 20-Securities Listed on Exchanges 97

Table 21-Value of Stocks Listed on Exchanges. . . . . . . . . . . . . . . 98

Securities on Exchanges 99

Table 22-Securities Traded on Exchanges. . . . . . . . . . . . . . . . . . . 99

Table 23--Unduplicated Count of Securities on Exchanges 99

1933 Act Registrations 99

Effective Registration Statements 99

Table 24-Effective Registrations 100

Chart-Securities Effectively Registered With SEC 1935-1983

(Dollar Value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Chart-5ecurities Effectively Registered With SEC 1935-1983

(Number of Registrations) 102

Purpose and Type of Registration 103

Table 25-Effective Registrations by Purpose and Type of

Security: Fiscal Year 1983 104

Effective Registrations Cash Sale for Account of Issuers

xxiii
1935-1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Regulation A Offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Table 26-0fferings Under Regulation A .... . . . . . . . . . . . . . . . . . 106

Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Types of Proceedings 106

Table 27-Types of Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Table 28-Nationwide Enforcement Program . . . . . . . . . . . . . . . . . 111

Table 29-lnvestigations of Possible Violations of the Acts

Administered by the Commission . . . . . . . . . . . . . . . . . .. ..... 112

Table 30-Administrative Proceedings Instituted During Fiscal

Year Ending September 30, 1983 . . . . . . . . . . . . . . . . 112

Table 31-lnjunctive Actions 112

Tradmg Suspensions 112

Foreign Restricted List 113

Right to Financial Privacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Public Utility Holding Companies 116

System Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Table 32-Public Utility Holding Company Systems . . . . . . . . . . . . 116

Table 33-Key Financial Statistics of Registered Public Utility

Holding Company Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Table 34-Public Financing of Holding Company Systems.. . . . . 118

Table 35-Subsidiary Service Companies of Public Utility Holding

Company Systems 120

Table 36-Fuel Program Expenditures of Holding Company

Systems (Fiscal 1983) 121

Table 37-Fuel Program Expenditure of Holding Company

Systems (1971-1983) 122

Corporate Reorganizations 123

Table 38--Reorganization Proceedings Under Chapter 11of the

Bankruptcy Code in Which Commission Entered Appearance . 123

Table 39-Pending Reorganization Proceedings Under Chapter X

of the Bankruptcy Act in Which the Commission Participated . . 125

SEC Operations .. 126

Chart-Appropriated Funds vs Fees Collected 127

Table 40-Budget Estimates and Appropriations 128

xxiv

"
Enforcement Program

Key 1983 Results

The Commission maintains an aggressive enforcement program. In fiscal

1983, it commenced 261 enforcement actions, as compared with 254 in 1982,

which was a 30% increase over fiscal 1981.

The total includes 151 civil injunctive actions, compared with 136 brought in

1982 and 115in 1981.There were 416 defendants named in the Injunctive actions

brought during fiscal year 1983 compared with 418 in 1982.

In addition to injunctions against further violations of the Federal securities

laws, the Commission obtained court orders during fiscal 1983 that required

defendants to divest themselves of illicit profits amounting to more than $11

million, either as disgorgement or restitution to defrauded Investors.In response

to actions initiated by the Commission, courts froze assets estimated to exceed

$55 million to protect the assets until appropriate dispositions could be made by

the judge involved.

The Commission instituted 94 administrative proceedings in fiscal 1983, compared with 106 proceedings begun during 1982 and 72 during 1981.There were

189 respondents named in 1983 and 287 respondents named in 1982.

The Commission staff also provided substantial assistance to the Department

of Justice and state authorities in connection with potential or pending criminal

cases. There were 75 criminal indictments or informations obtained in such

cases, many of which arose out of prior Commission investigations.

The emphasis on civil and criminal contempt proceedings is reflected in the 14

actions brought In fiscal 1983 as compared with 9 in 1982.

In addition, there were two reports of investigation under Section 21(a) of the

Securities Exchange Act of 1934 (Exchange Act), including one concerning the

Silver Crisis of 1980. One court order was obtained under Section 21(e) of the

Exchange Act ordering compliance with a previously issued Commission order.

Introduction

The Commission's enforcement program seeks to preserve the inteqnty efficiency and fairness of the securities markets. The Federal securities laws provide

civil and administrative remedies designed to rectify past violations and prevent

future violations.

The Commission's primary enforcement remedy is a Federal court injunction.

An injunction directs an individual or entity to comply with the law in the future. If

the injunction is violated, contempt of court proceedings may result in imprisonment or the imposition of fines. In addition to "obey the law" injunctions, courts

often enter orders providing other equitable relief such as restitution, disgorgement of illicit profits, or other remedies appropriate to a particular case.
Another enforcement remedy against regulated entities is an administrative

proceeding. The principal regulated entities are broker-dealers, investment companies and investment advisers. An administrative proceeding may result in a

censure or a revocation or suspension of registration for up to 12 months. Regulated entities may not conduct business without an effective registration.

Administrative proceedings may also be instituted against persons associated

with regulated entities. The remedies include censure, suspension for up to 12

months or a bar from participation in the securities industry.

In addition, issuers of securities may be subject to administrative proceedings if

they fail to comply in a material respect with the Exchange Act's disclosure

requirements and certain other provisions. They may be ordered by the Commission to comply with these provisions upon specified terms and conditions.

Criminal sanctions for Federal securities law violations include a fine of up to

$10,000 and imprisonment for up to five years for each violation. The Commission has proposed legislation to increase the maximum criminal fine for most

Exchange Act violations from the $10,000 established in 1934 to $100,000.

Program Areas

Some of the areas of enforcement activity in fiscal 1983 are discussed below,

along with illustrative cases.

Corporate Reporting and Accounting-This category includes violations of

the periodic reporting requirements. The Commission initiated 51 cases in this

area In fiscal 1983 compared to 36 in 1982.I

Financial disclosure violations may involve valuation of inventories, assets or

liabilities: the remuneration of officers and other related parties; the ability of a

corporation to meet its obligations; or the recognition of revenue and expenses.

Violations with respect to non-financial information may include material misstatements concerning corporate operating information, or a failure to disclose

material facts concerning corporate management.

The cases in this category include 22 delinquent filing actions, as compared

with nine in 1982

Closely related to the emphasis on fraud by reporting companies is enforcement of the accounting provisions of the Foreign Corrupt Practices Act (FCPA). In

fiscal 1983 12 such actions were brought. There were 10 in fiscal 1982. The 22

cases brought during the past two years represents two-thirds of all such actions

brought since the FCPA was enacted in 1977.

Recent cases brought under the accounting provisions have included some in

which issuers have improperly deferred expenses, recognized sales prematurely,

overstated inventories and used other improper techniques to inflate profits or

decrease losses. One case involved systematic deferral of the recognition of

promotional and advertising expenses in amounts of up to $3.6 million in a fiscal

period. In another case, the Commission alleged that the defendants caused the

preparation of false documents that failed to reflect a diversion of $2.2 million to

an off-the-books account.

Audited financial statements are the backbone of the disclosure system established under the Federal securities laws. In the past fiscal year, the Commission

2
has alleged that certain fraudulent filings reflected deficient audits by issuers'

accounting firms. An injunctive action was brought against an accounting firm

with respect to its audits of the financial statements of three separate issuers. In

another case, the Commission brought an administrative proceeding in which it

alleged that two auditors, in performing an audit of an insurance company, acquiesced in the use of financial reports based upon an obsolete mortality table.

Several fiscal 1983 reporting cases involved non-financial issues.In one case,

the Commission alleged that an insurance company failed to disclose that it

faced possible loss of the endorsement of two non-profit organizations whose

members bought a substantial portion of its policies. In another case,the Commission alleged that the issuer failed to report that a customer, which had accounted for 15 percent of its revenue and one-third of its earnings, would be

making no purchases during the relevant reporting period, and thereafter would

make purchases at drastically reduced levels. In a third case, the Commission

alleged that an issuer failed to disclose that a control person who had resigned

from the company continued to dominate and control the issuer,and also continued to receive remuneration and other significant benefits.

Securities Offering Violations-Some issuers fail to register public offerings of

their securities, although required to do so by the Securities Act. Some may rely

on purported exemptions to registration requirements which are not available to

them. Some may violate anti-fraud provisions of the Federal securities laws by

making material misrepresentations in connection with a securities offering or

omitting material information in connection with such an offering.

There were 41 cases principally involving offering violations by issuers and

other persons brought during 1983.2 (This figure does not include 32 cases

principally involving offering violations on the part of regulated entities,which are

classified as regulated entity cases.) A total of 48 cases were brought in the

securities offering category in 1982 (exclusive of those cases involving violations

principally on the part of broker-dealers).

Among the injunctive actions alleging securities offering violations were cases

involving issuers that offered investments in tax shelters and oil and mineral

interests. In one case an issuer offered participation interests in an arbitrage

trading program involving U.S. government securities. The Commission alleged

in its complaint that more than 2,000 investors were defrauded of $16million in a

scheme that promised an eight-to-one tax write-off. The promoters allegedly

made personal use of the funds instead of investing them. In another case the

Commission alleged the saleof $35 million in limited partnership interestsin coal

mining projects, without compliance with the registration requirements of the

Securities Act. Among other things, the defendants allegedly inflated various

projections, failed to disclose the identities of the principal promoters and failed

to disclose the profits the promoters made in selling mining interests to the

partnerships.

Offerings by first-time issuers increased significantly in fiscal 1983.A number

of these had no operating history, no permanent employees, or no stated business purpose. In response to these developments the Commission established a

"Hot IssuesTask Force" to co-ordinate investigations involving issuersand related

3
entities. The Task Force consists of members of the staffs of the Commission's

Divisions of Enforcement, Market Regulation and Corporation Finance, various

regional offices of the Commission, and examiners from the National Association

of Securities Dealers.

The Commission also emphasized remedial actions during fiscal 1983 against

professionals who provide issuers with access to the securities markets. Brokerdealers and underwriters who engage in questionable or improper sales practices

are being subjected to increased scrutiny. One example is an administrative

proceeding involving a Denver-based broker-dealer. The Commission alleged

that the broker-dealer, acting as an underwriter, had used a false and misleading

prospectus in connection with two offerings, and had failed to escrow funds

received from investors in a "best efforts" underwriting.

Several cases involving the fraudulent sale of unregistered securities have been

brought against those holding themselves out as investment advisers. In addition,

the Commission alleged in one case that a sham transfer agent was used to

facilitate the distribution of a shell corporation's securities by improperly rernovIng a restrictive legend from the stock certificates.

Regulated Entities and Associated Persons-Fiscal 1983 actions involving

regulated entities, including broker-dealers, investment companies, investment

advisers and transfer agents, ranged from books and records violation to attempts to defraud customers. There were 110 cases involving regulated entities

compared with 118 in fiscal 1982.3 Thirty-two cases involved securities offering

violations by regulated entities. Of the other 78 cases, 43 primarily involved

broker-dealers. 16 investment advisers, four investment companies and three

transfer agents. The total includes 12 actions in which customers or employees

were alleged to have defrauded a regulated entity.

During fiscal 1983 the Commission revoked the registration of 19 firms, suspended 3 and censured 12. This compared with 11 revocations, 9 suspensions,

and 28 censures in fiscal 1982. There were 54 individuals barred, 44 suspended,

and 8 censured in fiscal 1983, compared with 44 bars, 82 suspensions, and 19

censures in fiscal 1982.

One action against a regulated entity involved a failure to maintain proper

books and records. The district court found that a broker-dealer's books and

records were inaccurate, that it had failed to do proper box counts, failed to deliver

customers' money and securities, and used customers' fully paid securities to

satisfy its obligations to deliver securities to other broker-dealers. In another case

involving two investment companies and their investment adviser, the investment

companies were found to have improperly maintained their books and records

and inaccurately valued the price of their common shares. The investment companies had recorded as accounts receivable various expenses they incurred for

which they allegedly were going to be reimbursed by the investment adviser, when

the investment adviser was actually insolvent and unable to meet its obligations.

The Commission brought several cases involving fraud against regulated entities in fiscal 1983. One involving a fraud perpetrated against a broker-dealer by

its managing partner, illustrates the swiftness with which the Commission can

respond to emergency situations. In late January 1983 the Commission acquired

4
information indicating that the managing partner had illegally obtained $47 rrullion from his trading account with the broker-dealer, and that the broker-dealer

was insolvent. The Commission filed a complaint in Federal District Court on

February 5,1983, in which it was alleged, among other things, that securities held

as collateral were valued at $278 million, but were actually worth only $5,000. It

was also alleged that another $105 million in securities, purportedly held as

collateral, did not exist. The court thereupon issued a temporary restraining order

ordering the defendant to refrain from violating the Federal securities laws and

appointed a temporary receiver.On February 10, the broker-dealer consented to

the appointment of a trustee under the Securities Investor Protection Act, for the

purpose of liquidating the firm, and on February 11the court issued a permanent

injunction against future violations. The managing partner eventually pled guilty

to a five-count indictment and was sentenced to 25 years imprisonment.

In another case in this category, the Commission alleged that a foreign corporation engaged in "free-riding" by ordering the sale of $200 million in securities

through U.S.broker-dealers, when it did not have possession of the securities and

was therefore unable to tender the securities sold at the time of settlement. (Freeriding consists of placing a buy or sell order for securities and not satisfying the

obligation to pay for or deliver the securities unless a favorable price movement

occurs.) The Commission alleged that this conduct caused losses of at least $21

million for six American broker-dealers. In another case the Commission alleged

that employees of various broker-dealers facilitated a free-riding scheme by using

misappropriated stock loan funds to finance other securities purchases.

Insider Trading-Insider trading is the purchase or sale of securities by persons

in possession of material non-public information relating to such securities. This

conduct undermines the expectation of fairness and honesty that is the basis of

public confidence in the nation's securities markets. The trading of standardized

options contracts, coupled with tender offers and other acquisitions, has increased opportunities for those with material non-public information to reap

large profits.

Insider trading remained an important enforcement priority during fiscal 1983.

The Commission brought 24 insider trading cases, compared with 20 commenced during fiscal 1982, and a total of 121brought since 1949.4

Some of the cases brought during the year involved large groups of persons

who learned about a number of prospective offers from informants employed by

firms serving either the targets or offerors in a tender offer.These casesappear to

reflect a trend toward more sophisticated and elaborate schemes to acquire and

benefit from the use of material non-public information.

One case illustrates how an insider may avoid losses by improperly trading

securities while in possession of material non-public information. The Commission alleged that two high corporate executives sold warrants and common stock

while in possession of material non-public information concerning large unanticipated losses by a major unit of the issuer. One defendant, without admitting or

denying the Commission's allegations, consented to an injunction forbidding

violations of the Federal securities laws and agreed to disgorge more than

$80,000.

5
As part of its effort to combat insider trading, the Commission has recommended enactment of the Insider Trading Sanctions Act of 1983. This Act would

authorize the courts to impose civil money penalties of up to three times the profit

gained or loss avoided in Commission enforcement actions involving the use of

material non-public information. On April 13, 1983, the Chairman, the Commission's General Counsel, the Director of the Division of Enforcement and other

senior staff members testified on behalf of the proposed law before the Subcommittee on Telecommunications, Consumer Protection and Finance of the House

Energy and Commerce Committee. The House of Representatives approved H.R.

559 on September 19, 1983 and, at the close of the fiscal year, the bill was

awaiting action in the Senate.

In July 1983, the Supreme Court issued its opinion in Dirks v. SEC, a case

involving the liability of a person who receives material non-public information

from a corporate insider. Future enforcement actions involving tippees must be

evaluated in light of this opinion, which is discussed in the Section of this report

entitled "Litigation and Other Legal Work."

Market Manipulation-The Commission is charged with insuring the integrity

of trading on the national securities exchanges and in the over-the-counter markets. The Commission's staff, the exchanges and the National Association of

Securities Dealers engage in surveillance of these markets. The Commission

brought 11 cases involving market manipulation during fiscal 1983.5 Ten such

actions were brought in fiscal 1982.

In one case, the Commission alleged that two individuals falsely created an

appearance of active trading and raised the price of a security through 20 accounts

they maintained with 10 different broker-dealers. In addition, another individual,

an investment adviser, was alleged to have sent "Research Report Recommendations" to 5,000 broker-dealers containing untrue statements and projections

made without a reasonable basis concerning the issuer's sales, earnings and

marketing of new products. During the relevant period, the price per share of the

issuer's stock rose from $4 to $25. The three defendants allegedly made profits in

excess of $1.75 million for themselves and others through this scheme.

The Commission also alleged in an injunctive action that two Canadian citizens

manipulated the price of a stock traded on the Vancouver Stock Exchange and

on the National Association of Securities Dealers Automated Quotation System

(NASDAQ). The complaint alleged that the defendants induced persons to purchase the issuer's securities on NASDAQ by creating a false impression of the

value of the issuer's oil and gas properties and expected returns in a series of

press releases, paid advertisements, and reports to sharehholders and brokerdealers. The Commission alleged that each of these contained materially false

and misleading information. The price of the issuer's common stock rose over

800 percent during the period in question.

Chenqes in Corporate Control-Sections 13 and 14 of the Exchange Act

govern the activities of persons and entities involved in gaining, attempting to

gain or maintain control or ownership of a corporation. These provisions govern

proxy solicitations and the filing of reports by persons or groups who make a

tender offer or acquire beneficial ownership of more than 5 percent of a class of

6
equity securities registered with the Commission. These requirements are intended to insure that investors have the material information needed to make

Informed investment or voting decisions. Five enforcement actions were brought

in this area during fiscal 1983, while nine were brought in fiscal 1982.6

In one case the Commission alleged that two individuals failed to disclose their

relationship and activities in connection with a proxy solicitation and their substantial direct or Indirect interests in future transactions with the issuer.In another

case an individual and a holding company wholly owned by the individual allegedly failed to disclose their total beneficial ownership position and the close

relationship and financing arrangement they had with a foreign nation.

Related Party Transactions-Fundamental to the relationship between an investor and management is the expectation that a company's assetswill be used

for the benefit of the company and not for the personal benefit of its managers.

Accordingly, the Commission's rules require disclosure of transactions by companies with management or related parties. In fiscal 1983 the Commission

brought five cases in this category.7 Four cases were brought in 1982.

In one case the Commission alleged that an issuer failed to disclose certain

transactions between it and companies controlled by the Chairman of its Board

of Directors and Chief Executive Officer, and his family. These transactions involved fuel purchases with two companies totalling over $86 million and equipment leasing with another company amounting to between $100,000 and

$200,000.

Other Developments

Litigation-Most Commission enforcement actions are settled by the defendants or respondents involved without admitting or denying the Commission's

allegations of misconduct. However,a number of the Commission's enforcement

actions are litigated rather than settled, and vigorous defenses are often conducted.

In order to obtain quick, effective relief to protect the investing public the staff

hassometimes asked courts to freezedefendant's assetspending the outcome of

litigation. It also is making increased use of motions for summary judgment.

In addition, civil and criminal contempt proceedings are being used more often

as a means of assuring continuing compliance with the Federal securities laws.

For example, three of the 14 contempt actions commenced during the past year

alleged that an issuer had not complied with an injunctive order requiring the

filing of delinquent reports. In each case a control person was named in the

contempt action, as well as the issuer.Fines of $1,000per day were levied against

the control persons. The Commission also seeks criminal contempt sanctions in

appropriate cases.

In fiscal 1983, the Commission also obtained a court order, under Section

21(e) of the Exchange Act, to enforce an order previously issued by the Commission under Section 15(c)(4). The Commission's order had directed the issuer to

comply with the reporting requirements of Section 13(a) of the Exchange Act.

Cooperation With Other Authorities-The Commission has developed a close

working relationship with other law enforcement authorities, both In the United

7
8

States and abroad. The Commission has assisted, and been assisted by, a number of state criminal prosecutors and securities regulators. It has provided assistance to the Department of Justice and a number of U.S.Attorneys' offices in

the prosecution of criminal violations of the Federalsecurities laws.The Commission also cooperates closely with various self-regulatory organizations, including

the National Association of Securities Dealers and the national securities exchanges.

Sources for Further Inquiry-The Commission publishes litigation releases

which describe its civil injunctive actions and criminal proceedings involving

securities-related violations. Among other things, these releases report the violative conduct that is either alleged by the Commission or the Department of

Justice or found by the court, and the disposition or status of the case.

Each of the enforcement actions brought during fiscal 1983 is listed in the

Appendix to this report. Appropriate references are made to the litigation releases

published in the SEC Docket.

In addition, Commission orders that institute administrative proceedings and

provide remedial relief are published in the SEC Docket. The citations to these

orders also are noted.

Copies of the SEC Docket may be reviewedat the Commission's headquarters

or In a regional office. Further information can be obtained by contacting the

Public ReferenceBranch at (202) 272-7468 or by mail at 450 Fifth Street, NW.,

Washington, D.C. 20549.
Full Disclosure System

The Commission's full disclosure system insures that full and accurate material

information about publicly traded companies is available to investors. Full disclosure fosters investor confidence, contributes to the maintenance of fair and

orderly markets and facilitates capital formation.

Key 1983 Results

The Commission handled 65,550 full disclosure filings in fiscal 1983. Filings

which required detailed reviews Increased significantly. For example, first-time

Securities Act registration statements increased 41% to 1,393; merger proxies

increased 29% to 254; and small offerings registered on Form S-18 increased

135% to 501.

Computer-Assisted Operations-Since the advent of the selective review system in 1980 the staff has made increasing use of computers to aid the screening

process. All filings are screened to identify those which present significant disclosure issues.

In fiscal 1983, the Commission began development of an electronic filing,

processing and information dissemination system.

Projects-The Commission has made substantial progress in its review of the

proxy regulations. The objective is to provide more uniform requirements, less

duplicative disclosure, and reduced compliance costs (at shareholders' expense)

in a manner consistent with investor protection.

The Commission also established the Advisory Committee on Tender Offers

which examined the tender offer rules and related regulations and practices and

made recommendations to the Commission for rulemaking and legislative

changes.

The Proxy Review Program

In fiscal 1983, the Commission continued the major review of the rules and

regulations applicable to the proxy solicitation process begun in 1982. The first

initiative under the proxy review program was the adoption on December 2,1982,

of a new item governing disclosure of management relationships and transactions in proxy statements, registration statements and periodic reports." The new

item integrates what had been two separate disclosure provisions relating to these

matters.

On September 23,1983, the Commission adopted substantial revisions to the

item governing the disclosure of executive cornpensetion.!? The revised item

simplifies the required disclosure by providing that contingent compensation paid

within the year is disclosed in the table and stock option and other contingent

compensation plans are described in the text, and (1) limiting individual dis9
closure to the five highest paid executive officers whose cash compensation

exceeds $60,000; (2) imposing a disclosure threshold on noncash, non securities

compensation; (3) requiring disclosure of cash compensation paid all executive

officers, as a group; (4) streamlining disclosure of compensation paid under

plans; (5) requiring disclosure of all fees and other compensation paid directors;

and (6) requiring disclosure of all plans or arrangements triggered by a change in

control of the registrant, a change in a named individual's responsibilities after

such event, or the individual's termination of employment

On July 28, 1983, the Commission adopted a number of rule amendments

relating to the process by which companies communicate with the beneficial

owners of securities registered in the name of a broker, bank or other nominee. I I

The changes originated with recommendations made by the Advisory Committee on Shareholder Communications. These amendments require, among other

things, that brokers keep a record of whether customers object to disclosure of

their names, addresses and securities positions to the company. If they do not

object, companies that request it must be provided with such information. The

timetable for dissemination of the proxy materials was also tightened.

In response to comments received on several different proposals for modifications to the shareholder proposal process.P in August 1983, the Commission

adopted rule revisions that retain the framework of the rule governing shareholder

proposals by continuing to allow security holders access to issuers' proxy statements and also by continuing federal regulation of the security holder proposal

process.'? The revisions change certain requirements, such as those relating to:

(1) the amount of securities a shareholder must hold in order to submit a proposal; (2) the number of proposals which he or she may submit; (3) the staffs

interpretation of one paragraph of the rule so as not to require inclusion of a

proposal relating to a report or committee on a matter involving the registrant's

ordinary business; (4) the exclusion of proposals dealing with substantially the

same subject matter as proposals submitted in prior years; and (5) the percentage of shareholder support required for inclusion of previously submitted proposals in the current proxy statement.

Tender Offer Advisory Committee

In February 1983, the Chairman appointed the Advisory Committee on Tender

Offers to review techniques for acquisition of control of public companies and the

laws applicable to such transactions.l? The Committee members included recognized authorities from the business and financial community, academia and

the legal and accounting professions. The Committee was requested to consider

the acquisition process in terms of the best interests of all shareholders-those of

target, bidder and bystander corporations. The Committee held six public meetings, which included participation by commentators, shareholders, and professionals.

The Committee's final July 8, 1983 report contained 50 recommendations,

including:

uniform treatment of cash and exchange offers;

10

•
revision of regulations to effect more timely reporting of open market purchases resulting in holdings of over 20% of a class of voting securities;

regulatory disincentives to partial two-tier bids;

elimination of the requirement that shareholders be permitted to withdraw

shares tendered to one bidder upon commencement of a competing bid;

restrictions on the ability of corporations to adopt certain types of "antitakeover" provisions;

shareholder advisory voting requirements for certain corporate actions; and

restrictions on "golden parachute" agreements (contracts relating to change

of control compensation).

A copy of the Committee's report was furnished to the Senate Banking Committee. The Commission is studying the report, with a view to regulatory and

legislative initiatives.

Research Forum

To improve communication between the Commission and various users of

corporate full disclosure documents, the Commission initiated the first Research

Forum, held on November 17, 1982. Over 40 people representing various types of

users of Commission documents, such as securities analysts, institutional investors, investment advisers, rating organizations and shareholder groups, were invited to meet with the Commission and staff. The issues discussed related to the

form and content of disclosure documents, including non-financial and financial

reporting, and proxy statement disclosure requirements. The Research Forum

has resulted in improved communication between the Commission and financial

analysts. The Commission anticipates that such forums will be scheduled every

other year.

SEC Government-Business Forum on Small Business Capital

Formation

The second annual SEC Government-Business Forum on Small Business

Capital Formation was conducted during June and July 1983. The Commission

was directed to host this annual forum by the Small Business Investment Incentive Act of 1980. Participants included other federal agencies, state securities

commissioners and leading small business and professional organizations concerned with capital formation.

Five regional forums were held. Over 125 witnesses made presentations. Although considerable attention was devoted to the difficulties that small businesses encounter in the capital formation process, particularly in the tax area, a

much more diverse and numerous set of recommendations evolved out of the

1983 forum. Certain subjects, such as minorities in small business, were focused

on for the first time. In November 1983, the final report containing the participants' recommendations in the areas of securities regulation, taxation, banking,

small business credit assistance, minorities and certain other small business

concerns was forwarded to Congress.

11

•

•

•

•

•

•
SEC/NASAA Conference on Federal-State Securities Regulation

The Commission and the North American Securities Administrators Association (NASAA) jointly sponsored a conference in September 1983 to enhance

uniformity of securities regulation.

The Commission and NASAA solicited private sector comments and recommendations for increasing the efficiency of securities regulation through enhanced federal-state uniformity. Also, ajoint SEC/NASAA panel conducted a day

of public hearings on September 12,1983.

The state securities administrators and senior Commission staff reviewed the

public comments and met with those who testified, and members of the selfregulatory organizations. An agenda was prepared of the problems to be addressed by the joint efforts of the SEC and NASAA.

The conference represents the first time the SEC and NASAA have met to

consider increasing the efficiency of the dual regulatory process through enhanced cooperation and uniformity. As a result of the conference, permanent

coordinating committees at the SEC and NASAA will address the problem areas

identified and coordinate rulemaking initiatives.

Actions that the SEC and NASAA plan to take, include: (1) the conformation of

state rules to federal registration exemptions; (2) reduction of multiple state filings; and (3) coordination of federal and state enforcement and rulemaking

initiatives.

Small Business Rulemaking and Interpretive Initiatives

Simplified Registration Form Amended-On September 23, 1983, the Commission Increased the initial public offering limit under the simplified registration

statement from $5 to $7.5 million.!" The increase is in part In response to a

recommendation of the 1982 SEC Government-Business Forum of Small Business Capital Formation. It adjusts the ceiling for inflation since the short form was

adopted four years ago. The Commission intends to study the need and implications of an additional increase in the ceiling.

The Commission also revised,on a conditional basis, the short form disclosure

requirements for executive compensation. The revisions conform this form, to

the extent appropriate given the size of the issuer and the offerings, to the general

disclosure requirements for other Securities registration forms.

Resales-On September 23,1983, the Commission amended the resale provisions which: (1) define persons deemed not to be underwriters under the Securities Act;17 and (2) govern resales of securities acquired in certain business

combination transactions subject to registration under the Securities ACt.18The

revisions eliminate the requirement that information about the registrant be publicly available for resales by non-affiliated shareholders who have held the securities for at least three years.

Interpretive Advice on Exempt Offers Rules-On March 3, 1983,the Commission published the views of its staff on various interpretive questions regarding the

recently-adopted exempt offers rules under the Securities ACt.19 By publishing

12
the staffs views on frequently-raised questions, the Commission assisted those

persons who wish to make exempt offerings in compliance with the new rules.

Certain offerings, up to $5 million to others than the general public, were exempted from registration in fiscal 1982. In fiscal 1983, several states adopted

similar exemptions, which were the first joint state and federal registration exemptions. The exemptions for larger private placements were also simphfied. In fiscal

1983, over $20 billion of financings were effected under these new exemptions at

substantial savings to issuers.

Electronic Filing

The Chairman has established a staff task force to implement a pilot electronic

filing, processing and information dissemination system by the fall of 1984. The

objective is to permit investors and securities analysts to access such information

on home and office computer screens instantly as It is electronically transmitted

to the Commission by issuers. This system will use advanced technology to make

the delivery, storage and dissemination of information more efficrent and less

costly, thereby improving the flow of information to investors and facilitating the

work of the Cornrnissrons staff

The Commission has entered into a consulting contract with the not-for-profit

MITRE Corporation to study all aspects of the system and to provide assistance in

developing the prototype. (See further discussion, p. 49.)

Foreign Securities

On October 28, 1982, the Commission published proposed exemptions of the

securities of foreign issuers that have not voluntarily sought entry into U.S. markets from Exchange Act reqrstretlon.F" The final revision, adopted on October 6,

1983, requires foreign securities to be registered under the Exchange Act in order

to be quoted on NASDAQ.21 Canadian secunties on NASDAQ have until January

1986 to either register or withdraw Other foreign securities already on NASDAQ

were grandfathered indefinitely.

American Depositary Receipts

As part of its comprehensive review of the rules and forms for foreign issuers,

the Commission revised the regulation of American Depositary Receipts (ADRs).22

The Commission replaced two forms for registration with a single form that

codified unwritten practices and eliminated obsolete provisions. In order to simplify and streamline the registration process, a new rule was adopted allowing

certain registration statements to become effective upon filing.

Other Rulemaking Initiatives

Pro Rata Rule-On December 15, 1982, the Commission revised the Exchange Act rules which govern acceptances of securities in oversubscribed

tender offers.i-' The revised rule requires pro rata acceptance of securities depos13
ited by each depositor during the entire period the offer remains open. The

purpose was to provide security holders adequate time to obtain and respond to

such offers.

Shelf Registration-The Securities Act rule which governs the registration of

securities to be sold on a delayed or continuous basis was adopted temporarily

when the Commission adopted the integrated disclosure system in March

1982.24 The rule was effective until December 31,1983. Subsequent to its adoption, the Commission conducted public hearinqs-? and monitored the operation

and impact of the rule. In June 1983, the Commission once again solicited public

comment in order to afford interested parties the opportunity to provide their

views and experience under the rule so that the Commission may consider all

views in making its final determination with respect to the rule.26

On November 10, 1983. the Commission adopted a revised shelf registration

rule. As revised, the rule is available for traditional shelf offerings and for offerings

of securities which may be registered on Form S-3 or F-3, the short form registration statements. Over $70 billion of debt and $13 billion of equity offerings have

been filed under the shelf rule. Based on an independent economic analysis. the

discounted present value of interest saving to corporate debt issuers to date

under the shelf rule has been hundreds of millions of dollars.

Electric and Gas Utility Guide-On September 16, 1983, the Commission

published for comment proposed amendments to the Electric and Gas Utility

Guides under the Securities Act and the Exchange Act.27 The amendments,

proposed in response to a rulemaking petition filed by the California Association

of Utility Shareholders, would require disclosure by electric and gas utilities of the

effects on book value and on an alternatively computed earnings per common

share. of the issuance of new equity securities at below book value.

Definitional Rule-On September 23, 1983, the Commission adopted a new

rule that defines the terms "earnings statement", "made generally available to its

security holders" and "effective date of the registration statement" for purposes of

Section 11(a) of the Securities Act.28 Under the terms of the rule, the information

and availability requirements of Section ll(a) can be met by the income statements contained in anyone or a combination of a registrant's Exchange Act

filings or reports. The rule is intended to provide clarity and uniformity with

respect to these terms by building upon the integrated disclosure system.

MergerForms-The Commission is completing a review of merger registration

statement forms. These forms relate to transactions involving the issuance or

exchange of securities under a plan of reclassification. merger, consolidation,

acquisition or transfer of assets. The forms can be simplified by building upon the

existing short-form merger registration statement and the integrated disclosure

system. A release seeking comments on a revised business combination is expected to be published early in 1984.

Accounting Matters

Oversight Activities-Among others, the Commission oversees the accountIng profession and the Financial Accounting Standards Board (FASB). The

14
Commission looks to these private sector bodies to provide leadership in the

establishment of requirements that guide the activities of auditors and the standards that govern accounting measurement and financial reporting. This oversight entails frequent staff contact with these private sector organizations and

direct staff participation in their meetings, public hearings, and task forces. Such

contacts and participation speed referral of problems that emerge from the review of filings made by the Commission's staff. Thus, the Commission continues

to fulfill its statutory responsibility in these areas through close oversight of private

sector initiatives. However, the Commission remains alert to situations that require

prompt attention and takes regulatory action if indicated by the circumstances.

SEC Practice Section-As of June 30, 1983,426 accounting firms had voluntarily become members of the SEC Practice Section (SECPS) of the American

Institute of Certified Public Accountants Division for CPAFirms. These firms audit

85% of all publicly held companies. A SECPS member firm agrees to conduct its

public accounting practice in accordance with prescribed standards. Among

these are requirements to file annual reports, maintain a system of quality control,

and test that system once every three years by submission to an independent

peer review.

An independent Public Oversight Board (POB) oversees and annually reports

on the SECPS. In its report dated June 30, 1983, the POB concluded that the peer

review and special investigative processes have reduced the number of audit

failures by fostering and improving quality control systems of firms belonging to

the Division.P? The Commission agrees with the POB's assessment of the peer

review process and strongly encourages all accounting firms that audit publicy

held companies to participate in this self-regulatory program.

(1) Peer Review-Last year, the Commission reported that, for the first time, its

staff had reviewed a sample of the working papers underlying peer reviews under

the terms of an "access" arrangement reached by the SECPS and the Commission. This review, combined with the staffs review of the POB's oversight files,

enabled the Commission to determine that it can rely to a great extent on the

POB's oversight function in fulfilling its own oversight responsibilities.

Similar reviews were performed in 1983 and the Commission continues to

believe that this important aspect of the accounting profession's self-regulatory

initiative is functioning adequately. The Commission intends to continue its practice of directly monitoring the peer review process by means of the access

arrangement. Access to the peer review working papers enhances the Commission's ability to evaluate the peer review process and the POB's oversight of that

process.

The SECPS adopted certain procedural changes to the peer review process.

The new procedures require peer reviewers to consult immediately with the Peer

Review Committee when they discover materially substandard performance, establish deadlines enforceable with sanctions to ensure timely submission of peer

review reports, and provide more guidance for the selection for review of audit

work performed by other offices for the office primarily responsible for the overall

engagement. These changes are responsive to situations encountered during the

peer review process and in many instances incorporate suggestions made by the

15
POB and SEC staffs.

(2) Special Investigative Process-In its 1982Annual Report to Congress, the

Commission stated that it "has no basis for reaching any conclusion" about the

special investigative process, and "believes that visible evidence as to specific

activities is critical to demonstrate to the public the effectiveness of this aspect of

the profession's self-regulation."3o This continues to be the case.

The Commission can express no conclusions on the process or on the POB's

oversight of that process because very little information about the special investigative activities is available to it. The public is also unable to evaluatethat process.

The SECPSwill not be widely recognized as a credible self-regulatory body unless

more specific information about the activities of the special investigative process

becomes public.

In addition to urging the SECPS to publicize its disciplinary activities to a

greater extent, the Commission also believes the SECPS should revise the requirements for reporting cases to it. Presently,member firms only need to report

allegations of audit deficiencies relating to SEC registrants. The Speciallnvestigations Committee (SIC) should look into, and member firms should report, all

cases which have generated significant public interest and involve allegations of

audit failure.

FASB Actwities-While the FASB has continued to perform satisfactorily on

most matters, the Commission continues to be disappointed with the absence of

significant progress on the Conceptual Framework Project. A description of this

Project and certain technical agenda items follow.

(1) Conceptual Framework-An exposure draft of a concepts statement on

reporting Income, cash flows, and financial position was issued in November

1981.Based on review of the comments on the exposure draft, the FASB determined to delay the issuance of the concepts statement until further progress was

made on the recognition and measurement phases of the project. In the interim,

the staff of the FASB is reviewing the reporting of cash flows in 1982 annual

reports. More recently,the FASB decided to consider the measurement, recognition and financial statement display issues concurrently. The Commission believes that it is Important for the FASB to expedite development of the concepts

underlying the reporting of relevant cash flow information.

The accounting recognition and measurement phases of the project deal with

initial recognition of, subsequent changes in, and the appropriate measurement

of the asset, liability and equity elements in financial statements. Failureto resolve

the measurement issue has delayed this phase significantly and raised considerable doubt about the ultimate success of the Conceptual Framework Project.

The most immediate result of the FASB's inability to reach hard decisions in

this Project is that the resolution of emerging accounting problems is hampered

because the underpinnings for resolving those problems have not been decided

In the framework project. Furthermore, the FASB may be unable to point to a

clear basis for its decision when dealing with a specific issue, and thus will be

subject to criticism on all controversial projects. The lack of a conceptual framework makes it difficult to predict the FASB's decisions on basic issues.Although

establishment of a conceptual framework will not eliminate all controversy or

16
uncertainty, it should assist the FASB and others in reaching decisions and also

result in a better understanding of the FASB's decision-making process.

(2) Financial Reporting Practices for Oil and GasProducers-In December

1982, the Commission amended its rules to require presentation of supplemental

oil and gas disclosures specified in FASB Statement 69.3\ This action was consistent with the Commission's policy of deleting its rules whenever they become

unnecessary due to actions of the private sector.

(3) TImely Guidance on Emerging Accounting Issues-Attention has recently been focused on the FASB's role in the area of providing timely guidance

on emerging accounting issues. A report on the operating efficiency of the FASB,

issued in August 1982 by a committee of the Financial Accounting Foundation,

its oversight body, recommended, among other things, that "the FASB should

develop a plan ... to provide timely guidance regarding the implementation of

standards and for implementation questions and emerging issues,"32 The FASB

formed a task force to study the recommendation and provide advice as to an

appropriate response. In July 1983, the task force issued its report after evaluating

the comment letters received in response to an FASB Invitation to Comment on

this matter. The report recommends that the FASB could improve the provision

of timely gUidance by: (1) broadening the scope of FASB technical bulletins

(which are issued by the FASB staff without formal deliberation by FASB members and without the lengthy due process procedures required of FASB statements or interpretations); and (2) establishing an advisory group to assist the

FASB in identifying financial reporting issues. The FASB is presently considerinq

the report and any new procedures that might be necessary to implement the

recommendations of the task force.

Prompt implementation of these recommendations would materially aid public

(and private) companies to make appropriate decisions for financial reporting.

Because of the SEC staffs need to resolve accounting and disclosure questions

for particular companies, the Commission will always be involved in emerging

problems. Nonetheless, the Commission believes that the FASB can and should

have a greater presence in the resolution of emerging accounting issues.

(4) Accounting for Pensions-The FASB's current project on employers' accounting for pensions addresses a very significant financial reporting matter that

needs to be resolved. In its Preliminary Views document, the FASB proposed

significant changes in the way companies account for pensions. Under this proposal, employers would be required to use a single actuarial method to compute

annual pension expense under defined benefit plans. Where plan benefits measured under this single method exceed the plan's net assets, companies would

report a net pension liability on their balance sheets. Conversely, where the plan's

net assets exceed plan benefits measured by this single actuarial method, a net

pension asset would be reported. The FASB's tentative conclusions on this matter

have generated a great deal of interest and controversy In the business community. While there is lack of agreement as to the appropriate resolution of this

matter, there clearly exists an urgent need for more comparable reporting of

pension costs and liabilities. The FASB's leadership role in establishing accounting standards is being tested by this issue.

17
(5) Other Projects-Other important items on the FASB's agenda include

consolidations and the equity method of accounting, accounting for income

taxes as well as some narrow emerging practice problems. The Commission

concurs with the FASB's decision to address these issues and is particularly

hopeful that determinations made in the consolidations project will help resolve

many of the emerging accounting issues encountered by registrants and their

accountants in this area.

International Accounting and Reporting-The disclosure of information by

multinational enterprises continues to be of interest to a variety of user groups,

including investors, creditors, governments and employee organizations. A number of regional and international bodies continue to devote substantial time and

resources to improving the quality of the information included in general purpose

reports.

The Commission monitors certain activities of several regional and international standard setting bodies, including those of the European Economic Community, the International Accounting Standards Committee and the International

Federation of Accountants. While not a direct participant in such activities, the

Commission is interested in and supportive of the development of international

standards of accounting and auditing. Some degree of standardization of such

requirements would provide more useful and understandable information for

investors and other users of financial reports and lessen differences between the

reporting requirements applicable to domestic and foreign private issuers which

register securities with the Commission.

In addition to monitoring developments in international accountIng and reporting, the Commission's Office of the Chief Accountant maintains communications

with various national and international standard-setting bodies and comments on

the proposed standards of such bodies from time to time. A staff member from

the Office of the Chief Accountant serves as an expert advisor on the United

States delegations to the regular meetings of working groups on international

accounting and reporting standards established by the United Nations and the

Organization for Economic Cooperation and Development. While the Commission recognizes that the harmonization of accounting and reporting standards is

a long term process, it is hoped and expected that these efforts will continue and

favorably affect the efficiency of the world's capital markets.

Accounting-Related Rules and Interpretations-The Commission's principal

accounting requirements are embodied in Regulation S-X which governs the

form and content of, and requirements for, financial statements filed under the

Federal securities laws. The Commission also publicizes its views on various

accounting and financial reporting matters in Financial Reporting Releases

(FRRs). Accountmg and Auditing Enforcement Releases (MERs) are issued to

announce the Commission's enforcement activities that involve accounting and

auditing matters. In addition, the Commission's staff periodically issues Staff

Accounting Bulletins (SABs) as a means of informing the financial community of

its views on accounting and disclosure issues-'>

The Commission's accounting-related rules and interpretations serve primarily

to supplement generally accepted accounting principles (GMP), as established

18
by the private sector, by addressing those areas which are unique to Commission

filings or where GMP is not explicit. The Commission continually evaluates its

requirements as the private sector changes financial reporting standards, and

modifies or eliminates those requirements which become unnecessary. To the

extent that the FASB and the A1CPAaccelerate their efforts to enhance financial

reporting, the Commission should be able to place more reliance on private

sector standards.

Sunset Review-During the past year, the Commission devoted substantial

resources to complete its comprehensive review of existing accounting-related

rules and interpretations. The objective of this review was to ensure that the

Commission's requirements remain necessary and cost-effective in todays environment and that they contribute to the usefulness of financial reporting without

imposing unjustified burdens on registrants. Some specific actions in this area

are discussed below.

(1) ReguLation S-X-During the fiscal year, the Commission adopted revised

rules regarding financial statement requirements for investment companies and

bank holding cornpanles.>' That action substantially completed the project, initiated in 1980, to establish uniform requirements applicable to virtually all filings

with the Commission as well as annual reports to security holders.

During the fiscal year, the Commission also revised its requirements regarding

independence of accountants-'> and its full cost accounting rules for determining

when it is appropriate for oil and gas producers to exclude costs from immediate

amortization.>"

(2) FinanciaL Reporting Requirements for Banks and Bank HoLding Companies-In addition to revising the financial statement requirements contained in

Regulation S-X, the Commission and its staff undertook a number of other

initiatives involving financial reporting requirements for banks and bank holding

companies. In October 1982, the Commission issued SAB 49 (later supplemented by SAB 49A) regarding disclosures by bank holding companies about

loans in countries that are experiencing liquidity problems. Also discussed was

the related need to provide additional disclosures about restructurings of existing

debt or funding of additional borrowings in these countries. The staff also issued

SAB 50 in March 1983 to express its view as to the appropriate financial statement

and industry guide disclosures in filings involving formation of a one bank holding company. In August 1983, the Commission authorized the issuance of revised

staff gUidelines for disclosures by bank holding companies about nonaccrual,

past due and restructured loans; potential problem loans; foreign outstandings;

and loan concentrations.>? Because of close cooperation with the Federal banking agencies, the amended guildelines relating to the presentation of information

about nonaccrual, past due and restructured loans and foreign outstandings by

bank holding companies are consistent with comparable rules applicable to

banks in reports filed with the banking agencies.

(3) Accounting for Computer Software DeveLopment Costs-In August 1983,

the Commission announced a moratorium on the practice of capitalization of

costs of internally developed computer software for sale or lease to others.38 The

Commission imposed this moratorium in order to prevent further divergence in

19
accounting for these costs. The prohibition of capitalization does not apply to

companies which had disclosed a capitalization practice before April 14, 1983.

This moratorium will automatically be rescinded concurrent with the effective

date of a final FASB pronouncement providing specific accountmg guidance on

this issue.

20
Regulation of the Securities Markets

Key 1983 Results

Rapid expansion of new financial products and enhancement to automated

securities trading characterized the securities markets during fiscal 1983, while

the Commission continued with its cost savings initiatives. The over-the-counter

market and the stock exchanges were linked for the first time through the Intermarket Trading System (ITS), furthering progress toward a national market system. Legislation initiated by the Commission and signed into law this year ended

the Commission's duplicative program for directly regulating those over-thecounter broker-dealers who are not members of a national securities association

(formerly called "SECO" brokers) by requiring them to join an association. The

range of approved option products expanded to include options on stock indices

and options on certificates of deposit.

The level of activity for processing of broker-dealer reports increased during

fiscal 1983. There were 7,067 broker-dealer reports processed, compared to

6,599 and 6,106 in fiscal years 1982 and 1981, respectively.

The Commission adopted rule amendments in the trading practice area designed to enhance the depth and liquidity of the over-the-counter market by

reducing restrictions on market-making activity before a distribution of securities.

This terminated a 20-year-old program of regulating most purchases by issuers

of their own securities.

In the reporting area, the Commission eliminated a requirement that brokerdealers send immediate confirmations of transactions in shares of certain money

market funds, resulting in an estimated cost savings of $35 million to the industry

and fund shareholders. The Commission rescinded the requirement that brokerdealers file reports concerning stabilizing activities, saving the industry approximately $3 million annually.

The Commission's approval of a set of rule changes requiring certain financial

institutions to confirm, affirm, and settle trades through the facilities of registered

securities depositories, should reduce settlement costs by hundreds of millions of

dollars annually. The Commission also approved changes to the formulas for

determining participants' contributions to the Options Clearing Corporation

clearing fund, thus freeing up more than $300 million in capital.

New transfer agent rules were approved that establish minimum standards and

reporting requirements regarding records of security holders and safeguarding of

funds and securities used in performing transfer agent functions. And, in its

efforts to facilitate the broker-dealer examination program conducted by the selfregulatory organizations (SROs), the Commission granted the SROs access to

computer software for monitoring customer accounts.

21
Securities Markets, Facilities, and Trading

The National Market System (NMS)-The Commission permitted operation,

on an indefinite basis, of the Intermarket Trading System (ITS),39 which is run by

seven national securities exchanges and the National Association of Securities

Dealers, Inc. (NASD), and of the Cincinnati Stock Exchange's National Securities

Trading System (NSTS).40 Through its Directorate of Economic and Policy Analysis and Office of the Chief Economist, the Commission continued monitoring

trading in Rule 19c-3 securities (i.e. securities not subject to exchange off-board

trading restrictions) through the automated interface between ITS and the

NASD's Computer Assisted Execution System (CAES).41

In adopting Rule 19c-3, the Commission established a program to monitor the

extent of Rule 19c-3 trading and its impact on the market performance of Rule

19c-3 securities. To date, no favorable or adverse effects on the markets for

securities traded under Rule 19c-3 have been found. The volume in Rule 19c-3

eligible securities, as a percentage of composite volume executed in the over-thecounter market, has declined substantially in the past year. The same is true for

Rule 19c-3 eligible securities traded through the automated interface between ITS

and CAES.

Monitoring of the ITS showed that it has become a major trading facility that

increases intermarket competition and improves customers' orders. Monitoring

the National Securities Trading System of the Cincinnati Stock Exchange showed

that the system provided its users with an effective and efficient mechanism for

executing orders and attracting order flow in the eligible securities.

The Commission also deferred action on a reproposed order exposure rule

that would apply to Rule 19c-3 securities traded through the ITS/CAES interface.

The Commission believes that absent evidence of need, and considering the

small amount of over-the-counter trading in these securities, there is insufficient

justification for imposing the costs associated with the rule.42

By the end of 1983 over 700 actively-traded OTC securities had been designated as national market system (NMS) securities under Rule IlAa2-I.43 That

rule requires transactions In NMS Securities to be reported in a real-time system

which, the Commission believes, increases market efficiency and improves execution of customer's orders.

National System for the Clearance and Settlement of Securities Transactions-The Commission proposed Rule 17Ad-14 that would require registered

transfer agents acting as tender agents for bidders during tender offers to establish accounts with registered securities depositories to permit book-entry delivery

of tendered securlties.v' for an anticipated annual saving to brokers and agent

banks of over $350 million.

The Commission approved rule changes proposed by five registered securities

exchanges and the NASD requiring certain financial institutions to confirm, affirm, and settle institutional trades through the facilities of registered securities

depositories. These rule changes will substantially reduce settlement costs for

those institutlons.s" The Commission also approved a proposal submitted by the

Midwest Securities Trust Company that modernizes the settlement of municipal

22
securities transactions.?"

Options-During fiscal year 1983, new legislation clarified the Commission's

regulatory responsibility regarding options and futures."? Under that authority,

the Commission approved the issuance and trading of 23 new products including

options on stock market indices,48 foreign currencies.s? U.S. Treasury securities.>? Government National Mortgage Association securities>' and certificates of deposit.V The Commission also raised no objection to the issuance of

futures on a number of stock indices. Trading has not begun on all approved

options and futures.

Market Manipulation-On March 22, 1983, the Commission adopted amendments to Exchange Act Rule lOb-6. The rule governs trading in securities by

persons participating in a distribution of those securltles.P The amendments: (1)

defined the term "distribution" for purposes of the rule; (2) codified existing staff

positions concerning some of the exceptions to the rule; (3) relaxed the prohibitions of the rule to permit participants in a distribution of certain securities and

issuers of those securities to continue purchasing such securities until two business days before the commencement of the sales of the securities being distributed; and (4) excepted non-convertible investment grade debt and preferred

securities from the rule. Simultaneously, the Commission adopted an amendment to Exchange Act Rule 10b-8 that extended the scope of the rule to cover

purchasing activity by broker-dealers who act as "standby underwriters" in connection with a call for redemption by an issuer of its convertible securities.

Issuer Repurchases-On November 30,1982, the Commission adopted Exchange Act Rule lOb-18.54 The rule regulates purchases of an issuer's securities

by or on behalf of an issuer and certain other persons. The rule provides a "safe

harbor" from liability under the anti-manipulative provisions of Section 9(a)(2) of

the Exchange Act and Rule lOb-5 under the Exchange Act for issuer repurchases

complying with specified time, price, and volume limitations.

Issuer Tender Offers-On August 2, 1983, the Commission adopted amendments to Exchange Act Rule 13e-4,55 which regulates cash tender offers and

exchange offers by issuers for their equity securities. The amendments exempt

from the Rule's application tender offers by issuers to purchase shares from

security holders, excluding participants in employee or shareholder stock purchase plans, who own less than 100 shares. A companion amendment to Exchange Act Rule 13e-3 was also adopted.

Stabilization Reports-On September 7, 1983, the Commission amended

Exchange Act Rules 17a-2 and lOb-7 and rescinded related Rule X-17a-1.56The

effect of the change is to eliminate the requirement that underwriting syndicate

members file a report with the Commission of all of their transactions in a

stabilized security. Instead, the manager of an underwriting syndicate is now

required to maintain, in a separate file, records of only stabilizing transactions by

the syndicate.

Publication of Quotations by Broker-Dealers-On April 26, 1983, the Commission published for comment amendments to Exchange Act Rule 15c2-1).57

The rule generally requires that a broker-dealer have certain information concerning an issuer before initiating quotations on the issuer's securities. The proposed

23
amendments would require broker-dealers to maintain information with respect

to additional categories of issuers and would broaden the types of quotations to

which the rule would apply. The Commission also announced its intention to

review the rule in its entirety.

Exemption from Short Sale Rule-On September 27,1983, the Commission

published for comment an amendment to Exchange Act Rule 1Oa-I, the short

sale rule.58 If adopted, the amendment would permit a broker-dealer selling a

security acquired in the capacity of a block positioner to ignore, for purposes of

compliance with the "tick" provisions of the rule, a hedged short position in that

security arising from arbitrage or hedging activities. The amendment is designed

to facilitate block posrtioninq.

Regulation of Brokers, Dealers, Municipal Securities Dealers, and

Transfer Agents

Broker-Dealer and TransferAgent Examinations-In fiscal 1983, the number

of completed field examinations of broker-dealers was 11% less than the previous

year because the Commission had fewer examiners and some of them were

redeployed to handle widespread problems related to the "hot issue" market.

Nevertheless, the Commission continued to emphasize Improved efficiency, thoroughness, and overall quality of regional office examinations, particularly oversight examinations of SRO member firms. Also, one particular oversight

examination found that an SRO had failed to discover fraudulent activities at one

firm involving approximately $40 million. Consequently, the firm was placed in

Securities Investor Protection Corporation (SIPC) liquidation, and the firm's principal officer was barred from the securities business, indicted and sentenced to 25

years In prison.

Refinements were made to the computerized Customer Account Statement

Evaluation System (CASE), which permits more rapid analysis of activity in cus-.

tomer accounts and contributes to increased examiner productivity and effectiveness. Further, the Commission granted SRO access to the CASE program for use

in their exarrunatrons.

During the fiscal year, the staff reviewed approximately 165 transfer agent

examinations performed by the regional offices and the federal bank regulators

and 796 regional office broker-dealer examinations in order to identify any novel

or unique national concerns and to assist in promoting better regional office

examination programs.

Securities Confirmations-On April 18, 1983, the Commission approved

amendments to Rule lOb-lO, the customer confirmation rule. The amendments

allow use of monthly confurnations as a limited exception from the immediate

delivery requirements of the rule for transactions In shares of those investment

companies usually referred to as money market funds. This exception is expected

to save the securities industry about $35 million annually. The amendments also

require disclosure of yield and call features in transactions in debt securities,

except municipal securities.>?

Fingerprinting-The Commission amended Rule 17f-2 to reduce the cost of,

24
and to simplify the procedures for, requesting certain exemptions from the fingerprinting requirements under the Exchange Act.6o

TransferAgent Regulation-The Commission adopted rules establishing uniform minimum standards for registered transfer agents. The rules ensure the

prompt and accurate creation and maintenance of issuer security holder records

and the safeguarding of funds and securities in the possession or control of

transfer aqents.>'

Oversight of Self-Regulatory Organizations

National Securities Exchanges-As of September 30, 1983, ten exchanges

were registered With the Commission as national securities exchanqes.v-' During

the fiscal year the Commission granted applications by exchanges to delist 44

equity and 12 debt issues, and granted applications by issuers requesting withdrawal from listing and registration for 22 equity and 10 debt issues. In addition,

during the fiscal year the Commission granted 775 applications by exchanges for

unlisted trading privileges.

The exchanges reported to the Commission 475 final disciplinary actions

imposing a variety of sanctions upon member firms and their employees. This

contrasts to 334 final disciplinary actions in fiscal 1982.

During the fiscal year, the Commission received 194 proposed rule changes

from exchanges. Among the significant rule filings approved by the Commission

were: (1) amendments to the Philadelphia Stock Exchange's by-laws and rules

relatmg to disciplinary procedures.v" (2) amendments to the American Stock

Exchange, Inc. (Amex) listing standards:"? and (3) amendments to the New York

Stock Exchange, Inc.'s (NYSE) Constitution limiting the number of NYSE physical access memberships to 24.65

During the fiscal year, the Commission amended Rule 6a-2 and Form 1 and

I-A under the Exchange Act regarding the form of applications for registration as

a national securities exchange and of periodic amendments to an exchange's

registration staternent.v"

Allocation of Regulatory Responsibilities-On September 8, 1983, the Commission approved a plan filed jointly by seven SROs: the Amex, Chicago Board

Options Exchange, Inc. (CBOE), Midwest Stock Exchange, Inc. (MSE), NASD,

NYSE, Pacific Stock Exchange, Inc. (PSE), and Philadelphia Stock Exchange, Inc.

(Phlx). The plan allocates regulatory responsibility for certain option-related sales

practice matters with respect to broker-dealers which are members of more than

one participating SRo. It IS designed to reduce regulatory duplication.

National Associsuon of Securities Dealers, Inc.-The NASD, which has 4,232

members, is the only national securities association registered with the Commission. At the close of the fiscal year, the NASD reported to the Commission the

disposition of approximately 227 significant disciplinary actions and 100 summary actions by the NASDAQ Trading Committee, as compared With approximately 429 and 248 a year earlier. In addition, the Commission received from the

NASD 17 filings of proposed rule changes, down 1 from 1982.

Under the amendments to the Exchange Act, the Commission's SECO pro25
gram terminated on December 6, 1983.67 The NASD has cooperated with the

Commission to phase out the SECO program and has submitted a number of

rule filings to permit the conversion of SECO members to NASD rnernbers.s"

Cleennq Agencies-The Commission granted full registration to nine clearing

agencies under Sections 17A and 19 of the Exchange Act.69 The Commission

also extended the temporary registration of two clearing agencies until September 30, 1984.70

Surveillance and Compliance Inspections-During the fiscal year, the staff

conducted 18 inspections of SRO market surveillance, disciplinary, compliance

and operational programs. When notified of the inspection findings, each SRO

took steps to respond to staff recommendations.

During 1983, the staff focused several of its surveillance inspections on the

adequacy of transaction audit trails. Through a series of special inspections, the

staff monitored the NYSE's progress in developing its equity audit trail. In June

1983,the NYSE and member firms completed systems and procedural modifications to use the comparison process to collect and pass through to the exchange

essential audit trail data elements. An inspection of the CBOE found that surveillance for intramarket and intermarket violations at the exchange would be

enhanced greatly by an automated options audit trail. Also, an inspection of the

NASD's program for surveillance of securities quoted in NASDAQ disclosed

siqrnflcant deficiencies caused largely by the NASD's inability to capture and use

for automated surveillance certain detailed information on individual trades. Accordingly, the Commission recommended that the NASD create an adequate

audit trail for transactions in all NASDAQ stocks.

In addition, the staff inspected the NASD's enforcement of its standards for

inclusion of securities in NASDAQ. While the inspection disclosed that the NASD

had improved its tracking of issuers' compliance with qualifications standards, it

also disclosed that the NASD had not verified the accuracy of issuers' financial

filings. The Commission recommended that the NASD hire additional staff to

perform routine analyses of these filings. In addition, the staff completed an

inspection of the CSE which was prompted by the CSE's request for permanent

approval of its National Securities Trading System (NSTS). The inspection disclosed no major problems with the CSE's operational surveillance programs

which would prevent the Commission's permanent approval of the NSTS.

Also during 1983, the staff conducted a series of inspections to examine the

exchanges' capability to detect certain intermarket trading violations. A comparative study of surveillance techniques to detect stock/option manipulation discovered certain surveillance weaknessesat each of the options exchanges,A staff

review of the treatment of frontrunning violations by the options exchanges,

conducted in conjunction with a joint SRO task force, discovered variations in

SROinterpretations of the frontrunning prohibition. Finally, severallimited inspections of SRO trading programs for options on debt instruments and foreign

currency disclosed that surveillance capability for these new products appeared

adequate in light of the low trading volume.

At the end of the fiscal year, five surveillance inspections were in progress:

Amex disciplinary program, BSE surveillance and operational programs, PSE

26
stock and options surveillance programs, and the MSE surveillance program.

The staff conducted an inspection of the NYSE to evaluate the exchange's

handling of margin maintenance violations at a member firm. As a result, the staff

recommended the adoption of procedures to assure the prompt abatement of

margin violations by member firms and to assure a more thorough sales practices review. The staff also conducted an inspection of the NYSE concerning

routine examinations of member firms and began an inspection of the NASD

Central Registration Depository. These inspections were in progress at the end of

the fiscal year.

S/PC Assessment-On May 1,1983, SIPC reimposed its assessment on member broker-dealers at the annual rate of one-fourth of 1% of aggregate gross

revenues from the securities business. The renewed assessment on gross revenues followed SIPe's notification to the Commission that the SIPC fund had fallen

below the statutory minimum of $150 million on April 13, 1983. This is the first

time that the fund dropped below the statutory minimum since that level was

achieved in 1977.

The Commission did not disapprove two SIPC bylaw amendments relating to

the SIPC assessment. On April 29, 1983, the Commission considered, and did

not disapprove, SIPe's requested change in the instructions of the SIPC assessment forms permitting SIPC members a deduction from "gross revenues" of

40% of the interest earned on customers' securities accounts. On August 11,

1983, the Commission considered, and did not disapprove, SIPe's request that, in

computing "gross revenues" for assessment purposes, SIPC members be allowed to net all interest expense in connection with repurchase agreements and

securities borrowing acitivities against the interest income generated by such

transactions.

Clearing Agencies-During fiscal year 1983, the Commission approved many

proposed rule changes reducing clearing costs and refining clearing agency

systems for controlling financial exposure. For example, the Commission permitted the Options Clearing Corporation to accept letters of credit issued by foreignbased banks to secure participants' margin obllqatlons?" and to modify the

formulas for calculating participants' contributions to the clearing fund, thereby

freeing up three hundred million dollars in capltal.??

Applications for Re-Entry-During the fiscal year, the Division of Market Regulation received 80 applications to permit persons subject to statutory disqualifications, as defined in Section 3(a)(39) of the Exchange Act, to become

associated with broker-dealers. The following SROs filed applications: NASD-49;

NYSE-22; Amex-6; CBOE-2; and MSE-l. Six of the 80 applications were subsequently withdrawn, 64 were processed and 10 were pending at year end.

Market Oversight and Surveillance System-The Market Oversight and Surveillance System (MOSS) was initiated on a pilot basis in 1980. It is designed to

automate the Commission's surveillance and oversight capabilities. In August

]981, at the Commission's initiative, the SROs submitted a proposal for an SRO

intermarket surveillance program, to which the Commission would have ready

access. The SRO program, when fully implemented, should result in significantly

enhanced intermarket surveillance. Therefore, the Commission has deferred rna27
jor enhancement of MOSS pending Implementation and evaluation of the SRO

program, In the Interest of avoiding unnecessary costs and duplication.

During fiscal year 1983, the staff refined and expanded the oversight and

research capabilities of MOSS. During this period, the SROs made siqrufrcant

progress towards the implementation of their program. Under the requirement in

the Congressional budget authonzation for MOSS, the Commission submitted

reports to Congress on the MOSS project on April 1, 1983 and October 1,1983,

which provide greater detail on MOSS and the SRO project.

Municipal Securities Rulemaking Board-As in the case of the NASD, the

Commission reviews proposed rule changes of the Municipal Securities Rulemaking Board (MSRB). During the last nine months of the fiscal year,the MSRB

filed 13 proposed rule changes.

A number of these proposed rule changes revised the content of Inter-dealer

and customer confirmations. These changes were necessitated by the TaxEquity

and Fiscal Responsibility Act of 1982,which provided that municipal securities be

issued in registered form to maintain their tax exempt status, and by the advent of

new products, such as the zero coupon bond, which require additional disclosure

on the confirmation 73

28
Investment Companies and Advisers

Key 1983 Results

Despite budgetary constraints and personnel reductions, as a result of increasIng productivity. during fiscal 1983 the Commission completed a record 1,085

examinations of investment companies and investment advisers,an increaseover

the 1,065 Inspections conducted in fiscal 1982. In addition, through its examination program, the Commission recovered $5.1 million during the year which was

returned to investment company shareholders and investment advisory clients.

The number of registered Investment companies and investment advisers increased significantly during fiscal 1983: 12% in the case of investment companies and 34% for investment advisers. In anticipation of continued growth in the

industry and in the complexity of financial products, the Commission initiated a

program to increase the number and effectiveness of Investment company and

investment adviser examinations to be conducted in future years.Existing examination procedures will be streamlined through increased use of computers for

developing priorities, scheduling examinations and analyzing collected information. These changes will improve the cost-effectiveness of the inspection program

without reducing investor protections.

Office of Regulatory Policy

Early In fiscal 1983, the Investment Company Act Study Group and the Investment Advisers Act Study Group were combined to form the Office of Regulatory

Policy. This office is responsible for the Division of Investment Management's

ongoing review of the Investment Company Act of 1940 (Investment Company

Act), the Investment AdvisersAct of 1940 (AdvisersAct), and the rules, regulations

and administrative practices adopted under those Acts. The objective is to alleviate regulatory burdens imposed upon investment companies and investment

advisers without reducing investor protection. During fiscal 1983, the Office responded to recent market and industry trends by examining and proposing

several significant deregulatory initiatives.

On the Office's recommendation, the Commission Issued two advance concept releases during the fiscal year.The first requested comment on alternatives

for mutual fund governance 74 The second requested comment on alternatives

for the establishment of a self-regulatory organization to conduct investment

company inspections.?" The Commission also proposed, at the recommendation of the Office. Rule 22d-6 under the Investment Company Act that would

permit investment companies to sell redeemable securities at prices that reflect

different sales loads.?" Also, the Commission proposed Rule 205-3 under the

Advisers Act that would permit registered Investment advisers to charge certain

financially sophisticated chents advisory fees that are based upon capital qains.??

29
The Commission adopted an amended registration form for investment advisers,

thereby reducing their compliance burden.?"

Disclosure Study

The Division established a Disclosure Study Group in fiscal 1979 to undertake

a thorough review of the disclosure requirements for investment companies under the Secunties Act of 1933 (Securities Act) and the Investment Company Act.

Dunnq fiscal 1983, upon the recommendation of the Study Group, the Commission adopted a new registration form under the Securities and Investment

Company Acts for all open-end management investment companies other than

insurance company separate accounts."? The new form, Form N-IA, establishes

a two-part format for disclosure to investors. The first part is a shortened and

simplified prospectus that may be used to satisfy the delivery requirements of the

Secunties Act. The second is a "Statement of Additional Information" that is

available to Investors upon request, without charge.

The Commission also adopted temporary amendments to Rule 482 under the

Securities Act.8o The temporary amendments permit mutual funds to mail advertisements in the form of an "omitting prospectus" directly to investors. Money

market mutual funds are permitted to include in such advertisements an effective

yield comparable to the compound interest rates advertised by banking institutions.

Insurance Products

Durmq fiscal 1983, the Commission took action on three exemptive rules

relating to variable annuity contracts. These initiatives were designed to eliminate

the many individual exemptive applications under the Investment Company Act

filed by insurance company separate accounts offering variable annuity contracts. The rules codify the standards that the Commission has developed in

connection with certain routine applications for exemption.

On October 18, 1982, the Commission proposed Rule 6c-7 and amended Rule

14a-2 under the Act.'" Proposed Rule 6c-7 would provide separate accounts with

exemptive relief to permit them to comply with applicable Texas law in the sale of

variable annuity contracts to certain employees of Texas institutions of higher

education. Amended Rule 14a-2 expands the availability of existing relief from the

Investment Company Act's minimum net worth requirement. On July 28, 1983,

the Commission adopted Rule lla-2 under the Investment Company Act82 which

eliminates the need for separate accounts to obtain individual orders of the

Commission approving the terms of certain routine exchange offers. Rule 6c-8,

adopted on the same day,83 eliminates the need for individual orders of the

Commission permitting separate accounts to impose a deferred sales load on

their variable annuity contracts and to deduct a full annual fee for administrative

services in certain instances.

Significant Applications and Interpretations

Fidelity Fund, Inc.-During fiscal 1983, the Division approved requests by the

30
Fidelity and Federated groups of investment companies to effect certain types of

securities transactions with affiliated banks. Such transactions included purchases and sales of municipal securities as well as purchases of certificates of

deposit and repurchase agreements issued by certain of the affiliated banks.

Exemptive relief was particularly important for those funds that are designed for

institutional investors or as "private label" funds sold exclusively to the customers

of a single bank. In both situations, securities trading by the Fidehty and Federated funds with those affiliated banks would have been prohibited by the Investment Company Act without Commission approval. This would have had the

effect of depriving the entire Fidelity and Federated groups of needed portfolio

management flexibility.

American Property Mortgage, Inc.-The Division processed an application of

American Property Mortgage, Inc., for a Commission order under Section 17 of

the Investment Company Act and Rule 17d-l thereunder, which limit transactions

between registered investment companies and their affiliates. This application

concerned the organization of a closed-end investment company, Tax Exempt

Equity Fund, Inc., which proposed to offer investors a new type of investment

opportunity. Under the proposed arrangement, proceeds from the sale of shares

of the fund would be used to purchase tax-exempt, industrial development bonds

from municipalities. The proceeds of the bond sales would be loaned by the

municipalities to companies jointly owned by the fund and an affiliate of the

fund's investment adviser, which would use the loans to purchase and develop

commercial real estate projects for leaseto qualified tenants. The applicant represented that Fund shareholders would benefit from this arrangement by receiving

not only a return of principal and tax-exempt interest, but also a share of the

residual value of the real estate projects after the 20 year life of the bonds. The

Division, under delegated authority, issued a notice of the filing of this application

on July 29, 1983.

Venture Capital-During the fiscal year,the Division facilitated the operations

of venture capital companies, including business development companies

(BDCs), by granting them various types of exemptive relief under the Investment

Company and Advisers Acts. For example, orders were issued to Allied Capital

Corporation and to Narragansett Capital Corporation to allow those companies to

pass the Section 18(k) exclusion from the 300% asset coverage test of Section

18(a) of the Investment Company Act (concerning indebtedness of small business investment companies) through to the companies' parents. In addition, the

Division issued an order to Allied Capital to allow that company, which does not

meet the definitional requirements of a BDC under the Investment Company Act,

to engage in certain joint transactions under Section 17 of the Act with downstream affiliates on a basis comparable to that of a BDC. Furthermore, the

Division issued an order to Narragansett to allow it to issue stock options so that it

can attract and retain qualifed managerial talent. While meeting the definitional

requirements of a BDC under the Act, Narragansett, for tax reasons, has not

elected to register as a BDC. Finally,the Division issued an order to Merrill Lynch

Venture Partners I to permit that company to engage in certain parallel investments with affiliates.

31
Repurchase Agreements-Upon the Division's recommendation, the Commission issued an interpretive release revising the Division's position concerning

the basis on which mutual funds should enter into repurchase agreements

(repos). Issuance of the releasewas precipitated, in part, by a finding of the Office

of the General Counsel that a fund that enters into a repo may be exposed to the

risk that it will be unable to Iiquidate immediately the "collateral" underlying the

repo if the issuing party initiates bankruptcy proceedings, The Division advised

that, pending either judicial or legislative resolution of the uncertainty regarding

the status of repos under the Bankruptcy Code, issuance of a new interpretive

release-'? would be appropriate to ensure that investment companies will avoid

entering Into repo transactions with parties that present a serious risk of becoming bankrupt. The interpretative release announced: (1) that the Division was

modifying a prior "no-action" position by requiring that mutual fund boards of

directors evaluate the creditworthiness of the brokers or dealers with which their

funds propose to enter Into repos; and (2) the Division's position that directors of

money market funds using the amortized cost or pennyrounding valuation methods under a Commission order or Rule 2a-7 are required to evaluate the creditworthiness of all entities with which they propose to enter into repos.

Peavey Commodity Funds, I, /I and /II-On May 2, 1983, the staff advised

PeaveyFunds I, II and 1/1 that, as long as they did not invest in securities, the staff

would not recommend any enforcement action if the funds invested primarily in

futures contracts and other specified forms of options without registering as

Investment companies. This action was taken in light of the jurisdictional accord

between the Commission and the Commodity Futures Trading Commission. The

staff said it would treat a fund as being primarily engaged in investing in futures

contracts and other specified forms of options, if investing in such interests is its

primary source of gains and risks, even if the fund's assets consist mostly of

Government securities.

Institutional Disclosure Program

Section 13(f)(5) of the Exchange Act requires certain "institutional investment

managers" to file reports on Form 13F on a calendar quarterly basis. Managers

required to file 13F reports disclose certain equity holdings of the accounts over

which they exercise investment discretion. In fiscal 1983, Form 13F reports were

filed on behalf of 1,050 managers for holdings totalling $703 billion.

Form 13F reports are available to the public at the Commission's Public Reference Room promptly after filing. Two tabulations of the information contained in

Form 13F reports are also available for inspection at the Public Reference Room.

The first of these tabulations includes a listing, arranged according to the individual security, showing the number of shares held and the name of the money'

manager reporting the holding. The second tabulation is a summary listing

showing the number of shares of a security reported by all institutional investment managers filing reports. Both tabulations normally are available 10-14 days

after the deadline for filing Form 13F,which is 45 days following the close of the

calendar quarter.

32
Both tabulations are produced by an independent contractor selected through

the competitive bidding process. The contractor provides its services to the Commission without charge, and IS required to make a vanety of specified tabulations

available to the public at reasonable prices within ten days after receipt of the

reports.

33

Other Litigation and Legal Work

The General Counsel represents the Commission In all litigation In the United

States Supreme Court and the courts of appeals, defends the Commission and

its employees when they are sued, prosecutes administrative proceedings under

Rule 2(e), and appears amicus curiae on behalf of the Commission in significant

private litigation under the Federal securities laws. In this litigation, the General

Counsel seeks to insure that the objectives of the Commission's enforcement

program are attained, that judicial interpretations of the Federal securities laws

afford adequate protection to investors, and that the Commission is able to

discharge its statutory responsibilities, unimpeded by law suits aqainst the agency

or its staff.

In fiscal year 1983 the Division of Corporate Regulation represented the Commission in court appearances in corporate reorganizations where there was a

substantial public investor interest.

Key 1983 Results

The General Counsel represented the Commission in 239 litigation matters

during the past fiscal year, many of which are still pending. Forty-four appellate

and Supreme Court cases were concluded, 38 favorably to the Commission.

There were 52 appellate cases before the Supreme Court and Federal courts of

appeals in which a party subject to a Commission injunctive action challenged

the lower court's resolution of the case in a manner favorable to the Commission

or, much less frequently, the Commission challenged an adverse decision. Of

these appeals, 16 were concluded, with only two outcomes unfavorable to the

Commission. The foregoing compares with the following cases in fiscal 1982: a

total of 251 matters, of which 62 were appellate cases in which a party subject to

Commission injunctive action challenged the lower court's resolution of the case

In a manner favorable to the Commission, or the Commission challenged an

adversedecision. Of those appellate cases 34 were concluded, two of which were

unfavorable to the Commission.

There were also 19 appellate actions seeking to overturn Commission orders,

primarily those issued in Commission administrative proceedings or those affirming self-regulatory organization disciplinary proceedings against broker-dealers.

Thirteen of these appeals were concluded, with only one adverse result. In fiscal

year 1982, there were 38 such actions.

In 53 cases during the year (compared to 58 such instances in fiscal year 1982)

Commission participation as a friend of the court in litigation conducted by

private parties was considered in order to afford the court the benefit of the

Commission's views on significant questions of concern to the Commission.

Amicus briefs were filed, and 13 private cases in which the Commission participated were concluded. Only one of these resulted in a decision adverse to the
views which the Commission advocated.

In addition, the General Counsel handled more than 115 other proceedings

before the Commission or in the Federal trial courts, compared to 90 in fiscal

year 1982. These Included 35 SUitsbrought against the Commissioners or the

Commission's staff, and 46 suits, including actions under the various public

information statutes, seeking access to Commission documents. In fiscal year

1982, there were 23 suits brought against the Commissioners or the Commission's staff, and 19 suits under the various public information statutes.

During the fiscal year, 79 debtors With publicly issued securities outstanding

entered Chapter 11reorganizations.The Division of Corporate Regulation entered

Its appearance In 15 of these cases,with assets of $19 billion and about 75,000

public investors.

Litigation

Appeals in Commission Iryunclwe Aciions-:-- This litigation consists primarily

of appeals in which a defendant attempts to reverse a trial court's entry of an

injunction. Occasionally however.the Commission appeals the denial of injunctive relief.These appeals frequently raise highly significant issues concerning the

scope and interpretation of the securities laws.

One case which was litigated during the fiscal year raised the constitutionality

of enjoining an investment adviser from publishing a newsletter recommending

securities investrnents.v" The defendant in that case had been criminally convicted of fraud and misappropriation of customers' funds, and the Commission

therefore barred him from the investment advisory industry. Notwithstanding the

bar,the district court, on First Amendment grounds, refused to issue an injunction against further newsletter publication. On appeal, the Commission asserted

that investment advisory newslettersconstitute commercial speech which may be

subject to a greater degree of regulation than political or ideological speech. The

Commission further urged that, because of the delicate fiduciary relationship

between an investment adviser and his dent, there is need to protect the public

by barnng unfit persons. (On January 18,1984, the court of appeals reversedthe

opinion of the district court.)

The standard for obtaining injunctive relief against future Violations of the

securities laws is a frequent subject of appeals in Commission enforcement

actions. This year the Cornrnissron appealed the refusal of a district court to

enjoin a defendant whom that court found to have violated antifraud, reporting

and proxy provisions of the securities laws.86 The Commission maintained that,

in declining to grant an injunction, the court erroneously afforded undue weight

to a Single factor-whether the defendant's occupation at the time of trial provided an opportunity to commit future violations. The Commission urged that,

consistent with investor protection, the proper analysis requires consideration of

various factors, including the egregious nature of the defendant's past violations,

not merely current occupation.

In another case, the Commission successfully resisted an attempt to vacate a

consent injunction entered in 1976.87 In the defendant's appeal from the district

36
court's refusal to vacate the injunction, the court of appeals relied on the district

court's findings that there was no harm to the defendant flowing from the decree

and that the injunction continued to protect investors. The court of appeals

recognized that "significant governmental interests" were Involved in efforts to

vacate consent decrees, noting that consent injunctions allow the Commission to

secure the protections of an injunction while preserving its own, and judicial,

resources. In exchange for the defendant's consent, the Commission surrenders

its right to the entry of findings of fact. The court of appeals was "reluctant to

upset this balance of advantages and disadvantages" by dissolving consent injunctions, "unless it is clearly inequitable for the decree to continue in effect."ss

Petitions to Review Commission Orders-Petitions to review Commission

orders arise from Commission administrative proceedings and from Commission orders on review of disciplinary action by national securities exchanges and

the National Association of Securities Dealers, Inc. Like appeals in injunctive

actions, these administrative cases frequently involve issues central to the Commission's enforcement program and thus to the integrity of the secunties markets. In one such case, the court of appeals upheld Commission sanctions

imposed on a securities salesman based on findings that, Without disclosure to

his customers, the salesman charged excessivemarkups and illegally sold unregistered securitles.P? In another case, the court of appeals affirmed the Commission's determination that a broker introducing accounts to a clearing broker has a

duty to disclose material information concerning the credit-worthiness of its

customers.P?

Commission Participation In Private Litigation-The Commission also participates as a friend of the court in private litigation which raises significant securities laws issuesor other issuesof concern to the Commission. Privateactions

serve to supplement the Commission's own enforcement program, deterring

violations as well as affording relief to injured investors.Also, becausethe Federal

securities laws provide for both governmental enforcement actions and private

remedies, decisions in private caseswhich interpret provisions of those laws may

have precedential effect In Commission enforcement actions.

Early in 1983, the Supreme Court adopted the position urged by the Commission in a case which concerned the relation between the express and implied

remedies available to investors under the Federal securities laws (Herman &

McLean v. Huddiestoni'" In a strongly worded opinion, the Supreme Court

emphasized the remedial purposes of the securities laws and the necessity of

construing them broadly to protect investors. Consistent with this analysis, the

Court held that the availability of the expressremedy for falsehoods in registration

statements in Section 11of the Securities Act does not prevent defrauded purchasers from suing under Exchange Act Rule lOb-5 as well. The Supreme Court

also agreed with the Commission that the standard of proof in private antifraud

cases is a preponderance of the evidence, not the more stringent clear and

convincing evidence standard.

At the request of the Supreme Court, the Commission also filed a brief in

response to a petition for reviewof IMtlck v. American Stock Exchange in which

the court of appeals had held that private parties cannot seek damages from a

'),,7
stock exchange under Section 6 of the Exchange Act for failure to enforce its

rules.92 The Commission's brief disagreed with the conclusion of the court of

appeals, pointing out that an implied right of action against exchanges is wellrecognized and that the existence of such a right is important to investor protecnon, The Commission stated, however,that reviewshould not be granted because

of the limited precedential value of the case, which interpreted the language of

Section 6 prior to its amendment in 1975. Consistent with the Commission's

recommendation, the Supreme Court denied review.

In 1983, the Commission participated in several private actions which considered the scope of the term "security." In two such cases, the Commission disagreed with lower court decisions requiring instruments that come within the

term "note" in the definition of "security" also to meet the test for "investment

contract," another term in the definition, in order to qualify as securities.v" In

briefs filed in these cases, the Commission expressed concern that the exclusive

use of the investment contract test for determining whether instruments are

securities would restrict the coverage of the securities laws and limit investor

protection.

In another case raising this basic jurisdictional issue, the Commission argued

that time deposits issued to persons in the United States by a foreign bank are

securities if issued in investment--as distinguished from commercial-transactions.?? The Commission argued that, merely because the foreign issuer is a

bank, the securities laws should not be construed to deny United States residents

protection; where instruments, unregulated by Federal banking agencies, are

offered to the general public as investments, the securities laws should apply.

The Commission also urged in several cases that shareholders and their companies can sue for Injunctive and other equitable reliefto enforce Section 13(d) of

the Exchange ACt.95 That provision requires persons who acquire more than 5%

of the securities of an issuer, and thus could potentially effect changes in corporate control, to disclose their holdings and certain other information to the investing public. In one such case, the Court of Appeals for the Seventh Circuit ruled, in

accordance with the Commission's position, that such a right of action is consistent with congressional intent.96 Other cases raising this issue are pending.

Litigation Involving Trading On Nonpublic Information-Trading on the

basis of material nonpublic information--a practice which impairs confidence in

the integrity of the securities markets--has been the subject of a number of

recent cases. Last year,in Dirks v. SEC, the Supreme Court set aside the Commission's censure of an officer of a securities brokerage firm who had conveyed

adverse nonpublic information received from officers and employees of a corporation to potential sellers.P?This conduct caused institutions to sell $17million of

securities to public investors who did not know that the securities were in fact

virtually worthless. The decision strongly reaffirmed that both insider and tippee

trading on the basis of nonpublic, material information is prohibited under the

Federalsecurities laws.But the Supreme Court rejected the Commission's theory

that a corporate outsider assumes the fiduciary duties of his inside sources by

receiving confidential corporate information from them. However, the Court

stated that outsiders can acquire a duty to disclose or abstain from trading in

38
several situations. First, outsiders may become fiduciaries of the shareholders

when they receive confidential information solely for a corporate purpose. Second, outsiders acquire derivatively the fiduciary duties of their inside sources

when they obtain confidential corporate information from insiders who transmit it

with the expectation of direct or indirect personal benefit, or make a gift of the

confidential information to the recipient

Following the Supreme Court's ruling in that case, the Commission successfully opposed the Supreme Court review in United States v. Newman, in which

the defendant had been criminally convicted for trading on confidential information concerning possible takeovers. His confederates misappropriated the information from their employer, investment banking firms, and their clients.P" The

defendant purchased securities of the companies that were the subject of the

proposed takeovers and, after the stock rose as a result of announcement of the

takeovers, sold at a profit. The court of appeals held that the proscriptions of the

antifraud provisions are not limited to situations where the fraud is perpetrated on

the purchaser or seller of securlties.P? The defendant's subsequent petition for

Supreme Court review argued that the misappropriation by the defendant and his

confederates did not give rise to liability under the securities laws, but involved

only the breach of state law contractual or fiduciary obligations. The government,

in response, emphasized the broad, remedial nature of the antifraud provisions,

the nexus between the fraud and the defendant's purchase and sale of securities,

and the fact that the misappropriated information concerned proposed purchases of securities by clients of the investment bankers.

The Commission also filed a friend of the court brief in a related private action

for damages. The plaintiff in that case sold shares of a target company on the

same day that the criminal defendant purchased the secuntles.'?? The district

court dismissed the complaint on the ground that any duty owed to the investment banking firms and their clients did not give rise to a separate duty to the

target company's shareholders. In its brief, the Commission recognized that persons who gain superior market information by reason of acumen, industry, or

intelligence owe no disclosure duty to those with whom they trade. The Commission argued that, nonetheless, a person who purchases securities on the basis of

non public information which he knows to have been misappropriated, owes a

duty of disclosure to the selling shareholders-independent of any other relationship. Otherwise, the Commission argued, the law would encourage theft of information. The court of appeals rejected the Commission's position, commenting

that such a holding would grant a private plaintiff a "windfall "?' In so doing, the

court of appeals distinguished its earlier decision in the criminal case: the critical

defendants traded on the basis of misappropriated information, in violation of

duties owed to their employers and the firms' clients; the defendants did not,

however, violate any duty owed to persons, like the plaintiff, with whom they

traded in the market

Commission Action Under Rule 2(e)--{jnder Rule 2(e) of its Rules of Practice,102 the Commission may suspend or bar professionals (generally lawyers

and accountants) from practicing before it if they have violated the Federal securities laws or engaged in unethical professional conduct in their Commission

39
practice. Accountants and lawyersplaya critical role in the disclosure of information to the investing public. The Commission relies on the integrity of these

professionals, and the ability to bar those who have engaged in misconduct is

necessary to protect the Commission's internal processes.

In the last year, Rule 2(e) proceedings were instituted against one lawyer,five

individual accountants, and one accounting firm. In all but one of these proceedings the respondentsagreed to suspensionsfrom practice before the Commission

for varying lengths of time. Before these professionals may be readmitted to practice, they must demonstrate that they have undertaken further professional education and that they will be subject to adequate supervision. The remaining matter

was pending before an administrative law judge at the close of the fiscal year.

Durmg the year,the Commission readmitted two attorneys to practice before it.

Litiqeuon InvoLving Requests For Access ToCommission Records-In fiscal

1983, the Commission received 1,424 requests under the Freedom of Information Act (FOIA) for access to Commission records. The majority of these requests

were for investIgatory files. At the same time, the Commission received 1,392

requests for confidential treatment from persons who submitted information. The

foregoing compares with 1,420 FOIA requests and 939 confidentiality requests in

fiscal 1982.

Despite the large number of requests handled by the Commission's FOIA

office, only 129 requesters appealed the denial of FOIA requests to the Commission's General Counsel, who has been delegated authority to decide such appeals.l?> Additionally, 20 of the confidential treatment requesters filed appeals.

Notwithstanding the number of FOWconfidential treatment appeals decided,

only three court actions were filed against the Commission in 1983.Two of these

actions were settled,'?" and in the third the court upheld the Commission's denial

of access to the documents sought.105

Litigation Against The Commission And Its Staff-During fiscal year 1983,

the Commission and its staff members were defendants in 12 district court

actions in which persons sought to enjoin Commission law enforcement efforts

or to obtain damage awards against the staff. In each case the action was dismissed or the Commission's motion for summary judgment granted. Eight appeals from district court decisions dismissing such actions were taken during the

year.Four of these were decided favorably;106the other four are still pending, 107

although one of those resulted m an unfavorable court of appeals decision.lOB

(On December 2, 1983, one of the pending cases was decided favorably to the

Commission.)

In 0'Brien v. SEC,109the Court of Appeals for the Ninth Circuit held that,

absent special circumstances, the Commission must notify "targets" of its nonpublic investigations whenever it issues subpoenas to third parties. This notice

requirement could substantially impede the Commission's ability to conduct

investigations by providing targets of investigations with prior notice of all witnesses who are subpoenaed. They would thus be enabled to either attempt to

influence the witness not to cooperate or to file court actions challenging the

Commission's subpoenas. Indeed, since O'Brien, the Commission has defended

three lawsuits brought by subjects of Commission investigations to enforce their

40
"O'Brien rights."11OThe Commission has successfully defended two of these

actions.III Because of the far-reaching ramifications of 0 'Brien on the Commission's investigatory powers, the Commission has petitioned for review of this

decision in the Supreme Court. (The Supreme Court granted the Commission's

petition for a writ of certiorari on January 9, 1984.)

In addition, five actions were filed under the Right to Financial Pnvacy Act

Involving 16 Comrnlssion subpoenas for customer records from financial institutions. In each case, the district court found that the Commission was properly

seeking the subpoenaed records and enforced the Commission's subpoena.

Significant Legislation

Financial Services Industry-Vice President Bush's Task Group and GlassSteagall Legislation-DurIng fiscal year 1983, the Chairman participated as a

member of the Vice President'sTask Group on Regulation of Financial Services.

The Task Group resulted in part from the Commission's proposal that a one-year

task force be formed to reviewthe regulatory structure for the securities, bankmq,

thrift and insurance industries; that financial services be regulated by functional

activities rather than by outmoded industry classification; that overlapping, duplicative and conflicting regulatory activities be consolidated; and that excessive

regulations within and between agencies be eliminated.

Of the many significant proposals under the TaskGroup's consideration at year

end, two of the most relevant to investors were: repeal of the current exemptions

in the Securities Act for registration of securities issued by banks and savings and

loan associations; and transfer to the SEC of administration of the periodic

reporting, proxy solicitation, and shortswing profits provisions of the Act as they

relate to such institutions. These proposals would consolidate within the Commission administration of securities disclosure requirements for banks and savings and loan associations. It would result In more uniform financial disclosure to

public shareholders and securities analysts, facilitating evaluation of comparative

investment risks. Delays in conforming regulations governing bank and savings

and loan association filings with those applicable to all other issues would be

eliminated and duplication of agency staff requirements in establishing, interpreting, processing, and enforcing securities disclosure requirements would be reduced. The Commission would become the repository for filings of all publiclyheld banks, savings and loan associations, and holding companies, as it is for all

other publicly-owned companies.

The Task Group is expected to make recommendations concerning the future

regulatory structure for the financial services industry early in 1984.

The Commission also continued to support legislative efforts to revise the

Glass-Steagall and McFadden Acts in order to reflect the contemporary financial

services marketplace. The Commission has supported legislative efforts that

would allow bank and thrift holding companies to sponsor mutual funds and

underwrite municipal revenue bonds if these activities are carried out by separate

corporate affiliates subject to the Federal securities laws.

Mortgage-Related Securities-In the closing weeks of fiscal 1983, the Com41
mission prepared and submitted comments to Congress on legislation to facilitate development of the private secondary mortgage market. The legislation

seeks to expand substantially the role of the private sector in providing home

buyers with mortgage credit supplied by investors.Significant shifts in sources of

housing capital from the savings and loan and banking industries to the investor

community have occurred since the mid-1970s. The Commission staff provided

technical assistance in drafting the two bills introduced in the Senate.

Public Utility Holding Company Act-Two bills proposing modification of the

Holding Company Act were introduced in the 98th Congress. Generally, these

bills would create additional exemptions from the Act and remove some of the

regulatory controls on holding company system financing and diversification.

The Commission testified in support of the objectives of these bills.

Regulatory Reform-In testimony before a congressional subcommittee in

July 1983, the Commission stated that it has, to the extent practicable, voluntarily

incorporated cost-benefit analysis into its rulemaking proceedings. The Commission suggested that Congress, in examining proposals for regulatory reform,

consider the cumulative impact on agencies, and the benefits to the public, of

existing procedural statutes.

Insider TradingSanctions Act-As proposed by the Commission and passed

by the House on September 19, 1983, the Insider Trading Sanctions Act would

authorize the Commission to seek a civil penalty of up to three times the profit

gained or loss avoided as a result of insider trading transactions. The Commission's authority to obtain injunctive and other equitable relief against such conduct would not be affected. The bill would also increase the current maximum

fine of $10,000 (established in 1934) for a criminal violation of the Act to

$100,000 and would amend Section 15(c)(4) of the Exchange Act to permit

administrative proceedings to remedy violations of Section 14 of that Act. At the

close of the fiscal year,the bill was pending in the Senate.

Corporate Reorganizations

Reorganization proceedings, administered in the United States courts, are

commenced by a debtor or by its creditors. In a reorqaruzation under Chapter 11

of the Bankruptcy Code, a debtor usually continues to operate under the court's

protection while it attempts to rehabilitate its business and work out a plan to pay

its debts. On the average,about 70 companies with publicly held securities file for

Chapter 11relief each year.Reorganization plans often provide for the issuance to

creditors and shareholders of new securities which may be exempt from registration under the Securities Act of 1933.

Under the Bankruptcy Code, the Commission may enter its appearance and

raise, or present its views on, any issue in a Chapter 11case.Although Chapter 11

relief is available to businesses of all sizes, the Commission generally limits its

participation to cases in which a substantial public investor interest is involved.

The Commission acts to protect the rights of those investors and to render

independent, expert assistance to the courts and parties in these complex

proceedings.

During the fiscal year, 79 debtors with publicly issued securities outstanding

42
entered Chapter 11 reorganization proceedings. The Commission entered its

appearance in 15 of these cases,with aggregate assets of $1.9billion and about

75,000 public investors.A list of these proceedings is set forth in Table 38 in the

Appendix to this Report. In these cases, and in those pending from prior years,

the Commission presented its views on a variety of Issuesincluding: (1) the need

for appointment of additional committees to represent classes of public debt

holders or equity security holders; (2) the debtor's operations, including proposed sales of major assets; (3) the need for appointment of a trustee to direct

the debtor's affairs or an examiner to conduct an investigation; (4) questions

concerning the status and rights of the securities held by public investors, the

classification of their claims, and proposed treatment in reorganization plans;

(5) the adequacy of the disclosure statements required to be transmitted to

creditors and investors when their votes on a plan are being solicited; (6) the

reasonablenessof fees sought by counsel and other professionals, and (7) interpretive questions concerning the applicability of the securities lawsto bankruptcy

proceedings.

During the fiscal year,the commission moved, or supported others' motions,

for the appointment of committees to represent investors in six Chapter 11cases

involving about 90,000 investors. Committees were appointed in all but one of

these cases.

On proof of past mismanagement, the Commission successfully moved for

the appointment of a trustee to direct the reorganization of a debtor with $50

million of claims held by 6,000 investors. The Commission also supported successful motions to appoint a trustee in three other cases. The Commission

moved for the appointment of an examiner to investigate the debtor's affairs in

two cases;one motion was denied and the other is still pending.

During the past year, the Commission reviewed 22 disclosure statements for

plans in 16 cases, filing objections asserting that, without certain specified

amendments, the statements were either misleading or lacked sufficient information to enable a typical investor to make an informed judgment about the plan. In

virtually all instances the plan proponents corrected the deficiencies voluntarily or

after the Commission's objections were sustained by the court.

The Commission was also successful in its objection to full payments in applications for interim allowances filed by professionals.As a result of the Commission's efforts, courts have adhered to the longstanding policy of granting interim

allowances that were less than the full amount claimed. Generally the award was

limited to about 75% of the requested amount.

(After the end of the fiscal year the Commission reviewed its statutory responsibilities under the Bankruptcy Code and adopted a series of recommendations

made by Commissioner Bevis Longstreth after a lengthy study of the Commisions role in reorganization proceedings. A significant recommendation adopted

was the revocation of all delegated authority to the staff in this area and the

requirement that the Commission authorize all participation in and substantive

positions taken in such cases.The Commission transferred management of the

program from the Division of Corporate Regulation to the Office of the General

Counsel.

Although, the Commission voted to reorient its prioritres in appearing and

43
participating in Chapter 11cases involving public investor interest, many aspects

of the Commission's involvement in Chapter 11cases will not be changed. The

new focus of the Commission's bankruptcy program rests on three major premises:First, so long as public security holders are adequately represented through

the committee process, there is less need for day-to-day Commission participation in reorganization cases; second, the Commission should work even more

closely with United States Trustees and should support expansion of the United

StatesTrustee pilot program: and third, the Commission should exercise caution

to avoid partisan involvement in negotiations for a plan to reorganize the company.Based on these conclusions, the Commission determined that, as a general

matter, the focus of its participation in Chapter 11cases should principally be on

legal and policy issues which are of concern to public investors generally and

which may have an impact beyond the facts of the particular case. By so concentrating its efforts the Commission will be better able to participate in those

Chapter 11cases entailing significant investor Interest. The Commission will, of

course, continue to address matters of traditional Commission expertise and

interest relating to securities-for example, by commenting, where appropriate,

on the adequacy of reorganization plan disclosure statements and by participating where there is a Commission law enforcement interest. In addition, where

special circumstances warrant, the Commission may participate on matters

which do not meet these criteria.

The Commission will be participating in Chapter 11 cases in support of the

formation of security holder committees in order to ensure that public investors

are adequately represented and will be monitoring caseshaving significant public

investor interest in order to identify issues of Commission concern.)

44
Public Qtility Holding Companies

Composition

Under the Public Utility Holding Company Act of 1935 (Holding Company Act),

the Commission regulates interstate public utility holding company systems in

the electric utility business or in the retail distribution of gas. The Commission's

jurisdiction also covers natural gas pipeline companies and non utility companies

within a registered holding company system.

There are presently 13 holding companies registered with the Commission. As

of June 30, 1983, their total assets were $66.1 brllion, representing an Increase of

$3.1 billion over the previous 12 month period. Total operating revenues, as of

June 30, 1983, were $31.3 billion, a $1.3 billion increase over the previous year. In

the 13 systems, there are 66 electric and/or gas utility subsidiaries, 65 non utility

subsidiaries and 19 inactive companies, for a total of 163 system companies

(including the parent companies but excluding 7 power supply company subsidiaries). Table 32 in the Appendix lists the systems and Table 33 lists their aggregate assets and operating revenues.

Proposed Legislation

Two bills proposing modifications of the Holding Company Act were introduced in the 98th Congress. The bills would create additional exemptions from

the Act, permit diversification of registered holding companies into non-functionally related businesses, and change the standards under which financings are

approved. The Commission has testified in favor of the legislation.

Financing

During fiscal year 1983, the Commission approved approximately $4.5 billion

of senior securities and common stock financing for the 13 registered holding

company systems. Of this amount, approximately $3.9 billion was long-term debt

financing, $5.1 billion was short-term debt financing and $421 million was pollution control financing. The short-term debt amounted to approximately 17 percent more than the authorized amount in fiscal year 1982. Table 34 in the

Appendix presents the amount and types of securities issued by the holding

company systems under the Holding Company Act.

On September 2,1982, the Commission authorized securities issuers to adopt

alternative procedures, other than those prescribed in Rule 50(b) of the Holding

Company Act, to develop and procure two or more competitive offers for securities. This step was taken in conjunction with the extension of Rule 415 under

the Securities Act of 1933 and applies only to offers which have been authorized

for sale by the Commission under Sections 6 and 7 of the Holding Company Act.

45
During fiscal year 1983, the following companies filed applications for approval

to sell preferred stock with an adjustable dividend rate: New England Power

Company, 112 Central Power and Light Company.'!" West Texas Utilities Company,1I4The Connecticut Light and Power Company (CL&P),115and Mississippi

Power & Light Company. 116 The basic terms of the security were similar in each

case. The dividend rate for the initial dividend period is a fixed percentage.

Thereafter, the rate is adjustable each dividend period and is determined on the

basis of a certain percentage above or below a variable index. Typically, there is a

predetermined maximum and minimum percentage rate limit on the variable

rate with a maximum permissible spread of 500 basis points between such limits.

The Commission authorized Georgia Power Company'!" and the CL&p,1I8

utility subsidiaries of registered holding company systems, to organize new,

wholly-owned financing subsidiaries to borrow for the utilities in the Eurodollar

market. The financing subsidiaries will be organized in the Netherlands Antilles.

Their purpose is to take advantage of alternatives and cost savings in the Eurodollar market which may be unavailable in the domestic market. In the case of

CL&P, the financing subsidiary has been authorized to sell intermediate term

debentures and to make the proceeds available to the utility.

The Commission also authorized CL&P to negotiate an interest rate swap.U?

This is a type of hedging agreement for the purpose of effectively converting

variable rate debt into flxed rate debt. Under such an agreement, CL&P, which has

variable rate debt, would be contractually obligated to make fixed rate payments

to a financial institution. The financial institution would, in turn, make variable rate

payments to CL&P.

Nonutility Subsidiary Matters

The Commission authorized Central and South West Corporation (CSW) to

organize and finance a new, nonutility subsidiary.'<? The primary business of the

subsidiary will be to invest and participate in qualifying cogeneration facilities and

in small power production facilities, as defined by the Public UtIlity Regulatory

Policies Act of 1978. Cogeneration is a form of power production in which both

usable heat, usually in the form of steam, and electricity are produced in the

same process. CSW intends to commit up to $50 million toward the activities of

the new subsidiary which will invest with nonaffiliated companies, directly and

indirectly, in cogeneration projects located in the CSW system service area. Sales

of electric power from any project will be made to CSW system companies or to

nonaffiliated, non utility companies.

Fuel Programs and Service Companies

During fiscal year 1983, the Commission authorized over $823.4 million for

fuel exploration and development activities of the holding company systems.

Since 1971, the Commission has authorized over $6.6 billion for such expenditures (see Tables 36 and 37 in the Appendix to this Report).

At the end of calendar year 1982, there were 12 subsidiary service companies

providing managerial, accounting, administrative and engineering service to 11of

46
the 13 holding companies registered under the Holding Company Act. The billings for these services amounted to $1.073 billion or 3.49 percent of the total

revenues generated by the electric and gas operating utilities. The subsidiary

servicecompanies are heavily labor-intensive,employing over 16,790people, and

have assets of over $474 million. Table 35 in the Appendix lists the subsidiary

service companies along with the total billings, total assets,total personnel, and

number of operating utility companies served.

The Commission's examination of service company and fuel procurement

activities has resulted in savings to consumers during the fiscal year of approximately $12.3 million.

47

Management, Economic Analysis and

Program Support

Key Management and Program Developments

The Commission's effectiveness has been due in part to its flexibility and

innovation in the face of a changing operating environment. In this tradition, fiscal

1983 was marked by a number of significant initiatives to improve the management, operational efficiency, and analytical resources of the Commission, The

Commission took steps to upgrade its computer and data processing capabilities, Increased emphasis was placed upon economic analysis and statistical

research.

The most noteworthy management initiative was the Productivity Innovation by

Computer (PIC) effort. PIC is a comprehensive, five-year program that will implement a full range of technological applications to increase productivity in the

Commission's regulation, enforcement and management functions.

Despite government-wide budgetary restraints and unprecedented growth and

change in the securities markets, PICwill improve the Commission's productivity.

The Commission plans to commence a pilot electronic filing, processing and

information dissemination system in 1984. The objective is to automate registration and reporting by public companies and regulated entities and to make such

information instantly accessible to investors and securities analysts on home and

office computer screens. Industrywide application is intended to coordinate with

the growth of home computers from 5 million today to over 50 million within five

years.The first steps were in fiscal 1983. A staff task force has been formed and

the Commission has let a contract to the MITRE Corporation to perform the

technical requirements analysis. Optical scanning equipment is being tested and

pilot operations are being planned within the Divtsion of Corporation Finance

(see p. 13).

The PICinitiative also involves efforts to improve and consolidate the Commission's existing management and analytical systems. A number of the Commissions support offices were modernized in 1983.

The Office of the Executive Director conducted management reviews in support of the Division of Investment Management and the New YorkRegional Office.

The recommendations implemented are designed to improve managerial effectiveness and increase productivity. Management reviewsof the Office of the General Counsel and the Administrative Law Judges are scheduled for completion

early in fiscal 1984.

The Office of the Executive Director also performed a cost/benefit analysis of

the Market Oversight and Surveillance System, an assessment of the Commission's fee structure, and an evaluation of staff productivity.

In October 1982, the Commission sponsored a conference on major issues

confronting the nation's financial institutions and markets in the 1980s.The con49
ference was attended by over 500 business and government leaders.Some of the

recommendations have been implemented and others are in process.

Two members of the Commission's corps of senior executives were honored

with Presidentialrank awards. Lee B. Spencer, Director of the Division of Corporation Finance, was designated the rank of Distinguished Executive, the highest

award given to a Federal employee. Robert H. Davenport, Regional Administrator

of the Denver Regional Office, was awarded the rank of Meritorious Executive.

Economic Research and Statistics

The economic research and statIstics program provides an objective perspective of the Commission's regulatory activities. This task is carried out by the Office

of the Chief Economist and the Directorate of Economic and PolicyAnalysis.

The program provides the Commission with economic advice and research

studies on rule proposals, established policy and the capital markets. In addition,

it encompasses statistical monitoring and publication of the SEC'sMonthly Statistical Review.

To the extent practical, cost-benefit analyses are intended to ensure that

the Commission's rules and regulations are cost effective. The Commission is

committed to reducinq regulatory burdens in a manner consistent with investor

protection.

The rapid erosion of boundaries between segments of the financial service

industry, and the dramatic increase in new financial products and services have

increased the need to assess and respond to changing economic and market

conditions.

Economic research projects completed during fiscal 1983 include: the shelf

registration rule, linkage of exchange and over-the-counter securities trading,

revision of broker-dealer net capital requirements, and aspects of tender offers.

The staff analyzedthe impact of the temporary shelf registration rule on issuers'

interest and underwriting expenses, identifying substantial savings which were a

factor in the Commission's decision to adopt a revised rule on a permanent basis.

The effects of over-the-counter trading in exchange listed securities (under

Rule 19c-3) were carefully monitored. These studies indicated that linkage neither

improved nor hurt the market in these securities, which was a factor in the

Commission's decision to defer action on an order exposure rule.

Studies of the effects of updating broker-dealer net capital requirements disclosed that over $500 million of the industry's capital had been freed up for more

productive employment for the benefit of investors and issuers. This additional

capital facilitated the industry's ability to handle the significant increase in the

volume of trading and financings in fiscal 1983.

During the fiscal year the Commission published a Staff Report on the Securities Industry. The report provides a comprehensive analysis of the financial

condition of 2,500 NASD and exchange members which conducted a public

business as broker-dealers. The following are a few of the report's highlights:

The 10largest investment banking houses were the outstanding clearing and

carrying firms during 1981;their pre-tax income increased by 36% to over $870

50

•
million.

Pre-tax income of the 11 national full line broker-dealers fell 28% from a

record level of $798 million the previous year.

Interest revenues from margin lending, U.S. government securities trading,

and repurchase agreements increased but did not offset declines in commission

revenue, commodities revenue, and gainSfrom trading equities and options.

An analysis of the growth of output and productivity in the U.S. and Japanese

manufacturing sectors demonstrated that capital formation is the main determinant of differences in rates of growth and output per worker-hour in these two

countries.

In recent years, the U.S. has experienced a significant increase in the number

and size of tender offers. One of the most widely publicized corporate takeover

contests involved the Bendix Corporation, Martin Marietta Corporation, United

Technologies Corporation and Allied Corporation. A detailed analysis of the effects of this contest upon the shareholders of the four companies concluded that

they were not adversely affected.

During fiscal 1983 advice was given to the operating divisions on the requirements of the Regulatory Flexibility Act, particularly, the economic effects of proposed rules and alternatives for reducing regulatory burdens on small business

entities.

Information Systems Management

Under the PIC initiative, a number of automated systems have been implemented that have resulted in immediate cost savings and improved internal

controls. During fiscal 1983, the use of microcomputers was expanded to each of

the regional offices and nearly 800 staff members were trained in the usage of

these machines. Using this capability, a computerized data base for broker-dealer

customer accounts was compiled. The availability of these data will aid in expediting broker-dealer examinations and enforcement investigations. Software was

also developed which will enable the Commission to maintain up-to-date registration data on broker-dealers. This system will for the first time provide on-line

access to registration data and will eventually be expanded to include investment

companies and advisers, municipal securities dealers, and transfer agents.

The Commission further improved its internal computing capability with the

creation of the User Support Information Center (USIC).The objective of the USIC

is to provide the professional staff with greater access to automatic data processing facilities. The USIC is being utilized to improve selective review of disclosure

documents, index enforcement case information, track FOlA and Privacy Act

requests, and perform stock transaction analyses. The USIC has become an

important factor in the overall effort to increase the Commission's productivity.

The Commission significantly improved its market surveillance capability by

replacing inefficient contractor-provided services with improved in-house procedures. The staff now retrieves trading information directly from the Securities

Industry Automation Corporation (SlAC), rather than through an intermediate

contractor. In addition, staff developed software provides an internal price history

51

•

•
service and eliminates the need for contractual services.These two modifications

are saving the agency $170,000 per annum.

The growing volume of corporate mergers and acquisitions has increased

public demand for the prompt access to tender offer filings. The Commission is

responding to this demand by developing an on-line information system, designed to provide the public rapid access to such filings.

During fiscal 1983, the Commission's automated employee payroll system was

also modified to permit on-line revision of employee status records and direct

interaction with the Commission's personnel management system. An automated property accountability system was implemented which provides a comprehensive inventory of all agency property and interfaces with the Commission's

automated financial accounting systems. This system has improved the Comrnissrons equipment utilization.

Financial Management

During fiscal 1983, the Commission collected a record $98,6 million in fees

for deposit into the General Fund of the Treasury. Such fees amounted to

nearly 110%of the Commission's fiscal 1983 appropriation, compared with 94%

in fiscal 1982. The four sources of fees were: registration of securities under the

Securities Act of 1933 (68%), transactions on securities exchanges (24%), miscellaneous filings and reporting fees(7%),and the registration of regulated brokerdealers (l%).

The staff processed nearly 34,000 fee checks from filers. For the first time,

microcomputers were used to assist in this labor-intensive effort. The use of

microcomputers to process employee travel vouchers also eliminated time-consuming manual review of agency travel files. These innovations have improved

the accuracy and control of financial operations.

Under a government-wide cash management initiative, the Commission obtained Department of the Treasuryapproval to conduct fee transactions via electronic funds transfer systems. This will save $35,000 annually in interest that

would otherwise be expended by the Federal government, due to delayed payment of fees. The recently enacted Prompt Payment Act requires Federal agencies to make timely disbursements to private vendors in order to avoid interest

penalties. During fiscal 1983,the Commission did not incur any interest penalties.

Over the past year,the Commission executed six major employee compensation adjustments: the July 1st Federal tax reduction, the executive pay cap raise,

the Medicare tax adjustment, the military buy-back program, the October cost-ofliving adjustment, and health benefit modifications by 30 percent of all Commission employees. To accommodate these adjustments, the Commission significantly expanded the data processing and storage capabilities of its automated

payroll system.

Facilities Management

Fiscal 1983 was the Commission's first full year in its consolidated headquarters buildinq. Adapting the new building to the Commission's needs required the

52
installation of electronic security devices to safeguard sensitive data, the development of more efficient evacuation procedures, improvement of the building's

accessibility for handicapped persons, and tagging all Commission property for

identification purposes.

Greater administrative support was also provided to the regional offices. The

headquarter staff performed seven on-site assessments of regional facilities, and

the Los Angeles Regional and Detroit Branch Offices were relocated.

As part of a government-wide space reduction initiative, the Commission took

steps to reduce space allocations to 135 square feet per employee. A study of the

agency's space requirements produced a plan to comply with GSA space management directives.

Some routine support functions can be performed less expensively by private

contractors than in-house. During the past year, contracts were negotiated with

private firms for transportation, specialty printing, key-punching and other data

processing tasks. An estimated $200,000 in annual savings was realized as a

result of these contracts. The Commission also renegotiated its nationwide stenographic service contract.

The productivity of the Commission's administrative personnel increased significantly dunnq fiscal year 1983, Despite a reduction in staffing, the printing plant

achieved a 10% increase in production over 1982. In addition, the staff handled

nearly two million pieces of mall in 1983, a 21% increase over 1982.

Personnel Management

The Commission had 1,922 total employee staff-years in fiscal 1983. This

compared to 1,881 and 1,982 in fiscal 1982 and 1981, respectively.

Personnel actions and training decisions are evaluated in terms of their impact

on staff productivity. During fiscal 1983, the Commission conducted 193 employee classification reviews; processed over 7,000 personnel actions; and issued

final regulations for its merit pay and performance appraisal system and temporary regulations governing in-grade pay increases for non-merit pay employees.

Fiscal 1983 saw the completion of the first agency-wide merit employee appraisal cycle. A study conducted by an independent consultant determined that

while the Commission's procedures were in compliance with the standards of the

Civil Service Reform Act, managers were in need of greater instruction in the

implementation of the Act's employee appraisal procedures. A managerial training program was therefore established.

The Commission conducted personnel management evaluations of seven of

its regional offices to determine the extent of compliance with Office of Personnel

Management and internal personnel policies. Regional practices were modified

in order to achieve agency-wide uniformity in the administration of personnel

policies.

During fiscal 1983, employee assistance services provided included seminars

to assist employees in selecting health care plans and to advise prospective

retirees of modifications in the Federal Retirement System.

The Commission's commitment to affirmative action led to creation of a minority recruitment program for undergraduates in the fields of business or finance at

53
Howard University.The objective is to place students in permanent careers within

the Commission upon completion of their undergraduate studies. The Commission continued its handicapped employment efforts by tailoring a program to the

needs of disabled veterans.

Public Affairs

Efficient dissemination of information about Commission activities is essential

to the effective enforcement of the securities laws. In fiscal 1983, an estimated

640 articles on Commission enforcement actions, new and revised rules and

regulations and other topics were published and circulated to 700 million readers.

In addition to media coverage,the Office of Public Affairs works closely with the

Commission's major divisions on major projects.

OPAwas one of the three offices principally responsible for the Commission's

second Major Issues Conference. This proved to be an extremely successful

event, attracting some 500 leaders of the financial services industry, the private

bar and the accounting profession. The "Proceedings" of the conference were

published and made available to the public.

OPAprovided public relations support for the work of the Advisory Committee

on Tender Offers and the SEC Government-Business Forum on Small Business;

arranged a seminar on the Commission during the annual meeting of the Society

of American Business and Economic Writers; and produced an updated version

of the Commission's audiovisual program, "Eagle on the Street." Distribution

began during 1983 of "What Every Investor Should Know," a handbook for new

investors that represents the most ambitious effort in this area ever undertaken by

the Commission. Its publication coincided with the beginning of the dramatic

Increasein securities transactions and prices, which has attracted into the market

millions of first-time investors. Free distribution of the first 25,000 copies was

underwritten by the White House Office of Consumer Affairs. Subsequent distribution has been at a price of $4.50 per copy.In July, the Consumer Information

Center operated by the General Services Administration reported that the handbook was its fourth-ranked sale publication.

Consumer Affairs and Information Services

The resurgence in the securities markets was reflected in the workload of the

Commission's consumer affairs program. Investor inquiries and complaints increased 37% to 26,000 in fiscal 1983. Of the complaints, 45% involved investor

conflicts with registered broker-dealers, 27% concerned issuers of securities, and

8% pertained to mutual funds. The remaining complaints were related to transfer

agents, banks and investment advisers.At the same time, the Public Reference

room received 172,000 inquiries, an increase of 23% over 1982.

The Commission also processed 1,424 Freedom of Information Act and 55

PrivacyAct requests. In addition, there were 1,392 requests for confidential treatment in connection with documents filed with the Commission, a 48% increase

over 1982. Each of these requests was carefully evaluated, consistent with the

policy of preventing indiscriminate and unwarranted release of information ex54
empt from the Freedom of Information Act. During 1983, the Commission also

conducted a training conference for complaint specialists from headquarters and

the regional offices to increase agency-wide uniformity in processing consumer

matters.

Equal Employment Opportunity

During 1983,the number of women at the Senior Executive Service (SES) level

increased from two to seven.Women now represent 15.2% of the Commission's

SES employees. In addition, despite recent staffing constraints, the Commission

has made steady improvement in the overall number of minorities employed.

Minorities represented 27.6% of the Commission's work force In 1983, as compared with 23.8% in 1979.

In conjunction with the Securities Industry Committee on Equal Employment

Opportunity, the Commission continued its support of the achievement scholarship program for outstanding minority students pursuing careers in the securities

industry. During 1983, scholarships were awarded to seven deserving students.

The program's first recipient of a four-year scholarship was graduated from Harvard University in 1983.

More than 100 of the Commission's senior managers and supervisors attended

one-day equal employment training courses this year. These courses provide

Instruction on equal opportunity laws and regulations, affirmative action guidelines, methods of improving employment opportunities for minorities and

women, and techniques for preventing discrimination and sexual harassment.

Observations were conducted in honor of Hispanic Heritage Week, AfroAmerican History Month, Asian-Pacific Heritage Week and the birthdate of Dr.

Martin Luther King, Jr.

55

Footnotes

ICorporate Reporting and Accounting cases Include. SEC u Goldfield Deep Mines

Co. of Nevada. litigatIon Release No. 9969 (April 20,1983),27 SEC Docket 1298; In the

Matter of Bruce R Ashton. Litigation Release No. 9975 (April 27, 1983),27 SEC Docket

1440, In the Matter of George L. Simmon. Secunties Exchange Act Release No. 20064

(August 9,1983),28 SEC Docket 822; SEC u Drawn, Lmqatlon Release No 9836

(December 15,1982),26 SEC Docket 1583; SEC u Consolidated Publishing Inc.

Litigation Release No. 9975 (December 15, 1982),26 SEC Docket 1583; SEC u WF

Industnes Inc, Litlqation Release No. 9840 (December 16, 1982),26 SEC Docket 1586,

SEC u Amundsen, Linqation Release No. 9896 (December 17, 1983),27 SEC Docket

473, In the Matter of Russell G Davy. Securities Act Release No. 6440 (December 2,

1982),26 SEC Docket 1296; SEC v McCormick & Company lnc.. Litiqauon Release No

9846 (December 21, 1982),26 SEC Docket 1671; SEC u Maxwell, litIgation Release No

9885 (February I, 1983),27 SEC Docket 355; In the Matter of Clebir Corp., Secunues

Exchange Act Release No. 19504 (February 16, 1983), 27 SEC Docket 424, In the Matter

of Richard A. Chepul, Securities Exchange Act Release No. 19968 (July 14, 1983),28

SEC Docket 448, In the Matter of Aetna Life & Casualty Co, Securities Exchange Act

Release No. 19949 (July 7,1983),28 SEC Docket 394; SEC u Fox & Co., Ltnqauon

Release No 10022 (June 8, 1983),28 SEC Docket 71, In the Matter of Fox & Co.,

Securities Exchange Act Release No. 19930 (June 8, 1983), 28 SEC Docket 71; SEC u

AM International, Inc, Litiqanon Release No. 9980 (March 2,1983),27 SEC Docket

1504; In the Matter of Ronson Corp; Securities Exchange Act Release No. 19212

(November 4, 1982),26 SEC Docket 860; SEC u Datametncs Cotp., Litiqatron Release

No. 10118 (September 12, 1983),28 SEC Docket 1274; In the Matter of Stanley I.

Goldberg, Securities Exchange Act Release No 20209 (September 22,1983),28 SEC

Docket 1326; SEC u Nitron, lnc.; Littqation Release No. 10147 (September 30,1983),28

SEC Docket 1635, SEC u CraffOl1 Co., litIgation Release No. 9971 (ApnI22, 1983), 27

SEC Docket 1435; SEC u Permeator Corp; Lmqation Release No. 9948 (ApnI4, 1983),

27 SEC Docket 1063; SEC u Anefco lnc.. litIgation Release No. 10082 (August 2, 1983),

28 SEC Docket 797; SEC u Agolllnc., Lrtlqation Release No. 10105 (August 25, 1983),

28 SEC Docket 1116;SEC u Orthomolecular Nutrition Institute, lnc., Litiqation Release

No. 10083 (August 3,1983),28 SEC Docket 198, SEC u The Equtlink; Corp; LItigation

Release No. 9833 (December 9,1982),26 SEC Docket 1472, SEC u IBI Secunty Seriuce

lnc.. Litiqation Release No. 9895 (February 16, 1983),27 SEC Docket 472, SEC u

Cordyne Corp; Litiqauon Release No 9868 (January 17,1983),27 SEC Docket 141;SEC

u Canaveral lntemauonel Corp; litIgatIon Release No. 9883 (January 31,1983),27

SEC Docket 352; SEC u DynamiC Amencan Corp; LItigation Release No. 10080 (July

27,1983),28 SEC Docket 730; SEC u Plaza Realty Investors, litIgation Release No

10059 (July 5, 1983), 28 SEC Docket 433; SEC u Mil/crest Products Corp; Litigation

Release No. 10064 (July 7,1983),28 SEC Docket 439; SEC u First General Resources

Co., Litigation Release No. 10067 (July 8,1983),28 SEC Docket 505; SEC u MIniComputer Systems lnc., Linqation Release No. 9939 (March 25, 1983), 27 SEC Docket

993; SEC u OSR Corp; Litigation Release No. 9986 (March 5,1983),27 SI;:C Docket

1513;SEC u Applied Devices Corp; Litigation Release No. 10008 (May 20,1983),27

SEC Docket 1816; SEC u Fifth AJenue Cards, Inc., Litigation Release No. 9810 (November 17,1982),26 SEC Docket 1121;SEC u Satellite Television & Associated Resources,

Inc., litIgation Release No. 9826 (November 30,1982),26 SEC Docket 1354; SEC u

Reltron Corp: Litiqanon Release No. 9802 (November 9,1982),26 SEC Docket 1007;

SEC u CV Amencan Corp., Linqation Release No. 10155 (October 4,1983),28 SEC

Docket 1642; SEC u Delta Petroleum & Energy Corp, Litigation Release No. 10156

57
(October 4,1983),28 SEC Docket 1642; SEC u tniersctence Systems, Inc; litigation

Release No. 10128 (September 20, 1983),28 SEC Docket 1395; SEC u Ronson Corp;

Litiqation Release No. 10093 (August 15, 1983),28 SEC Docket 1040, SEC u Equtu]

Gold Inc, Litigation Release No. 9891 (Feburary 22,1983),27 SEC Docket 420; SEC v

American Free Enterprise Institute, Litigation Release No. 10201 (November 15, 1983),

29 SEC Docket 283; In the Malter of Coloruel Penn Group, lnc., Securities Exchange

Release No 19186 (October 18, 1982),26 SEC Docket 783; SEC u McGoff. Litigation

Release No. 10122 (September 14, 1983), 28 SEC Docket 1278; SEC u Nashwinter,

Litiqanon Release No. 9940 (March 25,1983),27 SEC Docket 993; SEC u Numex Corp;

Linqation Release No. 9944 (March 30, 1983),27 SEC Docket 996; In the Matter of

Robert E. Schulman (Apnl 28, 1983); In the Matter of Gary L. Jackson (June 10, 1983).

2Securities Offering VIolations cases include: SEC u Quinn, litigation Release No.

9964 (ApnI14, 1983),27 SEC Docket 1149, SEC u Firestone, Linqanon Release No.

9977 (Apnl 29,1983),26 SEC Docket 1501; SEC u Del-tex 011 Company lnc.. Lmgation

Release No 9947 (ApnI4, 1983),27 SEC Docket 1063; SEC u Maxinl', litigation

Release No. 10092 (August 12,1983),28 SEC Docket 1039; SEC u Tashof. Litigation

Release No. 10086 (August 5, 1983), 28 SEC Docket 891, In the Malter of

Orthomolecular lric., Securities Act Release No. 6477 (August 8,1983),28 SEC Docket

807, In the Matter of Union Home Loans, Securities Exchange Act Release No. 19346

(December 16, 1982),26 SEC Docket 1517; SEC u Coombs, LItigation Release No. 9850

(December 27, 1983),27 SEC Docket 1754; SEC u Zolp, litigation Release No. 9831

(December 9,1982),26 SEC Docket 1470; SEC u American Completion & Development Corp; Lmqation Release No. 9865 (January 17, 1983),26 SEC Docket 1982; SEC u

Monarch 011& Gas Corp., Litigation Release No. 9875 (January 24,1983),27 SEC

Docket 262; SEC u Dynergy Corp; LItigation Release No. 9859 (January 5, 1983),26

SEC Docket 1824; SEC u Solomon, litigation Release No. 10078 (July 26,1983),28

SEC Docket 728, SEC u Sharp, Lmqation Release No. 10028 (June 10, 1983) 28 SEC

Docket 194; SEC u Iieuqet; LItigation Release No. 10042 (June 20, 1983),28 SEC

Docket 283, SEC u Freitsq. Litigation Release No. 10044 (June 21,1983),28 SEC

Docket 284; SEC u Federal Bank & Trust Ltd., Litigation Release No. 10149 (June 29,

1983),28 SEC Docket 386; SEC u River Entertainment lnc., Litigation Release No. 9996

(March 11, 1983),27 SEC Docket 1615; SEC u Cylinder Technology Ltd., Litigation

Release No 9926 (March 15, 1983),27 SEC Docket 827; SEC u Omtu Resource

Development Corp; LItigation Release No. 9929 (March 16, 1983),27 SEC Docket 830;

SEC u Stange, Litigation Release No. 9930 (March 17, 1983),27 SEC Docket 831; SEC v

Wills, Litigation Release No. 9912 (March 2, 1983),27 SEC Docket 649, SEC u Daystar

(\.\est Indies) Ltd., LItigation Release No. 9931 (March 21,1983),27 SEC Docket 903;

SEC u Kerr, Linqetion Release No. 9936 (March 24, 1983), 27 SEC Docket 907; SEC u

Paradyne Corp., LItigation Release No 9938 (March 25,1983),27 SEC Docket 991; SEC

u Golden Irienqle Royalty & Oil Inc; Litiqenon Release No. 9913 (March 3,1983),27

SEC Docket 650, SEC u Hansen, litigation Release No. 10000 (May 16, 1983), 27 SEC

Docket 1695; SEC u Kenney, Litigation Release No. 9989 (May 5,1983),27 SEC Docket

1516, SEC u Homestead Oil Co., lnc.. LItigation Release No. 9993 (May 9,1983),27

SEC Docket 1612; SEC u Tentex Petroleum lric., LItigation Release No. 9809 (November

16,1982),26 SEC Docket 1119;SEC u HLS Enierpnses Inc., Litigation Release No.

10164 (October 11, 1983),28 SEC Docket 1682; SEC u Golden Petroleum Corp;

litigation Release No. 10167 (October 12,1983),28 SEC Docket 1684; SEC u Johnson,

litigation Release No. 9783 (October 14,1982),26 SEC Docket 663; SEC u Alpha &

Omega Realty, lnc.. LItigation Release No. 9794 (October 29,1982),26 SEC Docket

929; SEC u Triunion, Litigation Release No. 10160 (October 7, 1983),28 SEC Docket

1680; SEC u Colorado Development Corp; Litigation Release No. 10130 (September 22,

1983),28 SEC Docket 1397; SEC u Greenlaw, Litigation Release No. 10132 (September

26, 1983),28 SEC Docket 1498; In the Malter of Martin Hecht, Securities Exchange Act

Release No. 20234 (September 27,1983),28 SEC Docket 1421; SEC u Gulf Resources

lnc., Litigation Release No. 10139 (September 27, 1983),28 SEC Docket 1502; SEC u

58
Legare, March 2, 1983; In the Matter of Chipuncii Inc., Securities Act Release No. 6491

(September 30,1983),28 SEC Docket 1516.

3Regulated Entities and Associated Persons cases mclude. In the Matter of /sdoest,

lnc.. Securities Exchange Act Release No. 20096 (August 17, 1983),28 SEC Docket

1003, SEC v Park Ryan, lnc., LItigation Release No. 10088 (August 5,1983),28 SEC

Docket 892, SEC u Northridge Securtues, lnc.. Lmqatron Release No. 9841 (December

17,1982),26 SEC Docket 1665; In the Matter of First Miami Securities lnc., Secunues

Exchange Act Release No. 19552 (February 28, 1983),27 SEC Docket 578; In the

Matter of First Discount Securiues Cotp., Securities Exchange Act Release No. 19982

(July 18,1983),28 SEC Docket 525; SEC u \-\.esternPacific Securities Inc., Lmqanon

Release No. 10068 (July 8, 1983),28 SEC Docket 505; In the Matter of J Daniel Bell [;

Co., Inc., Securities Exchange Act Release No. 19867 (June 13, 1983),28 SEC Docket

108, In the Matter of James J. Keegan, Securities Exchange Act Release No. 19872

(June 13, 1983),28 SEC Docket 126,In the Matter of Hyun Kowal Farley [; Co, Inc,

Secunties Exchange Act Release No. 19876 (June 15, 1983),28 SEC Docket 130, SEC u

Gtbreico. Inc., litigation Release No 10076 (June 21, 1983),28 SEC Docket 727; In the

Matter of International Securities lnc.. Securities Exchange Act Release No. 19738

(March 17, 1983),27 SEC Docket 1477; In the Matter of Judith Bnles [; Co., Securities

Exchange Act Release No. 19632 (March 28,1983),27 SEC Docket 916; SEC u SWink

[; Co.. lnc.. Lmqation Release No 9914 (March 3,1983),27 SEC Docket 651; SEC u

First Miami Securities, lnc.. litigatIon Release No. 9918 (March 3, 1983),27 SEC Docket

754; In the Matter of Justin S. Colin. Secunties Exchange Act Release No. 19766 (May

13, 1983), 27 SEC Docket 1623; In the Matter of Northridge Securities, Inc, Secunties

Exchange Act Release No. 19770 (May 15, 1983),27 SEC Docket 1626, In the Matter of

Royer Securities Co., Securities Exchange Act Release No. 19201 (November I, 1982),

26 SEC Docket 847; In the Matter of RvV Peters Rickel [; Co., Secunties Exchange Act

Release No. 20173 (September 13, 1983),28 SEC Docket 1233; SEC u Blinder Robinson [; Co., Inc., LItigation Release No. 9968 (April 20, 1983), 17 SEC Docket 1296, In

the Matter of William N Miller. Securities Exchange Act Release No 20200 (August 29,

1983),28 SEC Docket 1177, SEC u LeWIS [; Company, Litiqauon Release No. 9853

(December 29, 1982),27 SEC Docket 1756, In the Matter of LeWIS [; Co., Securities

Exchange Act Release No. 19381 (December 29,1982),26 SEC Docket 1711,In the

Matter of John Bryant Meaux. Jr., Secunties Exchange Act Release No. 19314 (December 9, 1982),26 SEC Docket 1398; In the Matter of Stalvey [; Assocrares. Inc, Secunties

Exchange Act Release No. 19553 (February 28,1983),27 SEC Docket 579, SEC u

Rappaport. LItigation Release No. 10081 (July 29, 1983),28 SEC Docket 797; In the

Matter of Trenton H. Parker [; Associates, Securities Exchange Act Release No. 19950

(July 6, 1983),27 SEC Docket 1296; In the Matter of Howard Goodstein, Securities

Exchange Act Release No. 19873 (June 14, 1983),28 SEC Docket 127; In the Matter of

John D. Gilles, Securiues Exchange Act Release No 19899 (June 21, 1983),28 SEC

Docket 228, In the Matter of Robert D. Peterson, Securities Exchange Act Release No.

19764 (March 13, 1983),27 SEC Docket 1620,In the Matter of Charles Schwab [; Co.,

lnc.. Secunties Exchange Act Release No 19598 (March 14, 1983),27 SEC Docket 777;

In the Matter of v. Malcolm Cipeu; Securities Exchange Act Release No. 19204 (November 1, 1982), 26 SEC Docket 882, In the Matter of Thomas J Houston, Securities

Exchange Act Release No. 20180 (September 14, 1983),28 SEC Docket 1241; In the

Matter of John H. Turner. Securities Exchange Act Release No. 20235 (September 28,

1983),28 SEC Docket 1452, In the Matter of Combined Equttu Securiues, lnc.,

Securities Exchange Act Release No. 20238 (September 30, 1983),28 SEC Docket

1536; In the Matter of E J Putock [; Co., lnc.. Securities Exchange Act Release No.

19307 (December 7, 1982),26 SEC Docket 1383; In the Malter of Bruce R. Frederick,

Securities Exchange Act Release No. 20016 (July 27,1983),28 SEC Docket 633; SEC u

WJlfish. Litigation Release No. 10033 (June 14, 1983),28 SEC Docket 198; In the Matter

of John Latshaw, Securities Exchange Act Release No. 19903 (June 23, 1983),26 SEC

Docket 233; In the Matter of Stewart F. Beck, Securities Exchange Act Release No.

59
19916 (June 27. 1983).28 SEC Docket 303; In the Matter of Bruce Paul. Secunties

Exchange Act Release No 20355 (November 3. 1983),29 SEC Docket 132; In the

Matter of Bache Halsey Stuart Shields. Secuntres Exchange Act Release No 19725

(May 3, 1983),27 SEC Docket 1462; SEC u Drysdale Securities Corporation. LItigation

Release No. 10188 (November I, 1983),29 SEC Docket 114,SEC u Schipa, Litlqation

Release No. 9967 (April 19, 1983),27 SEC Docket 1294; SEC u Hyman. LItigation

Release No 9953 (April 5, 1983).27 SEC Docket 1067; In the Matter of Edward P

WJlfram. Jr. Securities Exchange Act Release No. 19653 (April 5, 1983),27 SEC Docket

1016;SEC v Crump ley Litiqanon Release No. 10097 (August 16,1983),28 SEC Docket

1044; SEC u Bell 5 Beckwith. Lrnqation Release No. 9887 (February 7,1983),27 SEC

Docket 413; SEC u Robb. litigation Release No. 10071 (July 14, 1983),28 SEC Docket

507; SEC u Cook. Litigation Release No. 9932 (March 21, 1983),27 SEC Docket 904;

SEC u D'angelo. Lttrqatron Release No. 9807 (November 16,1982),26 SEC Docket

1117.SEC u C5R Pastor Securities Inc. Litigation Release No. 10159 (October 7.1983).

28 SEC Docket 1679; In the Matter of Wilham Harty Securities Exchange Act Release

No 20182 (September 15, 1983),28 SEC Docket 1243; In the Matter of Professionel

Capital Management. Inc. Investment Advisers Act Release No. 856 (April 22, 1983).26

SEC Docket 1431. In the Matter of Hammon Capital Management Corp., Investment

Advisers Act Release No. 848 (April 5. 1983),27 SEC Docket 1061; SEC u Bishop

Belduun Rewald Dillingham 5 WJng. Inc. Litigation Release No. 10103 (August 23,

1983), 28 SEC Docket 1115;In the Matter of Donald F. Kreger; Investment Advisers Act

Release No 872 (August 3, 1983),28 SEC Docket 796; SEC v Krol/, Lmqation Release

No. 10091 (August 9, 1983), 28 SEC Docket 894; In the Matter of Manus, Inc..

Investment Advisers Act Release No 838 (February 3, 1983),27 SEC Docket 349; In the

Matter of Willamette Management Associates, Inc.. Investment Advisers Act Release No

837 (January 17. 1983),27 SEC Docket 135. In the Matter of Sherwood Grant Peterson.

Securities Exchange Act Release No. 19943 (July 5, 1983),28 SEC Docket 389,In the

Matter of Atlantic Financial Management. Inc. Securities Exchange Act Release No.

19898 (June 21, ]983). 28 SEC Docket 227; In the Matter of Sam E. Whittaker;

Investment Advisers Act Release No 864 (June 3, 1983),28 SEC Docket 66, In the

Matter of Carl P. Herbert. Jr:, Investment Advisers Act Release No. 861 (March 18, 1983),

27 SEC Docket 1690. SEC u Herbert, Litiqation Release No. 10014 (March 25, 1983), 27

SEC Docket 1820. In the Matter of Richard D. Farrer; Investment Advisers Act Release

No. 847 (March 31, 1983),27 SEC Docket 981, In the Matter of PAD Investment Corp.

Investment Advisers Act Release No 880 (September 13, 1983), SEC Docket ]271,ln the

Matter of Edith C. Alter; Investment Advisers Act Release No. 827 (October 6,1982),26

SEC Docket 548; SEC v Investment Notes Research Group, Inc. litigation Release No.

10145 (September 30, 1983),28 SEC Docket 1633; In the Matter of David M. Barrera.

Investment Advisers Act Release No. 853 (April 15, 1983),27 SEC Docket 1291, SEC u

Archer; Litigation Release No. 9974 (April 27, 1983),27 SEC Docket 1439; In the Matter

ofCMC Funding Limited. Investment Advisers Act Release No. 838 (January 31,1983),

27 SEC Docket 323; SEC u Amdisco Corp.. Litiqatron Release No. 10032 (June 13,

1983),28 SEC Docket 197. SEC u Peterson. Litigation Release No. 9960 (April 11, 1983),

27 SEC Docket 1145; SEC u General Security Enterprises lnc., litigation Release No

9966 (April 15, 1983),27 SEC Docket 1294; SEC u Executive Investment Corp.,

Litigation Release No 9973 (April 26, 1983), 27 SEC Docket 1438; In the Matter of

Mountain PaCIfiC Investment. Co.. Inc. Securities Exchange Act Release No 19650

(April 4, 1983),27 SEC Docket 1009; In the Matter of Money Placement Service, Inc.,

Securities Exchange Act Release No. 19651 (April 4, 1983),27 SEC Docket 1013; In the

Matter of Finencie! Planning Center of Greater Washington, Inc. Securities Exchange

Act Release No 20083 (August ]5,1983),28 SEC Docket 1037, SEC u The American

Board of Trade Inc .. LItigation Release No 10108 (August 29, 1983),28 SEC Docket

1175,SEC u Best, Litigation Release No 10109 (August 29,1983),28 SEC Docket 1176;

In the Matter of Lebkeucher; Spencer; lric., Securities Exchange Act Release No 19324

(December 10, 1982), 26 SEC Docket 1487; In the Matter of Carl John Peterson,

Securities Exchange Act Release No. 19340 (December 15, 1982),26 SEC Docket 1506,

60
In the Maller of Donald Messenger; Securities Exchange Act Release No. 19517 (February 22, 1983),27 SEC Docket 484; In the Matter of Josephthal [; Co.. Inc., Securities

Exchange Act Release No. 19518 (February 22,1983),27 SEC Docket 486, In the Maller

of Alan Bennett Harp. Securities Exchange Act Release No. 19425 (January 13, 1983),

27 SEC Docket 1853; In the Matter of Mabon Nuqent [; Co. Securities Exchange Act

Release No. 19424 (January 13, 1983),26 SEC Docket 1846, In the Matter of Rooney

Pace Inc. Securities Exchange Act Release No. 19453 (January 27,1983),27 SEC

Docket 208, In the Matter of Melvin Meckler; Secunties Exchange Act Release No.

19468 (January 31, 1983),27 SEC Docket 278, In the Maller of C Joseph Manfredo.

Securities Exchange Act Release No 19966 (July 13, 1983),28 SEC Docket 466; In the

Matter of Sleven R Grayson, Securities Exchange Act Release No. 19978 (July 15,

1983),28 SEC Docket 521, In the Matter of Nell Stephens Assocrazes. Inc., Securities

Exchange Act Release No. 19900 (June 21, 1983), 28 SEC Docket 229, In the Matter of

S Paul Palmer; Securities Exchange Act Release No. 19835 (June I, 1983),27 SEC

Docket 1856, In the Matter of A Larry Lindsey, Securities Exchange Act Release No.

19560 (March 2, 1983),27 SEC Docket 592; In the Matter of Roger Berry Smith,

Securities Exchange Act Release No. 19631 (March 28, 1983),27 SEC Docket 914; SEC

u Bangs Secunties. lric.. Litigation Release No 9915 (March 3, 1983),27 SEC Docket

652; SEC u Murdock. litigation Release No. 9991 (May 6, 1983),27 SEC Docket 1610,

SEC v. Goldman. Litigation Release No. 9992 (May 9, 1983),27 SEC Docket 1611,In the

Matter of Universal Secunties Inc. Securities Exchange Act Release No 19741 (May 9,

1983),27 SEC Docket 1526; SEC v Arture, litigation Release No. 9814 (November 19,

1982),26 SEC Docket 1265, In the Maller of Herbert A Schley, Securities Exchange Act

Release No. 19277 (November 29, 1982),26 SEC Docket 1286, In the Maller of A. L.

Williamson [; Co.. Securities Exchange Act Release No. 19177 (October 26,1982),26

SEC Docket 774; In the Maller of Jack J Illare. II, Securities Exchange Act Release No

19103 (October 4, 1982),26 SEC Docket 484; In the Matter of MBD tniestors Inc.,

Securities Exchange Act Release No. 20195 (September 16, 1983),28 SEC Docket 1206,

In the Matter of Alan D Platt, Securities Exchange Act Release No. 20210 (September

22,1983),28 SEC Docket 1337, In the Maller of Fust lndependent Transfer Agent Inc,

Securities Exchange Act Release No. 19608 (March 17, 1983),27 SEC Docket 792; SEC

v Nail anal Bond [; Share Co, Litigation Release No. 9832 (March 29, 1982),27 SEC

Docket 924; In the Matter of Neuonel Bond [; Share Co. Securities Exchange Act

Release No. 19638 (March 29,1983),27 SEC Docket 924; Report on Silver Crisis,

October 18, 1982; SEC v DaVIs. March 30, 1983; In the Maller of E F. Hutton Co, Inc.

Securities Exchange Act Release No 19339 (December 15, 1982),26 SEC Docket 1503.

<lnsider Tradmg cases include. SEC v Gaspar; Litigation Release No 9970 (April 20,

1983),27 SEC Docket 1299; SEC v. Olzman. litigation Release No 10104 (August 14,

1983),28 SEC Docket 1115,SEC u Carmichael, Litigation Release No 10094 (August

16, 1983), 28 SEC Docket 1041, SEC u Maurer; Litigation Release No. 10098 (August 18,

1983),28 SEC Docket 1045, In the Maller of Frank Joseph Bauer; Securities Exchange

Act Release No 20099 (August ]8, 1983),28 SEC Docket 1007; In the Maller of Everett

J. Wadler; Securities Exchange Act Release No. 20109 (August 24, ]983), 28 SEC

Docket 1076; SEC v Lewis. Litigation Release No. 10114 (August 31, 1983),28 SEC

Docket 1180, SEC v Deyoung, Litigation Release No. 10084 (August 4,1983),28 SEC

Docket 798, SEC u Muth, Litigation Release No. 9808 (December 16, 1982),26 SEC

Docket 1118;SEC v Petrou, litigation Release No. 9828 (December 2,1982),26 SEC

Docket 1357, SEC u Clements, Litigation Release No 9844 (December 20,1982),26

SEC Docket 1668, SEC u Platt. Litigation Release No. 9886 (February 1, 1983),27 SEC

Docket 356; SEC v Johnson. Litigation Release No. 9899 (February 17, 1983),27 SEC

Docket 475; SEC u Musella. Litigation Release No. 9862 (January 11, 1983),26 SEC

Docket 1979; SEC v. Gritfuh, litigation Release No 10072 (July 20.1983),28 SEC

Docket 608; SEC v. Kapachunes. litigation Release No. 10073 (July 21, 1983),28 SEC

Docket 610, SEC v. Madan, litigation Release No. 10063 (July 7, 1983),28 SEC Docket

437; SEC u G. Heileman Breunnq Co., Litigation Release No. 10049 (June 29, 1983), 28

SEC Docket 368, SEC v. Smith. Litigation Release No. 9933 (March 22, ]983),27 SEC

61
Docket 905. SEC u Montgomery. Litigation Release No. 9782 (October 13.1982),26

SEC Docket 662; SEC u Hall, Lmqation Release No. 10129 (September 21. 1983), 28

SEC Docket 1396; SEC u Groth. Litigation Release No. 10138 (September 26,1983).28

SEC Docket 1501;SEC u Kassar; Litigation Release No. 10137 (September 26,1983),28

SEC Docket 1500; SEC u Wattenbarger; litigation Release No. 10143 (September 29,

1983),28 SEC Docket 1508.

5Market Manipulation cases include: SEC u TexasGeneral Resources Inc., Llnqatron

Release No. 9866 (January 13, 1983),26 SEC Docket 1983; SEC u First Jersey

Securiues lnc.. Litigation Release No. 9870 (January 19, 1983),27 SEC Docket 142; In

the Matter of Shelley Cohen, Securities Exchange Act Release No. 19942 (July 5,1983),

28 SEC Docket 387; SEC u Cohen, litigation Release No. 10053 (July 5,1983),28 SEC

Docket 428; SEC u Chosei. Litigation Release No. 10036 (June 15, 1983),28 SEC

Docket 200, SEC u BIOnic Instruments of Delaware lnc., litigation Release No. 9911

(March 2, 1983),27 SEC Docket 647; SEC u Goldman, litigation Release No. 9985

(March 5, 1983),27 SEC Docket 1512; In the Matter of Marc Goldman, Securities

Exchange Act Release No. 19724 (May 3, 1983),27 SEC Docket 1457; In the Matter of

Amencan ~stern Securities lnc.. Securities Exchange Act Release No. 19275 (November 26,1982),26 SEC Docket 1284; SEC u Frontier Resources Corp., litigation Release

No 10125 (September 16, 1983),28 SEC Docket 1392; SEC u United Greenwood

Exploration Ltd, litigation Release No. 10131 (September 23,1983),28 SEC Docket

1495.

6Changes In Corporate Control cases Include: SEC u Instrument Systems Corp.,

Lrtrqatron Release No. 9871 (January 19. 1983),27 SEC Docket 143; SEC u CanalRandolph Corp.. LItigation Release No. 9909 (March 1, 1983),27 SEC Docket 644; SEC

u Can ran Associates I. L.P., LItigation Release No. 9908 (March 1,1983),27 SEC Docket

642, In the Matter of Montagu Investment Management Limited, Securities Exchange

Act Release No. 19591 (March 10, 1983),27 SEC Docket 703; SEC u Tristate Holding

Group Inc, Litigation Release No. 9937 (March 24, 1983),27 SEC Docket 909.

7Related Party Transaction cases include: SEC u Iransnet Cotp., litigation Release

No 10050 (June 30,1983),28 SEC Docket 369; SEC v. Scharf. litigation Release No.

9942 (March 29, 1983), 27 SEC Docket 994; SEC u Mid Continent Systems, lnc.,

Litigation Release No 10016 (March 31,1983),27 SEC Docket 1906; SEC u \-\Gleo

National Corp. LItigation Release No. 9798 (November 9,1982),26 SEC Docket 1003;

SEC u Alpex Computer Corp; Lmqatron Release No. 10144 (September 29,1983),28

SEC Docket 1510.

8Contempt cases Include' SEC u Enerdtne International Corp., litigation Release

No. 9979 (ApnI29, 1983),27 SEC Docket 1504; SEC u RT Systems Inc., Litigation

Release No 9954 (April 5, 1983),27 SEC Docket 1068; SEC u Martin, litigation Release

No. 9894 (February 16,1983),27 SEC Docket 471; SEC u Monarch Oil [; Gas Corp.•

Linqation Release No. 9875 (January 24,1983),27 SEC Docket 262; SEC u Diversified

Growth Corp; LItigation Release No. 10030 (June 13,1983),28 SEC Docket 195; SEC u

Ormont Drug [; Chemical Co., lnc., litigation Release No. 10011 (March 24, 1983),27

SEC Docket 1818, SEC u Smith, Lmqation Release No. 10170 (October 17,1983),28

SEC Docket 1746; SEC u Greenspan, Litigation Release No. 9976 (April 28, 1983),27

SEC Docket 1441,SEC u Martin, Lmqation Release No. 9894 (February 16,1983),27

SEC Docket 471; SEC u W:Jlflsh. LItigation Release No. 10033 (June 14, 1983),28 SEC

Docket 198, SEC u Murphy. Litigation Release No. 9999 (March 13, 1983),27 SEC

Docket 1694; SEC v. Johnson, Litigation Release No. 9987 (March 5,1983),27 SEC

Docket 1314; SEC u Smith, litigation Release No 10170 (October 17, 1983),28 SEC

Docket 1746; SEC v. Fry. June 30, 1983.

9Secuntles Act Release No. 6441 (December 2, 1982),26 SEC Docket 1276.

IOSecurities Act Release No. 6486 (September 23,1983),28 SEC Docket 1406.

IISecuntles Exchange Act Release No. 20021 (July 28,1983),28 SEC Docket 677.

12Securities Exchange Act Release No. 19135 (October 14, 1982),26 SEC Docket

601

I3Securities Exchange Act Release No. 20091 (August 16, 1983),28 SEC Docket

62
989.

14Securities Exchange Act Release No. 19528 (February 25, 1983),27 SEC Docket

504.

15Secunties Act Release No. 6474 (July 22, 1983),28 SEC Docket 615

16Secuntles Act Release No 6489 (September 23, 1983),28 SEC Docket 1419.

17Secunties Act Release No. 6488 (September 23, 1983),28 SEC Docket 1418.

18Securities Act Release No. 6487 (September 23, 1983),28 SEC Docket 1417

19Securities Act Release No. 6455 (March 3, 1983),27 SEC Docket 561.

20Securities Exchange Act Release No 19188 (October 28,1982),26 SEC Docket

800

21Secuntles Exchange Act Release No. 20264 (October 6, 1983),28 SEC Docket

1530.

22Secuntles Act Release No. 6459 (March 18, 1983),27 SEC Docket 834

23Secunties Exchange Act Release No. 19336 (December 15, 1982),26 SEC Docket

1599

24Securitles Act Release No. 6383 (March 3, 1982),24 SEC Docket 1318.

25Secuntles Act Release No 6391 (March 12, 1982),24 SEC Docket 1579.

26Secuntles Act Release No 6470 (June 9, 1983),28 SEC Docket 2.

27Secuntles Act Release No. 6482 (September 16, 1983),28 SEC Docket 1283.

28Secunties Act Release No. 6485 (September 23, 1983),28 SEC Docket 1403.

29pubhc Oversight Board, Annual Report (1982-1983) at 19

3048th Annual Report at 16.

31Statement of Fmancial Accounting Standards No 69, Disclosures About 011and

Gas Producing Actiouies. November 1982.

320perating Efficiency of the FASB, Report of the Structure Committee, Fmancial

Accountmg Foundation, August 1982 at 5.

33Staff Accountmg Bulletm No. 49 (October 26,1982),26 SEC Docket 838 (bank

holdmg company disclosures): Staff Accountmg Bulletin No 49A (January 18, 1983),27

SEC Docket 143 (bank holding company disclosures); Staff Accountmg Bulletin No. 50

(March 3, 1983),27 SEC Docket 759 (flnancial statements of bank holdmg companies);

Staff Accounting Bulletin No 51 (March 29, 1983),27 SEC Docket 1000 (subsidrarys

sales of stock), Staff Accountmg Bulletin No. 52 (May 16,1983),27 SEC Docket 1700

(pension plans); Staff Accounting Bulletm No 53 (June 13, 1983),28 SEC Docket 192

(guarantors of secunnes),

34FmanClai Reportmg Release No.8 (December 6, 1982),26 SEC Docket 1360 and

Fmancial Reportmg Release No. ]) (March 7, 1983),28 SEC Docket 673, respectively.

35FmancJaI Reporting Release No. 10 (February 25, 1983),27 SEC Docket 549

36FmanClai Reporting Release No. 14 (September 16,1983),28 SEC Docket 1286

37FmanClai Reporting Release No. 13 (August 11. 1983),28 SEC Docket 808.

38FmanClai Reporting Release No. 12 (August 8,1983),28 SEC Docket 802

39Secunties Exchange Act Release No. 19456 (January 27,1983),27 SEC Docket

212.

40Securitres Exchange Act Release No. 19315 (December 9, 1982),26 SEC Docket

1399.

41 Securities Exchange Act Release No. 19372 (December 23, 1982),27 SEC

Docket 146.

42Securities Exchange Act Release No. 20074 (August 12,1983),28 SEC Docket

938.

43Securities Exchange Act Release No. 17549 (February 17,1981). 22 SEC Docket

22.

44Securities Exchange Act Release No. 19678 (April 15, 1983),27 SEC Docket 1158.

45Securitles Exchange Act Release No. 19227 (November 9,1982),26 SEC Docket

946.

46Securities Exchange Act Release No. 19888 (June 20, 1983),28 SEC Docket 211.

47pub. L. No. 97-303, 96 Stat 1409; Pub. L. No. 97-444, 96 Stat 2294. See also 7

o.s.c ~2a(iv) (1983 Supp.)

63
48Securities Exchange Act Release No. 19264 (November 22, 1982),26 SEC Docket

1166; Securities Exchange Act Release No. 19486 (February 4,1983),27 SEC Docket

358, Securities Exchange Act Release No. 19709 (April 27, 1983), 27 SEC Docket 1325;

Securities Exchange Act Release No. 20075 (August 12, 1983),28 SEC Docket 963;

Securities Exchange Act Release No 20125 (August 26, 1983),28 SEC Docket 1125;

Securities Exchange Act Release No 20178 (September 13, 1983),28 SEC Docket 1238.

49Securities Exchange Act Release No. 19133 (October 14, 1982),26 SEC Docket

597, Securities Exchange Act Release No. 19274 (November 24, 1982),26 SEC Docket

1182

50SeCUritles Exchange Act Release Nos. 19126-27 (October 14, 1982),26 SEC

Docket 585.

51Secunnes Exchange Act Release No 19125 (October 14,1982),26 SEC Docket

580.

52Securities Exchange Act Release No. 19263 (November 22,1982),26 SEC Docket

1162.

53Securities Exchange Act Release No. 19565 (March 22, 1983),27 SEC Docket 656.

54Securities Exchange Act Release No 19244 (November 30, 1982),26 SEC Docket

1012

55Securities Exchange Act Release No. 19988 (August 2, 1983),28 SEC Docket 536.

56Securities Exchange Act Release No. 20155 (September 7, 1983),28 SEC Docket

953

57Securities Exchange Act Release No. 19673 (April 26, 1983),27 SEC Docket 1099

58Securitles Exchange Act Release No. 20230 (September 27, 1983),28 SEC Docket

1447.

59Securitles Exchange Act Release No 19687 (April 18, 1983),27 SEC Docket 1176

60Securities Exchange Act Release No. 19268 (November 18, 1982),26 SEC Docket

1173

61Securities Exchange Act Release No. 19860 (June 10,1983),28 SEC Docket 81.

620n July 5, 1983, the Spokane Stock Exchange filed wrth the Cornrmssion an

application for exemption from reqrstration as a national secunties exchange pursuant to

Section 5 of the Exchange Act The Cornrrussion has not yet acted upon this application

63SecUritles Exchange Act Release No. 19351 (December 20, 1982),26 SEC Docket

1603.

64SecuritJes Exchange Act Release No 19619 (March 21, 1983),27 SEC Docket 862.

65Securitles Exchange Act Release No. 19520 (February 22, 1983),27 SEC Docket

491.

66Securlties Exchange Act Release No. 19814 (May 26, 1983),27 SEC Docket 1753

67pub. L. No. 98-38 (June 6, 1983),97 Stat. 205

68SecUritles Exchange Act Release No. 19383 (December 29, 1982),26 SEC Docket

1713, Securities Exchange Act Release No 20009 (July 27, 1983),28 SEC Docket 626,

Secunties Exchange Act Release No. 20273 (October 12, 1983),28 SEC Docket 1653.

69SecUritles Exchange Act Release No. 20221 (September 23, 1983),28 SEC Docket

1424.

70SeCUritles Exchange Act Release No. 20222 (September 23, 1983),28 SEC Docket

1439.

71Securities Exchange Act Release No. 19422 (January 12, 1983),26 SEC Docket

1842

72Securities Exchange Act Release No. 19999 (July 21, 1983),28 SEC Docket 560.

73Securitles Exchange Act Release No. 19742 (May 9, 1983),27 SEC Docket 1531,

Securities Exchange Act Release No. 20039 (August 2,1983),28 SEC Docket 745;

Securities Exchange Act Release No. 20032 (August 1, 1983),28 SEC Docket 743;

Securities Exchange Act Release No. 20031 (August 1, 1983),28 SEC Docket 742;

Securities Exchange Act Release No. 20110 (August 24,1983),28 SEC Docket 1077;

Securities Exchange Act Release No 20118 (August 25, 1983), 28 SEC Docket 1085,

Secunties Exchange Act Release No. 20127 (August 29,1983),28 SEC Docket 1130;

Securities Exchange Act Release No 20128 (August 29,1983),28 SEC Docket 1131,

64
Securities Exchange Act Release No 20153 (September 6,1983),28 SEC Docket 1187;

Secunnes Exchange Act Release No. 20189 (September 16, 1983),28 SEC Docket 1296

741nvestment Company Act Release No. 12888 (December 10, 1983),26 SEC Docket

1552, requesting comment on regulatory alternatives for mutual fund governance.

75lnvestment Company Act Release No. 13044 (February 23, 1983),27 SEC Docket

532, requesting comment on the utrhzation of pnvate entities In investment company

examination and imposition of examination fees.

761nvestment Company Act Release No. 13183 (Apnl 22,1983),27 SEC Docket 532

77 Investment Advisors Act Release No. 865 (June 10, 1983), 28 SEC Docket 187

781nvestment Advisors Act Release No. 840 (February 28, 1983),27 SEC Docket 639

79Secuntles Act Release No 6479 (August 12,1983),28 SEC Docket 899

80Secuntles Act Release No 6454 (February 28,1983),27 SEC Docket 559.

8I1nvestment Company Act Release No 12745 (October 18, 1982),26 SEC Docket

727

821nvestment Company Act Release No. 13407 (July 28, 1983),28 SEC Docket 709

831nvestment Company Act Release No. 13406 (July 28,1983),28 SEC Docket 700

84lnvestment Company Act Release No. 13005 (February 2, 1983),27 SEC Docket

332.

85SEC u Lowe, Nos 83-6108,83-6116 (2d Cir ) appeal denied, January 18, 1984.

86SEC v Youmans. appeal pendmg. No 83-5054 (6th Crr.),

87SEC v Cutten, 700 F2d 744 (D.C Or. 1983)

88SEC v Clifton, id

89Ryan v SEC No. 82-7312 (9th Or. May 23,1983)

90Boylan v SEC No. 82-711 (9th Cir Mar. 7,1983).

91Herman & McLean v Huddleston, 113 S. Ct. 683 (1983).

92Walck v American Stock Exchange, Inc, 103 S 0.2118 (1983)

93Hunsmger v Rockford Business Credits, appeal pendmg, No. 83-2169 (7th Cir.),

Spmuzza u U-encke, appeal pending, No. 83-2251 (7th Cir.), The Commission also filed

a bnef on rehearing en banc In Villeneuve v Advanced BUSiness Concepts Corp; 698

F2d 1121 (11th Cir. 1983), rehearing en banc granted, concerning the proper formulation of the Investment contract test.

941MJlfv Banco Necionel de Mexico, appeal pendtnq, No. 83-1534 (9th Cir.)

95Liberty National Ins. Holding Co. v The Charter Co . appeal pending, No.

82-7260 (11th Cir.): Indiana Neuonal Corp ii Rtch. 712 F.2d 1180 (7th Cir 1983); San

FranCISCo Real Estate Investors v Real Estate Investors of America, 701 F2d 1000 (1st

Or 1983).

961ndlana National Corp v RICh, 712 F2d 1180 (7th Cir 1983).

97Dirks u SEC 103 S Ct. 3255 (1983).

98Unlted States v Newman. cert denied, No 82-1653 (S. Ct. Oct. 3,1983)

99Uniled States v Newman, 664 F.2d 12 (2d Cir. 1981)

lOoMoss u Morgan Stanley, No 83-7120 (2d Cir Sept 9. 1983)

101DIrks u SEC 103 S 0 3255 (1983), Chiarella v United States, 445 U.S. 222

(1980).

10217CFR 2012(e).

10317CFR 200.83.

104Hunt v SEC No. C82-5912 RPA(N.D. Cal); Furch u SEC No. 82-CV-1138

(N.D.N.Y.)

105Atkinson u SEC No. 83-2030 (D.D C Oct 27,1983)

106/anAllison u SEC No. 82-4133 (9th Cir ), First Jersey Securities, Inc u SEC No.

82-5784 (3d Cu.): Blinder-Robinson v SEC No 82-2041 (10th Or). Sprecher u Graber;

No. 82-6188 (2d Cir.).

107FlrstMultiiund v SEC Nos 81-4057,81-6092,83-4039 (2d Or); Catalano u SEC

No. 83-6092 (2d Cu.), Dist Court Judgment affirmed, December 2, 1983, Friedman v

Bache, Halsey, No. 83-1249 (D.C. Cir.); Jerry T O'Brien u SEC 704 F.2d 1065 (9th Cir.),

cert. granted. No. 83-751 (Supreme Court, January 9,1984)

108Jerry T O'Brien, Inc. u SEC 704 F.2d 1065 (9th Or)

65
I09/d at 1069.

I 10 Wedbush u SEC [Current] Fed. Sec. L. Rep. (CCH) "99,468 (1983), Pepisco u SEC

563 F.Supp. 828 (S.D.N.V. 1983); SEC u Murph!j No. CV 75-2775 (D.C Cal. Aug. 15,

1983).

111Pepsico u SEC 563 F.Supp. 828; SEC u Murph!j No. CV 75-2775.

112NewEngland Power Company, Holding Company Act Release No. 22992 (June

30, 1983),28 SEC Docket 339; and Holding Company Act Release No. 23025 (August 5,

1983),28 SEC Docket 867.

113Centra IPower and Light Comperui Holdmg Company Act Release No. 22873

(March 8,1983),27 SEC Docket 717, and Holdmg Company Act Release no. 22996

(July 1, 1983),28 SEC Docket 400

1 14 West Texas Utiluies Company, Holdmg Company Act Release No. 22916 (Apn120,

1983),27 SEC Docket 1190; and Holding Company Act Release No. 22964 (June 6,

1983),28 SEC Docket 31

115TheConnecticut Light and Power Company, Holding Company Act Release No.

22972 (June 10, 1983),28 SEC Docket 143.

116MisSIssiPPIPower and LIght Company, Holding Company Act Release No. 22854

(February 15, 1983),27 SEC Docket 440.

117Holdmg Company Release No. 22959 (May 27,1983),27 SEC Docket 1869.

118Holdmg Company Act Release No . 22715 (November 17, 1982),26 SEC Docket

1067.

119Holdmg Company Act Release No. 22940 (May 17,1983),28 SEC Docket 1651.

120Holding Company Act Release No. 23021 (August 4, 1983),28 SEC Docket 775.

66
Glossary of Acronyms

MER-AccountIng and Auditing Enforcement Releases

ADR-Amencan Depositary Receipts

AlCPA-American Institute of Certified Public Accountants

Amex-Amencan Stock Exchange

BDC-Business Development Company

CAES-Computer Assisted Execution System

CASE-Customer Account Statement Evaluation System

CBOE-Chicago Board Options Exchange

CFTC-Commodity Futures Trading Commission

FASB-Financial Accounting Standards Board

FCPA-Foreign Corrupt PracticesAct

FRRs-Financial Reporting Releases

GAAP-Generally Accepted Accounting Principles

ITS-Intermarket Trading System

MOSS-Market Oversight and Surveillance System

MSE-Midwest Stock Exchange

MSRB-Municipal Securities Rulemaking Board

NASM-North Amencan Securities Administrators Association

NASD-National Association of Securities Dealers

NASDAQ-National Association of Securities DealersAutomated Quotation

System

NMS-National Market System

NSTS-National Securities Trading System

NYSE-New York Stock Exchange

Phlx-Philadelphia Stock Exchange

PIC-Productivity Innovation by Computer

POB-Public Oversight Board

PSE-Pacific Stock Exchange

SAB-Staff Accounting Bulletin

SECPS-SEC Practice Section of American Institute of Certified Public

Accountants

SES-Senior Executive Service

SIAC-5ecurities Industry Automation Corporation

SIA-Securities Industry Association

SIC-5pecial Investigations Committee of SEC Practice Section of American

Institute of Certified Public Accountants

SIPC-Securities Investor Protection Corporation

SRO-Self-Regulatory Organization

USIC-User Support Information Center

67

Appendix

THE SECURITIES INDUSTRY

Income, Expenses and Selected

Balance Sheet Items

Broker-dealers which are self-regulated

through their membership in a national securities exchange or the National ASSOCIation of Securities Dealers earned revenues

of $29.0 billion In 1982, 19 percent above

the 1981 level.' Almost 50 percent of this

increase in revenues stemmed from the

growth of the trading gains on firms' securities accounts ("trading gains").

Securities cornrrussion income grew

$850 million but dechned to 26 percent of

total revenues. Trading gains increased

$2.3 billion and rose as a percent of total

revenues from 22 percent in 1981 to 26

percent In 1982. Despite a 23 percent increase in the market value of equity sales

on all registered exchanges, securities

commission Income rose only 13 percent

while trading gains increased 42 percent.

1Due to changes in FOCUS reporting

requirements, consolidated information

for 1981 is not available. In order to provide

consistent information, new financial data

APPENDIX

The volume of large transactions, which

generate fewer cornrmssion dollars relative

to trading volume, accounted for a disproportionately large portion of the Increase.

Revenue from underwriting rose by 46 percent in 1982 which reflects a 12 percent

Increase in gross proceeds from pnrnary

public offerings in 1982 over 1981.

Expenses grew by $34 billion to $24.9

billion In 1982. Interest expenses declIned

by $27 million to $6.5 billion reflectmq the

decline of the broker call loan rate and the

margin debt In 1982 The 19 percent

growth in revenues outstripped the 16 percent nse in expenses and Increased pretax Income to $4.1 billion, up 47 percent

from the preceding year.

Assets rose by $52.9 billion to $207.9

bilhon and liabilities grew $49.9 billion to

$194.6 btlhon. Ownership equity rose $2.9

billion during 1982 to $13.2 bilhon at year's

end.

was developed for prior years and Table I

now presents unconsolidated data for all

years. This data will not be comparable to

the Table 1 of previous years.

71
Table 1

UNCONSOLIDATED FINANCIAL INFORMATION FOR BROKER-DEALERS

1978-1982

(Millions of Dollars)

1978 7979 1980 7987 7982P

A Revenues

1 Securities Cornrrussions S 4,430 S 4,737 S 6,800 S 6,589 $ 7439

2 Gain (Loss) In Trading 1,925 2,909 4,309 5,401 7691

3 Gain (Loss) In Investments 385 732 807 635 878

4 Profit (Loss) from Underwriting

and Seiling Groups 927 930 1594 1,860 2717

5 Revenue from Sale of Investment

Company Secunnes 160 197 278 342 629

6 All Other Reverlues 3446 4,452 6,196 9,545 9690

7 Total Revenues $ 11273 s 13,957 s 19984 $ 24,372 $ 29,044

B Expenses

8 All Employee Compensation and

Benefits (Except Registered

Representatives Compensation) $ 2129 $ 2,475 $ 3,402 $ 3,951 $ 4770

9 Cornrmss.ons and Clearance Pard

to Other Brokers 787 845 1079 1,104 1,320

10 Interest Expense 1967 3,058 3,893 6506 6479

11 Regulatory Fees and Expenses 72 75 100 121 152

12 Compensation to Partners and

Voting Stockholder Officers 602 664 883 1056 1,198

13 All Other Expenses (Including

RegIstered Representatives

Compensation) 4,644 5,188 7,574 8,845 11029

14 Total Expenses $ 10201 $ 12305 $ 16931 $ 21,583 s 24,948

15 Pre-Tax Income $ 1072 $ 1652 s 3053 $ 2,789 S 4,096

C Assets LIabilitIes and Ceptte!

16 Total Assets $ 65354 $ 87,068 $120,152 $155,063 $207927

17 LIabilities

a Iotal uatnhtres (excluding

subordinated debt) 58506 79,537 109,742 142,865 192,348

b Subordinated debt 1167 1296 1859 1,869 2,335

c Total liabilities (17a + 17b) 59673 80833 111,601 144734 194,683

18 Ownership Eqtnty 5681 6235 8551 10329 13244

19 Total liabilities and Ownership

EqUity $ 65354 $ 87068 $120,152 $155,063 $207,927

Number of FIrms 4,822 4,824 5,283 5,714 6,100

P Preurnmary

Note Includes only those broker-dealers self-regulated through the" membership In the National Association of Securities

Dealers or a registered secuntres exchange

Source FOCUS Report

72

=0
Table 2

UNCONSOLIDATED ANNUAL REVENUES AND EXPENSES OF FIRMS

DOING A PUBLIC BUSINESS

1978-1982

(Millions of Dollars)

1978 1979 1980 1981A 1982 p

Revenues

Securities Cornrmssrons $ 3983 $ 4.518 $ 6454 $ 6163 $ 7049

2 Realized and Unrealized Gains

or Losses In Trading and

Investment Accounts 2043 3378 4686 5,481 8.060

3 Commodities Revenues 345 481 669 699 704

4 Profits or Losses From Underwntrnq and Seiling Groups 871 900 1.519 1.797 2643

5 Revenues From Sale of Investment Company Securities 148 179 274 338 619

6 Margin Interest 1115 1669 2136 2884 2.034

7 All Other Revenues 1533 2.038 2993 5320 6462

8 Total Revenues $ 10038 $ 13163 $ 18731 $ 22682 $ 27572

Expenses

9 Salanes and Other Employment

Costs for General Partners and

Voting Stockholder Officers $ 540 $ 600 $ 793 $ 944 $ 1073

10 All Other Employee Compensation

and Benefits (Except Registered

Representatives Compensallon) 1 1.908 2.353 3.116 3.749 4552

11 Commissions and Clearance Paid 702 791 949 972 1197

12 Interest Expense 1817 2957 3.778 6.016 6229

13 Regulatory Fees and Expenses 60 65 85 103 133

14 All Other Expenses 1 4.097 4944 7251 8.389 10.599

15 Total Expenses $ 9124 $ 11710 $ 15972 $ 20173 $ 23.783

16 Pre-Tax Income $ 914 $ 1453 $ 2.759 $ 2510 $ 3789

17 Number of frrms as of

end-of-year 2.516 2,479 2613 2836 3187

P Preliminary

R~ Revised

1 Reglslered representatives compensation IS Included In -All Other Expenses" because It IS not reported separately on Part

IIA of the FOCUS Report

Note FIgures may not sum due to roundmq

Source FOCUS Report

73

~
Table 3

SUMMARY UNCONSOLIDATED BALANCE SHEET FOR FIRMS

DOING A PUBLIC BUSINESS YEAR-END, 1978-1982

(Millions of Dollars)

1978 1979 1980 1981R 1982P

A Assets

1 Cash $ 1162 $ 2,078 $ 2,611 $ 2,671 $ 4,413

2 Receivables from other broker-dealers

a Securities failed to deliver 2,436 3,138 3,881 3,280 6,204

b Securities borrowed 2,611 4,319 7,752 9,228 15,550

c Other 872 827 1,177 1,906 2,438

3 Receivables from customers 15,796 16,942 23,464 21,076 24,520

4 Long positions In securities and

commodities 17,624 23,757 33,001 41,714 61,931

5 Securities owned not readily

marketable 57 67 121 104 147

6 Securities borrowed under subordinated agreements and partners

Individual and caprtal secunties

accounts 69 74 90 90 88

7 Securities purchased under agree.

ment to resell 15,469 26,630 32,888 45,222 52,915

8 Secured capital demand notes 276 292 305 309 297

9 Exchange memberships 122 171 213 216 277

10 Other Assets 3,225 4,320 5,579 6,771 9,337

11 TDial Assets $59,719 $82,615 $111,082 $132,587 $178,117

B tsetnuues and EqUity Capital

12 Bank loans payable

a Secured by customer collateral $ 5045 $ 4,284 $ 3,892 $ 3,633 $ 2,776

b Secured by film collateral 5,443 5,554 5,592 7,583 8,683

13 Securities sold under repurchase

agreements 17,587 27,105 34,949 55,679 67,908

14 Payable to other broker-dealers

and cleannq orqaruzatrons

a Securities failed to receive 2,491 3,080 4095 3,298 6,711

b Securities loaned 2,041 3843 7,184 8,273 13,734

c Other 790 829 1,105 1,418 2,168

15 Payable to customers 7784 9613 14,833 12,705 16,188

16 Short positions In secuntres

and commodities 7,106 14,492 21,160 18,698 30,542

17 Other liabilities 5717 7097 9,444 11,001 15,744

18 Total liabilities excluding

subordinated lIabllltes 54,004 75,896 102,254 122,288 164,454

19 Subordinated liabilities 1042 1,198 1,648 1,698 2,126

20 Total Liabilities $55,046 $77 094 $103,902 $123,986 $166,580

21 Equity Capital $ 4672 $ 5,521 $ 7,180 $ 8,601 $ 11,537

22 Total Liabilities and EqUity Capital $59,719 $82,615 $111,082 $132,587 $178,117

23 Number of films 2,516 2,479 2,613 2,836 3,187

p,= Prehrnmary

R-= Revised

Note Figures may not sum due to rounding

Source FOCUS Report

74

-
Securities Industry Dollar In

1982 For Carrying and Clearing

Firms

Data for carrYing and clearing firms

only are presented here to allow for more

detail, as reporting requirements for iniroducinq and carrying and clearing firms

differ and data aggregation of these two

types of firms necessarily results in loss of

detail. Carrying and clearing firms are

those firms which clear securities transacnons or maintain possession or control of

customers' cash or securities. The 87 percent of industry revenues earned by carrying and cleannq firms in 1982 suggests

that this group ISa suitable proxy for the

Industry.

Securities cornrrussions and trading

gains accounted for 24 cents and 28

cents, respectively, of each revenue dollar

In 1982. Together these two items accounted for 52 cents of each revenue dollar earned in 1982 as compared to 49

cents In 1981. In terms of dollars, they accounted for $13.1billion of the $25.4 billion of total revenues earned by carrying

and clearing firms. Margin interest income

declined to account for 8 cents of each

revenue dollar in 1982 compared with 14

cents In 1981.

Total expenses consumed 86 cents of

each revenue dollar earned in 1982, a decrease over the 1981level of 89 cents. The

industry's pre-tax profit margin increased

to 14cents per revenuedollar In 1982 from

11cents In 1981.

Interest expense,again the Singlelargest

expense item, in 1982 rose by less than

one percent to absorb 24 cents of each

revenue dollar, which compares to 29

cents in 1981. In dollars, interest expense

grew only slightly to $6,184 million in 1982

from $6,176 In 1981.Employee-related expenses (registered representatives' compensation and clerical and adrnimstrauve

employees' expenses) consumed 34 cents

of the revenue dollar In 1982, one cent

above the 33 cent level In 1981.RegIstered

representatives' compensation while increasing by 22 percent over the 1982 level,

absorbed 18 cents of each revenue dollar

In 1982 as it did the previous year In dollar

terms, employee-related expenses accounted for $8,593 million of the $21,938

of total expenses.

The "NI Other Expense" category,

which includes promotional costs, regulatory fees and expenses and miscellaneous

items, consumed 11cents of each revenue

dollar, compared to 10 cents In 1981.

Total assets of broker-dealers carrymq

and clearing customer accounts rose by

$42 4 billion to $179 1 billion In 1982.

About 91 percent of this increase in assets

can be attributed to four Items: long pOSItions WIth $19.7 billion, receivables from

other broker-dealers WIth $9.4 billion, resale agreements With $6.0 billion and $3.4

billion for receivables from customers.

Total liabilities, including subordinated

debts moved up $397 bilhon or 31 percent to $168.5 bilhon with Increases in repurchase agreements of $12.8 bilhon and

short positions in securities of $10.3 billion. Owners' equity rose 33 percent from

$8.0 billion in 1981 to $10.6 billion and

total capital increased 32 percent to $12.6

billion from $9.6 billion in 1981.

75
76

w

:Eo

Co> zx«

J-;- w

a:

e, oz«

enww

::l Zw>w

a:

u. o

enw

Co>

a:

::l o

en
Table 4

REVENUES AND EXPENSES OF BROKER-DEALERS

CARRYING/CLEARING CUSTOMER ACCOUNTS

(Millions of Dollars)

1981R 1982P 1981-1982

Percent of Percent of Percent

Dollars Total Revenues Dollars Total Revenues Increase

Revenues

1 Secuntres Cornrmssrons $ 5,425 25 5~o $ 6062 239% 117°0

2 Gain (Loss) In Trading 5009 236 7086 279 415

3 Gain (Loss) In Investments 527 25 642 25 218

4 Profit (Loss) from Underwriting

and Selling Groups 1,717 81 2550 100 485

5 Revenue from Sale of Investment

Company Secunnes 209 10 469 19 1244

6 Margin Interest Income 2,914 137 2043 81 (299)

7 Commodity Revenue 694 39 693 27 (01)

8 Other Revenue Related to

Securities Business 3,562 117 4,727 186 327

9 Revenue from All Other Sources 1 197 32 1120 44 (64)

10 Total Revenues $21,254 1000% $25392 1000% 19 5 ~o

Expenses

11 Registered Representatives

Compensation $ 3,765 1770,0 $ 4610 182°'0 224 %

12 Clerical and Adrrnrustranve

Employees Expenses 3,291 155 3,983 157 210

13 Cornrrussrons and Clearance Paid

to Others 741 35 900 35 215

14 Interest Expense 6,176 291 6184 243 01

15 Communication and Data Processing 1,394 65 1,654 65 187

16 Occupancy and EqUipment 719 34 934 37 299

17 Compensation to Partners and Voting

Stockholder Officers 705 33 814 32 155

18 All Other Expenses 2,174 102 2,858 113 315

19 Total Expenses $18965 892°, $21 937 8640,0 157 %

Pre- Tax Income

20 Pre-Tax tncome $ 2,289 108% $ 3455 136% 509 %

Number of Firms 1,234 1,253

P Preliminary

R~ ReVised

Note Includes information for firms that carry customer accounts or clear secunnes transactions Percentages may not add due

to rounding

Source FOCUS Report

77

~
Table 5

UNCONSOLIDATED BALANCE SHEET OF BROKER-DEALERS

CARRYING/CLEARING CUSTOMER ACCOUNTS

(Millions of Dollars)

YearEnd YearEnd % Change

1981 Percent 1982 Percent 1981-1982

Assets

1 Cash $ 2596 19% $ 4287 24% 651%

2 Receivable From Other

Broker-Dealers 14,562 107 23,963 134 646

a Secuntres Borrowed 9,624 70 15,784 88 640

b Other Receivables 4938 36 8,179 46 656

3 Receivables From Customers 21,096 154 24,543 137 163

4 Resale Agreements 46932 343 52,920 296 128

5 Long Positions In Secuntres

and Spot Cornrnodmes 44,576 326 64,255 358 442

6 Other Assets 6,983 51 9,135 51 308

7 Total Assets $136,745 1000% $179,103 1000% 310%

!..Jablhtles and EqUIty

Cepnet

8 Bank loans 11,808 86% 11,503 64% (26)%

a Secured by Customer Sec 3612 26 2,761 15 (236)

b Secured by Propnetary Sec 8,196 60 8,742 49 67

9 Payable to Other Broker-Dealers 12,896 94 21,981 123 701

a Secunties Loaned 8,526 62 13,778 77 616

bather Payables 4,370 32 8,203 46 877

10 Payable to Customers 12,732 93 16,219 91 274

a Free Credit Balances 6188 45 7,679 43 241

b Other Credit Balances 6544 48 8,540 48 305

11 Repurchase Agreements 59,358 434 72,127 403 215

12 Short Positions In Securities 19,682 144 29940 167 521

13 Subordinated Debt 1,556 12 1,956 11 257

14 Other Liabilities 10,701 78 14,730 82 377

15 Iotal Liatnlmes 128,733 941 168,456 941 309

16 Owners EqUity 8,012 59 10,647 59 329

17 Total liabilities

and Owners Equity $136,745 1000% $179,103 1000% 310%

Total Capital $ 9,568 $ 12,603 317%

Number of Films 1,234 1,253

Source FOCUS Report

Broker-Dealers. Branch Offices.

Employees

The number of broker-dealers filing

FOCUS Reports rose from 5,714 In 1981to

6,100 in 1982. During the same penod, the

78

number of branch offices Increased from

7,693 to 9,314. The number of full-time

personnel employed in the securities industry rose from 220,219 to 244,665 in

1982, an 11percent Increase.
o

Broker-Dealers and Branch Offices

5,000 10,000

1975

1976

1977

1978

1979

1980

1981

1982

I I

I , , I

...• :.... .. J~079

16267

I ..

... I~315

16290

I

I~602

16~98

I .. -.- ..

14822 ..

1589,

I

". -,

14824

166)9

I

1

528

16968

I

-, .. 157/4

1 769,

I

.. !6100P

191//

I I I I I I I I I

[" .. J Broker Dealers

P Prcttnnnarv

] Branch Offices

SOURCE FORM X-17A-l0 AND FOCUS REPORTS

79

'

'

'

' . ~ __
Table 6

BROKERS AND DEALERS REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF

1934-EFFECTIVE REGISTRANTS AS OF SEPTEMBER 30, 1983 CLASSIFED BY

TYPE OF ORGANIZATION AND BY LOCATION OF PRINCIPAL OFFICE

Number of Registrants

Sole

Total Propne- Partner. Corporatorsrups ships lions'

Alabama 38 3 1 34

Alaska 2 0 0 2

Arizona 48 2 1 45

Arkansas 36 2 0 34

Cautorrua 1048 292 96 660

Colorado 203 6 6 191

Connecticut 130 15 16 99

Delaware 11 1 1 9

DIstrict of Cofurnb.a 45 3 6 36

Florida 311 16 8 287

Georgia 85 1 4 80

Hawau 23 0 0 23

Idaho 10 2 0 8

Hhnors 2.381 1,470 286 625

Indiana 57 7 1 49

Iowa 43 4 2 37

Kansas 40 4 3 33

Kentucky 15 1 0 14

LOUISiana 59 3 4 52

Maine 13 0 2 11

Maryland 68 6 3 59

Massachusetts 206 30 14 162

Michigan 92 5 5 82

MInnesota 101 3 0 98

MISSISSiPpi 21 0 1 20

MIssouri 91 7 2 82

Montana 8 1 0 7

Nebraska 26 0 0 26

Nevada 14 3 1 10

New Hampshire 10 2 0 8

New Jersey 264 44 28 192

New MexIco 14 2 0 12

New York 2169 712 312 1145

North Carolina 49 3 1 45

North Dakota 5 0 1 4

Ohio 129 5 11 113

Oklahoma 61 5 1 55

Oregon 46 0 1 45

Pennsylvania 376 19 98 259

Rhode Island 16 4 1 11

South Carolina 29 3 1 25

South Dakota 3 0 0 3

Tennessee 85 2 3 80

Texas 355 26 10 319

Utah 52 2 2 48

Vermont 7 3 1 3

VIrginia 56 4 2 50

wastunqton 102 5 1 96

West Virginia 9 2 0 7

wisconsm 83 8 2 73

Wyoming 9 1 0 8

Total 9130 2.737 937 5,456

Forelgn2 24 2 2 20

Grand Iotat 9154 2.739 939 5,476

1 Includes all forms of organization other than sale propnetorsrups and partnerships

2Regrstrants whose principal offices are located In foreign countries or other [unsdrctrons not listed

80
Table 7

APPLICATIONS AND REGISTRATIONS OF BROKERS AND DEALERS

AND INVESTMENT ADVISERS

Fiscal Year 1983

BROKER-DEALER APPLICATIONS

Applications pending at close of precedmq year

Applications received dunnq trscal 1983

Total applications for oisposmon

DISposition of Application

Accepted for IIling

Refurned

Withdrawn

Denied

Total applications disposed of

Apphcatrons pending as of Sepfember 30, 1983

BROKER. DEALER REGISTRATIONS

Effective registrations at close of preceding year

Registrations effective dunnq frscal 1983

Total registrations

Registrations terminated dunnq fiscal 1983

Withdrawn

Revoked

Cancelled Other

Total registrations terminated

Total registrations at end of nscal 1983

INVESTMENT ADVISER APPLICATIONS

Applications pending at close of preceding year

Applications received dunnq nscai year 1983

Total applications for disposmon

DISposition of applications

Accepted for filing

Withdrawn

Returned

Denied

Total applications disposed of

Applications pending as of September 30, 1983

INVESTMENT ADVISER REGISTRATIONS

Effective registrations at close of preceding year

Registrations effective dunnq IIscal 1983

Total registrations

Reglstrallons terminated dunnq IIscal1983

Withdrawn

Revoked

Cancelled Other

Total registrations terminated

Total registrations at end of IIscal 1983

3

2,647

2,650

1963

493

0

0

2459

191

8,076

1,963

10039

791

0

94

885

9154

2

2,609

2,611

1954

516

0

0

2,470

141

5445

1,954

7,399

207

0

149

356

7043

81
Table 8

APPLICATIONS AND REGISTRATIONS OF MUNICIPAL SECURITIES

DEALERS AND TRANSFER AGENTS

Fiscal Year 1983

MUNICIPAL SECURITIES DEALERS APPLICATIONS

Applications pending at close at preceding year

Applications received dUring fiscal 1983

Total apphcatrons for drspositron

DISposition of Apphcatron

Accepted for filing

Returned

Denied

Total applications disposed of

Applications pending as of September 30 1983

MUNICIPAL SECURITIES DEALERS REGISTRATIONS

Effective registrations at close of precedmq year

Registrations effective dunng fiscal 1983

Total registrations

Registrations terminated dunng fiscal 1983

Withdrawn

Cancelled

Suspended

Total reqrstranons terminated

Total registrations at end of nscal 1983

TRANSFER AGENTS APPLICATIONS

Applications pending at close of preceding year

Applications received dunng fiscal year 1983

Total applications for drsposmon

Orsposrtron of applications

Accepted for filing

Returned

Withdrawn

Denied

Total applications disposed of

Applications pending as of September 30 1983

TRANSFER AGENTS REGISTRATtONS

Effective registrations at close of preceding year

Registrations effective dunng fiscal 1983

Total registrations

Registrations terminated dunng fiscal 1983

Withdrawn

Cancelled

Suspended

Total registrations terminated

Total registrations at end of fiscal 1983

82

-0-

23

23

18

1

0

19

4

372

18

390

12

0

0

12

378

-0-

79

79

69

4

0

0

73

6

986

69

1,055

14

1

0

15

1.040
Self Regulatory Organizations:

Revenues, Expenses, Pre-Tax

Income and Balance Sheet

Structure

In 1982 the aggregate total revenue of

self-regulatory orqanizanons ("SROs")

reached $404.0 million, representing an

Increase of 8.5% since 1981 NYSE,Amex,

and NASD account for 69.9% of the aggregate total revenue. Most of the revenue

accrued was generated by various types of

fees, including fees for branch offices and

for listing fees. NYSE reported a total revenue fiqure of $169.0 million of which approximately 568% was made up of listing

and trading fees. NASD reported a total

revenue figure of $54.7 million. Over

56.8% of this figure was derived from listIng and trading fees. Approximately 8.3%

of the aggregate revenues was pre-tax income.

Aggregate total expenses for all SROsby

1982 were $370.3 million, an Increase of

9.5% over 1981. NASD reported total expenses as $51.3 million, representing an

increase of 25.9% over the previous year.

Salaries and employees benefits made up

52.4% of the total NASD expenses.

The aggregate pre-tax income figure of

all SROs declined by 1.7% from the previous year. NYSE reported total pre-tax income of $15.9 million, an increase of

68.9% from the previous year The pre-tax

income for Amex decreased from 1981 by

29.4%, for CBOE by 46.5% and for the

NASD by 44.8%.

The aggregate total asset figure for 1982

was $662.1 million, an increase of 5.2%

over 1981 NYSE's share of the aggregate

total assetswas $190.9 million, an Increase

of 15.8% since 1981. BSE's asset figure

declined from $21.3 million in 1981 to

$17.2 million in 1982, a decrease of 18.9%.

MSE's figure also declined from $110.4

million in 1981 to $95.7 million In 1982, a

decrease of 13.3%. For the past two years

total assets for PSE have exceeded those

of the NYSE. This difference occurs because of the manner in which the two

firms report clearing funds and depository

transactions.

The aggregate net worth rose to $258.8

million from $235.5 million In 1981,an increase of 9.9%. Phlx,Amex and NASD reported the largest percentage Increases in

net worth over 1981 figures. Phlx posted

the largest Increase of the three exchanges, 32.0% since 1981.

Aggregate clearing agency revenues for

1982 increased by approximately $13 million over 1981 due, in most part, to the

substantial increase in equity securities

trading volume experienced late In the

year.Revenuesfrom depository services of

the Depository Trust Company ("DTC"')

alone Increased $13 million. While much

of the rise in DTC's revenues IS due to increased equity trading, a sigmficant portion resulted from additional participants.

The number of DTC participants increased by 81 In 1982 for a total of 455 and

the number of shares on deposn Increased

from 19 billion to 26.7 billion.

The Options Clearing Corporation

("OCC"') results are only reported for a SIX

month period due to a change In their year

end. The SIX month results approximated

half the previous year's results because

OCC relates most of its profits, effectively

reducmq its fees to a level that covers its

expenses. Had OCC results for a full year

been presented, aggregate clearing

agency revenues and expenses each

would have been approximately $5 million

higher.

Aggregate clearing agency expenses increased $13 million during 1982. Of this

increase, $9 million IS attributable to additional employee costs incurred by DTC.

Higher labor costs were the result of personnel resources needed to handle DTC's

increased volume as described above.

Additional electronic data processing

expenditures accounted for another $6

million of the Increase In aggregate clearing agency expenses. Of this increase, $4

million and $2 million was incurred by the

National Securities Clearing Corporation

and DTC respectively

83
a: a: a: a: a: ...J _r--'" "''''0 ON'" ~COr-- r--,,<o

-c "r--r-- r--o><o ",CO_ "<0'" N_~ ~"'" f- <ONO> OO>N CONr-- N"'O "'CON 0> "'CO

f2 NNC":i (")"':0 M~M ooiN ""-MM C\iu->ai _r--O CO"'r--

"''''''' <ON <0 "0>0

"'''''' N"'''' r--<o<O "'''''' NNN

'"

W 0>00 ONO ~~> <0"''' ~~::: N"'''' en "''''''' en '" x <00<0 NO" "ON <ON'" OON <oN'" ONO ~r--o> 0>"'_ ~-'" "o0 r--~",

L' ON'" "'0" ~.-q Or--CO O>O>N

° CO <0 0.. C\iC'?lri c:iM~ ...rLfltO ..nWlO coco"":

Ei}"-'- "N'" "'_N

lIJW ",COCO ~NO N<OCO CO"'''' N-CO <o"r-- ",_N NOO

__N

ON" 0><0 CO ~<O'"

Z en o>NCO ~O>CO CO "'0 ,,~<o ,,"'CO o>r--r-- 0 0.. cONN Men"": uiC\i""': co..oo a)...rcO eric"":

N"'''' NN'" ",<or-- ""'''' '" N~~ N __

N a: a: Z W r--_", r--" _"'co "'~'" <ON'"

,,"'CO "-<0 <ONN r--"" "'~<o "''''CO

c:a: en <ONO> "'COO ",,,0> "'0>0> O~'" "'CO'"

>- NMcO "":MM menu) ai...ro cDmM

N ai,....-

C'

Z "''''<0 N"'"

N <0<00> <o",r-- OO~

a: ;;.-..-- 0>

a: 0>"'0 <o"CO CO_'" CO"'''' 0 N"'''' CO ° co ~_r-- COCO" N"'''' ",,- ,,-'" 0>"'<0 0 en 0> CO <0 cor--", 0o", "''''co 0>0>0 ",,,r--

!;;( -c uitt:ici NO..--- ..£WM eDaN r-:U"iui cri-..i"r-: z "'''''' "'''''' "''''''' N"''''

...J '" ::;)

C'

W <oN" Nr--", ""'~ NNO -N'" _or--

UJ N<O" <o",r-- <oNr-- ~"'''' 0><0'" NO>O>

a: en 0_'" "''''0 <0 CON ",,,,r-- "'NN 0>0"

::< Nc.Om al-..ir..: C\i"":C\i u5ciLfi ,....-ci ci aici"":

iL NNN ~NN "'~o> "OCO

...J ov UJ

en

u,

N <5

en CO

0

W "'''~ <0<0<0

~~l()

000 N~~ CO 0> 0>

0 Q) '5 ~~N ~N~ "'N'" N_N

Q) ";" !!2 '" :0 Z '" 0 0 -0

CO

c

Q) lJl ... :J

v 0>,,0 ",or-- ;;;:--$00 ""'''' "'0 CO o>",r--

0

w -0'" 0> CO CO NNO <o"r-- "'CON s: en ~N'" ~N'" t::.t::-~ ""'<0 N"'"

t:-

o a: '" 0 W o>",r-- "0>0 ",<or-- CO,,'" ONr-- CON<o U. "''''0> N"'O "'0>0> 0> "'CO "'''0 ,,~r-- 0 "or-- ~r--", "'NN O>NO r--<oo> N<OeD uitJil.ri MOM N~N MaiO> ci"":ci ..ttDeO

...J () ~C")("') N"''''

"''''''' NNN

c:a:

(3 a: a: a: W "'-'" "'~'" (\lOCO <or--'" ''"'0 N"'<O Z co"'''' ~cor-- r--co", ",r--co ..._r--

en NCOO>

N t-; 0> r--",,,, ~NN 000 _N_ .\'2 c:a: eD ,...:,...:,...: "":cO"': ~- 0"":"": aiciw C\i"': ...... c Z

'" NN~ ~N~

'" u: Es C .!!!

UJ ... "'''' 0><0 ... "'r--- ",r--o ",r--N cooco en ~O>N <0 "'co ... "' ... "'COO> <O~- r--r--r-- iii !;;( N ...", NN'" O>NO> o>r--o ...~o> ...<o~ E "":,....00 aillici ,...: ......-,...: ""':C\icD C'oicriai ai.,jci U « ""'''' ... '" ... "'''' N"'''' c C '" '" ::i s:

Ii:

0 -0

en iii

'"

Z >1 0 "5 0 '"c0o

-0

c;;g

C

'" .8~oo .\'2" E(1)MC") 0-

~a~~ '"

a: Q.:lCD::JQ. iii

°

O(J)""")c{ ::>

0 cncncno

c

'"

c c:c c: c:

'" '" '" "6-0"6"6

«

'"

E

c

c

c

c

c

0 :J -0", c c 8 "'.r: '";;; '";;; ;;; '" '";;; 0:

~o"--C\l '" ~O"--N "'- en 0.0 ......N .EO ......N .00 .....(\1 = 0 ......N s '" lD Q) (1) Q)

Q)COC:OCO xcococo x~~~ U)CO co 00 tlICX)ooco '-mcoco

'" '" >.:>->.>.

a:~~~ w~~~ «~e~ 0:'" (ijcoron; ............... '" ...J

<ii <ii iii <ii II g~~~ ::J

;Q ;Q

e ;Q ;Q CD II ffM=~

0

0..

Z 0:. en

84

"''''''

~ "''''

~

"''''''

_

~~

~

~~~

-

~

"'

'"

~ '" '" ~

'"

~ ~~~~ ~~~~~
m

<l>

C

"

<l>

~'Z,

o~

m <l> me.

<l> x

<l>

W

'"

M

N

<:0

on N

CO

q CO

N

.,. on N CO

N

on

.,. CO

M M

N

00 -e- 00 -e N.,. "-

N <!)

coon .,.Moon

;;;

o

-e

N

CO<!)

NCO N.,.

N

eo

on

-e

o

CO

co

o

-e-

<"i

OCO CO coon M CO CO r-;

m M oi

V>

on <!) N r-,

"-C\i ex>

N so CO CO on M o r-, CO

N N

V>

<0 co co C\l ec ei r-, tJ)

0<000 to

r-: r--: -: <D LO CD LO l"-

V>

o

CO.,.

<:0

lh

85

~

'"

~

~ ~

~

~

~
Table 11

MUNICIPAL SECURITIES RULEMAKING BOARD

STATEMENTS OF REVENUES AND EXPENSES AND

CHANGE IN FUND BALANCE

for the years ended September 30, 1983 and 1982

Years Ended September 30

1983 1982

Revenues

Assessment fees $ 943,938 $1,582,498

Annual fees 197,400 182,400

Initial fees 24,200 15,800

Investment income 133,521 113,478

Board manuals and other 21,201 23,094

1,320,260 1,917,270

Expenses

Salaries and employee benefits 570,566 504,309

Board and committee 337,300 276,845

Operations 167,661 153,207

Educatron and communication 212,930 194,442

Professional services 15,803 17,147

Depreciation and arnoruzanon 14,538 11,035

1,318,798 1,156,985

Revenues over expenses 1,462 760,285

Fund balance beginning of year 1,410,987 650,702

Fund balance, end of year $1,412,449 $1,410,987

86
EXEMPTIONS

Section 12(h) Exemptions

Section 12(h) of the Exchange Act

authonzes the Commission to grant a

complete or partial exemption from the

reqistretion provisions of Section 12(g) or

from other disclosure and insider tradmg

provisions of the Act where such exernpnon IS consistent with the public interest

and the protection of investors,

For the year begmning October I, 1982,

19applications were pending, and an additional 23 applications were filed during the

year. Of these 42 applications, 29 were

granted, and 7 were withdrawn. SIXapphcations were pending at the close of the

year.

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 Perhaps the most Important of these IS that

contained m subparagraph (b) which provides an exemption for certain foreign ISsuers which submit on a current baSIS

material specified m the rule. Such material includes that information about which

investors ought reasonably to be informed

and which the issuer: (1) has made public

pursuant to the law of the country of domicile or in which it ISincorporated or orgamzed;(2) has filed with a foreign stock exchange on which Its securities are traded

and which was made public by such exchange; and or (3) has distnbuted to Its

secunty holders Penodically,the Cornrmssion publishes a list of those foreign ISSUers which appear to be current under the

exemptive provrsion The most current list

is as of October 5, 1983 and contains a

total of 445 foreign issuers.

Rule 10b-6 Exemptions

Exchange Act Rule lOb-6 is an antimanipulative rule that prohibits tradmg in

securities by persons interested m a distnbution of such secunues. During the fiscal year,the Cornrrussion granted approximately 180 exemptions pursuant to paragraph (h) of Rule lOb-6 under circumstances indicating that proposed purchase

transactions did not appear to constitute

mampulatIve or deceptive devices or contnvances comprehended withm the purposes of the rule.

FINANCIAL INSTITUTIONS

There were 2,181 companies registered

under the Investment Company Act of

1940as of September 30, 1983,with active

compames having an approximate market

value of assets of $330,458 million New

registrations totaled 287, with 50 reqrstranons terminated durmg the fiscal year.

This compares WIth 1982 fiscal year figures of 1,944 total reqistratrons, 305 new

registrations and 45 terrmnatrons.

87
Table 12

COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY

ACT OF 1940 AS OF SEPTEMBER 30, 1983

Number of Registered Companies Approximate

Market Value

of Assets of

Active Inactlvea Total Active

Companies

(Millions)

Management open-end (-Mutual Funds) 1,403 36 1,439 $287,047

Vanable annuity-separate accounts 72 3 75 2,248

All other load funds 1,331 33 1,364 284,799

Management closed-end 163 58 221 8,218

Small Business Investment companies 40 6 46 182

All other closed-end cornparues 123 52 175 8,036

urut Investment trust 487 25 512 33,711°

Varrable annuity-separate accounts 151 2 153 2,876

All other unit Investment trusts 336 23 359 30,835

Face-amount certificate cornparues 5 9 1,483

Total 2,058 123 2,181 $330,458

a Inactive refers to registered companies which as of September 30 1983 were m the process of being liquidated or merged. or

have filed an apphcauon pursuant to Section 8(f) of the Act for dereprstranon. or which have otherwise gone out of existence and

remain only until such time as the Cornrrussron Issues order under Section 8(1) terminating their registratIon

o Includes about 6 2 billIon of assets of trusts which Invest In securitres of other Investment cornparnes, substantially all of them

mutual funds

88
Table 13

COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY

ACT OF 1940

Approximate

market value

of assets

Reg,stered Registered Registration Registered of active

Fiscal year ended at beginning dunnq terminated at end of companies

September 30 01 year year dunng year year (rmlhons)

1941 0 450 14 436 s 2500

1942 436 17 46 407 2400

1943 407 14 31 390 2,300

1944 390 18 27 371 2,200

1945 371 14 19 366 3250

1946 366 13 18 361 3750

1947 361 12 21 352 3600

1948 352 18 11 359 3,825

1949 359 12 13 358 3,700

1950 358 26 18 366 4,700

1951 366 12 10 368 5600

1952 368 13 14 367 6800

1953 367 17 15 369 7,000

1954 369 20 5 384 8,700

1955 384 37 34 387 12,000

1956 387 46 34 399 14000

1957 399 49 16 432 15,000

1958 432 42 21 453 17 000

1959 453 70 11 512 20,000

1960 512 67 9 570 23,500

1961 570 118 25 663 29,000

1962 663 97 33 727 27300

1963 727 48 48 727 36,000

1964 727 52 48 731 41,600

1965 731 50 54 727 44,600

1966 727 78 30 775 49800

1967 755 108 41 842 58197

1968 842 167 42 967 69,732

1969 967 222 22 1,167 72,465

1970 1,167 187 26 1,328 56,337

1971 1,328 121 98 1,351 78,109

1972 1,351 91 108 1,334 80,816

1973 1,334 91 64 1361 73,149

1974 1361 106 90 1377 62287

1975 1,377 88 66 1,399 74,192

1976 1,399 63 86 1,376 80,564

1977' 1,403 91 57 1437 76,904

1978 1,437 98 64 1,471 93,921

1979 1,471 83 47 1,507 108572

1980 1,507 136 52 1,591 155,981

1981 1,591 172 80 1,683 193,362

1982 1,683 305 45 1944 281,644

1983 1944 287 50 2,181 330,458

Began Fiscat Year Ending September 30, 1977

89
Table 14

NEW INVESTMENT COMPANY REGISTRATIONS

Management open-end

Vanable annumes

All others

Sub-total

Management closed-end

SBICs

All others

Sub-total

Unit Investment trust

Variable annuities

All others

Sub-total

Face amount certificates

Total Registered

Table 15

INVESTMENT COMPANY REGISTRATIONS TERMINATED

Management open-end

Vanable annuities

All others

Sub-total

Management closed-end

SBICs

All others

Sub-total

Unit Investment trust

Variable annurnes

All others

Sub-total

Face amount certificates

Total terminated

90

1983

4

231

235

3

11

14

23

15

38

o

287

1983

2

38

40

o

6

6

3

1

4

o

50
SECURITIES ON EXCHANGES

Market Value and Share Volume

The total market value of all equity securities transactions on registered exchanges totaled $657 bilhon in 1982. Of

this total, $603 billion, or 92 percent, represented the market value of transactions

in stocks and $54 billion, or eight percent,

the market value of options transactions.

The remainder covers the market value of

transactions in warrants and rights. The

value of equity transactions on the New

York Stock Exchange was $515 billion, up

24 percent from the previous year.In contrast, the market value of such transacnons fell 15 percent to $34 billion on the

American Stock Exchange but Increased

42 percent to $108 billion on all regional

exchanges combined. The volume of trading In stocks on all registered exchanges

totaled 22 brlhon shares In 1982, a 38 percent increase over the previous year,with

81 percent of the total accounted for by

trading on the New York Stock Exchange.

The number of contracts traded on options exchanges rose 26 percent dunnq

1982 to 137 million contracts, the market

value of such contracts Increased 29 percent to $54 billion. The volume of contracts executed on the Chicago Board

Options Exchange rose 31 percent to 76

million; trading on the American Stock Exchange Increased 11percent; Philadelphia

Stock Exchange contract volume expanded 35 percent; and Pacific Stock Exchange contract volume went up 34

percent.

91
M

cC: Eow

en"

e5l

1!l

c;

'"E

-o

c:

'"E«

'"

'"5c

en'"

;0'"

>.

.cU

'"UC

'"E

'"

-e- '"

S!?

NOOO(()C\looao

gRoN

ovC»MO'>(")MC'?CJ)O

,....mOtDNU')r- .......... o..-mOlCOU1r-c:om

cir-:""Mciaioi"":Lri r.nomv..-oCO ...... U')T- ......Na:>v

....: "":00

LO O~MO,.....OOO cn ~l,{)cnl'---~C\lO

"<;ftr.l~~C\I(\JNO:>O:>

ci<O~"":M<Oo:iN (\Jtr.l~~<Ooco

lOOo:>..-(\J"<;fl()

aJMNLO..,fa5cn (") ......

..... OOOCOMoooa q

OJ'"

Oc11..;tOlOO V al CO<D (")0

mco,....Oll)1,{)

M(")cO"":C\i""': v __M(") ......C\l

(\JC'?VQ'){ON

O:I(\I(')OO>l.O

f'..MO>ml.O .....

l.6N<o<D"-:""':

..-vNv(")C"?

vf'-.OMlJ')lt)

COQOloo;tl,{)O

"':ajcO"':rD<D

<O<Df'-..tOvl,(')

U1VCO ..... (")'<t"

MC\lVOOlM

Vl'--OltON(\J

~"",..:o)r-:M a)VVU1C\1N

"-MI'--l1')C'?'V

N<Df'..OO(P<D

NM-.;tC\JQ(D

(,()MMCOvN

ai""':~c.Oa>"':

C":l(()COO':lOM

U1COCOM<of'-..

(")(J)lt)«),....0l

..........0..-001"-

oiriooiLtlm 0)0<0000)1,()

COf'--oor--.tO(()

omC\iuj"":C"i

,....,....C\lvvlO

......I'--U')(OL{)M

OQNCO ...... N ......OllX)(,()(")O

MMmLric.iC"i

NCDVCO..-N

O"'1'COVO)'V

r-:O>OLriu1C\i ................. C\I

t--OlOOlOO

U1C\JCOt'--LOO lO())(()CO __

O

NtOaiai"CO"": O ..... vvCOM NNr-COCOO'>

"':aioiLriciC\i

COvO'lf'-.mO

,....C\lNvv<D

())vOMOV

,....r--.C\Iv<oOO

(J) ......t,DlOCO .....

....-c.ri~u)N..--

O'l(£)tDO ......N NC\JMNr--.O

a5ciMNN""':

C'l(OC\JNMIfl

..... C\l(")U')l.t)l.O

I'-Q)OlO ..... (\J

I'--I"--t-cococo

OlmmmO'lO'l

,.... .......... ..- ..........

-g

"iii '"0

:;;

iJ 1!l E"6 E " ::> z en

l-I

CJ

a:

aiQ)~

-t:.2.!£!

:;;

iJ 1!l E'O E " ::> en z I-z«

a:

a:

10", co ~(G=

::e~

:;;

u

~o~

c

en

z <3

z0

f=

11. 0 Q)4>~

"'''''' (ij~o

::i'e

:;; '" ~o~ Z .cen U,

'"0

12

en Q.)Q)~ "',,'" (ij«j= ~>e.

I- ....JWW(/)

~~3~

f2«~8 ::i'

enw

C) z<

:I: 0XW

enw

i=

::J0W

encw

a: w

Ienaw

a: "0

c;

Z co

'" CD 0 "0

en ;0

Ql

W :0 ...J

*

<en '" > "iii

"0

I-

:50w

u. 0w

::i:

::J

...J 0>cz<W

::J

...J

I-W

lll::

a:

-e

::i:

92

~

~~ '"

~~~

'"

'"

~

~

~ '"

~

'"

~

'"~

~

~

"

~

~~

'"

-

~

-

~

~~~

~
NASDAQ (Volume and Market

Value)

NASDAQ share volume and market

value information for over-the-counter

trading has been reported on a dally basis

since November 1, 1971. At the end of

1982, there were approximately 3,700 issues In the NASDAQ system, an increase

of eight percent during the year Volume

for 1982 was over eight bilhon shares, up

eight percent from eight billion shares In

the previous year.This trading volume encompasses the number of shares bought

and sold by market-makers plus their net

Inventory changes The market value of

shares traded In the NASDAQ system was

$84 btlhon at the end of 1982

Share and Dollar Volume

by Exchange

Share volume in 1982 for stocks, rights,

and warrants on exchanges totaled 23 bilhen, an Increase of 41 percent from the

previous year. The New York Stock Exchange accounted for 81 percent of 1982

share volume, the American Stock Exchange, seven percent, the Midwest Stock

Exchange, five percent, and the Pacific

Stock Exchange, four percent

The market value of stocks, rights, and

warrants traded was $603 bilhon, an increase of 23 percent over the previous

year. Trading on the New York Stock Exchange contributed 85 percent of the total;

and trading on the American Stock Exchange accounted for three percent and

the Midwest Stock Exchange trading

reached SIX percent of the total.

93
Market Value Of Securities Traded On

All O.S. Stock Exchanges

Dollars Billions

650

600

550

500

450

400

350

300

250

200

150

o

BStocks, Rights

& Warrants

Options

53 7

94

1972 73 74 75 76 77 78 79 80 81 1982
Table 17

SHARE VOLUME BY EXCHANGES1

In Percentage

Total Share Volume

Year (thousands) NYSE AMEX MSE PSE PH LX SSE CSE Other 2

1935 681971 7313 1242 191 269 110 096 003 776

1940 377,897 7544 1320 211 278 133 119 008 387

1945 769,018 6587 2131 177 298 106 066 005 630

1950 893,320 7632 1354 216 311 097 065 009 316

1955 1,321,401 6885 1919 209 308 085 048 005 541

1960 1,441,120 6847 2227 220 311 088 038 004 265

1961 2,142,523 6499 2558 222 341 079 030 004 267

1962 1,711,945 7131 2011 234 295 087 031 004 207

1963 1,880,793 7293 1883 232 282 083 029 004 194

1964 2,118,326 7281 1942 243 265 093 029 003 144

1965 2,671,012 6990 2253 263 233 081 026 005 149

1966 3,313,899 6938 2284 256 268 086 040 005 123

1967 4,646,553 6440 2841 235 246 087 043 002 106

1968 5,407,923 6198 2974 263 264 089 078 001 133

1969 5134,856 6316 2761 284 347 122 051 000 119

1970 4,834,887 7128 1903 316 368 163 051 002 069

1971 6,172,668 7134 1842 352 372 191 043 003 063

1972 6,518,132 7047 1822 371 413 221 059 003 064

1973 5,899,678 7492 1375 409 368 219 071 004 062

1974 4,950,833 7847 1027 439 348 182 086 004 067

1975 6,381,669 8092 896 405 325 154 084 013 031

1976 7,125,201 8003 935 387 393 141 078 044 019

1977 7,134,946 7954 973 395 371 149 066 064 028

1978 9,564,663 8008 1075 358 314 149 060 015 021

1979 10,977,775 7978 1082 329 338 164 054 027 028

1980 15,584,209 7995 1079 383 280 151 056 032 024

1981 15,969,398 8068 932 460 287 155 051 037 010

1982 22,500,576 8119 696 508 362 218 048 042 008

1Share volume for exchanges Includes stocks, rights. and warrants

20ther Includes all exchanges not listed above

Table 18

DOLLAR VOLUME BY EXCHANGES1

In Percentage

Total Share Volume

Year (thousands) NYSE AMEX MSE PSE PH LX SSE CSE Other 2

1935 $15,396,139 8664 783 132 139 088 134 004 056

1940 8,419,772 8517 768 207 152 111 191 009 045

1945 16,284,552 8275 1081 200 178 096 116 006 048

1950 21,808,284 8591 685 235 219 103 112 011 044

1955 38,039,107 8631 698 244 190 103 078 009 047

1960 45,309,825 8380 935 272 194 103 060 007 049

1961 64,071,623 8243 1071 275 199 103 049 007 053

1962 54,855,293 8632 681 275 200 105 046 007 054

1963 64437,900 8519 751 272 239 106 041 006 066

1964 72,461,584 8349 845 315 248 114 042 006 081

1965 89,549,093 8178 991 344 243 112 042 008 082

1966 123,697,737 7977 1184 314 284 110 056 007 068

1967 162,189,211 77 29 1448 308 279 113 066 003 054

1968 197,116,367 7355 1799 312 265 113 104 001 051

1969 176,389,759 7348 1759 339 312 143 067 001 031

1970 131,707,946 7844 1111 376 381 199 067 003 019

1971 186,375,130 7907 998 400 379 229 058 005 024

1972 205,956,263 7777 1037 429 394 256 075 005 027

1973 178,863,622 8207 606 454 355 245 100 006 027

1974 118,828,272 8362 439 489 350 202 123 006 029

1975 157,555,469 8504 366 482 325 172 118 017 016

1976 195,244,815 84 35 387 475 382 168 093 053 007

1977 187,393,082 8396 460 479 353 162 073 074 003

1978 249,603,319 8435 617 419 284 163 061 017 004

1979 300,728,389 8365 693 382 285 180 056 035 004

1980 476,416,379 8354 732 432 227 159 051 040 005

1981 491,017,044 84 74 541 504 232 160 050 040 000

1982 603,361,387 8528 327 583 305 159 051 047 000

'Dollar volume lor exchanges Includes stocks, nghts, and warrants

20ther Includes all exchanges not listed above

95
Special Block Distribution

percent of total number of special block

In 1982, there were 79 special block dis- distributions and 99 percent of the value.

tributions with a value of $1.3 billion. The special offering method was emSecondary distributions accounted for 96 played three times.

Table 19

SPECIAL BLOCK DISTRIBUTIONS REPORTED BY EXCHANGES

(Value in Thousands)

Secondary distributions Exchange distributions Special offerings

YEAR

Number Shares Value No. Shares Value No. Shares Value

sold sold sold

1942. 116 2,397.454 $ 82,840 0 0 0 79 812,390 $22,694

1943. 81 4,270,580 127,462 0 0 0 80 1,097,338 31,054

1944 94 4,097,298 135,760 0 0 0 87 1,053,667 32.454

1945. 115 9.457,358 191,961 0 0 0 79 947,231 29,878

1946. 100 6.481,291 232.398 0 0 0 23 308,134 11,002

1947. 73 3,961,572 124,671 0 0 0 24 314,270 9,133

1948. 95 7,302.420 175,991 0 0 0 21 238,879 5.466

1949. 86 3,737,249 104,062 0 0 0 32 500,211 10,956

1950. 77 4,280,681 88.743 0 0 0 20 150,308 4,940

1951 88 5,193,756 146,459 0 0 0 27 323,013 10,751

1952. 76 4,223,258 149,117 0 0 0 22 357.897 9,931

1953 68 6,906,017 108,229 0 0 0 17 380,680 10,486

1954. 84 5,738,359 218.490 57 705,781 $ 24,664 14 189,772 6,670

1955. 116 6.756,767 344,871 19 258,348 10,211 9 161,850 7,223

1956. 146 11,696,174 520,966 17 156.481 4,645 8 131,755 4,557

1957 99 9,324,599 339,062 33 390,832 15,855 5 63,408 1.845

1958 122 9,508,505 361,886 38 619,876 29,454 5 88,152 3,286

1959. 148 17,330,941 822,336 28 545,038 26.491 3 33,500 3,730

1960. 92 11.439,065 424,688 20 441,644 11,108 3 63,663 5,439

1961. 130 19,910,013 926,514 33 1,127,266 58,072 2 35,000 1,504

1962 59 12,143,656 658,780 41 2,345,076 65.459 2 48,200 588

1963 100 18,937,935 814,984 72 2,892,233 107,498 0 0 0

1964. 110 19.462,343 909,821 68 2,553,237 97,711 0 0 0

1965. 142 31,153,319 1,603,107 57 2,334,277 86,479 0 0 0

1966. 126 29,045,038 1,523,373 52 3,042,599 118,349 0 0 0

1967. 143 30,783,604 1,154,479 51 3,452,856 125,404 0 0 0

1968 . 174 36,110.489 1,571,600 35 2,669,938 93,528 1 3,352 63

1969. 142 38,224,799 1,244,186 32 1,706,572 52,198 0 0 0

1970. 72 17,830,008 504,562 35 2,066,590 48,218 0 0 0

1972. 229 82,365,749 3,216,126 26 1,469,686 30,156 0 0 0

1973. 120 30,825,890 1,151,087 19 802,322 9,140 91 6,682,111 79,689

1974 45 7,512,200 133,838 4 82,200 6,836 33 1,921,755 16,805

1975. 51 34,149,069 1,409,933 14 483,846 8,300 14 1,252,925 11.521

1976. 44 20,568,432 517,546 16 752,600 13,919 22 1,475,842 18,459

1977. 39 9,848,986 261,257 6 295,264 5,242 18 1,074,290 14,519

1978 .. 37 15,233,141 569,487 3 79,000 1,429 3 130,675 1,820

1979. .R 37 10,803,680 192,258 3 1,647,600 86,066 6 368,587 4,708

1980. ..R 44 24,979,045 813,542 2 177,900 5,101 4 434,440 7,097

1981 43 16,079,897 449,600 0 0 0 0 0 0

1982. 76 40,024,988 1,284,492 0 0 0 3 717,000 11,112

R Revised.

96

~
Value and Number of Securities

Listed on Exchanges

The market value of stocks and bonds

listed on U.S. exchanges at the end of

1982 was $2.2 trillion, an increase of 19

percent over the previous year. The market

value of stocks was $1.4 trilhon, an increase of 12 percent during the year. The

value of listed bonds increased 33 percent

Stocks with primary listmg on the New

York Stock Exchange had a market value

of $1 3 trilhon and represented 94 percent

of the value of common and preferred

stocks hsted on reqistered exchanges

Those listed on the Amex accounted for

SIX percent of the total hsted and were valued at $78 bilhon, a decrease of 13 percent

over the previous year.

Table 20

SECURITIES LISTED ON EXCHANGES1

December 31 1982

EXCHANGES COMMON PREFERRED BONDS TOTAL SECURITIES

Market Market Market Market

Value Value Value Value

Registered Number (Million) Number (Million) Number (Million) Number (Million)

American 884 $ 75364 106 $ 2276 253 s 6572 1243 s 84212

Boston 84 1,206 0 0 1 2 85 1208

Cmcmnan 4 20 2 1 8 85 14 106

Midwest 23 625 6 17 0 0 29 642

New York 1499 1 271,580 726 33,775 3233 766103 5458 2,071,458

Pacific 69 2,589 28 591 50 2126 147 5,306

Philadelphia 15 433 23 1,265 34 927 72 2,625

Intermountain 35 1 0 0 0 0 35 1

Spokane 26 6 0 0 0 0 26 6

Total 2,639 $1,351,824 891 $37,925 3579 $775815 7109 $2165564

Includes Foreign

Stocks

New York 43 $46,524 4 109 125 $8,598 172 $55,231

Amencan 50 16.239 1 59 9 358 60 16,656

Pacific 3 79 2 59 0 0 5 138

Total 96 $62,842 7 227 134 $8956 237 $72,025

1Excluding secunties which were suspended from trading at the end of the year and secunties which because of macnvuy had

no available quotes

+ Less than 0 5 million, but greater than zero

Source SEC Form 1392

97

=
Table 21

VALUE OF STOCKS LISTED ON EXCHANGES

(Billions of Dollars)

New York Amencan Exclusively

Dec 31 Stock Stock On Other Total

Exchange Exchange Exchanges

1936 $ 599 $ 148 $747

1937 389 102 491

1938 475 108 583

1939 465 101 566

1940 419 86 505

1941 358 74 432

1942 388 78 466

1943 476 99 575

1944 555 112 667

1945 738 144 882

1946 686 132 818

1947 683 121 804

1948 670 119 $30 819

1949 763 122 31 916

1950 938 139 33 1110

1951 1095 165 32 1292

1952 1205 169 31 1405

1953 1173 153 28 1354

1954 1691 221 36 1948

1955 2077 271 40 2388

1956 2192 310 38 2540

1957 1956 255 31 2242

1958 2767 317 43 3127

1959 3077 254 42 3373

1960 3070 242 41 3353

1961 3878 330 53 4261

1962 3458 244 40 3742

1963 4113 261 43 4417

1964 4743 282 43 5068

1965 5375 309 47 5731

1966 4825 279 40 5144

1967 6058 430 39 6527

1968 6923 612 60 7595

1969 6295 477 54 6826

1970 6364 395 48 6807

1971 7418 491 47 7956

1972 8715 556 56 9327

1973 7210 387 41 7638

1974 5111 233 29 5373

1975 6851 293 43 7187

1976 8583 360 42 8985

1977 7767 376 42 8185

1978 8227 392 29 8648

1979 9606 578 39 1,0223

1980 1,2428 1035 29 1,3492

1981 1,1438 894 50 1,2382

1982 1,3054 776 68 1,3897

98
Securities on Exchanges

As of September 30, 1983, a total of

7,208 securities, representmq 3,054 ISSUers, were adrrutted to trading on securiues

exchanges In the United States. This compares with 7,119 Issues, involving 3,014 issuers a year earlier. Over 5,000 Issues were

listed and registered on the New York

Stock Exchange, accounting for 62.4 percent of the stock issues and 87.7 percent

of the bond Issues. Data below on "Securities Traded on Exchanges" Involved some

duplication since It Includes both solely

and dually listed securities

Table 22

SECURITIES TRADED ON EXCHANGES

Issuers Stocks Bonds'

Temporanly

Registered exempted Unlisted Total

Amencan 919 953 24 978 254

Boston 1168 159 1.074 1.233 10

Chicago Board at Trade 4 1 3 4

Cmcmnau 553 74 492 566 43

Intermountain 42 40 2 42

MIdwest 1451 351 1169 1521 31

New York 1.885 2.374 2.375 2.986

PaCIfic Coast 803 763 191 955 139

Philadelphia 968 857 259 1117 95

Spokane 34 34 3 37

'Issuers exempted under Section 3(a)(12) of the Act. such as obligations of U S Government. the states and cures are not

Included In trus table

Table 23

UNDUPLICATED COUNT OF SECURITIES ON EXCHANGES

(September 30. 1983)

Issuers

Stocks Bonds Total Involved

Registered and Listed 3.779 3395 7.174 3.040

Temporanly Exempted from registration 2 2 4 2

Adrrutted to unlisted trading pnvlleges 24 6 30 12

Total 3.805 3,403 7.208 3.054

1933 ACT REGISTRATIONS

Effective Registration Statements

During the fiscal year ending September

30, 1983, 5,743 registration statements

valued at $256 billion became effective.

This represented increases of 56 percent

and 19 percent, respectively, over the value

and number of effective registrations in

1982.

Among issuers whose registration statements became effective, there were 1,682

first-time registrants In fiscal year 1983, a

decrease of 247 registrants (13 percent)

from the previous fiscal year's total of

1,929.

99
Table 24

EFFECTIVE REGISTRATIONS

(Millions of Dollars)

Cash Sale for Account of Issuers

Total Bonds,

Fiscal Year Number of Common Debentures Preferred

Statements Value Stock' and Notes Stock Total

Fiscal year ended June 30

19352 284 $913 $168 $490 $28 $686

1936 689 4,835 531 3,153 252 3,936

1937 840 4,851 802 2,426 406 3,634

1938 412 2,101 474 666 209 1,349

1939 344 2579 3t8 1,593 109 2,020

1940 306 1,787 2tO 1,112 110 1,432

1941 313 2611 196 1,721 164 2,081

1942 193 2,003 263 1,041 162 1,466

1943 123 659 137 316 32 485

1944 221 1,760 272 732 343 1,347

1945 340 3,225 456 1,851 407 2,714

1946 661 7,073 1,331 3,102 991 5,424

1947 493 6,732 1,150 2,937 787 4,874

1948 435 6,405 1,678 2,817 537 5,032

1949 429 5,333 1,083 2,795 326 4,204

1950 487 5,307 1,786 2,127 468 4,381

1951 487 6,459 1,904 2,838 427 5,169

1952 635 9,500 3,332 3,346 851 7,529

1953 593 7,507 2,808 3,093 424 6,325

1954 631 9,174 2,610 4,240 531 7,381

1955 779 10,960 3,864 3,951 462 8,277

1956 906 13,096 4,544 4,123 539 9,206

1957 876 14,624 5,858 5,689 472 12,019

1958 813 16,490 5,998 6,857 427 13,282

1959 1,070 15,657 6,387 5,265 443 12,095

1960 1426 14,367 7,260 4,224 253 11,737

1961 1,550 19,070 9,850 6,162 248 16,260

1962 1,844 19,547 11,521 4,512 253 16,286

1963 1157 14,790 7,227 4,372 270 11,869

1964 1,121 16,860 10,006 4,554 224 14,784

1965 1,266 19,437 10,638 3,710 307 14,655

1966 1,523 30,109 18,218 7,061 444 25,723

1967 1,649 34,218 15,083 12,309 558 27,950

1968 2,417 54,076 22,092 14,036 1,140 37,268

1969 3,645 86,810 39,614 11,674 751 52,039

1970 3,389 59,137 28,939 18,436 823 48,198

1971 2989 69,562 27,455 27,637 3,360 58,452

1972 3,712 62,487 26,5t8 20,127 3,237 49,882

1973 3,285 59,310 26,6t5 14,841 2,578 44,034

1974 2,890 56,924 19,811 20,997 2,274 43,082

1975 2,780 77,457 30,502 37,557 2,201 70,260

1976 2,813 87,733 37,1t5 29,373 3,013 69,501

'Iransiuon Quarter

July-Sept 1976 639 15,010 6,767 5,066 413 12,246

Fiscal Year ended

September 30

1977 2,915 92,579 47,116 28,026 2,426 77,568

19783 3,037 65,043 25,330 23,251 2,128 50709

1979 3112 77,400 22,714 28,894 1,712 53,320

1980 3,402 110,583 33,076 42,764 2,879 78,719

1981 4,326 144,132 49,276 40,163 2,505 91,944

1982 (r) 4,846 164,455 50,486 63,950 3,939 118,375

1983 (p) 5,743 255,597 84,292 86,016 8,820 179,128

Cumulative Total 80,836 $1,868,334 $715,681 $627,993 $56,663 $1,400,337

(r) revised

(p) preliminary

'Includes warrants, shares of benencrat Interest, certificates of parncipatron and all other equity mterests not elsewhere

Included

2For 10 months ended June 30, 1935

3The adoption of Rule 24f-2 (17 CFR 270 24f-2) effective November 3, 1977 made It Impossible to report the dollar value of

secuntles registered by mvestrnent companies

Note The Total Cash Sale differs from earlier presentations due to changes ,n rounding procedures

~

~
170

Securities Effectively Registered With S.E.C.

1935-1983

150

130

110

BILLIONS OF DOLLARS

90

70

50

30

40 45 50 55 60 65 70 75

~~jj:;~Y:;~1j~

.........

.. . :.. ::' ,':: ..:: .............

. : ':' ','::::: .........

.. . . .. . .. . , ..

80 1983

( Fiscal Years)

::;,::: In 1977 Fiscal Year End Changed From June To September

Data For Transition Quarter July-September 1976 Not Shown On Charts

Effective Registrations $15 0 Billion

11 Does Not Inelude Investment Companies As Of 1/1/78 Due To Rule Change

101
65 60 55 50 45

NUMBER OF REGISTRATIONS

Securities Effectively Registered 

1935.1983

Hundreds

60

50

40

30

20

10

0

1935 40

o

I\)

(Fiscal Years)

In 1977 Fiscal Year End Changed From June To September

Data For Transition Quarter July-September 1976 Not Shown 

Number of Registrations 639

11Does Not Include Investment Companies As Of 111/78 Due T

~~~~~~~
Purpose and Type of Registration

Effective registrations for cash sale for the

account of Issuers in fiscal year 1983

amounted to $179 billion, 56 percent

above the $115 bilhon registered a year

earher.Some $64 billion (36 percent) was

intended for immediate offerings, an increase of $2 bilhon (3 percent) from fiscal

1982. Nearly all of this amount consisted

of secunties registered by business to be

offered to the general public. Such registrations totalled $63 billion, an Increase of

$3 bilhon (5 percent).

Of this $63 bilhon debt secunties accounted for $22 billion (or 35 percent of

this total), preferred stock $6 billion (10

percent) and common stock $35 billion

(55 percent). Cash nqhts offennqs (offerings to security holders) came to $211rrulhon, a decline of 61 percent from the $543

million of such offermqs in the previous

year Immediate cash offerings by foreign

governments in fiscal year 1983 totalled $1

bilhon, approximately the same volume as

in 1982.

Delayed and extended cash sales registered for the account of the Issuer totalled

$115billion (45 percent of all registrations).

Registrations pursuant to Rule 415, (or socalled "shelf' registrations) amounted to

$57 billion, or 50 percent of this amount

Secunties registered for the account of ISsuers other than for cash sale (in conjuncnon with exchange offers, for example)

amounted to $65 bilhon In 1983, or 25

percent of all registrations. Registrations

of securities for secondary offenngs (for

the account of secunty holders rather than

issuers) amounted to $11 billion (4 percent) of all registrations in fiscal year 1983.

Of these latter registrations, $5 bilhon (45

percent) were for cash sale and $6 bilhon

(55 percent) were for other secondary

offerings.

The value of registrations aggregating

$256 billion in fiscal year 1983 consisted

of $91 bilhon In bonds, debentures and

notes, $15 bilhon In preferred stock and

$150 billion In common stock Of the $91

bilhon of debt secuntres registered,24 percent ($22 billion) were registered for Immediate cash sale to the general pubhc for

the account of the Issuer Delayed and extended cash sales accounted for $63 bilhon (69 percent) Fifty-eight percent of the

$15 bilhon in preferred stock registrations

consisted of immediate cash offerings,

while non-cash registrations for account of

the Issuer comprised 37 percent of the

total. The $150 billIon In cash common

stock volume consisted of $35 bilhon in

Immediate cash sales, $49 bilhon In delayedor extended cash sales,$56 btlhon of

non-cash registrations for the account

of the Issuer and $10 billion of secondary

offenngs.

103
Table 25

EFFECTIVE REGISTRATIONS BY PURPOSE AND TYPE OF SECURITY:

FISCAL YEAR 1983

(Millions of Dollars)

Type of Secunty

Purpose of registrations Bonds

Debentures Preferred Common

Total and Notes Stock Stock'

All registrations (estimated value) $255,596 $90,545 $15116 $149,935

For account of Issuer for cash sale 179,128 86,016 8,820 84,292

Immediate offering 64,047 22,920 6,151 34.976

Corporate 63,004 21,877 6,151 34.976

Offered to

General Public 62,793 21,873 6,121 34,799

Securrty Holders 211 4 30 177

Foreign Governments 1.043 1.043 0 0

Delayed and extended cash sale and other Issues 115.081 63.096 2,669 49,316

For account of Issuer for other than cash sale 65.029 3.922 5,597 55,510

Secondary Offenngs 11,440 608 699 10,133

Cash Sale 5,494 138 0 5,356

Other 5,946 470 699 4,777

'Includes warrants, shares of benencral Interest, certrhcates of participation and all other equity Interests not elsewhere

Included

Note Preliminary

]04
Dollars Billions

Effective Registrations

Cash Sale For Account Of Issuers

1935-1983 90

80

70

,

'\

,\

Common Stock'" \

Bonds

60

50

40

30

20

10

o

1935 40 45 50 55 60 65 70

I

I

I

I

1983

( Fiscal Years)

*In 1977 F,scal Year End Changed from June to September

Data for Transmon Ouarter July September 1976 Not Shown on Chart

Bonds $5 1 Billion, Preferred Stock S 4 Brlhon, Common Stock 56 8 Billion

105
Regulation A Offerings

Dunng fiscal year 1983, 207 offenng

statements were filed for proposed offermqs under Requlanon A Issues between

$500,000-$1,500,000 predominated.

Table 26

OFFERINGS UNDER REGULATION A

Fiscal Fiscal Fiscal

1983 1982 1981

Size

$100 000 or Less 14 7 8

$100,001-$200,000 9 30 31

$200001-$300,000 11 11 39

$300001-$400000 6 7 23

$400 001-$500 000 26 15 35

$500001-$1,500,000 141 189 303

Total 207 259 439

Underwriters

Used 69 74 172

Not Used 138 185 267

Total 207 259 439

Otterors

ISSUIng Compames 204 246 429

Stockholders 3 12 3

Issuers and Stockholders JOintly 0 1 7

Total 207 259 439

ENFORCEMENT

Types of Proceedings

As the table reflects, the securities laws

provide for a wide range of enforcement

actions by the Commission. The most

common types of actions are injunctive

proceedings Instituted in the Federal dIStrict courts to enjoin continued or threat106

ened secunties law violators, and administrative proceedings pertaining to brokerdealer firms and/or individuals associated

with such firms which may lead to venous

remedial sanctions as required in the pubhe Interest. When an injunction is entered

by a court, violation of the court's decree is

a basis for cnminal contempt against the

VIolator.
Table 27

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons Subject to, Acts Constituting,

and Basis for Enforcement Action

Broker-dealer, mumctpal seeunnes

dealer, Investment advrser or assccsated person

Willful violation of securities acts provision or rule aiding or

abetting such violation failure reasonably to supervise others

willful misstatement or ormssion In filing with the Commrssron.

conviction of or injunction against certain cnmes or conduct

Registered secunnes assocratren

Organization or rule not conforming to statutory requirements

Violation of or Inability to comply With the 1934 Act, rules

thereunder. or Its own rules. unjustified failure to enforce com.

pllance With the foregOing or With rules of the Municipal Secunnes Rulemakmg Board by a member or person associated

WIth a member

Member of regIstered securities

associancn, or associated person

Being subject to Cornrrussron order pursuant to 1934 Act. 9 15

(b), willful Violation of or effective transaction for other person

With reason to beheve that person was vrolatinq securities acts

provisions. rules thereunder, or rules of MUnicipal Securities

Hulernakmq Board

National seeunnes exchange

Organization or rule not conforming to statutory requirements

Violation of or inability to comply With 1934 Act, rules thereunder or Its own rules, unjustified failure to enforce com.

phance With the foregOing by a member or person associated

With a member

Member of natIonal securities

exchange, or assocrated persons

Being subject to Cornrrussron order pursuant to 1934 Act. 9

15(b), Willful Violation of or effective transaction for other perSOn With reason to beheve that person was Violating securities

acts, provisions or rules, thereunder

Registered clearing agency

Violation of or Inability to comply With 1934 Act, rules thereunder. or ItS own rules. failure to enforce compliance With ItS

own rules by partiopants

PartIcipant In regIstered clearing agency

Being subject to Comrrussion order pursuant to 1934 Act. 9

15(b)(4), Willful viotauon of or effecting transaction for other

person With reason to believe that person was Violating provisions of cleanng agency rules

Sanction

Censure or limitation on actrvrties revocation suspension or

denial or registration bar or suspension from assocrat.on

(1934 Act 99 15B(c)(2)-(6) 15b(b)(4)-(6) Advrsers Act 99

203(e)-(f))

Suspension of registration or limitation of activities, functions

or operations (1934 Act 9 19(h)(1))

Suspension or revocation of registration, censure or limitation

of activities functions or operations (1934 Act. 9 19(h)(1»)

SuspensIon or expulsion from the assocranon, bar or sus pen.

sion from association With member of association (1934 Act, 9

19(h)(2)-(3))

Susoens.on of reqistrauon or limitation of acuvmes functions

or operanons (1934 Act 919(h)(1))

Suspension or revocauon of registration, censure or urnuanon

of acnvmes functions or operations (1934 Act 9 19(h)(1))

Suspension or expulsion from exchange bar or suspension

from association With member (1934 Act, 99 19(h)(2)-(3))

Suspension or revocation or registration censure or limitation

of acnvmes. functions, or operations (1934 Act, 9 19(h)(1))

Suspension or expulston from cleanng agency (1934 Act

19(h)(2))

107
Table 27-Contlnued

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons Subject to Acts Constituting

and Basis for Enforcement Action

seeunnes Information processor

VIolation of or mabrnty to comply with provrsions of 1934 Act or

rules thereunder

Transfer agent

Willful violation of or Inability to comply with 1934 Act SS 17 or

17A or regulations thereunder

Any person

Willful violation of securities act provisron or rule aiding or

abettmq such violation wrllful rrusstatement In frllng with Com.

rrnssron

Officer or director of selfregulatory organization

Willful vrotatron of 1934 Act rules thereunder, or the orqaruzanon s own rules Willful abuse of authority or unjust.ned failure

to enforce cornpuance

Principal of broker-dealer

Engaging In business as a broker-dealer after appointment of

Sf PC trustee

1933 Act registratIOn statement

Statement materially Inaccurate or Incomplete

Investment company has not attained $100 000 net worth 90

days after statement became effectIve

Persons subject to Sections 12, 13

or 15(d) of the 1934 Act

Matenal noncompliance with such provisions

SecUrities Issue

Noncompliance by Issuer with 1934 Act or rules thereunder

Public Interest requires trading suspension

Registered Investment company

Failures to llIe Investment Company Act registration statement

or recurred report filing matenally Incomplete or rrusleadmq

statement of report

Company has not attained $100.000 net worth 90 days after

1933 Act reqistratron statement became effective

108

Sanction

Censure or operational hrmtanons, suspension or revocation

of reqrstranon (1934 Act S 11A(b)(6))

Censure or limitation of activities denial suspension or revocation of registration (1934 Act. S 17A(c)(3»

Temporary or permanent prohibition from serving In certain

capacrtres for registered Investment company (Investment

Company Act. S 9(b))

Removal from office or censure 11934 Act. S 19(h)(4»

Bar or suspension from being or being associated with a broker-dealer (SIPA S10(b»

Stop order suspending effectiveness (1933 Act. S BId))

Stop order (Investment Company. Act. S 14(a»)

Order directing compliance (1934 Act. S 15(c)(4))

Denial suspension of effective date. suspension or revocation

of registration on nanonal secuntres exchange (1934 Act S

12(j))

Summary suspension of over-the-counter or exchange trading

1934 Act. S 12(k)

Revocation at registration (Investment Company Act. S B(e))

Revocation or suspension of registration (Investment Company Act. S 14(a»)
Table 27-Contlnued

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons Subject to Acts Constituting,

and Basis for Enforcement Action

RegIstered Investment company

Failures to file Investment Company Act registration statement

or required report, filing matenally Incomplete or rnisleadmq

statement of report

Company has not attained $100 000 net worth 90 days after

1933 Act registration statement became effective

Allorney, accountant, or other

protessronat or expert

Lack of reqursite quahhcanons to represent others, lacking In

character or Integrity. unethical or Improper professional con.

duct. willful violation of securities laws or rules or aiding and

abetting such violation

Attorney suspended or disbarred by court, experts license

revoked or suspended, conviction of a felony or misdemeanor

Involving moral turpitude

Permanent Injunction against or finding of securities violation

In COmmission. Instituted action flndlng of secunnes violation

by Cornrrusston In adrmrustrauve proceedings

Member of MUnicIpal Securotles

Rulemakln9 Board

Willful viotanon of secunties laws, rules thereunder, or rules of

the Board

Sanction

Revocation of registration (Investment Company Act 9 8(e))

Revocation or suspension of registration (Investment Company Act 9 14(a))

Permanent or temporary derual of pnvneqe to appear or practice before the Commission (17 C FR 9201 2(e)(1))

Automatic suspension from appearance or practice before the

Comrrussion (17 C FR 9201 2(e)(2))

Temporary suspension from appearance before Commission

(17 C F R 9201 2(e)(3))

Censure or removal from office (1934 Act 9158(c)(8))

CIVIL PROCEEDINGS IN FEDERAL DISTRICT COURTS

Persons Subject to. Acts Constituting

and Basis for, Enforcement Action

Any person

Engaging In or about to engage In acts or practices VIolating

secunnes acts, rules or orders thereunder (mcludmq rules of a

registered sell-regulatory organization)

Noncompliance With provisions of the law, rule, or regulation

under 1933. 1934 or Hotdlng Company Act order Issued by

Commission, rules of a reqistered self-regulatory organization, or undertaking In a reqistratron statement

Securotles Investor Protectron

Corporation

Refusal to commit funds or act for the protection of customers

National securities exchange or

registered securities association

Noncompliance by ItS members and persons associated With

ItS members With the 1934 Act rules and orders thereunder or

rules of the exchange or assocranon

Sanction

Injunction against acts or practices whrch constitute or would

constitute viotanons (plus other equitable rehef under court s

general equity powers) (1933 Act 9 20(b). 1934 Act 921(d),

1935 Act 18(1). Investment Company Act 9 42(e). Advisers

Act 9209(e) Trust Indenture Act 9321)

Writ of mandamus, injunction or order directing compliance

(1933 Act 920(C) 1934 Act 9 21(e). Holding Company Act 9

18(g))

Order directing discharge or obligations or other appropriate

rehef (SIPA 97(b))

Writ of mandamus Injunction or order directing such exchange or assocranon to entorce comphance (1934 Act 9 21

(e)

109

~
Table 27-Conttnued

TYPES OF PROCEEDINGS

CIVIL PROCEEDINGS IN FEDERAL DISTRICT COURTS

Persons Subject to Acts Constituting.

and Basrs tor Enforcement Action

Registered clearing agency

Noncompliance by Its participants WIth Its own rules

Issuer subject to reporting requirements

Failure to file reports required under 9 15(d) of 1934 Act

Registered Investment company or

affiliate

Name of company or of secunty Issued by It deceptive or

misleading

Officer. director, member of advisory

board, adviser, depositor, or underwriter of

Investment company

Engage In act or practice constituting breach of nducrary duty

mvolvmq personal misconduct

Any person having fidUCiary duty respecting

receipt of compensation from Investment company.

Breach of fidUCiary duty

Sanction

Wnt of mandamus mjunction or order directing clearing

agency to enforce compliance (1934 Act. 9 21 (e)

Forfeiture of $100 per day (1934 Act 932 (b)

Injunction against use of name (Investment Company Act. 9

35(d»

Injunction against acting In certain capacities for Investment

company. and other appropriate rehet (Investment Company

Act 936(a»

Injunction (Investment Company Act. 936(a»)

fll CRIMINAL PROSECUTION BY DEPARTMENT OF JUSTICE

Basis for Enforcement Action

Any person

Willful Violation of secuntres acts or rules thereunder or Willful

misstatement In any document required to be flied by secunnes laws and rules or by self-regulatory organization In

connection With an application for membership partie.patron

or to become associated WIth a member thereof

Any Issuer whIch VIolates 9 30A(a) of

fhe 1934 Act (foreign corrupt practices)

Any officer or drrector of an Issuer of any stockholder actmq

on behalf of such Issuer who Willfully Violates 9 30A(a) of the

1934 Act

Any employee or agent (subrect to the JUrisdiction of the

Untted States) of an Issuer found to have violated 9 30A(a) of

the 1934 Act who Willfully earned out the act or practice constituting such vrotanon

Sanction or Relief

Maximum penalties $10.000 fine and 5 years rmpnsonment.

an exchange may be fined up to $500.000. a public-utility

holding company up to $200.000 (1933 Act. 99 30(b). 24. 1934

Act. 99 21(d) 32(a) Holding Company Act. 99 18(f). 29. 1939

Act. 9 325. Investment Company Act. 99 42(e). 49. Advisers

Act. 99 209(e). 217)

Maximum penalty $1.000.000 nne (1934 Act. 932(c)(1»

MaXimum penalty $10.000 fine and 5 years irnpnsonment

(1934 Act. 932(c)(2»

MaXimum penalty $10.000 find and 5 years impnsonrnent

(1934 Act 932(c)(3))

Statutory references are as lollows -1933 Act" the Secunties Act of 1933 "1934 Act". the Securities Exchange Act of 1934.

Investment Company Act- The Investment Company Act of 1940. "Advisers Act". the Investment Advisers Act of t940. "HOldtng

Company Act" the Public Utility Holding Company Act of 1935 "Trust Indenture Act". the Trust Indenture Act of 1939. and "SIPA".

the Securities Investor Protection Act of 1970

110
Table 28

NATIONWIDE ENFORCEMENT PROGRAM

ENFORCEMENT CASES INITIATED BY THE COMMISION

DURING FISCAL YEAR 1983 IN VARIOUS PROGRAM AREAS

(Each case trutratec has been Included In only one category listed below. even though

many cases Involved multiple allegations and may fall under more than one category)

Program Area In Which

CIVIl Action, Adrrnrustranve

Proceeding. or 21 (a) Report

Was Inillated

Secunues Offermg Cases

(a) Non-regulated Entity

(b) Regulated Entity

Total Securities Offenng Cases

Broker-Dealer Cases

(a) Backofuce

(b) Fraud aqmst customer

(c) Other

Total Broker-Dealer Cases

Issuer Ftnencte! Statement and

Reporting Cases (including the

aissemmeuon of false mtorme- tion to the publtC, vioteuons

01 the ForeIgn Corrupt Practices

Act accoutmg provtssons)

Insider Trading Cases

Other Regulated Entity Cases

(a) Investment Advisers

(b) Investment Companies

(c) Transfer Agents

Total Other Regulated Entity Cases

Delinquent Filing Cases

Contempt Proceedmgs (mcludmg

CIvil and cnmmaJ cases)

Fraud Against Regulated Enltty

Market MampulatlOn Cases

Corporate Control Violations

Related Party Transactions

TOlJI.lS

CIvil Administrative 21(a)

Acnons 2 Proceedings 1 Reports' TalaI'

37 (149) 4 (6) 41 (155)

9 (25) 23 (39) 32 (64)

46 (174) 27 145) 73 (219)

6 (12) 12 (38) 18 (50)

3 (6) 13 (33) 16 (39)

2 (6) 6 (9) (1) 9 (16)

11 (24) 31 (80) (1) 43 (105)

17 (43) 11 (16) (1) 29 (60)

22 (73) 2 (2) 24 (75)

4 (6) 12 (23) 16 (29)

2 (3) 2 (3) 4 (6)

1 (4) 2 (3) 3 (7)

7 (13) 16 (29) 23 (42)

22 (23) 22 (23)

14 (19) 14 (19)

9 (20) 3 (5) 12 (25)

8 (23) 3 (11) 11 (34)

(9) (1) (10)

5 (14) 5 (14)

165 (435) 94 (189) 2 (2) 261 (626)

1The number of defendants. respondents or subjects IS noted parenthetically

2ThlS category mdudes Injunctive actions CtVIIand Criminal contempt proceedmqs and one court order obtained pursuant to

Section 21(e) of the Exchange Act

111

'
Table 29

INVESTIGATIONS OF POSSIBLE VIOLATIONS OF THE ACTS

ADMINISTERED BY THE COMMISSION

Pending as of October 1 1982

Opened In fiscal year 1983

Total

Closed In fiscal year 1983

Pending as of September 30, 1983

During the fiscal year ending September

3D, 1983, 148 Formal Orders of lnvestrqanon were Issued by the Cornrnissron upon

recornmendation of the Division of Enforcement.

Table 30

ADMINISTRATIVE PROCEEDINGS INSTITUTED DURING FISCAL YEAR

ENDING SEPTEMBER 30, 1983

Broker-Dealer Proceedings

Investment Adviser, Investment Company and Transfer Agent Proceedings

Stop Order Proceedings

Rule 2(e) Proceedings

Disclosure Proceedings (Section 15(c)(4) of the Exchange Act)

Total Proceedings In fiscal year 1983

Table 31

INJUNCTIVE ACTIONS

740

373

1,113

358

755

62

16

2

9

5

94

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

Fiscal Year Actions tnrtiated

148

174

158

166

135

108

103

115

136

151

Defendants Named

613

749

722

715

607

511

387

398

418

416

Trading Suspensions

During fiscal year 1983, the Commission suspended tradmg in the securities of

11companies. This compares with nine in

fiscal year 1982. In most instances, the

trading suspension was ordered either be112

cause of substantial questions as to the

adequacy. accuracy or availability of public

information concerning the company's financial condition or business operations,

or because transactions in the company's

secunties suggested possible manipulation or other violations.
Foreign Restricted List

The Commission maintains and pubhshes a Foreign Restncted LIst which is

designed to put broker-dealers, financial

insntutions, investors and others on notice

of possible unlawful distributions of foreiqn securities in the United States. The hst

consists of names of foreign companies

whose securities the Commission has reason to believe have been, or are bemg offered for pubhc sale in the United States in

possible violation of the registration requirernent 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, mcluding the right to receive a

prospectus containing the Information required by the Act for the purpose of enablIng the investor to determine whether the

mvestrnent is suitable for him. While most

broker-dealers refuse to effect transactions

in securities Issued by companies on the

Foreign Restricted List, tlus does not neeessanly prevent promoters from illegally

offering such securities directly to investors in the Umted States by mail, by telephone, and sometimes by personal sohcitation. 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. Allred Fund for Capital Appreciation

(AFCA, SA) (Panama)

5. Amalgamated R.,-e Earth Mines, Ltd.

(Canada)

6. American Industrial Research SA,

also known as Investigation lndustnal

Americana, SA. (Mexico)

7. American International Mimng

(Bahamas)

8. American Mobile Telephone and

Tape Co., Ltd. (Canada)

9. Antel International Corporation, Ltd.

(Canada)

10 Antoine Silver Mmes, Ltd. (Canada)

11. ASCA Enterpnsers Lirmted (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,

UK.)

16. Briar Court Mmes, Ltd. (Canada)

17. British Overseas Mutual Fund Corporation Ltd. (Canada)

18. California & Caracas Mming Corp.,

Ltd. (Canada)

19. Canterra Development Corporation,

Ltd. (Canada)

20. Cardwell Oil Corporation, Ltd (Canada)

21 Caribbean Empire Company, Ltd.

(British Honduras)

22. Caye Chapel Club, Ltd. (British Honduras)

23. Central and Southern Industnes

Corp (Panama)

24. Cerro Azul Coffe~ Plantation (panama)

25. CIa. Rio Banano, SA (Costa Rica)

26. City Bank A.S. (Denmark)

27. Claw Lake Molybdenum Mines, Ltd

(Canada)

28. C1aravella Corporation (Costa RIca)

29. Compressed Air Corporation, limited (Bahamas)

30. Continental and Southern Industries,

SA (Panama)

31 Crossroads Corporation, SA (Panama)

32. Darien Exploration Company, SA

(panama)

33. Derkglen, Ltd. (England)

34. De Veers Consolidated Mining Corporation, SA. (panama)

35. Doncannon Spirits, Ltd. (Bahamas)

36. Durman, Ltd. Formerly known as

Bankers International Investment

Corporation (Bahamas)

37. Empresia Mmera Caudalosa dePanarna, SA (panama)

38. Ethel Copper Mmes, Ltd. (Canada)

39. Euroforeign BankJng Corporation,

Ltd. (Panama)

113
40. Fmansbanker a/s (Denmark)

41 First Liberty Fund, Ltd. (Bahamas)

42. General Mining SA. (Canada)

43. Global Explorations, Inc. (Panama)

44 Global Insurance Company, Limited

(British West Indies)

45. Globus Anlage-VermittJungsgesellschaft MBH (Germany)

46. Golden Age Mines, Ltd. (Canada)

47. Hebilla Minmg Corporation (Costa

Rica)

48 Hemisphere Land Corporation limited (Bahamas)

49. Henry Ost & Son, Ltd. (England)

50. Intercontinental Technologies Corp.

(Canada)

51. International Communications Corporation (British West Indies)

52. International Monetary Exchange

(Panama)

53 International Trade Development of

Costa Rica, SA.

54. lronco Mining & Smelting Company.

Ltd. (Canada)

55. James G Allan & Sons (Scotland)

56 Jojoba all & Seed Industries SA.

(Costa Rica)

57 Jupiter Explorations, Ltd (Canada)

58. Kenilworth Mines, Ltd. (Canada)

59 Klondike Yukon Mmmg Company

(Canada)

60. KoKanee Moly Mines, Ltd. (Canada)

61. Land Sales Corporation (Canada)

62. Los Dos Hermanos, SA. (Spain)

63. Lynbar Mining Corp., Ltd. (Canada)

64. Massive Energy Ltd. (Canada)

65. Mercantile Bank and Trust & Co.,

Ltd. (Cayman Island)

66. J P. Morgan & Company, Ltd., of London, England (not to be confused

with J.P.Morgan & Co., Incorporated,

New York)

67. Norart Minerals Limited (Canada)

68. Normandre Trust Company. SA

(panama)

69. Northern Survey (Canada)

70. Northern Trust Company. SA. (Switzerland)

71. Northland Minerals, Ltd. (Canada)

72. Obsco Corporation, Ltd. (Canada)

114

73. Pacific Northwest Developments, Ltd

(Canada)

74. Pan-Alaska Resources, SA. (panama)

75. Panamerican Bank & Trust Company

(Panama)

76. Pascar Oils Ltd. (Canada)

77. Paulpic Gold Mines, Ltd. (Canada)

78. Pyrotex Mining and Exploration Co.,

Ltd. (Canada)

79 Radio Hill Mines Co., Ltd. (Canada)

80 Rancho San Rafael, SA. (Costa Rica)

81. Rodney Gold Mines Limited (Canada)

82 Royal Greyhound and Turf Holdings

Limited (South Africa)

83 SA. Valles & Co., Inc (philippines)

84. San Salvador Savmgs & Loan Co.,

Ltd. (Bahamas)

85. Santack Mines Limited (Canada)

86. Security Capital Fiscal & Guaranty

Corporation SA. (Panama)

87. Sliver Stack Mines, Ltd. (Canada)

88. Societe Anonyme de Refinancernent

(Switzerland)

89. Strathmore DIstillery Company, Ltd.

(Scotland)

90. Strathross Blendmg Company Limited (England)

91. Swiss Caribbean Development & Finance Corporation (Switzerland)

92. Tam O'Shanter, Ltd. (Switzerland)

93. Timberland (Canada)

94 Trans-American Investments, limited (Canada)

95. Trihope Resources, Ltd. (West Indies)

96. Trust Company of Jamaica, Ltd.

(West Indies)

97. United Mimng and Milling Corporation (Bahamas)

98. Unitrust limited (Ireland)

99. Vacationland (Canada)

100. Valores de Inversion, SA (MeXico)

101. Victoria Oriente, Inc (Panama)

102. Warden Walker Worldwide Investment

Co. (England)

103. Wee Gee Uramum Mines, Ltd. (Canada)

104 Western International Explorations,

Ltd. (Bahamas)

105. Yukon Wolverine Mining Company

(Canada)
Right to Financial Privacy

Section 2I(h)(6) of the Securities Exchange Act of 1934 [15 U.S.c. 78u(h)(6»)

requires that the Cornmission "compile an

annual tabulation of the occasions on

which the Commission used each separate subparagraph or clause of [Section

21(h)(2») or the provisions of the Right to

Financial Privacy Act of 1978 [12 U.s.c.

3401-22 (the "RFPA'")J to obtain access to

financial records of a customer and Inc1ude it in its annual report to the Congress." During the fiscal year, the Commission successfully made one application to

a court for an order pursuant to the subparagraphs and clauses of Section 21(h)(2)

to obtain access to financial records of a

customer In this application, the provisions of Subsections 2I(h)(2)(A)(IV), (A)(v),

(B), and (D)(il) were relied upon. The table

below sets forth the number of occasions

upon which the Cornrnlssion obtained access to financial records of a customer

usmq the procedures provided by. (I) Section 1104 of the RFPA [12 U.s.C 3404],

applicable to customer authorizations;

(ii) Section 1105 of the RFPA [12 U.S C.

3405 I, applicable to adrrunistratrve subpoenas, and (IIi) Section 1107 of the RFPA

[12 U.S.C 34071, applicable to judicial

subpoenas.

Section 1104 Section 1105 Section 1107

4 244 47

115
PUBLIC UTILITY HOLDING

COMPANIES

System Companies

At fiscal year 1983, there were 13 holdIng companies reqistered under the Public

(Jnlity Holding Company Act of 1935 of

which 12 are "active". In the 13 reqistered

systems, there were 64 electric and/or gas

utility subsrdiaries, 66 non-utility subsidiaries, and 19 macnve companies, or a total

of 164 system companies including the

top parent and subholding cornparues.

The following table lists the acnve systems.

Table 32

PUBLIC UTILITY HOLDING COMPANY SYSTEMS

Solely

Registered

Holding

Companies

RegIstered

Holding

Operating

Companies

ElectrtC

and or

Gas Utility Nonulility

Subsidranes Subsidranes

Inactive Total

Companies Companies Other

Allegheny Power System

(APS)

Amencan Electric Power

Company (AEP)

Central and South West

Corporation (CSW)

Columbia Gas System

(CGS)

Consolidated Natural Gas

Company (CNG)

Eastern Utilities Associates

(EUA)

General Public Utilities

(GPU)

Middle South Utilities

(MSUI

NatIonal Fuel Gas Company

(NFG)

New England Electric

System (NEES)

Northeast Utilities (NEU)

Philadelphia Electric Power

Company (PEP)

Southern Company (SC)

Total Companies

o

1

12

o

o

o

o

o

1

o

3

3

12

3

9

5

3

6

6

5

1

5

64"

4

14

5

13

6

o

4

66

10

6 33

11

0 23

0 12

0 5

10

3 14

0 6

0 10

6 17

1 3

0 10

19 164

o

o

o

l'

o

o

o

18

'OhiO Valley Elec Corp & Subs

Indiana-Kentucky Elec Corp

erectnc utrhty

3780

0 AEP

12500 APS

49 7°'0 Other Companies

"West Penn Power Co In APS and

Southwestern Electric Power Co

In CSW are both electric

utumes and holding companies

116

'Arklahoma Corp

320

0 CSW

34Qo MSU

34Q, Oklahoma Gas & Elec

C Yankee Atomic Electric Co

30% NEES, 31 5% NEU,

45%EUA

Connecticut Yankee Atomic Power

Co 15% NEES, 44% NEU,

45% EUA

Vermont Yankee Nuclear Power

Corp 20% NEES, 12% NEU

25%EUA

Maine Yankee Atomic Power Co

20% NEES 15% NEU, 4% EUA

Statutory utility suossnanes
Table 33

KEY FINANCIAL STATISTICS OF REGISTERED PUBLIC UTILITY

HOLDING COMPANY SYSTEMS

Name of Company

Allegheny Power System

American Electric Power Company Inc

Central and South West Corporation

Columbia Gas System Inc

Consolidated Natural Gas Company

Eastern Utilities Associates

General Public unnnes Corp

Middle South Utilities Inc

Nanonal Fuel Gas Company

New England Electric System

Northeast unnnes

Philadelphia Electric Power Company

Southern Company The

As 01June 30 1983 (000 omitted)

Iotat Assets Operatmg Revenues

S 3500000 S 1756000

12479000 4041929

5433364 2528,498

4919000 4922000

3184536 3325,200

539676 288680

5180060 2427615

10,500,000 2860000

854078 1 038042

2,485750 1248320

4,159602 1772116

60658 8877

12759541 5052187

Total $66,055265 $31269464

117

~
0 00000000 0000000 0 0 000 0000

0 00000000 0000000 0 0 000 0000

0 00000000 0000000 0 0 000 0000

5 ELi 0 60000000 0000000 <5 <5 cicici COOO 0 8gggg~gg 0000000 0 0 000 0000

c75~c3 0 0000000 0 0 000 0000

'" lli..ooLIiciMLriLri oocioocio '" <5 e6U"i1.ti lficiLlici -e tDM(DMLO It) tOOOlOMlO(") '" to _M "''''''' ;;; "d'"C\:I ........ M

0 0

c: 0 0 0 0 0 <5 <5 E 0 0

E "'- on

0 t: N U

'" -"

U

0

iii

0 0

U

0 0 0 0

[!! <5

2 0

0

en '" 0 n, '" ;:>

UJ

len

>-

en

>- 000 0 0

Z c:_ 000 0 0

f 0> 000 0 0

ggB cicici <5 <5 "'00 0 0 ::> c: c: 0"''' '" 0

~8~ r-:cri~ M <5

0 M co '" .. 0 IX) u,

Q) '" C' ... z a: C') 5 « Q) ..J UJ

:0 0 >-

t!!! :J: ..J E 0 :g 0 000 000 0

« 0 ggg 000 0

u. 0 u 0 000 0

0 <I> c:::> <5 cicio cicici <5 en Fm- c: 0 000 000 0

0>", <I> 0 000 000 0

C' ii: c: <1>-0 <5 0":0 ciolfi <5

Z .9~~ co "'~'" -"'" ;:>

(3 ;;; .. z

«

z

ii:

0 000 0 00 0 000 0 00 0

:J '" 000 0 00 0

-o cicici <5 cia <5 CD c: 000 0 00 0

::J 0 000 0 00 0

CD cicio <5 ciei <5 Q. "'''' .... M 0'"

" '"

118

u

E

E

i

en

o

m

.B

E

::>

8

1ij

z

-g

1ij

"!2

"0

'"

c:

o

U

'"

~ ~ ~

'"

~

~

~ ~

•

~

~

~
0 00000 0000000 0000 00 000 0 0 0 0 0 00000 0000000 0000 00 000 0 0 0 0 0 00000 0000000 0000 00 000 0 0 0 0

5 ED 0 cioocia 0000000 0000 06 ciao 0 0 0 0 0 00000 0000000 0000 00 000 0 0 0 0 ,l;.Qil1> 0 00000 OQU10000 0000 00 000 0 0 0 0

U)FCl 0 cricit.riolll ci<Da:ici..n~Lri OOOlO 0"': cicici 0 so <0 N <Xl ON<olON -e .-No>..-- Ol.O(,ON ON MvM

'" 0> M -- ~N _N 0

.,;

'"

0 0 0 0 0 0 0 0 c 0 0 0 0 0 0 0 0 0 E 0 0 0 0

E N N 0

0 .,; r-: .,; o <Xl M M NM

'" o

00 0 0 0

00 0 0 0

"0 00 0 0 0

cci 0 0 0 00 0 0 0

00 0 0 0

Lrici .,; 0 .,; n, r-- M 0>

N

'"

0 0 000 0

0 0 000 0

c- Ol 0 0 000 0

~g~ 0 0 cicio 0 0 0 000 0 0 "'00 =O8~ .,; .,; C\il.t'io ""0 Cl. Ii: v 0 NMN NV Ql

::> '" c

E

0

o

I v 0 0 0

E~

00 0 00 0 0000 000

(') 00 0 00 0 0000 000 0 0 0

00 0 00 0 0000 000 0 0 0

Ql ~~.2 co 0 cci 0 ciooo ciao 0 0 0 00 0 00 0 0000 000 0 0 0

:c c 00 0 00 0 0000 000 0 0 0 Ol"'''' c",.o O:)U) 0 0"": 0 citrioo cioo 0 0 0

.9~~ Nr-- '" ON N <Xlv MMO v N N M r--

N

'"

00 0 0 0

00 0 0 0

00 0 0 0

cici 0 0 0 "0 00 0 0 0 c 00 0 0 0 0

ell cia .,; 0 .,;

0'" ec

'" t-,

_N N -:

;;;

119

'"

~

~

~ _

'"

'"

'"~

~

•

~ '" '"

'"
Table 35

SUBSIDIARY SERVICE COMPANIES OF PUBLIC UTILITY HOLDING COMPANY SYSTEMS

AS OF DECEMBER 31, 1982

(In Millions)

Total Total Total Number 01 Operating

Name of Service Company Billings Assets Personnel Utilities Served

Allegheny Power Service Corporation $ 349 $ 31 682 3

American Electric Power Service Corp 1298 1100 2596 12

Central and South West Service Inc 226 169 321 4

Columbia Gas System Service Corp 493 214 741 9

Consolidated Natural Gas Service Corp 307 121 378 5

EUA Service Corporation 139 22 296 3

GPU Service Corporation 470 319 720 3

GPU Nuclear Corporanon 2602 382 2,573 3

Middle South Services Inc 614 857 829 5

New England Power Service Co 789 94 1,540 7

Northeast Utilities Service Co 1637 698 3,016 5

Southern Company Services Inc 1803 739 3,098 5

TOlal $1,0727 $4746 16790 64

120
o o

;;; '"

>- 00

-c:

<D <D

:> > U.E

CO)

o

<0

r-,

0>

'"

r-,

N

__00)0000

u)C"')I"-MtOU')

M"<tT'""T'""«)N

~N

0>

'"

<0

o

.....

'"

.....

0>

;;;

r-,

N

'"

co

0>

0>

'"

121

'"

-

- '"
00

1 I I I I

o

ec

M

ffl

('I')Q') OMO U"l

g~JII~:gJ~~

ffl ffl

o

N

N

....

ffl

0>

I I ;b I I I

M

@@

ONO'J ,.... ..... C\j

t:2~~I::g~gll

fJ)vO)(O v ......,.

c

E Q

E~ro.Q ~Q.

~xUJ

>.

05

m~ I

"> ffl lJ..E

c: ... Q.l 0 V

~~~O)IIII~

"lJ..

Z £

;;;

CD

Q.

'"

C>

ro

I

55585559

'0:1'000)(,0000

MOO""" O'o:t C'\lW

C\lU"lMOltOCD'o:tCO

aJU10I/')...,- ...... C")U"l

W~lAb9~tI)(fl~

122

~~ J t

"

-

J J J

~

~~~~~~~~
CORPORATE

REORGANIZATIONS

During the fiscal year the Commission

entered 15 reorganization cases filed under Chapter 11 of the Bankruptcy Code involvmq companies with aggregate stated

assets of about $1.9 bilhon and close to

75,000 public investors. lncludmq these

new cases,the Commission was a party in

a total of 63 Chapter 11 cases dunnq the

fiscal year.In these cases the stated assets

totalled approximately $14.3 billion, habiliues totalled about $122 bilhon, and

505,000 pubhc investors were Involved

During the fiscal year, 12 cases were concluded through confirmation of a plan of

reorganization or liquidation, leaving 51

cases in which the Commission was a

party at year-end

The Commission also continued Its parucipanon In pendmq reorqanization cases

under Chapter X of the prior Bankruptcy

Acl During the fiscal year, 11 Chapter X

cases were closed, leevmq at year-end 37

open Chapter X cases.

Table 38

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

IN WHICH COMMISSION ENTERED APPEARANCE

Fiscal

Debtor District Court Year Filed

AIrlift International, Inc S D FL 1981

AM International N D IL 1982

Amarex Inc WD OK 1983

Amencan Nautilus Fitness Center- SD CA 1981

Arctic Enterprises. Inc 1 D MN 1981

Atlas Mortgage Loan Co ED CA 1982

Auto Tram Corp 2 D DC 1980

Bear Lake West D ID 1982

Bobbie Brooks, Inc' ND OH 1982

Braniff International N D TX 1982

Briggs Transportation D MN 1983

Christian Life Center ND CA 1980

Coleman Amencan Companies, Inc 1 D KS 1980

Colonial Commercial Corp , SD NY 1982

Colonral Discount Corp SD IN 1982

Combustion Equipment Associates. Inc S D NY 1981

Computer Cornmurucatrons. Inc CD CA 1981

Dreco Energy Service Lid S D TX 1982

Empire Oil & Gas Co D CO 1982

Fashion Two-Twenty Inc' ND OH 1982

Fidelity American Fmancial Corp ED PA 1981

Flight Transportation Co D MN 1983

FWD Corp' ED WI 1981

General Resources Corp ND GA 1980

Geopnysical Systems Corp CD CA 1983

Goldblatt Brothers, Inc N D IL 1981

Grove Finance Company D UT 1981

G Weeks Secunhes, Inc' WD TN 1980

Haven Properties, Inc D OR 1981

Hawan-Nevada Investment Corp 2 D NV 1981

Hentage Investment Group of Ark 3 ED AR 1981

HOrizon HOspital, Inc M D FL 1981

HRT Industries, Inc SD NY 1983

Inlorex, Inc 1 D MA 1980

lIel Corporation ND CA 1981

Internat'l Inst of App Tech DOC 1983

KDT Industries, Inc SD NY 1982

LS Good&Co2 ND WV 1980

Robert C laBine/Pro Assoc ED MI 1983

Leisure Time Products, Inc ND IN 1982

Fiscal

Year Closed

1981

1982

1981

1983

1983

1983

1983

1981

1983

1982

1981

1981

1981

123
Table 38-ContJnued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

IN WHICH COMMISSION ENTERED APPEARANCE

Fiscal

Debtor District Court Vear FIled

Lewis Enerqy Corp D CO 1982

The Lionel Corp SD NV 1982

Manoa Finance Co Inc D HA 1983

Mansfield Tire & Rubber Co ND OH 1980

Manville Corp SD NY 1982

Manon Corp S D AL 1983

McLoulh Steep Corp 1 SD MI 1982

Mld.Amencan LInes Inc 1 WD MI 1982

North American COin & Cur DAR 1983

NOVA REIT' DC VA 1981

Nucorp Energy Inc SD CA 1982

Omega Financial Investment Corp 2 CD CA 1981

Park Nursmq Center ED MI 1980

Penn-DIxie Industries 1 SD NY 1980

Pleasant Grove Medical Center N D TX 1980

Resource Exploration Inc 1 ND OH 1980

Revere Copper & Brass Inc SD NY 1983

Rusco lndustnes Inc 1 SD GA 1982

Sambas Restaurants Inc CD CA 1982

Saxon Industries Inc SD NY 1982

SBE Inc 1 ND CA 1980

Seatram lines Inc S D NY 1981

Shelter Resources Inc ND OH 1982

Soulh Atlannc Financial Corp S D FL 1983

Southern Industrial Banking Corp ED TN 1983

Southland Lutheran Home 1 CD CA 1980

Stewart Energy Systems D ID 1982

Tax Info Ctr P&K Fry' D OH 1982

Tenna Corp> ND OH 1980

Texas General Resources. Inc SD TX 1983

Topps & Trowsers 1 ND CA 1980

Urushetter Inc 1 ED WI 1981

UNR Industnes N D IL 1982

Western Farmers ASSOciation D WA 1980

White Malar Corp ND OH 1980

WIckes Companies CD CA 1982

Wilnor Drilling Inc SD IL 1982

Wilson Foods Corp WD OK 1983

Iotal Cases Opened (FY 1980-1983) 78

Total Cases Closed (FY 1980-1983)

1 Plan of reorganization confirmed

2Debtor liqurdated under Chapter 7

JChapter 11 case dismissed

Fiscal

Vear Closed

1983

1983

1983

1981

1983

1981

1981

1983

1981

1981

1983

1980

1981

1983

27

124

'
Table 39

PENDING REORGANIZATION PROCEEDINGS UNDER CHAPTER X OF THE

BANKRUPTCY ACT IN WHICH THE COMMISSION PARTICIPATED

Fiscal Year 1983

SEC Notice 01

Debtor Drstnct Court Petition Filed Appearance Filed

Aldersgate Foundation, Inc 2 M 0 FL Sept 12 1974 Oct 3 1974

Arlan s Dept Stores Inc 1 2 SO NY March 8 1974 March 8, 1974

Bankers Trust Co 2 SO MS Dec 16 1976 April 5, 1977

Beck Industries, Inc 1 SO NY May 27 1971 JUly 30 1971

Bermec Corp 1 2 SONY April 16, 1971 April 19 1971

Beverly Hills Bancorp CD CA April 11 1974 May 14 1974

Brethren s Home The2 SO OH Nov 23, 1977 Dec 27 1977

Bubble up Delaware tnc CD CA Aug 31 1970 Oct 19 1970

Carolina Caribbean Corp 1 2 WD NC Feb 28 1975 April 17 1975

Cmzens Mortgage Investment Trust o MA Oct 5, 1978 Nov 1 1978

Commonwealth Corp 1 Z NO FL June 28 1974 July 17 1974

Continental Investment Corp 2 o MA Oct 31, 1978 Oct 31 1978

Continental Mortgage Investors o MA Oct 21 1976 Oct 21 1976

Diversmed Mountaineer Corp 2 SO WV Feb 8 1974 April 24 1974

Duplan Corp' 2 SO NY Oct 5 1976 Oct 5, 1976

Farrington Manufactunng Co 1 2 ED VA Dec 22 1970 Jan 14 1971

First Baptist Church, Inc ot Margate Fla 2 SO FL Sept 10, 1973 Oct 1 1973

Fort Cobb, Okla lrnqanon Fuel Authority' 2 WD OK April 20, 1979 July 16 1979

GEBCO tnvestment Corp WD PA Feb 8, 1977 March 24 1977

Wm Gluckm Co , ltd 2 SO NY Feb 22, 1973 March 6, 1973

Guaranty Trust Co 2 WD OK April 9 1979 April 9, 1979

Gulfco Investment Corp WD OK March 22, 1974 March 28, 1974

Harmony Loan Inc 2 ED KY Jan 31 1973 Jan 31 1973

Hawau Corp 2 o HI March 17, 1977 March 17, 1977

Home-Stake Production Co NO OK Sept 20 1973 Oct 2 1973

Investors Fundrnq Corp of New York' 2 SO NY Oct 21, 1974 Oct 22, 1974

King Resources Co 2 o CO Aug 16 1971 Oct 19, 1971

Lake Winnebago Development Co Inc WD MO Oct 14, 1970 Oct 26 1970

Lusk Corp DAR Oct 28 1965 Nov 15 1965

Mount Everest Corp 2 ED PA May 29, 1974 June 28, 1974

Natronal Telephone Co , Inc 2 o CT July 10, 1975 May 27 1976

North American Acceptance Corp 2 NO GA March 5, 1974 March 28 1974

Omega-Alpha, Inc 2 NO TX Jan 10, 1975 Jan 10, 1975

Pan Amencan Fmancial Corp 2 o Ht Oct 2, 1972 Jan 9 1973

Parkvlew Gem Inc 1 2 WD MO Dec 18, 1973 Dec 28, 1973

Pocono Downs, Inc MD PA Aug 20 1975 Aug 20, 1975

John Rich Enterprises, Inc 2 o UT Jan 16 1970 Feb 6 1970

Reliance Industries, Inc o HI May 24 1976 Aug 10, 1976

Royal Inns of America, Inc 2 SO CA April 24 1975 June 24 1975

Sierra Trading Corp 2 o CO July 7, 1970 July 22 1970

Stanndco Developers, Inc WD NY Feb 5, 1974 March 7, 1974

Sunset International Petroleum Corp 2 NO TX May 27, 1970 June 10 1970

TMT Trailer Ferry Inc 2 SO FL June 27, 1957 Nov 22, 1957

U S Fmancral Inc 2 SO CA Sept 23, 1975 Nov 3, 1975

Washington Group, Inc 2 MD NC June 20, 1977 July 25 1977

Western Growth Capital Corp DAR Feb 10, 1967 May 16 1968

Westgate Calnorrua Corp SO CA Feb 26, 1974 March 8 1974

Wonderllowl, Inc 2 CD CA March 10, 1967 June 7 1967

1Reorganization proceedings closed dUring fiscal year 1983

2Plan has been substanlially consummated but no final decree has been entered because of pending matters

125

'
SEC OPERATIONS

DUring fiscal 1983, the Cornrrussion collected a record $98.6 million In fees for

deposit into the General Fund of the Treasury.Such fees amounted to nearly 110% of

the Cornmlssions fiscal 1983 appropriation, compared with 94 % in fiscal 1982.

126

The four sources of fees were: registration

of secunnes under the Securities Act of

1933 (68%), transactions on securities exchanges (24%), miscellaneous filings and

reporting fees (7% ) and the registration of

regulated broker-dealers (l% ~
Appropriated Funds vs Fees Collected

Dollars Millions

100

90

80

70

60

50

40

30

20

1972 73 74 75 76 n 78 79 80 81 82 1983.1/

Y Esttmated

127
o

s

s

o

.n

en

<F>

s

o

.n

<0

o

c?

<0

en

co.

OJ

CD

en

o

o

o

C'i

'"gi

<F>

<0

o

<oJ

o

o

o

.n

CD

<0

en

co.

0000

0000

0000

cicicici oo(O~

CO) OH.{) M

~ai'ai

'CD CD

000

'000

'000

. ci ci ci ..."'en "''''<0 ai+ai

CD CD

000

000

000

r.ri M ei

.~~~

~M~

.g .g .8 .g

.~ .~ :~ .~

o

s

:ci .:2

i,

r-..U') I/) ,.... ,....

C\I :~

C\i"N N"N

00000000

00000000

00000000

OWVOVWOW

(")ocnOO)OOO

...... I"--LOMM(J)"l:tM

~...:N~...:N+M '0)+00'0) co

0000

0000

0000

e-iwcir.ri

cn~vco

I ~+Ol~

00000000

gggggggg

tricicici ci cicio LnlOl,{)OlOLOlOO

C\IC")I"-- .... r--M(X)C\1

+r.O+"':'tDMO ,.... ,.... ,.... co

o

o

<oJ

'"'"<oJ

o

s

g

CD

i,

N

o

o

o

W

'"

CD

<oJ

CD

o

o

o

c?

o

o

o

ci

'"

'"q;

o

s

s

co.

-e-

-e

<oJ '"

o

o

o

'"

en

OJ

<oJ

o

o

o

g

<0

:8

<F>

o

o

o

...

<F>

;;;-

c:

o

::;

c:

o

::;

;;;-

c:

o

::;

;;;-

c:

o

::;

._ <Il

<Il c:

~g

._ <Il

<Il c:

~g

._ <Il

so c: 00

0..:=

en

ten

'"

CD

en

(J)

z

o

!i

D.

o

a:

D.

D.

< o 0

~z

:0 <

~l3

w

tu

C)

o

:::l

al

128

'" ~

~

~

~

~

~ ~ :

~ ~ ~ ~

~

•