Fourteenth Annual Report

of the

Securities and Exchange

Commission

Fiscal Year Ended June 30, 1948

UNITED STATES ..GOVERNMENT PRINTING OFFICE, WHASINGTON : 1949

For sale by the Superintendent of DOC1ID1euls. U. S. Government Prlntin& Ofllce, Washingtou 25, D. C.

PrIce 45 eeuts
II

SECURITIES AND EXCHANGE COMMISSION

Central Office

425 Second Strt"et, N. W.

Washington 25, D. C.

COMMISSIONERS

EDMOND M. HANRAHAN, Chairman

ROBERT K. MCCONNAUGHEY

RICHARD B. McENTIRE

HARRY A. MCDONAW

PAUL R. ROWEN

ORVAL L. DuBoIS, Secretary
EmIOND M. HANRAHAN,

Ohairman.

LETTER OF TRANSMITTAL

SECURITIES AND EXCHANGE Cm.IMISSION,

Wa8hington, D.O., Februarp 15, 1949.

SIR: I have the honor to transmit to you the Fourteenth Annual

Report of the Securities and Exchange Commission, in accordance

with the provisions of section 23 (b) of the Securities Exchange Act

of 1934,approved June 6,1934; section 23 of the Public Utility Holding Company Act of 1935, approved August 26, 1935; section 46 (a)

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

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

August 22, 1940.

Respectfully,

THE PRESIDENT OF THE SENATE,

THE SPEAKER OF THE HOUSE OF REPRESENTATIVES,

Wa8hington, D. O.

m

TABLE OF CONTENTS

Page

Foreword_________________________________________________________ XI

Commissioners and staff officers; ____________________________________ XII

Regional and branch offlces, ________________________________________ XIII

Commissioners appointed during fiscal year ___________________________ XIV

PART I

,

ADMINISTRATION OF THE SECURITIES ACT OF 1933

The registration process

The registration statement and prospectus

Effective date of registration statement

Examination of registration statements

Time required for registration

The volume of securities registered

Volume of all securities registered

Volume of securities registered for cash sale

A. All securities

B. Stocks and bonds

C. All securities registered for cash sale for the accounts of

issuers-by type of issuer

D. Use of investment bankers as to securities registered for cash sale for the accounts of issuers

E. Cost of flotation of securities registered for cash sale for

the accounts of issuers

All new securities offered for cash sale

Registered securities

Unregistered securities

Corporate

Noncorporate

Total of registered and unregistered securities

New capital and refinancing

Registration statements filed

Disposition of registration statements

Other documents filed under the actExemption from registration under the act

Exempt offerings under regulation A

Exempt offerings under regulation A-M

Exempt offerings under regulation B

Confidential written reports under regulation B

Oil and gas investigations

Formal actions under section 8

Examinations under section 8 (e)

Stop-order proceedings under section 8 (d)

Disclosures resulting from examination of registration statements;

Changes in rules, regulations, and forms

Proposed rule 431-Definition of prospectus

Rule 409- Disclaimer of responsibility

Rule 424-Pre-effective prospectus

Proposed amendments to regulation S-X

Changes in forms for registration

Litigation under the act

PART II

ADMINISTRATION OF OF THE SECURITIES EXCHANGE ACT 1934

Regulation of exchanges and exchange trading Registration of exchanges

Disciplinary actions by exchanges against members

Market value and volume of exchange trading

Special offerings on exchanges

Secondary distributions approved by exchanges

Registration of securities on exchanges

Purpose and nature of registration

Examination of applications and reports

Statistics of securities registered on exchanges

.,

1

1

1

1

2

2

4

4

4

4

4

5

5

6

6

6

7

7

7

7

7

8

8

8

9

9

10

11

11

11

12

13

13

15

17

18

18

19

19

19

20

24

24

24

25

26

26

27

27

27

28

28

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

-
VI TABLE OF CONTENTS

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT

OF 1934-Continued

Temporary exemption of substituted or additional securities

Unlisted trading privileges on exchanges

Applications for unlisted trading privileges.L;

Changes in securities admitted to unlisted trading privileges Delisting of securities from exchanges

Securities delisted by application

Securities delisted by certification

Securities removed from listing on exempted exchanges

Exempted securities removed from exchange trading Manipulation and stabilization

Manipulation------------------------------------------- __ Trading investigations Stabilization

Security transactions of corporate insiders

Examination and dissemination of information

Preventing unfair use of inside information

Statistics of ownership reports

Solicitations of proxies, consents, and authorizations

Statistics of proxy statements

Examination of proxies.Lc . . Changes in proxy rules

Regulation of brokers and dealers

Registration

Broker-dealer inspectionsAdministrative proceedingsSupervision of NASD activity

Commission ~~~~~~~:~a~ti~-;S~~~===================================== review of actions on membership Changes in rules and forms

Rule ~-:3AI2-2-Exemption for municipally guaranteed secunbes

Rule X-llDI-I-Extension of credit by broker-dealers

Rules X-12A-4, X-12D3-1, and X-12D3-2-"When-issued" dealing

Forms 12-K and 12A-K-Annual report forms

Litigation under the act

Injunction and appellate proceedings involving broker- dealers

Injunction actions against persons other than broker-dealers;

Participation by the Commission in private actions

Page

29

29

31

31

32

32

32

33

33

33

34

35

35

36

36

37

37

38

38

39

41

42

42

43

44

47

47

47

48

50

50

50

50

51

51

51

53

55

PART III

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935_____ _ ___________________________ 56

Companies registered under the act., _____________________________ 57

Integration and corporate simplification under section 1L__________ 57

Status of integration and simplification program- __________________ 62

American Gas & Electric Co ________________________________ 62

Cities Service Co __________________________________________ 63

The Commonwealth & Southern Corp________________________ 64

Electric Bond & Share Co __________________________________ 65

Engineers Public Service Co ________________________________ 66

International Hydro-Electric System, ________________________ 67

The Middle West Corp____ _________________________________ 67

New England Public Service Co_____________________________ 68

The North American Co____________________________________ 68

Ogden Corp----------------------------------------------- 69

Standard Power & Light Corp.-Standard Gas & Electric Co___ 70

The United Corp__________________________________________ 72

The United Light & Railways Co____________________________ 74

The West Penn Electric Co _________________________________ 75

Financing under sections 6 and 7 75

Other activities under the aet , __________________________________ 78

Statistics of litigation under the act______________________________ 79

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

- _______________________
TABLE OF CONTENTS

PART IV

PARTICIPATION OF THE COMMISSION IN CORPORATE REORGANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY ACT, AS AMENDED

Summary of activities

Commission's functions under chapter X

Problems in the administration of the estate

Responsibilities of fiduciaries

Activities with respect to allowances

Institution of chapter X proceedings and jurisdiction of the eourt , Plans of reorganization under chapter X

Farrness

Feasibility

Consumation of plan

AdV~~;~~~~:~~e~~~t~~================~==~================

PART V

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939_ Statistics of indentures qualified

PART VI

ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF 1940

Unlawful acquisition by investment company of insurance company stock

Changes in rules

Rule N-17 A-2- Exemption of transactions by banks

Rule N-17 A-4- Exemption of contracts with nonaffiliates

Rule N-17F-2-Custody of securities

Rule N-17G-I-Bonding of officers and employees

Statistics relating to registered investment companies

PART VII

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT OF 1940

Registration statistics

PART VIn

OTHER ACTIVITIES OF THE COMMISSION UNDER THE

VARIOUS STATUTES -_ The Commission in the courts

Civil proceedings

Criminal proceedings

Complaints and investigations

In vestigations of securities violations

Securities violations fiIe

Activities of the Commission in accounting and auditing

Examination of financial statements - - -_ Proposed amendment of regulation S-X

Simplified records for brokers and dealers

Commission cases of particular interest to accountants

Developments in accounting principles and procedures

. .1?evelop~e!?ts in ~~diting procedures and professional practice __ DIVISIOnof opmIOn writing - - - - - - - - - --

International financial and economic matters -_ Advisory and interpretative assistance

Confidential treatment of applications, reports, or documents

Statistics and special studies

Saving study - - - - -- - - - --

Financial position of corporations -_

Stock market statistics

Survey of American listed corporations

Investment company data - - - - - - - - - - - - -- Brokers and dealers

Quarterly sales data

Distribution of registrants by independent accounting firms; - -- Registrants and subsidiaries

VII

Page

82

82

82

83

84

85

87

88

88

89

90

90

90

92

92

94

94

95

95

95

95

95

96

98

98

99

99

99

99

104

104

104

105

106

107

108

108

110

112

114

116

118

119

119

120

120

121

121

122

122

122

122

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

- - __- _

_

_

_

_ - - _

_

_

- __

- __

_

- - __- - - __- - _-- --

_

- __-

- _- - - _- - - - - - - - --

- _- - - - - - -- --

-- __-- __- - -- - - - - - - - -- - _- - - _- - - - --

-- _- - - - - - - - --
vm TABLE OF CONTENTS

OTHER ACTIVITIES OF THE COMMISSION UNDER THE

VARIOUS STATUTES-Continued Page

Analyses of stock market decline of September 3, 1946 _____________ 123 Personnel ~_________________________________________ 124

Fiscwaffairs__________________________________________________ 124

Publications; _ _________ _______ _ ____________ ______ 125

Public releases; ________________ ______________ __________ 125

Otherpublications_________________________________________ 125

Information available for public inspection________________________ 126

Public hearingsc.., , __________ ____ _ _____________ 127

PART IX

APPENDIX-STATISTICAL TABLES

Table 1. Registrations under the Securities Act of 1933 fully effective

during the fiscal year ended June 30, 1948:

Part 1. Distribution by months_________________________________ 131

Part 2. Break-down by method of distribution and type of security

of the volume proposed for cash sale for account of the issuers________________________________________________ 131

Part 3. Purpose of registration and industry of registrant___________ 132

Table 2. Classification by quality and size of new issues, exclusive of investment trust issues, registered under the Securities Act of

1933 for sale to the general public through investment bankers

during the fiscal years 1946, 1947, and 1948:

Part 1. Number of issues and aggregate vwue_____________________ 134

Part 2. Compensation to distributors____________________________ 135

Table 3. New securities offered for cash sale in the United States:

Part 1. Type of offering., , _____ __________________________ ___ 136

Part 2. Type of security _ _____________ ____________ ___ 137

Part 3. Type of issuer_____ ______________________ ______ ______ 138

Part 4. Private placements of corporate securities_________________ 140

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

securities offered for cash sale in the United States:

Part 1. All corporate______ _____________________________________ 142

Part 2. IndustriaL _ ________________ ___________________________ 143

Part 3. Public utility__________________________________________ 144

Part 4. Railroad______________________________________________ 145

Part 5. Real estate and financiaL_______________________________ 146

Table 5. Brokers and dealers registered under sec. 15 of the Securities

Exchange Act of 1934---effective registrations as of June 30,

1948, classified by type of organization and by location of principal office; _________________________________ ____ _ 147

Table 6. Data relating to resources and liabilities of registered brokers and

dewers-1946 and 1947____ __ ___________________ _______ 149

Table 7. Market value and volume of sales effected on securities ex- changes for the fiscal year ended June 30, 1948______________ 150

Part 1. On all registered exehanges , 150

Part 2. On all exempted exchanges______________________________ 151

Table 8. Round-lot stock transactions effected on the New York Stock

Exchange for the accounts of members and nonmembers,

weekly, June 30, 1947-June 26,1948______________________ 152

Table 9. Odd-lot stock transactions effected on the New York Stock Exchange for the odd-lot accounts of odd-lot dealers, specialists,

and customers, weekly, June 30, 1947-June 26, 1948________ 154

Table 10. Round-lot and odd-lot stock transactions effected on the New

York Curb Exchange for accounts of members and nonmem- bers, weekly, June 30, 1947-June 26,1948________________ 156

Table 11. Special offerings effected on national securities exchanges for

fiscal year ended June 30,1948___________________________ 158

Table 12. Secondary distributions of listed stocks approved by national

securities exchanges______ _ _ _____ __ 159

Table 13. Classification by industry of issuers having securities registered

on national securities exchanges as of June 30, 1947 and June 30, 1948__ _________________________ _________ _ 160

Table 14. Totals of security issues admitted to trading on exchanges as of June 30,1948________________________________________ 160
TABLE OF CONTENTS IX

Page

Table 15. Stock and bond issues admitted to trading on each exchange,

including the number of issuers, the basis for admission to

trading, and the percentage traded on other exchanges, as of

June 30, 1948 - - -________ __ _ 161

Table 16. Number of issues admitted to unlisted trading pursuant to

clauses 2 and 3 of section 12 (f) of the Securities Exchange

Act of 1934 and volume of transactions therein____________ 162

Table 17:

Part 1. Electric utility properties divested by registered holding

companies, July 1, 1947 to June 30,1948________________ 163

Part 2. Gas utility properties divested by registered holding com- panies, July 1,1947 to June 30,1948____________________ 166

Part 3. Nonutility properties divested by registered holding com- panies, July 1,1947 to June 30,1948____________________ 167

Table 18. Utility and other properties subject to divestment under section

11 (b) (1) orders outstanding as of June 30, 1948___________ 169

Table 19. Public utility holding companies subject to dissolution or liquidation and subsidiaries subject to divestment under

section 11 (b) (2) orders outstanding as of June 30, 1948____ 172

Table 20. Number of applications and declarations received and disposed

of during the fiscal year ended June 30, 1948 under the

Public Utility Holding Company Act of 1935 _ _ __ _ _ _ __ __ _ __ 176

Table 21. Reorganization cases instituted under chapter X and section

77-B in which the Cormnisslon filed a notice of appearance

and in which the Commission actively participated during the fiscal year ended June 30, 1948_ _ _ __ 177

Par-s I, Distribution of debtors by type of industry________________ 177

Part 2. Distribution of debtors by amount of indebtedness _________ 177

Table 22. Reorganization proceedings in which the Commission participated during the fiscal year ended June 30, 1948_ _ __ __ __ _ _ _ 178

Table 23. Statistical summary of all cases instituted by the Commission

under the Securities Act of 1933, the Securities Exchange Act

of 1934, the Public Utility Holding Company Act of 1935,

the Investment Company Act of 1940, and the Investment

Advisers Act of 1940____________________________________ 181

Table 24. Statistical summary of all cases instituted against the Commission, cases in which the Commission participated as intervenor or amicus curiae, and reorganization cases on appeal

under chapter X in which the Commission participatedpending during the fiscal year ended June 30,1948_________ 181

Table 25. Injunctive proceedings brought by Commission, under the

Securities Act of 1933, the Securities Exchange Act of 1934,

the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, and the Investment Advisers

Act of 1940, which were pending during the fiscal year ended June 30, 1948___ _ __ _ ___ _ __ _ __ _ _ _ __ _ __ _ _ _ __ _ _ __ __ _ _ __ _ _ _ 182

Table 26. Indictments returned for violation of the acts administered by

the Commission, the Mail Fraud Statute (sec. 338, title 18,

U. S. C.), and other related Federal statutes (where the

Commission took part in the investigation and development

of the case) which were pending during the 1948 fiscal year ____ 185

Table 27. Petitions for review of orders of Commission under the Securities

Act of 1933, the Securities Exchange Act of 1934, the Public

Utility Holding Company Act of 1935, and the Investment

Company Act of 1940, pending in circuit courts of appeals

during the fiscal year ended June 30,1948_________________ 190

Table 28. Civil contempt proceedings pending during the fiscal year ended June 30, 1948__ __ _ __ __ __ _ _ __ _ _ __ _ ___ ___ _ _ __ _ __ _ __ _ _ _ 192

Table 29. Cases in which the Commission participated as intervenor or as amicus curiae, pending during the fiscal year ended June 30,

1948__________________________________________________ 193

Table 30. Proceedings by the Commission, pending during the fiscal year

ended June 30, 1948, to enforce subpenas under the Securities

Act of 1933 and the Securities Exchange Act of 1934________ 200
x TABLE OF CONTENTS

Page

Table 31. Actions to enforce voluntary plans under section 11(e) to comply with section 11(b) of the Public Utility Holding Company Act of 1935 201

Table 32. Actions under section 11(d) of the Public Utility Holding Company Act of 1935 to enforce compliance with Commission's

order issued under section 11(b) of that act 203

Table 33. Reorganization cases under chapter X, pending during the fiscal

year ended June 30, 1948, in which the Commission participated

when appeals were taken from district court orders; _________ 203

Table 34. Cases involving statutes administered by the Securities and

Exchange Commission-July 1, 1947 through June 30, 1948:

Part 1. Securities Act of 1933___________________________________ 207

Part 2. Securities Exchange Act of 1934__________________________ 207

Part 3. Public Utility Holding Company Act of 1935______________ 208

Part 4. Trust Indenture Act of 1939 and Investment Company Act

of 1940______________________________________________ 209

Table 35. A 15-year summary of criminal cases developed by the CommisslOn-1934 through 1948, by fiscal year __ __ _______ 209

Table 36. A 12-year summary of criminal cases developed by the Commission which are still pending-1937 through 1948, by fiscal

year__________________________________________________ 210

Table 37. A 15-year summary classifying all defendants in criminal cases developed by the Commission-1934 to July 1, 1948________ 210

Table 38. A 15-year summary of all injunction cases instituted by the

Commission-1934 to July 1,1948, by calendar year________ 211
FOREWORD

This is the fourteenth annual report to the Congress about the work

of the Securities and Exchange Commission. Of necessity it is only

a summary and a selection of the more significant Commission activities. The day-to-day work load is presented primarily through statistical tables and other condensed compilations. The Commission is

always ready to give any additional information that may be requested.

This report should be of particular help to members of the Congress

who have had no experience with the work of the Commission. An

attempt has been made to outline the regulatory provisions of the

statutes administered by the Commission and to relate each segment

of Commission activity to the specific authority under which it is

performed.

Xl
COMMISSIONERS AND STAFF OFFICERS

(as of January 15,1949)

Commissioners

Term expires

June 5-

EDMONDM. HANRAHAN, of New York, Chairman' 1952

ROBERTK. MCCONNAUGHEY,of Ohio 1949

RICHARDB. McENTIRE, of Kansas 1953

HARRYA. McDoNALD, of Michigan 1951

PAUL R. ROWEN, of Massachusetts 2 1950

Secretary: ORVALL. DuBOIS.

Staff Officers

BALDWIN B. BANE, Director, Division of Corporation Finance. ANDREW

JACKSON,Associate Director.

MORTONE. YOHALEM,Director, Division of Public Utilities. SIDNEYH. WILLNER,Associate Director.

EDWARD H. CASHION, Director, Division of Trading and Exchanges."

ANTHONH. LUND, Associate Director.

ROGERS. FOSTER,General Counsel. Loms Loss, Associate General Counsel.

MWHAELE. MOONEY,Director, Division of Opinion Writing.'

WALTERC. LOUCHHEIM,Jr., Adviser on Foreign Investments.

NATHAN D. LoBELL, Adviser to the Commission.

SHERRYT. McADAM, Jr., Assistant to the Chairman.

EARLEC. KING, Chief Accountant of the Commission.

HASTINGS P. AVERY,Director, Division of Administrative Services.

\VILLIAM E. BECKER,Director, Division of Personnel.

JAMES J. RIORDAN,Director, Division of Budget and Finance.

1Elected chairman on May 18, 1948.

2 Appointed May 27, 1948, to fill the vacancy created by the resignation of James J. Caffrey.

3 Appointed to fill the vacancy created by the resignation of James A. Treanor.

'Appointed to fill the vacancy created by the resignation of Herbert B. Cohn;

xn
REGIONAL AND BRANCH OFFICES

Regional Administrators

Zone I-PETER T. BYRNE,Equitable Building (Room 20(6), 120 Broadway,

New York 5, N. Y.

Zone 2-PHILIP E. KENDRICK,"Post Office Square Building (Room 501), 79

Milk Street, Boston 9, Mass.

Zone 3-WILLIAM GREEN,Atlanta National Building (Room 322), Whitehall

and Alabama Streets, Atlanta 3, Ga.

Zone 4-CHABLES J. ODENWELLER,Jr., Standard Building (Room 1608),

1370 Ontario Street, Cleveland 13, Ohio.

Zone 5-THOMAS B. HART,Bankers Building (Room 630), 105 West Adams

Street, Chicago 3, Ill.

Zone 6-ORAN H. ALLRED,United States Courthouse (Room 103), 10th and

Lamar Streets, Fort Worth 2, Tex.

Zone 7-JOHN L. GERAGHTY,Midland Savings Building (Room 822), 444

Seventeenth Street, Denver 2, Colo.

Zone 8---HOWARDA. JUDY,Appraisers Building (Room 308), 630 Sansome

Street, San Francisco 11, Calif.

Zone 9-DAY KABB,1411 Fourth Avenue Building (Room 810), Seattle 1,

Wash.

Zone lo-E. RUSSEL KELLy, O'Sullivan Building (Room 2410), Baltimore

2, Md.'

Branch Offices

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

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

Street, Los Angeles 12, Calif.

Pioneer BUilding (Room 400), Fourth and Roberts Streets, St. Paull, Minn.

Wright BUilding (Room 327), Tulsa 3, Okla.

United States Courthouse and Custom House (Room 1006), 1114 Market

Street, St. Louis 1, Mo.

Appointed to fill the vacancy created by the appointment of Paul R. Rowen to the

Commission. eMoved to 425 Second Street, N. W., Washington 25, D. C.

XIII

•
COMMISSIONERS APPOINTED DURING FISCAL YEAR

PAUL R. ROWEN

Mr. Rowen was born in Brighton, Mass., October 7, 1899. He received an A. B. degree from Georgetown University in 1921, attended Harvard Law School from 1921 to 1924, received an LL. B.

degree from Boston University Law School in 1925,and was admitted

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

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

to 1936he served successively as assistant district attorney in Boston,

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

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

Rowen was appointed regional administrator of the Commission's

Boston regional officeand served in that capacity for over 6 years. On

May 27,1948, he was appointed to the Securities and Exchange Commission for a term of officeending Jnne 5, 1950.

XIV
PART I

ADMINISTRATION OF THE SECURITIES ACT OF 1933

The Securities Act of 1933is designed to prevent fraud in the sale

of securities. It affords to investors the protection of full and fair

disclosure of information about the security offered for sale and, at

the same time, prohibits the employment of certain practices in connection with the sale of securities as fraudulent. The act provides

for the registration of securities and for the use of a prospectus in

their sale, both designed to provide the investor with sufficient facts

about the security to enable him to make an informed judgment of

the merits of the investment before he buys the security offered to

him. In addition, the act defines and prohibits certain practices to

prevent active fraud, misrepresentation, and deceit in the sale of

securities. The Commission IS charged with the enforcement of these

provisions as to the adequate disclosure of information and the prevention of active fraud, but it does not pass upon the merits of securities registered with it under the act. The fact that a registration

statement has been filed under the act, or that it has been examined by

the Commission's staff, or that the registration statement is in effect

does not imply any approval or disapproval by the Commission of

the security as an investment. The act does not aim at the elimination

of risk in investment, but only at the disclosure of sufficientinformation to enable the investor to measure the risk involved.

THE REGISTRATION PROCESS

The Registration Statement and Prospectus

A security may be registered with the Commission by filing a registration statement with the Commission, and it is one of the Commission's most important functions under the act to examine these

statements to insure their compliance with the statutory requirements

as to the contents of a registration statement. An integral part of

each statement is the prospectus, consisting of pertinent information

about the security to be sold. Unless a registration statement is in

effect as to a security, the act makes it unlawful to sell or offer to buy

the security through the mails or in interstate commerce, and it is

also made unlawful thereby to sell or deliver any security unless accompanied or preceded by a prospectus meeting the requirements of

the act.

The prospectus brings the pertinent information about the security

directly to the attention of the investor, but it should be pointed out

that the filing of any registration statement, which is immediately

made public by the Commission pursuant to the statute, instantly

gives rise to widespread publicity released by financial news services,

financial writers, and newspapers generally.

Effective Date of Registration Statement

In order to permit widespread publicity among investors of the

information contained in a registration statement, the act provides

1
2 SECURITIES AND EXCHANGE COMMISSION

for a 20-day waiting period after the filing of the registration statement before the registration statement becomes effective and the

security may be offered for sale. If the registration statement is

amended after it is filed but before it has become effective, the 20-day

waiting period starts anew from the time of the amendment, unless

the amendment is filed with the consent of or by order of the

Commission.

The Commission is empowered at its discretion to accelerate the

effective date of a registration statement, in cases where the facts

justify such acceleration, so that a fu1l20-day period need not expire

before the securities may be offered for sale. The act directs that,

in the exercise of this power, the Commission must give due regard

to the adequacy of the information about the security already available to the public, to the complexity of the particular financing, and

to the public interest and the protection of investors.

Examination oC Registration Statements

An important step in the registration process is examination of

registration statements to insure their compliance with the requirements of the act. In view of the fact that a registration statement

may becomeeffective on the twentieth day after filing, this examination

must be completed with a maximum speed consistent with thoroughness and a full consideration of all the facts. Neither the Commission,

the issuer, nor the underwriter desires a statement to become effective

unless it complies with the act. Itis often the case that the staff will

ascertain that deficiencies exist in the registration statement, or the

issuer or underwriter may wish to amend the statement or delay its

effectiveness for business reasons. In such cases, if there is a danger

that the registration statement may become effective in defective form

or prematurely for the purposes of the issuer or underwriter, it is

customary for the issuer to file a minor amendment to the registration

statement, thereby starting the 20-day period running anew.

In order to speed the registration process, and at the same time to

make available to the registrant the assistance of the Commission's

staff of experts, the Commission has continued to make widespread

use of the procedures of its prefiling conference and "letter of comment." The prefiling conference enables the registrant to discuss with

the staff, prior to the filing of the registration statement, any special

or novel problems involved in the particular registration statement.

The letter of comment is an informal device by which the registrant

is informed of any deficiencies found upon examination to exist in

the registration statement as filed. The registrant can thereupon

make the necessary amendments and thereby prevent the registration

statement from becoming effective in deficient form.

Time Required CorRegistration

The Commission seeks to accomplish completion of the registration

process, from the time the registration statement is filed to the time

when it becomes effective, within the 20-day waiting period provided

by the act. With the cooperation of persons in the securities industry

it constantly studies ways to shorten the process, and a great deal has

been accomplished in this direction during the 1948fiscal year. During the 1947 fiscal year the average median elapsed time was 30lh

days. In the 1948fiscal year it was 24% days.
FOURTEENTH ANNUAL REPORT 3

More significant than the average for the year are the averages for

each month during the 1948fiscal year. In 1 month the elapsed median

time was only 21 days. In 4 months it was only 22 days, in 1 m0I?-th

23 days and in 2 months 24 days. In the other 4 months the median

time was 25, 27, 30, and 32, respectively. It is to be noted that in

no month did the median time from the date of filing to the date

when the Commission provided the registrant with a letter of comment

exceed 12 days, which was the case in only 1 month. In the other

months, this median time was only 9 days in 2 months, 10 days in

7 months, and 11 days in 2 months. It may be pointed out that in

the 2 months when the total median elapsed time was 30 and 32 days,

respectively, the letter of comment was provided in the median time

of 11 and 12 days, respectively. In the same months, the median

elapsed time from the date of the letter of comment to receipt of

the first amendment to the registration statement was 12 and 10 days,

.respectively, substantially above the average for the whole year,

which was 8.4 days.

In evaluating this data, and in comparing it with the goal of 20

days total elapsed time, it must be borne in mind that a single registration statement may substantially affect the figures for the whole

month. Thus, as has been indicated, the issuer or underwriter may

seek to delay effectiveness for business reasons, perhaps to await a

better market. It is also the case that some registration statements

require more amendment than others, or amendment of a more complex

nature, so that the total elapsed time is increased. These are the two

major reasons for a total elapsed time of more than 20 days, and inasmuch as these situations occur invariably in one or more cases in each

month, the median figures must be interpreted accordingly. In the

1948 fiscal year 1,778 amendments were filed prior to the time when

the registration statements became effective. Of these 980 were filed

intentionally to delay effectiveness and 798 were filed in order to make

material changes in the registration statement.

The Commission will continue to study its processes with the aim

of further reductions in the total elapsed time for registration, and

it has every indication that this may be accomplished. The figures as

to the time required for registration in the 1948 fiscal year are presented in the following-table:

Time elapsed in registration process-1948 fiscal year

1947 1948

July Aug Sept Oct. Nov. Dec Jan. I Feb Mar. Apr. May June -- -- -- -- -- ---- Total registration state- ments e1Ieetive during month (number) _______. 44 15 39 44 50 43 29 25 43 37 38 39 Elapsed time (median number of days): From date of filmg registration state- ment to first letter of comment. __________ 10 12 10 9 10 11 11 9 10 10 10 10 From date of letter of comment to first

amendment by reg- istrant ______________ 7 10 8 7 7 12 7 14 7 8 7 7 From date of first

amendment to the

effective date ofreg- istration. ___________ 6 10 6 5 5 7 4 4 5 7 7 5

Total median -- --

elapsed time 21 (days) __________ 23 32 24 22 30 22 27 22 25 24 22

813892-49--2
4 SECURITIES AND EXCHANGE COMMISSION

THE VOLUME OF SECURITIES REGISTERED

Volume of All Securities Registered in Fiscal Year

1948 1947

Total registered $6,404,633,000 $6,732,447,000

The amount of securities effectively registered during the 1948 fiscal

year was 5 percent less than the amount registered in the 1947 fiscal

year and 9 percent less than the peak of $7,073,280,000established in

the 1946 fiscal year.

The volume registered in the 1948 fiscal year was distributed over

435 1 registration statements covering 559 issues, as compared with

493 statements covering 68()issues for the 1947 fiscal year.

V''llume of Securities Registered for Cash Sale

$4,874,141,000

A. ALL SECUIUTIES

1948

Registered

for cas h

sale for ac- counts of

issuers $5, 032, Hl!l,000

Registered

for cas h

sale for accounts of

others than

issuers 209, 102, 000

Total registered for

cash sale $5,241,301,000

Total registered for

other than cash sale., 1, 163, 332, 000

Total of all registered

securities $6,404, 633, 000

1947

3!l7,029, 000

$5,271,170,000

1,461,277,000

$6,732,447,000

B. RTOC!U; .\XD noxns HEGISTERED FOR CAF>H S.\LE FOR THE ACCOUNTS

OF IF>SITEUF>

19}8

Ef)uit~. ser-urities other

than prefr-rred stock $1, 678, 127, 000

I'rpfelTed

stock 336, !l42,000

Total all stock_______ $2,215,069,000

All bonds____________ 2,817,130,000

Total $3,032,19!l,OOO

1947

$1,130,330,000

786,866,000

$1,937,196,000

2,936,945,000

$4,874,141,000

The volume of securities registered for cash sale for the accounts of

the issuers in the 1948 fiscal year was greater than that for the prior

year. A small decrease in the volume of bonds was more than compensated for by an increase in the volume of stocks which brought the

volume of stocks to within 5 percent of the highest volume of stocks

'Tins ficut I' dllfe", from the 440 shown in the table on \l R due to difference in the

classification as to the time of effectiveness of registration statements. See footnote 2 to appendix table 1 for details.
FOURTEENTH ANNUAL REPORT 5

registered for cash sale for the accounts of issuers in the 1946fiscal year.

From September 1934through June 1947,new money purposes represented 26 percent of the net proceeds expected from the sale of

issues registered for the accounts of the issuers. In the 1948 fiscal

year, new money purposes were 81 percent of the expected net proceeds

for the year-large enough to raise the 14-year average over seven

points to 33 percent,"

C. ALL SECURITIES REGISTERED :FORC.\SH SALE :FORTHE .\CCOUNTS OF

ISSUERS-BY TYPE OF ISSUER

'l'ype Of iseuer 19~8

Transportation and communication companies '_ $1,674, G28, 000

Electric, gas, and water compallies___________ ],606,551,000

Manufacturing companies____________________ 872,471,000

Financial and investment companies__________ 780,542,000

Alerchandising companies____________________ 51,333,000

Extractive companies________________________ 26,238,000

Service cornpanies___________________________ 20,498,000

Construction and real estate companies______ 39,000 Foreigngovernrnents

19~7

$1,190,814,000

1,214,346,000

1,266,055,000

714,529,000

201,373,000

15,685,000

16,109,000

8,125,000

247,105,000

Total S;:;, 032, 1BD,O:JO $-1,Xi.!. 14],000

'Does not include companies subject to regulation by the Irrtei state Commerce Commission and therefore exempted from registration.

Registrations of securities for cash sale by transportation and communication companies in the 1948 fiscal year established a new high

for the gronp exceeding by 41 percent the previous high established

III the 1947 fiscal year, and accounted for a third of the total. The

amonnt of such registrations by the electric, gas, and water group,

almost equal to that for the transportation and communication group,

represented an increase of 32 percent from its amount for the 1947

fiscal year. Financial and investment companies registered 9 percent

more and manufacturing companies 31 percent less than in the 1947

fiscal year. Bonds of the International Bank for Reconstruction and

Development are included in the figures for the financial and investment companies group.

D. USE OF INVESTMENT BANKERS AS TO SECURITIES REGISTERED FOR CASH

SALE :FORTHE ACCOUNTS OF ISSUERS

1948 1947

Amount registered to be sold through investment bankers:

Under a g r e e

ments to purchase for re- sale_________ $3, 016, 544, 000 $3,333, 621, 000

Under agreements to use

"best efforts"

to seIL______ 759, 791, 000 697, 123, 000

Total registered to be sold

through investment bankers; $3, 776, 335, 000

Total registered to he sold

directly to Investors b)' is- suers 1,255,865,000

Total $5,032,199,000

2 See also appendix table 1, part 3.

$4,030,744,000

843,397,000

$4,874,141,000

_

-
6 SECURITIES AND EXCHANGE COMMISSION

In the 1948 fiscal year, investment bankers were used for the sale

of 75 percent of the total securities registered for cash sale for the

accounts of issuers as compared with 83 percent in the 1947fiscal year.

Commitments by investment bankers to purchase for resale involved

60 percent of the total registered for cash sale for the accounts of

issuers, as compared with 68 percent in the 1947 fiscal year,"

E. COST OF FLOTATION OF SECURITIES REGISTERED FOR CASH SALE FOR THE

ACCOUNTS OF ISSUERS

The cost of flotation of securities registered for primary cash distribution, as reported in the registration statements for such securities,

amounted to 6.1 percent of the aggregate dollar volume of such securities. A further break-down of this 6.1 percent indicates that 5.5

percent represented commissions and discounts and 0.6 percent all

other expenses incidental to the flotation of the securities, including

all costs relative to registration. A study of the portion of aggregate

gross proceeds paid as compensation to investment bankers on securities registered for sale to the general public through such bankers

reveals a downward trend for bonds but a sharp interruption of the

downward trend for preferred stock in the 1948 fiscal year and a

slightly higher rate for common stock in 1948than in the five previous

years.

Compensation-Percent Of gross proceeds

Year endedJune 30 Bonds Preferred Common

stock stock

1939_________________________________________________________________ 2. 0 6. 4 16. 9 1940_________________________________________________________________ 1. 9 7. 2 16. 4 1941_________________________________________________________________ 1. 8 4- 1 14- 4 1942_________________________________________________________________ 1.5 4- 1 10. 1 1943_________________________________________________________________ 1.7 3. 6 9. 7 1944_________________________________________________________________ 1.5 3. 1 8. 1 1945 1. 3 3. 1 9. 3 1946_________________________________________________________________ 9 3. 1 8. 0 1947 9 2. 8 9. 3 1948.. _#--- 6 4. 5 10. 2

In general, a trend similar to that noted in the table may be noted

with respect to bonds, subdivided on the basis of the investment risk

involved,"

ALL NEW SECURITIES OFFERED FOR CASH SALE.

Registered Securities

Securities effectively registered under the Securities Act of 1933 and

actually offered for cash sale during the 1948 fiscal year were at

approximately the same level as the preceding year. The amounts

of such offerings, valued at actual offering prices, are as follows: 6

See appendix tables 1 and 2 for a more detailed break-down of the dollar volume of

Securities Act registrations. Details of these data are to be found in part 2 of table 2 of this report and of the

Eleventh and Nmth Annual Reports See appendix table 3 for a detailed statistical break-down of the volume of all securities

offered for cash sale in the United States. Footnote 1 of that table gives a description of

the statistical series. eThe figures given in this section exclude securities sold through continuous offering, such as issues of open-end investment companies and employee-purchase plans, because

complete data on sales of these securities are not currently available.

______________________________________• __________________________

________________________________________________________________•

______------------------------- --- - -- -- -- --------- --------

•

•

•
FOURTEENTH ANNUAL REPORT 7

1948 1947

Corporate (excluding investment cos.) $3, 758,000,000 $3, 733,000,000

Noncorporate (foreign gov't and Int'l Bank) __. 249,000,000 247,000,000

Total registered securities offered $4,007,000,000 $4,080,000,000

Unregistered Securities

CORPORATE

Some $3,332,000,000 of unregistered new corporate securities are

known to have been offered for cash sale by issuers in the 1948 fiscal

year as compared with $2,529,000,000 in the 1947 fiscal year. The

basis for exemption of these securities from registration is as follows: 7

Basis for exemption from registration: 1948

Privately placed issues $2,701,000,000

Railroads and other common carriers_____ 451,000,000

Commercial bank issues__________________ 24,000,000

Intrastate offerings_____________________ 8,000,000

Offerings under regulation A ____________ 141,000,000

Other exemptions_______________________ 7,000,000

1947

$2,058,000,000

292,000,000

26,000,000

9,000,000

143,000,000

1,000,000

1947

$10,264,000,000

140,000,000

1,977,000,000

6,000,000

Total $3,332,000,000 $2,529,000,000

1 Includes only offerings between $100,000 and $300,000 in size. See p. 9 for a more detailed discussion of Regulation A offers.

NONCORPORATE

The total of unregistered governmental and eleemosynary securities

offered for cash sale in the United States was $11,897,000,000 as compared with $12,387,000,000 in the 1947 fiscal year. These totals consist

of the following:

Issuer: 1948

United States Government $9,349,000,000

Federal agencies_______________________ 0

States and municipalities________________ 2,544,000,000

Miscellaneous nonprofit organizations.L,., 4,000,000

Total $11,897,000,000 $12,387,000,000

Total of Registered and Unregistered Securities

The volume of all corporate securities offered for cash sale rose to

$7,090,000,000 in the 1948 fiscal year, the increase from the preceding

year being due chiefly to the larger amount of securities placed privately. Offerings in the noncorporate category declined moderately,

reflecting a substantial decline in sales of United States savings bonds

more than offsetting an increase in State and municipal offerings.

Comparable figures for the 1948 and 1947 fiscal years are:

1948 1947 Corporate $7,090,000,000 $6,262,000,000

Noncorporate 12,146,000,000 12,634,000,000

Total securities $19,236,000,000 $18,996,000,000

New Capital and Refinancing

Proceeds from corporate securities flotations, both registered and

unregistered, applicable to expansion of fixed and working capital

amounted to $5,638,000,000 compared with $4,066,000,000 for the 1947

r Where a security may have been exempted from registration for more than one reason, the security was counted only once.

'
8 SECURITIES AND EXCHANGE COMMISSION

fiscal year. It is estimated that the dollar volume of new money

financing by corporations, excluding investment trusts, holding companies, and other financial organizations, is at the highest level in our

history, exceeding even the large amount of new capital flotations in

the late twenties. Public utility companies (including telephone)

accounted for 50 percent of the new money financing, industrial and

miscellaneous firms for 44 percent, and railroad companies for 6 percent. The volume of refinancing through new issues of securities

declined to $1,130,000,000compared with $2,055,000,000for the 1947

fiscal year and $5,310,000,000for the 1946fiscal year."

REGISTRATION STATEMENTS FILED

There were 449 registration statements filed in the 1948 fiscal year

covering proposed offerings in the aggregate amount of $6,149,704,288.

The corresponding figures in the previous year were 567 statements

and $6,934,388,303in offerings of securities. Comparative figures as to

statements filed and their disposition, and data as to other filings with

the Commission under the act, are given in the tables below.

Number and disposition o] reoistration. statements {iled

Prior to July July I, 1947, Total as of 1, 1947 to June 30, 1948 June 30, 1948

Registration statements FIled _______________________________________________ 7,139 449 7,588

Effectlve ____________________________________________ 5,825 1440 26,258 Under stop or refusal order. ________________________ 181 2 1182 Wtthdrawn _________________________________________ 1,036 57 1,093 Pending June 30,1947 97 ... Pending June 30, }f'48 55 Aggregate dollar amount: $46,688,527,742 $6,149,704,288 As filed _____________________________________________ $52, 838, 232, 030 As effective _________________________________________ $42,375,702,846 $6, 404, 633, 217 $48, 780, 336, 063

I Excludes 6 rejnstration statement, which became ettective and were subsequently withdrawn. 2 Two registration statements which hecame effective prior to July I, 1947, were placed under stop order and 5 regrstration statements which became effective prior to July I, 1947, were withdrawn and are counted

in stop orders and withdrawals, respectively 3 One registration statement which was under stop order prior to July I, 1947, was withdrawn during the

year and IS counted m the number of withdrawn statements.

Additional documents {iled in the 1948 fiscal year under the act

Number

Material amendments to registration statements filed before the effective

date of registration_________________________________________________ 798

Formal amendments filed before the effective date of registration for the

purpose of delaying the effective date________________________________ 980

Material amendments filed after the effective date of registration_______ 565

Total amendments to registration statements 2,343

Supplemental prospectus material, not classified as amendments to regis- tration statements 1,131

Reports filed under section 15 (d) of the Securities Exchange Act of lll34

pursuant to undertakings contained in registration statements under the

Securities Act of 1933 : Annual reports -------------_____________________________ 680

Current reports__________________________________________________ 298

See appendix table 4 for statio-tics in greater detail as to the 'IFe of net proceeds from

the sale of securities.

_______________________________ ---------------- --------- ------ _______________________________ -~-------------- ----------------

•
FOURTEENTH ANNUAL REPORT 9

A break-down showing the number and dollar amount involved in

statements filed during each of the last four 6-month periods appears

below:

6-month period

July-December 1946.

January-June 1947_. July-December 1947

January-June 1948

306 $3, 170, IRI, 321

261 3, 764,206,982

230 3.095, 915,944

219 3, 053, 788,344

EXEMPTION FROM REGISTRATION UNDER THE A(.'T

The Commission is empowered under section 3 (b) of the act to

exempt from registration, subject to such terms and conditions as it

might prescribe by rule and regulation, issues of securities not exceeding an aggregate offering price to the public of $300,000. Five

regulations have been adopted pursuant to this authority: Regulation

A, a general exemption for small issues; regulation A-R, a special

exemption for notes and bonds secured by first liens on family dwellings; 9 regulation A-M, a special exemption for assessable shares of

stock of mining companies; regulation B, an exemption for fractional

undivided interests in oil or gas rights: and regulation B-'1', an exemption for interests in oil royalty trusts or similar types of trusts or unincorporated associations.

The availability of an exemption under any of these regulations

does not include any exemption from civil liabilities under section 1:2

or from criminal liabilities for fraud under section 17. In order to

insure the proper enforcement of these sections, the conditions for

the availability of the exemptions provided by these regulations, with

the exception of regulation A-R, include the requirements that certain

minimum information be filed with the Commission and that disclosure of certain information be made in sales literature.

Exempt Offerings Under Regulalion A

The trend of business to make greater use of public offerings under

regulation A continued during the fiscal year. In the 1948 fiscal year

1,610 letters of notification were filed and examined under the regulation, compared to 1,513in the 1947fiscal year. At the same time the

aggregate offering price of the securities covered by these letters of

notification remained about the same, decreasing slightly from

$210,791,114in the 1947 fiscal year to $209,485,794in the 1948 fiscal

year. A major increase is noted in connection with companies engaged

in the oil and mining industries. Companies engaged in various

phases of the oil and gas business filed 101 letters of notification in

the IV48fiscal year for a total of $12,797,478in securities and oil and

gas leases. In"the 1947 fiscal year they filed 68 letters of notification

for $8,660,261. Mining companies filed 181 letters of notification in

the 1948fiscal year for a total of $18,594,453in securities.

The relative size of proposed offerings last year under regulation A

is reflected in the following distribution of 1,594letters of notification

Inasmuch as no reports or filings are required under this regulat lon, no stn t lst lca l data as to its application and use are uvatlabte.

_

_

_ --- _

•
10 SECURITIES AND EXCHANGE COMMISSION

(omitting data as to 16 which were incomplete and subsequently withdrawn) : First group, 851 of $100,000 or less; second group, 324 of

more than $100,000 but less than $200,000; and third group, 419 of

more than $200,000 but not more than the statutory maximum of

$300,000. Of these 1,594 offerings, 1,392 were made by issuers, distributed generally through all size groups; 186 by stockholders, all

occurring in the first group; and the remaining 16 jointly by the issuer

and a stockholder.

In930 cases the offerings were to be made without use of an underwriter. .An underwriter was to be used in the remaining 664 cases.

Of these, a commercial underwriter was to be employed in 486 cases,

distributed by size as follows: First group, 262; second group, 84;

and third group, 140. In 178 cases officers and directors of the issuer

or other persons not regularly engaged in the underwriting business

were to be used as underwriters.

The regulation makes provision for the filing of the requisite letter

of notification at the appropriate regional officeof the Commission for

the greater convenience of small businesses making use of this regulation. The letters of notification and the related sales literature are

examined in the regional office where filed and then reviewed by a

staff of experts at the Commission's central office. This review involves a search for pertinent information in the Commission's extensive files and an examination to determine whether the exemption of

the regulation is applicable in the particular case and whether the

information filed discloses any violations of any of the acts administered by the Commission. The results of this review are made available promptly to the regional officeinvolved; 1,916letters were written

in this connection during the fiscal year!. in addition to the numerous

letters written by the various regional otnces,which have the primary

responsibility as to offerings under regulation A. Further, the Commission cooperates with the proper authorities in the States in which

the securities are proposed to be offered by informing them of the fact

that the offering is to be made and giving them a summary of pertinent

data concerning the proposed offer.

Itshould be emphasized that the exemption from registration provided by regulation A, as well as by the other exemptions granted

under section 3 (b), does not constitute complete exemption from all

provisions of the act. Thus, these exemptions are subject to the express

provisions of section 12 imposing civil liability on persons who sell

securities in interstate commerce or through the mails by means of

untrue statements or misleading omissions, and to the provisions of

section 17, which makes it unlawful to sell securities by such means

or by other types of fraud. By their express terms, each of these sections is applicable whether or not the transactions involve securities

which have been exempted under section 3 (b). Accordingly, the

principal effect of a section 3 (b) exemption is to permit the sale of

small issues of securities on the basis of a less complete formal filing

than that required by the act in the case of a registered security.

Exempt Offerings Under Regulation A-M

Last year the Commission received and examined a total of seven

prospectuses covering an aggregate offering price of $241,34:6for assessable shares of stock of mining corporations conditionally exempted

from registration pursuant to rule 240 of regulation A-M.
FOURTEENTH ANNUAL REPORT 11

Exempt Offerings Under Regulation B

Promotions in oil and gas securities increased considerably during

the past year. This expansion is reflected especially in the sharp

increase in the number of filings under regulation A which cover oil

and gas stock offerings as mentioned above. In addition to the 101

offerings in the 1948fiscal year under regulation A relating to oil and

gas securities, 87 offering sheets were received and examined under

regulation B. Regulation B provides :for the conditional exemption

from registration of fractional undivided interests in oil and gas rights

where the aggregate offering price does not exceed $100,000. The following actions were taken with respect to these offering sheets:

Various actions on filings under regulation B:

Temporary suspension orders (rule 340 (a) )_______________________ 18

Orders terminating proceeding after amendmenL___________________ 11

Orders consenting to withdrawal of offering sheet and terminating proceeding_____________________________________________________ 2

Orders terminating effectiveness of offering sheet (no proceeding pending)_______________________________________________________ 3

Orders consenting to amendment of offering sheet (no proceeding pending) 44

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

Total orders_______________________________________________ 80

Oonfidential written reports of sales under regulation B.-Offerors

seeking exemption pursuant to regulation B are required under rules

320 (e) and 322 (c) and (d) to file with the Commission written

reports of sales actually made by broker-dealers or offerors to individual investors and by dealers to other dealers. In the 1948 fiscal

year 3,088 reports were received and examined under these provisions.

Of these, 2,990 reports were on Form 1-G and 98 on Form 2-G, representing aggregate sales of $823,259 and $264,608respectively. These

reports are to be kept confidential, under the rules, unless the Commission orders otherwise.

Oil and gas investigations.-The Commission's technical oil and gas

staff made a number of analytical studies in the course of the year

leading to the preparation of valuation estimates and technical memoranda, including the preparation of comprehensive charts relating

estimated oil recoveries to past production of interests sold by royalty

dealers, both for individual tracts and entire fields covering such tracts

in various locations :from the Great Lakes to the Gulf of Mexico.

Studies of this kind form a significant part of the staff's work in conducting the oil and gas investigations which are made to determine

whether there have been any violations of sections 5 (requiring registration) or 17 (prohibiting :fraudulent sales) of the Securities Act or

section 15 of the Securities Exchange Act (regulating the conduct of

brokers and dealers) in the sale of oil and gas securities.

During the year 13 such oil and gas investigations were instituted by

the Commission, making a total of 143 current during the year; 12

investigations were closed during the year and 131 were pending at

the end of the year. In connection with these investigations, the Commission's staff prepared some 1,175 technical letters, reports, and

memoranda, and conducted nearly 250 personal and telephone conferences during the year, In addition, a special unit which has been
12 SECURITIES AND EXCHA..l'oWECOMMISSION

established within the Tulsa regional officeprepared about 650 such.

letters, reports, and memoranda.

Four of these investigations led to an injunction against the persons

concerned from violating the registration and fraud provisions of the

Securities Act. In a fifth case the facts were referred to the Department of Justice for 'possible criminal prosecution. An indictment has

been returned in a sixth case.

An example of the manner in which the Commission is sometimes

called upon to render technical assistance in litigation arising out of

these oil and gas investigations may be cited in the Grayson case,

which involved the sale of oil royalties. Stanley Grayson had been

convicted in the United States District Court, Southern District, New

York, in early 1947and had entered an appeal. Before the hearing on

the appeal, a petroleum engineer of the Commission's staff was called

upon to advise the assistant United States attorney as to whether, in

view of the sharp increase in the price of oil, the interests sold by Grayson might return the original investment. After the circuit court of

appeals had remanded the case for retrial, this engineer made a 3-week

field trip to reexamine physically certain of the oil properties involved

and to locate witnesses who could furnish primary factual evidence.

The assistant United States attorney accompanied the Commission's

engineer on a part of this trip and was convinced that, notwithstanding

the greatly increased price of crude oil, the properties in which interests had been sold by Grayson would not produce sufficientoil to return

the investment. Grayson pleaded guilty rather than face retrial and

was sentenced on June 8, 1948, to a year and a day in prison, and he

was placed on probation for a period of 3 years after release from

imprisonment during which time he is prohibited from engaging in

any manner in the sale of securities.

FORMAL ACTIONS UNDER SECTION 8

The Commission employs its various informal procedures, such as

conferences and the letter of comment, to insure that a registration

statement shall comply ...vith the requirements of the act before it

becomes effective. In almost all cases this practice has been found

to be sufficientboth for the needs of the registrant and for the adequate

protection of investors. It is sometimes necessary, however, for the

Commission to exercise its powers under section 8 in order to prevent

a registration statement from becoming effective in deficient or misleading form or to suspend the effectiveness of a registration statement which has already become effective.

Under section 8 (b) the Commission may institute proceedings to

determine whether it should issue an order to prevent a registration

statement from becoming effective. Such proceedings are authorized

if the registration statement as filed is on its face inaccurate or incomplete in any material respect. Under section 8 (d), proceedings may

be instituted at any time to determine whether the Commission should

issue a stop order to suspend the effectiveness Of a registration statement if it appears to the Commission that the registration statement

includes any untrue statement of a material fact or omits to state

any material fact required to be stated or otherwise necessary to make

the statements included not misleading. Un~er section 8 (e) the
FOURTEENTH ~~UAL REPORT 13

Commission may make an examination to determine whether to issue

a stop order under section 8 (d).

In the 1948 fiscal year the Commission instituted two examinations

under section 8 (e) and one proceeding under section 8 (d). In the

1947 fiscal year seven examinations and five proceedings were instituted.

Examinations Under Section 8 (e)

Where examinations are conducted by the Commission under section 8 (e) it is the practice to direct that the proceedings be held

privately to prevent any injury that might be done to a registrant

through adverse publicity if, after the examination, it is determined

that no violation of law has been committed. The Commission does,

however, have the power to hold such examinations in public and may,

after the close of a private proceeding, order that the record be made

public. Both of the two examinations ordered to be held in the

current year were held in private. One of these was still pending at

the close of the year. In the second case the record of the examination

was made public."

Stop-Order Proceedings Under Seclion 8 (d)

Two stop-order proceedings were pending at the beginning of the

year and one other was instituted during the year.

Globe Aircraft Oorp.-File No. ::?-6i304.-This case was pending

at the beginning of the year and is discussed in full at page Hi of the

Thirteenth Annual Report. As a result of the proceeding the Commission issued a stop order suspending the effectiveness of the registration statement on the basis of the misleading nature. of its contents.

The formal opinion of the Commission was published in Securities

Act Release No. 3255 (1947). For a fuller discussion of this case see

the section herein on activities of the Commission in accounting and

auditing at page 108.

Kiwago Gold Mines, Ltd.-File No. :2-685:2.-This case also was

pending at the beginning of the year and is described fully at page 18

of the Thirteenth Annual Report. The Commission issued a stop order

during the year suspending the effectiveness of the registration statement. A formal opinion was published in Securities Act Release

No. 3278 (1948).

T'homasoolor,Inc.-File No. :2-7142.-Proceedings in this case were

instituted during the fiscal year. The company filed a registration

statement on July 9, 1947, relating to a proposed public offering of

1,000,000 shares of $5 par value class A common stock at a price of

$10 per share. The underwriter did not contract to purchase the

stock but only to use his best efforts in its sale. Stop-order proceedings were instituted on September 2, 1947, after extensive preliminary investigation, includmg consultation with technical experts,

into the accuracy and adequacy of the information filed in the registration statement, much of which related to complex and technical

aspects of color photography. Hearings in the matter were started

on September 16, 1947, and the record was closed on October 20, 1947.

The order for proceeding alleged that the registration statement

contained material misstatements and omissions of fact and it conreSecurities Act Release No. 3277 (1948).
14 SECURITIES AND EXCHANGE COMMISSION

tained a complete statement as to such deficiencies. Generally, they

were of four types: First, the statement of the proposed allocation of

proceeds from the sale of the stock was incomplete and inaccurate;

second, the registrant made false claims as to the technical nature of

the process it was going to exploit; third, there was a failure to make

adequate and accurate disclosure of the history of the registrant and

of the relationship of various individuals to the registrant; and

fourth, the financial statements included in the registration statement

were highly misleading in certain respects.

During the course of these proceedings the registrant admitted

that the proposed allocation of proceeds appearing in the registration

statement was incomplete and inaccurate. The amended registration

statement sets forth a complete revision in the allocation of proceeds

and contains a full discussion of their proposed application. It is

indicated that the initial proceeds of the offering will be used to pay

liabilities of the registrant, consisting primarily of organization and

stock issue expense and legal fees, estimated to exceed $300,000.

Among the claims contained in the original registration statement

thereafter admitted to be false by the registrant and deleted in the

amended registration statement were misrepresentations to the effect

that the Thomascolor process is a new system of color photography

offering many advantages over existing processes; that Thomascolor

can be employed under substantially the same conditions as ordinary

black and white photography; that the registrant proposed to exploit

first the motion-picture field; that its devices could be readily and

widely used in connection with motion picture cameras and projectors;

that its process offered great possibilities in the field of color television; and that its process had a ready market in the field of amateur

photography.

In striking contrast to these claims the record reveals and the

registration statement, as amended, discloses that the principle of

the Thomascolor process is old in the art of color photography and

has been wholly or in part abandoned or supplanted by other processes

and techniques; that the Thomascolor process requires the use of

special devices which cannot be attached to standard motion picture

cameras and projectors without substantial modifications and reengineering; that registrant's entry into the motion picture field is

conjectural because of the grave problems arising from the technical

limitations of some of its devices and the very serious economic problem arising from the necessary conversion of existing equipment; that

the registrant will devote itself principally to color printing and

publishing and still color projection; that registrant does not now

represent that its process will have any application in the field of

amateur or ordinary portrait photography; and that for the present

the registrant intends only to conduct research in the field of television and that there is no assurance that a technically or commercially feasible process will result.

The facts developed during the proceedings show that the original

registration statement did not disclose adequately and accurately the

character of the various enterprises preceding the organization of the

registrant. The record shows that the various predecessor organizations, which were controlled by Richard Thomas, who was instrumental in organizing the registrant and who controlled it, were primarily
FOURTEENTH ~AL REPORT 15

promotional and development organizations; that they had not produced on a commercial basis; and that at most they had constructed

only prototypes of a few of the devices that the registrant proposed

to market. In describing the transactions leading to the acquisition

of the assets of the predecessor interests, the registration statement

failed to make adequate disclosure of the nature of the relationships

or identity of the individuals involved or of the method of determining the amount of consideration paid for the assets and, by references to formal agreements and offers and acceptances, implied that

there had been arm's-length bargaining in the various transactions

between the three predecessor organizations and the registrant.

The financial statements contained in the registration statement,

as originally filed, were highly misleading in the disclosures and

accounting treatment of registrant's stock issued for intangibles. The

significance of this matter is evident from the fact that these intangibles amounted to $2,014,941.03out of total assets shown in the

balance sheet aggregating $2,551,583.40. The balance sheet was

amended to carry patents and patent applications at the nominal

amount of $1, and all of the remainder of the $2,014,941.03was then

displayed under the caption: "Other intangibles-Excess of par or

stated value of stock issued over net tangible assets acquired on May

20, 1947 (Note 2)." In brief, the financial statements included in the

original registration statement overstated the registrant's assets and

minimized, if it did not deliberately conceal, information that would

have fairly disclosed the true nature of the assets which the registrant

represented would be used to conduct its business.

During the course of and after the close of the hearings in the section

8 (d) proceedings, the registrant filed substantial amendments which

appeared to correct satisfactorily the material misrepresentations and

omissions. The Commission thereafter dismissed the proceedings and

issued an opinion commenting, in the public interest and for the protection of investors, upon certain facts developed in the proceedings

and discussing the Commission's action in this case and the limitation

of its jurisdiction." In this opinion the Commission also warned

the prospective investor of the danger of relying on past judgment

based on magazine articles or other earlier publicity, in view of the

admission in the proceedings that certain of such publicity contained

materially false and misleading information, and pointed out the need

for careful study of the amended registration statement and prospectus. The registration statement was permitted to become effective

after adequate dissemination of the corrected prospectus had been

made and sufficient time had elapsed since the release of the Commission's opinion. Subsequently, the registrant filed an amendment to

its registration statement for the purpose of withdrawing registration

for all but 100 shares of the stock origmally registered.

DISCLOSURES RESULTING FROM EXAMINATION OF

REGISTRATION STATEMENTS

In its examination of registration statements the staff of the Commission seeks not only to insure that the registration statement contain the information required by the act but also that the information

n Securities Act release No. 8267 (1948).
16 SECURITIES AND EXCHANGE COMMISSION

be clearly stated in a simple and not misleading manner and, to the

extent possible, that the information be accurate. Due to the experience of the staff and to the availability of information about many

companies in the Commission's extensive files, it is often possible

for the staff to detect omissions of material facts, misstatements of

material facts, and statements of minor facts made in such form as to

give exaggerated and unwarranted importance to the facts out of

proportion to their materiality. In addition, the staff may request

a more simple statement of complex information so that it might be

most readily understood by the prospective investor. In most cases

a registrant makes the necessary amendments to its registration statement. The following brief case histories are examples of the failure

of registrants to make adequate and accurate disclosure discovered by

the staff after examination of the registration statements involved.

Failure To Disclose Price Differential

A. foreign gold mining exploration and development company filed

a registration statement for 666,667shares of common stock of $1 par

value. The stock was to be offered at 42.84 cents a share. However,

the stock was listed on a foreign stock exchange, where it was then

currently quoted at approximately half of the price at which the stock

was to he offered to investors in the United States. In letters and

conferences the Commission's staff pointed out to counsel for the registrant that this wide price discrepancy raised some doubt as to whether

the registrant intended to make a bona fide offering accompanied by

full disclosure of all relevant facts. The registrant subsequently made

other arrangements for its financing and, shortly after the close of the

fiscal year, filed an application for the withdrawal of its registration

statement. This company had, in addition, failed to make adequate

disclosure of its underwriting arrangements.

Exclusion of Exaggerated Claims

A. company which intended to exploit an industrial process made

many claims in its registration statement asto the nature of the process,

its use, its application in various fields, and the availability of a

market. The registration statement was thereafter amended to show

that the process was not new, that it had been wholly or partly abandoned in favor of other processes and techniques, that the registrant

does not represent that the process would have any application in

certain fields, and that the registrant would devote itself for the

present only to research and that there is no assurance that a technically or commercially feasible process would result. This case is

described in greater detail in this report under the section discussing

stop-order proceedings under section 8, above.

Sale of Stock at Different Prices

A. foreign mining company filed a registration statement for 700,000

shares of common stock at $1 per share. The company amended its

statement to disclose, in connection with the statement of the offering

price on the cover page of the prospectus, that the offering price

had been arbitrarily determined. In addition it filed an amendment

to disclose that during the 2-year period prior to the filing of the

registration statement the company had sold the stock at from 3.4 cents

to 30 cents per share, and that during such period the price in the
FOURTEENTH ANNUAL REPORT 17

foreign over-the-counter market had ranged from 27% cents to 45

cents per share. In addition, the registrant indicated that it also knew

of subsequent sales at prices from 35 cents to 60 cents per share.

Disclosure of Speculative Hazards

A foreign mining company filed a registration statement for 333,333

shares of capital stock of $1 nominal value at an offering price of 30

cents a share. After examination of the statement by the staff the

registrant inserted under the heading "Introductory statement" a summary of the speculative and unusual aspects of the offering, so that

the registration statement now includes the disclosures mentioned

below.

The registrant has no operating history and the offering price of

30 cents a share was predicated solely upon future possibilities, as to

which no representations are made.

The proposed financing will serve only to conduct preliminary exploration which, at best, will enable the registrant to decide whether

additional exploratory work would be warranted, and, if such additional work becomes warranted, further financing will be required,

possibly to be followed by still further financing.

No underwriter has contracted to purchase the stock and if only

a portion of the offering is sold, the registrant has no further plans

for financing. In such event the registrant might not have sufficient

funds to carry through an adequate exploration program.

The registrant had offered 335,000 shares of stock for sale at only

15 cents a share after November 21, 1946, and only 131,000 shares were

sold. No new developments in the registrant's business outlook justify

an increase of 100 percent in the offering price over the last previous

offering price.

The underwriting commission and advertising expenses will consume 32% percent of the offering price and, after estimated total distribution expenses of approximately 36% percent, only approximately

63lf2percent of the gross proceeds from the proposed offering based

upon the offering price will be invested in the registrant's business.

The three original promoters paid an average price of 4.59 cents

per share for the 960,000 common shares acquired by them and still retain 361,750 of such shares costing them 2.53 cents per share, and

another promoter owns 158,075 shares which cost him nothing in

money. These promoters as a group will, after the proposed financing,

retain 32.6 percent of the voting control through the ownership of

shares costing them an average of 1.76 cents a share. These four promoters, on the basis of the proposed public offering price, would have a

book profit of $146,794.75 or 28.24 cents a share.

CHANGES IN RULES, REGULATIONS, AND FORMS

Rules, regulations, and forms adopted by the Commission must be

flexible to meet changing business conditions. Further, experience

has shown that any procedure for compliance with a regulatory statute

is made most simple, economical, and expedient for those who must

comply if each type of situation is recognized and specific provision

made for its particular need. To assure these results the Commission

has long made it a practice to maintain a continuous review of its

procedures in the light of current conditions. Changes often result,
18 SECURITIES AND EXCHANGE COMMISSION

either by reason of recommendations made by the staff or, as is frequently the case, at the suggestion of persons who must comply with

the statute. No material change is made without a series of conferences with all persons interested in or who might be affected by the

contemplated change. Changes made or planned during the 1948

fiscal year in the rules, regulations, and forms under the Securities

Act are described below. The accounting aspects of some of these

changes are discussed in Part IX of this report in the section concerning the Commission's activities in accounting and auditing.

Proposed Rule 431-Definition of Prospectus

Information about a proposed issue of securities may be given the

most widespread publicity through use of the preeffective prospectus

under the provisions of rule 131. This prospectus, necessarily, does

not contain certain information about the security, such as the finally

determined selling price, information about underwriting agreements,

and such other data not normally available before the time when the

securities are actually offered for sale. In present practice complete

data about the security are included in the final prospectus and this

prospectus, if accurate, is the one actually used in the course of the

sale. In order to avoid the necessity of printing both the preeffective

and final prospectuses, as well as the duplications involved in two

deliveries and the delay in time attendant upon such a procedure, the

Commission took under consideration a rule intended to prevent these

results.

The proposed rule applies only to offerings by an issuer to its stockholders. Under it the information normally omitted from the preeffective prospectus could be added to that prospectus by the issuer in

the form of a short document containing the missing data. This

document and the preeffective prospectus could then together constitute the final prospectus. The proposed rule contains certain safeguards to prevent abuse of the procedure, to assure the full protection

of the act to investors, and to permit adequate inspection by the Commission of the preeffective prospectus and the supplemental document.

These safeguards provide: (1) That the preeffecti ve prospectus be

incorporated by reference into and be made part of the document;

(2) that a copy of such prospectus was sent or given, in compliance

with rule 131, to the person to whom the document is sent or given;

and, (3) that the document is sent or given to the stockholder within

20 days of the time when he was sent or given a copy of the proposed

form of prospectus. Shortly after the close of the fiscal year the Commission formulated these provisions in proposed rule 431 and issued

the rule for public comment in Securities Act Release No. 3300.

Rule 409-Disclaimer of Responsibility

Under rule 409 a registrant may omit information from a registration statement if the information is unknown or not reasonably

available to the registrant. In such cases, the present rule provides,

in essence, that the registrant shall furnish the best information

available to it under the circumstances. In addition, the rule permits

the registrant to include in the registration statement a disclaimer

of responsibility for the accuracy or completeness of such information. The proposed amendment would strike from the rule the provision permitting this disclaimer of responsibility. The purpose of
FOURTEE~ ~AL REPORT 19

this amendment is to protect the prospective investor against inaccurate or incomplete information. The proposal was widely circulated by the Commission in Securities Act Release No. 3296 (1948).

Rule 424-Preeffective Prospectus

Rule 131 provides for the use of a preeffective prospectus in order

to give information about a prospective issue of seeurrties the widest

possible circulation. The preeffective prospectus must comply substantially with requirements applicable to the proposed final prospectus as filed with the Commission, but there is no provision for filing

the pre effective prospectus actually used. In order to provide the

Commission with copies of such prospectus for its administrative

functions and to make them available for inspection by the general

public, the Commission proposes to amend rule 424 (which pertains to the filing of prospectuses with the Commission) in order to

require the filing of preeffective prospectuses with the Commission.

Proposed Amenlhnents to Regulation S-X

Regulation S-X contains the Commission's rules respecting the form

and content of financial statements filed with the Commission under

various of the statutes which it administers. The purpose of the proposed amendments, set out in Securities Act Release No. 3294 (1948),

is to provide rules as to the financial statements of commercial, industrial, and mining companies in the promotional, exploratory, or development stage. A full discussion of these proposals appears in

Part IX of this report under the section on the Commission's activities

in accounting and auditing.

Changes in Forms for Registration

Form 8-2 had been used for the registration of securities of certain

corporations having simple corporate structures. This form was revised to provide a simple registration form for commercial and industrial companies still in the development stage. The change permits use of Form S-2 by companies previously limited to Form S-12

and certain established companies previously using Form S-2 may

now use Form S-l, the form most generally used to register securities.

The revision of Form 8-2 made it possible for the Commission to

rescind Form S-12. See Securities Act Release No. 3247 (1947).

Form C-1 had been used for some time as a registration form for

securities of unincorporated investment trusts of the fixed or restricted management type. The subsequent adoption of other forms

for the securities of such trusts made Form C-1 obsolete and it was

rescinded during the year. See Securities Act Release No'.3247 (1947).

Form 8-3 is used to register securities-of mining corporations in the

promotional stage. Originally, the form required the inclusion of

certified financial statements as of a date within 90 days prior to the

date of filing the registration statement. The purpose of the amendment is to permit the filing of uncertified financial st.atements as of

such date if there are also filed certified financial statements as of a

date within 1 year prior to the date of filing. See Securities Act

Release No. 3269 (1947).

Rule 131, which provides for the use of the preeffective prospectus,

had been adopted originally, in December 1946, for a 6-month trial

period. In Securities Act Release No. 3240 (1947) the Commission

813892-49-3
20 SECURITIES AND EXCHANGE COMMISSION

announced the continuance of the rule in its original form. Study

of the operation of the rule during the 6 months indicated that the

rule does facilitate the dissemination of information contained in

Securities Act registration statements.

In Securities Act Release No. 3238 (1947) the Commission announced adoption of Form 8-7. This form is designed specifically for

the registration of securities issued by the International Bank for

Reconstruction and Development.

LITIGATION UNDER THE ACT

Part of the Commission's enforcement activity under the Securities

Act is injunctive action to prevent violations of section 5, which (with

certain exemptions) requires registration of securities offered to the

public, and section 17, which makes it unlawful to sell securities by

fraudulent means. While the Commission's investigation may result

in subsequent criminal prosecution, the injunction is used to stop activity immediately and prevent the continuance of violations. Some of

the injunction actions instituted last year are pending, but most of

them have been successfully concluded.

As a result of a story appearing in a popular magazine a number of

financing plans were offered to the public involving the use of Government bonds to guarantee repayment of the investment. This practice

has been denounced by the Secretary of the Treasury and this Commission. It involves the sale of securities under an arrangement

through which $75 of each $100 advanced by the investor is used to buy

series E bonds in the name of the investor. This investment will be

worth $100 at maturity in 10 years. The other $25 is invested in the

business enterprise sought to be financed. The Commission filed an

action to enjoin this practice, S. E. O. v, lV. Geoffrey Haynes, 12 alleging that, while the, defendant unconditionally guaranteed the return

of the original investment, he omitted to inform investors that only

one-fourth of the amount would be used in the business enterprise and

that three-fourths would be invested in Government bonds. The

complaint charged violations of both the fraud and registration provisions of the Securities Act. A similar action, ",,'.E. O. v. J ohr:

Der'J'yberry,I3 was instituted to enjoin violations of the registration

provisions of the Securities Act and the broker-dealer registration

provisions of the Securities Exchange Act of 1934. Derryberryengaged in the purchase and sale of oil royalties, giving to each investor

a $100 Government bond to guarantee repayment of the investment

at the end of 10 years. Again only $25 of the investor's money went

into the oil royalty. The Commission's enforcement staff has been

able to deter several promotions of this type without court action and

was able to secure full disclosure of the features of the plan in still

other cases through filings made with the Commission.

The Commission filed a complaint charging Louis A. Montague 14

with violating the registration provisions of the Securities Act in

connection with the leasing of apartments in a building under construction. Under the terms of the agreement for lease each applicant

was to loan a sum of money to Montague to be repaid within 1 year with

12 u. S. D. C., E. D. Pennsylvania. 13 U. S D. C, W. D. Louisiana. "u. S. D. C., District of Columbia.
FOURTEENTH ANNUAL REPORT 21

interest at 5 percent. Upon service of the complaint the defendant

immediately discontinued all attempts to offersecurities and the action

was dismissed pursuant to stipulation.

S. E. O. v. Petroleum Royalty OorpY and S. E. O. v, Petroleum.

Southwest Oorp.» were companion cases involving the activities of

one John R. Moroney, who was president of both companies. Judgments were entered enjoining Moroney and the companies from selling

unregistered stock. Petroleum Royalty Corp. had been organized to

buy and sell oil royalties and Petroleum Southwest Corp. to produce

and sell petroleum products.

Other actions filed by the Commission to enjoin the sale of securities

in violation of the registration provisions of the Securities Act included S. E. O. v. Fyre-Mi.~t Inc.,17 involving a company organized for

the purported purpose of manufacturing and selling a device for the

burning of oil and water to produce enormous heat; S. E. O. v. Amos J.

DO'l1J'n8,lS involving the president of Homestake Le Roi Mining Co.

who was selling its common stock without registration; S. E. O. v.

Dixieland Petroleum. Oorp.» in which the Commission enjoined the

sale of stock which had been issued to the company's president in exchange for oil leases and the sale of additional shares for the company

without making the necessary filing; and S. E. O. v. American Silver

Oorp.,20in which an injunction was requested to prevent the defendant

from selling stock in a new company to be organized for the purpose

of taking over the assets of American Silver Co., which was at that

time in the bankruptcy court pursuant to a chapter XI proceeding.

In S. E. O. v. Edmond Michel/1 the Commission charged violations

of both the registration and fraud provisions of the Securities Act in

the sale of stock of Larmloc Sales Corp. The complaint charged that

the defendants failed to register the stock and that in effecting sales

had made numerous false representations, including statements that

the Bureau of Narcotics of the Treasury Department had approved

the Larmloc device and had recommended its use bv dealers in narcotics; that it had been approved by Underwriters Laboratory, Inc.;

that use of the lock would reduce burglary insurance rates; and that

the device wasin use by banks, hotels, and stores in the Chicago area.

In the case of S. E. O. v. Nye A. lVimer 22 the Commission charged

in its complaint for injunction that Wimer was selling unregistered

stock of Great 'Vestern Exploration Co. and Tennessee-Schuylkill

Corp. by means of false representations concerning the stock. The

court upheld the right of the Commission to bring the action in Pennsylvania even though the defendant resided in California and had

never personally been present in the State of Pennsylvania or the

district in which the action was instituted. The court stated that

sections 20 and 22 of the Securities Act gave it jurisdiction to hear

the case since the sale took place within that district and the defendant

had participated in the sale. Other cases in which the Commission

charged violation of the fraud provisions of the Securities Act include

,. u. S. D. C., N. D. Texas. reU. S. D. C., N. D. Texas. 11 U. S. D. C., D. Ohio. 1B U. S. D. C.• D. Colorado 19 U. S. D. C., S. D. New York. ,. U. S. D. C, S. D. California. 21 U. S. D. C., N. D. Illinois . ., U. S. D. C., W. D. Pennsylvania.
22 SECURITIES AND EXCHANGE COMMISSION

S. E. O. v. American Soil Products 00., hW.,23 and S. E. O. v. Ben

Olin ton Banner,"

The complaint inS. E. O. v. Metropolitan Mines Corporation; Ltd.,25

was instituted during the 1947 fiscal year but resulted in the entry of

a decree during the 1948 fiscal year requiring Metropolitan Mines

Corp. to file with the Commission annual reports as required by section

13 of the Securities Exchange Act of 1934, and reports of change of

ownership of equity securities by officersand directors as required by

section 16 (a) of that act, and enjoining the further sale of securities

without compliance with the registration requirements of the Securities Act. . In connection with its investigative function it was necessary for the

Commission during the year to institute several actions to enforce

Commission subpenas. These subpenas, issued by officers of the

Commission in connection with investigative activities, required witnessesto appear and give testimony and in some cases to produce documentary evidence for examination. In each case the Commission was

successful in obtaining the desired evidence. These caseswere S. E. O.

v. Uontinental-Iliinoie Bank d':: Trust 00. of Ohicagoj26 S, E. O. v.

Edward J. O'(Ionnor]" S. E. O. v. M. E. Harrison and Allen Hull;28

S. E. O. v. Tucker 00rp.29

Tucker Oorp.-During the past year the Commission instituted a

routine investigation relating to certain activities of the Tucker Corp.

Incident to the investigation it became necessary to examine certain

books and records of the corporation and a request was made to the

officersto permit such examination. When the corporation refused

to produce the records a Commission subpena was issued and upon

the failure of the corporation to respond to the subpena the Commission authorized the filing of an action in the United States District

Court in Chicago to obtain an order requiring compliance with the

subpena. Subsequent to the filing of answers and argument on the

issues involved, the court entered an order directing the Tucker Corp.

to produce the books and records in compliance with the subpena to

be examined by an officer of the Commission at the plant of the

corporation.

Kaiser-Frazer Oorp.-One of the major investigations by the Commission during the fiscal year concerned the collapse of the third offeringof common stock of the Kaiser-Frazer Corp." On January 6,1948,

the Kaiser-Frazer Corp. filed with the Commission a registration

statement covering a proposed offering of 1,500,000shares of common

stock. Otis & Co., First California Co., and Allen & Co. were named

as underwriters. Delaying amendments were filed by the issuer to prevent the statement from becoming effective 20 days after the filing.

On February 2, 1948, the registration statement still not being effective, counsel for the corporation inquired of the Commission's staff

concerning the propriety of the issuer stabilizing the market in its

securities prior to the time of the offering. They were advised that

this could be done within certain prescribed limits and it was indi23 U. S. D. C, S. D. New York. 24 U. S. D. C., N. D. Texas. as U. S. DC., E. D. Washington. 26 U. S. DC, N. D. IllinOIS. 27 U. S D. C., S. D. California. 28 rr. S. D. C, E D. Michigan. 20 U. S. D. C., N. D. Illinois. 30 Previous offerings had been made on September 26, 1945, and .January 23, 1946.
FOURTEENTH ANNUAL REPORT 23

cated to the staff that the issuer proposed to stabilize in this manner

on the following day. On February 3, 1948, total trading for the

day amounted to 180,200 shares compared with approximately 7,000

shares on the New York Curb on the previous day. All of the shares

were purchased by Kaiser-Frazer at $13.50 per share in its stabilization effort. It was decided to conduct a private investigation for the

purpose of determining the circumstances surrounding this large

volume of trading. The private investigation disclosed facts which,

in the judgment of the Commission, warranted a public investigation

in the matter and such investigation was ordered by the Commission

on March 23, 1948.

Public hearings began on April 12, 1948, in 'Washington and were

subsequently held in seven other cities throughout the United States."

These hearings disclosed that after the registration statement had

become effective at 5 :30 p. m. on February 3, 1948,the offering which

was made at $13 per share had gone poorly and that at about 12:30

p. m. (e. s. t.) on February 4 the underwriters, Otis & Co., First California Co., and Allen & Co., who were then stabilizing for their own

account, had terminated the selling group and withdrawn the offering.

The investigation disclosed that on February 9, 1948, which was

the day for settlement between the issuer and the underwriters, Otis

& Co. and First California Co. stated that they were not bound by the

underwriting agreement. This statement was based on a provision in

the contract which provided that no material litigation not disclosed

in the prospectus should be pending against the issuer at 10: 00 a. m. on

the date of settlement. A derivative action had been filed against the

issuer in the county court for Wayne County, Mich., on that date, by

one James F. Masterson, a Philadelphia attorney, as plaintiff. He

was represented by David V. Martin, a Detroit attorney.

A number of circumstances raised serious questions in connection

with this lawsuit. Among them was the fact that Marvin C. Harrison

and Allen Hull, two Cleveland attorneys, testified under order of Judge

Lederle in the United States District Court at Detroit 32 that they had

been retained by Cyrus Eaton, the principal stockholder of Otis & Co.,

to go to the Wayne County Court in Detroit on February 9 to determine

whether a suit similar to the Masterson suit had been tiled against the

Kaiser-Frazer Corp. Harrison and Hull refused to supply any information other than the identity of their client and based such refusal on

the attorney-client privilege. The investigation remains open."

31 New York, Cleveland, Cincinnati, Detrort, Chicago, San FranCISCO,Los Angeles. 3> In the course of thrs investrgut ion it has on tln ee occasrous been necessary for the

Commission to invoke the aid of Fodera! distrtct courts to effect compliance WIth its subpenas, In addition to the action referred to above, the Commission has instituted a SImilar

action against the same defendants in the Federal District Court for the District of Columbia asking that the court order them to disclose the contents of communications WhICh

would normally fall under the attorney-client privilege, upon the ground that the Commission had made a prima facie showing that they were retamed by Eaton for a fraudulent

purpose. Judge MorrIS of that COUI t has refused to enforce the subpena. The Comrmsslon

also intervened in an action III the Federa l dtstr-lct court in Cincinnati wherein the Portsmouth Steel Co.sought to enjoin the telephone company from producing, in compliance with a Commission subpena, certain telephone toll tickets covering calls made by certain officers

of Portsmouth Steel Co. These papers were subsequently obtamed These matters are more fUlly covered in the section of this report relating to litigation under the Securities Exchange Act of 1934. 33 On August 12, 1948. the Commission announced the institution of broker-dealer revoca- tion proceedings against Otis & Co. based on alleged VIOlationsof sections 5 and 17 of the

Securities Act of 1933 and sections 10, 15 (c) and 9 (a) (4) of the Securities Exchanl;e Act

of 1934. At the same time It was announced that similar proceedings had been instituted

against First California Co. based solely on alleged violation of section 5 of the Securi ties

Act Of 1933. The institution of both of these actions was based on facts disclosed by the

investigation.
PART II

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT

OF 1934

The Securities Exchange Act of 1934:is designed to eliminate fraud,

manipulation, and other abuses in the trading of securities both on the

organized exchanges and in the over-the-counter markets, which together constitute the Nation's facilities for trading in securities; to

make available to the public information regarding the condition of

corporations whose securities are listed on any national securities

exchange; and to regulate the use of the Nation's credit in securities

trading. The authority to issue rules on the use of credit in securities

transactions is lodged in the Board of Governors of the Federal Reserve System, but the administration of these rules and of the other

provisions of the act is vested in the Commission.

The act provides for the registration of national securities exchanges,

brokers, and dealers in securities, and associations of brokers and

dealers.

REGULATION OF EXCHANGES AND EXCHANGE TRADING

Registration of Exchanges

Each securities exchange in the United States is required by section

5 of the act to register with the Commission as a national securities

exchange or to apply for exemption from such registration. Under this

section, exemption from registration is available to exchanges which

have such a limited volume of transactions effected thereon that, in the

opinion of the Commission, it is unnecessary and impracticable to require their registration. During the fiscal year the number of exchanges registered as national securities exchanges remained at 19 and

the number of exchanges granted exemption from such registration remained at 5.

The registration or exemption statement of each exchange contains

information pertinent to its organization, rules of procedure, membership, and related matters. To keep this information up to date

the 24 exchanges filed a total of 10~ amendments to their statements

during the 1948 fiscal year. Each of these amendments was reviewed

to ascertain that the change involved was not adverse to the public

interest and that it was in compliance with the relevant provisions of

the act. The nature of the changes effected by the exchanges in their

constitutions, rules, and trading practices varied considerably. Some

of the more sig-nificantof these changes are briefly outlined below.

Baltimore Stock Exchange reinstated a rule, which had been rescinded in 1939, prescribing requirements for companies desiring to

Iemove their securities from listing on that exchange.

Chicago Stock Exchange, following several years of study and trial

operation, adopted a plan enabling its out-of-town members to clear

their own exchange transactions by mail. The primary objective of

24
FOURTEENTH ANNUAL REPORT 25

the plan was to extend equal opportunities to all members and to

develop a better exchange market by providing present and prospective out-of-town members with an added profit incentive to develop

exchange business and to act as specialists in issues which are of public

interest in their respective localitiei,

Cincinnati Stock Exchange and Philadelphia Stock Exchange each

increased their rates of listing fees. In addition to the revised schedule

of listing fees, Cincinnati also adopted an annual service charge payable by all companies having securities listed on that exchange.

San Francisco Stock Exchange adopted amendments to its constitution permitting corporations to become regular members of that

exchange. Previously, corporations were eligible only for associate

membership in the exchange.

New York Stock Exchange adopted. effective November 3, 1947, a

schedule of increased commission rates on stock" selling at 50 cents

or more per share. Under the new schedule. commission rates are

computed on the basis of the amount of money involved in a transaction

aggregating not more than 100shares rather than on a rate-per-share

basis as in the past. Following this action by the N" ew York Stock

Exchange, 12 of the 17 regional exchanges abo adopted revised schedules of commission rates which are. in many instances, identical with

the new rates of the New York Stock Exchange. The New York

Curb Exchange, however, did not effect any changes in its schedule

of commission rates.

In the latter half of 1947,the Board of Governors of the New York

Stock Exchange placed greater restrictions on members' trading for

their own account on the floor of the exchange. The modified floor

trading rules. adopted in February 1947, prohibit any purchase of

a stock by a floor trader at a price above the last sale price. Under

the policy adopted by the exchange several months later, purchases

cannot be made at a price above the last preceding different price

if that price is lower than the last sale price. Purchases at such a

price by floor traders, individually or as a group, are limited to 300

shares or 30 percent of the amount offered at that price, whichever

is greater. In April 1948the 30 percent limit was raised to 50 percent.

An exception to this policy may occur if there is an interval of 15

minutes during which no purchases by floor traders have been made.

After such an interval, floor traders may again purchase stock subject

to the limitations in the ruling. In addition, a floor trader who

acquires stock off the floor mnst sell that stock off the floor.

'Vashington Stalk Exchange, in an attempt to improve its service

to the public and to provide facilities for the execution of transactions

on the exchange which theretofore had been executed either over the

counter .01' on another exchange, extended its hours of trading to

coincide with those of the major exchanges. Only securities which are

traded on the 'Vashington Stock Exchange a;. well as on another exchange are eligible for trading during the new extended hours. Members continue to meet from 11: 15 a. m. to noon each day as in the

past to execute transactions in securities traded solely on the Washington Stock Exchange as well as in dually traded securities. The new

trading hours went into effect on July 15, 1948.
26 SECURITIES AND EXCHANGE COMMISSION

Disciplinary Actions by Exchanges Against Members

Pursuant to a request of the Commission, each national securities

exchange reports to the Commission any action of a disciplinary nature taken by the exchange against one of its members or an employee

of a member for violation of the Securities Exchange Act, any rule

or regulation thereunder, or of any exchange rule. During the year

5 exchanges reported such actions against a total of 34 members,

member firms, and partners or employees of member firms.

In nine of these cases the individual or firm involved was censured

for an infraction of the rules and warned against further violations.

The remaining actions taken included finesranging from $50 to $2,500

in 12 cases with total fines aggregating $6,450; the expulsion of an

individual from exchange membership; the suspension of an individual and his firm from exchange membership for a period of 90 days;

the suspension of five individuals from exchange membership for

periods ranging from 3 months to 1 year; the suspension of two registered representatives of a member firm for a period of 2 months;

and the cancellation of registration of three specialists in certain of

their stocks. The disciplinary actions resulted from violations of

various exchange rules, principally those pertaining to partnership

agreements, capital requirements, handling of accounts, floor trading,

registered employees, and specialists.

Market Value and Volume of Exchange Trading

The market value of total sales effected on national securities exchanges for the 1948 fiscal year, as shown in appendix table 7,

amounted to $13,932,441,000,a decrease of 5.9 percent from the market value of total sales for the 1947 fiscal year. Of the total, stock

sales (excluding value of right and warrant sales) had a market

value of $12,899,694,000,a decrease of 6.2 percent from 1947,and bond

sales that of $996,747,000,an increase of 2.4 percent over 1947. The

market value of right and warrant sales totaled $36,000,000,involving

35,323,000units.

The share volume of stock sales (excluding unit volume of right

and warrant sales) for the 1948fiscal year totaled 536,749,000shares,

a decrease of 3 percent from the preceding; fiscal year. Total principal amount of bond sales was $1,356,372,000,an increase of 0.5

percent over 1947.

The market value of total sales effected on exempted exchanges

for the 1948 fiscal year amounted to $9,899,000,a decrease of 13.5

percent from 1947.

Special Offerings on Exchanges

Under rule X-10B-2, special offerings of blocks of securjties are

permitted on national securities exchanges pursuant to plans filed

with and declared effective by the Commission. Briefly stated, these

plans provide that a special offering may be made when it has been

determined that the auction market on the floor of the exchange cannot absorb a particular block of a security within a reasonable period

of time without undue disturbance to the current price of the security. A special offering of a security is made at a fixed price
FOURTEE~ ~AL REPORT 27

consistent with the existing auction market price of the security

and members acting as brokers for public buyers are paid a special

commission by the seller. Buyers are not charged a commission on

their purchases and obtain the securities at the net price of the offering. During the year the Los Angeles Stock Exchange became the

eighth national securities exchange to file and have declared effective

by the Commission a plan for special offerings. The plan of the

Los Angeles Stock Exchange is generally similar to the plans of the

other exchanges previously declared effective and which remained in

effect throughout the year.'

Three of the eight exchanges having plans in effect reported that

a total of 25 special offerings were effected during the year. These

offerings involved the sale of 332,999shares of stock having an aggregate market value of $8,503,000. The size of these offerings ranged

from one with a market value of $1,768,000to one valued at $52,000.

Brokers participating in these offerings were paid a total of $222,000

in special commissions. By comparison, in the preceding fiscal year

a total of eight special offerings involving 104,814 shares of stock

having a market value of $2,852,000were effected on two exchanges,

with special commissions paid to brokers totaling $68,000. Further

details of special offerings during the 12-month period ended June 30,

1948,are given in appendix table 8.

Secondary Distributions Approved by Exchanges

A "secondary distribution," as the term is used in this section, is a

distribution over the counter by a dealer or group of dealers of a comparatively large block of a previously issued and outstanding security

listed or admitted to trading on an exchange. Such offerings take

place when it has been determined that it would not be in the best interest of the various parties involved to sell the shares on the exchange

in the regular way or by special offering. The distributions generally

take place after the close of exchange trading. As in the case of

special offerings, buyers obtain the security from the dealer at the net

price of the offering which usually is at or below the most recent price

registered on the exchange. It is generally the practice of exchanges

to require members to obtain the approval of the exchange before

participating in such secondary distributions. Registration of such

distributions under the Securities Act of 1933may also be necessary.

During the year 5 exchanges reported having approved a total of

83secondary distributions under which 6,347,361shares of stock having

an aggregate market value of $152,803,000were sold. Of these, 78

distributions involving the sale of 6,273,290shares having a market

value of $150,019,000 were completed, while 74,071 shares having

a market value of $2,784,000were sold in the 5 distributions which were

1These exchanges are: Chicago Stock Exchange, Cincinnati Stock Exchange, Detroit

Stock Exchange, New York Curb Exchange, New York Stock Exchange, Philadelphia Stock

Exchange, and San Francisco Stock Exchange.
28 SECURITIES AND EXCHA...l\fGECOMMISSION

not completed. Further details of secondary distributions of exchange stocks are given in appendix table 12.

REGISTRATION OF SECURITIES ON EXCHANGES

Purpose and Nature of Registration

The statutory purpose of making available currently to investors

reliable and comprehensive information as to the affairs of companies

which have securities listed on a national securities exchange is accomplished by requiring each such company to file with the Commission

and the exchange an application for registration which discloses such

data. Unless a security is so registered pursuant to section 12 of the

act (or has unlisted trading privileges), it is unlawful to trade in the

security on the exchange. In order to keep this information up to

date, section 13 requires the filing by these companies of annual,

quarterly, and other periodical reports.

Examination of Applications and Reports

All applications and reports filed pursuant to sections 12 and 13

are examined by the staff to determine whether accurate and adequate

disclosure has been made of the specific types of information required

by the act and the rules and regulations promulgated thereunder.

The examination under the Securities Exchange Act, like that under

the Securities Act of 1933, does not involve an appraisal and is not

concerned with the merits of the registrant's securities. ",Vhenexamination of an application or a report discloses that material information

has been omitted, or that sound principles have not been followed in

the preparation and presentation of accompanying financial data,

rhe examining staff follows much the same procedure as that developed in its work under the Securities Act in sending to the registrant

11 letter of comment, or in holding a conference with its attorneys or

accountants or other representatives, pointing out any inadequacies

in the information filed in order that necessary correcting amendments may be obtained. Here again, amendments are examined in the

same manner as the original documents. Where a particular inadequacy is not material, the registrant is notified by letter pointing out

the defect and suggesting the proper procedure to be followed in the

preparation nnd filing ot future reports, without insistence upon the

filing of an amendment to the particular document in question.

Statistics of Securities Reglstered on Exchanges

At the close of the fiscal year, 2,20V issuers had 3,539 security issues

listed and registered on national securities exchanges. These securilies consisted of 2,575 stock issues aggregating 2,837,496,642 shares,

and 964 bond issues aggregating $19,224,375,537principal amount.

This represents increases of 182,432,292shares and $797,621,682principal amount, respectively, over the securities registered on national

secur-ities exchanges at the close of the 1947 fiscal year.

During the fiscal year 19 new issuers registered securities under the

act on national securities exchanges, while the registration of all

securities of 55 issuers was terminated, principally by reason of retirement and redemption and through mergers and consolidations. No

proceedings were instituted during the year under section 19 (a) (2)

of the act to deny, suspend, or withdraw the registration of a

security.
FOURTEENTH ~~UAL REPORT 29

The following applications and reports were filed during the fiscal

year in connection with the listing and registration of securities on

national securities exchanges:

Applications for registration of securlttos on nut lonul l"l'l'1!l'itipR exchanges .___________ 434

Applications for registration of unissued l':e('ul"itiel': for "when isxuecl'

trading on national securitles exl'hanges_____________________________ G3

Exemption statements for trading short-term warrants on national securities exchanges_____________________________________________________ 60

Annual reports ~,123

Current reports 7

R,767

Amendments to applications and reports 1,101

TEMPORARY EXEMPTION OF SUBSTITUTED OR ADDITIONAL

SECURITIES

Rule X-12A-5 provides a temporary exemption from the registration requirements of section 12 (a) of the act to securities issued

in substitution for, or in addition to, securities previously listed or

admitted to unlisted trading; privileges on a national securities exchange. The purpose of this exemption is to enable transactions to

be Iawfully effected on an exchange in such substituted or additional

securities pending their registration or admission to unlisted trading

privileges on an exchange.

The exchanges filed notifications of admission to trading under

this rule with respect to 101 issues during the year. The same issue

was admitted to trading on IIIore than one exchange in some instances,

so that the total admissions to such trading, including duplications,

11umbered LtS.

UNLISTED TRADING PRIVILEGES ON EXCH.4.NGES

Unlisted trading on exchanges is of two principal varieties. The

one variety is in issues listed and registered on some other registered

exchange, in which case the public enjoys the protections afforded by

the listing and registration under the Securities Exchange Act. A

great majority of these issues are listed on New York Exchange and

admitted to unlisted trading on various exchanges in other cities. The

other variety is in issues not listed nor registered on some other registered exchange. Most of such issues are admitted to unlisted trading

on New York Curb Exchange alone. In their case the public is not

protected by any listing agreement with the issuer nor by the financial

reporting requirements of section 13, the proxy rules under section

1~, and the "trading.by insider" reporting and penalty clauses of section 16 of the Secui'ities Exchange Act, except to the extent that the

issuers or issues are registered under other acts administered by the

Commission containing similar requirements.

Exchange trading in issues admitted to unlisted trading prior to

March 1, 1934, is permitted to continue under section 12 (f) (1) of

the Securities Exchange Act. The frn-thcr admission of issues to

unlisted trading, however, has been prohibited except to the extent

permitted under section 12 (f) (2), in the case of issues already listed

and registered on some registered exchange," and under section 12

(f) (3), in the case of issues not so listed and registered, as more

specifically outlined under the next subheading "Applications for Unlisted Trading-Privileges." 3

: "Reg latered exchanges" and "national securtttos exchanges" are used 8) nonymously in

this sectton,

P 3The subject IS treated at length in the Tenth Annual Report under "Unlrsted Trading rivileges on Securities Exchanges,"
30 SECURITIES AND EXCHANGE COMMISSION

Ten years ago, on June 30, 1937, the status of unlisted issues on the

registered exchanges was as follows:

Stocks listed on some other registered exchange________________________ 554

Stocks not listed on any registered exchange_________________________ 737

Bonds listed on some other registered exchange________________________ 42

Bonds not listed on any registered exchange__________________________ 550

1,883

These issues were practically all in the section 12 (f) (1) category of

securities admitted to unlisted trading prior to March 1, 1934.

Since the first grant in April 1937 of an application by an exchange

under section 12 (f) (2) for unlisted trading in stocks listed on some

other registered exchange, there have been 524 admissions of such

stocks to the various exchanges. The number of issues involved is

less than this figure because many issues have been admitted to unlisted trading on two, three, or more exchanges. These admissions of

stocks under section 12 (f) (2) have, however, barely maintained

the number of listed stocks traded unlisted on other exchanges, which

has fallen from 554 in 1937 to 542 in 1948. The grants have tended

to make the same stocks available on numerous exchanges and to

substitute currently active stocks in offset to the many retirements of

issues originally admitted to unlisted trading under section 12

(f) (1).

Only seven stock issues have been admitted to unlisted trading on an

exchange (one of them on two exchanges) under section 12 (f) (3).

Only two of these were common stocks, and one of these has been removed from unlisted trading on New York Curb Exchange by reason

of listing on New York Stock Exchange. Inaddition, one of the preferred stocks has become listed also on Philadelphia Stock Exchange.

Thus only five stocks, including four preferred and one common, admitted to trading under section 12 (f) (3) retain that status and are

not listed on any registered exchange.

Admissions of bonds under sections 12 (f) (2) and 12 (f) (3) have

totaled 49, but retirements have exceeded admissions, and only 20 of

the issues are still outstanding. It has become unusual to apply for

bond admissions under these sections, except in case of very large, and

particularly convertible, issues.

The status of unlisted issues on the registered exchanges as of June

30, 1948, was:

Stocks listed on some other registered exchange________________________ 542

Stocks not listed on any registered exchange____________________________ 353

Bonds listed on some other registered exchange________________________ 12

Bonds not listed on any registered exchange____________________________ 85

992

There has been a great disappearance of issues, in all except the first

category, from the figures of 1937. The principal shrinkage has been

in stocks and bonds not listed on any registered exchange, and this,

as has been frequently stated in these reports, was the expectation of

Congress when it authorized continuance of such privileges in 1936.

The 353 stocks admitted to unlisted trading without being listed on

.any registered exchange aggregated 354,477,579 shares, warrants, and

receipts as of June 30,1948. The reported volume of trading in these

stocks for the calendar year 1947 was 21,056,358 units, including

14,889,271 domestic shares, 3,046,387 Canadian shares, 2,312,700 war-
FOURTEENTH ANNUAL REPORT 31

rants, and 808,000 American depositary receipts. The 354,477,579

unlisted shares were about 11 percent of the total 3,196,160,946shares

admitted to trading on the registered exchanges, and the 21,056,358

reported volume was a little over 4 percent of the total 512,475,639

share and warrant volume on the registered exchanges for the calendar

year 1947. Comprehensive figures with respect to issues and volumes

on exchanges will be found in appendix tables 7 to 16, inclusive.

Applications Cor Unlisted Trading Privileges

Section 12 (f) (2) of the act provides that, upon application to and

approval by the Commission, a national securities exchange may extend unlisted trading privileges to a security which is listed and registered on another national securities exchange. Pursuant to this section, and in accordance with the procedure prescribed by rule X-12F -1,

applications were granted during the year extending unlisted trading

privileges to Boston Stock Exchange in 12 stock issues; Chicago Stock

Exchange, 2 stock issues; Cleveland Stock Exchange, 1 stock issue;

Detroit Stock Exchange, 1 stock issue; Los Angeles Stock Exchange,

23 stock issues and 1 bond issue ; New York Curb Exchange, 1 stock

issue; Philadelphia Stock Exchange, 4 stock issues; St. Louis Stock

Exchange, one stock issue; San Francisco Stock Exchange, 1 stock

issue and 1 bond issue. An application of Boston Stock Exchange

involving one stock issue and an application of San Francisco Stock

Exchange involving one bond issue were withdrawn by these exchanges

after they had been advised that they did not meet the requirements

prescribed by the rule.

Section 12 (f) (3) of the act permits the Commission to grant

an exchange's application for the extension of unlisted trading privileges to a security which is not listed and registered on another national securities exchange if investors have, respecting such a security, protections equivalent to those provided for in the act regarding listed securities. An application of New York Curb Exchange

under this section was granted with respect to Cities Service Co.

3-percent sinking fund debentures, due January 1, 1977,on the ground

that equivalent protection was afforded to the public from the fact

that the common stock of the same company was listed and registered

on other national securities exchanges.

Changes in Securities Admitted to Unlisted Trading Privileges

During the year the exchanges filed numerous notifications pursuant to rule X-12F-2 (a) of changes in title, maturity, interest rate,

par value, dividend rate, or amount authorized or outstanding of

securities admitted to unlisted trading privileges. Where changes of

this nature only are effected in an unlisted security the altered security is deemed for the purposes of the Securities Exchange Act to

be the security previously admitted to unlisted trading privileges

and such privileges are automatically extended to the altered security.

However, when changes more comprehensive than these are effected

in an unlisted security, the exchange is required to file an application

with the Commission, pursuant to rule X-12F-2 (b), seeking a determination that the altered security is substantially equivalent to

the security previously admitted to unlisted trading privileges. Applications filed pursuant to this rule were granted by the Commission

with respect to one stock issue on Boston Stock Exchange; one stock

issue on Detroit Stock Exchange; four stock issues on New York

Curb Exchange; three stock issues on Philadelphia Stock Exchange:
32 SECURITIES AND EXCHANGE COMMISSION

one stock issue on Pittsburgh Stock Exchange; and one stock issue

on San Francisco Stock Exchange. The Commission denied applications of the Boston, Detroit, Philadelphia, and Pittsburgh Stock

Exchanges and New York Curb Exchange with respect to a total

of three stock issues.

DELISTING OF SECURITIES FROM EXCHANGES

Securities Delisted by Application

Section 12 (d) of the act provides that upon application by the

issuer or the exchange to the Commission, a security may be removed

from listing and registration on a national securities exchange in accordance with the rules of the exchange and subject to such terms as

the Commission deems necessary for the protection of investors.

In accordance with the procedure prescribed by rule X-12D2-1 (b),

10 issues were removed from listing and registration on exchanges

during the year. Of these, 3 issues were removed upon application

of their issuers and the remaining 7 upon application of exchanges.

In each of these instances the application was granted without the

imposition of any terms by the Commission.

Of the three issues removed upon application of their issuers, one

had not been traded on the exchange involved for a period of 6

months; the mining properties of the issuer of one had not been in operation for the past 20 years, there was no immediate prospect for

resumption of such operations, and there was an insufficient number

of shares outstanding in the hands of a very few public stockholders

to justify continuance of listing and registi ation of the issue which had

been suspended from trading on the exchange involved for the past

2 years; the remaining issue was removed from one of the two

exchanges on which it was listed and registered for the reason that the

small number of transactions effected on one of the exchanges did not

justify the expenses resulting from the maintenance of a coregistrar

and cotransfer agent and additional legal servicesin the State in which

the exchange was located.

The removal of the seven issues upon application of exchanges

was occasioned by various events which had the effect of practically

terminating public interest in the issues involved. These included

situations where the issuer was no longer operating; where the issuer

was in process of liquidation; where the financial condition and future

prospects of the issuer did not warrant continuation of listing and

registration of the issue; and where the number of shares of the issue

outstanding in public hands had been greatly reduced.

Securities Delisted by Certification

Securities which have been paid at maturity, redeemed, or retired in

full, or which have become exchangeable for other securities in substitution therefor, may be removed from listing and registration on a

national securities exchange uRon the exchange's filing with the Commission a certification to the effect that such retirement has occurred.

The removal of the security becomes,effective automatically after the

interval of time prescribed by rule X-12D2-2 (a). The exchanges

filed certifications under this rule effecting the removal of 227 separate

issues. In some instances the same issue was removed from more

than one exchange, so that the total number of removals, including

duplications, was 284. Successor issues to those removed became

listed and registered on exchanges in many instances.
FOURTEENTH ~~UAL REPORT 33

In accordance with the provisions of rule X-12D2-1 (d), New

York Curb Exchange removed 15 issues from listing and registration

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

This rule permits a national securities exchange to remove a security

from listing and registration in the event trading therein has been

terminated pursuant to a rule of the exchange which requires such termination due to the security's becoming listed and registered and

admitted to trading on another exchange. Removal under this rule is

automatic, the exchange being required merely to notify the Commission of the removal.

Securities Removed From Listing on Exempted Exchanges

A security may be removed from listing on an exempted exchange

upon the filing by such exchange of an appropriate amendment to its

exemption statement setting forth a brief statement of the reasons

for the removal. '

Three exempted exchanges removed 11 issues from listing thereon

during the year. The removal of these issues was occasioned by such

events as calling of the issue for redemption, dissolution of the issuer,

or substitution of a new security under a plan of reorganization.

Exempted Securities Removed From Exchange Trading

During the year Chicago Stock Exchange and New York Stock

Exchange removed from trading a total of 19 separate issues which

had been temporarily exempted from the registration requirements 0 f

section 12 (a) of the act pursuant to either rule X-12A-2 or rule

X-12A-3. One of these issues had been paid at maturity while the

remaining issues were retired in various manners under plans of

reorganization of their issuers.

MANIPULATION AND STABILIZATION

Sections 9, 10, and 15 of the Securities Exchange Act empower the

Commission to prohibit manipulation and to regulate manipulative

devices. Section 9 of this act forbids certain specifically described

forms of manipulative activity. Transactions which create actual or

apparent trading activity or which raise or lower prices. if they are

effected for the purpose of inducing others to buy or sell. are declared

to be unlawful, Certain practices designated as "wash sales" awl

"matched orders" effected for the purpose of creating a false or misleading appearance of active trading or a false or misleading appearance with respect to the market for a security are declared to be illega 1.

Persons selling or offering securities for sale are prohibited from

disseminating false information to the effect that the price of the

security will, or is likely to, rise or fall because of market operations

conducted for the purpose of raising or depressing the price

of a security. Persons selling or purchasing securities are forbidden to make false or misleading statements of material facts, wit 11

knowledge of their falsity, regarding securities for the purpose of

inducing the purchase or sale of such securities. Sections 10 and lfj

empower the Commission to adopt rules and regulations to define and

prohibit the use of new forms of manipulation which the Commission

might encounter from time to time.

Pursuant to statutory authority, the Commission has adopted rules

and regulations to aid it in carrying out the expressed will of Congress.

The three above-mentioned sections, as augmented by rules and regulations, are aimed at freeing the security markets from artificial influ-
34 SECURITIES AND EXCHANGE COMMISSION

ence, thus insuring the maintenance of fair and honest markets and

allowing prices to be established by supply and demand.

Manipulation

The Commission's purpose in its administration of the provisions of

the Securities Exchange Act against stock-market manipulation is to

provide policing of the stock exchange markets and the over-thecounter markets sufficient to accomplish the elimination of manipulative practices without interfering with the legitimate functioning of

these markets. In order to accomplish this, the Commission has continuously modified and sought to improve its procedure for the systematic surveillance of trading in securities. The methods used to detect manipulation have, of necessity, been elastic in character since

techniques employed by manipulators have changed constantly, increasing in subtlety and complexity.

The staff scrutinizes price movements in approximately 7,500 securities, including 3,500 traded on exchanges and 4,000 in the over-thecounter markets. The information maintained with respect to these

securities includes not only data reflecting the market action of such

securities but also includes news items, earnings figures, dividends,

options, and other data which might explain price and volume changes.

When no plausible explanation can be found for an unusual movement

in any security, the matter may be referred to the appropriate regional

office of the Commission for a field investigation. For reasons of

policy, the Commission keeps confidential the fact that trading in a

given security is under investigation, lest knowledge of the existence

of such investigation unduly affect the market or reflect unfairly upon

individuals whose activities are being investigated. As a result, the

Commission occasionally receives criticism for failing to investigate

situations when in fact it is actually engaged in an intensive investigation of those very matters.

The Commission's investigations in respect to matters involving

unusual market activity take two forms. The "flying quiz," or preliminary investigation, is designed to detect and discourage incipient

manipulation by a prompt determination of the reason for unusual

market behavior. Often the results of a flying quiz point to a legitimate reason for the activity under review and the case is closed. Frequently facts are uncovered which require more extended investigation, and in these cases formal orders of investigation are issued by

the Commission. In a formal investigation, members of the Commission's staff are empowered to subpena pertinent material and to

take testimony under oath. In the course of such investigations, data

on purchases and sales are often compiled covering substantial periods

of time and trading operations involving considerable quantities of

shares are scrutinized.

The Commission operates on the premise that manipulation should

be suppressed at its inception. Many of the cases investigated never

come to the attention of the public because the promptness of the

Commission's investigation, through the flying quiz technique, stops

the manipulation before it is fully developed. Since public losses are

seldom recoverable even though the perpetrator of a fraud is brought

to justice it is believed that the investigatory methods adopted afford

important protection to the public.
FOURTEENTH ANNUAL REPORT 35

A tabular summary with respect to the Commission's trading investigations follows:

Trading investigations

Fl1/lng Formal

quizzu inoutiga- tlom

91 34

147 2

238 36

2 -------- 98 9

Pending June 30, 1947

Initiated July 1,1947, to June 30,1948

Total to be accounted for

Changed to formal investigation

Closed or completed

Total disposed oL_ ______________________ ____ 100 9

Pending June 30, 1948________________________________ 138 27

Stabilization

During the 1948 fiscal year the Commission continued the administration of rules X-17A-2 and X-9A6-1. Rule X-17A-2 requires the

filing of detailed reports of all transactions incident to offerings in

respect of which a registration statement has been filed under the

Securities Act of 1933 where any stabilizing operation is undertaken

to facilitate the offering. Rule X-9A6-1 governs stabilizing transactions effected to facilitate offerings of securities registered on national securities exchanges, in which the offering prices are represented

to be "at the market" or at prices related to market prices.

Of the 449 registration statements filed during the fiscal year, 199

contained a statement of intention to stabilize to facilitate the offerings covered by such registration statements. Because a registration

statement sometimes covers more than one class of security, there

were 222 offerings of securities in respect of which a statement was

made, as required by rule 426under the Securities Act, to the effectthat

a stabilizing operation was contemplated. Stabilizing operations were

actually conducted to facilitate 71 of these offerings, principally the

stock offerings. In the case of bonds, public offerings of three issues

aggregating $26,084,000in principal amount were stabilized. Offerings of stock issues aggregating 23,370,892shares and having an estimated aggregate public offering price of $335,147,302were also stabilized. In connection with these stabilizing operations, 8,579reports

were filed with the Commission during the fiscal year. Each of these

reports has been analyzed to determine whether the stabilizing activities were lawful.

To facilitate compliance with the Commission's rules on stabilizing

and to assist issuers and underwriters to avoid violation of the statutory provisions dealing with manipulation and fraud, many conferences were held with representatives of such issuers and underwriters,

and many written and telephone requests were answered. A total

of 1,002 letters, memoranda relating to such conferences and telephone requests, and memoranda to the regional officesof the Commission wer written in connection with the administration and enforcement of the stabilization and manipulation statutory provisions

and regulations.

813892-49-4

_

_

_

_

_
36 SECURITIES AND EXCHAJ.~GE COMMISSION

SECURITY TRANSACTIONS OF CORPORATION INSIDERS

Under section 16 (a) of the Securities Exchange Act of 1934, section 17 (a) of the Public Utility Holding Company Act of 1935, and

section 30 (f) of the Investment Company Act of 1940, during the

past 14 years 43,243 corporate "insiders" of more than 3,000 issuers

have filed 290,241 reports covering their transactions in and holdings

of securities of their companies. Such reports must be filed by beneficial owners of more than 10 percent of any class of an equity security

which is listed and registered on a national securities exchange; officers and directors of the issuers of any security so listed; officers and

directors of registered public utility holding companies; and officers,

directors, beneficial owners of more than 10 percent of any security

(other than short-term paper), members of advisory boards, investment advisers, and affiliated persons of investment advisers of registered closed-end investment companies. An initial report is required

of these persons showing their beneficial ownership of securities of

their companies at the time any of these relationships is assumed, and

a report setting forth purchases, sales, or other changes is required

for each calendar month thereafter in which any change in beneficial

ownership of these securities occurs.

Examination and Dissemination of Information

While, in general, the Nation's principal organized security markets

are located in the larger financial centers of the country, security

ownership, particularly of the larger issues, is divided among thousands of large and small investors scattered throughout the country. The primary purpose of security ownership reports is to make

available to investors, wherever located, information as to the transactions of insiders in their companies' securities. Members of the staff

examine all reports filed to determine their compliance with the statutory requirements, and request amended reports where inaccuracies

or omissions appear. Documents and reports filed under other sections of the various acts administered by the Commission and data

published by various financial news services must also be examined

for current information as to corporate actions involving situations

or transactions in which ownership reports must be filed. Where

any report is not received within the prescribed time, necessary steps

are taken to secure its prompt filing.

All ownership reports are available for public inspection as soon

as they are filed at the Commission's office in Washington, and in

the case of reports under section 16 (a) of the Securities Exchange

Act also at the exchanges where additional copies of such reports

must be filed. Recognizing the limited opportunity of many individual investors to inspect the reports in person at 'Washington or at

the exchanges, the Commission in addition condenses the information

contained in the actual reports and publishes a monthly Official Summary of Security Transactions and Holdings which is mailed to any

interested person 'who requests it. This publication has a wide distribution among individual investors, security brokers and dealers,

libraries, newspapers, press associations, and others. Complete files

of this summary are available for public inspection at each of the

Commission's regional officesand at each national securities exchange.
FOURTEENTH ANNUAL REPORT 37

Preventing Unfair Use of Inside Information

Section 16 (b) of the Securities Exchange Act of 1934 aims at the

prevention of unfair use of information which may have been obtained by a corporate insider by reason of his relationship to the company. To this end, the section provides that any profit realized by

an insider from any purchase and sale, or any sale and purchase, of

any equity security of his company within a period of less than 6

months shall be recoverable by the issuer. Suit for the recovery of

such profits may be instituted by the issuer, or by any security owner

acting in its behalf if the issuer fails or refuses to bring suit within 60

days after request or if it fails diligently to prosecute the suit after

it is instituted. Similar provisions are contained in section 17 (b)

of the Public Utility Holding Company Act and section 30 (f) of

the Investment Company Act.

Substantial amounts, ranging up to several hundred thousand dollars, have been recovered under these provisions by or on behalf of

issuers. In a number of cases voluntary payments of such profits

have been made to the company by the officer or director. Such

voluntary payments were often brought about by the necessity to

report short-term transactions. Inasmuch as the section provides for

the recovery of profits through private civil suits, the Commission

does not have the power to administer or enforce the provisions of

the section. Ithas, however, filed briefs as amicus curiae in many of

the suits brought in the courts, particularly where novel questions of

law have been raised for judicial determination.

As has been noted, information as to changes in ownership of securities held by persons subject to liability under section 16 (b) is required

to be furnished in reports under section 16 (a). These reports make

available to stockholders data which may indicate the existence of

liability under section 16 (b).

Statistics of Ownership Reports

The number of ownership reports filed with and examined by the

Commission during the past fiscal year is set forth below:

Number ot oumcrsh ip reports of officers, directors, principal security holders,

and. certain other affiliated persons filed and erumined during tile fiscal year

ended June 30,19-'18

Descnption of report I Original Amended Total reports reports

Securitres Exchange Act of 1934 Form 4 _________________________________________________________ 13,391 715 14,106 Form 5_________________________________________________________ 536 14 550 Form 6 _________________________________________________________ 1,8R4 30 1,914

15,811 759 16.570

Publie Utlhty Holding Company Act of 1935 90 1 91 Form U-17-1 ___________________________________________________ 432 34 466 Form U-17-2 ___________________________________________________ 522 35 557

Investment Company Act of 1940. II5 4 II9 Form N -30F-L _________________________________________________ Form N-30F-2 __________________________________________________ 525 20 545

6!0 24 664 TotaL ________________________________________________________ 16,97& i 818 17,791

I Form 4 IS used to report changes m ownership, Form 5, to report ownership at the time any equity secunties of an issuer are first hsted and registered on a national sccunues exchange; and Form 6, to report

ownership of persons who subsequently become officers, directors, or prmerpal stockholders of such Issuer,

under sec 16 (a) of the Securrties Exchange Act of 1934, Form U-17-1 IS used for mural reports, and Form U-17-2 for reports of changes III ownership of secunties, under sec 17 (a) of the Public Utllity Holdmg

Company Act of 1935; and Form N-30F-11S used for Initial reports and Form :\'-30F-2 for reports of changes

ill ownership of securities under sec 30 (0 of the Investment Company Act of 1940.
38 SECURITIES AND EXCHANGE COMMISSION

SOLICITATION OF PROXIES, CONSENTS, AND AUTHORIZATIONS

Under three of the acts it administers-sections 14 (a) of the Securities Exchange Act of 1934, 12 (a) of the Public Utility Holding

Company Act of 1935 and 20 (a) of the Investment Company Act of

1940-the Commission is authorized to prescribe rules and regulations

concerning the solicitation of proxies, consents, and authorizations in

connection with securities of the companies subject to those acts. Pursuant to this authority, the Commission has adopted regulation X-14,

which is designed to protect investors by requiring the disclosure of

certain information to them and by affording them an opportunity

for active participation in the affairs of their company. Essentially,

this regulation makes unlawful any solicitation of any proxy, consent,

or authorization which is false or misleading as to any material fact

or which omits to state any material fact necessary to make the statements already made not false or misleading. Under the regulation

it is necessary, in general, that each person solicited be furnished

such information as will enable him to act intelligently upon each

separate matter in respect of which his vote or consent is sought.

The proxy rules set forth in this regulation also contain provisions

which enable security holders who are not allied with the management

to communicate with other security holders when the management is

soliciting proxies.

Statistics of Proxy Statements

During the 1948 fiscal year the Commission received and examined

both the preliminary and definitive material required with respect to

1,677 solicitations under regulation X-14 as well as "follow up" material employed in 229 instances. The number of proxy statements filed

by management and nonmanagement, and the principal items of business for which stockholders action was sought in these SOlicitations,

is shown below for each of the past five calendar years.

Year ended December 31-

1943 1944 1945 1946 1947

-- -- -- -- Proxy statements filed by management ________________________1,467 1,523 1,570 1,664 1,613 Proxy statements filed by others than management ____________ 31 sa 24 21 32

Total proxy statements filed_____________________________ -- -- -- -- -- 1,498 1,550 1,594 1,685 1,645

-- For meetings at whlch the election of directors was one of the Items of bnsiness _____________________________________________ 1,368 1,350 1,350 1,407 1,461 For meetings not involving the election of directors ____________ 109 172 213 244 149

For assents and authorizations not Involving a meeting or the election of directors __________________________________________21 28 31 34 35

Total proxy statements filed_____________________________ -- -- -- -- -- 1,498 1,550 1,594 1,685 1,645

A corresponding distribution of the specific proposals of action other

than the election of directors reflected in these proxy statements is set

forth below.

-- -- -- =
FOURTEENTH ANNUAL REPORT 39

Year ended December 31-

1943 1944 1945 1946 1947

-- -- -- -- Mergers, consolidations, acquisition of businesses, and purchase and sale of property _________________________________________47 59 40 65 69 Issuance of new securities, modification of existing securities, recapitalization plans otber than mergers or consolidations ___ 95 144 2Z7 249 223 Employees pension plans ______________________________________46 105 94 75 66 Bonus and profit-sharing plans, includmg stock options ________ 51 58 51 52 60 Iudemnification of officersand directors ________________________ 137 31 25 36 22 Change in date of annual meeting _____________________________ 54 33 33 28 27

Other miscellaneous amendments to bylaws, and miscellaneous other matters ________________________________________________ 131 141 217 309 207 Stockholder approval of independent auditors _________________ 307 310 296 304 312 Number of management's proxy statements containmg stock- holder proposals under rule X-I4A-7 ________________________ 27 20 14 19 15 Number of such stockholder proposals _________________________ 66 38 34 34 29

Net number of stockholders whose proposals were included in

management's proxy statements under rule X-14A-7 (each

stockholder is counted only once in each year regardless ofthe

number of his proposals or the number of companies that m- eluded his proposals m proxy statements) ____________________ 19 17 17 9 13

Examination of Proxies

An example of disclosure resulting from the Commission's examination of preliminary proxy soliciting material before it is mailed in

definitive form to stockholders may be noted in the following particular case from among the hundreds processed last year. It involved solicitations by a registrant of proxies for the election of directors proposed by both the management and a minority stockholders

group. The management slate was headed by the registrant's chairman of the board of directors, who had acquired a dominating position

in the registrant's affairs as a result of the transactions described

below.

In September 1945 the chairman acquired all the common stock

and other property of company B for $200,625,of which he allocated

$150,000 as the cost of the stock. In July 1947, he transferred this

common stock to company A and received in exchange all the common

stock of company A and a promissory note of the company for $650,-

000 at 4 percent interest. The common stock of company B was then

the sole asset of company A. The chairman of the registrant then

sold the common stock of company A to the registrant in the same

month, July 1947. The registrant agreed to issue to the chairman,

in payment for the stock, 47,000 shares of its own common stock

having a market value of approximately $246,750. Subsequently, the

registrant assumed payment of the $650,000note of company A held

by the chairman. By reason of these transactions the chairman had

converted his original $150,000investment into stock of the registrant

worth $246.750and a promissory note for $650,000,a total of $896,750.

A former chairman of the registrant was in control of manufacturing, insurance, and investment companies which together owned

19,990 shares of the registrant's common stock (which shares were

subsequently acquired by the chairman or his associates). One of

these controlled companies, company C, had previously purchased
40 SECURITIES AND EXCHANGE COMMISSION

one of the registrant's former subsidiaries, company D, and had given

the registrant a note for $250,000in payment. Thereafter, company

C had refused to make payments of principal or interest on this note,

asserting offsets and counterclaims against the registrant in the

amount of $500,000in connection with this transaction. Accordingly,

as a condition precedent to the exchange of the 47,000 shares of stock

of the registrant for stock of company A, general releases were exchanged between the registrant, company C and company D, with

respect to all claims arising out of the sale of company D to company

C, and the $250,000 note was canceled.

As a result of disclosures required by the Commission's staff in this

situation, the registrant's definitive proxy statement contained the

following information:

(a) Details of the arrangements entered into for the acquisition of

the shares of the registrant by its chairman or his associates from the

corporate interests of its former chairman.

(b) Details with respect to the exchange of general releases between the registrant, company C and company D related to claims

arising out of the sale by the registrant to company C of the capital

stock and accounts receivable of company D, and the relationship of

the former chairman to these companies.

( c) An indication with regard to company B that (1) its fixed

assets were reappraised after acquisition by the chairman, resulting

in a net increase of $26,038.59over the previous depreciated carrying

value of land and buildings; (2) it has outstanding a mortgage upon

its land and buildings, in the unpaid principal amount of $105,500,

bearing interest of 4 percent a year; (3) it also has outstanding 30,000

shares of 60-cent cumulative preferred stock requiring annual dividend payments of $18,000, of which shares 5,595 were owned by the

chairman, 420 by his son, and the balance by friends and/or employees;

and (4) these interest and dividend requirements represent prior

charges on the earnings of company B before dividends may be paid

on its common stock which was acquired by the registrant. The net

income of company B for each of the past 3 years was also set forth.

The definitive proxy also disclosed, with respect to the $650,000

promissory note: (1) That if such note is not paid at maturity the

ownership of company B will revert to the chairman, since all the

common stock of company B is pledged as collateral for the note;

(2) that in connection with the issuance of such note an intangible

item of $650,000arose which now appears on the books of company B

and that the disposition thereof has not yet been determined; and

(3) that such note has resulted in an annual fixed charge of $26,000,

representing interest payments, which must be paid out of the earnings

of the registrant and its subsidiaries before any dividends may be

paid to stockholders of the registrant.

. Th~ proxy req?irements of the Securities Exchange Act operated

III this case to give stockholders of the registrant full information

about the manner in which the chairman acquired control of the

registrant, about his dealings with the registrant, and of the results

of these transactions as they affected the interests of the stockholders.
FOURTEENTH ANNUAL REPORT 41

Changes in Proxy Rules

In Securities Exchange Act release No. 4037 (1947) the Commission announced the adoption of a number of changes in its proxy rules

after wide circulation of the proposals and numerous conferences with

interested persons. The fundamental purpose of the proposals was to

revise the rules to clarify their application and to write into them

more explicitly the exact situations they covel'. The response to the

Commission's invitation for comments on the revision was very generous and the comments and suggestions received were most constructive and helpful to the Commission. ~\.number of the more important

changes made are noted below.

The new rules require disclosure of the individual remuneration

paid only to the three highest-paid officersof the issner.

Follow-up material must now be filed in advance of its transmission to security holders, but this does not apply to replies to inquiries

from stockholders requesting further information or to communications requesting only that proxies previously solicited be signed and

returned. 'Vhere a proxy solicitation is made in person and written

material discussing the merits of any matter as to which the proxy is

being solicited is used, copies of such material must also be filed with

the Commission prior to its use.

The rule requiring the mailing of communications for security

holders has been clarified, particularly as to the circumstances under

which the management of the issuer is required to mail solicitation

material. The new rule also gives the management the option of

furnishing the security holder who wishes to make such a communication with a reasonably current list of security holders in lieu of mailing

his material for him. Another rule which requires the management

to include a security holder's proposal in its proxy material has been

revised to require such security holder to furnish the management with

a copy of his proposal and statement at the time he gives notice to

the management ot his intention to make the proposal at the meeting.

The revised rules became effective December 18, 1947, immediately

upon announcement of the changes, in order to permit those who wished

to do so to comply with the new rules rather than the old. However,

it was provided that any person commencing a solicitation prior to

February 15, 1948, could make the solicitation under either the old or

revised rules at his option.

During the year the Commission also had under consideration proposals to adopt amendments to the proxy rules other than those described above. These proposals were circulated by the Commission

shortly after the close of the fiscal year in Securities Exchange Act

Release No. 4114 (1948). These proposals are not as extensive as the

amendments adopted on December 1947, but they involve certain important problems. The proposed changes are noted below.

The proposals contemplate a number of changes as to the form of

proxy and the rules governing its use. To simplify the pro~y, the

changes would eliminate certain statements heretofore required to

be in the proxy. Other changes would provide that no proxy may

confer authority to vote at any annual meeting other than .the one

following the solicitation and that the proxy statement provide that

the shares covered by a proxy will be represented at the meeting and
42 SECURITIES AND EXCHANGE COMMISSION

will be voted according to the choice made by the security holder.

The purpose of these changes is to prevent the premature solicitation

of proxies on the basis of out-of-date information and to insure that

a proxy be given its full effect.

Rule X-14A-8 would be amended so that the management of an

issuer need not include the proposal of a security holder in its proxy

solicitation material where such proposal is submitted for the purpose

of enforcing a personal claim or of redressing a personal grievance

against the issuer or its management. In addition, the management

could omit a proposal if the management had included a proposal of the

same security holder in its proxy statement and the security holder

failed to attend the meeting before which the proposal was to be submitted and did not present the proposal for action. In another situation, the proposal could be omitted if the same proposal had been

submitted for action at the last annual meeting of the security holders,

or at a special meeting subsequent thereto, and received less than 3

percent of the total votes cast in regard to the proposal. Where a

management does omit a proposal, under the proposed rule, it would

have to file the proposal with the Commission together with a statement

of the reasons why the management deems such omission to be proper

in the particular case.

Schedule 14A, which states the information required to be contained in a proxy statement, would be amended with respect to item

7 (a) as to certain matters relating to the disclosure of remuneration

paid by the issuer to its officers,directors, and other persons. It would

also be amended to require information as to the indebtedness to the

issuer or its subsidiaries of associates of directors, officers, and nominees of the issuer as well as the indebtedness of such directors, officers,

and nominees. This would not include any indebtedness arising in

the ordinary course of business or to any person whose indebtedness

did not exceed $1,000 at any time durin~ the last fiscal year of the

issuer.

Item 12 of schedule 14A would be amended to make it clear that the

information required by that item must be supplied as to authorizations for securities to be issued, otherwise than in exchange for outstanding securities of the issuer, even though the securities are not

to be issued immediately. Itwould also be amended to provide that

a description of the securities to be authorized or issued need not be

given in cases involving only additional shares of common stock of a

class already outstanding.

REGULATION OF BROKERS AND DEALERS IN OVER-THE-COUNTER

MARKETS

Registration

Brokers and dealers using the mails or other instrumentalities of

interstate commerce to effect transactions in securities on over-thecounter markets are required to be registered with the Commission

pursuant to section 15 (a) of the Securities Exchange Act, except

those brokers and dealers whose business is exclusively intrastate or

exclusively m exempt securities, The following tabulation reflects

certain data with respect to the registration of brokers and dealers

during the fiscal year ended June 30, 1948.
FOURTEENTH ~AL REPORT 43

Registration of brokers and dealers under section 15 (b) of the Securities

E:cchanoe Act, fiscal year ending June 30, 19-'18

Effective registrations at close of preceding fiscal year 4,011

Effective registrations carried as inactive______________________________ 174

Registrations placed under suspension during preceding fiscal year______ 0

Applications pending at close of preceding fiscal year___________________ 40

Applications filed during fiscal year___________________________________ 466

Total 4,591

Applications withdrawn during yeaL_________________________________ 12

Applications canceled during year______________________________________ 2

Registrations withdrawn during year_________________________________ 407

Registrations canceled during the year________________________________ 53

Registrations denied during year 2

Registrations suspended during year 0

Registrations revoked during year_____________________________________ 8

Registrations effective at end of year 4,006

Registrations effective at end of year carried as inactive_______________ 172

Applications pending at end of yeaL__________________________________ 29

Total 4,591

1Registrations on inactive status because of inability to locate registrant despite careful

inquiry. Two such registrations were canceled, withdrawn, or restored to active status during the year.

Broker-Dealer Inspections

Inspections of brokers and dealers are undertaken pursuant to section 17 of the Securities Exchange Act for the purpose of determining

whether registrants are in compliance with the requirements of law.

To a considerable extent, the inspection work is correlated with the

examination of the financial reports filed by brokers and dealers, for

when these financial reports reflect weak financial condition it is

necessary to make prompt inquiry to determine whether customers'

funds and securities are in jeopardy and whether remedial action may

be necessary or appropriate. Inspections are also frequently made as

a result of complaints made to the Commission by customers, but the

facts presented by complainants are carefully considered before any

decision is made to make an inspection as a result of their complaints.

During the 1948 fiscal year a total of 841 inspection reports were

received from the Commission's regional offices. In 24 of these inspections the question of financial condition required consideration and

continued surveillance. In 217inspections the reports disclosed transactions at prices sufficiently different from prevailing market prices

to raise some question as to the fair treatment of customers. For the

most part, however, transactions of this type by the firms involved

were isolated and did not represent the characteristic pattern of their

business; 177 inspections disclosed information indicating noncompliance with regulation T relating to the extension of credit. In 55

inspections, questions were raised concerning noncompliance with the

rules adopted by the Commission with respect to hypothecation and

commingling of customers' securities. In only 3 inspections were

secret profits reported-transactions in which a firm misrepresents to

customers the prices at which the customers' orders are executed.

The Commission has continued its established policy of giving

informal notice of infractions to a firm when there is no indication of

willful disregard of the law, and generally as a result of such notice
44 SECURITIES AND EXCHA~GE COMMISSION

the infractions are promptly discontinued and measures taken to prevent their recurrence. There are, of course, inspections in which acts

and practices are discovered which represent such disregard of the

interests of customers that investigations looking to appropriate action

by the Commission are undertaken. During the 19"18 fiscal year 13

such investigations were undertaken,

Administrative Proceedings

Among the sanctions which the Conunission is authorized to apply

against brokers and dealers who violate the law are revocation of

registration or denial of registration to a new applicant. The Commission may also take action to suspend or expel brokers and dealers

from membership in the National Association of Securities Dealers

and from membership on national securities exchanges.

~\summary of the administrative proceedings instituted by the Commission during the 19:1:8fiscal year with respect to brokers and dealers

is given below.

Record of broker-dealer nroceetlmp« and proceedings to su spend or expel from

membership in a-national securities association instituted pursuant to section 15

Of the SeclInt1Cs Exchanue Act

Proceedings on revocation of registration pending at beginning of fiscal

year______________________________________________________________ 4

Proceedings on revocation of regtstratron and suspension or expulsion from

NASH pending at beginning of fiscal yeaL____________________________ 2

Proceedings on denial of registration pending at beginning of fiscal year___ 1

Proceedings ordered during year on revocation of registration____________ 13

Proceedings ordered during year on revocation of registration and suspension or expulsion from NASD______________________________________ I)

Proceedings ordered during year on denial of registration_______________ (;

Total_________________________________________________________ 35

Denial proceedings dismissed, wlthdrawal of application hping permltted.,., 3

Denial proceedings resulting in registration under terms and condittons.L; 2

Reglstra tion denled.Lc., ; _ __ __ _____ ____________ 2

Registra tion revoked_______ ___________ _______________ lJ

Revocation proceedings pending at end of fiscal year 10

Revocation proceedings and proceedings to expel or suspend from NASD

pending at end of fiscal yeaL_______________________________________ fI

Tutal_________________________________________________________ 3~

During the past 10 years a substantial number of administrative

proceedings and several criminal prosecutions against brokers and

dealers have involved the fraudulent practice OI dealing in securities

at prices not reasonably related to the prevailing market prices without

disclosure of the current market, and of confirming transactions "as

principal" when by its representations and conduct the firm in fact

acted as the customer's agent. Such practices, in part, resulted during

the 19:1:8fiscal year in the revocation of the registration of MayPhinney Co. and in the denial of registration to vVashington National

Co., Inc., controlled by Herbert R. May who had been a general partner in the May-Phinney firm and before that had operated as a sole

proprietorship under the name of Herbert R. May & CO.4 By various

artifices May sought and gained the trust and confidence of many

customers who were uninformed in securities matters and relied on his

• Securities Exchange Act release Xo. 4061 (I!H8).
FOURTEENTH ~AL REPORT 45

representations and recommendations in the belief that he was acting

in their behalf and for their best interests. Having thus insulated

himself against any suspicion on the part of the customer, it was May's

practice to recommend that the customer purchase a particular security

at a price which he knew, but did not disclose to the customer, was far

in excess of the market price of that security and to confirm the transaction as a sale by him "as principal." Similarly, he would recommend

the sale by the customers of particular securities at prices far below

the current market prices and again would confirm the transaction as

a purchase by him "as principal."

The Commission held that, by virtue of the trust relationship cultivated by him and the understanding reached by customers from his

representations that he would act in their behalf and lor them, he was

under a duty not to deal with them for his own account (as principal)

without their express consent. Furthermore, under these circumstances, he was obligated to obtain for them the best possible prices

and to divulge all the profits he made. In violation of this duty May

took large secret profits and without disclosing; the facts charged customers prices greatly in excess of the current market prices, thereby

violating the antifraud provisions of the statutes. But even assuming

he had no duty to act as agent and assuming that he was in fact a

principal, the Commission held that these transactions would also be

fraudulent because the prices customers paid and received were not

reasonably related to the prevailing market prices. The Commission

also found that May violated the law in the sale of preferred stock of

"Washington Chemical & Salt Corp. which he organized and promoted.

This stock was sold without registration under the Securities Act in

violation of section G (a), and in the sale May made false and misleading representations with respect to the company's financial condition

and the value of its properties. This violation was all the more reprehensible because about tiO percent of the stock was sold to six widows,

uninformed customers whose trust and confidence he had cultivated

and who, from the very beginning of their dealings in securities with

May, had indicated to him their need for nonspeculative investments

which would produce a reasonable income.

In proceedings on the question of revocation of the broker-dealer

registration of Arleen ",V.Hughes, doing business as E. ",V.Hughes

& Co., the primary legal issue related to disclosures required of a

fiduciary," Mrs. Hughes, registered as both a broker and dealer and

as an investment adviser, transacted business in securities with about

175 investment advisory clients with whom she had entered into a

written contract which purported to declare the respective rights and

obligations of the parties. Under the contract Mrs. Hughes would

act as a broker or dealer and investment adviser, and it provided that

when actina as investment adviser, she should act as a principal "in

every suclt""transaction, except as otherwise agreed." The contract

-Contained a schedule of "maximum rates and charges," expressed in

points on a base-price formula, to be paid by the client on all purchases of securities. In the actual operation of her business, it was

Mrs. Huzhes' practice to handle the client's entire account, advising

the client with reference to an investment program, furnishing information and making recommendations as to particular securities,

• Securities Exchange Act releases Nos 4c048.4073, and 4080 (1948).
46 SECURITIES AND EXCHANGE COMMISSION

and in connection with such recommendations she would give an approximate price that the securities would cost the client. If the client

agreed to the purchase she would either supply it from inventory or

purchase it to cover the sale and then, as principal, confirm the transaction as a sale of the security by her to the client at net price plus

insurance and postage. The Commission's staff took the position that,

because of the fiduciary relationship established by the contract, Mrs.

Hughes was under a duty in each transaction to disclose the cost of

the security to her and the best current market price. Mrs. Hughes,

on the other hand, although admitting her fiduciary relationship to

clients, contended that the disclosures made in the contract satisfied

all of her fiduciary duties and obligations. The Commission, in its

opinion and findings, held that her failure to disclose fully to her

clients the nature and extent of her adverse interest in transactions

with clients, including her cost of the security and the best price

available on a purchase in the open market, constituted a violation of

the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Mrs. Hughes filed a petition with the

Circuit Court of Appeals for the District of Columbia for review of

the Commission's order revoking her broker-dealer registration and

obtained a stay of the order pending such review.

In revoking the registration of Light, Wofsey & Benesch, Inc., and

denying registration to Light Bros., the Commission considered certain activities of Abraham Light, who was the dominant figure in both

firms and also treasurer and a director of Seco Signal Corp. which

he and his associates organized and promoted," Securities of Seco had

been sold to the public by a predecessor of Light, Wofsey & Benesch,

Inc. The evidence disclosed certain instances in which Light made or

was responsible for making express misrepresentations in offering Seco

securities. In addition, it appeared that, before various contracts for

the sale of the securities had been completed by delivery, Light and

certain of his associates in at least two transactions obtained secret

profits at the expense of Seco, At about the time of its formation Seco,

acting through Light as treasurer and director, purchased a building

and Light secretly received $500 of the commission from Herbert I.

Benesch, the agent representing the seller of the building. Later,

Light participated in the sale of electric storage batteries on behalf of

Seco which resulted in a diversion from the company treasury of

$25,000. This sum was divided among four persons, including Abraham Light, all of whom then made contributions to organize Light,

Wofsey & Benesch, Inc. and became its officers. No disclosure was

made of any of the facts relating to the diversions.

The Commission concurred in the finding of the hearing officerthat

the express misrepresentations and the diversion of funds from Seco

without disclosure of the facts operated as a fraud on the public

purchasers of the company's securities by Light and his associates,

and constituted willful violations of the antifraud provisions of the"

Securities Act of 1933 and the Securities Exchange Act of 1934.

The specter of the bucket shop appeared in three proceedings during the year in which the Commission ordered revocation of regis-

• Securities Exchange Act release No. 4052 (1948).
FOURTEENTH ANNUAL REPORT 47

tration," The general pattern of conduct was substantially the same

inall three instances. Customers were solicited to purchase particular

securities which the firm highly recommended, and were induced by

varying degrees of pressure and by various false representations to

enter their orders. At the time a customer agreed to effect a purchase

the firm would request payment of the purchase price, which would

be made by the customer with the understanding, of course, that the

transaction would be promptly executed. The firm, on the other hand,

would not deliver the purchased securities nor would it return the cash

it had received, but instead converted the cash paid by the customer

to its own use. Similarly, customers who delivered securities to the

firm for sale with the understanding that the proceeds of the sale

would be promptly turned over to them received neither the proceeds

nor the securities they had surrendered. Moreover, in the Bauer

proceeding the evidence showed that, contrary to the representations

in the application for registration, one D. W. Dawes, not K. L. Bauer,

was the real owner and manager of the business. Bauer, in street

jargon, was merely a front for Dawes who, as his own convenience

or necessity dictated, used various other names.

SUPERVISION OF NASD ACTIVITY

Membership

In the 1948 fiscal year membership in the National Association of

Securities Dealers, Inc. (NASD), the only national securities association registered with the Commission, increased to a year-end total of

2,677, a gain of 63 during the year. At the same date 26,228individuals, including generally all partners, officers,traders, salesmen, and

all other persons employed by member firms in capacities which involved doing business directly with the public, were registered with

the NASD as registered representatives, an increase of 655 during the

year.

Disciplinary Actions

The Commission received reports from the NASD during the

1948 fiscal year on the dispositions of 10 disciplinary actions in which

formal complaints had been filed against members. In three of these

cases the complaints were dismissed. In the other seven cases the

appropriate district business conduct committee found that the NASD

rules of fair practice had been violated by the accused members and

imposed various penalties. The membership of one firm was suspended for 30 days; one member was fined $1,000 and censured and

another was fined $250 and censured; in two cases members were

censured and assessed costs of the proceedings; and in one case the

member was censured. The seventh case involved a complaint filed

jointly against a firm and one of its registered representatives, an

officer and employee of the firm, charging the misappropriation of

customers' funds and securities and the falsification of the books and

records of the firm to conceal the misappropriations. The district

business conduct committee having jurisdiction found that the regJamea E. Scott I! 00., Securities Exchange Act release No. 4088 (1948) ; Louia J. Burn8,

Securities Exchange Act release No. 4087 (1948) ; Kenneth Lee Bauer, Securities Exchange

Act release No. 4006 (1948).

•
48 SECURITIES AND EXCHANGE COMMISSIOK

istered representatives had violated the rules as alleged in the complaint and revoked his registration as registered representative. The

committee found no fault with the employing firm and dismissed the

complaint as to it on a finding- that the firm had brouzht to light the

alleged violations, had promptly instituted a compfete audit, had

called the matter to the attention of the appropriate authorities, and

had brought about full restitution to all customers injured by the

misappropriations.

As is its custom the Commission referred to the NASD for

appropriate action facts concerning the business practices of members

where there were indications of possible violations of the NASD rules

of fair practice. Seven such references were made in the 1948 fiscal

year and one had been in process before the NASD at the start of

that year. Reports on six of these matters were received from the

NASD during the year. Two of these involved formal complaint

procedures in which violations were found, as reported above, and in

which some penalty was imposed on the offending member. The other

four cases had been disposed of by informal means. In these four

cases the NASD undertook its own examination of the members cited

in the reference. In two cases such examination, subsequent to the

date of the facts referred to, showed a marked change in the practices

of the member following the inspection by the Commission. Consideration of such correction and improvement led to the conclusion that

no further action against the members was necessary. Independent

examinations in the remaining two cases revealed other relevant facts

or circumstances such as to convince the committees having jurisdiction

that there was no basis for formal disciplinary action.

Commission Review of Actions on Membership .

Under section 15A (g) of the Securities Exchange Act the Commission may review certain types of action by the NASD, including

cases wherein membership is denied to an applicant. Such cases come

hefore the Commission either on its own motion or on application by

an aggrie\'ed party. One such case, involving DeWitt Investment

Co.. camp before and was decided by the Commission during the year.

The petitioner had been denied membership on the grounds that (1)

its principal officer, Paul K. Guthrie, had been suspended from the

Philadelphia Stock Exchange in 1922 for conduct inconsistent with

just and equitable principles of trade, and (2) the petitioning firm

was not regularly engaged in the business of acting as a broker or

dealer in securities.

After hearing, as well as on the record made before the NASD, the

Commission held that inasmuch as the suspension by the exchange had

occurred prior to the enactment of the Securities Exchange Act it was

not a valid disqualification from membership in the NASD. On the

second point the Commission stressed that, although the petitioner

had theretofore effected only a few securities transactions, its stated

purpose with respect to business proposed to be done if given the

benefits of membership should also have been considered, particularly

in the early stages of a new venture. Consideration of the firm's past

activities and professed intention led the Commission to find that the

petitioner was actually engaged in the business of effecting transac-
FOURTEENTH ANNUAL REPORT 49

00n~ in securiti~s and thus w~s not ineligible for membership under

Section 1 o! article 1 of the NASD bylaws. As required by statute

under the circumstances, the Commission by order set aside the action

of the NASD and required the NAtiD to admit the firm to membership."

Under section 15A (b) (4) of the Securities Exchange Act the Commission may be petitioned to determine whether it is in the public interest to approve or direct the admission to or continuation in membership of a firm if a partner, officer, director, or employee individually

is disqualified from membership. Such petitions are in the first

instance passed on by the NASD which, if it acts favorably to the

applicant, becomes the petitioner before the Commission on behalf

of the applicant. Should the NASD reject such un application, the

applicant may directly seek a Commission order direetiug the NASD

to admit or continue the applicant as a member.

The Commission gives public notice of the receipt of applications

under section 15A (b) (4) so that interested parties lllay present their

views or request public hearings. In the absence of such a request the

Commission either sets the matter down for hearing on its own motion

or decides the question on the basis of the record without hearing. In

addition the Commission will, upon request and under appropriate

circumstances, keep confidential the identity of the employing firm.

a procedure developed when it was advised that the publicity attendant

upon a Commission proceeding had discouraged some members from

taking the necessary legal steps to obtain approval of the employment

of persons under some disqualification but who, with due regard to the

public interest, might appropriately be employed under supervision

of an NASD member.

Two "approval" cases were decided by the Commission during the

1948 fiscal year and seven applications were in process or under advisement at the year end. One decision concerned Alois G. Scheidel,

held by NASD to have been a "cause" for the expulsion in 1941 of A. G.

Scheidel & Co., by and from the XASD under circumstances which

required Commission approval or direction for the admission to or

continuation in membership of any firm with which he later became

associated. A petition was subsequently filed with the Commission by

the NASD on behalf of Minnesota Securities Corp. who then employed

Scheidel. The NASD found the firm ineligible for membership due

to the employment of Scheidel, a disqualified person, but petitioned

the Commission to approve the admission of the firm to membership.

The Commission granted the application,"

A somewhat similar case involved John J. Bell, formerly n partner

of W. F. Thompson & Co. and a "cause" for the expulsion of that firm

by and from the NASD in 1942 for conduct inconsistent with just and

equitable principles of trade. Bell subsequently obtained employment

with a member firm which sought by petition to retain membership

while employing a disqualified person. As in the former case the

NASD acknowledged the disqualification but petitioned the Commission in Bell's behalf and the Commission approved the application."

8 Securities Exchange Act release No. 4076 (1948).

Securities Exchange Act release No. 40:13 (1947). ,. Securities Exchange Act release No. 4034 (1947) •
50 SECURITIES ANI? EXCHANGE COMMISSION

CHANGES IN RULES AND FORMS

Rule X-3AI2-2-Exemption for Municipally Guaranteed Securities

This rule was originally adopted to permit exchange trading without registration under the act in a security the income of which is

substantially guaranteed by a State or political subdivision thereof.

Under an amendment adopted during the fiscal year the exemption is

extended to cover the period while a company previously exempted

under the rule is in process of dissolution,"

Rule X-llD-I-Extension of Credit by Broker-Dealers

Section 11 (d) (1) generally prohibits a broker-dealer from effecting any transaction in connection with which he extends credit to

a customer on any security which was part of a new issue in whose

distribution he participated during the preceding 6-month period.

In some cases the "new issue" subject to section 11 (d) (1) consists of

additional shares of a class previously outstanding. In such cases

old securities of the same class are not subject to the prohibition

against extending credit. As a result it may be difficult during the 6-

month period to distinguish between shares of the "new issue," which

are subject to the rule, and the previously outstanding shares, which

are not. A purchaser's ability to obtain credit from his broker in such

a situation would depend therefore on the particular shares which the

seller happened to deliver after the transaction. The problem was

particularly difficult where the majority of the outstanding shares

were "old" shares, not subject to the rule.

Under an amendment to rule X-llD1-1 during the year the problem

was minimized by exempting a security of a mixed class, not predominently "new," provided that the particular security was sold to or

purchased for the customer by the broker-dealer after he ceased to

participate in the distribution of the "new issue." 12 However, the

proposal does not remove the prohibition against extensions of credit

in connection with sales of "new" shares effected by a broker-dealer

during the distribution of the "new issue."

Rules X-12A-4, X-12D3-1 and X-12D3-2-Exemption From Listing for

"When-Issued" Dealing

Holders of a security dealt in on an exchange are not afforded an

exchange market for short-term warrants or subscription rights

which have been issued to them unless such warrants or rights are

registered on an exchange or each "subject security" (the security

to be acquired by the exercise of the warrant or subscription right) is

admitted to dealing or is "in the process of admission to dealing on a

national securities exchange"; and they are not afforded an exchange

market on a "when-issued" basis for such warrants or rights which are

to be issued to them in the future, unless, among other prerequisites,

each "subject security" is "in the process of admission to dealing on

a national securities exchange." " The three rules in question were amended by waiving the "in the

process of admission" requirement to permit exempt trading in issued

warrants and "when-issued" dealing in unissued warrants on national

U Securities Exchange Act release No. 4077 (1948). 12 Securities Exchange Act release No. 4044 (1948).
FOURTEENTH ~AL REPORT 51

securities exchanges in certain cases where information regarding

each subject security and its issuer is available from registration statements and periodic reports filed with the Commission under any of

the statutes which it administers.v

Forms 12-K and 12A-K-Annual Report Forms

Companies which report to the Interstate Commerce Commission

on Form A are permitted, in connection with reports to the Securities

and Exchange Commission on Forms 12-K and 12A-K, to file certain

selected schedules in lieu of a complete Form A. Because of changes

made in Form A by the Interstate Commerce Commission for the

year ended December 31, 1947, the Commission revised the selected

schedules to conform to these ehanges.>

LITIGATION' UNDER THE SECURITIES EXCHANGE ACf

Injunction and Appellate Proceedings Involving Brokers and Dealers

Most of the court cases under the act during the year were injunction actions against brokers and dealers who either were or should

have been registered with the Commission under section 15 (a)

of the act.

Three actions against registered brokers and dealers involved the

financial responsibility of the defendants. In these three cases, SEO

v, Light, Wolsey ill Benesch, I1UJ.,et al., SEO v. Raymond, Bliss, Inc.,

and SEO v, York, the Commission's complaints charged that the defendants, in violation of the fraud provisions of the act, had accepted

money and securities from customers without advising them that the

defendants were insolvent. In addition, the Light complaint alleged

a violation of rule X-15C3--1 of the act, which prohibits a brokerdealer from permitting his aggregate indebtedness to exceed 2,000

percent of his net capital, and the Raymond, Bliss and York complaints alleged the hypothecation of customers' securities without their

knowledge or consent.

In the Light case the Commission's complaint alleged that, except

for furniture, fixtures, and certain other items which could not be

readily converted into cash, the firm's assets consisted of a total of

approximately $30 in cash and documentary stamps while it had

liabilities in excess of $5,000. After the United States District Court

at Baltimore had entered a preliminary injunction on this count, the

Commission in an administrative proceeding revoked the firm's

broker-dealer registration for violations including the insolvency

count. The revocation of the firm's registration having rendered the

court action moot, the Commission's complaint and the preliminary

injunction were thereafter dismissed without prejudice."

Both the Raymond, Bliss, and York cases were pending from the

preceding fiscal year and are described in the Thirteenth Annual Report, pages 58-59. In the Raymond, Bliss case a consent permanent

injunction was entered on the Commission's complaint during the

past fiscal year after the family of the registrant, who was deceased,

had made an assignment of $30,000for the benefit of creditors. Because of the assignment the Commission's request for the appoint-

:II Securities Exchange Act release No. 4053 (1948). 1< Securities Exchange Act release No, 4075 (1948), :IICivil No. 3645, D. Maryland, April 7, 1948.

813892-49-5
52 SECURITIES AND EXCHANGE COMMISSION

ment of a receiver of the firm's assets was denied. However, the

court reserved jurisdiction on the question to permit a future request

by the Commission for a receiver should developments so require."

The York case was dismissed during the past fiscal year after the

defendant had been shot and killed by his principal creditor." A

concurrent administrative proceeding instituted by the Commission

to revoke York's registration as a broker-dealer was also thereupon

discontinued.>

Two of the injunction actions involved persons conducting a business

in securities without being registered with the Commission as required

by section 15 (a) of the act. One was SEO v, Atlas Investment 00.,

Inc., Anchor Investment 00., Inc., and John R. Jones, filed in the

United States District Court for the Western District of Missouri.

The two corporations had been engaged in the securities business in

St. Joseph, Mo., under the management and control of Jones, who was

a stockholder in both corporations. The defendants admitted that

they had defrauded their customers by misrepresenting the prices at

which they were effecting securities transactions and by taking secret

profits. In addition it was admitted that the corporations, not having

registered as brokers and dealers, had neglected to keep proper records

and to file reports of financial condition with the Commission, and had

not given proper confirmations to their customers. The defendants

consented to the entry of a final injunction as sought by the

Commission."

The second of these actions was SEO v. Burmeister & 00., Inc.,

J. E. Burmeister; and Mail! Leiber, filed in the United States District

Court at Nashville, Tenn. The Commission in its complaint charged

that the corporation had been executing transactions in securities

without being registered as a broker or dealer with the Commission and

that the individual defendants had aided and abetted the corporation

in this violation of section 15 (a) of the act. The complaint charged

also that the defendants for several years had been selling securities

consisting of fractional undivided interests in oil and gas leases and

royalties in mineral rights in land in Texas without complying with

the registration requirements of the Securities Act of 1933. A permanent injunction by consent was entered shortly after the close of the

fiscal year.20

With respect to appellate court proceedings to review Commission

orders, only one new action was instituted during the past fiscal year.

That case is Arleen W. Hughes v, SEO, filed in the Court of Appeals

for the District of Columbia Circuit shortly before the close of the

fiscal year." The action is one to review the Commission's order

revoking the broker-dealer registration of Mrs. Hughes. The basis

of the appeal is that the Commission erred as a matter of law in finding

that it was a willful violation of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 for the

registrant, who was registered both as a broker-dealer under the

Securities Exchange Act and as an investment adviser under the Investment Advisers Act of 1940, to sell her own securities to her investment advisory clients without fully disclosing the nature and extent

,. Civil No. 5999. D. Massachusetts, Sept. 12, 1947. 17 Civil No. 894, W. D. Texas, July 31, 1947. I.Securities Exchance Act release No. 3965 (1947). ,. Civil No 469. W. D. Missouri, June 24, 1948. 20 M. D. Tennessee, July 1948 '" No. 9853, App. D. C.
FOURTEENTH AL~AL REPORT 53

of her adverse interest. This disclosure, the Commission held, should

have included the capacity in which she acted (i. e., whether as principal or agent), the cost of securities to her, and the current market price

of the securities. The appeal alleged also that it was unlawful discrimination on the part of the Commission to treat the registrant, who

was registered as an investment adviser as well as a broker-dealer,

differently from any other registered broker-dealer in imposing duties

of disclosure.

A second appellate court action involving a broker-dealer was Lann

v. SEO, pending from the preceding year. This appeal, described in

the Thirteenth Annual Report at pages (jO-fit, was the first petition for

judicial review of a Commission finding of manipulation in the overthe-counter market. Lann was a partner of M. S..Wien & Co., whose

registration as a broker-dealer the Commission had revoked for an

over-the-counter manipulation in violation of sections 10 (b) and

15 (c) (1) of the Securities Exchange Act and rules X-10B-5 and

X-15Cl-2 thereunder. While the court review was pending Lann

filed an application with the Commission for registration as a brokerdealer, Wien & Co. having been readmitted to registration after Lann's

separation from the firm. The Commission, in view of Lann's having

been out of business for a year and in consideration of his record both

prior and subsequent to the revocation of the registration of Wien &

Co., permitted Lann's application for registration to become effective.

Lann's petition in the appellate court to review the revocation of Wien

& Co. was thereupon dismissed."

The final appellate court review proceeding during the year was

Norris &: Hirschberq, Inc. v. SEO. an appeal from a Commission order

revoking the petitioner's registration as a broker-dealer for violation

of the antifraud provisions of the Securities and Securities Exchange

Acts. After the Commission had filed a transcript of its record in

the court of appeals the petitioner raised numerous objections to a

consideration of the case by the court upon that transcript. Some of

those objections have been discussed in the Twelfth Annual Report at

pages 35-6 and 41 and in the Thirteenth Annual Report at page 61.

During the past year an effort was again made to compel the Commission to include in the transcript of record a summary of the

evidence which it was alleged the staff had prepared for the use of the

individual Commissioners, and petitioner sought to inquire into the

decisional process of the Commission to determine how various items

in the record to which it objected were treated by the Conunission.

The petitioner filed a motion asking that a master be appointed, interrogatories framed and issued, or detailed statements concerning

these matters certified by the Commission. The court of appeals

denied the motion and denied a request for findings of fact and conclusions of law. The petitioner then applied to the United States Supreme Court for a writ of certiorari. This too was denied," and just

before the close of the fiscal year the court of appeals heard argument

on the merits of the case.

Injunction Actions Against Persons Other Than Broker-Dealers

One case in this category consummated during the year was SEO

v. Transamerica Oorp., an action base-l on regulation X-H. compris22 No. 9460, ApI).DC, November 15, 1947.

:a 333 U. S. 867 (1948).
54 SECURITIES AND EXCHANGE COMMISSION

ing the Commission's proxy rules. This case was reported previously

in the Twefth Annual Report at page 106 and in the Thirteenth Annual Report at page 62. The action was brought by the Commission for

the purpose, among others, of compelling the defendant corporation

to resolicit proxies originally obtained as a result of solicitations

which failed to include proposals which a minority stockholder sought

to have brought before the annual meeting. These proposals were:

(1) To permit the stockholders to amend the bylaws at any annual

meeting without the requirement that such proposed amendments be

contained in the corporation's notice of meeting; (2) to hold the annual meetings in San Francisco, Calif., instead of Wilmington,

Del.; (3) to cause auditors to be elected by the stockholders and

to have a representative of the auditors last chosen attend the annual

meeting; and (4) to require that an account of the proceedings at

annual meetings be sent to all stockholders. These proposals had

been submitted to the corporation by the minority stockholder under

rule X-14A-7 (since redesignated rule X-14A-8), which provides

that, if a qualified security holder has given the management reasonable notice that he intends to present a proposal which is a "proper

subject for action" by security holders, the management shall set forth

the proposal in the proxy soliciting material and provide means

by which the security holders can vote on the proposal as required

elsewhere in the proxy rules.

The Commission supported the request of the minority stockholder

on all four proposals. The district court sustained the position of

the Commission on the proposal relating to the election of independent

auditors by the stockholders, but held for the corporation on proposals (1) and (4). Proposal (2) had become moot by the corporation's changing the place of annual meeting to San Francisco. However, the court granted the Commission'srequest for an order enjoining

the management from violating section 14 (a) of the Securities Exchange Act and rules X-14A-2 and X-14A-7 thereunder."

On appeals by both sides to the Court of Appeals for the Third

Circuit, the district court's decision was modified to sustain the position of the Commission on the three proposals still in issue." The

court of appeals found for the Commission on the ground that (a)

each of the proposals was "a proper subject for action" by the stockholders under the law of Delaware, where the defendant was incorporated, and (b) the management's attempt to block any stockholder proposal by declining to include it in the notice of meeting

was contrary to the purpose of Congress in the Securities Exchange

Act to prevent the control of corporations by a very few persons. The

corporation filed a petition for a writ of certiorari in the Supreme

Court of the United States, which was denied." Thereafter, without

submitting the matter to a vote of the stockholders, the board of

directors adopted the proposals concerning the selection of the auditors

and the sending of reports to stockholders. The third proposal, designed to amend the by-law provision relied upon by the management

to preclude matters from being taken up at annual meetings, was

abandoned by its stockholder sponsor as unnecessary in the light of

the decision of the court of appeals.

.. 67 F. Supp. 326 (D. Delaware 1946).

"163 F. (2d) 511 (C. C. A. 3. 1947).

:18332U. S. 847 (1948).
FOURTEENTH ~~AL REPORT 55

Participation by the Commission in Private Actions

Itis the usual practice of the Commission, where private litigation

involves questions of construction of the statutes it administers, to

seek leave of the court to express its views in a memorandum filed as

amicus curiae. One case in which the Commission filed such a memorandum during the year was Phillips v. The United Oorp., in the

United States District Court for the Southern District of New York.

The Commission took the position that the court had jurisdiction to

entertain an action by a complaining stockholder for an injunction

and other equitable relief founded upon alleged violations of the Commission's proxy rules promulgated under the Public Utility Holding

Company Act of 1935,provided that the stockholder had exhausted his

administrative remedy by first bringing his complaint to the Commission for any action it might take in the exercise of its primary

responsibility tor securing enforcement of the statutes it administers.

The Commission conceded that the stockholder had satisfied this condition in the instant case, but expressed the view that the action was

without merit because: (1) To the extent that it sought invalidation

of a stockholder's vote on a management plan for the operation of

The United Corp. as an investment company after it had ceased to

be a holding cumpany, a justiciable controversy was not before the

court since the vote was without legal significance except as it might

affect future discretionary action of the Commission; and (2) to the

extent that the plaintiff sought invalidation of the election of United's

board of directors on the ground of unlawful expenditures by the management in the solicitation of proxies in violation of the Commission's

rule U-65, it did not appear from the circumstances that the rule had

in fact been violated.

The court sustained the Commission's position that such a suit could

be brought by a stockholder and indicated agreement with certain of

the other views expressed by the Commission, but denied the defendants' motion for summary judgment on the ground that the plaintiff should be afforded an opportunity to prove certain of his charges

at a trial." Shortly before the close of the fiscal year, the issues as

to the election of directors having been made moot by their uncontested reelection at a subsequent annual meeting of stockholders, the

court stayed the cause pending such disposition as the Commission

might make of an application by the corporation for an order declaring it no longer to be a public utility holding company." Following tl1.eclose of the fiscal year an appeal was taken by the plaintiff

to the Court of Appeals for the Second Circuit, where it was heard

together with a related appeal 29 taken directly to that court under

section 24 (a) of the Public Utility Holding Company Act with respect

to certain action of the Commission preliminary to the management's

solicitation of proxies.

There were a number of additional actions during the year, involving sections 10 (b), 14,and 16 (b) of the act, in which the Commission either participated as amicus curiae or over which close observation was maintained. In none of these were there any particularly

significant developments during the year .

...CCH Fed. Sec. Law Serv., par. 90, 895. .. CCH Fed. Sec. Law Serv., par. 90, 412. ... Phillips v, Securities and Ea:change Oommission, No. 20. 528.
PART m

ADMINISTRATION OF THE PUBLIC UTiliTY HOLDING

COMPANY ACT OF 1935

The Public Utility Holding Company Act of 1935 was adopted

following an extensive investigation by the Federal Trade Commision

and after exhaustive hearings and debates by the Congress. These

inquiries disclosed a variety of abuses in public-utility holding company finance and operations which the act was designed to correct.

The more significant of these are enumerated in section 1 (b) of the

act: (1) Inadequate disclosure to investors of the information necessary to appraise the financial position and earning power of the

companies whose securities they purchase; (2) the issuance of securities against fictitious and unsound values; (3) the overloadmg of the

operating companies with debt and fixed charges thus tending to prevent voluntary rate reductions; (4) the imposition of excessive

charges upon operating companies for various services such as management, supervision of construction and the purchase of supplies

and equipment; (5) the control by holding companies of the accounting practices and rate, dividend and other policies of their operating

subsidiaries so as to complicate or obstruct state regulation; (G) the

control of subsidiary holding companies and operating companies

through disproportionately small investment; (7) the extension of

holding company systems without relation to economy of operations

or to the integration and coordination of related properties.

The act covers all holding company systems which are engaged in

the electric utility business or in the retail distribution of natural or

manufactured gas. It was particularly designed to eliminate holding

companies serving no useful purpose, and thus to afford to the operating companies the advantages of localized management and to

strengthen local regulation. This objective finds its most direct

expression in section 11 of the act. Section 11 (b) (1) requires the

operations of holding company systems to be limited to one or more

integrated systems and to such additional businesses as are reasonably

incidental or economically necessary or appropriate to the operation

uf the integrated systems. Section 11 (b) (2) requires elimination

of undue complexities in corporate structures of holding company

systems and the redistribution of voting power among their security

holders on a fair and equitable basis. The act provides also for the

registration of holding companies (sec. 5); regulation of security

transactions of holding companies and their subsidiaries (sees. 6 and

7) ; regulation of acquisitions of securities and utility assets by holding companies and their subsidiaries (sees. 9 and 10) ; regulation of

sales of public utility securities or assets, payment of dividends,

solicitation of proxies, intercompany loans and other intrasystem

trensactions (sec. 12); control of services, sales, and construction

contracts (sec. 13) ; and the control of accounting practices (sec. 15).

56
FOURTEENTH ~~AL REPORT 57

COMPANIES REGISTERED UNDER THE ACT

As of June 30, 1948, there were registered under the act 46 public

utility holding company systems comprising 73 holding and subholding companies, 309 electric and gas subsidiaries, and 323 nonutility

subsidiaries. The assets of these 705 companies aggregated approxi- ...

mately $14,488,000,000. On June 30,1947,52 holding company systems

had been registered, with 89 holding and subholding companies, 336 >

electric and gas subsidiaries and 409 non utility subsidiaries. The v 1

assets of those 834 companies aggregated about $15,350,000,000. The 1/

decrease of approximately $870,000,000 in assets subject to the statute

reflects primarily the divestment of companies and properties under

section 11 modified by a substantial expansion of assets of those companies remaining under the act, as indicated below.

Total assets subject to act June 30, 1947 $15,350,000,000

Less:

Direct and indirect divestments of companies and properties no longer subject to

the act, less consideration received there- for $1,606,000,000

Assets of companies dissolved or exempted; 9, 000, 000

Add:

Net growth of assets from business ex- pansion, etc

Assets of companies not previously con- solidated

690,000,000

63,000,000

1,615,000,000

13,735,000,000

753,000,000

Total assets subject to act June 30, 1948______________ 14,488,000,000

.As suggested by these figures, the task of administering the act

during the past year has been concentrated in the integration and simplification of holding company systems and in the processing of a very

heavy financing program for the operating utility subsidiaries,

INTEGRATION AND CORPORATE SIlUPLIFICATION UNDER SECTION II

Under standards requiring both the disposal of properties not retainable under the physical integration standards of section 11 (b)

(1) and the elimination of undue corporate complexities as required

by section 11 (b) (2), holding companies divested themselves of 39

direct subsidiaries with assets of $3,198,000,000 during the year.

Twenty-nine of these companies with assets of $1,522,000,000 were

released from the jurisdiction of the act and the remainder continued

subject to the statute. This compares with the divestment of 31 subsidiaries with assets of $1,978,000,000 in the 1947 fiscal year, of which

number 23 companies, with assets of $870,000,000, are no longer under

the jurisdiction of the act. The total of subsidiaries divested since

December 1, 1935 is 470, with total assets of $11,312,000,000, of which

395 companies with assets of $6,972,000,000 are no longer subject to the

statute. A complete analysis of these divestments appears in the

following tables. *

-These data include direct divestments. but not indirect divestments 'I'hus, if a subholding company and its five small subsidiaries were divested as a group in one operation from a holding company system, the divestment table would show one company divested

with assets equal to the consolidated assets of that group of six companies.

~

'

_

_
58 SECURITIES AND EXCHANGE COMMISSION

Direct divestments of securities and properties, by registered holding companies

JUly 1,1947, to June 30,1948

Number of eompames Assets of companies divested (000,000omitted)

Elec- Non- Elec- Nontric Gas util- Total tnc Gas util- Total

Ity Ity

---- ------ -- Divested by exchange or distnbution ofseeuntles to security holders:

No longer subject to Holding Company Act ._ 9 3 1 13 $778 ~8 $14 $840

Still subject to Holding Company Act , .... .. 5 2 1 8 1,537 44 1,581

Divested by sale of property or securities:

No longer subject to Holding Company Act '_. 11 2 3 16 490 4 188 682

Still subject to Holding Company Act._. •••. 1 1 2 9 86 95 -- -- ---- Total divested.L. . . . . . . . 26 8 5 39 2,814 182 202 3,198

Number of companies Sale price (000,000 makmg such sales omitted)

Partial sales of property not Included III above totals'

Assets sold no longer subject to the act ._ 2 3 2 7 $6 $3 $1 $10 Assets sold stili subject to the act.. .. ._ .-----

TotaL . -- ---- ------ -- 2 3 2 7 6 3 1 10

I By reason of their relationship to other registered holding companies Includes all cases where total divestment was effected by sale of entire property to 1 or more buyers . In the case of sales to more than 1 buyer, the company was classified for the purposes of this table m accordance with the disposition of the major portion of its assets sold.

July 1, 1946, to June 30, 19.p

Number of oompanres Assets of companies divested (000,000ormtted)

Elec- Non- Elec- NonGas utll- Totsl Gas util- Total trio Ity tnc ity

-- -------- Divested by exchange or distnbution of securities to security holders:

No longer subject to Holding Company Act. 2 2 1 5 $172 $16 $27 $215

Still subject to Hnldmg Company Act , . 3 3 354 354

Divested by sale of property or securities:

No longer subject to Holding Company Act 9 4 5 18 620 15 20 655 Still subject to Holding Company Act , 5 5 754 --.--- -.---- 754 -- ---- -- Total dlvested., . '_" .,,_ .. ._ 19 6 6 31 1,900 31 47 1,978

Number of companies Sale price (000,000 making such sales omitted)

Partial sales of property not included in above totals.

Assets sold no longer subject to the 8Ct. 3 3 4 10 $2 $1 $3 $6 Assets sold still subject to the act

TotaL . ---------- ---- 3 3 4 10 2 1 3 6

I By reason oftheir relationship to other registered holding companies Includes all cases where total divestment was effected by sales of entire property to 1 or more than 1

buyer In the case ofsales to more than 1 buyer, the company was classified in accordance with the disposition

of the maJonty of the assets sold. , Reflects divestment of Pennsylvania Power & Light Co. by Electric Bond & Share Co. The divest- ment of Pennsylvania Power & Light Co. by National Power & Light CO. ISnot included in the above

summary table ligures.

--

___

_ __ ------ • __ __ __ -- -----~

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

__ ________ __________ __

________ ____ ______ --~--- ------ ------ ------ ------ ------ ------ -- ______•• ______________________________ __

• •

•

-- --

____ _____ ___ ------ ------ ------ ------ • •____ _________ ------

-- ------

-- -- -- ___ ___ _______ _____

___•_____

________________ -- ______________________ _________________

•

• •
FOURTEENTH ANNUAL REPORT

December 1,1935, to June 30, 1948

59

Number of comparnes Assets oC companies drvested (000,000omitted)

Elec- Non- Elec- Nontrio Gas util- Total tric Gas util- Total

Ity Ity

---- -- -- ---- -- Divested by exchange or dlstrlbution oC seeurities to secunty holders

No longer subject to Holding Company Act. ____ 23 13 4 40 $2,114 $482 $45 $2,641 Still subject to Holding Company Act 1_________ 16 '3 1 20 3,117 '107 ------ 3,224

Divested by sale of property or seeunnes: a No longer subject to Holding Company Act , ___. 142 92 121 355 3,384 369 578 4.331 Still subject to Holding Company Act 1 38 14 3 55 985 111 20 1,116

-- -- -- -- -- ---- -- Total divested . . . . _. ._. 219 122 129 470 9,600 1,069 643 11,312

Number or companies Sale price making such sales (000,000omitted)

Partial sales of pro~erty not included in above totals:

Assets sold no anger subject to the act. _________ 56 19 32 107 $86 $11 $31 $128

Assets sold still subject to the act. _______________ 11 5 1 17 11 4 1 16

Total ___________._____________________________ ---- -- -- -- -- -- -- 67 24 33 124 97 15 32 144

I By reason of their relationship to other registered holding comparnes. aNorthern Natural Gas Oo., whieh was a subsidiary in 3 holdmg company systems and Itself a regis, tered holding company, was reflected in these figures as 1 divestment , Includes all cases where total divestment was effected by sale oC entire property to 1 or more buyers. , In the case of sales to more than 1 buyer, the company was classIfIed for the purposes oC this table in

accordance with the dISpOSitIOnof the major portion of its assets.

Viewed from the standpoint of methods of disposition employed,

the divestments of the past year have followed a pattern very similar

to that of the 1947 fiscal year. Reflecting continuation of the less

favorable markets for equity securities which have prevailed since

the latter part of 1946, only four divestments were accomplished during the 1948 fiscal year by means of public offerings for cash. These

involved common stock of the following companies:

Detroit Edison Co.

Northern Natural Gas Co.

Public Service Co. of New Mexico.

American Water Works Oo., Inc.

Both the Detroit Edison and the Northern Natural Gas common

stocks had previously enjoyed good markets, which facilitated their

distribution. The American Water Works stock was sold subject to

the prior exercise of subscription warrants and exchange rights.

Five divestments were effected by means of sales to cooperatives or

public utility districts, 14 represented sales to other utilities, and 3

were private sales to individuals. The great bulk of the divestments

took the form of outright distributions to security holders of the parent companies or of exchanges.

Stocks of the following companies were distributed directly to the

common stockholders of the parent company:

Central Illinois Public Service Co. by Middle West Corp.

Conowingo Power Co. by Susquehanna Utilities Co.

East Coast Electric Co. by East Coast Public Service Co.

El Paso Electric Co. by Engineers Public Service Co.

Potomac Electric Power Co. by North American Co.

Southern Pennsylvania Power Co. by Susquehanna Utilities Co.

South Jersey Gas Co. by Public Service Co. of New Jersey.

____ • ____

__•__ _________ ____ ______
60 SECURITIES AND EXCHANGE COMMISSION

Virginia Electric & Power Co. by Engineers Public Service Co.

West Penn Electric Co. by American Water Works & Electric Co., Inc.

Wisconsin Electric Power Co. by North American Co.

Other distributions to security holders of the parent companies or

by exchanges for the securities of parent companies were as follows:

Atlanta Gas Light Co. by Consolidated Electric & Gas Co.

Edison-Sault Electric Co. by American States Utilities Corp.

Hartford Gas Co. by Connecticut Gas & Coke Securities Co.

Interstate Power Co. by Ogden Corp.

Minneapolis Gas Light Co. by American Gas & Power Co.

New England Power Association by International Hydro Electric System.

New Haven Gas Light Co. by Connecticut Gas & Coke Securities Co.

Portland General Electric Co. by Portland Electric Power Co.

Public Service Electric & Gas Co. by Public Service Corp. of New Jersey.

Southern California Water Co. by American States Utilities Corp.

These data do not include a number of indirect divestments. In

addition, simplification has resulted also from merger or consolidation

of companies and many companies have been released from the jurisdiction of the act by exemption. Thus, the over-all reduction in the

number of companies subject to the act is much greater than has been

indicated. From June 15, 1938,to June 30,1948, a total of 2,145 companies had become subject to the act, whereas on June 30, 1948, only

714 remained thus subject. Two hundred and forty-nine companies

were absorbed by merger or consolidation, 889 were sold, dissolved, or

otherwise divested, and 149 were released from jurisdiction of the ad

by exemption under section 3 or declarations of status under sections

2 and 5. The following tables present the record for the entire period

and for each of the past two fiscal years.

Fiscal year ended June 30, 1948

Elurnnatrons

Total

compames

subject

to act dunng

period

Ab- Sales,

sorbed dISSO- Exempby IU~;,o.Fnon by 0J~~r

:e~~~ other rule or posals 1

solida- divest- order

tion ments

Total

Companies

subject

to act

as of June 30,

1948

Holding compames___________________________ 87

Electric and/or gas compames________________ 345 1

Nonutilities plus utilities other than electric and/or gas companies. ______________________ 421 3

13 1 33 1 1

92 3

I4

36

98

i3

309

323

Total companies -s53--4 1381--2 --4 -148----r05

Fiscal year ended June 30, 1941

Holdmg companies ___________________________ 104 1 13 1

=:::=:::1 15 89 Eleetrre and/or gas compames ________________ 371 18 17 35 336

Nonutilities plus unhtres other than electnc and/or gas compames _______________________ 433 2 21 1 _______ oj 24 409

9081-2 1 ---- Total compames _______________________ 51 2 ________ 74 - 834
FOURTEENTH ANNUAL REPORT 61

Ellmmatlons

Total Com- com- Ab- Sales, parnes panies sorbed disso- subject

subject by luuons Exemp- Other to act to act merger and non by dIS- Total as of during or con. other rule or posals! June 30,

penod sollda- divest. order 1948

tlon ments

,-------------- June 15, 1938, to June 30, 1948

Holding companies ___________________________ 205 23 69 31 19 132 73 Electnc and/or gas compames ________________ 912 127 368 60 148 603 309 Nonutthties plus utihtres other than electnc and/or gas comparnes _______________________ 1,019 99 452 58 '87 600 323

Total compsmes 2,136 -;rui-----gg;- 1491~ U311---m5 I I

I Principally small or nonutihty subsidrarres, with little or no public interest, disposed of by various means.

The changes in the aggregate assets of holding company systems

subject to the act have not been as pronounced during the past 10

years as the sharp reduction in the number of companies. Comparable data for the smaller companies and for nonutility companies

have not been assembled for the earlier years, but an analysis has

been made of electric and gas subsidiaries with assets of $5,000,000

or over. This group constitutes the bulk of all assets subject to the

act.

From December 31, 1938 to June 30, 1948,a total of 276 companies

in this category had become subject to the Commission's jurisdiction.

On December 31, 1938, these companies had aggregate assets of approximately $14,000,000,000. Ninety-two with assets of $4,100,000,000

on that date have been released from the jurisdiction of the act by

divestment 1 or otherwise," One hundred and eighty-four companies,

with assets of $9,900,000,000on December 31, 1938, remained subject

to the act. The 92 companies released from the jurisdiction of the

act ultimately contracted by merger or consolidation into 62 companies by June 30, 1948, with assets of about $5,000,000,000.3 The

184 companies still subject to the act became 155 companies by June

30, 1948, with assets of approximately $11,000,000,000.3 Overall, the

276 companies originally subject to the act contracted in later years

by merger or consolidation (but not by divestment) into 217 companies on Jtme 3C2t1948,with assets of approximately $16,000,000,000.3

Some of the ettects of limiting interstate control by holding companies are indicated by a comparison of the geographical dispersion

of the systems under the act today with the situation existing in 1940.

1940 1948

Number of holding company systems providing electric or gas service m20 or more States ____________________________________________________________ 2 None

15 to 19 States _______________________________________________________________ 3 None

10 to 14 States _______________________________________________________________ 7 3 5 to 9 States -_ 17 13

3 or 4 States 17 13

1 or 2 States _________________________________________________________________ 10 16

Total systems subject to the SCl. __________________________________________ 56 I 45

I Does not include Engineers Public service Co now in final stages of hquidation and which now has

no su bsidianes

172 companIes with assets of $3,700,000,000 on December 31,1938

220 companies with assets of $400,000,000 on December 31, 1938. B Assets calculated as of December 31, 1947.

------- - - -~- -- - -- - - --

____________________________________________________- _- ____- - -- ______________________________________________________- __________
62 SECURITIES AND EXCHANGE COMMISSION 

While, in past years, substantlal emphasis has been placed upon the 

divestment of nonretainablc assets of holding companies, activlt has 

centered also around retainable properties which are being hittelinto 

integrated systems subject to the Commission's continuing jurlsdlction. Divested companies remaining subject to the act have been fitted either 

into new integrated systems created from suitable portions of the 

old systems or into entirely different systems with which integration 

of the divested properties is found to he feasible. Thus the reorganization of the former system of American Water works & Electric 

Co., Inc. involved the segregation of the utility and miscellaneous 

properties under The West Penn Electric Co., a former subsidiary 

whch now is a top registered holding company under the act. The 

Commonwealth & Southern Corp. reorganization has produced the 

formation of The Southern Co., a registered holding company whose 

subsidiaries comprise the former southern utility properties of the 

old parent company. The so-called "Central System" of American 

Gas 6;Electric Co. system is being developed as an integrated utility 

system through various purchases and sales of properties, thus requiring the parent to remain registered as a holding compan Numerous 

other systems such as Central and South West Corp., 6olumbia Gas 

Sgistem, Inc., Consolidated Natural Gas Co., and New En land Electrlc System might also be mentioned in this connection. gome prob- lems of integration remain in many of these systems, hut it is now 

readil~apparent that a substantial number of new integrated systems 

are in the mak~ng. 

STATUS OF INTEGRATION AND SIMPLImCiTION PROGRAMS 

There has been activity during the 1948 fiscal year in nearly all of 

the public-utility holding company systems suhject to the act. Principal developments, hower-er, occurred in the following 15 systems. 

which are described in this section: 

American Gas & Electric Co. 

Cities Service Co. 

New England public service Co. 

The North American Co. 

Oeden Corn. 

randa aid 6oaer & Light Gorp. 

Standard Gas 8- Electric Co. 

The United Oorp. 

The United Light & Railwags Co 

The West Penn Electric Go. 

American Gas & Electric Co. 

American Gas & Electric Co. (American Gas) has proceeded during thept fiscal~ear with the divestment of its common stock holdings in tlantlc Clty Electric Co. (Atlantic City). This constitutes the 

only remaining holding which the Commission has held to be not 

retainable by t.his company under section 11. In September 1947 

American Gas disposed of 343,106 shares, or 30 percent of its cummon 
FOURTEENTH ~AL REPORT 63

stock holdings in Atlantic City, by a sale to underwriters.' An additional448,232 shares has since been distributed as dividends by American Gas up to June 30, 1948. Itis anticipated that similar stock dividend payments will complete the divestment of this holding by the

close of 1948.

In April 1948Indiana Service Corp., a subsidiary of American Gas,

disposed of its transportation properties in Fort Wayne as required

by previous order of the Commission," Indiana Service Co. has since

been merged, with Commission approval, into another subsidiary,

Indiana & Michigan Electric CO.6

On August 19, 1948,approval was given to the acquisition by American Gas of the common stock of Citizens Heat, Light & Power Co.

(Citizens) of Indiana from United Public Utilities Corp.' It was

found that this acquisition tended toward the economical and efficient

development of the so-called Central System. The approval was conditioned, however, so that American Gas was required to dispose of

Citizens' water properties within 1 year from the acquisition date.

Cities Service Co.

Cities Service CO.'s (Cities) plan of corporate simplification filed

pursuant to section 11 (e) was consummated in June 1947. Under

that plan, new debentures were issued by Cities to holders of its outstanding preferred and preference stocks in a principal amount equivalent to their redemption prices plus accumulated dividend arrears,

the latter totaling approximately $50,000,000. Provision was also

made for the immediate retirement of about 40 percent of outstanding

long-term debt and for application of anticipated proceeds from the

disposition of utility subsidiary companies to the retirement of the

remaining long-term debt and to the reduction in the amount of new

dehentures.

Federal Light & Traction Co. (Federal), a subsidiary holding

company of Cities, was liquidated in October 1947pursuant to a plan

filed under section 11 (e). The plan was approved on September 11.

1947,Sand provided, in part, for the immediate cash payment to preferred stockholders of the stated value ($100) of their stock plus

accrued dividends and for a pro rata distribution to the common stockholders of shares in Public Service Co. of New Mexico (Public Service) and Federal Liquidating Corp., the latter formed as a vehicle

for consummating the plan. The common stockholders of Federal also

received an $11 per share cash distribution. An amount of cash covering the call premium on the outstanding shares of preferred stock

was placed in escrow pending a determination of any additional

amounts to which the preferred holders may be entitled. Reservation of jurisdiction over this matter was expressly ordered. In April

1948, Cities disposed of its interest in the common stock of Public

Service Co. of New Mexico, acquired by reason of the liquidation of

Federal. Disposition was made by sale at competitive bidding,"

An application was filed in May 1948 by Arkansas Natural Gas

Corp. (Arkansas), a holding company subsidiary of Cities, which

Holding Company Act release No. 7717.

File No. 70-1777.

Holding Company Act release No. 8325. Holding Company Act release No. 8453. 8 Holding Company Act release No. 770l.

Holding Company Act releases Nos. 8067 and 8113.

•

•

•

•

•
64 SECURITIES AND EXCHANGE COMMISSION

involves the creation of two new corporations to which are to be

transferred the pipe-line transportation system and the natural-gas

producing properties, respectively, now owned by Arkansas LOUIsIana

Gas Co. (Ark-Lou), a subsidiary of Arkansas. The capital stocks of

the new corporations are to be acquired by Ark-Lou and distributed to

its parent, Arkansas. This will leave Ark-Lou owning only gas distribution properties. After these transactions are completed all of the

capital stock of Ark-Lou will be sold by Arkansas. Hearings on the

application have not yet been concluded.

The Commonwealth & Southern Corp.

On August 1, 1947,'0the Commission approved a plan, filed as a

part of this company's over-all program under section 11, providing,

in substance, for the transfer by Commonwealth of all of its interest

in four southern operating companies to a new holding company, The

Southern Co. (Southern). On the same date, pursuant to the standards of section 11 (b) (1), the Commission required the divestment

from the Commonwealth holding company system of its northern subsidiaries, South Carolina Power Co., and its interest in the nonelectric

properties of the aforesaid four southern operating subsidiaries. In

connection with this plan Commonwealth had agreed to dispose of all

its interests in subsidiary companies, other than those transferred to

Southern, and to dispose of its interest in Southern after the retirement

of Commonwealth's preferred stock.

In accordance with Commonwealth's agreement, a new plan under

section 11 (e) was filed by Commonwealth on July 30, 1947,11 It provided, briefly, for: (a) The retirement of all of its outstanding preferred stock by the distribution in exchange therefor of its portfolio

common stock holdings in two subsidiaries, Consumers Power Co. and

Central Illinois Light Co.; (b) the distribution of Commonwealth's

remaining assets to the holders of its common stock; (c) the cancellation of Commonwealth's option warrants; and (d) the dissolution of

Commonwealth.

Hearings on the plan were instituted in October 1947and concluded

in January 1948. Subsequently, representatives of substantial

amounts of Commonwealth's preferred and common shareholders

offered a "compromise proposal" which would alter somewhat the

ratios of stock allocation and the amount of cash payment to the preferred stockholders. On June 11, 1948, the staff of the Division of

Public Utilities filed its proposed findings and opinion in which it

found that the plan as filed was unfair to the preferred stockholders

since it did not adequately compensate them for the surrender of their

rights. It was stated, however, that the plan could be found fair if

it were amended in a manner consistent with suggestions in the "compromise proposal." On July 7, 1948,Commonwealth amended its plan

in a manner deemed by the company to be consistent with the "compromise proposal" and the staff's proposed findings. The hearings

were reopened on the amended plan, further evidence taken, and the

record closed. The case is now before the Commission for its decision.

During the fiscal year there have been various divestments from the

Commonwealth holding company system pursuant to the terms of

the statute. Commonwealth's interest in South Carolina Power Co.

1.Holding Company Act release No. 7615. 11 Holdmg Company Act release No. 7667.
FOURTEENTH ANNUAL REPORT 65

has been sold to a nonaffiliated company." Additional divestments

by companies in the Commonwealth system included the sale by Alabama Power Co. of its gas distribution properties at Phenix City,

Ala.," and its transportation properties at Tuscaloosa, Ala. ; 14 the sale

by Gulf Power Co. of its gas properties in the city of Pensacola,

Fla. ;15 the sale by Southern Indiana Gas & Electric Co. of its transportation properties in Evansville, Ind.; 16 and the sale by Georgia

Power Co. of its gas properties located in Columbus and Americus,

GaP

Electric Bond & Share Co.

Electric Bond & Share Co. (Bond & Share) is continuing its program of reducing its holdings of utility stocks. looking toward the

final divestment of all such investments in the United States and its

emergence as an investment company. Bond & Share presently has

four major subholding companies: American & Foreign Power Co.,

Inc. (Foreign Power) ; American Power & Light Corp. (American);

Electric Power & Light Corp. (Electric) and National Power & Light

Co. (National). American Gas & Electric Co., formerly a subholding

company, ceased to be a statutory subsidiary of Bond & Share in March

1947.18

The plan of reorganization of Foreign Power was discussed in

findings issued by this Commission on November 4, 1947/9 and approved on November 19, 1947,20after the filing of certain modifications.

Application was then made to the United States district court for

enforcement. Under the plan, Foreign Power's corporate structure,

presently consisting of two classes of debt securities, three series of

preferred stock, common stock, and option warrants to purchase common, would be recapitalized and simplified bv the issuance and substitution of two debenture issues and common stock. On September

16.1948, the court entered its decision approving the plan as submitted.

During November 1947, American, which is largest of the four

Bond & Share subholding companies, advised the Commission that

market conditions were such that its then pending plan was no longer

feasible and that it proposed to file a new plan for disposition of its

assets and readjustment of the rights of its security holders. The

new plan pursuant to section 11 (e) was filed jointly by American

and Bond & Share on April 8, 1948.21 In general, the plan proposes

the distribution, directly or indirectly, by American to its preferred

and common stockholders of all its assets. Specific allocations of

American's assets to its preferred and common stockholders were not

included in the plan as filed. The joint applicants were not in agreement, at the time of filing, on such allocation. But the two companies expect to reach agreement after the conclusions of hearings

on the application or to file separate amendments containing their

individual allocation proposals at that time. Bond & Share has indicated that within 1 year after the effective date of the plan it will

,. Holding Company Act release No. 8080 (1948). aa Holding Company Act release No. 7565 (1947). 1< Holding Company Act release No. 7730 (1947).

"Holding Company Act release No. 8163 (1948).

t. File No. 70-1880.

"Holding Company Act release No. 8393 (1948). 18 Holding Company Act release No. 7285. to Holding Company Act release No. 7815. ,. Holding Company Act release No. 7849. 21 Holding Company Act release No. 8157.
66 SECURITIES AND EXCHANGE COM...l\HSSION

dispose of any securities received by it from American under the

plan. Hearings before the Commission are presently in progress on

this plan.

Electric, another subholding company of Bond & Share, also withdrew the section 11 (e) plan which it had on file with the Commission

because of changes in market conditions. A new four-part plan

was filed jointly by Electric and Bond & Share on March 25, 1948.22

The plan provides for the transfer to a new company of securities

of four of Electric's subsidiaries which operate in the Arkansas, Mississippi and Louisiana area. Electric will receive the common stock

of the new company, which will register as an electric utility holding

company. Provision is also made for the settlement of claims against

Bond & Share and its subsidiaries by the payment of $2,200,000to

Electric. The third part of the plan contemplates an allocation of

Electric's common-stock holdings in United Gas Corp. and the new

holding company to the existing classes of preferred stock to effect a

retirement of these shares. Finally, Electric is to be dissolved and its

assets, consisting of the remaining shares of its holdings in United

Gas Corp. and the new holding company, will be distributed among

the common stockholders. Hearings on this program have been

closed, briefs filed, and oral argument held. The matter is now

before the Commission.

National, the fourth subholding company of Bond & Share, has

already disposed of substantially all of its interests in utility subsidiaries. The consolidated book assets of this holding company have

contracted from a figure of $570,000,000at the date of mitial registration with the Commission to approximately $45,000,000at the present

time. In 1947,National filed an amended plan under section 11 (e)

for the reorganization of Lehigh Valley Transit Co. (Lehigh), largest

of its remaining subsidiaries. This is a further step looking toward

the final distribution of National's remaining assets and its complete

liquidation. Under this plan Lehigh would retire its outstanding

bonds with cash or the delivery of Pennsylvania Power & Light Co.

41;2percent preferred stock shares. The preferred stock of Lehigh

would be retired by cash payment to the public holders and the

issuance of new common shares for those preferred shares held by

National. Additional new common would be issued to replace the

old common, publicly held, on a share-for-share basis. This plan was

approved with some modification by the Commission after the close

of this fiscal year 23 and the application for enforcement in the district

court has also been approved.

Engineers Public Service Co., Inc.

. Engineers Public Service Co.,Inc. (Engineers) has progressed with

Its program under section 11to the point where its consolidated assets

have been reduced from $370,000,000at the time of original registrat~on.to curre~t figure of approximately $5,000,000. Its eventual

hqmdat.lOnawaits th~ results of final cou.rtdetermination with respect

to ce~am aspects of Its plan of reorganization filed under section 11.

TIllSplan as amended was approved by this Commission on January

8, 194724 and application for enforcement was made in the district

.. Holding Company Act release No. 8086. .. Holding Company Act releases Nos. 8445 and 8467 .. Holding Company Act release No. 7119.

~

•
FOURTEENTH ANNUAL REPORT 67

court. On May 15, 1947, that court disapproved a par~ of the plan

calling for the payment of the full voluntary redemption prices III

retiring Engineers' preferred stocks. However, it permitted consummation of the plan by the payment of $100 plus accrued dividends to

the preferred holders and the escrowing of an amount sufficient to

cover the difference between the involuntary liquidation price and

the voluntary redemption prices in the event that it should be determined on appeal that the preferred stockholders were entitled to

the larger amounts.

On appeal from the decision of the district court, the circuit court

of appeals on March 19, 1948, expressed agreement with the district

court's conclusion that the plan of reorganization for Engineers was

unfair and inequitable, but vacated that court's order, upon the ground

that the district court should have entered an order disapprovmg the

plan originally submitted to it, instead of modifying the plan as it

had done."

On August 23, 1948,since the close of the fiscal year, this Commission has petitioned the United States Supreme Court for a review of

the final order of the third circuit court. The Supreme Court has

granted certiorari.

International Hydro-Electric System

This company (IRES) is presently under order of the Commission

to liquidate and dissolve. On September 12, 1947, a plan toward this

end was approved. The plan provided for the payment by IHES to its

debenture holders of 30 percent of the principal amount of its outstanding debentures." The plan also received approval of the district

court and has been consummated.

Additional plans providing for the complete liquidation of

IHES have been filed by a number of parties,including the trustee for

the company and various security holders. However, one such holder

contends that due to changing circumstances the Commission's order

for dissolution of the company should be altered to one requiring only

its reorganization. Extended hearings on all such plans have been

conducted since October 1947 and were not yet concluded at the close

of the fiscal period.

The IHES holding company system has already been substantially

contracted. At the time of initial registration there were 66 direct

and indirect subsidiaries as against 10 at the close of the fiscal year.

Consolidated assets likewise show a reduction of approximately

$400,000,000.

The Middle West Corp.

In May 1947 the management of the Middle West Corp. (Middle

West) deemed it advisable for the benefit of stockholders to dissolve

the corporation. It presented an appropriate resolution to its stockholders who, in August 1947, voted in favor of this decision. Middle

West has filed no overall plan of dissolution but has taken a number of

steps tending toward that result. Its common stock holdings in

Oklahoma Power & Water Co. were sold to another company in December 1947.27 In February, it disposed of its common stock of Central

.. 168F. (2d) 722. .. Holding Company Act release No. 7714 (1947) .. Holding Company Act release No. 7942.

818892-49-6

•
68 SECURITIES AND EXCHANGE COMMISSIO]\f

Illinois Public Service Corp. by distribution to its own common

stockholders." A plan of its subsidiary, North West Utilities Co.

(North West), approved by the Commission on December 31, 1947,29

was also carried to completion after receipt of the district court order

of enforcement in March 1948. This plan, filed under section 1~ (e),

provided for the distribution of cash and common shares of WIsconsin Power & Lisrht Co. in exchange for the publicly held shares of

North West preferred stocks. The remaining assets of North West

consisting of additional common shares of .Wisconsin Power & Light

Co. plus cash were distributed to Middle West. Dissolution of North

West is anticipated as soon as practicable.

New England Public Service Co.

In connection with the plan of reorganization described in the Thirteenth Annual Report, the Commission instituted enforcement proceedings in the district court and, on August 6, 1947, the court approved

the plan and ordered it carried out." Thereafter, New England

Public Service Co. elected to go forward with one of the alternative

procedures permitted by the plan and gave notice of its adoption of

the so-called "alternative 1," which gave to the prior lien preferred

stockholders of New England Public Service Co. the option to take

common stock of Public Service Co. of New Hampshire in lieu of cash.

On September 15, 1947, the Commission approved the adoption of

alternative 131and the plan has been carried out to the extent of the

retirement of all of the prior lien preferred stock of New England

Public Service Co. by the payment of $100 per share plus accrued dividends and the issuance of certificates of contingent interest. Accrued

dividends included substantial amounts of arrearages on both classes

of prior lien preferred. The certificates of contingent interest represent the holders' claims, as yet of undetermined value, to call premiums on the retired preferred shares.

A parent of New England Public Service Co., Northern New

England Co., which owns 32.5 percent of the former company's common stock and is also a respondent in the section 11 (b) (2) proceedings instituted by the Commission, filed on January 30, 1948, a voluntary plan for its partial liquidation, which plan was still pending at

the close of the fiscal year.

The North American Co.

The section 11 (e) dissolution plan of Washington Railway & Electric Co. (Washington Railway), a subsidiary of the North American

Co. (North American), was consummated in the fall of 1947. North

American, by reason of its holdings of common stock of 'Washington

Railway, acquired directly 2,073,113 shares of common stock of Potomac Electric Power Co. (Potomacj v and 106,456 shares of capital

stock of Capital Transit CO.33 By the end of the fiscal year, North

American had disposed of all of its holdings of the common stocks of

Potomac and of \Visconsin Electric Power Co. (Wisconsin Electric),

constituting about 60 percent and 84 percent, respectively of the outstanding common stock of these companies." '

28 By Commission order dated jannary 23, 1948. ,. Holding Company Act releases Nos, 7905 and 7951.

'0 66 F. Supp. 378

01 Holding Company Act release No. 7713. ., Holding Company Act release No 7747 (1947) 33 Holding Company Act release No. 7703 (1947): 3' Holding Company Act releases Nos. 7654 and 7846 (1947).
FOURTEENTH ANNUAL REPORT 69

After approval by the Commission of the amended section 11 (e)

dissolution plan for North American Light & Power Co. (Light &

Power}," the District Court of the United States for the District of

Delaware entered its order enforcing the plan." The plan has been

consummated as to the public preferred stockholders of Light & Power

but certain common stockholders have appealed from the decree of the

court, and this appeal is now pending in the Circuit Court of Appeals

for the Third Circuit." In December 1947, Light & Power sold its

entire holdings of common stock of Northern Natural Gas Co. by

competitive bidding."

North American remains with Light & Power, Union Electric Co.

of Missouri, and several minor nonutility subsidiaries. Under the

plan for the dissolution of Light & Power, North American will

acquire directly all the common stock of the Kansas Power & Light

Co. and Missouri Power & Light Co., and up to approximately 35

percent of the common stock of Illinois Power Co. These holdings

are required to be divested under the Commission's order of April

14, 1942, which requires that North American sever its connections

with all subsidiaries except Union Electric and 60 Broadway Building

Corp.

Ogden Corp.

Since the initial registration of Utilities Power & Light Corp.,

predecessor of Ogden Corp. (Ogden), consolidated assets of this system have been reduced from approximately $314,000,000to less than

$10,000,000at the close of the fiscal year.

On July 29, 1947,39an amended plan pursuant to section 11 (e) was

approved which provided for the liquidation and dissolution of

Ogden's subsidiary, Central States Utilities Corp. (Central Utilities),

and the latter's subsidiary Central States Power & Light Corp. (Central States). Under the plan cash payments were made to the debt

holders and the preferred stockholders of Central States other than

Ogden and to the bondholders of Central Utilities other than Ogden.

The residual net assets of both companies were transferred to Ogden

Corp. Court approval of the plan was obtained on October 28, 1D47,

and liquidation of the two subsidiaries was commenced in April 1948.

Another subsidiary of Ogden completed an urgently needed financial reorganization during the past year. This action was taken after

the Commission approved the sale of new bonds, debentures, and common shares by Interstate Power Co. to retire its outstanding mortgage

debt.40 An amount of unsold common shares was placed in escrow in

favor of the holders of Interstate's securities junior to the first mortgage bonds. This reorganization of Interstate constitutes a necessary

step prior to the disposition by Ogden of its interest in the company.

On August 3, 1948, an order was entered by the Commission pursuant to section 5 (d) stating that Ogden has ceased to be a holding

company. The order was made subject to certain conditions, however, which were necessary for investor protection in connection with

.. Holding Company Act release No. 7515 (1947) .

.. 74 F. Supp 317 (Del. 1947).

31 C. C. A. srd, No. 9593.

as Holding Company Act release No. 7930 (1947), •• Holdrng Company Act release No. 7610

•• Holding Company Act releases Nos. 79;:;5 (1947) and 8066 (l94R).
70 SECURITIES AND EXCHA..'\WE COMMISSION

remaining unresolved problems related to Ogden's interest in Interstate Power CO.41

Standard Power & Light Corp.-Standard Gas & Electric Co.

On October 3, 1947, Standard Gas & Electric Co. (Standard Gas)

HIeda plan to dispose of its holding of stock in a subsidiary company

and to accomplish other corporate changes. The plan was not approved unanimously by all directors and two dissenting members of

the board submitted a separate plan.

Shortly thereafter, on October 8, the Commission permitted a

declaration to become effective allowing a protective committee for

$7 and $6 cumulative prior preference stock of Standard Gas to

solicit all such holders in connection with the reorganization of

Standard Gas.42 This protective committee, on October 23, filed a

petition which, among other things, requested that the Commission

act to prohibit the holding of the annual meeting of stockholders of

the company, the solicitation of proxies by Standard Gas for this

meeting, and the election of directors for Standard Gas. The committee further requested the Commission to apply, under section 11

(d), to a court and to petition the court to appoint the Commission

as trustee to hold and administer the assets of Standard Gas. Itwas

also requested that the plan of the company, filed October 3, be dismissed.

A memorandum opinion and order of the Commission dated October

30,1947, pointed out that the company plan was vague and indefinite

and Standard Gas was required to show cause why the plan should

not be dismissed." In addition, Standard Gas was prohibited from

soliciting proxies for the annual meeting unless prior approval of

the Commission was received; Standard Gas, its parent Standard

Power & Light Corp. (Standard Power), and their respective affiliates were prohibited from entering into new contracts without

giving the Commission 10 days' notice of such intention; and pending

the conclusion of hearings, Standard Power was prohibited from voting its stock holdings in Standard Gas. Standard Gas was directed

also to show cause why it should not be ordered to liquidate or recapitalize on a one-stock basis.

Standard Gas subsequently filed a declaration regarding its proposal to solicit proxies for the annual meeting and a consolidated

hearing was held to consider the matter specified in the Commission's

memorandum opinion and order of October 30, 1947. While the hearings were in progress the Commission postponed the annual meeting 44and subsequently, in its findings and opinion of February 17,

1948, permitted Standard to solicit proxies in connection with this

deferred annual meeting. Permission was conditioned so as to require Standard Gas to send a copy of the Commission's opinion to

each stockholder. at. the time of solicitation." In permitting this

action the Commission took note of a program of action, approved

by the board of Standard Gas on February 4, 1948, which included

the following steps: (1) Selection of a new chief executive to serve

01 Holding Company Act release No. 8402. .. File No. 68-93 . .. Holding Company Act release No. 7811. .. Holding Company Act release No. 7841 (1947) . .. Holding Company Act release No. 7983.
FOURTEENTH ~AL REPORT 71

as chairman of the board and president of the company and as a

director to be elected by the holders of prior preference stock; (2)

amendment of the certificate of incorporation and bylaws to provide

for an increase in the board of directors from eight to nine members

of whom three would be elected by holders of prior preference stock;

(3) immediate consideration by the new board of steps to be taken

to comply with section 11 of the act; (4) selection of new counsel

for purposes of the section 11 proceedings; and (5) consent by the

company to the entry of an order by the Commission pursuant to

section 11 (b) (2) of the act requiring the dissolution and liquidation

of Standard Gas or its recapitalization on a one-stock basis. On

March 1, 1948, the Commission ordered the hearing reconvened to

consider what action should be taken by Standard Gas to effect compliance with section 11 (b) (2) of the act," A hearing has been

held on this issue and the Commission has the matter under advisement.

The Philadelphia Co., a registered holding company and a subsidiary of Standard Gas, was ordered by the Commission on June 1,

1948, to dispose of its gas and transportation properties and, after

completion of such dispositions, to liquidate and dissolve." At present the system of the Philadelphia Co., aggregating $370,000,000in

assets, supplies electric, gas, and transportation services in the city of

Pittsburgh, Pa., and its surrounding area. Petitions for rehearing,

filed by Philadelphia Co., certain of its subsidiaries, and Standard

Gas were denied by the Commission on June 30, 1948.48 An appeal to

the Court of Appeals for the District of Columbia has been taken

by Philadelphia Co. and Standard Gas since the close of the fiscal year.

Philadelphia Co. has also presented a plan of reorganization of its

gas properties in Pennsylvania, and this plan was approved by the

Commission on June 30, 1948.49 Under the plan, all the gas properties

of the Philadelphia Co. and its subsidiaries located in Pennsylvania

will be brought under the ownership of Philadelphia Co.'s present

subsidiary, Equitable Gas Co. Equitable Gas Co. is being recapitalized so that its outstanding securities will consist only of first mortgage bonds and common stock, the latter to be owned by Philadelphia

Co. To this end, Equitable Gas Co. recently completed the sale of

$14,000,000of mortgage bonds and transferred the proceeds to Philadelphia Co. in payment for the gas properties received from that company. The Commission's order approving these transactions required

that the proceeds received by Philadelphia Co. be applied solely to

the reduction of its own outstanding debt.

On October 28, 1947,the Commission approved a section 11 (e) plan

of Louisville Gas & Electric Co. (Delaware), another subsidiary of

Standard Gas.50 The plan provides for the distribution by that company of its common-stock holdings in Louisville Gas & Electric Co.

(Kentucky) and subsequent dissolution of the Delaware company.

The distribution of these holdings, which constitute the Delaware company's principal asset, is to be made in the ratios of 1Y1.4 shares of the

Kentucky company common stock for each share of class A common

stock of the Delaware company and 0.913 of a share of the Kentucky

...Holding Company Act release No. 8004 (1948). 4T Holding Company Act release No. 8242. .. Holding Company Act release No. 8320 .. Holding Company Act release No. 8326 .. Holding Company Act release No. 7789.

•

•
72 SECURITIES AND EXCHANGE COMMISSION

company common stock for each share of class B common stock of the

Delaware company. The holdings of Standard Gas in the common

shares of Kentucky are to be disposed of as soon as the dissolution of

the Delaware company is accomplished. . . . Following its approval of the plan, the Commission applied to a

Federal district court for enforcement of the plan. On May 13, 1948,

the court remanded the case to the Commision in view of the court's

opinion, contrary to that of the Commission, that the class A stock

of the Delaware company has the right to cumulative dividends."

Despite the court's different view on this point it nevertheless found

rhe plan to be fair and equitable. Since the close of the fiscal year

the Commission held oral argument on the cumulative feature and in

supplemental findings reaffirmed its previous order, finding that the

proposed allocations were still within the range of fairness." Upon

subsequent application for enforcement by the Commission the court

issued its order providing that the plan be made effective on September 3,1948.

Hearings were ordered and, since the close of the fiscal year, have

been held on the section 11 (e) plan of Market Street Railway Co.

(Market Street), a nonutility subsidiary company of Standard Gas.

Included in the plan is an agreement among Standard Gas, Market

Street, and a committee of prior preference stockholders designed to

settle the open account indebtedness owed to Standard Gas by Market

Street and pending litigation with respect thereto. It also provides

for the settlement of other claims, distribution of remaining assets to

the holders of its prior preference stock, and the dissolution of Market

Street.

The United Corp.

The United Corp. (United) owned substantial amounts of the common stock of four major subholding companies: Public Service Corp.

of New Jersey (Public Service), Columbia Gas System, Inc. (Columbia), the Cincinnati Gas & Electric Co. (Cincinnati), and Niagara

Hudson Power Corp. (Niagara Hudson).

On August 14, 1943,the Commission issued an order under section

11 (b) (2) directing that United change its existing capitalization to

a single class of common stock and cease to be a holding company."

The Commission having subsequently approved two voluntary exchange plans for United's preference stock 54 under the terms of which

approximately 54 percent of that stock was eliminated, United filed, in

July 1947, a plan under section 11 (e) for the mandatory retirement

of the remaining shares in exchange for a package of $6 in cash, one

share of common stock of Public Service Electric & Gas Co. (PEG)-

as reorganized according to the plan described in the following paragraph-one share of common stock of Columbia, one-fourth of a share

of common stock of Cincinnati, and one-tenth of a share of common

stock of South Jersey Gas Co. (South Jersey). On April 9, 1948,

after appropriate hearings, the Division of Public Utilities filed its

recommended findings and opinion recommending approval of the

plan if modified in certain minor aspects, which include the elimination

51 In the Matter of Louisville Ga. c£ Electric 00., 77 Fed Supp, 176 . 2 Holding Company Act release No 8404 (1948). 53 Holding Company Act release No. 4478 .. Holding Company Act releases Nos. 5440, 5452, 5812, 5899.

•
FOURTEENTH ANNUAL REPORT 73

of the South Jersey stock from the package b.ecaus~of the character

and small size of that company and the fractional mterest to be dIStributed. On August 9, 1948, the plan was approved after being

amended by the company in accordance with modifications indicated by

the Commission in its previously issued findings and opinion. Application has been made to the appropriate court for enforcement of the

Commission's order, arguments have been heard, and the matter has

been taken under advisement.

PEG was one of three public-utility subsidiaries of Public Service

Corp. of New Jersey which, together with a transportation holding

company subsidiary, made up the Public Service subholding company

system. Pursuant to a plan approved by the Commission 55 and enforced by the district court on December 30, 1947, and March 19, 1948,

respectively, the ownership of the transportation holding company

was transferred to PEG, the holders of perpetual certificates of Public Service received debentures of PEG in exchange, the public holders of Public Service noncallable preferred received PEG preference

stock in exchange, and the common stock of PEG and another subsidiary of Public Service, South Jersey Gas Co., was distributed to the

common-stock holders of Public Service. The third utility subsidiary

of Public Service was sold to nonaffiliated interests. 56

The Columbia Gas System, Tnc., formerly Columbia Gas & Electric

Corp., has divested itself of its electric utility subsidiaries 57 and now

comprises, except for a minor part of the system, only gas utility and

related properties which the Commission had declared to be retainable.

Niagara Hudson, another of United's subholding companies, owns

all the common stock of Buffalo Niagara Electric Corp., Central New

York Power Corp., and New York Power & Light Corp., and, directly

or indirectly, of seven smaller companies. Niagara Hudson has on

file with the Commission two plans under section 11 (e) looking

toward its elimination as a holding company. The first plan, filed

May 19, 1948, provides for the consolidation of Niagara Hudson's

three major subsidiaries. Under the provisions of the plan the debt

of the three companies will be assumed by the consolidated company

and the holders of preferred stocks of the three companies will receive

in exchange therefor preferred stock of the consolidated company.

Niagara Hudson, which owns all the outstanding shares of common

stock of the three companies, will receive the common stock of the

consolidated company. A hearing on this plan was held on June 29,

1948. Proceedings are also pending concerning the merger of two of

the seven smaller subsidiaries of Niagara Hudson, Northern Development Corp., and Union Bag & Paper Power Corp., into two of the

companies which are to be consolidated, either before or after

consolidation.

On June 23 1948, Niagara Hudson filed the second plan, which

provides that Niagara Hudson will substitute 3 percent debentures,

maturing 10 years from the date of issue, for its outstanding preferred stock and will distribute to its common stockholders for each

share of its common stock tendered together with a cash payment of

$7.50one share of common stock of the consolidated company. Under

the plan, net income of Niagara Hudson and cash received by it in

.. Holding Company Act release No. 8002 (1948) .. Holding Company Act release No. 8164 (1948).

Twelfth annual report, p. 61.

•

"
74 SECURITIES AND EXCHANGE COMMISSION

the exchange will be applied to the payment of the bank loans of

Niagara Hudson presently outstanding in the amount of $21,370,000.

Niagara Hudson will accept for exchange its new debentures at face

value in amounts up to $4: per share toward payment of the $7.50.

The offer will remain open until all bank loans and debentures are

retired through application of the funds received from stockholders

and from corporate net income. Upon the retirement of the debentures, Niagara Hudson will distribute the remaining shares of common stock of the consolidated company to the remaming holders of

common stock of Niagara Hudson on a share-for-share basis, transfer

all its remaining assets to the consolidated company, and thereafter

Niagara Hudson will dissolve. While the plan is still formally on

file, discussions are being held with respect to revisions therein.

The United Light & Railways Co.

On December 31, 1947, the Commission approved a plan filed by

the United Light & Railways Co. (Railways) and its subsidiary

American Light & Traction Co. (American) which proposes that

Railways will dispose of its interest in American and in any stocks

transferred by American to it. American will continue to operate a

separate integrated gas production, transmission, distribution, and

storage system."

Details of the plan include, in part, the following procedures.

_ American will continue as parent company of a gas utility system

including a group of pipe line and gas distribution subsidiaries, but

will dispose of its holdings in Detroit Edison Co. and Madison Gas and

Electric Co. by public sale or distribution to its stockholders. In this

connection it is noted that, up to June 30,1948, American had already

disposed of 969,160shares of common stock of Detroit Edison by sales

at competitive bidding or as dividends on its common stock. Proceeds

from the sale of the Detroit Edison stock by American are to be

invested primarily in the equity of Michigan-Wisconsin Pipe Line

Co., a new long-distance line designed to bring gas from the Texas

area to the distributing subsidiaries of American. Under the plan,

American will also purchase all shares of its outstanding preferred

stock tendered to it during a specific period. The offer to purchase

has been fixed at $33 per share plus accrued dividends. As holder

of a substantial block of these shares, Railways will make disposition

of its holdings tlirough this offer.

Railways also proposes to dispose of its interests in Madison Gas &

Detroit Edison (shares received from American) and will also divest

itself of its holdings in American through the payment to its own

stockholders of dividends of stock of this company or by sale through

a rights offering. Proceeds of stock sales made by Railways will then

be applied against its outstanding bank loan. The proceeds of new

serial note borrowing .by Railways will be used to retire the prior

preference stock of Railways and to make an additional cash investment in its subsidiarJ:, Continental Gas & Electric Corp., enabling the

latter comp~ny to retire sImIIl;tramount of Its oWIl;outstanding bank

loans. Review proceedmgs WIth respect to certam aspects of this

approved plan are still pending.

IS Holding Company Act release No. 7951.

~
FOURTEENTH ANNUAL REPORT 75

The West Penn Electric Co."

American Water Works & Electric Co., Inc. (American) was dissolved during the past fiscal year. This was in accordance with the

two-plan program filed by the company under section 11 (e) and

approved after some modification by the Commission in its findings

and opinions of December 23,1946, and February 17, 1947.60

Plan I, designed to establish an exempt holding company to acquire

and hold the water properties of American, was brought to completion with the sale of 2,687,069 shares of common stock of the American Water Works Co., Inc. (Water Works), a nonutility holding

company, at competitive bidding on September 25, 1947. The sale

was subject to a 10-day stand-by arrangement permitting the exercise of subscription warrants by common stockholders of American

and acceptance of an exchange arrangement by certain public stockholders of Community Water Service Co. and Ohio Cities Water Corp.,

two intermediate holding companies which were to be dissolved.

Under these purchase and exchange rights 784,593 shares were taken

up ; the balance of the common went to underwriters.

Transfer of the water properties by American to the other holding

company and receipt of proceeds from the stock sale permitted American to go forward thereafter with plan II looking toward its own

liquidation and dissolution. To this end, the outstanding debt and

preferred stock of American were retired, but an escrow fund of

$2,200,000was established to provide for such additional payments to

the preferred holders, over and above par plus accrued dividends, as

the Commission and the courts may finally determine to be fair and

equitable. The common-stockholders of American received shares of

the reclassified common stock of The West Penn Electric Co. (West

Penn) which has now become the senior company of the utility system

remaining under the jurisdiction of this Commission. American contributed all its remaining assets to West Penn, which also assumed

whatever liabilities were not otherwise provided for. Final dissolution

of American occurred in January 1948. It is noted that when American originally registered under the act it had a total of 142 utility

and nonutility subsidiaries. West Penn which now succeeds it as the

registered parent holding company had 25 subsidiaries on June 30,

1948.

FINANCING UNDER SECTIONS 6 AND 7

The postwar expansion program of the electric and gas industry,

which experts estimate will require an average expenditure of more

than $2,000,000,000a year for the next 5 years, went into full swing

during the 1948fiscal year. Reports indicate that about $2,200,000,000

was spent during that period WIth indications that expenditures in the

1949 fiscal year will exceed that amount. In 1941 they amounted to

only $700,000,000and in the peak years of the twenties never exceeded

$1,000,000,000. That the scale of expansion of the utility industry is

fully in step with that in other sectors of the economy is indicated by

the fact that capital expenditures for the country as a whole are

running at a dollar rate twice that of the peak years of the 1920's.

Furthermore, this increase in expenditures is not wholly due to price

eoFormerly a subsidiary of American Water Works & Electric Co., Inc . .. Holding Company Act releases Nos. 7091 and 7208.
76 SECURITIES AND EXCHANGE COMMISSION

advances but represents an increase in the rate of expansion in physical

facilities as is shown by the fact that private electric utilities plan to

install 17,000,000kilowatts of. capacity. during the 4 years 194~51,

as against 9,000,000kilowatts installed 111 the prevIOus 4-year period

of peak installation, 1925-28.

To finance this huge volume of capital expenditures the gas and

electric industry drew on the capital markets for about $2,000,000,000

of new money, the largest amount ever raised for new construction by

the electric and gas utilities in anyone year. The remainder of the

funds required, about $200,000,000,came from internal sources. To

obtain the funds raised from outside sources they sold approximately

$1,400,000,000of bonds and debentures, placed about $300,000,000of

short-term notes with banks and other financial institutions, and sold

approximately $100,000,000of preferred and $200,000,000of common

stocks. Since more than $600,000,000of securities were sold for refunding and other purposes, total issues for all purposes during the

year totaled over $2,700,000,000.

This trend was reflected fully in the financing operations of the

holding company systems subject to the act as evidenced by the fact

that applications and declarations for security issues approved under

sections 6 (b) and 7 rose from $1,200,000,000in the fiscal year ending

June 30,1947, to $1,900,000,000in the 1948fiscal year. This level was

only $400,000,000below the figure for 1946, which represents the alltime peak for financing under the act. Fifty percent of the dollar

amount of financing approved in 1948 took the form of bonds and

debentures, 24percent was in short-term notes sold primarily to banks,

and 26 percent in stock, of which 22 percent was represented by common and 4 percent by preferred.

The dollar volume of refundin~ issues was slightly higher,

$573,000,000as against $557,000,000III 1947. But the percentage to

the total declined from 49 percent to 31 percent. In 1946 refunding

accounted for 85 percent of the total, amounting to over $2,000,000,000.

The factors accounting for the continued decline in the importance

of refunding issues since 1946are the same as were pointed out in last

year's report, namely, that most companies had already completed

their refundings. Furthermore, money rates have continued to harden

and other costs of refunding have remained on a more expensive

plane. All of the increase in financing during the past year can be

accounted for by issues for new money. The dollar volume of new

money issues rose from $287,000,000in 1947 to almost $1,000,000,000

in 1948. In 1946 new money issues accounted for only $2,000,000of

the total and in the previous peak year, 1942, it totaled only

$90,000,000. Issues for new money accounted for over 50 percent of

the total dollar value of applications and declarations approved in

1948, as against 25 percent in the previous year and less than onetenth of 1 percent in the 1946 fiscal year. Two hundred and twentysix of the 285 issues approved during the year were for this purpose

in whole or in part. The significance of these data is enhanced when

considered in the light of the fact that, during the period in question, a

substantial number of companies have been released from jurisdiction

of the act by divestment under section 11.

Bonds and notes were the principal vehicle employed to raise this

new rooney, accounting for 40 percent and 27 percent, respectively,
FOURTEENTH ANNUAL REPORT 77

of the total applications and declarations authorized in 1948. In the

previous year notes and common stock predominated. Of the 56

bond issues approved, 42 were sold at competitive bidding in an aggregate amount of $338,000,000; 13 issues totaling $47,000,000 were

placed directly with banks and insurance companies; and 1 issue of

$14,000,000 was taken by the parent company. With respect to the 106

note issues authorized 98, amounting to $222,000,000, were placed with

banks and insurance companies and 8 issues totaling $46,000,000 were

taken by parent companies. Of nine debenture issues approved in the

1948 fiscal year eight, with a dollar volume of $118,000,000, were offered

to the public through underwriters, and one, amounting to less than

$500,000, was taken by an insurance company.

The most striking change in the pattern of financing from the

previous year was in the increase in the percentage of notes and common stock and the decline in preferred stock. However, the proportion

of new money financing reflected in authorizations of preferred and

common stocks was relatively low. The 44 common-stock issues representing approximately $117,000,000 of new money financing accounted

for only 12 percent of the total dollar volume of new money offerings.

This relatively minor proportion of common financing is considered due

to the combined effect of several factors. In part, it reflects the less

favorable market conditions prevailing since 1946 and the relatively

high-yield rates necessary to generate public buying interest. The

influence of these two elements is, of course, heightened by the continued existence of a strong market appetite for bonds, debentures,

and notes at very attractive rates of interest. It is recognized, however, that common capital is being increased in many instances by

retention of a portion of earnings, which thus assists in preserving a

balanced capital structure.

Of the common stock financing authorized during the year, over

90 percent represented sales of stock by subsidiaries to their parent

companies. Thus, utility holding companies have purchased over

$100,000,000 of such common stock offerings, to this extent facilitating

the growth of equity capitalization. Of the total amount, $32,000,000

was taken by American Light & Traction Co., $25,000,000 by American

Gas & Electric Co., $13,000,000 by Electric Power & Light Corp.,

$11,000,000 by the North American Co. ; $8,000,000 by The Middle West

Corp., and the remainder in lesser amounts by other registered holding

companies. In a number of instances funds used to make such stock

purchases have been derived from the sales of the stock of other subsidiaries by the holding company parent pursuant to divestment

programs approved by this Commission under section 11 (e). In

other cases the holding companies have resorted to public financing

. in order to provide the funds required by their subsidiaries,

There has been little marked change in the lack of public appetite for

preferred stocks. This trend has accentuated the reliance upon debt securities and is sufficiently important to merit some discussion at this

point. Yields on preferred stocks were driven to record lows (3.25 percent to 3.35 percent for electric utilities) early in 19-:1:6as a result of

heavy buying by institutions, induced by the pressure of idle funds.

With the postwar development of broad outlets for funds such as mortgages and privately placed industrial construction loans, the institutional market for preferred stocks narrowed. Since yields on preferred
78 SECURITIES AND EXCHANGE COMMISSION

stocks had for some years been too low to interest individual investors,

the contraction in the institutional demand was immediately felt in

the form of increased yields. A large portion of medium grade stocks

was forced into the individual investor market at yields sometimes in

excess of 5 percent. The sale of preferred stocks, particularly the

medium grade issues, may also have suffered from the less favorable

trend of earnings displayed by many companies in recent months.

Since institutions were no longer under any particular pressure to

buy preferred issues, they were in a position to demand certain concessions in the terms of security. In this way the sinking fund came

into use in connection with utility preferred stocks. These provisions

were initially set up on a 2 percent basis, although some later issues

have carried requirements of 2:lh percent or 3 percent. Thus preferred stock ceases to be permanent capital. A variation of this

arrangement is the purchase fund, which typically operates only when

the security is selling at less than a specified price, usually par or the

offering price. While a sinking fund or purchase fund appeals to

institutional investors, it places an additional cash requirement upon

the issuer and has undoubtedly led some companies to seek other means

of financing.

The declining interest in preferred stock has rendered more difficult

the problem of maintaining an adequate proportion of equity security

in the capital structure. This is particularly true in view of the

large sums still to be raised for construction purposes. However, we

are continuing our attempts to encourage equity financing as a means

of preserving that strength of the operating companies which has been

achieved through several years' work of overhauling their financial

structures and property accounts."

OTHER ACTIVITIES UNDER THE ACT

The remainder of the Commission's work load under the Public

Utility Holding Company Act relates principally to the administration of sections 2, 3, 11 (g), 12 (b), 12 (e), 12 (f), and -13. The cases

arising under these sections are numerous, but few are of an involved

nature. A number, particularly exemptions, received little attention

during the war due to shortages of personnel but with the return of

experienced veterans this backlog has been substantially reduced and

reattainment of a current status is inview.

Case load-other activities

Number of Number of Number proceedings proceedings pending Fiscal year ending June 30- filed or reopened disposed at end of

durmg of during fiscal

fiscal year fiscal year year

1944•.•........ .. ..... ..... ... ...•. .... •. •. 308 409 144 1945. ... . . . . 419 376 187 1946 . _. . .• .. . . 431 401 212 1947 .• •... .. , . .. .. _. •. 299 349 162 1948___ __________________________ ___. _______________ 194 20i 152

61 Attention is invited to the Tenth Annual Report in which these developments were dlseussed.

__'" ___ _ _ ___ _ __ __ ___ _ _____ __ _____ _______ _______________ _______• _________••

• ________•••

_____________ _____ ____________________ ___ ____• ___ __

___ ________ __• _ _____ _____ ____• ___________ ___
FOURTEE~ ~AL REPORT 79

The Commission's task of administering the Public Utility Holding Company Act of 1935 has been performed in the past year with

approximately 158 man-years of personnel. Following is a record

of personnel employment for this phase of the Commission's work for

each of the past 5 years:

Division employment in

Fiscal year end June 3D-- man-years 1944 193.3

1945 172.6

1946 172.4

1947 172.5

1948 157.9

STATISTICS OF LITIGATION UNDER THE ACT

The results of the year's work in the Federal courts are summarized

in the data which follow.

Applications by the Commission in district courts to enforce and carry out

voluntary plans pursuant to section 11 (e)

FIScal year

194i

Pending at beginning of year________________________________________________________4 Flied durmg year. 13

Proceedings reopened.i..; _______ ____ __ ____________________________ 1

~~gfi::~~;~e~~~:Jifr~m -eircuit -c-ourtS~~:::::::::::::: :::: :::::: ::::::::::::::::: '.

1948

2

8

4

5

11

TotaL 19 20

Plans approved for enforccmenL.___________________________________________________115 15

Order of approval vacated at Commission's requesL_________________________________ 'I Proceeding dismlssed at Commission's request. _ 31 _ Plans remanded to Commission for further proceedings

Plans disapproved by order of United States eircurt eourt and remanded to the Cornrmssion for further proceedmgs , 11

Pendmg at close of year 2 3

'I'otal., . 19 20

1The district court approved the plan of Engineers Public Service Co. except insofar as it

provided for payment to preferred stockholders of more than Iiquidatton preference. The

Commission was jOllled in appealing from this order by several parties III interest. The

circuit court of appeals vacated the order and remanded the plan to the district court with

orders to disapprove the plan and remand it to the Cornmissron,

FollowIng entry of an order by the district court enforcing a plan, New England Gas & Electric Association filed a new plan. The Commissron requested that the district court vacate its order of approval in order that the new plan might be acted upon. Following vacation of the district court's order the Comrmsston approved the new plan and upon application for an order enforcing it, the district court entered its order enforcing the new plan. a Following appoval by the Commission and before entry of an order by the district court, a change of cIrcumstances rendered the plan of Northern States Power Co. no longer "fair

and equitable." At the request of the Commisaion, the district court dismissed the pro- ceedings before it. A new plan was filed by the company and approved by the Commission. It was pending before the distrtct court on June 30. 1948.

_

_

_

_ _

• _

•
80 SECURITIES AND EXCHANGE COMMISSION

Appeals taken to circuit courts of appeals from orders of district courts approving

plans filed pursuant to section 11 (e)

FIScal year

1947 1948

Pending at bezlnmne of year

FIled by parties in mterest , Elled by Comrmssion

TotaL

2

4

11

7

4

6

10

Orders of district courts affirmed___________________________________________________ 2 2

Orders of district courts vacated and remanded to distnet courts with orders to dis- approve plan and remand it to the CommisslOn___________________________________ 11

Appeals disrmssed in favor of CommisslOn___________________________________________ 1 3 Pending at close of year 4 4

Total 7 10

I The district court approved the plan of Engineers Public Service Co. except insofar as It provided for payment to preferred stockholders of more than hqmdation preference. The Cornmissron was Joined in

appealing from this order by several parties in mterest. The circult court of appeals vacated the order and

remanded the plan to the distnct court with orders to disapproved the plan and remand It to the OomrmsSlOn

Two petitions were filed with the United States Supreme Court for

writs of certiorari to review orders of circuit courts of appeals affirming

orders of district courts approving plans under section 11 (e) upon

application to the Commission. Both petitions were denied by the

court. None had been filed during the 1947fiscal year.

Petitions filed in circuit courts of appeals pursuant to section 24 (a) to review

orders of the Oommission 1

FIScal year

1947

Pending at begmrnng of year - - 6

Filed during the vear.c.,; 16

Causes remanded from Umted States Supreme Court

1948

25

9

2

Total. 12 16

Orders of the Commission affirmed__________________________________________________ 2 Petitions disnnssed 5 Petltions withdrawn

Judgment vacated by order of United States Supreme Court and petition dismissed

p:~J'~,;~~g;.; ofyear::::::::: :::::::::: ::::: ::::::: ::::: ::::: ::::::::::::: ::::::: -------'5-

2

6

1

1

26

Total. 12 16

I All but one of these petitions involved section 11 (e) of the Act

2 Philadelphra Co appealed from adoption of amendment to rule U-49 (c) and moved for a stay of CommISSIon aetion. The Commrssion moved to disnnss and to modifY stay granted pursuant to petitioner's

motion and both motions were denied. The Oomzmssion petitioned the Umted States Supreme Court

for a wnt of eertioran to review the orders of the CIrCUIt court of appeals denying these motions and was denied. The cause was pending ill the circuit court of appeals on June 30, 1948.

_

_

_

_

_

_

_

- ___ ____ ____ __ _____ _______ _

_
FOURTEENTH ANNUAL REPORT 81

Petitions to U. So Supreme Oourt tor writs at certiorari to review orders ot

circuit courts at appeals on petition tor review at orders at the Oommission

under sec. 11

FIScal year

1947 1948

Petitions pendmg at beginning of year_______________________________________________ 2 Petitions filed dnring year 2

TotaL _ 4 _

Petitions granted

Petitions demed.. __ _____________________ __ _____________ ___ 4 _ Petrttons pending

TotaL _ 4 _

Hearmgs on petitions to U. S. Supreme Conrt for writs of eertrorarl granted (all on sec. 11matters). Pending.,., ________________ _ ____ ___ __________________ _______ I 2 3

TotaL__ _________________ __ ____ __ __ _______ 3

Judgment of circuit conrt ofappeals upholding order ofthe Comnnsslon affirmed __ , 1

Judgment of Circuit conrt of appeals reversed and remanded WIth instructions to affirm order ofthe CO=lSSlOn________________________________________________21

Judgment of circurt conrt of appeals denymg portion of order of the Oornmission

vacated and remanded With instructions to dISmiSSas moot ___________________ __________ 1 Pending at close of year __ 1 _

TotaL__ _ __ ______ __ ________ ____ 3

I The circuit conrt of appeals affirmed the order of the Commission requiring dissolution of Amenee n Power & Light Co. and Electnc Power & Light Corp. 2 The Circuit court of appeals reversed the order ofthe Oomrmssion lmntmg management of Federal Water & Gas 00. to cost plus 4 percent With respect to secunties acquired during reorgamzatton. The U. S.

Supreme Oonrt reversed the circmt court of appeals and remanded the proceedings With mstructions to set aside its Judgment and affirm the order of thc Commission.

_

_

_
PART IV

PARTICIPATION OF THE COMMISSION IN CORPORATE REOR.

GANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY

ACT

Chapter X of the Bankruptcy Act, as amended in 1938, in setting

up appropriate machinery for the reorganization of corporations

(other than railroads) in the Federal courts provides for participation

by the Commission in proceedings thereunder at the request of or with

the approval of the court for the purpose of providing independent

expert assistance to the court and to investors and for the preparation

by the Commission of formal advisory reports on plans of reorganization submitted to it by the courts in such proceedings. The Commission's functions in chapter X proceedings are of a purely advisory

character. The Commission has no authority to veto or to require

adoption of a plan of reorganization or to render a decision on any

other issue in the proceedings. It has no right to appeal in such proceedings, although it may participate in appeals taken by others and

has, as a matter of fact, participated in many appeals as a party or as

amicus curiae.

SUMMARY OF ACTIVITIES

The Commission actively participated during the year in 84 reorganization proceedings involving the reorganization of 105 companies

(84 principal debtor corporations and 21 subsidiary debtors)." The

aggregate stated assets of these 105companies amounted to $1,744,674,-

000 and their aggregate indebtedness was $1,130,548,000.2 During the

year the Commission filed its notice of appearance in 10 new proceedings under chapter X, two of which were filed at the request of the

court and the remaining eight upon approval by the court of the

Commission's motion to participate. These 10 new proceedings involved 11 companies (10 principal and 1 subsidiary debtor) with aggregate stated assets of $28,487,000and aggregate stated indebtedness

of $32,620,000. Proceedings involving 13 principal debtors and 4 subsidiary debtors were closed during the year.

At the closeof the year, the Commission was actively participating in

71 reorganization proceedings involving 88 companies (71 principal

debtors and 17 subsidiary debtors), with aggregate stated assets of

$1,562,053,000and aggregate stated indebtedness of $1,063,632,000.

COMMISSION'S FUNCTIONS UNDER CHAPTER X

A.detai~ed discussion of the Commission's duties and policies in connection WIthIts functions under chapter X appeared in the Tenth and

Twel~th Annual Reports of the Commission. To carry out its advisory

functions under chapter X, the Commission maintains expert staffs

of lawyers, accountant~, and financial analysts in various regional

officeswhere they ~eep III close touch with all matters arising in the

proceedings and WIththe parties in the case, and are readily available

1Appe~l(lixtab}",22 eontalns a complete list of reorganization Proceedings in which the

Cornriifsstonpartfeipated durmg the year ended June 30 1948

'.Appendix table 21, parts 1 and 2, classify these debtors 'according to industry and size of mdebtedness.

82
FOURTEENTH ANNUAL REPORT 83

to the courts. As a statutory party in interest in a chapter X proceeding, the Commission is concerned not only with proposed plans

of reorganization but also with the many diverse and complex legal

and financial problems that usually arise in the proceeding. Frequently these problems are met through informal conferences and

discussions, in which the Commission's staff participates, in an endeavor to work out solutions in advance of litigation in order to avoid

needless delay and expense. Some of the legal and financial questions

encountered in typical reorganization proceedings are described in the

following paragraphs.

Problems inthe Administration of the Estate

The Commission has continued as always to scrutinize the qualifications of trustees in the light of the standards prescribed by the

statute. Since the independent trustee has the duties of examming

into the history and affairs of the debtor, ascertaining its financial

and managerial problems, and formulating the plan of reorganization, it is obvious that the success of the reorganization depends

largely upon his thoroughness and skill and freedom from adverse

or conflicting interests. During the past fiscal year, in an important

case the Commission concluded that certain conduct and affiliations

of the so-called disinterested trustee required that he be removed

from office." In its petition seeking such removal the Commission

alleged, among other matters, that the trustee had permitted a director

and officer of the debtor, who had been connected with the parent

company for many years, to assume a leading role in the preparation

of a report by the trustee as to whether claims existed against the

parent company or whether grounds existed for equitable limitation

or subordination of claims filed by the parent company in the proceeding. The report involved was favorable to the parent company. The

matter is pending before the district court.

The responsibilities of an additional, or operating, trustee, who may

be an officer, director, or employee of the debtor, do not, of course,

assume the proportions of those of the disinterested trustee. Nevertheless, where the additional trustee's interests are adverse to those

of the estate or any class of security holder, his key position together

with the independent trustee in exercising responsibility for operations makes it essential that he be removed from office. In several

cases during the 1948fiscal year, the Commission had occasion to take

steps to have the additional trustee resign or to bring about his removal

because of conflicting or adverse interests or because of the existence

of causes of action against him by the debtor. In all of these cases,

the trustee tendered his resignation after informal conferences.

In connection with the independent trustee's investigation of the

debtor's operations and the reasons for its financial ills, the Commission has frequently found it necessary to advocate the retention bl

the trustee of an independent expert, qualified to appraise the debtor s

property, make valuations, or report upon the efficiencyof the debtor's

operations. In one case, during the fiscal year, the Commission objected to reliance for purposes of valu-ation upon an appraisal of the

debtor's assets made by an officer of the majority stockholder of the

debtor.• In a memorandum filed with the special master, the Com31n re Pittsburgh Railways 00., W. D. Pa. 41n re Van Bweringen Oorp., N. D. Ohio, E. Div.

813892-49-7
84 SECURITIES AND EXCHANGE COMMISSION

mission pointed out the conflicting interests of the appraiser, among

other matters, and urged that a qualified and independent appraiser

be retained. As a result steps have been taken toward the selection

and appointment of such an appraiser.

In another case, involving a large transit system, the Commission

petitioned the court to direct the trustee to employ engineermg experts

to advise whether, and the extent to which, bus routes should be substituted for trolley routes which by far predominated in the system,"

The Commission argued that most large cities had made increasing

use of busses to replace trolleys in the interests of economy and efficiency and that it was important, for purposes of determining the

fairness and feasibility of a plan, to ascertain whether the property

was being operated economically. The Commission also pointed out

that the management showed an apparent predilection for street

railway operations and that an independent, unbiased survey by experts would provide answers to many operating problems. Despite

the special master's adverse recommendation on the ground that,

prima facie, no one would be wronged by adherence to the same business in which security holders invested and which came into control

of the court or by refusal to spend a substantial sum to learn whether

a "different" business would be better, the district court granted

the Commission's petition. The court stated that it was evident from

the facts that a survey should be made whether used in the reorganization or not, and that it might be of value in the proceedings.

One of the fundamental reasons for the mandatory requirement

of the statute that a disinterested trustee be appointed in the larger

cases was to assure a thorough exploration, not solely of the causes

of financial difficulties, but of the possibility of claims against the

old management or other persons and their diligent prosecution. In

view of this precept, the Commission has in varIOUScases urged that

the facts warranted a thorough investigation of possible causes of

action by the trustee against persons controlling the debtor. In two

of these cases the trustee, with the assistance of the Commission,

prepared and made available to security holders a detailed report of

the results of his investigation, including a report on various misrepresentations and omissions in the prospectus under which stock

had been sold to the public," These reports included a reference to the

possible rights that purchasers of the stock might have under section

12 (2) of the Securities Act of 1933 and the time limitations of any

action thereunder contained in section 13 of that act. In another case,

the Commission's motion to require an investigation was denied." In

still another case," the investigation, sought and obtained by the Commission as to the grounds for equitable limitation to cost of certain

bonds acquired by insiders prior to reorganization but during a period

when the debtor was insolvent, resulted in a compromise favorable

to the estate and to the public bondholders.

Responsibilities of Fiduciaries

Trading in securities of a debtor in reorganization by trustees,

directors, attorneys, committee members, or other fiduciaries is a pracIn re PittsbUlgh Railways 00., W. D. Pa, «t« re Cosmo Records, Inc., E. D. N. Y.; in re Ameriacn Acoustics, Inc., D. N. J. r In re Kellett Aircraft coro., E. D Pa,

sIn re Gramott coro., S. D. N. Y.

•
FOURTEE~ ~AL REPORT 85

tice which has generally been condemned by the courts and the Commission in opinions and reports. The accessto inside information and,

frequently, the control or influence over the course of reorganization

which are possessed by these insiders are urgent considerations for

enforcing judicial sanctions against them strictly. One such sanction

which has been used during the fiscal year in several cases in which

the Commission participated is the prohibition against payment of

any fees or reimbursement of any expenses where a fiduciary bought

or sold securities of the debtor. Another sanction is the prevention

of any profiting by such a fiduciary through the limitation of his

securities to the cost thereof or requiring him to account for any

profits from securities sold by him. A compromise entered into in

one case where the purchase of securities occurred prior to the reorganization but when the corporation was insolvent has been mentioned." In another case,'? a committee member had purchased securities of the debtor and of its two subsidiaries, which were also in

reorganization under the Bankruptcy Act. The Commission contended that the committee member as a fiduciary should be limited

to cost or account for the profit on the purchased securities of the

subsidiaries as well as of the debtor under section 212 of the statute

and equitable principles applicable to the situation. A satisfactory

compromise of the issues was entered into and approved by the

court.

In its Thirteenth Annual Report, the Commission referred to the

reorganization proceedings involving National Realty Trust and Federal Facilities Realty Trust and to objections filed to the final accounts

of a former trustee of the debtors based upon charges that he had

permitted certain employees of his to trade freely in securities of the

debtors and their subsidiaries. The special master has since ruled in

favor of practically all of the Commission's contentions and the

matter is pending before the district court for decision.

Activities With Respect to Allowances

The Commission has actively participated in the matter of allowances of compensation to those claiming to have rendered services and

incurred expenses in a proceeding. In granting allowances the courts

seek to protect the estate from exorbitant charges, while at the same

time providing equitable treatment to the applicants. The Commission has continued to provide the courts with considerable assistance

in this matter.

The Commission itself receives no allowances from estates in reorganization and is able to present a wholly disinterested and impartial

view. The Commission has endeavored to obtain a limitation of the

aggregate fees to an amount which the estate can feasibly pay. In

each case, the applications are carefully studied and recommendations

are made to the end that unnecessary duplication of services and

nonbeneficial efforts shall not be recompensed and that applicants

shall be rewarded on the basis of their relative contribution to the

administration of the estate and the adoption of a plan of reorganization. Specific recommendations are made to the courts in cases in

which the Commission has been a party throughout the proceeding

In re Gramott Gorp., S. D. N. Y. 11 In re A.m~an Fuel d POlDer co., Inland Gall Gorp., and Kentuck1l Fuel Gall Gorp.,

l!l.D.Ky,

•
86 SECURITIES AND EXCHANGE COMMISSION

and is fully familiar with the activities of the various parties and all

significant developments in the case.

The Commission has contended consistently that fees be granted

only for disinterested and loyal services rendered to the estate. In

several cases during the past year the Commission opposed the allowance of fees to persons having interests adverse to those of the estate

or the security holders. In one case, applicants were attorneys for a

bondholder who in effect purchased the debtor's property through a

new corporation. The Commission opposed the granting of any fee

out of the estate to these attorneys on the ground that their services

were rendered for the purpose of advancing the individual interests

of their client which were distinct and different from that of other

bondholders in view of his objectives in the reorganization. Hence,

while their services may have contributed to the plan of reorganization, it was contended that they should look to their client for compensation. The district court denied applicants' request for a fee and,

on appeal, the Circuit Court for the Eighth Circuit affirmed the

decision."

In a similar case, the Commission opposed the granting of a fee

to attorneys who represented the lessee of property leased from the

debtor. During the proceedings the lessee had resisted efforts of the

trustee to secure possession of the property despite large arrears of

rent. A compromise was eventually effected which was incorporated

in a plan of reorganization and the applicants requested compensation

out of the estate for their contributions to the plan of reorganization.

The district court upheld the Commission's position that the services

were rendered on behalf of a client whose special interests were adverse to those of the estate and should therefore not be compensated by

the debtor. On appeal, the Circuit Court for the Seventh Circuit

affirmed."

In the proceedings for reorganization involving Pittsburgh Terminal Coal Corp., the Commission took the position that the chapter

X court had jurisdiction to pass upon the reasonableness of all fees

in connection with the reorganization even though such fees were to

be paid by a stockholders' committee and not out of the estate. The

Commission argued that under the specificlanguage of section 221 (4)

the court was required to pass upon all payments made or promised

by any person for services in connection with the proceeding. The

district court did not agree with this position and concluded that

it was without jurisdiction to pass upon the agreement between the

stockholders' committee and its counsel. An appeal to the Circuit

Court for the Third Circuit was taken by the committee but was not

prosecuted and the appeal was dismissed. Subsequently action was

brought III the State court by the attorneys against the preferred

stockholders' committee to enforce the agreement. The Commission

participated, as amicus curiae, in an appeal to the Court of Appeals

of the State of New York from the denial of a motion to dismiss the

?0II?-Pl~i~ton the ground that the chapter X court had exclusive

jurisdiction over the fee agreement. In upholding the contention of

the Commission, the court of appeals held that the chapter X court

had the statutory duty to determine reasonable compensation for all

U In re 00ngre88 <t; Senate 00. 163 F. (2d) 621 (C. C. A. 8, 1947). U In re 811-36North State Street Building Oorp., 164 F. (2d) 205 (C. C. A. 7, 1947).
FOURTEENTiI ~AL REPORT 87

services rendered by the attorneys for the committee and to determine

whether the payment of the fee under the agreement was reasonable,"

INSTITUTION OF CHAPTER X PROCEEDINGS AND JURISDICTION OF

THE COURT

The Commission has striven for a liberal interpretation of the provisions of the Bankruptcy Act so that the benefits of chapter X may

be made fully available to security holders in accordance with the

spirit and intent of the statute. In accordance with this policy, the

Commission has participated heretofore in various cases involving

the question of "good faith" in the filing of a petition.

During the past fiscal year the Commission participated in another

case involving the "good faith" of the filing of the petition, the proceeding involving Diversey Hotel Corp. The district court approved

the petition as having been properly filed and in good faith. In

supporting the decision on app~al, the Commission urged that the

debtor could not pay its debts (primarily a large mortgage bond

indebtedness) as they matured and that there was a need for a plan

of reorganization to avoid sacrifice of values through a forced sale.

The Commission pointed out the safeguards and flexibility of chapter

X and urged that a plan of reorganization could involve either a

sale of the property at a fair price and a distribution of the proceeds

or the issuance of new securities in a new or reorganized company

which would acquire the assets of the debtor. The Circuit Court for

the Seventh Circuit affirmed the decision of the lower court.v

Shortly after the enactment of chapter X, the possibility arose of

an improper use of chapter XI which was intended only for the small

corporation with no publicly held securities. Obviously the safeguards to investors of chapter X could be evaded if a corporation

were permitted to effectuate a plan of arrangement affecting public

investors under chapter XI. In the case of Securities and Eechanqe

Oomaniseioa v, United States Realty and Isnprovement 00., the

Supreme Court established the rule that chapter XI was inadequate

to assure to public investors the safeguards necessary for a fair, equitable, and feasible plan and that the Congress intended the reorganization of debtors with publicly held securities to take place under chapter

X. The Supreme Court also held that the Commission could intervene in a chapter XI proceeding for the purpose of having it dismissed as improperly commenced."

During the past fiscal year, the Commission intervened in a chapter

XI proceeding and was successful in having it dismissed." In that

case, the promoter of the debtor corporation, which had leased some

old mining claims of undetermined value, had been unsuccessful in

raising new funds for his project. An attempt to sell stock under

the exemption afforded by regulation A under the Securities Act of

1933 had ended when the Commission began an investigation into

charges of fraud and misrepresentation. The promoter then conceived the scheme of selling stock to raise money through the device

Leiman v. Gilttmann, N. Y., 78 N. E. (2d) 472 (1948). ,. In re Diver8611Hotel Gorp, 165 F. (2d) 655 (C. C. A. 7, 1948).

11810U. S. 484 (1940). 11 In re American Silver Gorp., S. D. Cal., C. D.

""
88 SECURITIES AND EXCHANGE COMMISSION

of a plan of arrangement under chapter XI without compliance with

the requirements of the Securities Act of 1933. Alleging the need

of funds to pay creditors, the debtor filed a petition under chapter

XI and a plan pursuant to which a new corporation was to be formed

to take over the assets of the debtor. Rights to subscribe to the assessable stock of the new company were offered to old stockholders in

exchange for the nonassessable stock of the debtor. Failure to subscribe meant, of course, that the stockholders would remain with shares

of a defunct corporation.

The Commission moved to dismiss the proceeding, contending that

chapter XI is not available for a corporation seeking to alter the rights

of publicly held securities, that chapter XI is available only for the

adjustment of unsecured obligations and not for the modification of

stockholders' rights, and that the proposed issuance of stock violated

the provisions of the Securities Act of 1933. The referee dismissed

the proceeding and, at the instance of the Commission, funds collected

from stockholders were returned to them. Subsequently the corporation filed a petition under chapter X.

PLANS OF REORGAN!ZATION UNDER CHAPTER X

The ultimate objective of a reorganization is the formulation and

consummation of a fair and feasible plan of reorganization. Accordingly, the most important function of the Commission under chapter

X is to aid the courts in achieving this objective.

Fairness

In appraising the fairness of reorganization plans under chapter X

the Commission has at all times taken the position that full recognition must be accorded claims in order of their legal and contractual

priority, either in cash or new securities or both, and that junior claimants may participate only to the extent that the debtor's properties

have value after the satisfaction of prior claims or to the extent that

they make a fresh contribution necessary to the reorganization of the

debtor. Hence, a valuation of the debtor is necessary to provide the

basis for judging the fairness as well as the feasibility of proposed

plans of reorganization. In its advisory reports, in hearings before

the courts, and in conferences with parties to proceedings, the Commission has consistently stated that the proper method of valuation for

reorganization purposes is primarily an appropriate capitalization of

reasonably prospective earnings. These principles as to the recognition of priorities and as to valuation are now firmly established as

a result of Supreme Court decisions.

In connection with the fairness of plans, the Commission has been

concerned among other matters with situations where mismanazement or other misconduct on the part of a parent company or cgntrolling person requires that the claim of such person be subordinated

to the claims of the public investors or, where a fiduciary's activities

require, that he be limited to the cost of his claims. Such matters

must be given full co~sideration. since they form an integral part of

the concept of the "fall' and equitable" plan. LIkeWIsethe Commission is concerned with the treatment of causes of action against the

former management or other parties. Unless such claims have been
FOURTEENTiI ~AL REPORT 89

disposed of by litigation or settlement during the proceeding or as

part of a plan of reorganization, the Commission has argued that the

plan provide for the retention and prosecution of such causes of action

by the trustee. In this way litigation in favor of the estate need not

delay the consummation of the reorganization.

Where operations of the debtor result in the accumulation of cash,

the Commission has generally successfully urged that cash distributions be made to creditors whenever it is feasible to do so, even though

in advance of the J?lan of reorganization. This position was taken

in several cases durmg the past fiscal year. In one case, junior creditors affiliated with the management of the debtor and Its principal

stockholders opposed any distribution to bondholders because certain

issues in the case were still undetermined. Emphasizing the tentative

nature of interim distributions, the Commission argued that the order

for distribution could preserve all the rights of the parties in the case

and that it would be inequitable to withhold partial payment until

final adjudication of all issues where such rights could be preserved."

The district court upheld the Commission's position and directed a

partial distribution to bondholders. An appeal is pending from this

decision to the Circuit Court for the Third Circuit but that court

denied a request for a stay of the judge's order.

Feasibility

Although the representatives of security holders frequently regard

the fairness of the plan as their principal concern, the provisions of

the statute and the protection of investors' interests require also that

the plan be feasible. To be feasible, a reorganization must be economically sound and workable. It must not hamper future operations or lead to another reorganization. The extent to which current

reorganizations are attributable to lack of feasibility in previous

reorganizations is indicated by the fact that numerous chapter X

proceedings involved companies which had already undergone reorganization in equity receivership proceedings or under section 77B

of the Bankruptcy Act. In order to avoid a similar record as to

chapter X cases some years hence, with its attendant expense and

injury to investors, the Commission gives a great deal of attention

to the factors affecting feasibility. In this connection, the Commission is particularly concerned with the adequacy of working capital,

the relationship of funded debt and of the capital structure as a

whole to property values, the adequacy of corporate earning power

in relation to interest and dividend requirements, and the effect of

the new capitalization upon the company's prospective credit.

In recent years the Commission has encountered difficulties because

the parties are disposed to base values and capital structures upon

inflated earnings, either because they overlook the extent to which

earnings are inflated or hope such earnings will continue long enough

to permit debt to be scaled down to manazeable proportions. Another obstacle to the formulation of feasible plans in the current period

of high tax rates is the reluctance of investors to scale down debt and

thereby lose the deduction for interest payments.

rr In re Isuluetrial Office Building Corp" D. N. J.
90 SECURITIES AND EXCHANGE COMMISSION

Consummation of Plan

The Commission also gives its attention to the drafting and preparation of corporate charters, bylaws, trust indentures, and other

instruments which are to govern the internal structure of the reorganized debtor. The Commission strives to obtain the inclusion of

various provisions in these instruments which will assure to the investors a maximum of protection, adequate information with regard

to the enterprise, and a fair voice in the management. The Commission has generally opposed the control device of a voting trust except

when its use has been justified by the special circumstances of the case;

and, when adopted, the Commission has sought to have the voting

trust agreement contain appropriate provisions in the interests of the

investors.

Rights to Interest

Creditors' rights to interest on secured claims were the subject of

several decisions rendered by the Circuit Court of Appeals for the

Second Circuit during the past year, in cases in which the Commission

was an active participant. In In re Realty Associates Securities

00rp.1S a majority of the court held that interest on the principal

amount of a claim continued to accrue after the institution of chapter

X proceedings at the contract rather than the legal or "judgment" rate.

The debtor in this case had covenanted to pay 5 percent interest "until

the reduced principal * * * shall be duly paid," which was held to

be the contractual post-maturity rate. Citing the ruling of the Supreme Court in Vans ton Bondholders Protective Oommittee v, Green,

329 U. S.156 (1946), the court held also that no interest was payable

on that portion of the claim which represented unpaid interest accrued

prior to the date of the chapter X petition. InEmpire Trust 00. v,

Equitable Office Building 00rp.,19 a debenture provision for the payment of interest at 5 percent "until such principal shall be paid" was

likewise construed as fixing the post-maturity rate applicable during

the pendency of the reorganization proceeding and as negativing the

6 percent legal rate which might otherwise have been applicable. The

court held also that an express covenant to pay simple interest on overdue and unnegotiated interest coupons is invalid in New York. In

Delatour v. Prudence Realization 00rp.,20 where guaranteed certificates of participation in a 6 percent mortgage issued by the debtor

provided for the remission of only 5lh percent interest to the public

certificate holders by the guarantor servicing-agent, the former were

nevertheless allowed the 6 percent mortgage interest to the exclusion

of the guarantor following default on the guaranty. The court held

that the lh percent interest represented compensation due the guarantor for its guaranty and agency for servicing the mortgage, both of

which terminated upon default.

ADVISORY REPORTS

Although the preparation of an advisory report is not the major

part of the activity of the Commission in any particular case, such

reports, because of their wide distribution, form one of the primary

18 163 F. 2d 387 (1947), cert. denied, 332 U. S. 836 (1947).

167 F. (2d) 346 (1948). 10 167 F. (2d) 621 (1948). '"
FOURTEENTH ANNUAL REPORT 91

means of contact between the Commission and the public in chapter X

matters. Generally speaking, an advisory report is prepared only

in connection with a proceeding involving significant problems and

a relatively large company in which the investing public has a substantial interest. Even though the Commission in some cases does not

file a formal advisory report, it does, in all cases in which it is a participant, advise the court of its opinion with respect to any plan of

reorganization under consideration by the court.

During the past fiscal year the Commission prepared two supplemental advisory reports with respect to a proposed plan of reorganization involving Childs Co., the owner and operator of a large chain of

restaurants. Previously the Commission had submitted an advisory

report and two supplemental reports on a plan of reorganization which

failed to receive the required percentage of approval of common stock

holders. The trustee's revised plan was considered to be feasible in

that it provided for adequate working capital and a sound capitalization. It was also considered to be fair in its treatment of creditors and

its allocation of new securities between preferred and common stock

holders, which fell within a range previously stated by the Commission

to be fair. The Commission suggested, however, certain protective

provisions for the preferred-stock holders in respect of pre-emptive

rights, a cumulative sinking fund and a two-thirds approval of any

extraordinary borrowing. Several of these suggestions were adopted

in the revised plan. After court approval, the plan was accepted by

stockholders and confirmed by the court and it has now been consummated.
PART V

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939

The Trust Indenture Act of 1939 outlaws the exculpatory clauses

used in the past in trust indentures underlying corporate debt securities. Many of these clauses eliminated liability of the trustee for

misconduct to such an extent that the word "trustee" was meaningless

as applied to indenture trustees. The act is designed to insure that

the trustee will act in the interest of the bond or debenture owners

and to insure his complete independence of the issuer and the underwriters. To secure its objectives, the act requires that bonds, notes,

debentures, and similar debt securities publicly offered for sale, sold,

or delivered after sale through the mails or in interstate commerce,

except as specifically exempted by the act, be issued under an indenture

which meets the requirements of the act and has been duly qualified

with the Commission. The provisions of the Securities Act of 1933

and the Trust Indenture Act are so integrated that registration pursuant to the Securities Act of 1933 of securities to be issued under a

trust indenture is not permitted to become effective unless the indenture conforms to the requirements expressed in the Trust Indenture

Act of 1939,and such an indenture is automatically '~qualified"when

registration becomes effective as to the securities themselves. An

application for qualification of an indenture covering securities not

required to be registered under the Securities Act of 1933, which is

filed with the Commission under the Trust Indenture Act, is processed

substantially as though such application were a registration statement filed pursuant to the Securities Act of 1933.

STATISTICS OF INDENTURES QUALIFIED

While the dollar amount involved in all indentures filed with the

Commission last year for qualification under the act again aggregated more than 2% billions of debt securities, this value shows a

reduction of $138,000,000 from the prior year. At the same time there

was an increase in the number of indentures filed from 108 to 121.

Other significant details concerning indentures examined last year

for qualification and the disposition thereof are shown below.

Total number of indentures filed under the Tl"USt Indenture Act of 1939

I

Number Aggregate

amount

~~:=lll'~dd~~~~ ~~~~~::: :::~~::::::::::::~:::~~::::~~ :::::::: 15 $230, 004, 800

121 2, 554, 029, 380

TotaL _________________________________________________________________ 136 2,784, 034, 180

Dispositron during fiscal year: Indentures quahfled 122 2, 445, 903, 580 Amount reduced by amendment ________________________________________ -.--------7- 5,000,000 Indentures deleted by amendment or withdrawn ________________________ 69,350,000 Indentures pending June 30, 1948________________________________________ 7 263, 780, 600

Total 136 2, 784, 034, 180

92

____________• ________________________________________

_______•• _________________________• ________________________• ______
FOURTEENTH ANNUAL REPORT 93

During the past year the following additional material relating to

trust indentures was also filed, in a volume somewhat above that of the

preceding year, and examined by the staff for compliance with the

appropriate standards and requirements of the act:

One hundred forty-three statements of eligibility and qualification

under the Trust Indenture Act;

Twenty-four amendments to trustee statements of eligibility and

qualification;

One hundred eight supplements S- T, covering special items of information concerning indenture securities 'registered under the Securities

Act of 1933;

Forty-three amendments to supplements S-T;

Seventeen applications for findings by the Commission relating

to exemptions from special provisions of the Trust Indenture Act; and

Three hundred ninety-three annual and interim reports of indenture trustees pursuant to section 313 of the Trust Indenture Act.
PART VI

ADMINISTRATION OF THE INVESTMENT COMPANY ACT

OF 1940

The Investment Company Act of 1940 requires the registration

and provides for the regulation of investment companies, which are,

generally, companies engaged primarily in the business of investing,

reinvesting, owning, holding, or trading in securities. Among other

things, the act requires disclosure of the finances and of the investment policies of these companies to afford investors full and complete information with respect to their activities; prohibits such companies from changing the nature of their business or their investment

policies without the approval of the stockholders; bars persons guilty

of security frauds from serving as officersand directors of such companies; prevents underwriters, investment bankers, and brokers from

constituting more than a minority of the directors of such companies;

requires management contracts III the first instance to be submitted

to security holders for their approval; prohibits transactions between

such companies and their officers and directors and other insiders

except on the approval of the Commission; forbids the issuance of

senior securities of such companies except in specified instances; prohibits pyramiding of such companies and cross ownership of their

securities; and requires face-amount certificate companies to maintain reserves adequate to meet maturity payments upon their certificates.

UNLAWFUL ACQUISITION BY INVESTMENT COMPANY OF INSURANCE

COMPANY STOCK

A registered, diversified management-investment company of the

open-end type acquired shares representing 50 percent of the voting

stock of an insurance company when it had no interest in the insurance company. The acquisition contravened section 12 (d) (2) of

the act which provides that it shall be unlawful, with exceptions not

pertinent here, for a registered investment company to acquire more

than 10 percent of the outstanding voting stock of an insurance company, unless the investment company owned at least 25 percent of

such securities at the time the purchase is made. Section 47 of the

act declares contracts made in violation of the act void, as regards

the rights of any person who shall have made or engaged in the performance of such contract or of any person, though not a party, who

shall have acquired any right thereunder with knowledge of the

pertinent facts.

After conferring with the staff, the investment company filed an

application under section 6 (c) of the act for an order of the Commission exempting the acquisition from the provisions of section 12

(d) (2). Itwas stated therein that the vendors had been apprised of

the violation and of their possible rights to rescind but had indicated

a desire to reaffirm the transaction. In its disposition of the case,

the Commission issued an order of exemption conditioned upon

divestment of the insurance company stock by the investment com94
FOURTEE~ ~AL REPORT 95

pany and other terms intended to insure that neither the investment

company nor its management would derive any benefit as a consequence of the violation which had occurred. (Investment Company

Act release No. 1189.)

CHANGES IN RULES

A number of changes were made last year further to simplify the

Commission's rules and regulations under this act.

Rule N-17 A-2-Exemption of Transactions by Banks

During the fiscal year the Commission amended rule N-17A-2

which exempts from section 17 (a) of the act certain purchase, sale,

or borrowing transactions. Prior to the amendment the exemption

was limited to a transaction between a bank and a person engaged

principally in the business of installment financing. The amendment

expanded the exemption provided by the rule so that it would also

apply to certain transactions between banks.

Rule N-17A-4-Exemption of Contracts With Nonaffiliates

During the fiscal year the Commission adopted rule N-17A-4 to

exempt from section 17 (a) of the act transactions pursuant to a contract where, at the time the contract was made and for a period of

6 months prior thereto, no affiliation or other relationship existed

which would bring the transaction within the purview of section

17 (a). The purpose of this amendment was to provide an automatic

exemption for such transactions since they are effected pursuant to a

contract presumably entered into upon the basis of arm's-length

negotiations.

Rule N-17F-2-Custody of Securities

Rule N-17F-2 specifiesthe conditions under which registered management investment companies may lodge their securities and similar

investments in their own custody. During the fiscal year the Commission revised this rule in the interest of clarification. The revision specifically made clear that such investments deposited with a bank or

other company under any arrangements which permit the withdrawal

of such investments by directors, officersor employees upon their mere

receipt are deemed to be in the custody of the registered company and

may be maintained only in accordance with the terms and conditions of

the rule.

Rule N-17G-I-Bonding of Officers and Employees

During the fiscal year the Commission circulated for public comment

and later adopted rule N-17G-1. This rule implements the provisions

of section 17 (g) of the act regarding the bonding of officers and

employees of registered management investment companies who have

access to securities or funds of the company. The rule permits the

management to determine initially the amount of the bond required,

but reserves to the Commission an opportunity, after appropriate

notice and opportunity for hearing, to fix a minimum reasonable

amount, as well as the type, form and coverage, of such bond.
96 SECURITIES AND EXCHANGE COMMISSION

STATISTICS RELATING TO REGISTERED INVESTMENT COMPANIES

As of June 30, 1948,there were 359 companies registered under the

Investment Company Act of 1940. During the fiscal year 18 companies registered under the act, and the registration of 11 companies

was terminated. The assets of the 359registered investment companies

aggregated approximately $3,825,000,000,an increase of $225,000,000

over the corresponding figure for 352 companies so registered a year

before. These companies are classified under the act as follows:

Management open-end_____________ 134

Management closed-end_________________________ 114

Unit 93

Face amounL___________________________________________ 16

Total 359

The 18 companies that registered during the fiscal year are classified

under the act as follows:

~Ianagement open-end____________________________________ 11

Management closed-end__________________________________ 7

Total 18

The 11 companies whose registrations were terminated during the

fiscal year were classified under the act as follows:

~Ianagement open-end____________________________________ 2

Management closed-end___________________________________ 8 Unit 1

Total 11

During the fiscal year 73 applications were filed under various

provisions of the act, 61 of these for orders of the Commission relating

to exemption from requirements of the act and the remaining 12 for

a determination of the Commission that the applicant had ceased to

be an investment company within the meaning of the act. At the

beginning of the fiscal year, 50 applications were pending. These

pending applications, together with the 73 filed during the year,

totaled 123 applications which required the appropriate examination

and consideration of the Commission during the year. As a result

of the Commission's action, 79 of these applications were disposed

of during the year and 44 were pending on J nne 30, 1948. The various

sections of the act under which these applications were filed, and the

disposition of the applications during the fiscal year, are shown in

the following table (since an application may involve more than one

section of the act, the numbers are not totaled) :

Number FIled Section of the act under whteh application PaetnJduninel! during was filed 30, 1947 year

Disposed of during year

Number

pending

at June

30, 1948

2 (a) (9) Determination of question of con.

trol.

3 (b) (2) Determination that applicant Is not an mvestment company.

6 (b) Employees' security company exemption.

6 (c) Vanous exemptions not specifically

provided for by other sections of the act.

4

9

13

4 1 granted

3 4 granted; 1 withdrawn; 1 denied; 2 dismissed. 1 1 withdrawn

22 21 granted; 2 withdrawn, 3 dIS- missed,

7

4

9

_

_
FOURTEENTH ANNUAL REPORT 97

Number FlIed Number Section of the act under which application pendmg during Disposed of during year penning

was filed at June at June 30, 1947 year 30, 1948

6 (d) Exemption for small closed-end com- 1 -------- 1 granted _____________________ - --------- Panles offering seounties In Intrastate commerce. 8 ([) Determmation that a registered In- 5 12 11 granted; 1 withdrawn; 1 4 vestment company has ceased to be an denied. investment company. 9 (b) Exemption of ineltgib1e persons to 13 13 serve as directors, officer", etc.

10 (I) Exemption of ccrtam underwriting ---------. 2 2 granted

transactions.

17 (b) Exemption for proposed transactrons 10 30 28 granted, 2 withdrawn, 1 dis- 9 between investment companies and missed. affihates.

17 (d) Approval of certain bonus and profit- 3 4 4 granted; 2 withdrawn, ______ 1 sharing plans

23 (c) (3) Terms under which closed-end 2 -------- 1 granted; 1 withdrawn ______ .--------- Investment company may purchase Its

outstanding securities.

I

The number of documents filed under the act by registered investment companies during the fiscal years ended June 30, 1947 and 1948,

together with other related statistics, are tabulated below:

Fiscal year ended

June3QlU4i 1948

Number of registered investment companies' Beginning of year

Registered during )'ear

'I'ermrnatrons of registratron durmg year ._._. . Number of comparnes regtstered at end of year Notifications of registrations

Registration statements

Amendments to registration statements Annual reports

Amendments to annual reports

Quarterly reports

Periodic reports, eontalning financial statements, to stockholders

Reports of repurchases of securities by closed-end management companies Proxy statements

COPies of sales hterature

Applications for exemptron from various prOVISIons of the act

Applications for deternnnation that registered Investment company has ceased to be an Investment company

Amendments to applieatrons

Total applloations- Bcginnmg of year

Filed during year

Disposed of durmg year Pending at end of year

361

12

21

352

12

12

18

226

?-O

790

its

102

162

I, \135

74

Ii

50

60

U1

101

50

~52

18

11

3,9

18

14

3S

219

28

i62

688

102

166

2,11061

12

42

50

7.j

79

44

-------- ---~---------------------------- ______________________ ----------

_

_

_

_

_

_

_ • • _

• _ • _

_

• _ • _

• _

~ _

• _

_

_

• _

• _

_
PARTVll

ADMINISTRATION OF THE INVESTl\ffiNT ADVISERS

ACT OF 1940

The Investment Advisers Act of 1940 requires the registration of

investment advisers, persons engaged for compensation in the business

of advising others with respect to securities. The Commission is

empowered to deny registration to or revoke registration of such

advisers if they have been convicted or enjoined because of misconduct

in connection with security transactions or have made false statements

in their applications for registration. The act also makes it unlawful

for investment advisers to engage in practices which constitute fraud

or deceit; requires investment advisers to disclose the nature of their

interest in transactions executed for their clients; prohibits profitsharing arrangements; and, in effect, prevents assignment of investment advisory contracts without the client's consent.

Inoestment advisers' registration statistics, 1948 fisca~ year

Effective registrations at close of preceding fiscal year_______________ 952

Applications pending at close of preceding fiscal year____________________ 19

Applications filed during fiscal year___________________________________ 166

Total 1,137

Registrations canceled or withdrawn during year______________________

=

73

Registrations denied or revoked during year___________________________ 0

Applications withdrawn during year 1

Registrations effective at end of year 1,048

Applications pending at end of year__________________________________ 15

Total 1.137

Approximately 222 of these investment advisers represent in their

applications that they engage exclusively in supervising their clients'

investments on the basis of the individual needs of each client. The

services of about 224 others are chiefly through publications of various

types; 237 investment advisers are registered also as brokers and

dealers in securities. Most of the remainder offer various combinations

of investment services.

98
PART vm

OTHER ACTIVITIES OF THE COMMISSION UNDER THE

VARIOUS STATUTES

mE COMMISSION IN mE COURTS

Civil Proceedings

Complete lists of all casesIn which the Commission appeared before

a Federal or State court, either as a party or as amW'U8 curiae, during

the fiscal year, and the status of such cases at the close of the year, are

contained in appendix tables 21 to 33. In addition, appendix table 34

contains a list of all those cases involving the statutes administered

by the Commission (including chapter X cases) which have been decidsd by the courts during the fiscal year, includmg the official citation

of each case and the sections of the statutes involved. The only cases

omitted are those in which no opinion was rendered and which, in

addition, did not involve a novel legal problem.

At the beginning of the 1948 fiscal year 23 injunctive and related

enforcement proceedings instituted by the Commission in connection

with fraudulent and other illegal practices in the sale of securities were

pending before the courts; 25 additional proceedings were instituted

during the year and 27 cases were disposed of, so that 21 of such

proceedings remained pending at the end of the year. In addition,

the Commission participated in a large number of reorganization

cases; in 19 proceedings in the district courts under section 11 (e) of

the Public Utility Holding Company Act of 1935; and in 28 miscellaneous actions, usually as amdcue curiae or intervenor, to advise the

court of its views regarding the construction of provisions of statutes

administered by the Commission which were involved in private lawsuits. The Commission also participated in 64 appeals. Of these, 23

came before the courts on petition for review of an administrative

order; 23 arose out of corporate reorganizations in which the Commission had taken an active part; 4 were appeals in actions brought by

or against the Commission; 12 were appeals from orders entered pursuant to section 11 (e) of the Public Utility Holding Company Act;

and 2 were miscellaneous appeals.

The civil proceedings in which the Commission participated during

the fiscal year are discussed at length in the sections of this report

devoted to the respective acts involved in the proceedings.

Criminal Proceedings

The statutes administered by the Commission provide for the transmission of evidence of statutory violations to the Attorney General

who, in his discretion, may institute appropriate criminal proceedings,

As a matter of practice the Commission, largely through its 10 regional

offices,thoroughly investigates suspected violations and, in cases where

the investigation appears to disclose a foundation for criminal proceedings, prepares detailed reports of investigation which are forwarded to the Attorney General. When it is decided to institute

criminal proceedings, the Commission may assign such of its employees

as have participated in the investigation to assist in the preparation

99 813892-49-8
100 SECURITIES AND EXCHANGE COMMISSION

of the case for presentation to the grand jury, in the conduct orthe

trial, and in preparing briefs on appeal. Parole reports on convicted

offenders are prepared also by members of the Commission's staff.

Where the investigation discloses violations of statutes other than

those administered by the Commission, reference is made to the appropriate Federal or State agency. . Up to .Iune 30, 1948, indictments had been obtained against 2,517

defendants in 412 criminal cases developed by the Commission.' By

the end of the 1948 fiscal year, 385 of these cases had been disposed

of as to one or more defendants, and convictions had been obtained

in 344,or over 89 percent of such cases, against a total of 1,235defendants," During the 1948 fiscal year 14 indictments were returned

against 33 defendants. Convictions were obtained against 16 defendants in 11 cases during the year. 3

In the criminal appeals decided during the past year judgments of

conviction were affirmed as to three defendants 4 and reversed as to

one defendant, whose case was remanded for a new trial," Upon

retrial this defendant pleaded guilty.

As in prior years. the criminal cases developed by the Commission

and prosecuted during the past fiscal year continued to be extremely

varied in nature. Generally they include fraudulent promotions of

a variety of mining ventures, new businesses, and inventions; fraud

in the sale of securities relating to oil and gas properties; fraudulent

schemes employed by securities brokers and dealers and their representatives; fraudulent practices by corporate "insiders"; and the

unlawful manipulation of stock on a securities exchange.

Cases prosecuted during the year involving the fraudulent promotion of a variety of mining ventures included U. S. Y. lJf oqnu« G.

Thomle et al. (Mass.); U. 8. v, Bennett S. Dennison (S. D. Cal.) ;

U. S. v. F. E. Nemec et al. (E. D. Wash.); U. S. v. Wallace R. O'Keefe

(W. D. 'Wash.); and U. 8. v. James A. Allen et al. (E. D. Wash.).

In the Thomle case two defendants were convicted for a fraudulent

promotion in connection with the sale of stock of a silver-mining company and for selling such stock in violation of the registration provisions of the Securities Act of 1933. The defendants were charged,

among other things, with employing the "Ponzi" type of swindle,

wherein purported dividends were paid to investors out of the capital

funds of the mining corporation 'which was the subject of the promotion. Another conviction for a fraudulent mining promotion was

obtained in the Dennison case, where the defendant was charged with

selling stock of a gold-mining corporation by means of false representations including, among others, that the company owned valuable mining properties on which rich gold ore deposits had been discovered and that the company had ample capital to put its mining

properties into successful commercial production. Dennison was also

1The status of all criminal cases pending during the past fiscal year is set forth In

appendix table 26. Appendix tables 26. 35, 36, and 37 contain condensed statistical

summaries of all criminal proceedings developed by the Commission, 2 Adjusted as of June 30, 1948. 3 Including pleas of guilty or nolo contendere, Two of these cases are still open as to other defendants,

As to one defendant the appellate court affirmed his conviction on four counts and

reversed as to two other counts. These appeals involved four separate cases,

•

•
FOURTEENTiI ~AL REPORT 101

found guilty on another indictment which charged him with the

fraudulent sale of securities relating to the promotion of a new business, a proposed corporation which purportedly was to engage in

the production and sale of building materials.

In the Nemec and O'Keefe cases the defendants were charged with

fraudulently selling securities in connection with the promotion of

various gold mining ventures. The indictments in these cases charged,

inter alia, that the defendants made false representations as to the

ownership of the mining properties which were the subject of the

promotion. Itwas also charged in the Nemec case that the defendants

fraudulently claimed that they had acquired the exclusive rights to a

secret process for the recovery of gold and other metals, which process

purportedly had been invented by one of their associates who was

falsely represented to be a nuclear physicist, eminent chemical engineer, and key atomic scientist in the development of the atomic bomb

at the Hanford project. After the close of the fiscal year convictions

were obtained in both of these cases,"

In the Allen case the defendants are charged with fraudulently selling the stock of two silver mining corporations. The indictment

charges, in addition to other things, that the defendants falsely represented that the proceeds received from the sale of stock would be used

for the exploration and development of the corporations' mining

properties, whereas according to the indictment the defendants appropriated and diverted a large amount of such proceeds to their own use

and benefit,'

Convictions in connection with the fraudulent promotion of new

businesses were obtained during the past year in U. S. v. Thomas A.

Neely (N.D.Ill.) and U.S. v, JolllnH. Boal (N.D.Cal.). TheNeely

case involved the fraudulent sale of securities of various corporations

which were organized or to be organized for the purported purpose

of providing barge-transportation facilities to a number of prominent

steel and oil companies. In the Boal case the defendant was convicted

for fraudulently selling various securities in connection with the

promotion of a corporation which purportedly was to engage in the

manufacture of artificial gas from hydro-carbon oils.

A promotion relating to the development of various oil and gas

properties was involved in U. S. v. Cactus Oil 00. et al. (Del.), in which

an indictment was returned during the year charging violations of the

registration and antifraud provisions of the Securities Act of 1933

in the sale of preorganization subscriptions and stock of the defendant

corporation. The defendants are charged with making various false

representations as to the size and value of the oil and gas properties

owned by the corporation and the quantity of oil and gas being produced from such properties. The indictment further charges the

defendants with employing the "Ponzi" and "reloading" fraud techniques in that they are alleged to have caused purported "dividends"

to be paid by the corporation out of capital for the purpose of inducing

investors to make repeated purchases of stock,"

"In the Nemec case one defendant pleaded guilty at the opening of the trial, four others were found guilty after trial, and two others were acquitted, one by the jury and one by direction of the court. In the O'Keefe case, O'Keefe, who was the sole detendant, entered a plea of guilty to one of the two counts of the indictment.

rpendlng.

SPending.
102 :::;ECURITIES AND EXCHANGE COMMISSION

The indictment in V. S. v. Ohester S. Plasket (W. D. Texas) alleges

that the defendant fraudulently sold royalty interests and other securities in connection with the promotion of two inventions, known as the

"Magic Fountain Shaving Brush" and the "Magicflo Siphon Jigger,"

a plastic liquor dispensing device,"

Several cases involved charges of fraud and unlawful conduct on

the part of securities brokers and dealers and their representatives.

These were V. S. v. Wells E. Turner (W. D. Wisc.) ; U. S. v. Kenneth

Leo Bauer et al. (N. J.) ; U. S. v. Arthur L. Augustine (N. D. Iowa);

and U. S. v, Olarence Everett Martin (N. D. Ill.). Convictions were

obtained in the Turner, Bauer." and Augustine cases, in which the

indictments charged, inter alia, that the defendants converted and

appropriated to their own use and benefit securities and funds belonging to their customers. The indictment in the Martin case charges

the defendant with employing a scheme to defraud representatives of

the estates of deceased and incompetent persons in connection with

the purchase and sale of various securities owned by such estates.

According to the indictment, Martin represented that he would dispose of the securities owned by the estates at the current market prices

and instead concealed the true current market value of such securities

and purchased them for his own account at prices less than the prevailing market prices,"

Fraudulent sales of securities of an alleged fraternal association

resulted in the conviction of the defendant in U. S. v. Preston E.

Douglass (N. D. Ill.). According to the indictment Douglass, by

means of various false representations, induced investors to purchase

stock purportedly issued or to be issued by the Frederick Douglass

Afro-American Cooperative Industry Builders Association, Inc., a

non-profit Illinois corporation (which was by statute prohibited from

issuing stock), which association had been organized by Douglass supposedly for the purpose of improving the economic status and welfare

of the Negro race and to furnish investors with employment in cooperative stores and on farms which the association would develop and

establish.

Fraudulent practices by corporate "insiders" were involved in

U. S. v. Alfred Epstein et al. (E. D. Mich.), in which three defendants were found guilty of mail fraud violations in connection with

the operation of two brewery corporations. The defendants were

alleged to have siphoned off to themselves substantial sums of moneys

from these brewery corporations through the medium of a number

of other companies which they had organized for the purpose of reselling brewing materials to the brewery corporations.>

In U. S. v. Albert B. Windt et al. (N. D. Cal.), the defendants were

convicted of manipulating and conspiring to manipulate the stock of

a mining company listed on the San Francisco Mining Exchange.

According to the indictment, the defendants conspired to and did

raise the market price of such stock on the exchange by a series of

manipulative transactions designed to create the appearance of active

trading and to raise the price of such stock for the purpose of inducing

others to purchase the stock at the higher prices.

UPending.

1J) Bauer pleaded guilty; pending as to two other defendants. 11 Pendlne. U Appeals pending.
FO~TEENTH ANNUAL REPORT 103

In a number of cases Canadian mining company stocks were sold to

residents of the United States by persons residing in Canada who

operated from across the border without compliance with the statutes

of this country. The Commission has been cooperating with the State

Department and the Department of Justice in efforts to secure a treaty

with Canada which would permit the extradition of persons violating

Federal and State securities laws. The treaty was ratified by the

United States Senate in May 1942, but has not yet been ratified by

the Canadian Parliament. Numerous cases of this type have been

the subject of investigation by the Commission and indictments have

been obtained in a number of these cases. One such case is U. S. v.

Albert E. Broadley et al. (W. D. N. Y.), in which an indictment was

returned during the 1948 fiscal year charging the defendants with

employing a scheme to defraud in the sale of stock of two Canadian

corporations in connection with the promotion of gold and nickel

mining ventures. In part, the indictment charges that the defendants rendered a purported free investment advisory service, the sole

purpose of which was to sell the stock of these corporations, and that

they falsely represented that the moneys received from the sale of

such stock would be used for the development of the corporations'

mining properties,"

Constant vigilance is maintained by the Commission in order to

cause the apprehension of the defendants in these Canadian cases if

they should enter the United States. During the past year such

efforts were successful in causing the apprehension of the defendants

in two such cases, U. S. v. Albert Edward DePalma (N. D. Ohio)

and U. S. v. Noel H. Knowles et al. (E. D. N. Y.). The indictments

in these cases, which had been impounded by the Federal district

courts at the time of their return, were made public after the defendants had been apprehended. DePalma, who Was released on

$50,000bail, failed to appear for arraignment and forfeited his bail.

He is presently a fugitive in Canada. The defendants in the other

case are awaiting trial.

The criminal appeals decided during the 1948 fiscal year were:

Kaufmanv. U. S., 163 F. (2d) 404 (C. A. 6, 1947), certiorari denied,

333 U. S. 857 (1948), in which a conviction for the fraudulent sale of

stock of Devon Gold Mines, Ltd., a Canadian corporation, was affirmed; U. S. v, Freeman, 167 F. (2d) 786 (C. A. 7, 1948), wherein

the court sustained the conviction of the appellant for conspiracy and

using the mails to defraud in connection with transactions involving

the exchange of whisky warehouse receipts for bottling contracts;

Reining v. U. S., 167 F. (2d) 362 (C. A. 5, 1948), in which the court

affirmed the defendant's conviction on four counts 14 charging violation of the Mail Fraud Statute in the fraudulent sale of various oil

and gas leases; U. S. v. Grayson, 166 F. (2d) 863 (C. A. 2, 1948),

wherein the court reversed the conviction of Grayson for conspiracy

and fraud violations in connection with the sale of various oil and gas

interests. In the latter case, the court found that the evidence supported the jury's verdict but remanded the case for a new trial because of certain errors committed during the trial. Upon retrial

Grayson pleaded guilty.

'.Pending . .. The court reversed as to two other counts on which the defendant had also been

convicted.
104 SECURITIES AND EXCHA....1IWECOMMISSION

COMPLAINTS AND INVESTIGATIONS

During the 1948 fiscal year the Commission received 5,921 items of

mail concerned with alleged securities violations. These communications are classified administratively as "complaint enforcement" correspondence. While they relate to complaints and alleged violations

of various laws administered by the Commission, the bulk of them

deals with the enforcement of the Securities Act of 1933 and the

registration provisions of the Securities Exchange Act of 1934.

This material constitutes an important source of information concerning possible securities violations. Investigations made by the

Commission's staff and contacts maintained with other governmental

or private agencies provide additional sources of such information.

Where it appears on the basis of any such data that any securities

violation may have occurred, the Commission conducts appropriate

investigations by means of correspondence or the assignment of cases

to field investigators to ascertain the facts of the particular case.

The extent of the investigatory activities of the Commission during

the past year under the Securities Act of 1933,the Securities Exchange

Act of 1934; sections 12 (e) and (h) of the Public Utility Holding

Company Act of 1935; the Investment Company Act of 1940; and

the Investment Advisers Act of 1940is reflected in the following table:

Investigations Of securities violations 1

IPreliminary 2 Docketed I Total

Pendinc at June 30, H147__________________________________________ 414 927 1,341

Opened July I, 1947 to June 30, 1948: New cases 209 152 361 Transferred from prelnninary _________________________________ -------------- 25 25

Total number of case, to be accounted for___________________ 623 1,104 1,727

Closed during year _______________________________________________ 104 118 222 Transferred to docketed __________________________________________ 25 -------------- 25

Pendmg at June 30, 1948 ------------------.---------------------- 494 986 1,480

I 'These figures Include the oil and gas Investigations which are separately tabulated and discussed elsewhere in this report 2 Investigations carried on tbrouzh correspondence and limited field work. I Investigatrous assigned to field Investlcators.

Securities Violations File

To assist in the enforcement of the various statutes which it administers, and to provide a further means of preventing fraud in

the purchase and sale of securities, the Commission has established a

securities violations file. This file constitutes a clearing house of

i~formatio~ concerning persons who ha:e. been charged with violations of varIOUSFederal and States securities statutes. It is kept up

to date by the Commission in cooperation with the United States

Post OfficeDepartment, the Federai Bureau of Investigation, parole

and probation officials, State securities commissions, Federal and

State prosecuting attorneys, police officials,members of the National

Association of Better Business Bureaus, Inc., and members of the

United States Chamber of Commerce. By the end of the 1948 fiscal

year this fil.econtain~d .data concerning 49,1.00persons against whom

Federal or, 111 the majority of cases, State action had been taken in connection with securities violations. During the past year alone addi-

____•• ______________________________________________
FOURTEENTH ANlfUAL REPOR~ 105

tional items of information relating to 2,771 persons were added to

these files, including information concerning 1,170persons not previously identified therein.

Extensive use is made of this clearinghouse of information by the

Commission and the cooperating agencies. During the past year, in

connection with the maintenance of the files, the Commission received

2,619"securities violations" letters or reports (apart from those mentioned above which are classified as "complaint enforcement") and

dispatched 2,424 communications in turn to cooperating agencies.

ACTIVITIES OF THE COMMISSION IN ACCOUNTING

AND AUDITING

The importance of adequate financial statements and their certification by independent public accountants in ensuring information

necessary for the protection of investors is recognized III the detailed

provisions of the several acts administered by the Commission. These

acts grant the Commission broad authority to prescribe uniform systems of accounts for registrants suoject to the Public Utility Holding

Company Act of 1935,to provide for a reasonable degree of uniformity

in accounting policies and principles to be followed by registered investment companies in maintaining their accounting records and in

preparing financial statements required by the Investment Company

Act of 1940,and to prescribe the form and content of financial statements required to be filed by registrants subject to the Securities

Act of 1933 and the Securities Exchange Act of 1934. Acting under

this authority the Commission has prescribed uniform systems of

accounts for certain public utility holding companies and for public

utility mutual and subsidiary service companies. The principal accounting requirements prescribed under the acts of 1933, 1934, and

1940 are set forth in regulation S-X, which governs the form and

content of most financial statements filed under these acts. In addition, under the Securities Exchange Act, rules have been adopted

governing record keeping, financial reporting, and the auditing of

the books of exchange members, brokers, and dealers.

Recognizing the pervasive nature of accounting in many of the

Commission's activities under all of the acts and in all of its major

operating divisions, the Commission organized its accounting staff

to facilitate the handling of day-to-day accounting problems and to

ensure reasonable uniformity of treatment of such problems. To this

end the chief accountant acts as the Commission's chief adviser and

consulting officeron accountmg matters and exercises general supervision over the establishment and execution of Commission policy

with respect to accounting and auditing- lrinciples and practices.

Assisting him directly is an assistant chie accountant and a small

staff whose principal functions are to prepare studies of current

problems and to draft necessary rules and opinions. In addition,

there are three other assistant chief accountants, each of whom is

assigned to and is directly responsible for the examination of financial

data and other accounting work in one of the three operating divisions of the Commission, namely, the Divisions of Corporation

Finance, Public Utilities, and Trading and Exchanges.

Although the Commission's accounting requirements, as they exist

in rules, regulations, and forms in use today, reflect nearly 15 years'
106 SECURITIES AND EXCHANGE COMMISSION

experience involving both formal and informal decisions rendered in

the daily work of the divisions, and although they exhibit the influence of valuable counsel of independent accountants and accounting and financial officers of registrants, as well as the advice of committees of professional and business organizations, other Government

agencies, and numerous public-spirited individuals, these requirements

do not constitute a completely integrated body of accounting principles. Itwas recognized, however, early in the handling of the Commission's accounting work that decisions would necessarily be made

which would be of general application. To make these decisions

readily available, a program of publication of accounting series releases was inaugurated in 1937. In release No.4 of this series the

Commission, recognizing that differences of opinion with respect to

accounting principles existed in the professional circles, announced

its administrative policy that, in the absence of substantial authoritative support for accounting principles employed, financial statements

were to be presumed to be misleading or inaccurate despite disclosures contained in the certificate of the accountant or in footnotes

to the statements, provided that the matters involved were material.

In the event of a difference of opinion between the Commission and

the registrant as to the proper principles of accounting to be followed,

disclosure would be accepted in lieu of correction of the financial statements only if there was substantial authoritative support for the

practices followed by the registrant and the position of the Commission had not previously been expressed in rules, regulations, or

other officialreleases of the Commission, including the published opinions of its chief accountant. The complete texts of a preseries release and the first 63 releases in the accounting series were republished in one handy volume at the close of the present fiscal year. It

is contemplated that subsequent releases as they are promulgated

will be printed in the same convenient form.

Examination of Financial Statements

The material referred to above comprises the necessary guides to persons contemplating filing financial statements with the Commission.

In addition, all members of the Commission's accounting staff are

available to advise prospective registrants and their accountants in

conference or by correspondence, prior to filing. Experienced practitioners who recognize unique problems regularly follow this procedure and save valuable time for themselves and their clients. The

public accountant without experience with the Commission should not

hesitate to do likewise. Although many problems are encountered

and solved in this way, a substantial part of the Commission's accounting work lies in the examination of financial statements after filing.

In the event that the examination discloses lack of compliance with

the rules o~ regulations or a failure to app~y generally accepted accounting principles the customary procedure ISto advise the registrant

by letter. The problems raised may then be resolved eit~er by correspondence or conference, WhIChmay result In corrections in the

financial statements. Itis only in the rarest cases that formal procedures are necessary to effect a solution. Itis appropriate to observe

again this year that ~umerous inquiries on accounting subjects were

received from companies and accountants not involved in proceedings

before the Commission. A growing practice not mentioned hereto-
FOURTEENTH ANNUAL REPORT 107

fore in these reports is the request from teachers and students of

accounting for assistance in research projects or for copies of accounting series releases and regulations for use in university classes--some

devoted especially to the study of Commission procedures.

Proposed Amendment of Regulation S.X

During the 1948 fiscal year the Commission requested public comment on several proposals to amend regulation S-X. These proposals

are discussed below.

Article 6B for face-amount certificate companies.-In connection

with the development of rules relating to face-amount certificate companies under the Investment Company Act of 1940, the Commission

on August 5, 1947, announced that there was under consideration a

proposal for the adoption of a new article 6B in regulation S.X to

prescribe the form and content of financial statements to be filed with

the Commission by face-amount certificate companies." The article

as proposed gives appropriate recognition to the special provisions

of section 28 of the act relating to certificate reserves and "qualified

investments." The proposal has been discussed with officials of the

principal companies concerned and their independent accountants in

a series of conferences.

Article 5..1 for commercial, industrial, and mining companies in the

promotional, eeploratorp or development stage.-8ince the adoption

in 1936of Form A-O-1 for securities of corporations organized within

2 years to engage in the exploitation of mineral deposits other than

oil or gas, the Commission has prescribed one or more forms containing provisions for special presentation of financial statements to

be used instead of the conventional balance sheets and profit and loss

statements. Form A-O-1 since has been superseded. The currently

effective Forms S-2, S-3, and 8-11 provide for separate statements

of assets and capitalized expenses, liabilities, capital shares, other

securities, and cash receipts and disbursements. Except for immaterial differences in captions the general form and content of these

financial statements !!-rethe same for the three forms. The purpose

of the present proposal 16 is to include these alternative forms of

financial statements in regulation S-X and to extend their use to

applications for registration on Form 10 and to annual reports on

Forms 10-K and 1-MD for companies of the type described. Prior

to publishing the proposal for general comment the staff had the

valuable assistance of the American Institute of Accountants' A.ccounting Procedure Committee Subcommittee on Mine Accounting in a

series of conferences to explore the desirability of the proposal and

thereafter to comment on a series of preliminary drafts.

Revised Form 8-2

In connection with the proposed article 5A of regulation S-X it

should be noted that Form 8-2 was revised so that its requirements are

substantially the same as Form S-12, subsequently rescinded. The

revised form provides for commercial and industrial companies still

in the development stage and prescribes financial statements of the

,. Accounting Series release No. 63 (1947). ,. Accounting Series release No. 65 (1948). The proposal was adopted and published in Accounting Series release No. 66 (1948).
108 SECURITIES AND EXCHANGE COMMISSION

type described above. Certain established companies which heretofore used Form &-2now use Form &-l.

Amendment of Form 8-3

Of interest to accountants serving small mining companies is the

amendment of Form 8-.1 announced in Securities Act release No.

3269 (1947). Prior to the amendment the form required certified

financial statements as of a date within 90 days prior to the date of

filing. The amendment provides that these statements need not be

certified if there are also filed corresponding certified statements as

of a date within 1 year prior to the date of filing.

Simplified Records for Brokers and Dealers

Inan effort to assist brokers and dealers operating on a limited scale

and with a minimum of officestaff, the National Association of Securities Dealers during the past year prepared a simple set of bookkeeping

forms and illustrations depicting the proper recording of transactions

of a small over-the-counter busmess. Members of the Commission's

staff were consulted during the preparation of the material and the

finished project was submitted for comment. Itwas the opinion of the

staff that if the use of the forms was confined to those members of the

NASD whose business ordinarily involved the kinds of transactions

comprehended by the forms submitted, the records thus maintained

should comply with the requirements of rule X-17A-3, assuming, of

course, that in individual cases the firm reflected the information contemplated by the rule. Itwas observed that the forms submitted did

not provide for certain complex types of transactions for which records would have to be maintained pursuant to the rule and for which

the individual broker-dealer engaging in such transactions would have

to provide the necessary records.

Commission Cases of Particular Interest to Accountants

Tobey Royalties Oo.,InoP-The broker-dealer in this case was one

of a class required by section 17 (a) (1) of the Securities Exchange Act

of 1934and rule X-17 A-5 thereunder to file annual reports of financial

condition. After appropriate hearing the Commission revoked the

company's registration for its failure to file such reports for 1943,1944,

and 1946, for filing a false and misleading report for 1945, and for

refusing to permit representatives of the Commission to examine its

books. Prior to taking this action the Commission had made repeated suggestions to the company regarding the proper manner of

compliance with the requirements of the act and the rule.

Globe Aircraft Corp.IS-In its accounting aspects this case is particularly interesting because of the significance of conditions arising

after the date of the certified financial statements included in the

registration statement but before the effective date of the registration

statement. These undisclosed adverse financial developments led to

the bankruptcy of the corporation and the Commission suspended

the effectiveness of the registration statement. As originally filed

the registration statement included an audited profit-and-loss statement for the last 4 months of 1945 which showed a loss of $540,000

as compared with net income of $53,000 for the full year. Of the

17 Securities Exchange Act release No. 3982 (1947). 18 Securities Act release No. 3255 (1947).
FOURTEENTH ANNUAL REPORT 109

$540,000loss $439,000represented a write-down of inventories from

cost to replacement value. At the request of the Commission a profit

and loss statement for the following January was included in an

amended prospectus. 'While disclosing a loss of $17,000for the month

this unaudited statement made no reference to additional inventory

write-downs necessitated by the continuation of excess costs for workin-process inventory incurred throughout January and February

1M6. Despite an assertion that there was a probability that a tax

refund would offset a substantial part of the indicated inventory

losses, the Commission held that the failure to disclose the situation

made the January profit-and-loss statement materially false and misleading. The registration statement was also found materially false

and misleading in that (1) it failed to disclose material increases

in outstanding note liabilities between the date subsequent to the

balance sheet as of which such liabilities were shown and the effective

date of the registration statement, and (2) misstated the issuer's

working capital needs by statin~ that the issuer intended to use the

proceeds from the sale of the securities being registered for the payment of an outstanding loan and the purchase of a plant, when in fact

the company's financial condition was such that it could not have

intended so to apply the proceeds since such proceeds were required

for working capital.

T'homascolor, Inc.lo-This case is fully discussed at page 13 of this

report. It will be recalled that the registration statement showed

"Patents and patent applications" amounting to $2,000,000in total

assets of $2,500,000. Although the intangible item was supported

by a footnote disclosing the number of shares of capital stock of the

registrant issued for assets acquired from predecessor interests and

presenting a comparison of the resulting valuations with amounts

carried on predecessor balance sheets, the presentation was considered misleading in two basic respects. The amounts shown as patents and patent applications included some $700,000 representing

promotion stock to be acquired by the registrant for a nominal

amount, and a substantial amount which was actually promotion expense. The amended balance sheet clarified the presentation, segregated the promotional items and more adequately disclosed the effect

of the agreement by which the registrant would receive the promotional stock. This case is the latest in a long series of cases involving

promotional enterprises in which the Commission has held that values

assigned to intangible assets acquired in exchange for stock must be

scrutinized with care to avoid a misleading result in the financial

statements due to the presence of inflated or improperly classified

asset accounts.

Drayer-Hanson, Inc.2°-In a report on an investigation it was determined that a registration statement which had become effective

contained untrue statements of material facts and omitted to state

material facts necessary to make the facts disclosed in the statement

not misleading. The registration statement when it became effective

on December 11, 1946, contained a certified balance sheet for the

predecessor partnership as of April 30, 1946, and a certified profitand-loss statement for the 10 months then ended. In June 1947 the

19 Securities Act release No. 3267 (1947). :ro Securities Act release No. 3277, Accountiug Series release No. 64 (1948).
110 SECURITIES AND EXCHANGE COMMISSION

company and its independent public accountants informed the Commission that the controller of the company had discovered an overstatement in the inventory of work-in-process and fabricated parts of

approximately $97,000 which resulted in a similar overstatement of

partnership net worth and net income reflected in the statements referred to above. Reexamination by the auditors indicated the overstatement to be approximately $85,000in an inventory item of $244,000

and in the net income of $181,000shown in the erroneous statements.

The company had not taken a physical inventory of work in process

since December 31, 1944; hence the auditors had not been able to

employ the generally accepted auditing procedure of observing the inventory taking, but stated in their certificate that they had made tests

of selected items subsequently to assure themselves of the existence of

the inventory and of the adequacy of the related accounting data.

However, the alternative procedures employed by the auditors did

not disclose the failure of the registrant to give effect to all partial

shipments from work in process. The Commission concluded that

under the circumstances of this case there was no justification for the

omission of the inventory taking. It was concluded further that

in view of the manner in which the audit work was done the accountants were not justified in stating in their certificate that they

had no reason to believe that the inventories as set forth in the statements were not fairly stated.

Developments in Accounting Principles and Procedures

During the year the high level of prices and of business activity

stimulated an unusual amount of discussion in financial and professional circles of certain basic problems in corporate accounting

and financial reporting. These problems have been reflected in many

of the registration statements and annual reports filed with the

Commission.

One of the problems discussed during the year was the accounting

treatment of general purpose contingency reserves and reserves designated for special purposes. One aspect of the subject, that of the

disposition of war reserves, was mentioned last year. It appears

that with few exceptions these reserves were eliminated during the

year by charges of the type anticipated when the reserves were created

and by the return of unabsorbed balances to earned surplus.

Another facet of the reserve question mentioned in the Thirteenth

Annual Report was the propriety of creating, from income, reserves

for future inventory price declines. Publication early in the 1948

fiscal year by the American Institute of Accountants of a research

bulletin on the subject of "Inventory Pricing," followed a few months

later by a bulletin on "Inventory Reserves," is a contribution to the

solution of the problem substantially in accord with the views set

forth in our last report. The Institute's bulletin on the "Accounting

Treatment of General Purpose Contingency Reserves" furnished support for the position that the creation and subsequent elimination of

such reserves have no part in the determination of income.

In the examination of financial statements it has been necessary in

some cases to take exception to profit-and-loss statements reflecting

an optional presentation permitted by both of the reserve bulletins

referred to in the preceding paragraph. Both of the bulletins express a preference for creating the reserves in question by a segrega-
FOURTEENTH ANNUAL REPORT 111

tion or appropriation of surplus but permit their creation by appropriation of net income disclosed on the profit-and-loss statement,

provided net income is first determined and clearly designated. Experience has shown that this last admonition has not been adequately

observed in all cases. Even when applied meticulously in the financial

statements, officers of the corporations and financial writers in referring to "net income for the year" frequently emphasize the final

figure after deduction of the reserve appropriation rather than the

designated net income. It is for this reason that our chief accountant

has taken the position that appropriations of the type in question

should be reflected only in the surplus statement and should not be

shown on the profit-and-loss statement. The Commission is advised

that the American Institute of Accountants' committee on accounting

procedure, having recognized the unsatisfactory results from the

optional treatment, has adopted a bulletin prescribing alternate methods of presenting information as to the disposition of income which

would prohibit the form of dubious reporting discussed above.

One old problem in accounting cropped up with renewed vigor

early in the fiscal year. This is the theory that depreciation of fixed

assets is related directly to replacement and that reserves for depreciation are inadequate if they are not equal to replacement cost

of the property at the time of its retirement from service. One of

the country's largest corporations applied this theory in its reports to

stockholders in 1947 by including an extra charge for depreciation

in its profit-and-loss statements on the grounds that replacement cost

of the assets would be greater than recorded cost and that the procedure adopted was consistent with their accounting for inventories

on the last-in-first-out basis. The company's independent accountants

expressed an exception in their certificate by stating that the procedure followed by the corporation was not ill accordance with generally accepted accounting principles. This example is cited because

it is perhaps the most clearly presented and most vigorously defended

of a number of efforts that have come to the Commission's attention

to deal with the effects of the present high price levels. The problem

is being given serious consideration and will be the subject of continuing study to determine whether there is justification for the

substitution of new procedures for the presently accepted basis of

recording fixed assets at cost and allocating appropriate portions of

that cost to expense during the anticipated useful life of the assets.

A problem which has been under consideration and which has been

the subject of repeated exchanges of views between the Commission's

staff and representatives of the American Institute of Accountants and

other interested parties is the concept of income and the proper form

of income or profit-and-loss statement most informative to investors,

At the close of the last year the discussion had progressed to a point

where it was the general opinion that a representative body of accountants or this Commission should publish conclusions on the subject

in the near future. The result was the publication in December 1947

by the committee on accounting procedure of the American Institute

of Accountants of Accounting Research Bulletin No. 32, on "Income

and Earned Surplus." The bulletin presents the opposing views of

the advocates of the "all-inclusive" and "current operating performance" types of income statements, reiterates the committee's opinion
112 SECURITIES AND EXCHANGE COMMISSION

that "it is plainly desirable that over the years all profits and losses of

a business be reflected in the net income," and emphatically expresses

the opinion that "there should be a general presumption that all items

of profit and loss recognized during the period are to be used in determining the figure reported as net income." It then proceeds to enumerate certain extraordinary items which should be excluded from

such determination of income "when their inclusion would impair the

significance of net income so that misleading inferences might be

drawn therefrom." Believing that the purposes desired to be served

by this exception to the general presumption of the bulletin can best be

served by proper presentation in an "all-inclusive" type of income

statement, the Commission authorized the staff to take exception to

financial statements which appear to be misleading, even though they

reflect the application of the bulletin. It also authorized the chief

accountant to address a letter to the Institute's director of research

expressing the view that the procedures recommended in the bulletin

seemed to be susceptible to abuse and might result in misleading

income and earned surplus statements in conflict with published rules

and opinions of the Commission. Through the courtesy of the director of research of the Institute and the editor the letter was given

wide publicity in accounting circles by publication in the Journal of

Accountancy immediately following the pages whereon the bulletin

was reproduced." Experience since publication seems to indicate

little attempt to apply the exceptions to which the Commission objected. In this connection it may be noted that the American Accounting Association has just published a revision of its 1941statement of

"Accounting Principles Underlying Corporate Financial Statements"

in which its endorsement of the all-inclusive form of income statement and the principle of matching costs against revenues as the basis

for the determination of income is reasserted (Accounting Concepts

and Standards Underlying Corporate Financial Statements-1948

Revision).

Developments in Auditing Procedures and Professional Practice

The annual reports of the last 3 years have referred to the financial

questionnaires of broker-dealers prescribed by rule X-17A-5 and

Form X-17A-5 and to the minimum audit requirements specified in

the form as applicable to those broker-dealers whose reports must 00

certified under the rule. As in these past years many of these reports

are filed by small companies employing public accountants who have

had no other experience with Commission requirements. In recognition of this situation the Commission staff, through correspondence

and direct contact by regional officerepresentatives, has devoted considerable time to explaining the requirements as to the content of

the questionnaires to registrants and their accountants where it was

apparent that inexperience rather than deliberate evasion was the

cause of the unsatisfactory reports filed. Itis believed that in these

cases a policy of education is more in the public interest than the

imposition of sanctions would be.

It will be recalled that two of the accounting cases described herein

involved inventories of work-in-process as the principal element. In

both cases an overstatement of the work-in-process inventories reII Jannal')' 1948, p. 21J.
FOURTEENTH ~AL REPORT 113

suIted in corresponding overstatements of the capital stock equity

and of the profit for the period. In this connection it is appropriate

to recall that early in the war period the Commission established, regarding companies engaged in war work, a liberalized policy with

respect to its requirements as to physical inventory verification by

independent public accountants in order to avoid any possible interruption in the production or delivery of war materials." Following

the disclosures in the McKesson &: Robbins, Inc. case, the American

Institute of Accountants adopted certain extensions of auditing procedure, including the requirement that if "inventories arc a material

factor, it should be generally accepted auditing procedure that, in

addition to making auditing tests and checks of the inventory accounts

and records >,' * * [the independent certified public accountant]

shall, wherever practicaole and reasonable, be present, either in person or by his representatives, at the inventory taking and by suitable

observation and inquiry satisfy himself as to the eflectiveness of the

methods of inventory taking and as to the measure of reliance which

may be placed upon the client's representations as to inventories and

upon the records thereof. In this connection the independent certified public accountant may require physical tests of inventories to

be made under his observation." ~3 III announcing its waiver of this

requirement and the acceptance of substitute procedures during the

war the Commission said:

It is implicit that, at the earliest opportunity, every reasonable effort will be

made to take physical inventory with normal observation and test checking by

the certifying accountants, and that any practicable improvements III the accounting records and controls of inventory will be undertaken. Finally, it should be

understuod that waiver of objections with respect to the current annual report

will not necessarily constitute a basis for similar action in respect of annual

reports for subsequent years or statements filed in reglstratrons for the sale

of securlties."

Current representations with respect to the auditing of inventory

accounts are being scrutinized with care in the light of this admonition

and the experience reflected in the cases cited.

Previous annual reports have commented upon the Commission's

practice of cooperation with various accounting groups in the development of accounting and auditing standards of practice. This cooperation has taken the form of interchange of ideas and the institution

of a practice of submitting for comment proposed changes in Commission rules to the several accounting organizations and others interested long prior to the adoption of the Administrative Procedure

Act. In return, the organizations have referred their proposed public announcements in the field of accounting and auditing to the Commission's accounting staff for comment. In addition to the pronouncements referred to above in the field of accounting principles and procedures, a special report by the committee on auditing procedure of

the American Institute of Accountants should be mentioned. The

report published under the title "Tentative Statement of Auditing

Standards-Their Generally Accepted Significance and Scope" is a

substantial contribution to a general understanding of the responsibilities of independent public accountants. The statement sets forth

standards of field work and reporting ; it recognizesthat examinations

"Accounting Series release No. 30 (1942).

Statements of Auditing Procedure No.1, October 1939. Ii Accounting Series release No. 30 (1942). "
114 SECURITIES AND EXCHANGE COMMISSION

of financial statements must be performed with due professional care

by persons having adequate technical training and proficiency and an

independence in mental attitude.

DIVISION OF OPINION WRITING

The Division of Opinion Writing aids the Commission in the

preparation of findings, opinions, and orders promulgated by the Commission in contested and other cases and controversies arising under

the Securities Act of 1933,the Securities Exchange Act of 1934,the

Holding Company Act of 1935,the Trust Indenture Act of 1939,the

Investment Company Act of 1940, and the Investment Advisers Act

of 1940. These statutes provide for a wide variety of administrative

proceedings which require quasi-judicial determination by the Commission. Formal opinions are issued in all cases where the nature of

the matter to be decided, whether substantive or procedural, is of

sufficientimportance to warrant a formal expression of views.

The Division of Opinion Writing is an independent staff office

which is directly responsible to the Commission. It receives all assignments and instructions from and makes recommendations and

submits its work to the Commission directly. It is headed by a director, who is assisted by an assistant director, supervising attorneys and

a staff of drafting attorneys and a financial analyst.

While engaged in the preparation of opinions assigned to the Division of Opinion Writing, the members of this Division are completely

isolated from members of the operating division actively participating

in the proceedings and it is an invariable rule that those assigned to

prepare such an opinion must not have had any prior participation in

any phase of the proceedings with respect to which the opinion is to

be prepared.

The director or assistant director of the Division of Opinion Writing, together with the members of the staff of the Division who are

assigned to work on a particular case, attend the oral argument of

the cases before the Commission and frequently keep abreast of

current hearings. Prior to the oral argument, the Division makes a

preliminary review of the record and prepares and submits to the

Commission a summary of the facts and issues raised in the hearings

before the hearing officer, as well as in any proposed findings and

supporting briefs, the hearing officer's recommended decision, and

exceptions thereto taken by the parties. Following oral argument or,

if no oral ar~ument has been held, then at such time as the case is

ready for decision, the Division of Opinion Writing is instructed by

the Commission respecting the nature and content of the opinion and

order to be prepared.

In preparing the draft of the Commission's formal opinion, the

entire record in the proceedings is read by a member of the staff of

the Division of Opinion Writing and in some cases he also prepares a

narrative abstract of the record. Upon completion of a draft opinion and abstract of the record, and after their review and revision

within the Division of Opinion Writing, they are submitted to the

Commission. If the study of the record in the case by the Division

of Opinion Writing has revealed evidence of violations warranting a

reference to the Attorney General for criminal prosecution, or has
FOURTEENTH ANNUAL REPORT 115

disclosed the desirability or the need for any changes in administrative

procedures or techniques, appropriate recommendations are made to

the Commission at the time the draft opinion in the case is submitted.

The draft opinion as submitted may be modified, amended, or completely rewritten in accordance with the Commission's final instructions. When the opinion accurately expresses the views and conclusions of the Commission, it is adopted and promulgated as the official

decision of the Commission. In some cases concurring or dissenting

opinions are issued by individual Commissioners who wish to express

their separate views on matters covered by the opinion adopted! by

the majority of the Commission. In such cases the Division of Opinion Writing is occasionally instructed to prepare drafts of such concurring or dissenting opinions and confers respecting them with the

individual Commissioners involved, submits drafts directly to them,

and makes such modifications and revisions as are directed.

The findings of fact, opinions, and orders adopted and promulgated

by the Commission serve as an aid and guide to the bench and bar.

With minor exceptions (e. g., certain opinions dealing with requests

for confidential treatment) all are publicly released and distributed

to representatives of the press and persons on the Commission's mailing list. In addition, the findings and opinions are printed and published by the Government Printing Officein bound volumes under the

title "Securities and Exchange Commission Decisions and Reports."

The foregoing represents the primary function of the Division of

Opinion Writing-to aid in the preparation of findings, opinions, and

orders promulgated by the Commission in contested cases arising

under the statutes it administers. This function has been assigned to

an independent division so that those who assist in the preparation

of the Commission's decision in a contested case are in no way connected with or participants in the preparation and presentation of the

case at the hearings.

Inaddition to this primary function, the Division is also given many

assignments of a general nature which are not inconsistent with the

objective of the separation of the investigatory and quasi-judicial

functions. Thus, the Division has been assigned continuing joint

responsibility with the office of the general counsel in dealing with

problems arising under the Administrative Procedure Act. It has

also been given the responsibility of preparing a compilation of annotations of the various statutes administered by the Commission, and

from time to time it is given other special assignments by the

Commission.

The Division of Opinion Writing also assists the oJ?erating divisions

of the Commission in the preparation of opinions III certain uncontested cases where participation by the operating division in the decisional process is proper under the Administrative Procedure Act.

In some instances members of the Division of Opinion Writing are

also assigned to assist the officeof the general counsel in connection

with court appeals taken from Commission decisions initially drafted

in the Division.

Some of the more significant opinions issued by the Commission

during the year are commented upon in this report under the discussions of the various statutes.

813892-49--9
116 SECURITIES AND EXCHANGE COMMISSION

INTERNATIONAL FINANCIAL AND ECONOMIC MATfERS

Foreign issuers, private and governmental, who seek to make public

offerings of their securities in the United States are required to register those securities under the Securities Act of 1933. Often such issues

involve preliminary discussions with representatives of the issuer as

well as other United States agencies prior to registration.

Among the significant issues registered during the year was one

covering bonds of a par value of $131,971,700to be issued by the Italian

Government in exchange for the outstanding dollar bonds of the

Kingdom of Italy. This issue was registered after a series of conferences between the staff of the Commission and representatives of the

Italian Government. The Italian Government filed also an application for registration of the new bonds under the Securities Exchange

Act of 1934 and for listing of the bonds on the New York Stock

Exchange.

On the effective date of the registration the Commission, after COIlsultation with the Departments of State and Treasury, withdrew the

request it had made at the outbreak of the war that brokers and dealers

in this country refrain from making a market in Italian securities.

The Italian issue was the only foreign governmental issue registered

during the year. Foreign private registrations of securities during

the year amounted to $18,040,890.25

The Commission maintains, through its Adviser on Foreign Investment, facilities for liaison with other agencies which might have jurisdiction over or interest in problems of foreign finance. The Commission has continued its representation on the Staff Committee of

the International Advisory Council on International Monetary and

Financial Problems. It has continued to cooperate with other agencies

concerned with the development of the Government's foreign economic

program through the Executive Committee on Foreign Economic Policy and its subcommittees on Foreign Investment Policy, Private Monopolies and Cartels, and the United Nations Economic Subcommittee. The Commission is represented also on the Federal Committee

on International Statistics formed to advise and assist the United

States member of the United Nations Statistical Commission.

Among the projects involving the foreign economic field in which

the Commission participated during the year the following may be

listed. Infurtherance of the European recovery program the Commission submitted a report and analysis of the volume, kind, and

liquidity of United States assets held by countries participating in

the European relief program and by their citizens including a review

of the steps which those countries have taken to utilize these assets.

In this connection, the Commission participated in the preparation

of the European recovery program through membership on the Financial Policy Committee of the Steering Committee of the European recovery program, which formulated the policy and prepared the documents for presentation to the Congress of all financial problems involved in the program. The Commission contributed to and participated in a report on "Foreign Assets and Liabilities of the United

2li During the 1947 fiscal year foreign governments reglstered $333,587,590 of securities ; and private foreign issuers registered $62,930,646. S. E. C. Thirteenth Annual Report, p. 140. The figures for private issues for this and the preceding year do not include offerings of securities of Canadian mining companies.
FOURTEENTH ~AL REPORT 117

States and Its Balance of International Payments" submitted to the

Committee on Finance of the United States Senate at the request

of that committee. This report was transmitted by Secretary of the

Treasury Snyder as Chairman of the National Advisory Council as

the work of a committee composed of representatives of the Departments of State, Treasury, and Commerce, the Federal Reserve Board,

the Export-Import Bank, and the Securities and Exchange Commission. Similarly we participated in the formulation of a "Statement

of the Foreign Loan and Investment Policy of the United States"

prepared by a joint subcommittee of the National Advisory Council

and of the Executive Committee on Foreign Economic Policy. This

statement has been approved by the President and the Secretary of

State as a guide to the executive agencies of our Government in the

further development of foreign lending programs, to our foreign

missions and to executive agencies in their consultations with foreign

governments and with private investors, and wherever appropriate to

our representatives on international bodies.

The Inter-American Economic Agreement signed on May 2, 1948,

at the Ninth International Conference of American States at Bogota,

Colombia, includes a complete chapter on private investments. The

Commission's representative took an active part in the formulation

of several of the articles in the chapter, in particular with respect to

that portion of the agreement which declares that the policy of the

states is in favor of the development of uniform accounting and disclosure principles. The Commission is lending its technical assistance

in the implementation of the agreement.

Upon the request of the International Monetary Fund and of representatives of the Economic Secretariat of the United Nations, representatives of the Commission have held a number of conferences for

the purpose of helping to develop uniform and current methods of

presenting information with respect to foreign investments and capital markets. Upon invitation of the United States Governor of the

International Bank and the Monetary Fund, the Chairman of the

Commission attended the second annual meetings of these institutions

held in London in September 1947.

At the request of the Chairmen of the Banking and Currency

Committee of the Senate and of the Interstate and Foreign Commerce

Committee of the House of Representatives, the Commission considered the proposal of the International Bank for Reconstruction and

Development that it be granted exemption from the Securities Act of

1933 and the Securities Exchange Act of 1934 respecting securities

issued or guaranteed by it.26 In a letter, and in a subsequent statement to the House committee, the Chairman of the Commission indicated the views of the Commission on these proposals. In effect the

Commission stated that, insofar as these proposals affected the country's international economic relations, the Commission was not in a

position to make policy recommendations.

Pursuant to an invitation extended by the Foreign Bondholders'

Protective Council, Inc., the Secretary of State and the Chairman of

.. This proposed legislation contemplated exemption of the above-mentioned securities

from the Securities Act and the Securities Bxcha nge Act. The Thirteenth Annual Report contains a full discussion of the problems involved and of the events leading to the

adoption by the Commission of certam rules and forms specifice.Ily destgned either to grant exemption from or to facilitate registration under the Securities Act of 1933 for securities

issued by the International Bank.
118 SECURITIES AND EXCHANGE COMMISSION

the Securities and Exchange Commission constitute a board of visitors

to the Council. On September 26, 1947, a member of the Commission

and a representative of the Department of State visited the Council

and reviewed its financial operations, its receipts and expenditures,

the nature and the sources of its fees, and discussed several problems

upon which the advice of the visitors was requested by the officers

of the Council. During the year the Council has asked the advice

of the Board of Visitors on several matters involving- the interests of

United States holders of foreign dollar bonds.

The Commission, through the officeof its Adviser on Foreign Investments, maintains a constant surveillance of foreign exchange reg-ulations and capital controls of other countries, noting particularly

the effect of such regulations and controls upon United States investors in foreign securities. One of the Commission's pur'p0ses in

making this review is to be assured that full and accurate disclosure

of these regulations and controls is made in registration statements

and prospectuses used in connection with public offerings of foreign

securities in the United States. The Commission has also on occasion

brought to the notice of the Department of State instances in which

the administration of these controls seemed to involve discriminatory

treatment of United States investors. The Commission also maintains a constant surveillance of the transactions effected by foreigners

in the securities markets under its jurisdiction.

ADVISORY AND INTERPRETATIVE ASSISTANCE

References are made throughout this report to the informal assistance rendered by the staff to the public in connection with the statutes

administered by the Commission. Such assistance is usually given

by the staff in connection with specific matters involving the filing

of a registration statement, proxy statement, annual report, and so on.

Mention has been made of the prefiling conference and the deficiency

letter in connection with registration statements. These represent

only a small part of the total of informal assistance given the public

by the staff. Itis not possible to determine the exact amount of assistance made available to the public by the staff by means of conference

and letter. At the least, such conferences run into the thousands, and

their number is more than equaled by the number of advisory letters

prepared by the staff during the 1948 fiscal year.

In addition to the above assistance rendered by the staff in connection with specific matters, a great amount of assistance was provided

the public by a special interpretative section in the officeof the chief

counsel of the Division of Corporation Finance. This section is

staffed with lawyers prepared to give expert advice as to all questions

of interpretation arising under the Securities Act of 1933, the Trust

Indenture Act of 1939, the Investment Company Act of 1940, and

parts of the Securities Exchange Act of 1934. Upon presentation of

all pertinent facts involved in a particular problem, the section will

furnish a detailed and informed opinion as to the application of a particular statute in a specific situation.

During the 1948 fiscal year, the section prepared 5,847 letters furnishing this highly technical assistance at the request of interested

lawyers, accountants, and students. In addition, the section rendered
FOURTEENTH ANNUAL REPORT 119

like assistance in many hundreds of conferences held, in person or by

telephone, with other such members of the public.

CONFIDENTIAL TREATMENT OF APPLICATIONS, REPORTS,

OR DOCUMENTS

The Commission is empowered to grant confidential treatment, upon

application by registrants, to information contained in reports, applications, or documents which they are required to file under the

Securities Act of 1933,the Securities Exchange Act of 1934, the Public Utihty Holding Company Act of ~935, the Investment Company

Act of 1940, and the Investment Advisers Act of 1940. Under the

Securities Act of 1933 the Commission has adopted rule 485,27which

provides that information as to material contracts, or portions thereof,

will be held confidential by the Commission if it determines that disclosure would impair the value of the contracts and is not necessary

for the protection of investors. The other four statutes referred to

are, in general, without specific restriction in this respect and empower

the Commission to hold confidential under certain conditions any information contained in any reports required to be filed under those

statutes. Disclosure of information filed confidentially under the

latter statutes is made only when the Commission determmes that disclosure is in the public interest.

The following table indicates the number of applications for confidential treatment received and acted upon during the year, together

with the number pending at its close:

Applications tor confidential treatment-1948 fiscal year

Number Number Number

Act and rule under which filed pending Number Number denied pending

July I, received granted or with- June 30, 1947 drawn 1948

--- --- --- --- Securities Act, rule 485______________________________ 4 26 20 6 4 Securities Exchange Act, rules X-24B-2, X-13A-6B_ 17 55 44 17 11 Investment Company Aet, rule N--45A-L 37 37 --- --- --- --- --- TotaL _______. ____________________________. ____ 21 118 101 23 15

Although registrants may seek judicial review of adverse decisions

by the Commission, no petitions for such judicial review were filed

in any of these cases during the 1948fiscal year.

STATISTICS AND SPECIAL STUDIES

Saving Study

The Commission continued its series of quarterly releases on the

volume and composition of saving by individuals in the United States.

These releases show the aggregate volume of individuals' saving,

that is, the increase in their assets less the increase in their liabilities,

exclusive of gains or losses from revaluation of assets. The figures

also show the components contributing to this total, such as changes

in securities, cash, insurance, consumers' indebtedness, and consumers'

durable goods.

.. Redesignatlon as of Jnly Hi, 1947, of former rule 580.

__________ ---------- ----------
120 SECURITIES AND EXCHANGE COMMISSION

Financial Position of Corporations

The series of quarterly releases on the working capital position of

all United States corporations, exclusive of banks and insurance companies, was continued. These releases show the principal components

of current assets and current liabilities and an abbreviated analysis

of the sources and uses of corporate funds. Semiannual supplementary

tables were also released showing a detailed break-down of current

assets and liabilities for various industry and size groups of corporations registered with the Commission. It is intended in subsequent

reports to present more detailed data on the sources and uses of corporate funds, thus giving an up-to-date analysis of the financial

condition of corporations as well as a complete picture of the volume

and composition of corporate saving.

During the 1948 fiscal year the Commission, together with the

Federal Trade Commission, inaugurated a series of quarterly industrial financial reports. These reports developed as an extension of

the working capital series and present a complete balance sheet and

abbreviated income account for all manufacturing corporations in the

United States. In addition the data are shown for various single

groups of corporations and for minor industry groups. Itis planned

that this report be extended to cover nonmanufacturing corporations

as well.

The Commission, together with the Department of Commerce, also

continued the series of quarterly releases on the plant and equipment

expenditures by United States businesses other than agriculture.

Shortly after the close of each quarter, these releases present industry

totals on the actual capital expenditures of that quarter and anticipated

expenditures for the next two quarters. It is intended in future reports to present additional data showing more detailed classifications

of industry groups and a size-of-company break-down. These data

provide a useful index of present and future activity in the capitalgoods industries and capital markets and a valuable barometer of

business activity in general.

Stock Market Statistics

Certain releases to the public, supplanted during the war by press

releases because of the manpower and _papershortage, were reinstated

toward the end of the fiscal year. Round-lot trading and odd-lot

trading releases were consolidated into one weekly public release and

a special mailing list was established for persons desiring these data.

The releases also cover, with a 2-week lag, daily total round-lot

sales in odd lots on the New York Stock Exchange, as well as the oddlot dealers' round-lot purchases and sales for their odd-lot accounts.

The releases also cover, with a two-week lag, daily total round-lot

transactions on the New York Stock Exchange and on the New York

Curb Exchange and the round-lot purchases, total sales, and short

sales of exchange member groups, as well as the numbers of reports

received weekly from each class of member.

The Commission continued publication of indexes, by industries,

of weekly closing prices of common stocks on the New York Stock

Exchange; and the monthly dollar value and volume of sales of stocks,

bonds, rights, and warrants on registered and exempted securities ex-
FOURTEENTH ANNUAL REPORT 121

changes. A number of these series are presented III the appendix

tables of this report.

The Commission's staff continued its studies of various aspects of

trading in securities, including floor trading, purchases and sales of

domestic securities for foreign account, purchases and sales of security options, and general research on exchange rules and practices.

Survey of American Listed Corporations

During the 1948 fiscal year, the Commission again released for

public and Government use statistical data filed with the Commission

by registrants under the Securities Exchange Act of 1934 and the

Securities Act of 1933. These data are summarized in a series of

reports known as the "Survey of American Listed Corporations"

showing individual data for each company as well as industry totals

for 1,825 registered companies in 156 industry groups.

One of the series of reports "Data on Profits and Operations Including Surplus, 1945-46" was completed in the fiscal year. This series,

consisting of seven volumes (divided according to industry groups), is

published annually. The data included are presented on an over-all

basis, covering all registrants, and are then presented on an individual

basis for each of the registrants constituting the group with all figures

given on a comparative basis with the preceding year. Principal

items furnished in these reports on profits and operations including

surplus are annual data on sales; costs and/or operating expenses;

operating profits; net profit before income taxes; net profit after income

taxes; depreciation, depletion, amortization, etc.; maintenance and

repairs; selling, general and administrative expenses; earned surplus

at the beginning of the period; additions to earned surplus (including

net profit after income taxes); deductions from earned surplus (other

than dividends); dividends charged to earned surplus; and earned

surplus at the end of the period. Also included are capital surplus

at the beginning of the period; capital surplus at the end of the period;

and net worth at the beginning of each period covered. In addition

each item in the profit and loss account is shown as a percentage of

net sales and a ratio of the net profit before income taxes as a percentage of net worth and a ratio of the net profit after income taxes

as a percentage of net worth. The data presented for the manufacturing industry groups supplement previous reports on "Data on

Profits and Operations" beginning with the year 1936. The data for

the nonmanufacturing industry groups supplement previous reports

beginning with the year 1942. Surplus is presented for the first time

in this series. A summarization of data on profits and operations for

the period 1937-46 was also publicly released for all manufacturing

companies as well as a summarization of all nonmanufacturing companies for the period from 1942-46. All of these data for registered

corporations, both on an individual company and industry basis, are

currently being carried through 1947.

Investment Company Data

Data for closed-end and open-end management investment companies were compiled and released to the public quarterly. These

reports show data for the purchases and sales in both shares and

dollars of the registrant's capital stock and of their own funded debt;

portfolio changes during the period showing purchases, sales and

balance of change in their portfolio; and the nature of their assets
122 SECURITIES AND EXCHANGE COMMISSION

at the close of the quarter. The items included in these assets are

cash and cash items; Government securities; securities of other investment companies; other securities; other assets; and total assets.

Brokers and Dealers

During the 1948 fiscal year, a study was made of the financial

condition of 3,284 registered brokers and dealers reporting under rule

X-17A-5 under the Securities Exchange Act of 1934 covering the

years 1946-47. The study consists of tables summarizing the data

for all registrants, for members of the New York Stock Exchange, and

for each of the 10 regions of the Oommission. The items covered in

each of the tables include net capital; aggregate indebtedness; cash

in banks; funds segregated pursuant to Oommodity Exchange Act

requirements; cash and exempt securities segregated; firms' inventory

of exempt securities at market value; firms' inventory of nonexempt

securities at market value; and customers' debit balances in margin

accounts. Also included are customers' free credit balances; customers' credit balances in cash accounts; customers' credit balances

in accounts with open contractual commitments; customers' credit

balances in margin accounts; money borrowed from banks on customers' securities; and money borrowed from banks on firms' and

partners' securities. The study is being carried through 1948 and the

results to date are included as appendix table 6.

Quarterly Sales Data

Data showing quarterly sales of registrants under the Securities

Exchange Act of 1934have been released by the Oommission. These

releases have been made in two forms, covering approximately 1,400

corporations in 156 industry groups. The data have been released

each quarter, first in the aggregate showing the total for all companies,

with a break-down of manufacturing and retail trade for the last five

quarters, and secondly for each individual company and for each

industry group for the current quarter, the previous quarter, and the

comparable quarter of the previous year.

Distribution of Registrants by Independent Accounting Firms

During the 1948fiscal year, a study was made of the distribution of

registrants by independent public accounting firms certifying financial

statements for 1946. The study included 2,265 registrants, with

aggregate assets of 100 billion dollars, filing annual reports with the

Oommission under the Securities Exchange Act of 1934 and the

Securities Act of 1933. These firms' reports were certified by 416

independent public accounting firms. The study classified the accounting firms by aggregate assets of registrants served, showing the

number of registrants, number of industry groups, and the percentage

of total number of registrants covered. Also shown are a break-down

of accounting firms by interval, the number of firms certified to, and

the aggregate assets of these registrants.

Registrants and Subsidiaries

Another report in the series entitled "Registrants and Subsidiaries"

is currently being carried through 1948. This study shows the relationship between about 2,100 registered companies and their 14,000

subsidiaries.
FOURTEENTH ANNUAL REPORT

ANALYSIS OF THE STOCK MARKET DECLINE OF

SEPTEMBER 3, 1946

123

On August 21, 1947,the Commission released a report of the Division of Trading and Exchanges giving the results of a study started

in October 1946of stock trading on the New York Stock Exchange on

September 3,1946. On that day, stock prices experienced the sharpest break in 9 years. The study was undertaken to determine the

causes of the break and to ascertain whether there had been any

planned or concerted action by any group in violation of the Securities

Exchange Act of 1934or its rules.

The study analyzed the buying and selling of various types of

buyers and sellers in 15-minute (and in some cases, shorter) periods

throughout the day. Ittraced prices for each minute of the day and

described the buying and selling in all stocks traded in 100-share lots

and in various classifications of these stocks. It showed what was

being done at given times by public traders, foreigners, banks, investment trusts, odd-lot dealers, member and nonmember firms (for firm

and individual accounts and for wives and dependents), and by floor

traders and specialists. These activities were in turn subdivided into

transactions in all stocks, in stocks graded according to activity and

price, according to their use in standard indices, in stocks with different

rates of decline throughout the day, and in stocks of various industrial

classifications.

For this analysis, two major types of data were collected. First,

every transaction in round lots on the New York Stock Exchange on

September 3 was reconstructed from the brokers' records. Comprehensive information was obtained from New York Stock Exchange

member firms and other brokers and dealers and banks which effected

transactions through the facilities of the Exchange on that day. For

each round-lot purchase and sale, these data included the name of the

stock, price, and volume, and the name and address of the customer.

The sales data also included information with respect to short sales

and stop-loss orders. Second, a number of public customers who either

bought or sold on September 3 were interviewed to obtain further

details on their trading, including their reasons for buying or selling.

Six hundred and twenty-two interviews were conducted, covering

practically all of the largest public purchasers and sellers on that

day, as well as a random sample of all other public transactions.

The study was limited to an analysis of market activity and did

not deal with the general domestic and international economic background of the day's market. Based on a voluminous collection of detailed information, the report gave the most comprehensive picture

of a day's market yet presented. While the report reached no specific

conclusions, no group or individual, professional or public, nor any

single market factor, plainly appears as exclusively or primarily

accountable for the character of the trading on the day in question.

In its release accompanying the report, the Commission stated that,
124 SECURITIES AND EXCHANGE COMMISSION

although the study should be helpful in the formulation and evaluation of standards designed to maintain fair and orderly markets, it

alone did not show what further controls, if any, are necessary or

desirable.

PERSONNEL

As of June 30, 1948, the personnel of the Commission consisted

of the following:

Headquarters Office:

Commissioners___________________________________ 5

Staff 813

818 ltegional offices___________________________________________ 331

Total 1,149

This represents a reduction of 10 employees from the total personnel

on June 30, 1947. Of the 1,144 employees of the Commission at the

end of the current year, 416 or 36 percent were veterans of World

War lor World War II.

In January 1948 the Headquarters Office of the Commission was

removed to Washington, D. C., from Philadelphia, Pa., where it had

been located for nearly 6 years. Among the administrative problems

presented by the return to Washington was the necessity for the

maintenance of operations during the period of the move notwithstanding a considerable turn-over in clerical and stenographic positions. The replacement of those employees unable to move to Washington with the Commission constituted one of the major functions

of the Division of Personnel during the 1948 fiscal year. It is noteworthy, however, that the Commission lost very few of its professional employees during this period. As a matter of fact, approximately 41 percent of the total professional and technical staff has

been with the Commission for 10years or more.

FISCAL AFFAIRS

Appropriation title Appropria- Obligated Unobligated non balance

Salaries and Expenses .. . . $5,688,700 $5,616, 250 $72,450 Printing and Bmding ___________________ . _____________________ 50,000 48,051 1,949

Total ___________________________________________________ 5,738, 700 5,644,301 74, 399

Receipts for the ji8caZ year 1948 1

Character of fee: Amount

Fees for registration of securities $630,322

Fees under Trust Indenture AcL_______________________________ 700

Fees from registered exchanges 250,813

Fees from sales of photo duplications___________________________ 14,023

]discellaneous receipts_________________________________________ 50,437

Total 946,295

I This money must be turned in to the general fund of the Treasury ofthe United States and is not available for expenditure by the Commlssren.

__ _•________________________________
FOURTEE~ ~AL REPORT

PUBLICATIONS

125

Public Releases

Releases of the Commission consist primarily of official announcements of Commission actions taken and filings made under the several acts which it administers. These include decisions, regulations,

orders for hearings, notices of filings, and related matters issued by

the Commission.

During the 1948 fiscal year releases issued under the several acts

and in connection with Chapter X of the Bankruptcy Act were as

follows:

Act Releases

Securities Act of 1933________________________________________________ 62

Securities Exchange Act of 1934______________________________________ 143

Public Utility Holding Company Act of 1935___________________________ 792

Trust Indenture Act of 1939__________________________________________ 4

Investment Company Act of 1940_____________________________________ 116

Investment Advisers Act of 1940______________________________________ 4

Chapter X, Bankruptcy AcL_________________________________________ 3

r.rotal 1,124

The following break-down of these releases for the month of June

1948is illustrative of their general nature:

Decisions and orders 63

Announcements of regulations adopted and proposed to be adopted__________ 2

Announcements of accounting opinions and instructions___________________ 1

Announcements of filings, orders for hearing, and notices giving opportunity to request hearing 55

The balance of the Commission's releases are of an informational

nature, the following having been issued during the year:

Announcements of publication of reports on corporate survey and statistical

studies_______________________________________________________________ 44

Reports of court actions in injunction and criminal prosecution cases initiated by the Commission____________________________________________ 62

Miscellaneous (announcements regarding appointments of Commissioners, staff officials, and other matters) 8

Total 114

In all, a total of 1,238releases were issued during the 1948fiscal year.

Other Publications

Daily Registration Record.

Monthly Statistical Bulletin.

Bound volume 14 of the Decisions and Reports, August 15, 1943,

to December 15, 1943.

Twelve monthly issues of the OfficialSummary of Securities Transactions and Holdings of Officers, Directors, and Principal Stockholders.

The Thirteenth Annual Report of the Commission.

List of Securities Traded on Exchanges under the Securities Exchange Act of 1934,as of December 31, 1947.

Securities Issues of Electric and Gas Utilities, 1935-47.

Working Capital of 1,169Registered Corporations, December 1939

to June 1947.

Survey of American Listed Corporations, Data on Profits and Operations, 1944-45, parts 6 and 7.

~
126 SECURITIES AND EXCHANGE COMMISSION

Survey of American Listed Corporations, Data on Profits and Operations, 1945-46,parts 1, 2, 3, 4, and 5.

Survey of American Listed Corporations, Investment Companies,

Quarterly Data, 1947-48.

Survey of American Listed Corporations, Brokers and Dealers

Resources and Liabilities, 3,276Companies for 1946.

Survey of American Listed Corporations, Quarterly Sales Data,

1948.

Work of Securities and Exchange Commission, as of January 1,

1947.

Accounting Series Releases, 1 to 63, August 1947 (compilation).

INFORMATION AVAILABLE FOR PUBLIC INSPECTION

The Commission maintains public reference rooms at the central

officein Washington, D. C., and in its regional officesin New York

City and Chicago, Ill.

Copies of all public information on file with the Commission, contained in registration statements, applications, reports, declarations,

and other public documents, are available for inspection in the public

reference room at Washington. During the fiscal year 1948, 2,016

persons visited this public reference room seeking-such information.

In addition to providing facilities for personal Inspection of registered public information, there were received in the public reference

rooms thousands of letters and telephone calls from persons requesting

registered information. (This does not include requests for copies of

releases, forms, publications, etc.) Through the facilities provided

for the sale of copies of public registered information, 2,131 orders,

involving a total of 173,488pages, were filled.

In its New York regional office,located at 120Broadway, the Commission provides facilities for the inspection of certain public information on file with the Commission. This includes copies of (1) applications for registrations of securities on all national securities exchanges except the New York Stock Exchange and the New York

Curb Exchange, together with copies of annual reports, supplemental

reports, and amendments thereto; and (2) annual reports filed pursuant to the provisions of section 15 (d) of the Securities Exchange

Act of 1934by issuers having securities registered under the Securities

Act of 1933. During the 1948 fiscal year 12,965 persons visited the

New York public reference room and more than 6,782telephone calls

were received from persons seeking registered public information,

copies of forms, releases, and other material.

In the Chicago regional office,located at 105 West Adams Street,

copies of applications for registration of securities on the New York

Stock Exchange and the New York Curb Exchange, together with

copies of all annual reports, supplemental reports, and amendments

thereto, are available for public inspection. During the 1948 fiscal

year 3,215 members of the public visited this public reference room,

and approximately 1,500 telephone calls were received from persons

seeking registered public information, forms, releases, and other material of a public nature.

In addition to the material which is available in the New York

and Chicago public reference rooms, there are available in each of
FOURTEENTH ANNUAL REPORT 127

the Commission's regional offices copies of all prospectuses used in

public offerings of securities effectively registered under the Securities

Act of 1933. Duplicate copies of applications for registration of

brokers or dealers transacting business on over-the-counter markets

filed under the Securities Exchange Act of 1934 and duplicate copies

of applications for registration of investment advisers filed under the

Investment Advisers Act of 1940 are available for inspection in the

regional office~aving jurisdiction over the zone in which the registrant's

principal officeis located. Also, copies of letters of notification filed

under regulation A (which exempts small issues of securities from the

registration requirements of the Securities Act of 1933) are available

for inspection at the regional officewhere filed and in Washington, D. C.

In the Commission's San Francisco office,where complete facilities

are provided for the registration of securities and qualification of

indentures, copies of registration statements and applications for qualification of indentures filed at that office are available for public

inspection.

Copies of all applications for the registration of securities on national securities exchanges are available for public inspection at the

respective exchange upon which the securities are registered.

PUBLIC HEARINGS

The following number of public hearings were held by the Commission under the various acts during the 1948 fiscal year:

Securities Act of 1933_________________________________________________ 4

Securities Exchange Act of 1934________________________________________ 19

Public Utility Holding Company Act of 1935_____________________________ 10:.!

Trust Indenture Act of 1939___________________________________________ 0

Investment Advisers Act of 1940_______________________________________ 0

Investment Company Act of 1940______________________________________ 9

Total___________________________________________________________ 134

A total of 49,168 pages of testimony were taken at these hearings, an

increase over the 1947fiscal year.

In addition to the above hearings, the Commission conducted a

public investigation in the matter of Kaiser-Frazer Corp., Otis & Co..

First California Co., and Allen & Co., under the Securities Act of

1933 and the Securities Exchange Act of 1934,taking a total of 4,902

pages of testimony during the fiscal year.

PART IX

APPENDIX

STATISTICAL TABLES

FOURTEENTH ~AL REPORT 131

TABLE I.-Registrations under the Securities Act of 1933 fully effective during the

fiscal year ended June 30, 1948

PART I.-DISTRIBUTION BY MONTHS

[Amounts in thousands of dollars]'

All effectively registered Proposed for sale for account

of ISSuers

Year and month

Number of Number Amount Number of Number Amount statements of ISSUes statements of Issues

--- 1947 July __________________________ 45 58 746,360 38 42 656,515 August; ______________________ 14 15 118,814 9 10 94,597 Septem ber ____________________ 36 50 1,018,2-% 30 38 947,914 October _______________________ 41 56 1,396,503 36 45 784,481 November ____________________ 50 62 308,376 43 51 275,363 December ____________________ 42 51 252,155 32 37 178,064

1948 January ______________________ 32 40 437,258 26 28 375,051 Feburary _____________________

March 23 28 193,374 20 23 166,471 ________________________ 39 57 439,068 36 50 407,349 AprIL ________________________

May 40 51 288,726 36 42 257,104 __________________________ 36 48 567,580 32 36 424,524 June __________________________ 37 43 638,183 32 33 464,766

Total tlscal year 1948____ 2435 559 6,404,6.33 370 435 5,032,199

PART 2.-BREAK-DOWN BY METHOD OF DISTRIBUTION AND TYPE OF SECURITY

OF THE VOLUME PROPOSED FOR CASH SALE FOR ACCOUNT OF THE ISSUERS

[Amounts m thousands of dollars] I

Type of seCUrIty

Method of drstrfhutionand group to 1----,---

whom oflered Secured Unsecured Preferred Common I Other

_______________ I_A_ll_t_yp_es_1bonds bonds stock stock types'

All methods of distnbution __________ 5,032,199 1,390,577 1,383,570 536,942 1,571,198 149,911

To general public ________________3,307,783 1,389,507 885,827 445,534 451,880 135,035 To security holders ______________ 1,230,427 1,032 497,128 89,385 642,855 28 To other special groups __________ 493,989 39 616 2,024 476,463 14,848

Through investment bankers ________ 3,776,335 1,390,008 965,831 514,669 784,331 121,495

By purchase and resale __________ 3,016,544 1,390,008 678,831 456,924 490,752 28

To general public ____________2,522,346 1,389,507 599,172 393,745 139,922 To security holders __________ 471,482 501 79,659 63,179 328,116 28 To other special groups ______ 22,715 22,715

On best efforts basis 759,791 287,000 57,746 293,579 121,467

To general publie ____________ 739,697 ---------.- 285,000 43,630 289,600 121,467 To security holders __________ 19,994 2,000 14,116 3,878 To other special groups ______ 100 ----------- ----------- ----------- 100

By Issuers ___________________________ 1,255,865 570 417,739 22,273 786,867 28,416

To general public 45,739 1,654 8,159 22,358 13,568 To security holders ______________ 738,951 531 415,469 12,090 310,861 To other special groups __________ 471,174 39 616 2,024 453,648 14,848

See footnotes at end of table.

813892--49----10

----------- -----~----- -----------

_____________ -----------

-----~-----

________________ -----------
132 SECURITIES AND EXCHANGE COMMISSION

C'i f&)~ .Q

00 ec

,

,

.1

,

,

,

a 'a:i' 'i ~

~i

~I

8

!r..

i ~

g S !

gi 1f ~ lQ- tci'

~ ~ ~ 8 8~~~~ ca :=:- go)

~~i ~~~~~~~

~~~«i~-ci qS .....

~ ~ E ~ ~~~~~~ ~ ~ g 5 ~ ~ ~~~~~ ~ ~ ~ g ..;

~ ~ 8 ~ ~~~k1

g ;::-0;

t"- .-I

..

--

~ 5 8 ~

~ ~ ~ ~ ~

~ '"

~ ~

~ ~ ~ ~ ~ ~

~ ~-

~ ~

~ ~ " ~ ~ ~ ~-

- ~

~

~ ~

~
FOURTEENTH ~AL REPORT 133

8 Cl:13 fg fg ::!:

'" ...,... '" '"

,, co- tQ~" , , , ... ,

... ..., ......0

1E ~~i"5 '0l:5 ...... "" ,..., ..., "'...... ... :~~ "" ri (;l cfoo; ::f ::!:- :;!: ....

'" '" ~f"'"4f"'"4 ee

... ... ...-

... :go...,

° 'co'" ee ... "'''' .. ., co 00 co ,: ...- ~-...-c" ".; :'" ..., so ., ..., ..., ., ... .... ....

..., c-cc e- ;: "''''''' '" ,'"

8 r-, r-, .... COte~

g '0

° "'''' ...

1"- 0- "";r£ 00 ,: ... "'...

;: ... ",. e-, ..., .... co ., ., gj '" i!!l_ Ie ~""'" s ,: ...,- ,., "'''' fi5- .,; ... 12 e-, ,.... .,

'" :'" ... ...

'" '" "''''''' ... 0""'" ...

,...

s

e -~'" ... "" ,0 , "'''''''' ° _"-0

,: ".; :r: tO~e'f ",- .... 'OcQ ,: :1- ;i '" "--

'" e- ... "' ... "" "'00

.,

"" '" gj:g~ ,.,

.

.

. '" "" .",

"" '" ee :~

,

t ;i -- .,; :'"

,.

- ... .,...... '" "'''''''' Cl> ~fg '" '" - gg""- ., ee ee -- '" ., ""00

gf e- .. .. .. .... ~-g-?i '" ... <ti

... "- 00 -'" - ... • ".; ".; , . ,,,,,

{1

. '" .E j '" . '0 ,,

'0

,

@ '"s

,

0"

,

, ...

"

e '" .s ... 'd 'd S :~ g gj '" '0 '" 2J

ffi :~

s 5l ::l 0

g :s.

" gj

S 'd

""

S ::-. '" oS ee

0

:g .::: :3

" ""-'" !{1 ~: ::l

'" "3~S 'd

0

1i "'€l

" 'd 'd g~8 .!l J=l :.s 13- ee s '"" ""~'" " .E . 'd"~ '0 d.g'tj Ii? ~'ol rg e """'" "''d '0 !~'0 0

"" '" "'''''

s ", ...t: '" os " 1:i=8 a 'S~~ .!l", 0 13 ...... '"gj .s" " 13 050£ o~ ... 00 <l P:?::o j:llOPo< .e '"''"' .e 'd " e " "" ... '" '" ::l ::l

'"

Z Po< Po<

""

..

~~

~ '"

~~~

~~~ ~~~

~ '"

~

~

~

~

'" "''''~

~

~

~ '" ~

~~~~

~~~ ~~ ~ ~

~

-=~

''''

-=

~

~

~

'"

~~ '"

~

~

~

~

~

~
134 SECURITIES AND EXCHANGE COMMISSION

o

'CCl'--tCc.l 1""'4

~~:g~OO

: ;CCCCOO ..,.

:~ .... C\l ::

:C':llL':OOQ lQ

'IQCOlC<O :~;::;CO

oeoco

CO L':) r-,

r-, lQ~C\l<O

co:i COC'l"",d r

o

....... t-C"J_ ..,.....

...;-

:lQ"":~ 00

'lCCM 1t:l :~t-~

:~t-CQCO 00

:~~~

~~OO~O c.l t-t-~_~ to ~NC_M ~~~8~ ~~~c ClClQ

o lQMQ:l

g ~g~ ...;-

:IQN"<t'~

;~~~~

:ooo_~ c.l

:~~~ ;i

I '" I '01

I I

I ~ I

I ~ I

~

~ ~ ~

~

~

= ~ ~ ~ ~ ~

~ ~ ~ ~ ~

~ __

~

_

~
....

.;;

......

'c'

"t:

"'"0

.~ Q;)

-;:l

l:::=

;:>'- ","'" ",=

~oQ

-51

....00 "'''I-

'"t:l~

.:...... ;:>'"t:l

'"t:l!:t

-~'" - '~'* ""~"' .... ...... -t:e-

:3~ ro

......

.~

0

t-< -~P "'''' .E~ I'Q

Pl

t-<

",'" ro

Ii:'I':,

HA -'" '" "''-;: 0 '"" '" - t-< e .~..,. "" Z 'c'~ 0 to ",'"t:l H

t-< '0 -<roZ 8 '"t:!:t f4 a

~.g Po<

:f~

0

;:l

0

"'Ii:

I .~~ .,.;

...

.. ",!:t -: .:..,. Po<

'c'~

:;5 '~.s

'"t:l<.>

~:::

<:l..o

;,,;:>

<:l~

;:> ....

""~

;,,'" ..0""

!:t'"

.c:S .,.

-c<:l-

.,. <:l

~'"

C3I

C'l

..:l

-<

E-<

FOURTEENTH ANNUAL REPORT

'''''''lQcq1Q

0

, :t--..-4~ ee :~""",:rll~

5~ :lL'3cciC!)~ 00 :t--S~ .,; :~OOO);::

S"

:- SE

0'" Q

,

'0 :O;IlOt:Cl

- OO;lCOO~ 00

: lOCO e- 00

l:.ld :_CQ'<t\OO ", C'i_C'iaoci ci :"""C":Il.Q0;I ... ~o.... "

,,'"

.... '" Po<

t-O"""oo

'" coo-_o IOt'-OOO_ ec -e o__ ~..o cilQ -"" 0

,Q

:;;j

'" :~~ :o:et:l0 :oo:t'~o.O

'"

S :et:lll) .; :-~lQ .; >->- ,.;

eeap

:e-:O'J-' "" :'" ee

~.c :t'?C":It- .;

;.... .... .Q~

~<:l

,

:CQCO~IQ

'" :~t--~~ -e- :'" :"" ec

,Q" :_~~t:) ... :- ~..,. ,.; :'" :", ..,'" fi:~

'"0 c.....,.t-"'OfI .... !::~", I'Q :~~c:;' :....-- ,.; _.-4,...4"'; ,.; ,.;

"''' ~to

0;1 CCl 0- 00 _oot--"""

'" """l'--t--oCO

"" "'" o' _ ... ,.;

:Ef 8bll

tOCOlQt-

"" "'''''>- CO"'1'1l)1C

"'",

0

=",

g~ro

"""'''' t- ""'" eo I.Q~-

..,

-'"

0 "''0

~ti

"'~"

!@8

~g .... .... > ">- "> o , ,... 0 ,- o

, ,-

w

I -g~

: :~ .~ -g~: :~ iij "0

I,

~O: :~ .~

I ~'?~at:l ;:j

:;; cel~.r,;:::. :;; dur~.Q= :;; os2il.),.l.D os2ilJ,.l.;:> os!i'iJ,.l.D

I

I

0

ee

'"

...."=

'""

, -e

:;;

?>

OJ

I ii .,; ..:

r;:; .... I ::: :::

135

'"~

~~~

'"

~

' '" __

~

=

""

~~~

~

~ '" "

'"= ~~ '" ~ ~~ ~ ~

~~

~~ -=~ '" '" ~

'"

~~

~~

~ ~~

~~ ''"'

~

~~•~

=

'"

~ '" ~

~

~
136 SECURITIES AND EXCHANGE COMMISSION

g!~~~~~g~:2~~E~

~gf~~t3~~~~~~~g~~ "';CN~ci

:0,0

? ,0

,0

:c::

:'"

~s~~~~

fi~!i!ioig

o 0)"l:t4 00""'0

....4"";- ...i

lQOOO'Oj'l

....

o;o~~~~ ..... ~_r--_~

....;fJSt,QfJ:5

~~~g~~

O"l14l.O dQO OOCO , .....0 <Ol.OlQ I_~ ...;- c:i

,

sH~~~~f8

~~g~~g

O>QOOH;Ot--a>

....

,

s.. I I

: .8 :2~

'~s ~S8 :~ C).Q Cl)c:;)

~~g.~~~

....«:oooZA

,0

,0

:~

:'"

II g~g~g~;~fi~~~~!

I

rD..Q~"-:-"";.QC'fOQ"'or...:_"oci

~~g~~~~~:;:~~~~g cQc6' ..C'i~~'"d't"

~~~~~

o

~~

~
'"0

<l)

::l

i=l

:0

i=l

0

0

J

0:>

'l>

'l::l

.:: ';;;'

.~ .s

t:> '0

>< '0 'l> Eo< '0 0-<

.~ '0

P l'l

0

[oil 0

e 00 ., -s

"'" ..<:! 0 .s .,

e [oil '0

'" <:> Jl"

l,. >< <>

0

c Eo< ... ...... I Po

'l::l ,,; 'l>

l,. .. 'l> 0: '0 l1:::: 1l <::> Jl"

ee '" .~....

... r! l,.

<:>

'l>

.,

s

'l>

t

CQ

r.1

III

<I

8

FOURTEENTII~AL REPORT

ifj~~~S~&1~~gf2~~~:::~H~~~~~~S8f2 l'l CQ_ ....~CI?_

0 tOg;!g-ii~-:2-:1'gf~~i€s~ ~s~-!~s-gi~~:8gg s"" sg _~ ..-I C'Il .... cooo

01;;

0

~~~~~~~~;;~~~~~ 00:00000 ....

'0 1.;S~:gi2~ 2£~~~8~

tg ~~-:2gg~ gf~~ ..rig~ oS ... f'" -- Jl"

1l ;;::1i:?!~b1~;:t~~&igHi38~ ~f::~~S~ :=~~g;~! e ~5r~~~g~g~~f~g~-~- ci;;;i~fi-- ~g;-~-gg-~.. 0

Eo ~CQCQ.C'?~ C'IlCQCOIOI:':l-.:t'

0 to:I-<:"Il-_-cq-C'Il-Ci-""; _-C":)...-o~l,Ql'l 0

'0

til .-r .... ac_COCt:)lQ ....coOO ....Ot'-l,Q lCCO_CO ....'Cf( g;:g~oof;5c;l gj ~~:!:~Z:H;~~~~g8g;s~ gg~g~S COOO_~"ltlC'D

i

0

~-~-~-i@-g~~-~~-~-~~-~~ co"c-flci"Ci-_-r: Eo ~~o;~g~ ~~-gE-ie-t a cq-co'"CQ-~""tl-C\?-co"'~~- 55- gf ~-;::! -- -- -- ... .a l'l

'" 0

'0 Z

~~~~fi~~~~!~:s~~ CI?OIOt---r- '0

s '" S;~~~8~

P:l .?1'" ?2-i@-~ga-~~~~-~-~~~-~ ~~~~-~~-gffJ~"~g~ CQ- to- co" ad'0';!!;";Q-i2C!;-~.. ...; ...r-t-C'f,-_- ..... .............

------

.~-lO_ ....CQ.<OO'JC'OOO .... ....O'Jll';)c:>1t:l

E ~(.()~bgEg~~C;~~~8 -~~~~~~g~Sg~ e ~~~~~gf~g~~g~~g ci"_-r:cP --0"

0

~"~-_-C'l-C'i~-_-_-"ltl-"":co-"": - .s 0

~E~~H~~~~~~88~~"'8-~""'" ~",~oiil13 g~S~~Si s 0

~igf;i~-~f!j- t&'~ ..&O.. _".r-: ~-;~-E-~-t '0 Eo ~fi]ea~g~

gj g ~-/:&)-~-~...-ett-~-~-!i~-g~-gf;:!~--- -- -- ... <=1 P. 0

t' Z

:;;: fig~~~~~~g~~f2~~OOC":l--~O ~fe~~~~ " ~:::~g;~:ti

'" ~~-~-~g~-~~~~~~t~- ~~-~..~-~ t-e-:Q-~-~$::! !J C'Q&OO"lt"_CO

'" CfJ" -'-~ co- OQ-C; =t--C'f..,.- 00~" ---"'--~-"';cq- _-,..;~-,...;,..;'....r

-< .... _~IOlt:lC'Q

: :

,

,

-S

<=1

0

S .... 0:>

'0 -e -e

<I

..

...

'"><'" : , . , 1 ,.""

~~f;;jSls~i~n~~~~ ____ 0""'l_0""'l _______

a)a)a)Ql2)a)~~Q)a)Q)Q)a)a)

ElEl El M as El EllH3 El El El ~~h~...,~...,..,t,..,t,,.,..,..., : : : : : SS.sSESSSSSSSS.s : I

:~ ili81Sl~~S~~1lJ~a:~~2£ ' :~ ~.8.8 :"'S,8S8 >-a : ---_ ...... _ ..... _----_ ..... ~~~O~8 ~ 2-a- ' : .......................................... E.g ~].~g '3'3"3'3'3"3"3'3'3'3'3"3'3"3 ....,.,,.,...,,,.,,.,..,. ......,...,t-t.., ......, ~~~~ZA~""'~-<~ ...

137

~-~-~~~~~~-~-~~~-~~

'"

~

'"

~

~

~ '" ~

~ ~ ~~~~~~

- ~ ~ ~ _

~

_ ~

~ ~ '" ~~~~~~ ~~~~~~-

~ ~ ~

'" ~ ~ ~-~-~-~- ~~ ~-

'" ~-~

'"

~ ~ ~

~ ~ ~ __

~

~

~ ~

, • , • I • ,

'"' '"' ~

~
138

'0

Q,)

::l

:5

g

u

I

ee

'"

'l::l

...

;:: :g

-e

... Cl .<::

- I:il 't:l

;:: P ... ell

ell " ... ... 0

t; r;., ;l ., 0 .E .<:: I'il ., ., Po< 't:l e

Q >< " Eo< "

o

.. I e c Po ..... 0; ., 'l::l .. ""' 0:

.. I;;, <

'" Po< -e ll:::

c

.,

..

t;

""'

.,

<:f5

[.il

....

-<

E-i

SECURITIES AND EXCHANGE COMMISSION

~'O

I

001'--..... CQIO .....tO~OO_OONC"IO cot-..

O)'<tlOOtOCQI.OOMO~lQ...,._1:':I r-. .... OOC"ltOeQlQCO...,. lQtO ..... 8~~~~g (l}r::O~ cit-=c:i~~"':ai'~~C'f eIS"'di CdJ:lc;::: ..;

e 10 _~~

Po I

e,6~ ~f3~~~~~:8~8~88 8 :r:M~.C'I_~C-: ec -~= ~g~M~~~- .,,- ~~S 'OlOHOO .....Ctl :oo ..........C"J~~ ;:i; r;.,,,,, -

'g'i fJ~~~~~~~~S~~~8C'? ..... ~o"':t'C'i OC'l~'"'f'C'?~ ,,:::- oo~~~tC"1l

3 '" ~~~~~~g1~~~~~~~&6ocit-=06c.f...; ,,- t":)OO ..... _O~ ~o: " ~S --cq ...._-

8- ...;,....;....; ..; ..; ...;ci

8 ~ss~~ ;:: g~~~g~~~~~~C!i~ 0 ...... OO"':t'~C'lcql'--_Ctl_-.:l"'<1'OO

Z 'O~ootl.O.E gt~cigg~~gC'i...;:5~~ ~~~8~

~UJ~.E~~tt:l6 ........ ~~~~~~g~~~~8;fJ~f;~fJ~~ ~~~::-:ag~f'g ~~~~g~~~~J~~~~~~~ g~~f!~t r::~o=::s~~a:5Q,) l'-~tOtClOiXl

pooo e"O co.- &~ ,...;lciC'i,...;ciei&6~~g~~SOJ- ....

6"o~ ~E~~~~~~~~8g~~8~~g~8 o:E r.i5C'5rJ5ll;),...;~....;M-r..:u5,..:~~u? .:;SC'itciC'l-"";": -;8-

~- ~~gs~~~oo~;!.:8ie~~~ ~~;;;~~~ 00 C'iciMei"~cQt::Sr-:t36o-a5C'1-C'i .... ..;

Eo<'" _"'1'tO'<tIC"I_.-4

OJ. fj~gH2~~~~Hg~~~~g lQOtOO'HOM ~;:: "':t'_OtO_~

~~- t-OO~O)(lO~

~g~~~~~g;:!~¥I~~~~6~~ci"';~ c:;>~.s IO_C"IM

c;;"Ot.>

--0:

~co

I

~H2~~~~~~~~8~i2~ oor---o_teO

~~~;;~~ OJ ~~g~~~g~~~g~g~l'!i~oQ~~g p:;

I ...;....;

2~~oc:~~gg:f;5~5tQfE~ 3 fl~~~~~ e ~.c C::-_lQC'ilQ"'lQ"I1't-1"-"'C'i"l1'C'I

.0'::: g~~g~~~ggg~~~~~It'ir--:'e'f ,"","'f"~"'; 0 g~;;;;~~ Eo

0 ci"'; ....;....;....; ....;ciC"f~

0

a; ~f2~~~8~Sfj8~~~~",1"-lOoo_rIOC'iO "":l""'I:I" 10 C'i1"-Ml.O_ ....

~~~~~~~8g~g~~~~l ~~~gi'I~8 .g eq_ C'i_O

oS -- ..; ....;~Cl':iei

.; I ~~~~85g~~~~~~8~r-~1.Ot=~ Co

I

_~~~S)~ 82 It'ir-:lt'io;t6c.for--:'ci'''l:l''~r-: ci0 ci''''';t'':c'''';o _co &5~~gj~~8~~~~~~8 O~IOC'j~r- .s~ ~"'''d''C,::l>,Q_

0 _~~....;C'fci~.....; .....:..;:r..:~~r..: -- b

0:5

;::

0

E , , I , , , , , , I

"" ~~~~~~:;;;:~~:j:~~~~ ;::

co

a CDCJCDCDCDCDCDCDCDQ,)CDCDCDCD

;::01;::0:01<00:0:;::;::;::0:::1;:: '" :::='='::l::l='='::S='='='::S::S::S >< I-:ll-:ll-:l 1-.11-:l1-:l1-:l1-)1-:l1-:l"'1-) 1-)1-.1

00000000000000

: :.8~.8.8 .................................................................

~a~~~~~~~~~~~!; ....---_ .... _ .... -,...;- .............. :~E "ss >a~>a~>a>a>a~>a~~>a>a~ ::,El,21-gf;8

~~~8ZA

~

~ ~~ ~ ~~

~

~

~

~

~ ~ ~

~ '"

~ _

~ ~

~ ~~ ~ ~ ~

~

~

~ ~

~

r , , r ~

~~~~~~~~~~~~~~ ~

~~~~~~~~~~~~~~
....

/'1/

~~~~9~

:g~fJ~~~

~~~~~E

ti~~~~g

O)~t'-lOtt:l1:O

~~~E~~ ,..; ,..;

~;~~~8 ~gg~et5a

m;g~~~~

IQlOl,QaQ'Q'O>

gi,ggi~1i

~=5~~~ ~~~CtJ~crro

S~~~Ci:;;:

~g~iiig ~-~-

~~~Sg~

!~~~~~

,

,

co

i!

~.,..cl

:I~():::>-'

<:I !il~'" ~r::::s< ~

FOURTEENTH ANNUAL REPORT 139

~ ~

~~~~~~

~~~~~~
140 SECURITIES AND EXCHANGE COMMISSION

,0

,0

:~

I

~~~gE~g~t1~~~~;

!~E~~~~g~k~~~~~ ~-....t"

~~8~8~g~~~~~8~

~~~~~~~~~~~~S~ .. .. C'1"

,

,

,

~~~~CD~:;i~ci:J:~~;h~~

Q:lQ:lSgSCtlQ:lQ:lOCtlQ)OQ:lO __ -1""'4 ... __ .-4

CUIQ;lCUQ;lQeueu<::l(l)C)eueueueu

~...,too,..,..,..,..,...,l"")...,""':1"""'''''

ssssssMssssss

00000000000000 ~~+='+:I~~-------- "'lfI&Qe:cf'ooOOQ)O_~('I')~lQfJ:lr-..

~g;g;g;g;~ct:ct:~;;ct:;;;;C£ _...-l,...( .... __

1»1»1»1»1»1»1»1»1»1»1»1»1»1»

'3'3'3'3'3'3'3'3'3'3'3'3"3'3 ..,...,..,...,..,...,...,..,~..,..,..,I-)"'"

, ,

1~ :~~

, :.8

S

";.0,8

,.... "'SS : gj ",.0

~~~~~g

~<aloz~

~S~~~g _lQ_COC'lc:l:l

Q:l"gg~g-~

,

,

00 ,

I I I

;>.e I

~ e"" : , E~~1:~a ~r;.,::S~..,

_ ~

~

'"

I
FOURTEENTH ANNUAL REPORT 141
142 SECURITIES AND EXCHANGE COMMISSION

I ............

I

I ~S~~~~~~~~~~~fg ~"'1'eo:IOO"'l:fOOO 00 1r,)"IfI Oet:C":I

.... '" f::~~;';~~ ......eo e-c-e- e- .,., I _lQ~O ....

.c'" _0 ...;..;~~~t:SO....1(J;)OOOc.£r;;M ~';";";~ci ";"';.Q~t-:.o ~cqco. _~cqC':lcq,"",,""'IO~O) _cqCol co O"" NI

N __

:::S

I

-<""

"'" I Ir,)_COC"lNO_"IflC"lOO..,.cq""M ~~~~S~ ...... CO::::O""'Ir,)O~tDC"l('l':lC"ltOOo)l,Q '.- ...." ,."

CO CO 0)""'0,"" COOOt..~ 1- CO 00 00 CO :--:t-- :~ ~~~~g-~fii~i~zfi Sci...:~r-:C'i :~ ,." I 080 I .,- C"IC"l """".... _CQCOC":! :"" .... "'

I

"" I

:0 " I 8~~~~~~~~~~~~~C":I~r-ceQ:ll'- 00 lQ 0"'" !NO O'H ... r--- ...... ICC":I C"l"'ll"_<o:t' ..... lC ., ., CQ OIC 00...,...,. toQl.QOOOOOCO

s "'" g-~iigfi~gg~~:i~i?i g~...;r-:O)M ~~g~;!:t ., ....

I

c:'I ___ ..,.

;; '" C"l ___ C"l C"l"':f'lCf:l

.c

" <5

I ",,0"" cqt- _00 t-.1'-00 >0 Ot- (01:l')""""M_ t-(01'-OOOOO

"'" a~~gN~S3oo~&5~ie~t:: ""oO)~o..,. ~a~~~~ "'~ oooC"':)t'--co_

""'.0

I

~~g~~g~-gs;igg~gJ" ~~~~~:i c:OM"C'ic:i"';e-i 0., _ooco

0"'" CO_Cl:l...,...,.COCtl OOC":lCOO) "o:I"C"I(O

r-. c€,....; ,....;,..;...; ei"";"';

,'" I ~~~g~~f::ie8gs~SS8~ OO)O'HOOOtO lQlQ_eQC"l""

",-

I .... 0 Q:l_ICt-C"lOO..,. COC'OCOOOlQ ~t;~~~~ t:~~~fii!:

-'" ~~~ig~~:i~g~~:igi eid~M.r;:o

E= ~~~&(0)Q:l ;;!i:S~~~ 0'" .t-tDC':)oor-.C)_O"':l"C"IC'I':leo:100-4

""~ I cr5'C'i ~~C'i"'; ....;~tQci,..; ,- I M NQCl)OMC00-4l'-OO0-4NQ:;ll'-tO l'-OQI.Q0-4C'1 &CtOC'lC"I"'I:l'e'Q

I

0- t-""lQlQ~r-c:.lQ~_""'C"IOO~

C'l~OO~_~CO_&CtO~C'll'-eQ ~ag~~~ ~&1~~~~ -".... .::: ~OOMcOcOOO~U-:>C;OO ci"";oo.Qoo C'ioo";-"';"';

'00.. ~~f3~~~~~:::~~fQ~~ oo":t'l'-~1'-o~

-- >.

I ",- I to"..OC'l_O)ClOOC'l{OO)"'t'COcqN flg~i~~ ~'o:1"OOOO"'l:l'~ '"

0 00 OOOO~Q0:l1'-o"'t'00Cl)ll':Il..-::''''t' O)t-o_t0 ,,~ 1_ l..'jCl0-4eQO~ I:QO) 0C'lQ:;l_"<tl 0<01'-001'-0<0

a _I::

I

igi;!~;i~~~~g~g8geir-:..;-~..; C;ooci";tiSoo

" I 09- C'I&C"'1'et:I_COll':l_cqNO-eeq et:I:~~~~ ~~~~~;

'" .$g. "';ei~

Z """,

" I 2:g~S58i:~g~~~~~~ to"'t'C"IC"IC"IeQ

cq_O)~.r-O

"'>' ~~:6~~~~:i:i:~~~g~ OO~Q:;l"'t'Q:;l 0",

I

~~~~~ci "";.Qo...,;tiSci -0

"0 :::~~~~~ie~~~~;Eo~ "'t'_C'I 10 "'t'O ~:;~~~:g '5= "';";-.Q'

Eo<

-" I 6~~~~~gfO~;c;;~~ 1'-01'-0'0:1"100.0(0 ~g~!~~ "'''' ~~fQ~~~ 0"'" C"It-et:It-.r-1'-o"<tlQ:;l~t-~OO0-4c:D

<;8 g~~~~~~~~g~~~~ g~~~~:2 O";O;.Q&r; ....;

I &Cet:I"'t'CO&C_ ~~~~g~

I "';~"";-C'ieici"'; ,..;...,;r:et5e1S

gJ" I 0'" ~~~~S8~~~~~~@g~~~rg~~ ~~~~g&j toil tQr-:u1'Q~.Q cior-:ci ";';"';ci 0 cf;"';';uS"';o <;8 ~~~~~;i I ~~~~~~a~t!~~~~a g?:5~~~~ _0

0 .... ...;~...;cici~,..; ...;...;r:et5r: Eo<""

I :

I ,

I

.c

"

0

E

I

e-, 00

"'" -e -e0 : '"2 , , , , , I I I , I I I I I , I I

lQtQt-coa>O_C">lIC":"'1"I.Q(Ol'--OO

ssaass~~~~;:c;~;;~ ,

I -------------- ~~Q,)~~ot::)Q~t::)c:;lQ;>QCJ , ~~s:ls:ls:lr::I~l:::lr::lCQs:ll:::ll:::l

::;::;::S::;j::S::3::S::S=::S==::S=

I-)I-)I-)I-),...,...,....,I-)~I-)~I-)Jo-:ll-) , , I 00000000000000 -----_ :1-0 :s,.;,.,: ....... _ ....... _----

I 'o:1"&Ccot--OOQ:;lO_C'lM'o:1"l.QcPt-- , :ll...;llll ~£s£s~8igsa;;;a;a;~~;~ : :tlElllES -------------- a ::s'€3_ I I

-3-3-3-3-3~:a_3_3_3~:a_3~ ~g,210~8 ::S~a~~~ I '3 :s g.l$ 0 <P

"'":lJo-:lt-)"'":lI-.,Jo-:lI-)Jo-:l~~~ ....-<woZA ~~~~.;

'"

sc

.,

::::

:5

.,

':i

;:: .~

.,

c;

'".-::

ee

e

'"....

sc

....

e

'"

.,

:s....

;;

'"

., f"l '"., Eo< "' oS -<: '0 ....

c 0 "'" '0 !'l. "" ec .... -e c 0

'" 0 g;

;:3 C) 0 ., H 0

;:: H '5

"& -< .!3 I '" ., Ci c; ... 0

'" '" 0

., -<

-s = "" c

.t,

'".,

.,

'"

e

....

!'l.

;::

"&

'"

.,

ee

;;

sc

'"

c

!'l.

c

d:

I

I'ol

..:l

I'll

-<

Eo<

~

-

'

' ~ ~~ ~

~

'"

~ _

~ __

~

~

~~~~~~~ ~~

~ ~

~

~~~~~~

~ ~

~

~ ~ ~~

~

~

~

~

~ ~ ~ r

~

'

~~
FOURTEENTH ANNUAL REPORT 143

....

..:t-"

i~;s~g :to_C"I_C'l

,~C'l~_C"I

ce cs ca cc cc ce ano 00 lC Ol r-; C'H'-tOC"IOO

gfJeE-~gf6-

~g8S~~

Qet:l_tO_M

~-g-cr~~-~-

~~~g~r:

_&t:lI.Ct-et:>e:>

_- ar5~-Mg~~g~~

M_C'\lC'\lOC

:£~gfg~-g;- '<$" .... e-.I_

r5~i~~~

uS ~~tQ-

...

o:>t-._'01'_tQ ~~~~r::~

t--r--- _-r: cl en- ____ C":I

?l~~~~~

$-~-gf~-~~-

... ..,

~~H~~~gH~~~~~~~g

~~-~~~-=-~~~~-i~~-g "';~"'e:.f

~gg~~8~~~~~~ii~

~~~f~f~rg~-g~ ii-~g-~-!1-~ _- -4~-r:QC"I-

~t;~~g~i~~g~~~g

g~ ~r~~-~-~8-

-"

:;;$

.0:'" _0

00.

=3

-<0.

""t~

~s

~'"

I'<

2l

<l :0

'"S '0'" e ... :l .c'" p:; '" 0

-e

"".0 "'-

0::",

r.."'''''

d.1!l

... 0::

:aa

0'"

8~

~- J<~

0", ... "" ii='"

'ff » ..:l ., -g1:i '0 0:: -< 0 .... :8 "" p:; S '0 .. ~.9 Eo<

<Zl ;;:;g. P <l Z i=l

Z 0 ~» .... ,;:J :::'" I _<l

.E .50 .. oS ... Eo< 0:

<

'" I'< 0

S -"<l"" "''''

c;~ -'"00

Eo< a

gj"

0'"

... bll","" -'""''''

_0

0'"

E-o""

'

_

: __

~-~-~~-~-~-~ - -

~

~

~

~

~ ""'"_
144 SECURITIES AND EXCHANGE COMMISSION

't-

"0

:u:

:e<

COlQt--ooo~

OCO ...... c:qOOl.Q

~lQOO 0

0; ...4' aO

~~~8~~ LQcqaQl-_ro

oo...".-oocq"'aSc:-f

;:!:~~~~~

I ~,

:

: e? i :: ~2.g- : :

a.g:;;~~

~f'«~<""':;

:~8~ :....-4 co..

0:>

,

,

,

, ,

, , , ,

::t1 :~al;laa ~~.s.g 8

~~£'8ZA

~g~~~g!i .t- OO

...g~~...g~

, ,

,

...."'ci .... ....-....- ---

~~S1gH~:g~~~ssH~~8

~~-t~t:t~"'~;i~gii~t ....;~-

~~~!~~~~~~~~~~ g-aii5~~~g~~~gg~

_-ci

i~s~~~~~~~i~8[8

~... __~t~"'~g~-~~~"'g~~-~ _-cq"'C'icQ

:~~~:=f;~f2~~OO::: oo~

: cc:lQ..."Otl 'itl_ ...u:CO...IQ... cc:~_ 0:. :~~ 8~iQsco~&5g:~~

: - -~- .

lBS:~gl~g:j~~~~i1i~~~

g~g~ifg~"'ggr2~g!-~

ci'_- ..4_- .... .-4"C'fC'ieO'

,

,

, ,

: :

~~~g;jgg;~~i~~~~

Q:I OloQ:l Q:I OloCD CQ Q:I Q:lCH~ Q:l0)0l

__ .... T""l _

...,...,...,...,...,...,...,...,p...,h...,...,""""

nnnUggUU

.sS.sS.sS.sSSSSSSS

I

~gH~~;Si~~~~~~~~ --_ .....__ 7"'4_------ -a--a--a--a--a--a--a--a--a--a--a--a--a--a- ..,...,...,...,..., .........,...,...,...,...,...,...,...,

~ - ~

""

:

'"

•

~

-

~~

~
FOURTEENTH ~AL REPORT

'" , . .", .'" : .. . , "'0 .00 00

"'" . .l:l'" ... :'"" :~ '" .'" .0 _0

0'"

=:t; . <'"

"" .00 '0 :~

t-a i~ :~ :'" ';:0 :"" :"" . ,,- , .. ill

00""0 .'""'" , '_Q:110

"'~OO .~"" '" It'--OOO .",

'" tz ... "'.... :C'-lO :~--:o: :0: S t:e-fco""

'" '5", """' .... :-~~ :~

::; 0""

J:I:"

'0 ~~i~~~~~~~~~8~.", ee

,,~ :;;s.~ 0'"

'0.0 ~C'-l-c? "';"Q"C' ..fot.Ou:rr:r-:6"';"': :,..c'll:l' t-:oO 0::", CO~~_lO~:::~COQ:l~~COCO ""~ ::l""

""

th~

I

~~~~~~i~~~~888.", ee ~'" .'" :~~ ... ,'" .. 0:: 0'" :0: -" ...""tl..."'fIt4... ....;..QC'-l-,..;t.Oad",..:r..:~ ...~t.O t"--crS'

&El O_C"l_lO_et)'<::t'COOf'-."'fIt4COt'- :.-l"'fltl ""~ :~ 0" _l.QC'-l C"-ll""l OC"l

8~ I

on ~~g~ :g ......... OI- ."' e- !S

:.:- . _d :e:~ ~;::: C'-l-ar . i_co °d.. '" :;:" ,

» ",,- et)C"I'o:tlt---OOCOl""lo:lOOO-OO_ ., 8~~~;jgf S5~~lEi~~ 0::= C'-lC'-llOC"Ir-et:l_C1Ct:lOO"'fltl'o:tlCOr-.

0 ~s Cl')lQCOOO.t'-_t'-co""OC"lIoQQ:lCO _CQr-.lQt'-o_ _C'4~~ .....

S Ole- cig-ggf~~g~~~"'~~~~ ~-gicQgtg g~~~tg

£g _C'I C"I_ C'lCQ

Z'"

~~~~~~~~g~~;~~ s~~s~~_'O:tlr--.(Ococ:n

C"IOOOC'lC":lC'l

"» lOCO t'-CQt-lOl-COCO:lOC'l LOCI lO COC"l'O:tl'O:tl_"I1'

_OI OI'" ....;C"'I...tr,i'ooo oco"'d'o~"'a:ietS'<tl"'C"I'" C"I"cQcQO~O gf~~~"~g- dO CO~~cq"dlOO~~(()COQ:lQ:l~~ C'lC"I CQCQe'I

"El Eo<

-" _OO_lQeq __ cot'-l'--COCf)COC'l ~~~S::;j~ _.0)_(0('0')

"'''' r...QOCO_I00000C"lOOOl'-l'-lOC't gj/il12~~1'l OI"" QOIl':IOOOOCQ'o:tlClt'-_Ot'-lOOCO OCQe"IlOt'-_

ai~ cQr-:'oio"';ricsS ~..QC'it.Oo_-c? gfcQ.Q~CO-O gf~~ita;f -" ~gg~'o:tl~~~~S~~;:$,;~~ CQC'Q~

08 E-oo.

l:'l" ~H~8?j~~~~~~8~~~oor-..o_coo O)COI,QOCQ"Itl

0'" ~~~g?i~ l,Qoco~ ....."Itl

!;;;al I.Ol.Ol.OlQ"ItlQ

,..:c£,.;,.;ui"..:.Q.."tcDcQ....;eD~rxS ~g:faQ~~g gf~g:icf&f -;8 CQlQO"'11oO) .......... o~~Lt:l .....

....0

_(01.0 l""'I~C'Q__ ..-4_CQC"I~

0"

Eo<'"

.l:l

;:;

0

S

""s ... 00

?!

?<" ~~~gigi~~~~i~~~~ ,

~Qo)OO)Q2£OClQQ)O~~

. . -------------- iV~Q)<:)Q)iV~t::lOQ)QQ<DQ)

=0::0::0::=0::==0::0::0::0::==

::l"'::l::l::l::l"'::l::l::l::l"'::l::l

t-,"''''''''''''''''''''''''''''''~''''''''''' . . ~+:>+:>+:>+:>_+:>+:> 00000000000000 __ +=o+=o+:>+:> :~ :t~ I>' : I

~~~ss;~~~~~~~~ ,

:.>'8~'8'8 >a.... 1

-------------- <Dog <:) <D :;;e73- : : »»»»»»»»»»»»»»

'3'3'3"3"3'3'3"3"3"3'3'3"3'3 ~!fg.~~s ~.g~~~ h~...,~~J-o:I""""""""I-a"""""" ..,--:",OZA ... ",,::.1--: ...

145

~ '" '"

'"

~

~

~~

~~

"' _

~~

~

"'" =

~

~

~

~~

~

~~

~ ~

'

•

. ~
146 SECURITIES AND EXCHANGE COMMISSION

g;~~g~

ei'

!,;;:::gj~~~

IQ &Q C'h-oj

...; .....

,

,

, } . ~~: i CIS :s,Q I

".s~'2l»~

~~::S~~

...; rD

,

,

,

,

, , ,

,

, , , , , I I I , I

:

I.e ...

:~~ .c.o ,tl8$88

::,6i,So~~

~.;jci~zA

~H:2~~~~

C'1C":lIl:lCQO~ ... ";CQ-

:; :~ .....:(0 ~oo

,

, ,

,

,

, , I , , I I

sgesa~~a;~2t~!~~ ___ ...-4 _

cPCV<1>Q)e:>~c:;>~c:;>(l,)C)c:>C)c:;>

aggggggggggggg

t-,t-,t-,t->I-"lII-)I-IIooo?t->t-,I-I"""i"--,'-"

££SS.8£.8.s.ss.s.s.8£

oottw:> 1:0 t--COQ') 0...-1 e-:lC":l.aoCOt---

SS88Sl88<l:C£Cl:C£Cl:C£C£C£

---....---.....------

~

_ ~

'

~~~~~~ _ ~

" '"

~
FOURTEENTH ANNUAL REPORT 147

co '0:""

"'::: :0:':

,

""

:""

:'"

1'- :l:'i :'" :""

,LOC":)t'-_Q)

: ...

;~~~~OO~~8~~~~~~~~~~~~~~~g CQ_C'<I co CO':ICPQ >lj

1 ,...; .,..; .-4- ..

~~OO~~~CI:I~~OO~~~~~~~~~~=~~~~OO~~~~

,...;

I ~

I ~

I

I -el~

I

I

I

I

I

I

I

I

I

I

I

...

o

'a

a

'"'0

...

a

Z

813892--49----11

~~~~~~~~~~~~~~~~s~~s~~~~~~

, ~ __ _

~

'"

~

~ ~

~ ~ ~ ~
148 SECURITIES AND EXCHANGE COMMISSION

I 6~

I

... :... i~:::.-f '''''s 1S

:1~~IIs ",,,

5£ 0 ,

S o~ 0 t=~a I

00., ;.-t r-- !Xl ;:: :eo:l~"Iitl .0 :I~~r co '" ! "00 d"'-

P-i=~

.c

:I"'" II0

'0 .st~~I ,- I_.-f_ .. : C"f_ "'<tl

'".c rJl~~~

E

'" I I

0..0 :00:~;e:!: -;:!:~::3 z :=: iI~gll~ ~oo 8

o~ I

~~:::~CN~~~t--~!_~: 10

_11_ 0'"

I ",,,

..0 : ~:.: 0- gj Of : '"... I ~s~~I~l'-OO :eqt--oo~ 0 ~~a :t-~~;COu:l_ :I

I000) OO~II~t--

'a dO-- I : ~u: t:

8 ~=~ '" I C'QlQ 00

'" .... CQ

'0 .:a"g,l.!

!

-e ee e-s co '00 0 oott ..

0- "';!:_I""l OO'l""'l :~-~~"'I ......

I

cc eq ~"'Il ....

lX)~C':l

~('II

.c ooB:a .- 8 U1 e VJ : .-t eq

Z'" '3 I

.~OO.~"~.~~~~~"'I.~II_ ~~~t- ~oottt--~ 0 ,!:ig Ii I 8

I o~ I C"':)O_l'ooCQu:lCO"d'l <o:tIoo .....

:' ee ee r 0'"

'" ",= -.:t'l~eqC"':) O:lO:l~_CQ"lt' LQ I t-'III:l'l

" ..0 eq .-t P"1_ I co_ 00

0- I ""r:I1"'_"' LQ'" 1:

d Of '" I i8l~~ :,"'''r ~"". tl.~ :::£l~~ i~~:::~ : ib8 S 0'" d"'- ... -- A..=~ : ~"ci to a>'" "&rr , 0'" -a-g~.9

1

"':= .. '" S~~~C'I:::8S :cooo<o<o., "'l:t'.-f I ~co r

"00 I oJ : .........;

..

'"

I .c ~O~~OO~~$_<O_OO.,OOI~OOliO 8 CCC'lCOCO co _1:--_C'lO 00""

'" t-- _C'Q eq..., ~"d'I 0

Z 8 00.'" ...

,~ SfacoS-~~t--C'lt--~ .... 0'" ",,,

as :I~~ll~ OC'l ...,

Of ....r

I : I-cor tl.!. t-t-_~-aQ rx)~1Q :~t-oC"':)LQ I 0

d"'- I t--co C'Q

.. &l.=~ I 1 l:

'0 ~].l.a

I .. ~~~~~=8~ :cooooo<ooo : "d'I"" I ~~::8 coco r .c'" a32~:a : -",_ ... 8 '" z'" '3 I ~~~~ ...~~~~~~:=:~001!~1I! 0

8

, , , :;;: - , , , 0:

8 , ,"l'

E , ..

o 0 , , ><: 'd

I

: c, "', 'S , , , z: " , , ",,' 1: , c, : :a: '0

I

, , , , '" I I I

I I' , I C3~ .s :ce.d.sii I I I I , :.g I I "-

;; eo " :~je] : : : : :g~ : : s~ 0; 0

...

I

d>O'J~A~ I '.w ,~.s~ 0", '5 d~O ~: :js.$.s>~- 8>- 8

0~""<9<9l:l[(l.g8.s'O-8~ 0",,, ...""[(lS!.!1l!>o o~~~~~~S>;;~~~~ Z

~

~

~

~ ~

~ j ~

~ ~~ ~

: ~

:

' ~

~~~ ~~ ~

~-

~ __ _

J

: ~ ~

~~~

~ ~

~ '

~

= \ :

__

~ ~

'"

'

' '

'

~

' = ' ' ' =

~ " ~
FOURTEENTH ~AL REPORT 149

TABLE 6.-Data relating to resources ana liabilities of reoteterea brokers and

dealers, 1946 and 1947 1

[3,284registrants]

1946 1947

Net capital

(No value given to fixed assets or other assets not readily convertible

into cash. Marketable securities included at their market value.)

Agl:(I:::~~~~TI~~de-borrowfngson e-xenlPtseciiiitlesSUch aiGovern.:- ment bonds and mumcipals )

AGGREGATE OF PRINCIPAL ASSETS

Cash in banks

Funds segregated pursuant to Commodity Exchange Act requirements

(Amounts which firms owe customers on transactions IIIregulated com- modrtres.) Cash and exempt securities segregated

(For particular purposes pursuant to requirements of exchanges or Federal and State regulatory agencies ) Firms' inventory of exempt securities at market value

Frrms' Inventory of nonexempt securrtles at market value

Customers' debit balances in cash accounts

(Due from customers on cash transaenons in secunties.) Customers' debit balances in margin accounts

AGGREGATE OF PRINCIPAL LIABILITIES

Customers' free credit balances

(Due and payable to customers on demand.) Customers' credrt balances in cash accounts

(Funds held for customers pending completion of securities transac- tions.) Customers' credit balances in accounts with open contractual commitments.

(Funds received from customers against open contractual commitments not available for delivery.) Customers' credit balances in margm aeeounts Borrowed from banks on customers' secunttes: On exempt seeurttres On nonexempt securities - -- ------- Borrowed from banks on finns' and partners' securities

(Exempt and nonexempt securities.)

$934,594,647 $802,942,042

2,487,523,472 2,077,287,796

622,402,899 576,912,204

50,032,196 89,838,098

24,238,958 21,096,628

810,342,478 534,942,147

798,325,807 609,999,960

283,069,724 213,396,373

754,745,609 540,803,528

712,794,382 659,241,014

153,322,390 158,125,884

36,079,761 24,029,191

72,924,740 98,693,554

111,727,143 55,806,142

246,657,286 111,414,515

978,738,125 714,806,085

IThis table shows the aggregate net capital and indebtedness of all registered brokers and dealers who

filed financial reports with the Commission as of dates in 1946and 1947.compiled according to the definitions set forth in rule X-15C3-1 of the Securities Exchange Act. This includes 528members of the New

York Stock Exchange who flied reports. 'Includes exempt securities $5,073,700In 1946and $4,241,644in 1947.

_

_

_

' _

_

_

_

_

_

_

_

_

_
150 SECURITIES AND EXCHANGE COMMISSION

TABLE 7.-Market value and volume of sales effected on securities exchanges for the

fiscal year ended June 30, 1948

PART I.-ON ALL REGISTERED EXCHANGES

[In thousands]

Number ~f~:t ~~~~l ~:f~:t Number

of shares (dollars) (dollars) (dollars) of units

Exchange

Total

market

value

(dollars)

Stocks I

Market

value

(dollars)

Bonds 2 Rights and warrant,

All registered exchanges 13,932,441 12,899,694

276 274

26 27 387

32

60

672

35,323

499

26

45

716

36,000

520 1,099

----g.-OOg- -----4.-gii

24, 115 26, 786

565 432

38 25

440

1,356,372

1,23516

16

21

88,048

1,265,232

1,056

4

3

996, 747

827

17

476

18

21

69,831

924,027

1,221

4

3

536,749

104

4,32028

7,532

369

648 3,597

11,176

42 80,393

387,568

4,017

1,011

280 15,722

5,845

11,466

2,513

88

2,450

175,335 165

202,282

13,uM

17,567

45,064

126,589

1,431

1,039,924

10,953,972

105,600

17,232

6,886

2,389 772 184,904

1,813

2,265

Baltimore___________________ 3,2i7

Boston______________________ 176,820

Chicago Board of Trade_____ 165 Chicago Stock_______________ 202,807

CinClnnatL________________ 13,080

Cleveland___________________ 17,612

DetroIL____________________ 45,064

Los Augeles_________________ 127,127 New Orleao.'________________ 1,452 New York Curb 1,117.763

New York Stock 11,902,114

PhlladelphlB________________ 107,3S6

Pittsburgh . 17,274

St. Louls____________________ 6,889 Salt Lake ._. __. __._______ 2,389

San FranCISCO Minmg_______ i72 San FrancISCO Stock_________ 186,096 Spokane ._ 1,813

Washington. .______ 2,511

Break-down of fiscal year totals by months

191,7 July .

August, .

September

October . ._. November

Decemher

1,147,337

792,903

782,213

1,316,206

875,510

1,323,652

1,059,466

727,356

718,325

1,224,903

804,962

1,173,884

44,032

29,191

29,037

50,769

32,004

48,739

85,253

64,886

60,326

85,862

63,949

145,181

109,385

81,063

80,312

121,655

87,497

186,213

2,618

661

3,562

5,441

6,629

4,587

1,813

471 2,612

4,967

5,273

4,422

191;8 January .

February _. . March ._. . . AprIL.

May .

June .

1,022,472

837,601

964,279

1,519,655

1,803,929

1,516,654

922,917

774,839

895,906

1,430,602

1,713,482

1,453,052

39,194

32,278

38,712

61,013

73,527

58,253

98,892

60,126

67,051

87,151

87,363

90,704

134,381

84,508

95,180

132,534

119,745

123,899

663 2,636

1,319

1,902

3,084

2,898

929

2,058

2,735

2,046

3,592

4,405

See footnotes at end of table,

_

_

_

_

_

_

_

_

_

_

_

_

_
FOURTEENTH ANNUAL REPORT 151

TABLE 7.-Market value and volume of sales effected on securities exchanges for

the {isealllear ended June 30, 1948-Continued

PART 2.-0N ALL EXEMPTED EXCHANGES

[In thousands]

Stocks 1 Bonds' Rights and warrants

Total

Exchange market

value Market Number Market Principal Market Number (dollars) value of shares value amount value of units (dollars) (dollars) (dollars) (dollars)

---- All exempted exchanges 9,899 9,724 786 175 178 ----~--.-- ---------.

---- Colorado Springs 515 515 217 Honolulu. -. -._-------- --------.- ---------- 6,004 5,829 415 175 178 -.- ---------- Minneapolis-St. Paul; 2,524 2,524 139 ------_.-- ----.----- -----.---- Rlchmond

Wheeling. 491 491 7 0 0 --.-.----- -----.---. 365 365 8 -.-------- -------._-- -------._- ---._-----

Break-down of fiscal year totals by months

191,7 July 726 711 63 15 15 ---.----- ..-----.--- August 779 779 51 0 0 ----.---- . .---------

~:~~~~: :::::::::::::::: 725 718 50 7 7 ----.--.-- .--------. November 1,001 999 68 2 2 ----.----- .--------- December 768 768 95 0 0 ----.----- -----._--- 992 991 109 1 1 .-------.-

1948 January . 915 817 58 98 100 ---_.---.- .--------- February .. 898 895 63 3 3 March . _. 836 787 72 49 50 -._------- ApnL _.

May 764 764 61 0 0 ---------- ., _. . 766 766 54 0 0 ---------- June ._. 729 729 52 0 0 ----_ .._--

1 "Stocks" includes voting trust certitlcates, American depositary receipts, and certiflcates of deposit for

stocks. , "Bonds" includes mortgage certitlcates and certificates of deposit for bonds.

NOTE.- Value and volume of sales effected on registered securities exchanges are reported m connection With fees paid under sec 31 of the Securities Exchange Act of 1934. For most exchanges the tIlffires represent transactions cleared during the calendar month. Figures may ditIer from comparable figures in the Statistical Bulletin due to revtsion of data by exchanges.

____•

___________• ---- ~--- _________________• --~---- _____• __• ________• _____• ----------- ________• ___• _____•

_________________________

___• __________________

__________________

•__________________ ----------

______ ___________• __

__________ ____• __ ---------- _______• ___• ___ ____

•• _______________• ___ ---------- ___•

•

_______ ________

____ ________________ -~--------

---~-~---- ---------~

___ 4 ____ 4.
152 SECURITIES AND EXCHANGE COMMISSION

",- I I I

",0 ~~~~g~~~~~~~~~~~~~~~~~~~~~ o

:;'" 15 I "'- .l:l lila '" ell

"'0 a;'"

I "0", ell a; b~$ "0~1:~ Eo< ~~~~~~~~~ci~~~~~~~~~~~~~~~~

",,-~

~g) I

gs8 I A<~

'"

I ~a I - I 5

.l:l

I g~ I '" ell I .,

:g~ a; I ell a; ol-

"'ll:: "0 I ;jo Eo<

-='a5 ,tl I z:$

,;:- Sgj

0 A<o@ I

I I I ~~OO~~~O~~~OOOOOOON~~~~~OOoo~~~ e ]8 ., I -5 ~~~-~ -~~~--- -~~ "" I .l:l S ~ll:l I ell

'"s -.,

I I

ell

'0 "'o:l ;jo Eo<

.bog

I ..- I "ol .l:l-

'" -- A<~ e 0 0

,;:

.s I .,-"" I

I I , , , , ,;:0;j I 1i , , ,

2

I !J .l:l I , , , .9 6~tI) '" I ell I , , , "5 -=8

I I 0_

0" ell

",0"

'" g"'''''!J Eo<

~oo= I

1; =:--,s I ... ~-b.c

I ~g) ce"C'O p. ~OOrn A<~ 0 I Eo< I °

I 8.,S I I I ~~g88~~~~~~~~~~~;~~~~~~~S~

"'"," I s;:: I ---- ---- I ""., rn _0 .. I

I

0.8 Cl3

I "'I» ell a;

~.s~ 1;

- - Eo<

~~-a~

I

oo=--t:>

I l.~ I

~~i$ "gj I Eo< A<o@ I

I - I -r I - I 5

""", .l:l a.sl to I

elll I I :;j Eo< I

I

I

I , I»

ol I ""B

I ell'" <- "" .... ., , , ,

"" I

'" I ., , ,

"" I I I ., I I I I I I I I , I I I I I I I I

0 : : : : : ::: :::::::::::: I I :

~~~~~=~~g~~~~~~~~~oo~~~~~~~

I ~~~~~~~~~iiii~~~~»»>occd

I

"

~a~~~sE~@~8~8~~~~~~~~~~~g~

~g8~~~~g~~S~~~~~~~~~~~~8S~ ~ ~~~~~~~~~~~~~

~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~~~~~~~~~~~~!~~~~~

~~~~~E~s~S~~~~~~~~~~~~~~

" " ~

'"

~ ~~ ~ s~~E~~~~~~~!!~~~~Ss~!~~

~

~ ~~ ~~~~!re~~~~~~~~~~~~m~~~~~!

"

~

~ ~ ~~~~~~E~;~!~~~~~~~~~~~~~

~

~ E~~~~E;~E~~~E~~~~~~~~!~~i~ ~

~ ~ ~

~

~E~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~g~~$~~~~~~~~~~~~a

~ ~~~~~~~E=a!~~~~~~~E!~~~~

~ ~:~~~~~~~Ei~8~~~~~~~~I~~

.~~~~~~~~~~

~ '

"

•

~

~~~~~~~~~~~~~8888zZZZZAAAA
FOURTEENTH ~AL REPORT 153

~~~$~~~~~~~~~~~~E~~~8S~~~$

~~~~~~~~~~~8~~~~~~~~~~~~~~

~~~~~~~~~~~~~~~~OQ~==~~QQ~

~~~~~~~S~=~~~g~~~~~~~~~~~~ .~~~~~~~~~~~~~~~~~~~=~

!~~~~~!~~~~~~~~~~~~~~~~~~a

!~~~8E~EE~~~~~~g~~~~~~~~~~

~~~~~~~~~~~~~~~~~~~~~~=

~~~~~~~~~~~~~~~~~~~g~~~~~~

~!~~Ess~~~~~~~~!~~~~~~S~~g

,

, , , ,

~~~~5~!~~s~~~~~~~~~~~~~~~~

~g~~~~~~~~~~~~~~~~~~~~~~~~

~g~~~ss3~S~~~~~~~==~~!~~~~

i~~~~~~~~~!ig~~~~~~~~~~~~~ .... .... ....

;~~£~S~~~~;~~~~g~~~~~~~~~~ .... ........

~~~~~~~a;~~~g~~~~~~~~~~~~~

~~~~~S~8~S~~~8gS~~~~~~~~g~ ~~~~.~~~~~.=~~Q~=oo~£~o~oooooo •• I • , I I I , • , I I'

I I "1 I , I I I I I ,

, I I I I I I I , , I I , I

I , , I I I I I I I

I I I I I I , 1" I I I

I , I I I I I I I I

I I I I I I I I I I I I I I

I I I I I I I I I I. , I I

I I I I I I I I I I I I I I

, I I I I I I I I I I I I I I

, I I , I I I • , I , I , I •

, I I , I I I , I I I I I I I

, I, , I I I I , , I I I I

I I I I I 1" I I I I I ,

00

, , I I I I I I I , , I I I I I

, , I I I I I I I I , I I I

, , I I I , I I I , , I I I

I , I I I I I I , , I

I I , I I I I I I , I ,

I I I I I I , I I I I I , ,

. • , , I • I I • I I I I I I

I I I I I , I I I I I I I

I I •• I I I I I , , I I I

:: :: ::: : :::::::::::::: ~~~~~~~~~~~.~M_~~-~-~ :: :: '''': I :or--: . : :.oC'i~~-~~ :C'i~ I

~~~~~~~~~~~~~««

=~=~~~~~~~~~~~~~~~~~~~~~

~~~~~~~~~~~~~~~~~~~~~~~~~~

-

•

•

'" •

•

'" •

•

'"

~ • r

•

~~~

~~~~~~~~
154 SECURITIES AND EXCHANGE COMMISSION

- -0 ~~~s--.eqeq ~H2~~E;~~~g t--~_eq

~~~gg .... _C"Ie-I

gj 1;;~ O>_MCD

gj .0:1 OO"';:fs~" £~"c:n-l.Qt": "'f11-~r--"'cQ 1Q-r:r:rIS :::::::,-Q)-co-aQ"lf4- -.zf-.ri.QM-

..., S.::l ... "'''' 0

C; .;J Z

"S -0 OO"d'lCO ggl::55S " 1;; ....n-oo ;!!~ ~$~~~ ~=~S "" "",.~ CQeqC"'1i __ C"fC'f __ .....

S .0" '0 .s S'E :g ",0

0 Z

c; '"

I

ooo~t-- C\!:-o:tcor-- C"'l_e"IOO ~$~~= ..... ...... '" ~~~gj " 8~;;;~ _algs~~ ..... C"IO) .....

'0 0(0_1:"1 !,;;.,C'.:8 ..., eq-'fj5-o"'co'" t~-~i@~-CQ-c:i_-_- ~;i~rfi fi$~;g~ cQco-Cf!a6' 0 ...,.$ -t- ~",~l:: C5~~&5 ;:£gjt!:1!2 "'~ .....-o:tro 10_00_-.:11

'0 ."10 ~-~"gffi ~o:So::SlL'J"'tr)- ~r:arttS C"f-_"'co"o '0 C!l-~~~"~ 8fgi~l:l' ...'0

0 d~ I ....-.......... ....--- C"IC"IC"IC")

.s I

e -0 OOHX'I_ lOt-COlt:) ~;X;:i5~:d '000:.0

S :g ...

~r:~S eg551:5~ CQ .•-4C:'':)000:. g;,;;eg'l

~-~~~O;-;S'o01:f"'" gg~£i"i2:2':8<i ~~~r~g_-.....;.Q...tt

s 0 co .....OHQ

g Eo< s"" ;;; ... ... s;l <=>~'" coco .....co

» Z"'''' .0

'0 -0 ~~;;~ .....~-eqC':l 1;5:;;&51;; ..... MCOt- ~g~~~ ~~~8 0 l;iB~lll~ ~~~gt '" 1;;f; _O';IQ,M t"-O)._

.0'" ~-;{c{~- eq-co"co"u:flQ- Cf)-o:SaS~'" gfc;fgfgf ~"et:l-,....-_.. s'E 1:"1_--- -....-- C'",,,,, ",0

Z

ggcocno !JiCO.lXlOO ee ee ee es ot:lt-OOlO :;;;::::~:g~ &;:g~iij '" 0; .....~;:::f6 ~;;;~IO ....Q:l,CC"<l"l 0) ":tlt-C"l oooot-.-I CQOOC"':l_ OC"':lCC":tlO

:;!; go;-..;..; ~~-pJ~C'i «rarS"oot-:'" S't!~-~ ~~~~g ei~-~-oi' ...,.$ lQlO":tlOO '0 i::~~8 "'0 ":tl~i2~ Q:l,cDC')CC~ ~Q:l~Q:l CQ":tlc;q1.O 0 ~'O g~gf1'l' ~-~~~-:=:- cD-flSo-Ct"J- cigfe:f~-gf ~oc""; S2 "'~ INC"I(QC'f.) .,.,<"1 o~ ::g ...--"

~g -0 81~~~ I:~~g~ r-.~~C'i Q) ...._C") geocooor-. t- ....1O.t- :!:~~;) <=>ff31;5g~ ego Q:llOO~ t-t-t'-t- agJ ~-O-OO.Q :g-~-~-~-~~'gf•.s8 ci'C'feo-....

~-g .0:1 c:DO":tlLQ ;B~~~ ~ii~~~~t~~

~.;l "I#ll'--l'--CO ...",:2 ... "''' "'"'

»... Z .o~

- s....l::;,;~ O~~O""I if:~g: ~~Sg~ 0 ~_l'--M ee ... ., t'-t--":tl0""l "'ltlg5lQl'--c:l:l O"l#lCOO .......<=> .g ... s-~-~-~-e-r~-flSeS~- lO-ocfoot-- ,0'" c:fl:l"C!fi!l' ~-~~gf;! g~j:~r~ 15 s'E C'I ............ ,...-j ....-....- P< ",0

Z , 0

,

,

, ,

0

, 0

, , 0

» , 0

ee , '0 , ,

B ,

, 0 0

ee , , 0 0

'" t- 0

'0

<> , , '0

<: ,

."I"

<>

, 0 I' ••

~ai::;~g ~ci~~ ~::i~~ ..Jcxi~fJ~ ci~~~ ;>.>.>.>. biJbilbiJtli>t:il ...;~..;...,; ...;.-i....,;~ dc.ic.i~

"3'3"3"3 "''''''''''''' """"co."" c:.>c:.>c:.>o G:lG)a;l(1) a;la;lcPa;l

~~~..., -<-<-<-<-< ClItlHDCO 0000 AAAA

~~~~

~

'" ~~ ~ ~~~~ '"

~

~ ~ ~~

~

~~~~~ ~~~~ '" ~~ ~

~-~~-~~

'"

~~

~~~~

~~~~ -

~~ ~~~~ ~~~~ "'

o

~

'"

~

~~~~

~~~~~
FOURTEENTH ANNUAL REPORT 155

;E~~~~~~;~~~~~~~~~~~~~~~~~

g~~g~~~~g~~~g~~~~gg~g~~~g~

8~~Sa~~~g~~~~~8~~~~~~~~i~g

~~g~~~i~~~~t~~~~~g~~~~~g~~ ...-lg~~;~~g~~~~~~8~~~!~~~~~~g~

~~~~~~~~~~g~~~~~g~~~:~g~~~

, . ,

,

,

o

.c

rn

..... .....

~

~

~
156

.:c.,

.,

fX>-

...

.,

..0

!:

.,

!:

c

">e

'"fX>

...

ec

..0

!:

.,

!:

'cfX>

;:l

c

<>

<>

e

...

ec

""

e

-e

<>

..00:>

.........

(5<:0- '7;;

.:c~ 0

... ., a

'0 ~( -e

0

iJi 0:> 0

...... 0

-;;cc~

-;:l

<> ....

.,

fX>

l::

c....

'"

fX>

e

.t;

.:c

<>

.s

fX>

">e

c

">e

e

;:l

c

I

0

.....

r;il

..:l

P'l

<

E-t

SECURITIES AND EXCHANGE COMMISSION

o.." I I

I .E:~ I . "'0 s

.c:

.Sl r:Jj

"

I ~5 u.l 3 ~~~g~;~~~~;~~~~~~~~~~~~~~~ 0_ 0 "0

.i:l", Eo<

b~ '" I "i"6 '0 ~~~~~~~gg~~~~~~a~~~~~~~~~~ -eo

-eo S~ 0" Il<.g I

",. I .

I ~~~~~~~~~~~~~Q~~O_~~~~~~~~ 00 ... "' ... 00 s ::;0

'" .c:

~o , oS xn I 0", ee

I ,,~ I m

'" .i:l0 "'0 ~Egg~~8~~~~~~~~~~~~~~~~~~~ "'Of5~ I Eo< ... ----- ...; ---- "i"8~ I -e E

I

I

~.9 8 ~E~~~~8~~~E~~~8~~~~~~~~E~~ I >::: Il<li ...... ----- ...; 0 ---- I I I .

I ~1.Q~"':tl_C'O("q_ ("q_C'O("qC'O"':tl~~~C'O"':tl~C'O_I.Q~("q

sa I S € "'0 .c: :50:: .; I u.l

-",

I

'5.c: ca

I 3 ~_I.QC'OO~OOC'O"':tlC'O~_OI.Q~"':tlI.QOOQ~O"':tlC'OC'OO

iil~ ~OO~"':tlC'O~("q ("qC'OC'OI.Q~C'O"':tl~"':tl("q"':tl~~I.QI.Q~~

oll:l 0

",0 Eo< :~0" I E .c:.- 0;::: 0" 0 Il<.g E

- I

I 0 . C"I

:_C'l_cq_C'l~C'OC'l_C'\l ...... 0

0 .Eo.. S € €

~g .c: 0

'" 0 u.l 00:: 0

" ,

I u.l '" C'OO~~~O~~"':tlQI.QOOC'\lOC'OO_C'O~OC'lI.Q~~~

iil~ C\lC'\lC"l___ C'OC'O"':tl~I.QC'l_C'O C'\lC'\l_

'" 00 "'0 0 ,,0 Eo<

oS

'5

:~ '" I ~~~~~~I.QI.QI.Q~~~~~~~~~~~~=~~~~ ~$ '0 '" S~ '" ~:::: 0 0 Il<.c:

11 0

,..!,.c: I

I .

I OC'\lC'OooOOC'OC'OC'OC'O~~C'O~OOOOO~Q~~ ~~OO~ 0

"'0" I --- - 'g~~ I S

I 0 ec .c: 0 Po 0 oS I co 0 "'o~ --'" ee

I >::: oO'}"@) u.l I '" S~8g~~~~~~~a~~~~~~~~~~~~~~ ...0 0"" "'0 ---- -----~- ------ .g'£f Eo< 'b0'}03

iil.8 >. .1'1 I 0"'0 g~~~~~~~~~~~~~~a~~~~~~s~~~ 03~..c: S'" ---- ~---- .... ......... o..-~ Il<li

I Eo< 0

.

I ~~~oo_~oo~~~oooo~~~~o~~~ooooooo_ "'0

__ ~__ __~_~oo~ __ _____

S ~O'} .c: 00 eo "'-

eiil "2 I ~_=_~~~~o~~ooooo~_~.~~~_~~~~

:< "'0 8~~~6~~~g~~g~~~ag~~8g~~;a~ Eo< I I

I ,

>.

"

-e

ec e-, -e -e- 0

""0

...'" , 0 I , , , I I I I I I I , I I I

, I , I , , I I I , ", I , , I I I I I I

~~~~~~~~g~~~~jd~~j~~~~~~~~

I .... ~~~~~od~Q

~~~~~~~o~££££~~~~ZZZZZAAAA

~ ~

~~ '" ~ ~~

~

~ ~ ~ j

'"

~~

~

~

'" ~ __

~ "

'"

~ ~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~ __ _____

~ ~

~ ~~ ~~ ~ _ __ __

'" ~

~~

~

~

~~ ~ ~ ~~~ __

~~ ~ ~

~

~

~

~

~

~

~

~

"'

~

~

~~~~~ ~~~~~ ~~ ~~~~

~

~

"

' " • ••

•

~ ~~~~~~~~~~~~~
FOURTEENTH ~AL REPORT 157

,

, ,

,

,

g~S~~~~~~~~~~~~~8oo~~~~~~g~ - -...

~g~~~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~_~_~o~~~~~~~~roO~~~O ~------- - - ~~~~~8~~8~~~g~a~~~~~;~~~~~

-- .... ...;.... ,..;.... ...;"";ei"';"';".fci"';"';"';"';"';

~~s~s~~~g~~~=~~~g~~~~~~~~~

...- .... .... ,....i,..;...;...;,..;c:i ........ C'iei...;...;...;...;...;

~~~~~ro~~_~_~ro~~~_OOO~~~Oro~~ cq ...-I ~eq

~o~ro~~~ooro~_~ro~ooo~~~~~~o~~~ ~~~~~~~~ro~~_~Orooo_oo~~~~~~_oo

- -- - -~- - ~~~~~~s~~~~~a~~~~~~~~~~~~~

O~eqeqeq_eq~ __ eq_eq ___ roeq~_ro eq_~C'il

€

~~~~~~~~~~~~~~~~ga~~~~;~~~

=~~~~~~~~~~~~~~g~~~~~~~~~~

oo~~oS~S~~~oo~~~oo~~~~~~~~~~~

=~~=~E~~~~g~~~~~~~~~~

S~~~8~8~~=~~~~~~~~~~~~~~~~

- -- - --------eqeq-----

~~~8g~~~~~~~~~~~i~~~i~~~~8

---- -- ...;...:...;,..;...;....C'i...;...;Ctici...;...;...;C'ici

,

, )

ct> , ,

,

,

I' , , , I I I I I , , I I I I I

I I I , , I I I I ",, I I I , I I I I

:o~~~~:~~~~~~~~~~~~~~~~~~~

~

~~~~~~~~~~~~~~~~~~~~~~~~~~

~

"" "

' "

~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~~~~~~~~~~~~~~~~~~~
158 SECURITIES AND EXCHANGE COMMISSION

TABLE ll.-Special offerings effected on national securities exchanges for fiscal year

ended June 30, 1948

Number of shares Value Ag- Number of offerings

of gregate by duration

shares special

Num- sold comExchange ber In (thous- mission 'I'erml- Other; Not

made orfg- Sub- ands (thou- nated termi- ternnmal scribed Sold o!dol- sands in 15 nated nated

offer lars) or dol- min- same sams lars) utes day day

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

Ali exchanges Total. __________________ 2.; 367,899 336,409 332,999 8,503 222 12 10 3 Completed __________ 20 265,459 271,615 268,205 6,173 173 12 7 I

--- --- --- --- --- --- --- --- --- Not completed ______ 5 102, 440 64,794 64,794 2,330 49 -------- 3 2

------ Chicago Stock Exchange: TotqL 3 20,412 20,412 20,412 254 9 2 I Completed __________ 3 20,412 20,412 20,412 254 9 2 I --------

--- ------ --- --- --- --- --- --- Not completed ______-------- -------- -------- -------- -------- -------- ------.- -------- -.-----.

------ --- --- ------------ --- New York Curb Exchange: Total. 3 26,618 26,618 26,618 202 9 2 I Completed 3 26, 618 26,618 26.618 202 9 2 I

--- --- --- --- ------------ --- Not completed ---._--- -----.-- -.------

--- New York Stock Exchange. Total. __________________ 19 320,869 289,379 285,969 8, 047 204 8 8 3 Complcted __________ 14 218,429 224,585 221,175 5,717 155 8 5 I

--- --- --- --- --- --- ------ --- Not Completed _____ 5 102,440 64,794 64,794 2,330 49 -------- 3 2

--- --- --- --- --- = = __________________ --------

__________________ -------- __________ --------

______-------- -------- -------- -------- -------- -------- --- --- == --- --- --- =
FOURTEENTH ANNUAL REPORT 159

TABLE 12.-Secondary dzstrtbutions of listed stocks approved by national secul'ities

exchanges for fiscal year ended June 30, 19481

Number of shares Value Number of secondanes

of by duration

Num- shares

Exchange ber sold Others Not

made Available (thou- 'I'ernn- termi- termi- In ongi- for dis- Sold sands nated nated nated nal offer tnbution of dol- same next next lars) day day day

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

All exchanges:

TotaL .... _...... ___.... __ 83 6,337,947 6,422, 459 6,347,361 152, 803 49 21 13

------ --- --- --- ------ --- Completed _____. _._._. 78 6, 169, 578 6,255,520 6,273,290 150,019 49 18 11 Not completed __. __. __ 5 168,369 166,939 74,071 2,784 3 2

--- --- Ohieago Stock Exchange: TotaL __.......... _...... _. 16 271,372 269,572 269,572 16,785 10 5 1

--- --- --- --- --- --- ------ Completed. _.. __. __._. 15 267,872 268,372 268,372 16,763 10 5 -------- Not completed ... _____ 1 3,500 1,200 1,200 22 ----_.-- __ w _____ 1

;1 17,700

--- --- ------------ Detroit Stock Exchange: TotaL •.. •.. •. .... 17,700 17,700 318 2 1

Completed. _.. ____.... _.--.-~-I.. -~:,.:~. 17,700 17,700 318 2 1 -------- Not completed_. ______

New York Curb Exchange: TotaL .. .. •. .. ... 15 512, 226 508,483 507,191 10,022 9 3 3

--- --- --- --- --- --- --- --- Completed __.. ____.... 15 512,226 508,483 507,191 10,022 9 3 3 Not completed _______.

---'= --- ---

124,9871 22

--- --- New York Stock Exchange: TotaL. .. •. .. 43 5,517,303 5,607,358 5,533,552 12 9

Completed __.. ___._ ... 39 5,352,434 5,441,619 5,460,681 122,225 22 9 8 Not completed. ___.. __ 4 164, 869 165,739 72,871 2,762 -------- 3 1

--- St. Louis Stock Exchange: TotaL._. __.. _. __.. _... __.. 6 19,346 19,346 19,346 691 6 -------- --------

------ --- --- --- --- --- --- Completed, . __.. __.... 6 19,346 19,346 19,346 691 6 -------- -------- Not completed ____... _ -------- ---------- ---------- ---------- -------- --------

I Secondary distributions which exchanges have approved for member participation and have reported

to the Commission.

-----~-- --- --- --- --- --- =

'" _ _ __ _

= __ _ _ _ __• __

____ __" ____ __

= ---- ---- --- == ---
160 SECURITIES AND EXCHANGE COMMISSION

TABLE l3.-Classification by industry of issuers having securities registered on

national securities exchanges as of June 30, 1947, and as of June 30, 1948

Industry

Agriculture..; _ _

Beverages (distilleries, breweries, soft drinks)

Building and related companies (mcludmg lumber, building materials, and construction)

Ohemicals, drugs, and allied products

Financial and investment comparues Food and related products

Foreign governments and pohtieal subdlvlsions thereof,

Foreign private Issuers other than Canadian, Cuban, and Phllrppme Iron and steel (excluding machmery)

Maehinery and tools (excluding transportatron equipment)

Merchandising (cham stores, department stores) Mining, coal. .

~1l~~~E~~~;~~~~~~~::::::::::::::: ::::::::::::::: ...::: 011 refinmg and distributing Paper and paper products

Pnnting, pubhshmg, and allied mdustries Real estate

Rubber and leather products

Services (advertising, amusements, hotels, restaurants) Textiles and related products Tobacco products,

Transportation and communication (railroads, telephone, radio) Transportation equipment ,

UtilIty holding companies (electnc, gas, water)

UtIlity operating-holding compames. Utrhty operatmg

Totals

As of June AsofJune

30,1947 30,1948

8 8 53 53

!lO 93

84 89 127 130 109 109 73 70 56 56 78 76 202 206 167 )fiS 19 19 225 221 38 39 53 52 37 39

38 39 21 21

16 15 36 36 49 48 66 67 18 18 245 238

173 173 36 31 15 15

£3 80

2,215 2,209

TABLE 14.-Totals of security issues admitted to trading on exchanges as of June

30,1948

As of June 30, 1948, 2,575 stock issues aggregating 2,837,496,642

shares and 964 bond issues aggregating $19,224,375,537in principal

amount 1were traded on national securities exchanges as fully listed

and registered. An additional 487 stock issues aggregating 393,831,-

339 shares and 101 bond issues aggregating $928,518,196in principal

amount were traded on exchanges in other capacities, making a total

of 3,062 stock issues aggregating 3,231,327,981shares and 1,065 bond

issues aggregating $20,152,893,733in principal amount. The bases

for admission to trading and the number of issues admitted on each

basis are given in the table below. Where an issue was admitted to

trading on more than one basis it has been counted once for each basis

of admission to trading."

Stocks Bonds

Basis of admISSIOn to trading

Issues Shares Issues Principal amount

Registered _______________________________________ 2,575 2,837,496,642 964 I $19,224,375,537

Temporarily exempted from registration 21 4,186,725 7 70,098,000

AdmItted to unlisted trading privileges on regis- tered exchanges ________________________________ 895 1,879,267,852 97 1,598,058,596 Listed on exempted exchanges ____________________ 124 113, 206,614 8 26,447,000

Admitted to unlisted trading prrvileges on ex- empted exchanges. 42 11,192,108 1 140,000

1 This principal amount does not include the aggregate amount of £29,122,620 of 8 foreign bond issues.

The I!'SUes themselves, however, are counted under bond issues. I Almost all of such issues consist of Issues registered on an exchange which are also admitted to unlisted

trading on other exchanges, amounting to 542 st ock issues aggregating 1.524,790,273 shares and 12 bond Issues

aggregating $766,225,400 in prmcipal amount.

_

• • _

_

• _

_

_

_ • _

_

_

_

_

_

_ - - - - _

• _

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

_ - -- _

_

_

_

• _

___ - _- ___

_________________- ___________
FOURTEENTH ~AL REPORT 161

:""

'0 ,lQ

i~;:2 .

.ec

:'"

.",,,,

.r-",

:""

.",0>00

o :c:~~~

:~t'-oof2

:lQ :-g8!;~ :~ 0>

:

,co 'co :,~~oE?:t :;:: ::,~ ",.~~-- : ~:-

~~~~~~~~~~~~~~;~~~~~~~~~ ...;

~~~~~g~~g~~~~~s~~~g~~~~~ ",'

_~_~lQ~~~~~~o~~~e~O_~MlQOO

~~~R~~~~~~~~~~goo~~o~R~gg

MlQOO~M~~ __ OlQ~~lQMO~O~lQ~~OO ~~~_~~_~~~ ~lQ~~~~~M~~~

M OO~~_ M

...;

I

I

I

I ~

I

I

j

-o

!

~

•

~ ~ ~

~
162 SECURITIES AND EXCHANGE COMMISSION

TABLE 16.-Number of issues admitted to unlisted trading pursuant to clauses 2

and 3 of sec. 12 (f) of the Securities Exchange Act of 1934 and volume of transac- tions therein I

[Stock volumes in shares; bond volumes in dollars of prineipal amount]

N arne of stock exchange

Number of issues

Admit. Remainted total ing June 30,1948

Volume

reported

for the

calendar

year 1947

Percent of

total 1947

volume on each ex- change in

stocks and bonds reo spectlvely

Aggregate

volume

reported

for the

calendar

years 1937

to 1947;

inclusive

Stocks pursuant to clause 2' Boston .... _._ .•... . . . •. ._

Chicago. . .. .... _. . . "_"

CineinnatL .. .•.. _. •. _. .. . •... Cleveland •. .• . . Detroit.; . . . ._•. Los Angeles _. . .• .. New York Curb..; .

Philadelphia . .

Pittsburgh .• _. •. _. •. _._ St. LoUIS ._._.

Salt Lake. ... ._. ...• _. ..

San Francisco Stock .. . .. . ..

Wheeling •....... ,. _. ., . .. .. ....

TotaL ..... . .... .. _. ..

82 276

40 39

30 30 29 29

71 68

63 61 6 4 97 291

50 49 5 '4 I I

38 '36 6 73

524 491

542,673

1,528,461

113,460

106,692

489,461

496,282

1,466.110

502,983

126,309

27,513

6,100

638,904

408

6,04.5,356

12.9

22.2

32.9

16.4

144

50

I 7

127

13 2

10.0I

63

58

3,619,800

9,269,346

681,039

733,865

3,104,918

3,.544,60.5

5,688,990

2,343,401

1,309,740

49,414

35,633

2,696,89.5

15,564

33,093.210

Stocks pursuant to clause 3. Chicago .. .. _. . . .... _. .. _.

New York Curh ... .. . . ..

Total stocks. .... _. . ..... ...

1

7

532

1 .. ..... .... 13,986

6 650,065 .7 1,931,851

'498 6,695,421 . . . 35,039,047

9.8 $123, 929, 000

1 .... •.•.. ..... ...

I $818,000 .9 $12,955,000

2 739, 900 100 0 2,276, :aJO

16 $9,:~I1,OOO

1

3

3

42

Bonds pursuant to clause 2 Los Angeles .. . ._. .. ..

New York Curb . ._ .... .

San Francisco Stock. ... _. .. _.

Bonds pursuant to clause 3 New York Ourb.; . ..... .... ..

Total bonds. _. _. .... . .. _. .•.. 20 10,758,900 .. 139,160,:aJO

I For enactment of clauses 2 and 3 and procedure thereunder, see tenth annual report under "Unlisted

trading prrvileges on secunties exchanges" For volume reported in each of the years 1937 through 1944,

see eleventh annual report appendix table 18. For subsequent volumes, see tables in subsequent reports.

I Only odd-lot trading is permitted m 6 of these issues.

, Only odd-lot trading is permitted m 1 of these issues.

Only odd-lot trading is permitted in 3 of these Issues. I Only odd-lot trading IS permitted in these 4 issues 'San FrancISCO Stock Exchange figures include San Francisco Curb Exchange figures prior to the 1938

merger. 7 Wheeling Stock Exchange ISan exempted exchange. All other exchanges shown are registered exchanges .

34 of these Issues had been removed as of June 30, 1918. , 'I'hrs figure mcludes duplications arising from admission of various issues to unlisted trading on more

than 1 exchange. The net number of ISSUes admitted as of June 30, 1948, was 260 pursuant to clauses 2 and 6

pursuant to clause 3. iD 29 of these ISSues had been removed to June 30, 1948, principally on account of redempnons,

__ __ __ _

_ _

_ _ _

_ • •

• _

• _ '" •

_

' _

__

__ __ __ __ __

__ __ __ __ __

__ __ __

__

__ __ •• •• •• __ •• __

__ __

__ __

__ __ __

__ __ __

•

_ " __ __ __

__

__

__

__

__

_

_'" • __ __

__

__

__

__

__

__

__ __

_

__

__ __ __ __ __ __

•

•
FOURTEENTH ANNUAL REPORT 163

,

'"

"

c

ee

...,

.,;

o

21

Z

a

a

o

o

813892--49----12

~

~
164 SECURITIES AND EXCHANGE COMMISSION

o

A

,

o

'q
FOURTEENTH ANNUAL REPORT 165

o

,

,

... ... gJ ::li 000 g s 0 ::l ...",

0 0

"" 0"", 00

g ",' '" .-: t.3t-= .,; 0

"" '" '" ~:g '" 00 ee '" ee

.,; .-: ;c' ci'.-4 .... ... 00 ... .;

<> t 60 ~.s ... - .", :0

'" '" :-= 0 0 .5 00 ",'" e 0 t 0 Zg 0 .'" .... I'< " "-< :> 0 ;. ....- 'O~ r;. 0 "'~ "'0:Q 0 o>, I'< .s ~" '" "" '" ci.i~~ ~ ~a ! .s .a o~ ci..E I'<1l'l '" ti;: ~::rl~~ $ CJI=: do .....

.Ef 0-'";::'1= .~ 1;", ~o .. " o~ OJ

oS ... '" " ril gSt)~8:a~lllo~g E

"S~ .~:a -.c c'O ~p 0 s:lQ U1 0

Ei ~O > . ~Ogf;l;l~d ~~w~:a E

J Il'l"" a~8 C7.l.c,"",,~oa i.c~ ~ril 0

0 0 ",,= W •• ogP:1oP-fd s e s ~+-=> .... =.!!l ,,~gj ",olj golj.g s::lil.< -e "2

fa . '" ",- =~o 50 ocil 2l~ ",,0 ~s '" 51'< -g~"C5 go "SQ 112 ",0

0 I'< I'< w P

~

'"

~

~ '"

~

'"

~ ~ ~

=

~ ~

~ ~

'" ~ = ~ ~~ ~ ~ ~
i66 SECURITIES AND EXCHANGE COMMISSION

<=>

<=>

<=>

€

...

,

cO

!!

;:; <ll

~ ~

~
FOURTEENTH ANNUAL REPORT 167

o

o
168 SECURITIES AND EXCHANGE COMMISSION
FOURTEENTH ANNUAL REPORT 169

o ....;- ec

~i

, .. 000

iii

:~~~!~!

:ct)etSr-:«)oo~"

:~~~~lQ8

:~~ g :

.-.,.

:c:r:

.<0

.00

:~..,.

:~

,

, . ,", ,-'" :8: .

'0:0

: :fi;

""'l< :~: :~~ . , :0 :8o'"o(j o80~ :~O~ o 00; :CJ~~" ,,; -cE.E~ :",O~.s ..d

~~e~:~f~~rgE: &1~ &e_'.~.a 8.;....0

o(j~a8gz8~~~

~ofD!i3~~~=<$.g °03°05 CJ~~~j;a:E-aij""~ a a co S-a~<U1

o.:s$::H'IJ~oo~~gj

]<Ciasgs<CiCif<1CJCJ

El :E

< 0

~ ~ ~ ~

" ~

~ ~~

= ~~
170 SECURITIES AND EXCHANGE COMMISSION

8 ~ 8 ~

r:

."

..'" :~",' :0 , :tid

:~a I~O

:;~

i~~

..,," :-g

:.:: .":0

.";a.":0

..

:9...

:.g

,,:: :0

d

"

...,

.....

:'"

:~

.",

.....

:~.....

.", :0<

<--

0< ",

.... - ~l':

, ""- <-0

.,.

.

.

.

.

.

BB00 , .,.,

r;ar;a

~~- ~
FOURTEENTH ANNUAL REPORT 171

:,d

'",

15

1- :21 .t-

• • 0>

.0>'00 00 ,..,. . :~~

,."

, 0> ,'"'

:...;

'0:0

::: 00 Q co a)(':l .....

"";cQt..= ..":J~OO e-f ...-lC":l C")CCl aQ '0

<cOOLQC':l- QO

eQ'''':t:''{-LQ-''''' -: 0) ColO to

..

:~

.0

:[8

.,,"

',," i~

,,' :~

:~

.

. . . . :~, ,

:00 :e~:Ec : :0j :;~:8 0 :t~ :.s : :0

1~t3 I

QZ ::=e : :8~

g~g :~ :~o . :o:.,~ ~~: : d 0 :~O d I 0 .... (JJ... :00 :~ rnO :0 :s =-== '-- :~~o :~~~ ~~~8gg :t9}idOB>

gj,,"=c;~~ :p,pj;looCl0i

~.sl~8~~ :gjgjfilgj5-a~

Ii; os'" S<P'E~3 :ii~c;~~~ e e:cQ~ .tOCDas-::::o,!:l:l

~ffClS g g1:t:~i~o~='E"3r2~= ~ZZa5~~goo~$~~~

.s o ell

""

~~~~~ ~•

'"

~

~

r : :

~

~~

~~~ ~~~ ~~

~
172 SECURITIES AND EXCHANGE COMMISSION

,

,

.

0

~, ,

o : 8 o~ : ~;gQ ,<:ll"<o .... .a-s~ 4)

m~-a

,,-'g ::l '" 5:... 0 E-<,;;Il< :ig i

~~£ ~

I I I I I I

,

:0.,<:l

.."

:s

:a

:.g

'OIl

:~

::11

1:::

I I I I I I I I I I I

,

,

: d ':~:g :g : g : :tD I

I I~:O 1:= ' , , : :::: ':<i ,1~ : 1 :i~J~ ~ :~

:eSc1~~~~.E ~:s : d ::E'dUJ=g~~ Ib/,) .g'!'CJOC I

: :;;.s~0 (C a : e : ,::::,' ifi: i~~:::~::: ::: :0 iE-<

&J

go

t

'69- I I I I III

I ~a;~~fJ8~~

~~~fg~-~~~

I ~...;...;.r:r:e-i"'!fl'" ~__"'IItl ~ce.. eQr-. 1""""1

I~

I

I

i

~

o

'

"

~

~

" j

~

'

o

o

""

•

~

~ ~~=
FOURTEENTH ANNUAL REPORT 173

,

ooood

""""""" I I I d I , I

O , , ,,

, . :~

:;i I I ;1> I ,

:" .:~o:o: :'g "4

:a :~~~ :O:p.,: :

:~

:~,'":~'0,..,.

,

,

000

~or::~

, ,

I I

a1d :~d

a~ ;.~~~ ~::::>J : :

.ec

:~.0>

i~,'":'"

~

~

"
174 SECURITIES AND EXCHANGE COMMISSION

,

o"

~ero

...."'... -_ .... '" .. ",-

..

:,g

I :~

. :","

,i~.

I :.5

I :a

'0

I :fh

I 1~

,

, , ,

.. :.E!

11;1')

:~'u::I I I

oS I i~I :

addS'$d

~~~gg~

t; : :S= : ;;.: :~I-t:

.

,

, ,

::si~i::~ I :~~!8'or:J

'Q~8- :Oa OOo~"a)-S 'E10 0i:::Qci~: aI

~=~oc. :8;:

e.soo~~ :P=lc:, r:.~QQ~O :~o -eJettOt :J:o J..I1iie:~~e: :~k

~5ooo(lO"E1~

ooPo<Po<~Po<O::l 0

': >.o(lo(l~o(lSI:l:Po<

~~~i~~'g!

~~~~~;:S~~~

c.c.11~-~ 0':1 ... ,s..9.s.sI'l.s~it:

c3c3.s.s .s;:g~Z

.

,

.

, ,

,

.-:~.."

..,.

:c:

,."

.... :'"

, , . , , , ,

,"

: j1. : :0 ,0 ,=- ,0 :'g d d~~~~

:.Q~~ g~ 8,Q

:00: :""0==00

: ::~

' ' , I I

~

'

•

~~~~~~~~~ ~
FOURTEENTH ANNUAL REPORT 175

eo

o

I

..

fo

~.

o(I~

l;;E-<

. oCo

~S

I

I 'g~

"''' iii::J

'M

""j~

:~,'"'<'I :'"

~

~~
176 SECURITIES AND EXCHANGE COMMISSION

TABLE 20.-Number of applications and declarations received and disposed of during

the fiscal year ended June 30, 1948, under the Public Utility Holding Company

Act of 1935

Section and description

Sees. 2 and 3-Exemptions from provisions of the act, __ Sees. 6 and 7-Issuance and sale of securities, alterations of rights, assumptions of lIability

Sec. 10-AcqUisition of securities or other assets Sec. 11 (b)-Proceedings instituted

Sec. 11 (e)-Plans for the simplification of registered holding companies or subsidiaries tbereoL

Sec. 11 (O-Reorganization under sec. 77B of the Bank- ruptcy Act

Sees. 11 (g) and 12 (e)-Solicitations of consents to trans- actions

Sec. 12 (b) and rule U-45-Loans, extensions of credit,

donations, and capital eontnbutions to associate companies

Sec 12 (c) and rule U-46-Payment of dividends out of capital or unearned surplus

Sec. 12 (c) and rule U-42-Acquisltion, retirement, and redemption of secunties by Issuer

Secs_12 (d), 12 (0, and rules U-43, U-44--Sale of sec un- ties and utility assets

Sec. 13-Servlce company regulation

TotaL

Number Number pending at Number Number pendmg at begmning disposed of fiscal filed of close of

year fiscal year

34 17 20 31

96 360 394 62 48 176 194 30 62 1 1 62

69 12 7 74

3 ------------ ------------ 3

21 22 29 14

11 48 40 19

11 21 22 10

40 48 63 35

74 201 211 64 10 ------------ 1 9

479 P06 972 413

_

_

_

_

_

-- _

_

_

_

_

_

- _
FOURTEENTH ANNUAL REPORT 177

TABLE 21.-Reorganization cases instituted under ch, X and sec. 77-B in which

the Commission filed a notice of appearance and in which the Commission actively

participated during the fiscal year ended June 30, 1948

PART I.-DISTRIBUTION OF DEBTORS BY TYPE OF INDUSTRY

Number of Total assets Total indebtedness debtors

Industry

Prinel- Subsid- Amount Percent Amount Percent

pal iary (thousands of grand (thousands of grand

of dollars) total of dollars) total

Agricultural . ------3- ------i. Mining ------6;iii" -------ii-36- ----."{2i2. --------ii-36 and other extractive . Manufacturing . . 9 4 Zl,Zl8 1.56 17,301 1. 52 Financial and investment •. 5 1 91,529 525 54,125 4 76 Merchandlsing . •. 1 1 1,135 .06 981 .08 Real estate.r., .. ._. . 40 3 235,765 13.51 232,775 20.58 Construction and allied. .. .. ------_.---- Transportation and communicatlon, .. 10 5 320,354 1836 294,296 26 03 Service ._. ._. . 7 '--'--6' 25,470 1 46 16,756 154 Utilities: Light, power, and gas 9 1,037,032 59.44 510,102 45 11

Other: Religious, charitable, etc ._ -----.------

Orand total ---84 21 1,744,674 100.00 1,130,548 100 00

PART 2.-DISTRIBUTION OF DEBTORS BY AMOUNT OF INDEBTEDNESS

Number of debtors Total indebtedness

Range of indebtedness (thousands of dollars) Amount Percent of

Pnnclpal Subsidiary (thousands grand

of dollars) total

Less than 100 . •. . _. ._. 4 7 404 0 04 100-249. . ., .•. .. •.. . _. . 5 3 1,424 .13 250-499 . . .. _' •.. . . . . 6 3 3,508 .31 5IlO--999. .• . •.. . _. . . . 12 4 11,739 1 04 1,000-1,999. . . _. .. .. 13 17,391 1 54 2,000-2,999. . .. ... . . .. _' 9 1 25,586 2.26 3,00Q-4.999 . . . _. . . _.' 11 43,452 3.84 5,OOQ-9,999 .. . . _. . _' . . 8 63,820 5 65 10,000-24,999_ •. .. .. . 12 190,438 16 84 25.00Q-49.999 . . .• ._. .. _. ... .. 1 1 61,654 5 45 Over 50,000. .. .. . ._. 3 2 711,132 62 90

Grand totat.; .• . .. , ,_" 84 21 1,130,548 100 00

________________• ___ _____

•• _______ __•• ___ ___ ___________

___ ________ ___• ______ ___ ____" __

__ ___ _____________ ________ __ ------------ ------------ ------------

__• ___• ___ ______ __ ______

_______

_____ ------------ ------------ ------------

_________________• ___

_____ _____ _____ ___' _____ __________

____ _____ ___ ____ ___ ____ _- ' __- "___ _____ _____ _____ ___ ____ ____ ____ __ ___ __ ____ _________ ______ ___ ____ ___ __ ___

__• ' ____• ________• _

_ ____" ' ____"

___ _____ ______ ____

__________ ______ __ ____ __ __ _____ _____ ____ _____ ___ _____ __

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

------------ __________ _____ _____ _________ __ __ __

_____ ____________ __ __' ' ____"

'

_____ __ ------------

------------ __ ___ _ ______• -____•

______•

___ _______ __ ___ ____ __ _______ ____ ____ _____ ___

________ ____ _____ __
178

co

"l0:>

....

0'

<r,)

'"

"l::l

"t:l '"

.,

...

<:!

;:"

'"

'"

<,::; '"

'"':S

"".....

;:;

"l::l

"l::l .,

t:l

R.

..

'"..

-.:

<:!

R.

c

..

ee

'"

...

;:

c3

':S'"

..0::

'".. ..0::

;:l

..

'"

""

'"

sc

'"

c

...

R.

c

..

<:;

'"

...

<:!

""

...

c

'"

I

C'i

C'l

i'1

...

-<

E-i

,

I

SECURITIES AND EXCHANGE COMMISSION

, I I I , , I I I I , I I I I I , I I I , , , I I I I I I I I , I I

, I I , I , I , , I , I , , I I I I , I I I , , I I I I I I I I I

j : ; lJ ; 1 ; 1 1 jJ i iJ : lJ : 11 l 1 iii iJ : iJ : ! 1 i i

0''0 I I I 0" , , , , Ib I 0' '"0 0''0 ,0''0 I I , , , I I , '0"0 I 0'''0 , I ,

: : : :~: : : : :~: :~:~~~:~~: : : : : : : : :~~:~~: : : : I I I "'1' ", I , 'I I I

,

.

0 '0

: : iJ : )))) 1 ) ( 1 : ci j)~ ))): 1 : ) ) 1 1)) : 1 ) )

: : 1.:l i i i i i d : ;0 : i ::~ i:: : : : J : : :~:~ :: : : : :'Q : : : I :0 :o.g : : ::: ~:P! :::~:::.5 : :~'B I : : ~:g :E' :8~:0:8:.s :0-S:: :80,: Eo:::-a:: :cn~: :SHO:: :°8 :8 :~Jor: :~ ::; :t:~ : : :-=8 :~ :8 :~ :d :'E~ : :<i~ : : :~~ : tJ)~~C).s ft :-; d:e dt5f;!;l J :d80 cJ~.:: : : :0 ! 8:5 : :o;g~ e. : :~~ I=-~"O *,08 ~Ob ~~~.s'0 ~5b I ~81:t= ',8 d~ S ,c.~ 0 , '13 .c .. ,",~P-I U)~$O~~ ..o ... (J :» 8 :<:C~ -oci._Q~O OQ. :~P1

~~88~~~~ ~O~::/::~O~C,)~ e~;'~~ ::a ~_ :~~a~~o~~.cstlD8 : a) a

0Eo~8g~~o~~~~~~~~g~85~~~~~ :oo~~~o~~~~~_ leE

.z asc ~<~~~:o;o~o~:s~!:; i~oooQ; ~~? :~ g 8.~~~ !3;a:a e80~ s~ g~ f a d~~~-g d~'8P=l~a:~ ~~~tD°o~.cs8 cn~ 8 g2 ~5~r.o O~~~5gg~~3~~~a~~~~Q~ioog~~o~~s~-~ooE=~~~ E~i~tii~~oail-<!~t1iig~~115~iso-<A~~AI.~Jfi~ ~~= aa a~ =~~f88~g5~~~~o~ f~~aai -<-<-<<-< <-<~~~~~~ooooooooo AA A~~~~~

~j~~~~~~~~~~j~~~~~~~~~]~~~~~~~~~~~~~j~~~~

" • •• • •

• •• • •• • •

t j j : J

• ' '

~ ~~ ~ r • """"

~

~

~

~'

'

'

~

'

~

'

'

~

~

~

~

'

~ ' 1 '

~

~ i ~ ~ ~~ ~ ~

~ ~ ~ ~ ~= ~

~ ~~ ~

~~
FOURTEENTH ~AL REPORT 179
180 SECURITIES AND EXCHANGE COMMISSION

, , , I I I' I,

.~ I~ :~

.g ~ ~.g~~ S.g.g.g.g.g.g ~ ~ C go : : :r~ : : I : : : go : : :Cl::~ : : i :~~

, I I I I I I I I I

, :1'1 , : , , , , , , , , :~ , I I : I' I I , I I I

~~~.g.gx.g~.g~.g~.g.g~~

.ci :d :.t:i :::::::d

O:aJ '0 ::: i : : a5

" ' " '

' , I t , I I I I :

~

~~~ ~

' r

I

l

I

i
FOURTEENTH ANNUAL REPORT 181

TABLE 23.-Statistical summary of all cases instituted by the Commission under the

Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility

Holding Company Act of 1935, the Investment Company Act of 1940, and the

Investment Advisers Act of 1940

Total Total Cases Cases Cases in- Total eases Cases in- cases pending pending stituted cases stituted closed closed pending Types of cases up to end up to end at end at end during durmg during

of 1948 of 1948 ofl948 of 1947 1948 1948 1948

fiscal fiscal fiscal fiscal fiscal fiscal fiscal

year year year year year year year

--- --- --- --- --- ---- Actions to enjoin vtolanons of the above acts ________________ 520 503 17 22 20 42 25 Actions to enforce subpenas under the seeunnes Act and the Securities Exchange Act._ 49 45 4 1 5 6 2 Actions to carry out voluntary

plans to comply WIth section

11 (b) of the Holding Com52 15 12 pany Act _____________________ 65 13 27 14 Miscellaneous actions __________ 12 10 2 3 0 3 1

Totals ____________________--- --- --- --- --- --- ---- 646 610 36 41 37 78 42

TABLE 24.-Statistical summary of all cases instituted against the Commission.

cases in which the Commission participated as intervenor or amicus curiae, and

reorganization cases on appeal under ch. )( in which the Commission participatedpending during the fiscal year ended June 30, 1948

Total Total Cases Cases Cases in- Total Cases cases in- cases pending pending stituted cases closed stituted closed pendmg

Types of cases up to end up to end at end at end durmg during during of 1948 of 1947 1948 1948 of 1948 of 1948 fiscal fiscal fiscal 1948 fiscal fiscal fiscal fiscal year year year year year }'ear year

--- --- --- --- --- Actions to enjoin enforcement of Securities Act, Securities Exchange Act, and Publtc Uttlity Holding Company

Act, with the exception of

subpenas issued by the Com64 64 0 0 0 0 0 mission ______________________

Actions to enjoin enforcement of or compliance WIth sub- penas issued by the Oomrms8 8 0 0 0 0 0 slon __________________________

Petitions for review of Commission's orders by CirCUIt

courts of appeals under the

vanous acts admmistered by 134 13 10 23 15 the Commission ______________ 142 8

Miscellaneous aenons against the Commission or officers of

the Oommission and cases in

which the Oommission partrcipated as intervenor or amIcus curiae ________________ 112 94 18 18 10 28 10

Appeal cases under ch. X III

WhICh the Comnnssion par- trcipated _____________________ 92 89 3 10 13 23 20

--- --- --- --- --- --- --- TotaL ___________________ 418 389 29 41 33 74 45

813892--49--14
182 SECURITIES AND EXCHANGE COMMISSION
FOURTEENTH ANNUAL REPORT

;i :::-;:;-

183

,

,

.9"

.g , @

....; Pl

....

.co~ ;

'E

;::

~ ~ ~

~

~

~ ~
184 SECURITIES AND EXCHANGE COMMISSION

,

~" :sg

""

~
FOURTEENTH ~AL REPORT 185

00 <Q

,

,.:i 3 ,.:i ,g

~j J

-<

I~~~~~ , g ellI~~~~~

I

~- ~- ~-

~

o

~

~ ~ ~

~
186 SECURITIES AND EXCHANGE COMMISSION

,

..,

,

,

r.i

g

£

A

~

~
FOURTEENTH ANNUAL REPORT 187

, , ,, ,

00

11

.... ""

.",

,....

:~

.0

00:>

::;

:"'"

.

.-

1° ,..,

,<>

, .. ,-

:~= , '" ~E.a

'd~~

:~~ :"'l

'"g

"'"

'J

o

I

SA

'

~~

o ..
188 SECURITIES AND EXCHANGE COMMISSION

,

.s

ll< i ~ ~ e- <I> .g ;> c'5 -<

!If

'"

~
FOURTEENTH ANNUAL REPORT 189

.sgi 20>

""d a~

~..;. -:;;0

S"'1la1

~~D

l1.l
190 SECURITIES AND EXCHANGE COMMISSION

,

.s

s

>

U1"

...:

c,

-<

g- r..:

~ ~

~ ~

~ ~
FOURTEE~ ANNUAL REPORT

... <0 r- r- ec !; !; r- r- ... ... ...

<5 cO gj .,; ",,' 8f <:5

"" "" "" "" "" 15. ...; .d .d >. >. > ,; c. " '" e> '" .., '; 0 0

ell 0 fz< fz< '" "' Z Z ell

...- , , , ,80 ,80 ...- , ",-

, "'- -'" .,;'" , al~ ",.~

0. ... 0. ...

~~.s 0.-

<~:g , ~.o

0"""S , 0"" S -d -d -d 0 .ci 'E +"'Q;l,9 0

;:; <::

~=8 g 0 0 ::l '" !:!' s~o '" ° .a IE ell'" r>< 0 ell'" fz< E- o ell

~'" S ] 0 0= 0 0" CJ , .~ '" 0

f :- <::

:: '" .0 ,s ~-:- "'0. " .0... " 0 ell _0

ell 0 .0 <: l:fO 0(10 ell 0 , 0(1 '" '" 0 r-:I~ ",- .E -" 0 CJ ~> =.0 '" 1:: <:: ..:I CJ '" "' ... oJ:!> 0 '" '" t: Za! ~..:I

c a '" ii:: , E ~e S.5l

:E~-: :0 g "'-

.d r><0 ... .0

0. 'iO ::l iii ~S6 CJ -= '" .g .::l- -< i5Po<

~~o @ 0

'" .::l ... Z'" gj 0

'" <:: gj ",OIl >. ~"

.5Po< gj r>< " a "8 a.:s a (i).!

-"l 0 :;;; '" .a IX: 0 '" ~i'J' 0-t'C 0 :a 0. "' "" ",.::l III

-z CJ :- :>or>< --'" ",,,,- -z " Iii " -o ... "" "'~ = .0 .s " ;; =0 -"'" S <:: .a .a ,sPo< t;lZ

'" '" 0 <T,/ Po< Po< P- m iQ Cll Eo< r-:I

191

~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

~

~ ~

•

= ~ ~~~ ~ ~

~ ~ ~ '" ~ ~

=

~~ ~~ ~ ~~~ ~ ~
192 SECURITIES AND EXCHANGE COMMISSION

8~~~8!!~l

~o.>tE .~~.E>

~rg~O:a;a:agf

~~.2~~.sg8.s

S s... S~ Q = ="0

~~E.8'8-E-EoE

~g;8.~g88ciS.

'" ~~~~s~~f@8 gj f 8~<'dq:;- ..o~ <> ~~go~~r-::-a '0

E ~8.'~~f~8-;~

~~~8og~~~ tl ~:a.c r:lc. .°8 e: 'd

.: ~r5~-;t gr cr<~ ee .8.E!z.g ~<:o:r-:od

S

0 ::: ai e g 5:~ <:: ~~~;:~ oZ'3,g 'd ,I:1d"i:.E-ggO'OI-)O

a;'" ;~~sa!o=s.w 0.

0. d~~E~~~~~g

'" ~~~!.!lo~~:as .: ~.-.: sOiS ~'"

..9

1> '8~s~ uiQ:a 8 ~ '" ...g~c;o~~~~ .:

.9 .~=o~G'I"g.s:a~-;

.~ ~ClJrno~<:qCtJgt:8

"8 ~~:goo>.i~.e

S 8+'> C) .0 o."t:l Wl~

0 0.5 E o.~"" o.~J:: r...

0 O~Q)'8<~::s;ag ~:::5C3=~O:Sg ~o+:>+:>O_t:G)o.= ~tr.I"E 0 p'd {1)_

~CD~ 8 ei 0 ~:di~i

~~"Ca:a$~"Cr:rn

;!:-tAS-g f~ ~~8 .Qtr.lg 't:I rn

~t~8:g~~~~ -<.: o;;.:cigj r:lE~.so 8.~~ 0

I ... ~(f:I ei

! ~'" '" -0.

.:l8, '"

:s

....

.... "3", 00

-0 <>- .!!l_ 58. ~o gjo. o.~

~-< a..Sl

"'- -<~ ~o .....$oi u.l~

'dg

~8 i~~ 0:5.= p 0

,

.

0

0

<>

1i

<> ... f=1 .:

.g 0(1

:g

Il. '"

'a

.:

B

I

..

'"

00

"to

......

<::>~

.,

>:!

;:g

.....

-e.,

't:l

>:!

.,

....

e.,

."

<:l u.l

0 <:> Z

'I:; '" I-<

eo A

f=1 ':S f=1

l:>l 0

.>:! .,. 0

....

;:! Il.

-e 8 l:>l Po< >:! ..,.

't:l f=1 >:!

., 8

R. Z

'" 0

"" 0

>:! ..,.

't:l :;' ec

., I-<

<:> 0 Q

....

R.

R.

;:

.,

c3

I

cO

<:<l

Iil

..:l

I"l

-<

E-i

~-~-g o~~~~~cq-~ge~"cDg~ Cl to • 8 G13::sd_ >.~ s... 0. • ""t:rj

~~!J 8 ",.. ",.2 0 1;'d -< C3~~~"C-g~~~:~~~z;~~ ""'SS~~~d<~o~g~'d~~~

s~g~~:~~~~OO~~~~

E ...O~<t)=M=' .t:PC=~CD~-~.::~dO ~is~o~-~~8~~~S:~~~ O~~B~~~~e-o~~~a~~~

a~8S~~~~~;~-~~£~~~ oS OOm~~~=~~~~-~ ~o~~~~~~~~~ o~B~~oo ooOooE_ ~~~CD~$ ~~.

~S~~!2~~~~~3!OoaE~

~~apso~w~~o~o~~~~~

d=s~~~~~~~85~~~~~i ~~o-o_ ~~~~M~ QSOo~=s~~;o.~~ea5E 0 ~~~,..., bD.8.c: O::a I::Cf;a I:) e~ e

'0 .p.,l-ogdrn,...,1t:lo.o~<S::0- 0""

088. :::I a>'~~ a>""';g;o d:::~~E~ .

3 a~s£~~~~oo~-OS~05~'"'~ >=0= .o-~=dtO"'oe8P-1';:;P-Io(g ..:::0 0 0::= = o.>a0~cq,...,"'l:j = (',,) - u.l o~~e dE~ .5~==od~~~O t:4-...b.Oo. .~gl-:lS5~p".gd-C.9Q)3; . ===-<~o=~=Qoo'"'o.~ag-'"' ~~E~~~~O]~~]~~~e~~~ ::SCl3g.S::~~1-< .Q~080O'J~Cl3"CCO ..... aoOO:::l::l1t:l~ 0'" =_ ....:::1 ....

'g 0.~~1:g'iil~ 0. .8.s g- g.l!i....0. ....... "'l:j -0.0 rno~~= ~8~a ...~,",~~~~~~o=O~8£ ~d~"'l:j~~~~~~:::1~~~8 -::::1=

-:~oo-g~ ~~.o g.sr:~ a~:::Ias'S g

I ~~~~oo-S~~~3~~~gf~~S

>< d~ .ci.i~ = 8 8 g g.~ goo e.g o . Q s= 00(1,} S.w ;=: (I,) Q,.c:;CD"g ee Zt13 ~~s~'C~ou s......,:l It:' I::

...J~ 8.~~ S'~g~~~E~~~;;,tj g -E~~!.'E8.s s;a~ f ~.a~a s~ 0 0

ee '" ~:i ... ;;<:l gl e{ ~iS

~B. '".: ci 1-<8, :s

.... '"

....

,

, '0 . 1l~ . 1>

"'0 . B

000 is.; 'd1>

~:s .. se "'''' .: ",.2

PO .<:1- 0 ~a; .. go

u.l

1il d> !J

I

'" ... 'S'd

=-'8 zo~

,

ci

'1il'

!J .. ,

.. 'd 'd

'd'" a;

1 0

'0

f 0

Il. 0

:s

'" &l <:l

S. Il.'" t!~ .<:I '" -<

~~ ~

~

~-~ ~-~~~~~~-~~

~-

~~~~

~ ~ ~

• ~ ~

~ ~

'"

~ •

~ '" ~ '"' __

= ~ •

~~ =~ ~

~ ~

~ ~

~ ~

~ ~ ~

'" ~~ ~

~~ ~

~ ~

~

~

~ ~

~ '" ~ ~ ~

~ ~ ~

~ ~

'" ~

~ ~
FOURTEENTH ANNUAL REPORT 193

,

, , ,

, ,

...:

.... "";;:: '"

00 'Cl

r-: l>o

'" -

0

z

--... 0

'"

0_

O.:l!:Z -'"

~A .

~e:E 1=:1",0

.~~ <> coo", -e

.!!3.Z

::>

Cl

'"8

:oi

e

;:l

..,

r}J

.. e

t;

...... .:;:

~

~

~

~ ~ ~

~

~ ~
194

r$

0:>

'"t::

;:l

....,

'"

t::

sc

...

e " '"." gj

'"'0 .,

<.> ., 'l:!, ::I

'" S

-s .,

"" "" I'l

t::

... So. "

e ;:l

"" z ...

so

R.

"'~

<:l ......

;:l

<.>

.,

;:l

.~

s

<:l"O

.,(1)

<:l::l s.E

... 00= ~o '"'"'al

-""!" ;::

.:: 0)

.,..... e

'"

.e-

<.> ...

e

e

R.

0

.. '"

0 .,

., 0 ...

;:

;:

8

-s'"

<.> ...

s

...

.,

'"

., 13 8 '0

I co8

C'l Z" fil

,.:l

III

..:

SECURITIES AND EXCHANGE COMMISSION

,

,

,..:

..;

:>=

o

z

~

~

~

~ ~

~

~

~

~

~~ ~ ~

~

~

~ ~ '

~

~

~

~

~

~
FOURTEENTH ANNUAL REPORT 195

.,,; >. .: "'''~

~a~ '" "'--"'- C. , <~a::l ... ., '" , -g~"d to

~g.s ad' ,

~~.=~2b '" .... rg" .01- ?j _.c..c.:~(Og~~~-~ uS or

oil >. ci :;:; 1"""1 Q,) >"0. ., l:) 00'0:;_ " " ..., -< 0

-<;::0 - t: ~- ~- 0; ...0 0; 30

" l:l 0_ 0 8- "

o~ "

"- OtJ o.s 0

'" 0" c, !:J -< :E -< E ~.~

.~A ,,'0 _....:..t)$ -~ !?~ iHl o'::L:A 05 .. . $i .23";j t:g~ $=~ A5-=- A .... gDA~!5 00 A~~ .<:~ '0" 0..,.. ..5~ 0'E .:; rti=:;a: '0 oi.r=oost .;a 00 "'.<:> mE-< wJ50 .~~ ..:: .~ .~Z .~Z

P ::;;~ P P ::;;~ P

,,~~

~;:l~ ~~d8 , -e i'1~"t

'ts~ :- is ~ga!2

J'~"; ~.~t~ ", .. . O<;1Ol .. .E ~-':"ll

O! ]~g- "'-':"':l;!

~~S ~'ts-:5~.~

~'/g::"8~"l

,,~-.:00 t~~~~& '" "':: fg~~i: ~~..:i ~~~::: .~ '" . ~'O':~~t= Sl

Q.1~:;; '";~.~]r3~ o.l S"'''' ..... ~c3 ~>-....:..~~~-SS() "" ~.:.t~ t2;o.~ " ~"" ';;

"'''' :::~;:!~ ..... Sl '" ",0 ~~&; ~.::~~~.~~d; 0 0

ti"

•

~ ~'" '"

~ ~ •

~ ~

" "

~~

~ ~~

~

~

~ ~ ~~ ~

~ ~ ~

~ ~

~ ""

~

~ "''''' ~ ~ ~ ~ ~ - ~ ~

~~~ ~

~ ~

~~~ "

~ ~
SECURITIES AND EXCHANGE COMMISSION

.B

0:

0

g

ee..,.' '" ::: ..,.

." g ~t: ",,'

.;, " "" .g:s ... -<'" i« 0"

il

e

t:~",,, t:_

8~ ::10

0

0..

.. oS

tlA ii~i ~o .!!lAo:

'" A.., A g;

'"1 rti~ aiS:>. ~- .,,'"

p

.5 " ,

.~

.. l:

...: "'" "" e3 .., l: ...:" l ...

S~ 6' -I>- " . ~t3 ,,~ <l " ~f. 5ltl " 1l::51 .s

~C3 "Il:: "" ~'l3 ,,~

Ii!~ ~.~ ..

"

'2 ;:::'4 C5 :( I::::

196

ll:>

'"

;:l

..."

't:l

-e'"

'"..

;:" '" '0 <>

'l::!, '" '" -s'" "" c:. ;l .~s;

;:l

-e

c:. Z'" se ...

"1:l

'"

"'~

e...

E<>

.,

;:s

o

.~

~"O .,'" ~;:l ",-_S

0....

.. I': 00

~o ""...

-""I- I:tl .~ 0:.

"' ..... e

't:l

'"1:l

!'l.

...

...<>

!'l. ..

s .s 0 ., 0 co ...

;:

;:

c3

'"oS

...<>

...e

;l

.~

co

'"

.,

8 -

0

I .,

s

0) Z'"

fzl

..:l

Il:I

<

Eo<

~

~

~

~

~ ~

'"

~

~

~

~

~

~

~~ ~ ~ ~~

~~

~ ~~

~ ~

~ ~

~ ~ ~

~

~~ ~~

~

~~

~~

~

~

~
FOURTEENTH ANNUAL REPORT 197

,

-d

a'"

°C-'"

.0

o

Z

'~

~'" oZ

~o

::s 0_

~i:

~!!3

:l!lA~

~::s~

~:p>"

p

::

"

!

813892-4l}--15

,

.,;

A

~

"

~

~
198

'"

-=:

'"I-

'"

'"

'"

ee

'l::.

'" "

'2 'c

:l ;;::

-e

.:: '"

co

e -=: E '" co

Z

-s

'"c

;;::

<>

.~

'"",t

",Q);:l

Ic:.:l

I- 0

Co

~I

eoo """ ",""l"

....0> a

~,.., -

" ... . ;: "'~ ll:l ",<>:l

~'"

"'~

.~

le;

c t:

':0 :l

0

'"

... 0

l::

l::

c

i;,)

.0::

.... '"

.0::

...<>

.0::

<::>

e-

... 5l '"

'" 21

'"

e; 'c c:> " I s

co

ci Z

;j

I'l

-<

Eo<

SECURITIES AND EXCHANGE COMMISSION

~

~

~

~

~ ~ ~

'" ~ ~ ~

~

~

~

~

~

~

~~

~

~

~

~

~
""

..

o

o

FOURTEENTH ~AL REPORT 199
200 SECURITIES AND EXCHANGE COMMISSION

I ...~~~£ a;'i~ e'8.a ~5~~ ~"'~ sZ1 ~~ ~8g~i]~~~&s0=88 ~~ g~ ~~~~gS

I ~~fS~.82'gt!~ :.~e~dg' "S~ oS~.5~e C3000=C300~...,;, ee ~~"C tlJ) .... 1::VJ ~StfJ.t:q:

.~~£08.:a~~Ec:,)-:ii5s;' s~ ~E fo~a'th-g

I ~:; ~f~<= e &-0 =-Jj grg 8 (f.J .~z :a'S ~O~A.t;a Q3

I ~'o g rnu.i.S~~<--a e:8~ s a = ~ 0 i:~ a .~~ I <gE~8ig~~~.g~o~:~~ ~Z~g~~~~ '" I "0 .... 0. O(IJ'£Olt5'dbllO~,,=G)O ,c ....s:loo ....."O.J:J g I e~"C~~ECO~~~~d-8~ ~£~&-o~E~ ....

'0 S=s:lgoEa -8~_Eo"t:l"t:l ~(f.Jg~g~3~Q

I O'ccd'do'"'_ .. ~Ca;>~= ete ;:: "'~Il.IO)Sr:=l:CL..2

'" fo~~-<o~-~~S~Zo.s:I 0d -oo~o~

I ~~~~8~~~~<~EE32~-~~a~~g~!;~ en I ~~~~~~~g~~l~~~~~i~~@~~~g~~~~~

I OO~Q(IJ~~ =~d ..dO ; ~oa~~~g~o -o.s:I~o. =~~5~~_o~e ~"C .a~~"C..c~~~Z

I ~~~"t:ld£~~g~VJ~~Q~~~S~~_:~~~~~_~~

::E£ g:9'O~ e "t~,g O~,g";-:9 5~ S~:S~=&:: fiJ'~ 8

I ~~s:I~~~e~~E~~ta~~~toiaE-t~~~~g~ I 'E:S~~ s e g~;a S-S-S'E~.g a'E'5~ a:a~'ES as f~ I 0 0 0 0 0 0

-e I .,

I > ... 13

£l " " " " " 0:>

<l 0:> ... 0:>

0:>

" ;:; '0 e: " '" 0 0 '" " I '" "'1 '" "': ., '" .,; .,; Ul '" ., ., I en en en ,

~-g 0:> 00 00 00 00

... ... ... ... ... 00 ..: .. ~i !:i ..:

Co '" '" '" -< -< .... " " , , ,

1::

'"

0 .. 0

... "0 m e '0

" , :El .El Ii .l:l

.s O! .!I 0 6

I:l 'S - '0 '0 0

... :5 " Ul .!I :5 "0 is is "" I:l .!I 0

.2l , s I:l '0 e OS " '" e I p "

0 '" '" .2l s

1: gj

'"

0

-< Z 1'<1 I:l Ul Z

... '"

I

'" .... '" '" .... .... ~6~

~""'" zoj-""

S 0 ,

, , III , , 0 0

"" 0 , 1%10 "'" "" .. 0

" '" .!If! 0 ...: .:E

'" ;s .a:a -e "";

i _0

... ~'S

" "" s 38 1'<1 ... i ..:- 0

I

" "... .r 0 0 Po< .a'" o<i 0 g .... 2 "'''' I:l 1:= 0 .... '" ,,8 0 0 ,,-< "

" 0 III 8'"

~ ~~ ~

~ ~

~

-

~~ ~ ~~

~~

~

~

~ ~

~

~ ~

'" ~ ~

~ ~ ~ ~ '"

~ ~ ~ ~ ~ ~ ~

~~ ~ ~ ~

~ ~ ~ ~ ~

'" ~ '"

~ ~ ~ ~ ~ ~ ~ ~

~

~ ~

~

~ ~

~ ~ ~ ~

~ ~

~
FOURTEENTH ~AL REPORT 201

..

,

,

,

Eo

o

s

-;:

:a

r:l

....

.

,

,

,

o

o

..

il<

,

,

,

.

I

, , ,

. , . 00

ii

. , .. , . , , , , , .,

,

-;.g

~i~ ~Z A

-o

Z

"

~ -= ~ ~

~

~

~ ~

~
202 SECURITIES AND EXCHANGE COMMISSION

. , , . ;~ I

;t~

~;~ . .,.,

:ZA

, . • I ••

, .., . :~1:-..,

: :~

oO~::S ..: ~~'O

:-~f5 00

.0.0

~&:~ Jj

. . ..

.,~," I ~g

'" o~

, . cxi$

! ;~

('I) ..

... =<:i

e

....

....

.;

]]:::l <0>1::

1t~

~8

00

~

~

~

~ ~

~ ~

~ ~

~ ~~

~ ~~ ~
FOURTEENTH ANNUAL REPORT 203 ,,..

.d

1::s

I S~ loCO OP"bo....,;,-ogf~t.=d4)

&Q~2~OS3~.E~ 1:~~.g ~..uS-Lo=_~at s:::~~~O "0 SE 8.8,8 S ~=~;aSs~ a80;;-il:;:-g3Se.,;'" s'"

~~=o_S~8-;~,!g~.c8~

-- ~+Ol~.5 C3_c:)'~<t:_cS ;8£~E &s E o~ CoO

.....~-~a:a~stf)~~~'5~ "-:2':"::"g ~~.9 tfl~'O_ s'E E CD :e~J£ <J3 to<3~ ..::1 C3 eJ:;Q;l.e..o c.", .~~-a:"'o>.,;'C.8- ;::e ~~,...;~_~ 5.2 0'0 i ~e JS 'E~:~~E~s;~a g .. Q) 0_ 0 0'''-'-'''' C3s::= s::: l=: r,o.t:"t:!UJ-oeJ U}..:>tnecO 0

L.~a~~ .::~.S3:a C£Ei ~o >.£ g ~z.£g~E~~'E

g~=.~5'g~ 't:l~~"li~s ~Cl38d ",E0l-,"CS d,)o

%i ~.E So:; Q-g () 'I:::: ce. o~o &:0 o>.L.~""Q~C3G)Q a !] go::::::S.B ~.::;a a'gQ

'0 8'OCDQI!8 .... t:f"O' Q,f:::'O~

Ol:l.o£.s::E!~S~"Ou5'C3 c,)~'g

E ~-2"O~g'Og02a!o~qs-:~ 1l ~SS~E~.g~2 _8.€r~~~ <0 s:l 0'._;; s::I CD_ 0) cett;:l ...... c. ....L.

a1 f.~ g_~.c o.~o OS; a:l at

s:lC'i:a~t::Q~:::sSos:::co"t~=.

gC;~~; z.::8 gQ~~ 8'O.s::-~

£:-.E.-a6b]~~o ~..;ts'E:E-g ~cq ~~:;:; t'3 8. Q d~-=: Q Q.>

~-Ctfl J: "'0- .....'0 ll.t

a'3E";i)~~;;tfl~5-0

o~0 c.r::= c.ce'C Q,) 8.~zw ........ t: 1io~8-S:t£0Cl3~ .2~~::r e ~~g:s Q~::7 5~'~g e'Oso~C':l-'E s_o<~~~s:l oSo ....a.o~~~~O~~5£ o.:9;:gg~'g'O.h"9:30~S E~

E8:::-8a;;i:a~~.ES .~o~ g 3'g g"S ~=<l)a e5~E r= -'E~~&::;<l)Qo~z~oc,).sg 't Q.l de ffJ<-O ...... .... l""'I (.:lAo; Po"""

-<

'0a'"

,

c.

,

"s""" ti 'Zl

"El H ""=' -<

~t

~o

",=,

I :'!

.50

i <o~ =' .,;.E s Slz 21 "El p

::s

f:.

<1.l"

'"B

'5 .. '0

'"s &7 z" ;;s

'Zl

..

. .. 8 H

~

~~~

~

~~

~

~

'"

~

~

~

~~~~~

~~

~~~

~

~~

~~

~

~~~=

~~
204 SECURITIES AND EXCHANGE COMMISSION

,

,

:g o

!

,

,

, , ,

,

.9 :0: ': :

al

,

,

,

.d

:a

f;:i

,

,

1

Cll

'"

o

o

o

o

o o

~ ~
FOURTEENTH ~AL REPORT 205

, , , , ,r--

, ....

:::: ;.Q' 0-

'0

iZ

,

,

,

.s

.a

Z

,

,

.s

g

:-

'"

'"

.d

.s

Z

~~
206 SECURITIES AND EXCHANGE COMMISSION

I

Ii

I

o

Z

~

~
FOURTEENTH A~AL REPORT 207

TABLE 34.-Cases involving statutes administered by the Securities and Exchange

CommMsion-July 1,191;7 through June 30, 191;81

PART I -SECURITIES ACT OF 1933

TItle Citation Sections of statutes involved

Carruthers v. U.8-

Danziger v. U.8-

E~~i~:eT8 ou Propertus Corp ,

Fure-MUBt, Ine., SECv

Gasomller Oorp ; U. S. v

Grouson,U S. v Haunes, SECv

Kaufman v, U 8-

Mansfield v : U. S

Miller v, Hand

Mtmjer; U. S, v. (U. S v,

Moore), MonJor; U. S, v

Montague v, Elearome Corp.

of America (McConnell v. same). Moore v. Gorman

O'Connor; S. E. C Penfield; SEC v

Piullrp« v, The UnUed Corp

V,daoer; U. S. v WImer, SECv

Cert. denied, 327 U. S. 787 (1946), re- See thirteenth annual report

hearing denied, 327 U. S. 817, 819 (1946)

Cert denied, 332 U. S 769 (1947), 77 F. Do. Supp. 466 (S. D, Cal. 1948). 72 F. Supp.989 (S. D. N. Y. 1947) 2.

CCH Sec. Act Servo para, 90, 399 5 (a).

(N. D. OhIO 1947).

7 F. R. D, 712(D. Del 1947),reheanng 17 (a) (1). demed Feb. 9, 1948. 166 F. 2d 863 (C. C. A. 2d 1948) 17 (a) (1).

CCH Sec. Act Servo para. 00, 403 5 (a), 17 (a), 20 (b), 22 (a).

(E. D. Pa 1948)

163 F. 2d 404 (C. C. A, 6th 1947), eert. 5 (a) (1,2),17 (a) (1,2).

denied, 333 U. S. 857 (1948), rehearmg denied, 333 U. S. 878 (1948).

Cert. denied sub nom. Browne v. See thirteenth annual report. U. S., 329 U. S. 792 (1946),

8 F. R. D 67 (E. D. Pa. 1947)_________ 12,15,22 (a).

Oert, denied, 325 U. S. 859 (1944)______ See thirteenth annual report.

64 1" Supp. 746 (D. Del. 1946).________ 17 (a) (1).

76 F. Supp. 933 (S, D. N, Y. 1948)_____ 11.

75 F. Supp. 453 (S, D. N. Y. 1948)_____ 2 (3), 4, 5, 12 (2), 22 (a). No. 8277-WM (S. D. Calif. 1948) 22 (b)

Rehearmgdenied, 331 U. S. 865 (1946), See thirteenth annual report.

contempt proceedmgs alI'd, 330 U.

S. 567 (1947), rehearing demed, 330

U. S. 585 (1947).

CCh Sec. Act Servo par. 00,395 (S. D. 14. N. Y.I947). 73 F Supp. 382 (E. D. Va 1947) 17 (a) (I).

75 F. Supp, 955 (W. D. Pa. 1948) 2 (3), 5, 17 (a), 20 (b), 22 (a).

PART n.-SECURITIES EXCHANGE ACT OF 1934

Acker v, &hulle (&hmolka v, 8ame). Bach v. QUlgan

Douenham v, Emerson Electric Mfg. OJ Do_ ..

Fru v. Schumaker __

Grossman v. Young

Hall v, AmeTlcan Can, Pret- zel Co. Investment Associates v, Standard Power'" L,ght Corp. Joslyn, Appheation 01.

Kardon v. Nauonal Gupsum

Co. Mmuse; People v . __

Montaaue v, Eledromc Corp.

of America (McConnell v ,

same). NOrris'" Hirschberg v SEC

74 F. Supp. 683 (S D. N. Y. 1947) See thirteenth annual report.

51" R. D 34 (E D. N. Y 1945)______ Do.

7 F. R. D. 195,343(E. D. N. Y, 1947)__ Do.

77 F. Supp, 306 (E. D. N. Y 1948) 16 (b).

CCH Sec. Act Serv par. 00,366 (E. D. 10 o». 27•• Pa 1947), 72 F. Supp, 375 (S. n. N Y.1947) 16 (a, b). 71 F. Supp. 266 (E. D. Pa. 1947) 1 et seq

AlI'd, 51 A. 2d 572{Sup. Ct Del. 1947)_ See thirteenth annual report.

78 N. Y. S. 2d 183 (Sup. Ct. 1948) 14.

73 F. Supp. 798 (E. D. Pa 1947)_______ 10 (b), 27.

78N Y S. 2d 309 (Sup Ct. 1948) let seq.

76 F. Supp. 933 (S. D. N. Y. 1948)_____ 10 (b\.

Withdrawn by order of court_________ See thirteenth annual report.

Do________________________ 163 F. 2d 689 (App. D. C 1947), eert. 15 (b), 15A, 25.

denied, 333 U. S. 867 (1948). Park'" TIlford v, &hulte Cert derued, 332 U S. 761 (1948) See thirteenth annual reoprt, Do CCR Sec Act Servo par. 00,413 (S. D. 16 (b).

N. Y.I948). Slavin v. Germantown Fire Ins. 74 F. Supp. 876 (E, D. Pa. 1947) 10.

Co.

See footnotes at end of table,

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

_

'"

_

_
208 SECURITIES AND EXCHANGE COMMISSION

TABLE 34.-0ases involving statutes administered by the seewrtuee and E(JJchange

Oommission-July 1, 1947 through June 30, 1945-Continued

PART .II-SECURITIES EXCHANGE ACT OF 1934-Continued

Title

Tramamenca Corp.; SECv

Truncale v, UnIVersal Pictures Co. Tuentieth Century Fox Film Corp. v. Jenims.

Citation

Modified 163 F. 2d 511 (C. C. A. 3d

1947), eert. demed, 332 U. S. 847 (1948).

76 F. Supp. 465 (S. D. N. Y.l948) ••...

7 F. R. D. 197 (S. D. N. Y. 1947)......

Sections of statutes Involved

See thirteenth annual report.

16 (b).

See thirteenth annual report.

PART IlL-PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

American Power &< Lizht Co. Cert. denied, 331 U. S. 827 (1947) .. __.. See thirteenth annual report.

(Flonda Power'" LIght Co. v. SEC)

As,oclated Gas'" EleclTlc c«,

In re.

BecJ.hardt v, National Power Light Co.

Cetural States Power Light

Corp., In te.

Cheneru Corp; SEC v, (SEC

v. Federal IVater Gas Corp).

Communitu Gas Power co., In re. Downmg v, Howard .

Eastern Minnesota Power

Corp., In re,

Etectrlc Bond Share Co., In reo Engineers Public &rlJlcc c«, In reo Engineers Publie Sertnee Co. v,

SEC.

lUinois Power Co., In re. __... __

Kings Countu Lighting c«, In reo LoulSlJIlle Gas Electric Co., In reo New England PubliC &rlJlee

In reo North West Utilities Co , In re .. Northern Statu Power Co., V.

SEC. Philadelphia CO. V. SEC .......

PhiUlps V. The United Corp .

Phillips V. The Umted Corp .

Pittsburg Railwag Co., In re ..

Portland Eledn« Power Co.;

Watsonv.

Public Sertnc« CommISsion Of

N. Y.v.SEC.

Rochester Gas Electric Corp. v.Maltbl<

Standard Gas'" Eledru: CO. V.

SEC.

Aff'd,l64F.2d220 (C. C.A. 2d 1947),

cert, denied, sub nom. Prmcrpale V.

General Public Utihiie« Co., U.S.

-,68 Sup. Ct. 662 (1948), rehearing

denied U. S. -, 68 Sup. Ct. 001 (19481.

164 F. 2d 199 (C. C. A. 2, 1947) .

74 F. Supp. 360 (D. Del. 1947) ..

Rev'd, 332 U. S. 194 (1947), rehearing

demed, 332 U. S. 783 (1947).

168 F. 2d 740 (C. C. A. 3d 1948), eert.

demed, 68 Sup. Ct. 1516 (1948).

Aff'd, 162 F. 2d654 (C. C. A. 3d 1947),

cert denied, 332 U. S. 818 (1947). 74 F. Supp. 528 (D. Mmn. 1947) __

73 F. Supp. 426 (S. D. N. Y. 1946) .

168 F. 2d 722 (C. C. A. 3d 1948) .

138 F. 2d 936 (App. D. C. 1943), cert.

granted, 322 U. S. 723 (1943),remand.

ed for dismrssal, 332 U. S. 788 (1947).

74 F. Supp. 317 (D. Del. 1947).

72 F. Supp. 767 (E. D. N. Y. 1947).. __

77 F. Supp. 176 (D. Del. 1948) .

73 F. Supp. 452 (D. Me. 19(7) .

76 F. Supp. 63 (D. Del. 1948).. _. __ .. 164 F. 2d 810 (C. C. A. 3d 1947).... __

164 F. 2d 889 (App. D. C. 1947), cert.

denied, 333 U. S. 828 (1948) .

CCH Sec. Act Servo par. OO,~95(B. D. N. Y.1947). CCH Sec. Act. Servo par. 00,412 (B. D. N. Y.l948). 74 F. Supp. 842, 845 (W. D. Pa. 1947), 76 F. Bupp. 725 (W. D. Pa. 1948).

Rehearing denied, 162 F. 2d 624 (C. C.

A. 9th 1947), cert. denied, 332 U. B. 837 (1947). 166 F. 2d 784 (C. C. A. 2d 1948), cert.

denied, 16 U. B. Law Week 3361 (Sup. Ct. June 7,1948). 73 N. Y. S. 2d 377 (Bup. Ct. 1947)......

CCH Sec. Act Servo par. 00,400 (App. D. C 1947).

Do.

11 (e).2

See thirteenth annual report.

Do.

Do.

Do.

11 (b, e), 18 (0, 19, 24 (a).

See Thirteenth annual report.

Do.

1 (h), 2 (a), 5, 11, 24.

11. 1 (a) (1),2 (a), 3 (a) (1),7 (g), 11 (b) (2).

11 (e), 18 (0.

11 (b, e).

11 (e), 18 (0.

11 (a, b, e), 24 (a).

2 (a) (5,8),3 (d), 6 (a), 7, 11, (0, 12 (e), 13 (b), 20 (a), 24 (a, b),

29 (g).

5 (d), 11 (b, g), 12 (e), 25.

5 (d), 11 (g) (2),24 (a), 25.

11 (t).

see thirteenth annual report.

1,6 (a), 7, 11 (b, e).

1et seq.

12 (e).

See footnotes at end of table.

_

-

-

'"

'"

'"

'"

'"

'"

'"
FOURTEE~ ~AL REPORT 209

T ABLE 34.-Ca~es. involving statutes administered 1Yy the Securities and Exchange

Comm1sswn-July 1,1947 through June 30, 1948-Continued

PART IV.-TRUST INDENTURE ACT OF 1939 AND INVESTMENT COMPANY ACT OF 1940

Title I Investment Com- Trust Citation Indenture pany Act of 1940 Act of 1939

Fidelity Union Title Guar- 54 A. 2d 243 (N. J. Ch. 1947)_______________------------------ 1 et seq. auty Co. Joslyu, Application or.. ______ 78 N. Y. S. 2d 183 (Sup. Ct. 1948) _________ 3,20 (a) _________ ._._------- SEC v, Aldred Investment Memorandum opmion, June 10, 1946 (D. See thirteenth -_._---._-- Trust. Mass), aff'd sub nom. BaIley v, Proctor, annual report. 160 F. 2d 78 (C. C. A. 1st 1947) cert.

Do ______________________.. denied, 331 U. S. 834 (1947). Memorandum opmions, June 19 1947 & 36_______________----------- November 6, 1947 (D. Mass.), remanded sub nom. BaIley v. Proctor, 166 F. 2d 392 (C. C. A. ist 1948), 76 F. Supp. 614 (D. Mass. 1948), rev'd, sub nom. Bailey v.

MI1/,Sch,168 F. 2d 635 (C. C. A.1st 1948). Do _________________.. _____ Sub nom. BaIley v. Mcunnan (attorneys' See thirteenth ----------- fees), cert. denied, 331 U. S. 834 (1947). annual report

I This table continues table 32 of the tenth annual report and table 38 of the thirteenth annual report. The only cases omitted from this table are those m which no opinion was rendered and whleh, m addition,

did not involve a novel legal problem. , Section not mentioned but necessarily involved.

TABLE 35.-A 15-year summary of criminal cases developed by the Commission1934 through 1948, by fiscal year

Number Number Number

Number of per- of such of these

of cases sons as cases In Number defendants Number

referred to whom which of de- Number Number as to of these

to De- prosecu- Indict- fendants of these of these whom defend- Fiscal year partment non was ments indicted defend- defend- proceed- ants as were ants ae- mgs were to whom of Justice reeorn- obtained msuch ants con- quitted dismissed cases are in each mended cases I victed year meach by United by United pendmg t

States States year attorneys attorneys

1934 7 36 3 32 17 15 1935 29 177 14 149 84 5 60 1936 43 379 34 368 164 46 158 1937_________ 42 128 30 144 78 32 33 1 1938__________ 40 113 33 134 75 13 43 3 1939_________ 52 245 47 292 199 33 58 2 1940 59 174 51 200 96 38 65 1 1941.. 54 150 47 145 94 15 36 1942_______._ 50 144 46 194 107 23 48 16 1943_________ 31 91 28 108 60 10 19 19 1944_________ 27 69 24 79 47 6 18 8 1945_________ 19 47 18 61 35 10 11 5 1946 16 44 14 40 11 5 3 21 1941 20 50 13 34 8 5 3 18 1948_________ '16 32 10 24 3 .---------- ------.---- 21

Totals. 505 1,879 '412 2,004 1,078 241 1570 115

I The number of defendants III a case Is sometimes increased by the Department of Justice over the num- ber ~ainst whom prosecution was recommended by the Commission. For the purposes of this table, an

mdrvidual named as a defendant m 2 or more indictments m the same case is counted only as a smgle

defendant. , See separate chart for break-down of pending cases. , 5 of these references as to 5 proposed defendants are still being processed by the Department of Justice 385 of these cases have been completed as to 1 or more defendants. Convictions have been obtained in

344 or 89.4 percent, of such cases. Only 41, or 10.6 percent, of such cases have resulted III acquittals or dismissals as to all defendants. I Includes 36 defendants who died after indictment.

_________ ----------- ----------- _________ ----------- _________ -----------

____• ____

_______ -----------

____• ____

___ • _____

•

•
210 SECURITIES AND EXCHANGE COMMISSION

TABLE 36.-A 12-year summary of criminal cases developed by the Commission

which are still pending-1937 through 191,.8, by fiscal year

Number Number of such defendants 8S to

Number of such whom cases are still pending and

of defendants reasons therefor

Cases defendants as to whom in such cases have Not yet cases been Awaiting Awaiting completed appre- trial appeals hended I

Pending, referred to Department ofJustice in' , 1937 I 7 6 ----------3- 1 1938___________________________ 2 5 2 _.---------- ------------ 1939--

1940 2 9 7 1 1 .. 1 12 11 1 ._---. 194L ------3- ---------3i- ---------is- ------. 1942__ 14 1 1

1943-.-::::::::::::::::: 1944.__________________________ ::::::: 5 33 14 15 4 ------------ 2 8 -----._----- 8 1945 -.---------- . 4 7 2 1 3 1 1946_._________________________ 7 21 ------_._--- 16 1 4 1947___________________________ 5 19 1 7 11 1948_. 8 22 1 .----------- 21 --- --------

TotaL ______________________ 40 174 59 66 43 6

SUMMARY

Total cases pending' __ 45

Total defendants' .__ __ _______________ 179

Total defendants as to whom cases are pending , .___________________________________120

1 Almost Without exception these defendants are residents of Canada and cannot be extradited. , Fiscal year ended June 30 of the year indicated. , Except for 1948.indictments have been returned in all pending cases. Indictments have not yet been

returned as to 5 proposed defendants m 5 cases referred to the Department of Justice m 1948. These are reflected only in the reeaprtulatlon of totals at the bottom of the table.

TABLE 37.-A 15-year summary classifying all defendants in criminal cases developed

by the Commission-1931,. to July 1, 191,.8

Number as to whom Number as Number Number Number cases were to whom

indicted convicted acquitted d,ismissed cases are by United

States pending

attorneys

Registered broker-dealers I(including prln- 318 202 21 90 5

pals of such firms).

Employees of such registered broker- 101 49 15 30 7

dealers.

Persons in general securities business but 683 345 55 241 42

not registered as broker-dealers (includes

A!l~~~~~~_~_~~~~~:~~' ____________ -__ 902 482 ISO 209 61

Total .. _____________•____•_____•__•___ 2,004 1,078 241 570 115

IIncludes persons registered at or prior to time of indictment. , The persons referred to in this column whIle not engaged in a general business in securities, were almost

without exception prosecuted for VIolations of law mvolvmg securities transactions.

___________________________ -------~---- ___________ ___________________________ -~--- --- ----- ------ ----

__________________________ ---~- ------------ ---- ------------ ------------

__ ________________________ ------------

_________________________ ------------

•
FOURTEENTH ANNUAL REPORT 211

TABLE 38.-A 15-year summary oj all injunction cases instituted by the Commiesion-1934 to July 1, 1948, by calendar year

Number of cases instituted Number of cases In which by the Commission and injuncuons "ere granted the number of defend- and the number of de- Calendar year ants involved fendants enloined I

Cases Defendants Cases I Defendants

1934____________________________________________

1935____________________________________________ 7 24 2 4

1936____________________________________________ 36 242 17 56 42 116 36 108 1937____________________________________________ 96 240 91 211 1938____________________________________________ 70 152 73 153 1939____________________________________________ 1940____________________________________________ 57 154 61 165 40 100 42 99 1941. __________ 40 112 36 90 1942 1943_______________

____________________________________________ ::::::::::::::::::::::::::::: 21 73 20 54 19 81 18 72 1944____________________________________________ 18 80 14 35 1945____________________________________________ 21 74 21 56 1946 21 45 14 32 1947 20 40 20 47 1948 (to June 30) _______________________________ 12 34 9 18

Total. 520 1,567 2474 1,200

SUMMARY

Cases Defendants

Actions instituted 520 I, 567 Injunctions obtained 467 I, 200 Actions pending _________________________________________________________ 9 3 26 Other dispositrons 44 341

TotaL 520 I, 567

I These eolunns show disposition of eases by year of disposition and do not neeessanly relleet the disposition of the cases shown as having been mstituted In the same years .

Ineludes 7 cases which were counted twice in this column because Injunctions against different defendants

in the same cases were granted m dtfterent years.

3 Includes 4 defendants in 4 cases in which Injunctions have already been obtained as to 15 codefendants

Includes (a) actions disnnssed (as to 281 defendants); (b) acnons diseonnnued, abated, vacated, abandoned, or settled (as to 50 defendants); (e) actions in which judgment was denied (as to 7 delendants), (d)

actions in which prosecution was stayed on stipulation to disoontmue misconduct charged (as to 3 defendants).

o

_______________• ____________________________

____• _____________________• _________________

______• ____________________________

________________________________________________________• __

_____ • ______________________________________________

•__________________• __________• ________________________

______• __________• __________• _____________________• __________• __

•

•