HG-l./ 55(,

.U 5A3

/9?+ ,-- / -,

cop. 5 ~50t~Annual Report/of the

0.5. SecuritieSa change Commission

::::: for the fiscal year ended Sep e , 984/

1984 marks the 50th anniversary of the Securities and Exchange Commission.

Fifty years ago, in the depths of the depression, the nation's securities markets

were demoralized. Today, they are by far the best capital markets the world has

ever known-the broadest, the most active and efficient, and the fairest.

The Securities and Exchange Commission has played an important role in the

restoration of public confidence in the nation's securities markets. With the help

and support of the Congress, the executive and the judiciary, the investing public,

industry, the financial community, the legal and accounting professions and legal

scholars, the Commission has discharged with distinction its mandate to protect

investors and maintain fair and orderly markets.

The Commission's illustrious history over the past half century is a testimonial

to the generations of exceptional and dedicated individuals who have served in a

wide variety of capacities, ranging from clerks, secretaries and staff professionals

to Division Directors and Commissioners. They have been widely acknowledged

to be among the best in government. They have built the Commission's reputation. They have set the standards of excellence to which we all aspire.

John S.R. Shad

Chairman

For Sale by the Supermtendent of Documents, U.S. Government Pnntmg Office

Washington, D C. 20402
DATE

1929

1933

1934

1935

1937

1938

1939

1940

1942

1948

1948-53

1949

1953

Late '50s

1961

1961-63

1964

1965

1968

1969

1970

1971

1972

1973

50 Years of Investor Protection

EVENTS OF NOTE

Stock Market Crash

Pecora Senate Investigation begins

Senate "Bear Hunt"

Securities Act enacted

Securities Exchange Act enacted, establishing SEC

Joseph Kennedy appointed first Chairman

Public Utility Holding Company Act enacted, but ruled unconstitutional

James Landis appointed Chairman

William 0. Douglas named Chairman

Constitutionality of the PUHCAupheld by the Supreme Court

New YorkStock Exchange reorganized

The National Association of Securities Dealers, Inc. is registered

by the SEC

Trust Indenture Act enacted

Jerome Frank takes over as Chairman

Investment Company Act enacted

U.S. enters WorldWar II;SEC moves to the Penn Athletic Club in

Philadelphia

SEC returns to Washington

Edmond Hanrahan, Harry McDonald and Donald Cook hold

successive Chairmanships during quiet post-war years

Hoover Report on Regulatory Commissions recognizes SEC as

outstanding agency

Ralph Demmler appointed Chairman

Market booms; SEC staff grows 63%

William L. Carey named Chairman

Milton Cohen heads Special Study of the Securities Market

The Securities Acts Amendments of 1964 result from Special

Study

Manuel Cohen becomes Chairman

Enforcement Division strengthened under Director IrvingPollack

Williams Act enacted to regulate Tender Offers

Hamer Budge appointed Chairman

Securities Investor Protection Act enacted

Investment Company Act Amendments enacted

WilliamJ. Casey becomes Chairman, begins internal reorganization

Institutional Investor Study completed

SEC eliminates fixed commission rates on orders above

$300,000

G. Bradford Cook appointed Chairman

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•
Ray Garrett Jr. appointed Chairman

1975 Securities Acts Amendments enacted

Fixed commission rates ended May 1

Roderick Hills appointed Chairman

1977 Harold Williams named Chairman

Roberta Karmel is first woman Commissioner

Foreign Corrupt Practices Act enacted

SEC Practice Session of A1CPAcreated

Moratorium on Options Market Expansion begins

1978 Bankruptcy Reform Act passed

1980 Small Business Investment Incentive Act passed

1981 John S.R. Shad becomes Chairman

1982 .1933 and 1934Acts Disclosures integrated

SEC/CFfC Accord and legislation on options and futures

Swiss Accord on Insider Trading

1983 Bush Task Group on Regulation of Financial Services

Shelf Registration Rule adopted

Electronic Filing, Processing and Information Dissemination

System Staff Task Force formed

1984 Insider Trading Sanctions Act passed

EDGAR (Electronic Data Gathering, Analysis and Retrieval System) inaugurated

ii

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

O~FICE OF

THE CHAIRMAN

December 31, 1984

The Honorable George Bush

President of the Senate

Washington, D.C. 20510

Gentlemen:

The Honorable Thomas P. O'Neill, Jr.

Speaker of the House of Representatives

Washington, D.C. 20515

Fiscal 1984, the Commission's 50th Anniversary, was another record year. Investor

protections and corporations' financing flexibility were increased, and unnecessary paperwork and other expenses, ultimately borne by investors, were reduced.

Fiscal 1984 highlights include:

Results: Through automation, paperwork reduction and other staff initiatives,

record results (or the highest levels in years) were achieved in the volume and

efficacy of enforcement actions, investment company and adviser inspections,

broker-dealer examinations and reports processed, self-regulatory organization

inspections, full disclosure filings processed and appellate and other litigation

cases opened. Since fiscal 1981,the annual volume of these activities has been

increased by 19% to 78%, with 5% less personnel. Also, the 1981-84 average

annual rate of accounting firm peer reviews, under SEC oversight, has been

increased more than 100% over the 1978-80 rate.

1981-4

SEC Fiscal Years Ended September 30th 1981 1982 1983 1984 Change

Investment Co. & Adviser Inspections 748 1,065 1,085 1,334* +78%

SROt InspectIons 12 19 18 20* +67%

Appellate and Other Cases 102 115 143 167* +64%

Enforcement Actions Brought 191 254 261 299* +57%

Broker-Dealer Exammations 278 249 324 389* +40%

Broker-Dealer Reports Processed 6,106 6,599 7,067 8,290* +36%

Full DIsclosure Filings Processed 56,919 63,423 65,550 67,466* +19%

Staff-Years 1,982 1,881 1,921 1,885 5%

Fees as a Percent of Budget 81% 94% 110% 129%*

*A record or the highest level in years. tSelf-Regulatory Organization.

iii

•

-
Edgar: The pilot high-speed electronic filing system was commenced on

schedule (September 24, 1984). It is intended to accelerate dramatically the

filing, processing, dissemination and analysis of corporate information; revolutionize the manner in which. many investment decisions are made and executed; and contribute to the efficiency of the securities markets .

Insider Trading Sanctions Act: The Commission proposed this Act, which was

signed by the President in August. Most inside traders have only been compelled to disgorge their profits, which has not been much of a deterrent. Now they

will be subject to fines, up to three times their profits. Criminal fines for securities law violations were also increased-from the $10,000 established 50

years ago, to $100,000 per count.

Revised Shelf Registration Rule: This rule has increased the largest and most

creditworthy corporations' financing flexibility and reduced their expenses, for

the benefit of their shareholders, by hundreds of millions of dollars per annum,

without compromising full disclosures. These large savings are principally due

to keener competition among underwriters, and among institutions which purchase the bulk of such issues, whether under shelf or conventional offerings.

The Commission is continuing to monitor the effects of the rule and will take

appropriate action, if warranted .

Proxies And Mutual Fund Prospectuses: Simplification and improvement of

these documents have reduced their cost and increased their utility to investors .

New Options: New options authorized by the Commission permit investors

and corporations to hedge stock market, foreign currency and other risks at a

fraction of the cost of other means of hedging or reducing such risks .

Intermarket Surveillance: At the Commission's initiative, the exchanges are

installing electronic intermarket stock and options surveillance systems and

transaction audit trails for the quick identification of inside traders and market

manipulators. Audit trails also reduce transaction reconciliation costs, ultimately borne by investors .

Shareholder Communications: Legislation proposed by the Commission will

telescope the time and expense of corporations' communications with their

shareholders, by requiring banks to provide corporations with the identity of

those shareholders, who do not object.

Bush Task Group: The recommendations of Vice President Bush's Task Group

on the Regulation of Financial Services include consolidation within the SEC of

the filings of all publicly owned banks and thrifts, and other major legislative

initiatives for the benefit of investors and depositors, which are expected next

year.

Budget: Registration, transfer and other fees exceeded the Commission's budget by 29%. In the past two fiscal years, such fees have exceeded the Commission's budget by over $35 million.

iv

•

•

•

•

•

•

•

•

•
The 50th Anniversary year results are a tribute to the Commissioners and the

fine men and women who serve throughout the agency. In addition to ongoing

programs, the future offers the prospect of major improvements in the regulatory

structures of the financial service industries and the exciting potential of high

speed, electronic dissemination and analysis of corporate information.

Sincerely,

v

Table of Contents

Chairman's Letter of Transmittal .

Enforcement Program .

Key 1984 Results .

Introduction .

Program Areas .

Corporate Reporting and Accounting .

Insider Trading .

Securities Offering Violations .

Regulated Entities and Associated Persons .

Market Manipulation .

Changes in Corporate Control .

Other Developments .

Waiver by Conduct .

Efforts to Obtain Evidence from Abroad .

Beneficial Ownership Reports .

Sources for Further Inquiry .

Full Disclosure System .

Key 1984 Results .

EDGAR and Computer-Assisted Review .

The Proxy Review Program .

Tender Offer Reforms .

SEC Government-Business Forum on Small Business Capital

Formation .

SEC/NASM Cooperation .

Foreign Securities .

Other Rule-Making Initiatives .

Resale of Securities Acquired in Certain Business Combination

Transactions .

Option Material. .

Suspension of Reporting .

Confidential Treatment. .

Electric and Gas Utilities .

Broker-Dealer Research Reports .

Accounting Matters .

Accounting Standards and Principles .

Conceptual Framework Project .

TImely Financial Reporting Guidance .

Accounting for Pensions .

Consolidations .

Other Projects .

iii

1

1

1

2

2

3

4

4

5

6

6

6

7

7

7

9

9

9

9

10

10

11

11

11

11

11

12

12

12

12

12

13

13

13

14

14

15

vii
Accounting-Related Rules and Interpretations. . . . . . . . . . . . . . . . . . . . 15

Audit and Certification of Financial Statements . . . . . . . . . . . . . . . . . . 17

SEC Practice Section. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

PeerReview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Special Investigations Committee. . . . . . . . . . . . . . . . . . . . . . .. . . . . 18

Reviewof SECPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

International Accounting and Reporting. . . . . . . . . . . . . . . . . . . . . . 19

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

Key 1984 Results. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Securities Markets, Facilities and Trading . . . . . . . . . . . . . . . . . . . . . . . 21

The National Market System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

National System for the Clearance and Settlement of Securities

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

Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Short Tendering of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Exemptions from Short-Sale Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Regulation of Brokers, Dealers, Municipal Securities Dealers, and

Transfer Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Broker-Dealer and Transfer Agent Examinations. . . . . . . . . . . . . . . 23

Persons Deemed Not to Be Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 24

Bank Securities Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Customer Protection Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Extension of Credit by Broker-Dealers on Investment Company

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2~

Conforming Amendments to the Net Capital Rule and Reporting

Form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Adoption of Revised Registration and Withdrawal from Registration

Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Transfer Agent Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Oversight of Self-Regulatory Organizations. . . . . . . . . . . . . . . . . . . . . . 25

National Securities Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

National Association of Securities Dealers, Inc. . . . . . . . . . . . . . . . . 26

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

SRO Surveillance and Regulatory Compliance Inspections. . . . . . . . . 26

Securities Investor Protection Corporation. . . . . . . . . . . . . . . . . . . . . 28

Applications for Re-Entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Market Oversight and Surveillance System. . . . . . . . . . . . . . . . . . . . 28

Investment Companies and Advisers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Key 1984 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Regulatory Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Disclosure Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Investment Advisers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Insurance Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Significant Applications and Interpretations. . . . . . . . . . . . . . . . . . . . . 31

viii
Savings and Loan Associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Financial Planners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Private Offering by Foreign Investment Companies. . . . . . . . . . . . . 32

Prudential Series Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Institutional Disclosure Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Other Litigation and Legal Work (General Counsel). . . . . . . . . . . . . . . . . 35

Key 1984 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Appeals in Commission Enforcement Actions. . . . . . . . . . . . . . . . . 36

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

Commission Participation in Private Litigation . . . . . . . . . . . . . . . . . 38

Definition of Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Challenges to the Commission's Authority Under the Investment

AdvisersAct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Commission Action under Rule 2(e) . . . . . . . . . . . . . . . . . . . . . . . . . 40

Litigation Involving Requests for Access to Commission Records . 40

Litigation Against the Commission and Its Staff. . . . . . . . . . . . . . . . 41

Significant Legislation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Financial Services Industry Vice Presidential Task Group and

Glass-Steagall Legislation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Mortgage-Backed Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

The Hot Issues Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

The Insider Trading Sanctions Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Tender Offer Reform Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Shareholder Communications Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Corporate Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Trustees and Examiners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

EstateAdministration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Plans of Reorganization/Disclosure Statements . . . . . . . . . . . . . . . . 46

Fee-RelatedQuestions. .. . .. .. . . . . . 47

Commission Standing to Appear As a Party in Interest. . . . . . . . . . 48

Public Utility Holding Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Composition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Fuel Programs and Service Companies. . . . . . . . . . . . . . . . . . . . . . . . . 49

Novel Financings and New Business Activities. . . . . . . . . . . . . . . . . . . 50

Management. Economic Analysis and Program Support.. . 51

Key 1984 Management and Program Developments.... . 51

Economic Research and Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Information Systems Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Facilities Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Personnel Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

PublicAffairs. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

ix

-
Consumer Affairs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Equal Employment Opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 .. Commissioners and Principal Staff Officers . . . . . . . . . . . . . . . . . . . . . . . 59

Biographies of Commissioners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

John S.R. Shad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

James C. Treadway, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Charles C. Cox. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Charles L. Marinaccio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Aulana L. Peters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Regional and Branch Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Footnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Glossary of Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

x
Enforcement Program

Key 1984 Results

Enforcement is the largest activity at the Commission, accounting for onethird of the total budget. The Commission commenced 299 enforcement actions

during 1984, compared with 261 in 1983 and 254 in 1982.

Total Actions Initiated

FY'81 FY'82 FY'83 FY'84

Total 191 254 261 299

Civil Injunctive Actions 114 136 151 179

Defendants Named NA 418 416 508

Administrative Proceedings 72 106 94 114

Respondents in Proceedings NA 287 189 221

Civil and Criminal Contempt

Proceedings NA 9 14 4

Defendants NA 16 19 8

Reports of Investigation NA 3 2 2

Court orders obtained by the Commission required defendants to divest themselves of illicit profits amounting to more than $12 million, either as disgorgement

or restitution to defrauded investors. The Commission also obtained freeze orders to protect over $23 million in assets until courts could make appropriate

dispositions.

In fiscal 1984, the Commission provided substantial assistance to the Department of Justice and state authorities in connection with criminal cases; 61 criminal indictments or informations were obtained in such cases, compared with 75

in 1983.

Introduction

The enforcement program seeks to preserve the integrity, efficiency and fairness of the securities markets by enforcing the Federal securities laws. These laws

provide civil and administrative remedies designed to rectify past violations and

prevent future violations.

The primary civil remedy is a Federal court injunction. An injunction directs the

subject to comply with the law in the future. If it is violated, contempt of court

proceedings may result in imprisonment or imposition of fines. Courts may also

issue orders providing additional equitable relief, including restitution, disgorgement and other appropriate remedies.
Administrative proceedings may be brought against regulated entities: principally broker-dealers, investment companies, investment advisers, and their associated persons, as well as transfer agents. Such administrative proceedings

may result in censure, imposition of limitations on activities, or suspension or

revocation of registration. (Regulated entities may not conduct business without

an effective registration.) Remedies against associated persons include censure,

suspension or a bar from association.

Issuers of securities are subject to administrative proceedings for failure to

comply with the disclosure requirements and certain other provisions of the

Exchange Act. Individuals causing such failures may be named as respondents

under legislation enacted on August 10, 1984 as part of the Insider Trading

Sanctions Act. Respondents may be ordered to comply with applicable provisions

upon specified terms and conditions, or to take steps to effect compliance.

Issuers also may be named as respondents in certain proceedings authorized by

the Securities Act. In addition, the Commission may publish reports of investigation under Section 21(a) of the Exchange Act.

Criminal sanctions for Federal securities law violations include fines and imprisonment for up to five years for each violation. During fiscal 1984, enactment

of the Insider Trading Sanctions Act increased the maximum criminal fine for

most Exchange Act violations from $10,000 to $100,000.

Close working relationships have been developed with other law enforcement

authorities, both in the United States and abroad, to assist in the investigation and

prosecution of cases. Such authorities include foreign policy officials, state prosecutors and securities regulators, the Department of Justice and U.S. Attorneys'

offices. The Commission also cooperates closely with enforcement efforts of selfregulatory organizations, including the National Association of Securities Dealers

(NASD) and the various national securities exchanges.

Program Areas

One of the strengths of the enforcement program is its breadth and depth.

Enforcement activity during fiscal 1984 included cases concerning corporate

reporting and accounting;' insider trading;2 securities offerinqs-' regulated entities and associated persons." market manipulation:" changes in corporate control;6 related party transactions." contempt proceedinqs." and delinquent filing

cases against issuers? and individuals.'?

Corporate Reporting and Accounting-Financial disclosure cases continued to be a high priority in 1984. For example, in fiscal 1984, the Commission brought 33 cases containing significant allegations of financial disclosure violations against issuers or their employees. This compares with 25

such cases in 1983 and 23 in 1982. The Commission brought 18 cases

alleging misconduct on the part of accounting firms, partners or employees

in 1984, including four of the issuer disclosure cases set forth above. There

were 11 enforcement actions against accountants or accounting firms in 1983

and 3 in 1982.

Classified by their principal violation category, there were 36 injunctive actions and administrative proceedings during 1984 involving issuer fraud or

2
reporting violations (excluding delinquent filing cases). This compares with

29 such cases reported in 1983. (The classification by principal violation

category omits 11 of the 1984 financial disclosure cases reflected in the paragraph above because those cases were classified in other categories.)

Typical financial disclosure cases involve improper valuation of assets or

liabilities; improper recognition of revenue or expenses; or failure to provide

adequate disclosure concerning the ability of a corporation to meet its obligations. For example, in one case the Commission alleged that although the

Issuer reported pre-tax earnings of approximately $33 million over a three

year period, earnings in fact were less $14.5 million.'! In another case, the

Commission brought an injunctive action agamst a publicly-held bank holding company and two individuals for overstating the holding company's earnings and failing to comply with the reporting requirements with respect to

other material developments.F

Many cases concerning financial disclosure by reporting companies also

involve enforcement of the accounting provisions of the Foreign Corrupt Practices Act (FCPA). In one, a reqistrant allegedly engaged in improper revenue

recognition practices and, as a result, materially overstated its 1981 revenues

by approximately $22.1 million and its net earnings for that year by $5 rrullion.l-' In fiscal 1984, 10 actions were brought to enforce the accounting

provisions of the FCPA, compared with 12 in 1983 and 10 in 1982. These 32

cases represent 78% of all such actions brought since enactment of the FCPA

In 1977.

Violations with respect to non-financial Information have included material

misstatements or omissions concerning corporate operating information, and

failure to disclose material facts concerning the remuneration of corporate

officers and other related parties. In addition, the Commission brought 15

delinquent filing actions during the fiscal year, compared with 22 in 1983 and

9 in 1982.

Insider Trading-In general, insider trading is the purchase or sale of securities by persons in possession of material non-public information relating

to such securities in violation of a fiduciary duty or other relationship of trust

and confidence. These practices undermine the expectation of fairness and

honesty that is the basis of investor confidence in the nation's securities

markets. Trading of standardized option contracts, coupled with tender offers

and other acquisitions, has increased opportunities for those With materiel

non-public information to reap large profits.

The Commission brought 13 insider trading cases dunnq fiscal 1984. This

compares with 24 commenced during fiscal 1983,20 in 1982 and a total of

132 brought since 1949.

Cases included actions involving Information concerning tender offers,

mergers, business combinations and other acquisitions of securities, as well

as proposed changes to dividend payment policies.l? Individual defendants

included an officer and director of a corporanon.'> employees of law firms

representing the involved corporations.!" an officer of an investment banking

firm;'? and varIOUStippees.P' ln one case, the Commission is alleging, among

other things, that an employee of a law firm communicated material nonpublic information to eight other defendants concerning proposed acquisi3
tions of various corporations.'? Disgorgement of approximately $1.9million is

being sought.

In another case, the Commission alleged that a former reporter for the Wall

StreetJournal misappropriated material, non-public information concerning articles to be published in the Journal's "Heard on the Street" column,2° and disclosed it to a broker for a major brokerage firm who agreed to split profits from

securities transactions with the reporter. Three other individuals are alleged to

havetraded securitieswhile in possessionof the information.

Securities Offering Violations-Some issuers fail to register public offermgs of their securities, although required to do so by the Securities Act. Some

purport to rely on exemptions to registration requirements which are not

available. Some violate antifraud provisions of the Federal securities laws by

making material misrepresentations or omissions in connection with a securities offering.

During 1984, the Commission brought 48 cases principally involving offering violations by issuers and other persons. That compares with 41 such cases

in 1983 and 48 in 1982. The 1984 figure does not include 17 cases involving

offering violations by regulated entities. The latter are discussed below under

"Regulated Entities and Associated Persons."

In one case, an oil and gas exploration company and its chief executive

officer allegedly violated antifraud provisions of the Securities Act in connection with a $16.5 million public offering of common stock and warrants.P The

complaint alleged that a registration statement filed with the Commission and

a prospectus issued in connection with the offering materially underestimated

the amount of the proceeds to be used to repay bank debt, failed to disclose

plans to purchase other companies with a portion of the proceeds and materially overstated estimates of proved oil and gas reserves.A related administrative proceeding was brought against an individual associated with the underwriter of the offering 22

An administrative proceedmg was also initiated against a New York brokerdealer firm and three individual respondents alleging violations of antifraud

provisions in connection with a $3 million securities offering. The alleged

fraud consisted of closing the offering before all customer purchase price

payments had been received and misrepresentation of, or failure to disclose,

material facts. The Commission also alleged that the firm failed reasonably to

supervise two of the respondents, and persons subject to their supervision.P

Regulated Entities and Associated Persons-Regulated entities include

broker-dealers, investment companies, investment advisers and transfer

agents. Fiscal 1984 actions involvinq regulated entities ranged from books

and records violations to attempts to defraud customers. There were 128

cases involving regulated entities compared with 110in fiscal 1983 and 118in

1982. Seventeen cases involved securities offering violations by regulated

entities. Of the other cases, 65 primarily involved broker-dealers, 28 investment advisers, 6 investment companies and one transfer agent. The total

includes 11 actions in which customers or employees were alleged to have

defrauded a regulated entity.

During fiscal 1984 the Commission revoked the registration of 12 firms,

suspended 10and censured 14.This compares with 19 revocations. 3 suspen4
sions and 12 censures in fiscal 1983; and 11revocations, 9 suspensions and

28 censures in 1982.

There were 43 individuals barred, 40 suspended and 12 censured in fiscal

1984. During fiscal 1983 there were 54 bars, 44 suspensions, and 8 censures

compared to 44 bars, 82 suspensions and 19 censures in the prior year.

Broker-dealers and underwriters who engage in questionable or improper

sales practices are subject to Commission scrutiny. In one proceeding, the

Commission's Atlanta, Fort Worth, New York and Washington Regional Offices

coordinated an investigation of several offices of a large nation-wide brokerdealer firm.24 The investigation resulted in institution of an administrative

proceeding against the firm charging that certain of its registered representatives engaged in fraudulent practices relating to the sale of options and securities, including conversion of customer funds, and that the firm failed

reasonably to supervise its employees in connection with this misconduct. In

another proceeding, a broker-dealer firm allegedly engaged in violations of

the financial responsibility, bookkeeping and financial reporting requirements, and failed reasonably to supervise persons subject to its supervision

who committed the vlolations.P The firm was censured and directed to comply with undertakings concerning the supervision and training of employees,

the adoption of written compliance procedures and the establishment of a

special audit function.

In a third case, a broker-dealer firm located in New York, and two of its

senior officers, were charged with operating a "boiler room" and defrauding

purchasers of bonds issued by the Washington Public Power Supply System

(WPPSS) and other municipal securities.e? The Commission's complaint alleged that many customers were charged excessive and unfair prices by the

defendants.

Market ManipuLation-The Commission, the securities exchanges and the

NASD engage in surveillance of trading on the national securities exchanges

and the over-the-counter markets to ensure their integrity. During 1984, 12

cases involving market manipulation were brought; there were 11in 1983 and

10 in 1982.

One Commission case alleged that an individual engaged in a fraudulent

free-riding scheme to amass and maintain a large portfolio of securities without meeting his obligation to pay for such securities by issuing more than $2

million in checks on accounts that had insufficient funds. In addition, the

Commission alleged that the individual artificially inflated the price of a corporation's common stock in order to profit from its sale and increase his

buying power in margin securities accounts holding the stocks?

In another case, a corporation and three individual defendants allegedly

engaged in a course of conduct to enhance artificially the market value of a

corporation's securities and to induce persons to purchase securities of the

corporation and its affiliated partnerships. According to the complaint, the

defendants created a false impression of the value of the corporation's interests of oil and gas leases and of the identity of its management. The defendants are also alleged to have caused the value of the corporate defendant's

common stock and warrants, and securities of another corporation that

owned a controlling interest of the corporate defendant, to be artificially in5
creased by the dissemination of materially false and misleading information.28

A third case involved alleged manipulation of a corporation's initial public

offering to cause the stock to sell in the after-market at a premium price.

Thereafter, various persons allegedly participated in creating the false appearance of active interest In the security-?

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

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

make a tender offer or acquire beneficial ownership of more than 5% of a

class of equity securities registered with the Commission. The requirements

are intended to ensure that investors have the material information needed to

make informed investment or voting decisions concerning potential changes

in the control of a corporation. Eleven enforcement actions were brought in

this area during fiscal 1984, while 5 were brought in 1983 and 9 were commenced in 1982.

In one case, the Commission alleged that a corporation and an individual

failed to correct proxy solicitation materials. The defendants allegedly failed to

disclose an agreement involving the issuance of a controlling interest in the

corporation's common stock and a change in control of its board of directors,

and failed to correct statements in the proxy materials which had become

materially false and misleading with the passage of time."?

In another case, the Commission alleged that a company's proxy solicitation

materials did not disclose the facts and circumstances concerning a potential

leveraged buyout. In a release regarding this case, the Commission noted that

adequate and accurate disclosure with respect to anti-takeover and other

proposed defensive measures is necessary. The Commission particularly

stressed the need for disclosure of management's interest in proposed transactions; the ultimate effect of proposals upon shareholders; and other material effects of the adoption of antitakeover and other proposed defensive

rneasures-'!

In another case, three individuals allegedly made false and misleading

statements in connection with materials regarding a joint proxy solicitation

and tender offer. The materials allegedly failed to disclose the true identity of

the soliciting purchasers, the true financial condition of the corporation, and

that a primary purpose of the tender offer was to oust the corporation's manaqernent.V

Other Developments

Waiver by Conduct-The Commission issued a release requesting comments on a concept to address problems encountered in investigations and

enforcement actions involving persons who purchase or sell securities in the

U.S. markets from foreign countries, particularly when such transactions are

effected through institutions in nations with secrecy laws.33 The concept for

analysis is whether the purchase or sale of securities in the U.S., whether

directly or indirectly, should serve as a "waiver by conduct" of the applicability

of foreign secrecy laws. Under the concept, the purchase or sale would constitute an implied consent to disclosure of information and evidence relevant

6
to the transaction for purposes of any Commission investigation, administrative proceeding or action for injunctive relief authorized by the Federal securities laws that may arise out of the transaction. The purchase or sale also

would constitute the appointment of the U.S. broker that executes the transaction as an agent for service of process or subpoenas and a consent to the

exercise of personal jurisdiction by the U.S. courts and the Commission. In

addition, the release seeks comments concerning the concept of codifying

the authority of U.S. district courts to impose sanctions where the Commission seeks a court order compelling the production of evidence or information related to a purchase or sale of securities within the U.S.

Efforts to Obtain Evidence From Abroad-The Commission was successful in three separate efforts to obtain evidence from abroad in connection with

an insider trading case filed in 1981.34 On May 16, 1984, the Swiss Federal

Tribunal granted a request for information concerning the identity of certain

individuals that allegedly purchased securities while in possession of material

non-public information through various Swiss banks. This represents the first

instance in which the Commission has successfully employed provisions of

the 1977 Treaty Concerning Mutual Assistance in Criminal Matters between

the United States and Switzerland in a case involving insider trading. In addition, the Commission successfully employed letters rogatory to obtain assistance in gathering additional evidence located in the United Kingdom and

France.

Beneficial Ownership Reports-A special effort was launched to assure

that corporate officers and directors, and shareholders of more than 10% of a

class of registered equity securities, file timely beneficial ownership reports.

The Commission brought 31 civil actions pursuant to Section 21(e) of the

Exchange Act to obtain orders commanding compliance with the applicable

requirements.

Sources for Further Inquiry-The Commission publishes litigation releases describing civil injunctive actions and criminal proceedings involving

securities-related violations. Among other things, they report the violative conduct alleged by the Commission, or the Department of Justice or found by the

court, and the disposition or status of the case. In addition, orders instituting

administrative proceedings or providing remedial relief are published.

The enforcement actions brought during fiscal 1984 in each major program area are listed in the footnotes to this report. Appropriate references are

made to the litigation releases or orders published in the SEC Docket.

Copies of the SEC Docket may be reviewed at the Commission's headquarters or in a regional office. Further information can be obtained by contacting

the Public Reference Branch at (202) 272-7450 or by mail at 450 Fifth Street,

r-.w. Washington, D.C. 20549.

7

Full Disclosure System

Key 1984 Results

The full disclosure system is administered by the Division of Corporation Finance. The disclosure system is designed to provide investors with full and

accurate material information, fostering investor confidence, contributing to the

maintenance of fair and orderly markets, facilitating capital formation and inhibiting fraud in public trading, voting and sale of securities. In fiscal year 1984, about

11,000 publicly-held concerns filed 67,466 full disclosure filings with the Commission, an increase of 3% over fiscal 1983.

Filings given a full review continued to be received at record or near record

levels. First-time Securities Act registration statements totaled 1,183; merger

proxies exceeded the 1983 level (320 vs. 254); and small offerings registered on

Form S-18 increased 13% over 1983 to 710 filings.

EDGAR and Computer-Assisted Review

Since 1980, the staff has increasingly used computers to screen all filings to

identify those which present significant disclosure issues and to facilitate review.

During fiscal 1984, the Commission met its goal of establishing a pilot EDGAR

system. A group of approximately 150 companies volunteered to participate

initially and a pilot branch to process the electronic filings was established in the

Division of Corporation Finance. After extensive development and training, the

first electronic filing was received by the Commission on September 24, 1984.

(See further discussion p. 51, Management Sec.)

The Proxy Review Program

On May 9,1984, the Commission proposed for comment a new form to be

used to register securities under the Securities Act in connection with certain

business combination transactions.P Designed to replace two existing, frequently unwieldy registration forms, the proposed form addresses disclosure

needs in mergers and exchange offers by applying principles of integrated disclosure. including utilization of the three-tiered registration system and incorporation by reference. This initiative is one of two proposals relating to business

combinations to improve the effectiveness of this prospectus by requiring that the

information be presented in a more meaningful and accessible formal A second

such initiative is the publication for comment of a comparable form designed to

be used by and in connection with business combination transactions involving

foreign private cornpanies.V The proposed forms will provide both transactional

and voting information so that, like their predecessors, they will function as both

registration and proxy statements. The comment period on these two forms

closed on August 17, 1984 and September 14, 1984, respectively. Commission

action is anticipated during the next fiscal year.

9
On August 9, 1984, the Commission adopted amendments governing disclosure of the background of management of registered companies.>? The

amendments, stemming from hearings held in December 1983 by the Subcommittee on Banking, Housing and Urban Affairs on "Fraud and Abuse in the 'Hot

Issues' and 'Penny Stock' Markets," willrequire companies to discuss violations of

the Commodity Exchange Act, as well as other legal proceedings now required to

be disclosed, in describing the background of directors and executive officers.

The amendments require companies not subject to the Exchange Act's periodic

reporting requirements for the last 12 months to disclose, with respect to control

persons, bankruptcy proceedings, criminal proceedings, securities and commodities violations and certain other legal proceedings material to a voting or

investment decision in which such control persons have been involved over the

last five years. In addition, companies organized within the last five years must

include such disclosure with respect to promoters. The disclosure will be provided in registration statements, proxy statements and annual reports.

Also, in April 1984, the Commission transmitted to Congress proposed legislation seeking an amendment to Section 14(b) of the Exchange Act authorizing the

Commission to regulate the proxy processing activities of banks, associations and

other entities that exercise fiduciary powers, in the same manner that the Commission currently regulates the activities of broker-dealers. The proposed legislation is based on recommendations contained in the report issued in 1982 by the

Commission's Advisory Committee on Shareholder Communications. The bill

was introduced in the House on May 22, 1984 and in the Senate on June 20,

1984.

Tender Offer Reforms

In February 1983 the Chairman appointed the Advisory Committee on Tender

Offers to reviewtechniques for acquisition of control of public companies and the

laws applicable to such transactions. All 50 of the Advisory Committee's recomrnendations-t" were considered at an open meeting on March 13, 1984. Chairman

Shad testified on Commission positions regarding these recommendations on

March 28, 1984 before the Subcommittee on Telecommunications, Consumer

Protection and Finance of the House Committee on Energy and Commerce.

Current activity includes a three-part response to the AdvisoryCommittee Report

(1) proposed reform legislation, introduced in the House on May 22,1984 and in

the Senate on June 20, 1984; (2) further study on certain issues; and (3) proposed rulemaking. As to the second phase, the Commission issued a release

soliciting public comment on two-tier tender offers and open market or privately

negotiated purchase programs, respectively-'? Rulemaking initiatives in other

areas relating to tender offers are underway.

SEC Government-Business Forum On Small Business Capital

Formation

The third annual SEC Government-Business Forum on Small Business Capital

Formation was conducted in Washington, D.C. on September 12-14, 1984. Approximately 170 small business executives, accountants, attorneys, financial ana10
Iysts, broker-dealers, venture capital investors, financial advisors, bankers and

government officials met to discuss issue papers containing recommendations

on taxes, securities, and state capital formation programs. Participants also discussed issues raised in a financial services panel featuring leading members of

the financial service and business community. The Forum is conducted under

the Small Business Investment Incentive Act of 1980 in which Congress directed

the Commission to conduct an annual Government-Business Forum "to review

the current status of problems and programs relating to small business capital

formation" and to include as participants other Federal agencies and leading

small business and professional organizations concerned with capital formation.

SECINASAA Cooperation

During the year, the Commission worked closely with the North American

Securities Administrators Association (NASM). At NASM's spring meeting, there

was prepared and released a summary report and agenda of areas of joint

consideration to increase efficiency of the dual regulatory process through enhanced cooperation and uniformity. A procedure under which Regulation D interpretive letters are reviewed by a NASM committee to help develop interpretations

that will be uniform on both the Federal and state levels is part of that effort.

Implementation of the Uniform Limited Offering Exemption (ULOE), designed to

coordinate with Regulation D on the state level, is another example of SEC/

NASM cooperation. As of the end of the fiscal year,29 states had adopted some

form of ULOE.

Foreign Securities

On October 6, 1983, the Commission adopted revisions to the exemption from

Exchange Act registration for securities of foreign issuers that have not voluntarily

sought entry into U.S. markets."? The revisions require foreign securities to be

registered under the Exchange Act in order to be quoted on the National Association of Securities Dealers Automatic Quotation System (NASDAQ). Canadian

securities already on NASDAQ have until January 1986 to either register or

withdraw. Other foreign securities already on NASDAQ were grandfathered indefinitely.

Other Rulemaking Initiatives

Resales of Securities Acquired In Certain Business Combination Transactions-Resale requirements for persons receiving securities in registered

business combination transactions were revised; a release was issued on

February 10, 1984.41 The revisions provide that persons will not be considered

to be underwriters and may freely transfer their securities if they are not

affiliates of the issuer and either (1) have owned the securities for at least three

years, or (2) have owned the securities for at least two years and the issuer

satisfies certain public information requirements.

Option Material-On March 22, 1984 the Commission adopted amendments to its rule excluding certain instructional or educational materials dis11
seminated about standardized options from the definition of a prospectus.F

They are intended to permit fuller explication of the nature of newly developed

option products in this rapidly evolving field. The revised rule willnow apply to

advertisements and to other written materials provided that no specific security is identified and that the name and address of a person from whom a

copy of any definitive options disclosure document can be obtained is included.

Suspension of Reporting-The Commission adopted amendments to its

rules permitting the immediate suspension of the Section 15(d) reporting

obligation under the Exchange Act on March 22, 1984.43 The new rules help

standardize and simplify the suspension critieria for all issuers and provide

additional relief from the reporting burden for small issuers.

Confidential Treatment-On March 23,1984 the Commission adopted an

amendment to its rules governing information eligible for confidential treatment under the Securities Act.44 The revised rule extends availability of confidential treatment under the Securities Act to the same types of information

that may be granted confidential treatment in issuers' annual reports under

the Exchange Act. It also conforms the procedure for requesting confidential

treatment under the Securities Act to that under the Exchange Act.

Electric and Gas Utilities-On June 15, 1984, the Commission adopted an

amendment to the Electric and Gas Utility Guides under the Securities Act

and the Exchange Act.45 The amendment, based on a rulemaking petition

filed by the California Association of Utility Shareholders, will require electric

and gas utilities which issue securities at a price below underlying book value

per share to disclose, in transactional and periodic reports, where material,

the extent of any resulting book value dilution and its effects on their business

and financing plans.

Broker-Dealer Research Reports-On September 19,1984, the Commission adopted an amendment to its rule governing distribution of research

reports by broker-dealers engaged in the underwriting or distribution of a

security discussed in the report.46 The rule provides safe-harbor protection

from registration violations for reports which meet its conditions. The amendments reflect the principles underlying the integrated disclosure system by

imposing somewhat different conditions on the availability of that safe-harbor

on companies eligible to use short-form registration than on other companies.

Accounting Matters

Audited financial statements and related financial disclosures form the cornerstone of the Commission's disclosure system under the Federal securities laws,

which give the Commission broad authority to prescribe the financial statements

to be filed,their form and content, and the accounting standards and procedures

to be followed in their preparation. Historically the Commission has relied initially

on the private sector to establish and to improve accounting principles and

auditing standards, and to develop a self-regulatory mechanism for compliance.

Oversight of the private sector activities and accounting-related regulatory initiatives ensures that standards and procedures are mel

12
Accounting Standards and Principles

Since 1973, the Financial Accounting Standards Board (FASB) has been recognized by the Commission as the private sector body responsible for setting

financial accounting and reporting standards.?? Oversight of the process involves

not only Commission review of the standards set, but also the direct participation

of staff members and, in some instances, the Commission itself in the initial

setting of standards. Staff members monitor developments closely and are in

frequent contact with FASB staff and Board members, participate in meetings,

public hearings, and task forces. The Commission monitors progress of FASB

projects and meets periodically with the FASB to discuss topical issues. For

example, application of the conceptual framework project to the FASB'sstandard

setting activities was discussed in an open Commission meeting in May 1984.

In addition to monitoring FASBactivities, the staff identifies emerging accounting problems in the review process and refers these items to the FASB for

consideration. In the past year these referrals have resulted in the FASBissuing a

technical bulletin on accounting for certain aspects of research and development

arrangements and adding to its technical agenda a project to clarify the accounting for conversion of convertible debt. Both of these issues surfaced in the

Commission's review process.

Although generally satisfied with FASB's performance, the Commission believesthat there is need for more timely guidance on emerging issues. The FASB,

in response to the concerns about lack of guidance on emerging issues, has set

up a Task Force on Emerging Issues which is discussed below.The Commission

has a representative on the Task Force and is hopeful that this willprovide adequate mechanism for timely response to emerging issues. Certain significant

developments during the past year and current agenda items are discussed

below.

Conceptual Framework Project-In prior annual reports the Commission

has expressed disappointment at the FASB's lack of progress on its Conceptual Framework Project. The Project has been part of the FASB's Technical

Agenda for virtually all of its ll-year history. It now appears that the FASB is

nearing completion of the Project as its scope is presently defined.

In December 1983, the Board issued an exposure draft of a proposed

concepts statement entitled Recognition and Measurement in Financial

Statements of Business Enterprises. This phase of the project deals with

initial recognition of, subsequent changes in, and appropriate measurement

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

As the Project nears completion, it is still not clear how the concepts developed

will ultimately impact the evolution of the financial accounting and reporting

model. The FASBbelieves that the concepts statements developed in this Project

are useful in that they provide a common frame of reference in deliberations on

new standards. The ultimate success or failure of the Conceptual Framework

Project, however, can only be evaluated by assessing the FASB'sfuture standard

setting activities.

Timely Financial Reporting Guidance-As noted above, the Commission

has encouraged the FASB to provide more timely guidance on emerging

issues and is supportive of recent initiatives in this area: (a) broadening the

13
scope of FASB technical bulletins (issued by the FASB staff without formal

deliberations by FASB members and without the entire due process procedures required of FASB statements or interpretations), and (b) establishing

an advisory group to assist the FASB in identifying emerging accounting and

reporting issues.

FASB technical bulletins provide guidance on specific, relatively narrow

accounting issues, and have been issued as interpretations of existing accounting literature. By expanding the scope of technical bulletins, they can

now address areas not directly covered by existing pronouncements. Technical bulletins will now be exposed for a short comment period to selected

knowledgeable individuals and will be discussed at public FASB meetings.

The Commission fully agrees with the expanded role of technical bulletins

and has encouraged their issuance whenever practicable.

The Commission's Chief Accountant is a participant in the Emerging Issues

Task Force, an advisory group composed of accounting practitioners and

representatives of major associations of preparers, such as the Financial Executives Institute and the National Association of Accountants. The primary

objective of the group is problem identification. The Task Force will not formally resolve issues nor will it be authorized to publish solutions to issues

considered, although minutes of its meetings are available. It may, however,

indicate that no immediate action by the FASB is needed if consensus from

discussion suggests that a diversity in practice is not likely to evolve.

The Emerging Issues Task Force is in its development stage; it is too early

to tell if it will effectively fulfillits stated objectives. A key test willbe its ability to

(a) bring emerging problems to the FASB's attention, and (b) limit the development of divergent practice when a consensus is reached by the group on

appropriate accounting for an emerging issue. If a consensus is not reached,

the FASB's challenge will be to resolve the issue through issuance of a technical bulletin or otherwise in a timely fashion.

Accounting for Pensions-Today, it is difficult for even sophisticated analysts to assess the impact of pensions on companies' financial positions and

results of operations and to make valid comparisons between companies. The

FASB's current project on pensions, which has proposed substantial changes

in the way companies account for pensions, addresses a significant financial

reporting matter that requires resolution. The FASB has issued a document

entitled Preliminary Views, disseminating its inclination on the appropriate

accounting for pension plans. Its tentative conclusions on this matter have

generated interest and controversy in the business community. This project,

more than any other in its history, has demonstrated the difficulty in promulgating "generally accepted" standards which may be unpopular with the

FASB's constituents. Clearly, the FASB's leadership role in establishing accounting standards is being tested by this project.

Consolidations-The FASB project on consolidations and the equity

method was placed on its technical agenda in January 1982. Unfortunately,

there has been little progress. The Commission believes that determinations

made in the project should help resolve many of the important accounting

issues encountered by registrants and their accountants. Resolution of these

fundamental issues should lessen the Commission's need to address ancillary

14
issues through its interpretive process-as was done this year with the issuance of staff accounting bulletins on consolidation-related issues of "push

down" accounting and "carveouts" (see subsequent discussions).

Other Projects-Last year the FASB issued standards on accounting for

extinguishment of debt, transfers of receivables with recourse, and futures

contracts.t" Other important items on the FASB's technical agenda include

accounting for income taxes, employee stock compensation plans, computer

software development costs as well as a number of practice problems. The

Commission concurs with the FASB's decision to address these issues, particularly the accounting for employee stock compensation plans and computer

software development costs.

Accounting-Related Rules and Interpretations

The Commission's accounting-related rules and interpretations serve primarily

to supplement generally accepted accounting principles (GMP), as established

by the private sector, by addressing areas unique to Commission filings or where

GMP is not sufficiently explicit. Principal accounting requirements are embodied

in Regulation S-X governing the form and content of, and requirements for,

financial statements filed under the Federal securities laws.The Commission also

publicizes its views on various accounting and financial reporting matters in

Financial Reporting Releases(FRRs).

During the past year, revised rules for income recognition by oil and gas

producers following the full cost method were adopted."? Rules which would

require the presentation of industry segment data for interim periods were proposed.P? As part of that proposal, other amendments were proposed, or comment invited, on matters involving interim reporting, segment data and offbalance sheet financing, issues cited by analysts and other users of disclosure

documents as important and in need of improvement. Rules calling for increased

disclosures about property-casualty insurance reserves also were proposed in

response to investors' and analysts' concerns.P!

As the private sector changes financial reporting standards, the Commission

evaluatesits requirements, modifying or eliminating those that become unnecessary. For example, in December 1983, the Commission rescinded an earlier

release prohibiting accounting for "quasi-defeasance" arrangements as extinguishments of debt.52 In quasi-defeasance arrangements, assetsare dedicated

to the future servicing and repayment of currently outstanding debt; the debt itself

may not have been legally satisfied under the terms of the debt agreement. The

FASBaddressed this issue and concluded that quasi-defeasance debt extinguishments should be recognized only in limited circumstances involving a "trust" type

arrangement. Thereafter, the Commission rescinded its previous release. However,in its release announcing that rescission, the Commission included certain

interpretive language to clarify possible ambiguities in the new standard and to

emphasize that its provisions should be strictly applied. The Commission and

FASB have closely monitored the implementation of the new standard, and the

FASB has provided timely response to ensure that its application is limited to a

very narrow set of circumstances.

15
In light of the Commission's integrated disclosure program, the need for an

earlier interpretation on the circumstances under which an accountant's report

qualified on a "going concern" basis may be acceptable in Securities Act filings

was re-evaluated.ln February 1984 the Commission rescinded that interpretation,

permitting registrants to offer securities, notwithstanding an accountant's report

qualified because of uncertainties about an entity's continued existence. Registrants are still required to provide full disclosure of the financial difficulties, and

plans to overcome them.53 Financial statements will continue to be considered

defective, however, ifthese statements are prepared on a going concern assumption but should more appropriately be based on the assumption of liquidation or

ifthe amounts and classifications of assets and liabilitiesin the statements should

be otherwise adjusted.

The staff periodically issues Staff Accounting Bulletins (SABs) to inform the

financial community of its views on accounting and disclosure issues.P? During

fiscal 1984, the staff issued SABs on two issues related to the broader issue of

consolidations currently being studied by the FASB and which arose during the

then "hot issues" market.

SAB 54 was issued in November 1983 to address the application of the "push

down" method of accounting. Under push down accounting, the costs of purchasing a business are pushed down to become the new reporting basis in the

separate financial statements of the acquired entity. SAB 54 expresses the view

that push down accounting should be applied where an acquired subsidiary is

substantially wholly owned and has no public debt or preferred stock outstanding.

Also in November, the staff issued SAB 55 to provide its view on appropriate

accounting for "carveouts"-situations where a subsidiary, division or lesser business component of a larger entity files a registration statement for purposes of

obtaining public financing. In such circumstances, financial statements of these

entities are frequently presented on the basis of operating as a subsidiary, division

or lesser business component and therefore, may not reflect all costs incurred in

operating the business. SAB 55 reflects the staffs views as to the necessity of the

allocation of expenses to the financial statements of these separate entities and

the required disclosures.

In the area of bank disclosures, the staff issued SAB 56 concerning appropriate

disclosures about certain reserves mandated by the Federal banking agencies.

The bulletin indicates that registrants are expected to disclose the existence of

these mandatory reserves in their Commission filings and that such disclosures

should be meaningful in the context of the analysis of the loan loss reserve

required by other Commission guidelines. The SAB emphasizes, however, that

registrants are responsible for determining the adequacy of reserves under GAAP

and that this responsibility is not affected by presence or absence of mandated

reserves.

Finally,the staff issued SAB 57 on its views concerning appropriate accounting

for contingent warrants issued by a company to certain of its major customers in

connection WIthsales agreements. The bulletin reflects the view that the cost of

the warrants contingently issuable under these arrangements should not be measured until the requisite amount of purchases specified in the sales agreement

have been made. This cost is the difference between the quoted market price of

16
the company's stock at the date the customer earnsthe warrantsand the amount

the customer is required to pay.

Audit and Certification of Financial Statements

The American Institute of Certified PublicAccountants (AICPA)establishedthe

Division for CPAFirms and the PublicOversightBoard (POB)in 1977in response

to recommendations for self-initiated reform made by various groups, including

Congress. The Division consists of two sections, the SEC Practice Section

(SECPS)and the PrivateCompanies PracticeSection.The Commission strongly

encourages membership in the SECPS,believing that it is evidence of a firm's

commitment to quality of practice.

SEC Practice Section-The primary objective of the SECPS is to improve

the quality of practice of CPAfirms before the SEC through various membership requirements, including peer reviews.It provides the organizational structure and processes for the self-regulation of accounting firms with SEC audit

practices. The POB, composed of prominent individuals from outside the

profession, monitors the activities of the SECPS. According to the POB's

Annual Report as of June 30,1984,430 firms havevoluntarily become members of the SECPS, including all firms with 30 or more public company

clients.

As discussed in the POB's Annual Report and a special report on "Audit

Quality: The Profession's Program,"Ss peer regulation must be viewed in the

context of its relationship with private regulation (policies and procedures

dictated and enforced by management of accounting firms) and public

regulation (state entrance and licensing provisions, court actions, and Federal

regulatory actions such as SEC's enforcement actions). Regulation of a profession requires the best efforts of all three levels; no one level of regulation is

adequate alone, nor can anyone of them substitute for any other. The POB

has reviewed the accounting profession's program for audit quality, both conceptually and in practice, and found the quality control standards, peer reviews of firms' compliance, and the supporting strength of the special

investigative process, with both public and regulatory oversight, combine to

provide a sound, comprehensive and effective assurance of audit quality.

Peer Review-In its 1984 annual report, the POB concludes that the peer

review process is functioning effectively, and notes that there has been a

significant percentage decrease in the number of qualified and adverse opinions on member firms' systems of quality control.P? In firms found to have

serious deficiencies, results obtained on subsequent peer reviews provide

convincing evidence of a commitment to improve quality of their accounting

and auditing services.

The Commission staff oversees the activities of the SECPS through frequent contact with the POB and members of the executive and peer review

committees of the SECPS.In addition, the staff reviewsPOB files and selected

working papers of the peer reviewers. The Commission believes the peer

reviewprocess contributes significantly to improving quality controls of members and thus should enhance the consistency and quality of practice before

the Commission.

17
However, the process is still evolving. The POB, in its Annual Report, comments on several significant changes effected during the past year, including

those relating to consideration of litigation alleging audit failures in determining the scope of the peer review.Several were suggested by the Commission's

staff in its oversight capacity. The Commission strongly encourages continuing refinements in the program (such as those dealing with uniformity of

reporting mentioned by the POB and the recommendation of a special committee dealing with the need for additional guidance in evaluating the scope

and effectiveness of the concurring second partner review membership requirernent),

Special Investigations Committee-Activities of the Special Investigations

Committee (SIC) supplement peer review. They determine whether allegations of failure in the conduct of an audit of an SEC registrant indicate need

for improvements in, or compliance with, quality control systems of the reporting firms or whether changes in professional standards are required. If

specific members of the firm's professional staff may have failed to follow

established policies and procedures, the SIC considers whether corrective

action taken by the firm is appropriate.

The POB actively monitors the activities of the SIC and has complete access to

its files. In its 1984 Annual Report, the POB concludes that the SIC has effective

operational procedures, that members take their responsibilities seriously and

that its decisions are sound and in the interest of the public and the profession.

In previous years.>? the Commission has stated that it "has no basis for reaching any conclusions" about the special investigative process or the POB's oversight of that process, and "believes that visible evidence as to specific activities is

critical to demonstrate to the public the effectiveness of this aspect of the profession's self-regulation." This continues to be the case.

Review of SECPS-In June 1984, an AICPA committee issued a report

entitled "Report of the Special Committee on the Review of the Structure and

Operations of the SEC Practice Section." The committee, composed of seven

distinguished members of the accounting profession and two representatives

from outside the profession, reviewed and evaluated the activities of the

SECPS since its formation in the light of the SECPS goal to improve the

quality of practice before the SEC. The report included an evaluation of the

role of the POB, and the SECPS objectives, membership requirements, organizational structure and functions.

The committee's overall evaluation is that the structure of the SECPS is

sound and that it is carrying out its major programs in an effective manner.

But a series of recommendations were made to further improve the effectiveness of the SECPS. One was to develop a broadbased public information

program, including the issuance of periodic reports on the scope and results

of its activities so that the SECPS objectives and accomplishments will be

better known and understood by various interested audiences.

With respect to the SIC, the committee found that the investigative process

complements the peer review process and has operated effectively within the

established guidelines for its activities. The committee addressed the question of whether the confidentiality of SIC activities should be modified. It

concluded that confidentiality on matters related to specific cases still ap18
pears to be desirable because of the voluntary nature of the SECPS, the

possibility of substantial and often unwarranted prejudice against member

firms, and the fact that the public interest has been adequately protected by

the procedures followed by the SIC and the regulatory and court processes. It

nonetheless concluded that some public information about the actions taken

in the investigative process is needed to enhance the credibility of the process.

Recommendations included the publication of a generalized report at least

annually and the publication for educational purposes of information about

unusual or recurring problems encountered in the investigative process.

The Committee also recommended that the membership requirements for

reporting alleged audit failures to the SICbe extended to cover casesinvolving

all entities in which there is a significant public interest as opposed to only

those involving SEC registrants. This recommendation is responsive to the

Commission's statements in its 1983 annual report58 and has been endorsed

by the POB.59Indeed, the POB annual report indicates that since the inception of the program, some non-SEC registrant caseswere voluntarily reported

to the SEC in response to a request by the SIC.

The Commission has urged the SECPS to carefully consider the recommendation of the special committee and to take positive steps to enhance the

credibility and acceptance of the SECPS; public disclosure of more specific

information about the activities of the SIC is imperative. Unless the public is

awareof the profession's response to potential problems, the requisite degree

of assurance that the profession's program is acting in the public interest by

protecting users of financial statements is unlikely.

International Accounting and Reporting-Disclosure of information by

multinational enterprises continues to be of interest to user groups including

investors, creditors, governments and employee organizations. A number of

regional and international bodies devote substantial time and resources to

Improving the quality and comparability of the information.

The Commission monitors certain activities of severalregional and international standard setting bodies, including the European Economic Community, the International Accounting Standards Committee and the International

Federation of Accountants and is interested in and supportive of development

of international standards of accounting and auditing. Closer correspondence

between national requirements will result in more useful and understandable

information for investors and other users of financial reports and mitigate

problems caused by disparate requirements applicable to domestic and foreign private issuers which register securities with the Commission.

The Office of the Chief Accountant maintains communications with various

national and international standard-setting bodies and comments on the proposed standards of such bodies from time to time. A staff member from the

Office serves as an expert advisor on the United States delegations to regular

meetings of working groups on international accounting and reporting standards established by the United Nations and the Organisation for Economic

Cooperation and Development (OECD). The OECD will sponsor an international forum, in April 1985, on harmonization of accounting and reporting

standards at the international level which could result in an important step in

the harmonization process. Harmonization of accounting and reporting stan19
dards is a long term process; these efforts will continue and should favorably

affect the efficiency of the world's capital markets.

20
Regulation of the Securities Markets

Key 1984 Results

The Division of Market Regulation, with the assistance of the Regional Offices,

is charged with the responsibility of overseeing operations of the nation's securities markets, exchanges and broker-dealers. Over 10,000 broker-dealers, 10

exchanges and 6,000 firms conducting a public business were subject to the

Commission's oversight in fiscal 1984.

Market Value of Equity Securities Transactions

in billions

FY'81

$564

FY'82

$534

FY'83

$1,005

FY'84

$1,013

FY'81

278

BID Oversight Examinations

FY'82 FY'83

249 324

FY'84

389

Surveillance and Regulatory Compliance Inspections of SRO's

FY '81 FY '82 FY '83 FY '84

12 19 18 20

In fiscal year 1984, the Commission continued facilitating efficient markets and

undertook important initiatives to protect investors and to reduce costs of regulation-from streamlining the clearing process to simplifying the registration process for broker-dealers. The Commission undertook a major initiative to assure

functional regulation of securities activity by banks as well as broker-dealers.

Capital and reserve additions of $83.2 million were secured from broker-dealers

in financial difficulty, increasing protection of customer assets in those firms'

custody.

Amendments to Municipal Securities Rulemaking Board (MSRB) rules requiring certain financial institutions to compare, confirm, affirm and settle by bookentry trades in municipal securities through the facilities of registered clearing

agencies should reduce processing and related costs by $350 million annually.

Adoption of a tender and exchange offer processing rule, requiring tender agents

to use book-entry transfer services at securities depositories, should reduce processing costs by $100 million annually.

Securities Markets, Facilities and Trading

The National Market System-The Intermarket Trading System (ITS), operated by seven national securities exchanges and the National Association of

21
Securities Dealers, Inc. (NASD), experienced record trading volume in 1984. ITS

upgraded facilities completely, expanding its capacity threefold. ITS also facilitated when-issued trading of stock in the seven regional holding companies

spun-off from American Telephone & Telegraph.

The Commission continues to monitor trading in Securities Exchange Act

(Exchange Act) Rule 19c-3 securities (securities not subject to exchange offboard tradmg restrictions) and trading through the interface between ITS and the

NASD's Computer Assisted Execution System. Although trading through the

latter has been light, all Rule 19c-3 securities now are eligible to be traded through

the interface.

By year-end over 1,000 actively-traded over-the-counter (OTC) securities were

designated as national market system (NMS) securities under Rule llAa2-1 of the

Exchange Act. That rule requires transactions in NMS securities to be reported in

a real-time system, increasing market efficiency and improving execution of customers' orders. In response to a petition submitted by the NASD, the Commission

proposed amendments to the rule to increase substantially the number of securities eligible for designation as NMS securities.s" The petition was granted

Nov. 16, 1984.

National System for the Clearance and Settlement of Securities Transactions-Rule 17Ad-14 under the Exchange Act was adopted requiring registered

transfer agents acting as tender agents for bidders during tender and exchange

offers to establish accounts with registered securities depositories to permit

book-entry delivery of tendered securities for anticipated annual savings to brokers and agent banks of about $100 rnlllion.v' Two securities depositories' proposals to offer tender delivery services were approved.Y (A third depository was

approved in early October 1984.)63

The Commission approved amendments to MSRB Rules G-12 and G-15 that

establish a two-phased timetable for integrating municipal securities brokers and

dealers into the National Clearance and Settlement System.54 Since August 1,

1984, every municipal securities broker and dealer that participates in a registered clearing agency offering automated municipal securities comparison, confirmation and affirmation services (or clears transactions through an agent that is

a member of such a clearing agency) has had to use those services. By February

1,1985, those municipal securities brokers and dealers or their agents also will be

required to settle by book-entry, through a registered clearing agency, compared

and confirmed transactions in depository-eligible securities. When fully effective,

these rule amendments should save the municipal securities industry about

$350 million annually in processing costs. The Commission approved proposed

rule changes of several clearing agencies that implement the first phase of the

tlmetable.s>

Finally, in April 1984, the Commission's Division of Market Regulation hosted a

two-day Securities Processing Roundtable with representatives from organizations involved in processing securities transactions. Discussions focused on improving efficiency and safety in the National Clearance and Settlement System,

and set an agenda for achieving identified goals during the balance of the

1980's.66

Options-During fiscal year 1984, the Commission approved issuance and

trading of ten new options products, including options on stock market Indices"?

22
and foreign currencies.s" and approved 75 other options-related rule filings.The

Commission, the Federal Reserve Board and the Commodity Futures Trading

Commission (CFTC), have continued work on the Congressionally mandated

Special Study of the Futures and Options Markets.

Short Tenderingof Securities-On March 29, 1984, the Commission adopted

amendments to Exchange Act Rule lOb-4, the short tendering rule,69prohibiting

the practice of hedged tendering, i.e. tendering and then selling a portion of the

tendered shares in the market. The amendments also clarify certain provisions of

the rule and limit the types of offers to which the rule applies.

On June 15, 1984, additional amendments to Rule lOb-4 were published for

comment. 70 The proposals would require persons who tender shares by guarantee to deliver all guaranteed shares to the bidder and would extend the prohibition

of hedged tendering to cover the writing of certain exchange-traded call options.

Exemption from Short Sale Rule-On March 6, 1984, the Commission

adopted an amendment to Exchange Act Rule lOa-I, the short sale rule,"! to

permit a broker-dealer selling a security acquired in the capacity of a block

positioner to ignore, for purposes of compliance with the "tick" provisions, a

hedged short position in that security arising from arbitrage or hedging activities.

The amendment is designed to facilitate block positioning.

Regulation of Brokers, Dealers, Municipal Securities Dealers, and

Transfer Agents

Broker-Dealer and Transfer Agent Examinations-Over the past two

years, the number of broker-dealer registrations increased by 30%. In response, the broker-dealer examination program was streamlined and greater

responsibility for "cause" examinations was transferred to self-regulatory organizations (SROs). Examiner resources remained constant. As a result,

depth and frequency of oversight examinations and reviews to ensure better

inspection programs by the SROs have been increased.

Another reason for improvement in the examination process is that during

1984, the Commission, with assistance from the NASD, continued efforts to

phase out the SEC-Only registration (SECO) program. Under amendments to

the Exchange Act enacted in 1983, the SECO program terminated on December 6, 1983.

The staff completed 389 oversight examinations of SRO members in fiscal

1984, the highest level of oversight examinations ever reached and more than

50% higher than the number conducted in fiscal year 1981. Only 218 cause

examinations were conducted, as compared to 435 in 1981, because of increased referrals to SROs of matters which could appropriately be handled by

SRO enforcement and disciplinary procedures. The staff also examined 74

transfer agents, and reviewed 76 transfer agent examination reports prepared

by the Federal bank regulators.

Examination programs were augmented by the formation of a joint SEC/

NASD task force to analyze "hot issue" distributions and other regulatory

concerns. A number of investigations were initiated as a result of this effort.

The Commission also provided training to staff of three SROs on use of the

Commission's Customer Account Statement Evaluation System. This should

23
substantially enhance SRO detection of broker-dealer mishandling of customer accounts.

Persons Deemed not to be Brokers-On May 9, 1984, the Commission

reproposed for public comment Exchange Act Rule 3a4-1 under the Exchange Act. The rule specifies certain conditions under which persons who

are associated with an issuer of securities and participate in sales of the

issuer's securities would not be considered to be acting as "brokers" as that

term is defined in Section 3(a)(4) and, accordingly, would not be required to

register with the Commission under Section 15 of that Act. The rule provides

guidance for issuers that sell securities through associated persons.F

Bank Securities Activities-On November 8, 1983, the Commission published for public comment proposed Exchange Act Rule 3b-9 which provides

that a bank cannot rely on the exclusion for banks from the "broker" and

..dealer" definitions in Sections 3(a)(4) and (5) of the Exchange Act when it (1)

publicly solicits brokerage business, (2) receives transaction-related compensation for certain brokerage services, or (3) deals in or underwrites securities

other than exempted or municipal securities. The proposed rule would require

that those activities be performed through a registered broker-dealer subject

to the same rules and regulations as all others who engage in such actlvities.P

Customer Protection Rule-On February 15, 1984, the Commission proposed amendments to Rule 15c3-3 under the Exchange Act affecting a

broker-dealer's computation of the Formula for Determination of Reserve Requirement for Brokers and Dealers.?" The proposed amendments were designed to provide greater protection of customer funds held by broker-dealers

against misuse or insolvency and to ensure that customer funds are used only

to service bona fide customer accounts.

On May 10, 1984, the Commission approved a rule change proposed by the

National Securities Clearing Corporation (NSCC) to reduce substantially borrowings of securities by broker-deelers.?> In conjunction with the approved

rule change, the Division issued a no-action letter to NSCC permitting brokerdealers operating under the new NSCC rule to treat positions represented by

money held at NSCC to be within the control of the broker-dealer for a limited

period of time for purposes of the Rule 15c3-3 customer securities segregation requirements.

Extension of Credit by Broker-Dealers on Investment Company SharesOn April 25, 1984, the Commission proposed for public comment Rule

lldl-2 which would conditionally exempt any security issued by an open-end

managment investment company or unit investment trust registered under

the Investment Company Act from the credrt restrictions of Section 11(d)(1) of

the Exchange Act. The effect of the proposed rule, when read in conjunction

with Regulation T of the Board of Governors of the Federal Reserve System.

would be to allow a broker-dealer to extend credit to a customer on fully-paid

securities issued by investment companies if the customer purchased the

securities held as collateral more than 30 days prior to the extension of

credit.?"

Conforming Amendments to the Net Capital Rule and Reporting FormConsistent with its policy of avoiding duplicative or inconsistent regulation, the

24
Commission adopted certain amendments to Exchange Act Rule 15c3-1, the

net capital rule, to conform it to the net capital rule of the CFTC.77 The

amendments, affecting firms registered with both agencies, related to: (1) the

treatment of exchange-traded commodity options purchased or sold for customers and of commodity option transactions in the proprietary accounts of

such firms; (2) the prepayment of subordinated loans; and (3) the establishment of financial and recordkeeping requirements for introducing brokers.

In addition, the Commission adopted amendments to Part II of Form

X-17A-5 (FOCUS Report) to include the amended CFTC Segregation Schedule which is a component of the FOCUS report. The FOCUS report also was

amended to reflect the previously adopted reduction in required net capital for

those firms on the alternative method of computing net capital.

Moption of Revised Registration and Withdrawal from Registration

Forms-On November 22,1983, the Commission adopted revised Form BD,

the Uniform Application for Broker-Dealer Registration, and revised Form

BDW, the Uniform Request for Withdrawal from Registration as a BrokerDealer.I" The revised forms enable a broker-dealer to use a single form to

register or withdraw from registration with the Commission, the States and

SROs. The revisions willmake the forms compatible with the Central Registration Depository (CRD), a computer data base maintaining current registration

information for broker-dealers that are members of the NASD and/or are

registered with a State participating in the CRD program.

Arbitration-The Commission adopted Exchange Act Rule 15c2-2 to prohibit broker-dealers from using predispute arbitration clauses in customer

agreements that purport to bind customers to the arbitration of claims arising

under the Federal securities laws. The rule clarifies investors' options for arbitration and litigation in resolving disputes with their brokers.t?

Transfer Agent Regulation-The Commission adopted amendments to

Rule 17Ad-2 under the Exchange Act establishing a minimum certificate turnaround and processing standard for certain transfer agents that handle securities issues that are immobilized in securities depositories. The

amendments ensure prompt transfer of record ownership by transfer agents

that previously were exempt from the Commission's certificate turnaround

and processing performance standard.s?

Oversight of Self-Regulatory Organizations

National Securities Exchanges-As of September 30,1984, ten exchanges

were registered with the Commission as national securities exchanqes.s! During the fiscal year, applications by exchanges to delist 53 equity, nine debt,

and eight options issues were granted, as were applications by issuers requesting withdrawal from listing and registration for 23 equity and two debt

issues. In addition, the Commission granted 751 applications by exchanges

for unlisted trading privileges.

The exchanges reported 394 final disciplinary actions imposing a variety of

sanctions upon member firms and their employees, compared with 475 final

disciplinary actions in fiscal 1983. In June 1984, the Commission amended

Rule 19d-1 under the Exchange Act to permit SROs to submit to the Commis25
sion plans for abbreviated reporting of minor disciplinary Infractions.sDuring the fiscal year,the Commission received 253 proposed rule changes

from exchanges. Among the significant ones approved were: (1) amendments

to the American Stock Exchange's (Amexs) stock allocation procedures, on a

12-month pilot basis, to permit newly listed Amex issuers to select the specialist units for their stock~;83 (2) a New York Stock Exchange (NYSE) regulatory

oversight services fee based on NYSE members' gross revenues.s" and (3)

amendments to NYSE rules relating to conflicts of interest involving NYSE

listed cornpanles.P''

National Association of Securities Dealers, Inc.-The NASD, with over

5,600 members, is the only national securities association registered with the

Commission. In fiscal 1984, the NASD reported the disposition of 218 formal

and summary disciplinary actions and 65 formal and summary actions by the

NASD Automated Quotation System (NASDAQ) Trading Committee, as compared with 227 and 100, respectively, in fiscal year 1983.

In addition, the Commission received 20 filings of proposed rule changes

from the NASD, up three from fiscal year 1983. One of the significant approved rules formally instituted standards and procedures to be observed in a

pre-membership interview of applicants for rnernbership.s" Another significant approved change concerned sales incentive items paid by sponsors of

direct participation program securtties.'? The amended rule requires that

such be paid in cash to members only and that the member control any

distribution of incentive items to its salespersons. The Commission also approved rule filings by the NASD and the MSRB that would permit the NASD to

prescribe certain remedial measures for NASD members that experience

financial or operational dlfflculties.v"

Clearing Agencies

During the year,the Commission approved 89 proposed rule changes reducing clearing costs and enhancing clearing agency systems for controlling their

financial exposure. Other changes enabled clearing agencies to use automated

terminal systems to communicate with securities processing systems.s? and

enabled the Pacific Clearing Corporation to refine its clearing fund letter of credit

proqram."?

Also, the Commission granted full registration to the Boston Stock Exchange

Clearing Corporation under Sections 17A and 19 of the Exchange Act,91 and

granted the withdrawal from, and cancelled the temporary registration of, the New

England Securities Depository Trust Company under Section 19of the Exchange

Act92

SRO Surveillance and Regulatory Compliance Inspections

During the fiscal year, the staff conducted 20 inspections of SRO market

surveillance, disciplinary, compliance, and operational programs. Many of these

were special inspections to monitor enhancement of programs found deficient

the previous year.

The 1984 inspection program continued to emphasize improving automated

26
surveillance through transaction audit trails, monitoring development at the

NYSE, Amex, Chicago Board Options Exchange (CBOE), and NASD. Special

inspections of the NYSE disclosed that significant progress had been made by

the NYSE in implementing its audit trail, although additional work was necessary

to improve the accuracy and completeness of the data submitted by member

firms so that the audit trail could be fully effective. By the end of the fiscal year,the

NYSE had begun to test its audit trail data to identify problem areas and to take

steps to improve compliance by member firms. The Amex, which is developing

an equity audit trail similar to the NYSE's and has implemented comparable

systems changes, also began late in the year testing the reliability of the information collected from its member firms. The CBOE, In early fiscal 1984, submitted a

plan for implementation of an options audit trail by October 1984. A recent

inspection confirmed that development of the CBOE audit trail is proceeding as

scheduled. During fiscal year 1984, the NASD made a firm commitment to

establish an equity audit trail, and in July 1984, submitted a comprehensive plan

to develop an audit trail for transactions in all NASDAQ securities. Under this

plan, the audit trail would be in place by the end of 1985. Special inspections that

preceded this submission reviewed and confirmed the soundness of the NASD's

proposal.

The staff also completed an oversight inspection of the NYSE's Stock Watch

program. It revealed that the NYSE's capability to detect various forms of price

manipulation had improved since the previous inspection. The staff did recommend some additional refinements in surveillance procedures and determined

that performance in detecting and disciplining members for trading violations

should further improve once the equity audit trail is fully integrated.

A comprehensive inspection of the Pacific Stock Exchange (PSE) options

program disclosed that, while its surveillance was strong in a number of areas

(such as customer complaints and investigation of insider trading), additional

efforts were necessary at the PSE to keep pace with the Exchange's added

regulatory responsibilities resulting from increased options volume and the introduction of new options products. The staff recommended a number of improvements in the PSE's options program (particularly in detection and investigation of

potential marking the close and frontrunning violations).

Surveillance programs for new options products at the CBOE, Amex, PSE,

Philadelphia Stock Exchange (Phlx) and NYSE were also inspected. The inspections focused specifically on intermarket surveillance capability. Programs at each

of these exchanges appeared to be generally well constructed and adequate to

detect most trading abuses, including manipulation. The staff recommended

minor procedural enhancements to surveillance of trading in index options and

the stock components of the indexes (particularly at expiration).

The staff also completed a series of inspections of market surveillance and

disciplinary procedures concerning equity trading at the PSE, Midwest Stock

Exchange (MSE), Phlx, and Boston Stock Exchange (BSE). The procedures were

found to be generally adequate; minor improvements were recommended for

various aspects on each exchange.

An inspection of the NYSE specialist surveillance program and a special review

of recently modified mini-manipulation surveillance procedures at the Phlx is

ongoing. The staff also was completing a report on a series of three inspections

27
of various NASD programs to detect abusive practices in new issues.

The staff conducted inspections of two NASD District Offices to review the

financial surveillance, routine examination and disciplinary programs as well as

the investigations of customer complaints and terminations from employment of

registered representativesfor cause. It also began preparation of an inspection to

reviewthe handling of certain customer complaints by the NYSE and CBOE.

Inspections of two clearing agencies, the Options Clearing Corporation (OCe)

and NSCC,were completed during the fiscal year and a comprehensive reviewof

the Pacific Clearing Corporation commenced.

Securities Investor Protection Corporation (SIPC)-After notifying the

Commission that the SIPC fund had fallen below the statutory minimum of

$150 million on April 13, 1983, on May 1, 1983, SIPC reimposed its assessment on member broker-dealers at the annual rate of one-fourth of one

percent of aggregate gross revenues from the securities business.v" The slPe

Board of Directors further decided to keep the present SIPC assessments in

place until the SIPC Fund totals $300 million. At September 30, 1984, the

SIPC fund totaled $225.9 million.

During fiscal year 1984, the Commission acted favorably on a number of

SIPC filings including rule changes which will improve SIPC liquidation proceedings by generally providing for the liquidation of options held for the

accounts of customers by the trustee in a proceedlnq.P"

Applications for Re-entry-During the fiscal year, the Division of Market

Regulation received 93 SRO applications to permit persons subject to statutory disqualifications, as defined in Section 3(a) (39) of the Exchange Act, to

become associated with broker-dealers. This represented a 16% increase in

applications over fiscal 1983. The distribution of filings among the SROs was

NASD (62), NYSE (21) and Amex (10). Of the total filings made, six applications were subsequently withdrawn, 84 were processed and three were pending at year end.

Market Oversight and Surveillance System-The Market Oversight and

Surveillance System (MOSS), initiated as a pilot in 1980, is designed to automate the Commission's surveillance and oversight capabilities. In August

1981, at the Commission's initiative, the .SROs submitted a proposal for an

SRO intermarket surveillance program, to which the Commission would have

ready access. When fully implemented, the program should result in significantly enhanced intermarket surveillance. Therefore, the Commission, to

avoid unnecessary costs and duplication, has deferred major enhancement of

MOSS pending implementation and evaluation of the SRO program.

However, the staff continued to refine the existing oversight and research

capabilities of MOSS, with particular progress in incorporating data regarding

trading in the NASDAQ system and in new products on the options exchanges. During the year, the SROs made substantial progress toward a full

implementation of their programs; most significantly, the SROs began producing a consolidated equity audit trail including trading from all markets.

28
Investment Companies and Advisers

Key 1984 Results

The Division of Investment Management oversees the registration and regulation of investment advisers and investment companies--mutual funds, money

managers and the like. Currently, 9,000 investment advisers (excluding investment companies) are registered with the Commission, up from 7,000 one year

ago.

FY'84

$872

FY'82

$666

Investment Company and Adviser Assets Onder Management

(in billions)

FY'83

$778

FY'81

$561

Inspection/Examination of Investment Companies and Advisers

FY'81

748

FY'82

1,065

FY'83

1,085

FY'84

1,334

Number of Active Registered Investment Companies

FY '81 FY '82 FY '83 FY '84

1,683 1,944 2,181 2,208

During the year, a number of measures were adopted to increase staff productivity. Improved inspection procedures resulted in completion of 1,334 examinations of investment companies and investment advisers, an increase of 23%

over the 1,085 inspections completed during fiscal 1983. The number of inspections completed per staff-year, which reflects directly productivity improvements

made over the past several years, increased by 29% from 12.6 in fiscal 1983 to

16.2 in fiscal 1984. As a result, of its inspection efforts, the Commission recovered

$3.8 million for investment company shareholders and investment advisory clients. The 3,750 registration statements filed by investment companies and advisers and processed by the staff represented an increase of 7% from the 3,490

filed during fiscal 1983. This productivity improvement was caused in part by the

selective review procedures adopted during the past several years.

During 1984, the Commission continued its review of rules under the Investment Company Act of 1940 (Investment Company Act) to eliminate restrictions

unnecessary for investor protection. During fiscal 1984, the Commission implemented several regulatory changes, modified certain disclosure requirements,

continued its review of investment advisers regulation, reviewed a major new

initiative in insurance and developed several significant applications and interpretations.

29
Regulatory Policy

In July 1984, the Commission adopted a new Rule 12d-1 (renumbered Rule

12d3-1) to permit registered investment companies to acquire, under certain

conditions, securities issued by persons engaged directly or indirectly in securities related businesses, such ,gS brokers, dealers, investment advisers and

underwriters.P? The Commission simultaneously rescinded Rule 2a-3 under the

Investment Company Act, so that banks acting as investment advisers to investment companies are treated in the same way as other issuers engaged in securities-related businesses.

The Commission, on September 7, 1984, adopted a revised proposal of Rule

17f-5 to permit registered United States and Canadian investment companies to

keep their foreign securities, cash and cash equivalents with foreign custodians

under certain conditions.v" At the same time, the Commission issued notices of

its intent to modify certain conditions of existing exemptive orders to conform

those conditions to Rule 17f-5.97

A revised version of Rule 2a-5 (to be renumbered 2a19-1) was issued for public

comment on May 2, 1984. As proposed, the amendment to Rule 2a-5 would

exempt broker-dealers and their affiliates from the definition of "interested person" under certain conditions. The revisions would expand the pool from which

disinterested investment company directors may be chosen.P'' The Commission

concurrently proposed Rule lOb-1 that would define the term "regular broker or

dealer" which appears in Section 10(b) of the Investment Company Act and in

Form N1-R, the annual report form for management investment companies.

On August 6,1984, the Commission proposed a new semi-annual reporting

form, N-SAR, which would replace five existing annual reports forrns.P?

Disclosure Requirements

During fiscal 1983, the Commission adopted a new simplified registration

form, Form N-1A, under the Securities and Investment Company Acts for all

open-end management investment companies, other than insurance company

separate accounts, required for filings on or after September 21, 1984.100 Following the approach developed for mutual fund prospectuses, the Commission

published for comment, on December 23,1983, Forms N-3 and N-4 to be used

for variable annuities offered by insurance company separate accounts organized

as management investment companies and unit investment trusts.l?' New simplified registration forms for unit investment trusts and new disclosure forms for

investment company mergers are also under development. The Commission

also proposed and adopted amendments to Regulation E (small issue exemption

under the Securities Act for securities issued by small business investment companies).102 The amendments increase the offering limits to $5 million, revise the

offering circular requirements and permit business development companies to

use the exemption.

To increase staff efficiency and improve procedures for reviewing investment

company filings, the Commission announced that the Division implemented new

gUidelines for selective review of registration statements, post-effective amendments, and proxy materials.103 In addition, the Commission amended Rule 24f-2

30
to simplify the procedures required to register an indefinite number of investment

company shares.l?"

On December 7, 1983, the Commission adopted amendments to Rule 482

under the Securities Act 105 As amended, the rule permits mutual funds to mail

advertisements in the form of "omitting prospectuses" directly to investors.

Money market mutual funds are permitted to include in such advertisements an

effective yield comparable to the compound interest rates advertised by banking

institutions.

Investment Advisers

The Commission continued Its review of the investment adviser regulatory

program to remove unnecessary regulatory burdens and otherwise improve investor protection. Early in the fiscal year, the Commission initiated discussions

with state securities administrators, through the North American Securities Administrators Association, to develop a uniform adviser registration system based

on the Commission's Form ADV.Because 37 jurisdictions and the Commission

require advisers to register, making the registration system more uniform will

reduce compliance burdens for advisers significantly. The Commission also rescinded Rule 202-1 relative to internal managers of certain employee benefit

plans'?" and proposed amendments to its adviser recordkeeping rules to permit

advisers to retain records in other than hard copy forrn.t??

Insurance Requirements

In fiscal 1984, the Commission undertook a major initiative relating to a new

type of insurance product known as flexible premium variable life insurance. On

November 23,1983, the Commission published for comment a rule, submitted

by an insurance industry trade association, that would provide extensiveexemptions from provisions of the Investment Company Act and rules thereunder to

insurance company separate accounts offering this product.

The Commission adopted three rules and proposed a fourth rule, for insurance

company separate accounts offering variable annuity contracts, as part of a

continuing effort to simplify their compliance with the Investment Company Act

by codifying conditions under which routine exemptive relief has been granted.

Rule 6c-7, which was adopted in December 1983, permits separate accounts to

offer variable annuity contracts to certain employees of Texas institutions of

higher education. Rule 26a-1, concerning deduction of administrative fees, and

Rule 26a-2, concerning deduction of other fees and certain custodianship activities, were both adopted in July 1984. An amendment to Rule 22c-1, which

would permit certain pricing procedures with respectto initial purchase payments

for variable annuity contracts, was proposed for comment on May 1,1984.

Significant Applications and Interpretations

Savings and Loan Associations-In recent years Congress and State legislatures have given savings and loan associations (S&Ls) deposit-taking and

trust powers. As a result, questions have arisen as to whether an S&L has the

31
legal status of a "bank" under the Federal securities laws. During fiscal 1984,

the Commission requested public comment on whether it should propose

rules or recommend legislation which would treat S&Ls as banks. The effect

of a rule or statutory amendment would be to exempt S&Ls from provisions of

the Federal securities laws. For example, they could sponsor and manage

common and collective trust funds without complying with the Investment

Advisers Act or the Investment Company Act. Pending Congressional consideration of the Bush Task Force recommendations, which included a recommendation that the bank exemption under the securities laws be deleted, the

Commission has declined to respond to requests for advice on whether S&Ls

are banks.

FinanciaL PLanners-An increasing activity requiring the resources of the

Division is the increase in the number of financial planners whose activities

bring them under the Advisers Act. The staff has advised that registered

representatives of a broker-dealer or insurance salesmen who, on their own as

financial planners, (1) give advice more involved than a general discussion of

the advisability of investing in general categories of securities or (2) discuss,

more frequently than on rare and isolated occasions, the advisability of investing in specific securities or specific categories of securities, must register as

investment advisers if they receive any compensation for giving that advice,

such as a share of the brokerage or insurance commissions paid by the client

to purchase securities or insurance products.

Private Offering by Foreign Investment Companies-The Division stated

in an interpretive letter that a foreign investment company, which makes a

private offering in the United States, would be subject to the Investment Company Act if, after the offering, more than 100 persons residing in the United

States beneficially owned its securities. The Division's position was based on

Sections 7(d) and 3(c)(1) of the Investment Company Act.

Prudential Series Fund, Inc.-The Commission issued an order granting

the application of Prudential Series Fund, Inc. ("Fund"), the underlying investment vehicle for variable annuity contracts, to allow it to use the amortized

cost valuation method for the short-term debt obligations held in certain of its

portfolios which invest in a mix of money market instruments, corporate

bonds, government securities, and common stocks. The Fund was the first

non-money market fund to seek an exemption to use amortized cost valuation.

Institutional Disclosure Program

Section 13(f)(5) of the Exchange Act requires certain "institutional investment

managers" to file reports on Form 13F on a calendar quarterly basis. Managers

required to file 13F reports disclose certain equity holdings of the accounts over

which they exercise investment discretion. As of June 30, 1984, Form 13F reports

had been filed on behalf of approximately 1,100 managers for holdings totaling

$641 billion.

Form 13F reports are available to the public at the Commission's Public Reference Room promptly after filing. Two tabulations of the information contained in

the Form 13F reports are available for inspection at the Public ReferenceRoom:

32
(1) a listing, arranged according to the individual security, showing the number of

shares held and the name of the money manager reporting the holding; and (2) a

summary listing showing the number of shares of a security reported by all

institutional investment managers filing reports. Both tabulations normally are

available approximately two weeks from the filing of the Form 13F.

The tabulations are produced by an independent contractor selected through

the competitive bidding process. The contractor provides its services to the Commission without charge, and is required to make a variety of specified tabulations

available to the public at reasonable prices within ten days after receipt of the

reports.

33

Other Litigation and Legal Work

Key 1984 Results

FY '81 FY '82 FY '83 FY'84

Win Loss Other Win Loss Other

Supreme Court n.a. n.a.

and

Appellate Courts n.a. n.a. 38 6 3 42 7 7

District Court n.a. n.a. 40 4 4 42 1 3

Other ** n.a. n.a. 6 1 6 13 0

** State Courts and Administrative Tnbunals

The General Counsel represents the Commission in all litigation in the United

States Supreme Court and the courts of appeals, defends the Commission and

its employees when sued, prosecutes administrative disciplinary proceedings

against professional persons under Rule 2(e) of the Commission's Rules of Practice, and appears amicus curiae on behalf of the Commission in significant

private litigation involvingthe Federal securities laws.In addition, under the supervision and direction of the General Counsel, the Regional Offices represent the

Commission in corporate reorganization cases which have a substantial public

Investor interest under the Bankruptcy Code. The General Counsel also seeks to

ensure that objectives of the Commission's enforcement and regulatory programs are supported, that judicial interpretations of the Federal securities laws

afford adequate protection to investors, and that the Commission is able to

discharge its statutory responsibilities, unimpeded by lawsuits against the agency

or its staff.

The General Counsel represented the Commission in 276 litigation matters

during the past fiscal year, more than half of which are still pending. Fifty Court of

Appeals and Supreme Court cases were concluded, 43 favorably to the Commission. There were 42 appeals before the Supreme Court and Federal courts of

appeals cases brought by the Commission to obtain injunctive relieffor violation

of the securities laws. Of these appeals, 19 were concluded, with only two outcomes unfavorable to the Commission. The foregoing compares with the following cases in fiscal 1983: a total of 239 matters, of which 52 were appeals or cases

brought by the Commission to obtain injunctive relief.Of those appellate cases,

16 were concluded, 14 of which were favorable to the Commission.

There also were 16 appellate actions seeking to overturn Commission orders,

primarily those issued in Commission administrative proceedings or affirming

self-regulatory organization disciplinary proceedings against regulated entities

such as broker-dealers. Seven of these appeals were concluded, with no adverse

results. In fiscal year 1983, there were 19 actions, 13 of which were concluded with

only one adverse result.

The Commission filed amicus curiae briefs in 52 cases during the year (compared to 53 such instances in fiscal year 1983). Fifteen private cases in which the

Commission participated were decided; only four of these resulted in a decision

adverse to views advocated by the Commission.

35
The General Counsel also handled more than 180 other proceedings before

the Commission or in the Federal district courts, compared to 115 in fiscal year

1983. These included 31 suits brought against the Commission or its staff, and 81

suits, including actions under various public information statutes, seeking access

to Commission documents. Fifty-nine of the latter involved discovery subpoenas

in private actions in which the Commission is not a party. In fiscal year 1983, there

were 35 suits brought against the Commissioners or the Commission's staff, and

46 suits (including 37 third-party subpoenas) under the various public information statutes.

In addition to litigation, the Office of the General Counsel is involved in sigmficant legislative and regulatory work. For example, the Office assisted the Chairman in his participation as a member of the Task Group on Regulation of

Financial Services, assisted the Commission in proposing the Insider Trading

Sanctions Act, the Tender Offer Reform Act, and the Shareholder Communications Act, and supported legislation to facilitate development of the private secondary mortgage market.

During the fiscal year, 64 debtors with securities registered under the Securities

Exchange Act of 1934 (Exchange Act) commenced Chapter 11 reorganizations.

The Commission entered its appearance in 26 of these cases involving aggregate

assets of $13.2 billion and about 150,000 public investors. In addition, the Commission entered an appearance in five cases to pursue a specific law enforcement

interest. A list of these cases is set forth in Table 38 in the Appendix to this Report.

Utigation

Appeals in Commission Enforcement Actions-This litigation consists primarily of attempts by defendants in Commission injunctive actions to obtain

reversal by a court of appeals of district court decisions finding that they have

violated the law, enjoining them, and/or ordering other ancillary relief such as

disgorgement. In addition, there are occasionally cases where the Commission is

denied relief and takes an appeal.

In SEC u Materia, an employee of a financial printer challenged the district

court's determination that he had committed antifraud violations by tipping and

trading on material nonpublic information he had misappropriated from his employer and its clients concerning the clients' plans to tender offers for other

corporations.t?" The lower court had enjoined the defendant from further violations of the antifraud provisions of Sections lO(b) and 14(e) of the Exchange Act

and Commission Rules 10b-5 and 14e-3, and ordered him to disgorge approximately $100,000 in profits from his illegal trading activities. On appeal, the defendant argued that Rule 14e-3, prohibiting the misuse of nonpublic information

concerning tender offers, exceeds the Commission's rulemaking authority, and

that United States u Newman,109 which held that tipping and trading on misappropriated material non public information concerning proposed tender offers

violated Rule lOb-5, was contrary to recent Supreme Court decisions. In response, the Commission urged that Rule 14e-3 came within the scope of Section 14(e), a provision directed at the prevention of abuses in connection with

tender offers, and that Newman was not contrary to the teachings of the Supreme Court. On October 1, 1984, the United States Court of Appeals for the

36
Second Circuit affirmed the lower court and held that by trading on information

misappropriated from his employer,the defendant had violated Section 10(b) and

Rule 10b-5.

In SEC u IMJrld Gambling COrp.,110the same court upheld an injunction

against a securities salesman charged with participating in a shell corporation

fraud, and an order requiring him to disgorge $11,700 in unlawful profits. The

court rejected the contention that the Commission must prove scienter as an

element of a violation of the registration provision of the Securities Act of 1933

(Securities Act), agreeing with the Commission that the public is entitled to

protection under that section against even negligent conduct.

In SEC u Youmans,111the United States Court of Appeals for the Sixth Circuit

held that the district court had ruled improperly when it refused to enter an

injunction against a former bank holding company officer who had committed

repeated and serious antifraud, reporting and proxy violations. The appellate

court agreed with the Commission that a change of occupation alone is not

determinative of whether a person is likely to commit future securities laws violations and, therefore, that he should be enjoined. Rather, consistent with the

protection of the investing public, a court should consider severalfactors, including the seriousness of past violations and their isolated or repeated nature. Another court of appeals, however,in SEC u Cayman Islands Reinsurance Corp;

found it unnecessary to reach the Commission's argument that the district court

had erred in considering the collateral administrative consequences of an injunction when it refused to enjoin the defendant, a partner in a securities firm.112 In

that case, on the cross-appeal of the defendant, the court refused to set aside

findings that the defendant had violated the securities laws.

In SEC u Randolph and Blackard,113 the United States Court of Appeals for

the Ninth Circuit reversedthe judgment of the district court, which had refused to

enter a consent decree proposed by the Commission, and directed the court to

enter the decree. The appellate court held, as urged by the Commission, that a

district court has "case or controversy" jurisdiction to enter court orders approving consent decrees,and that a supposed contract remedy availableto the Commission-suing the defendants later if they did not comply with the settlement

agreement-was not an adequate substitute for an injunction. The court emphasizedthat the district court "should have deferred to the [Commission's) decision

that the decree is appropriate and simply ensured that the proposed judgment is

reasonable," instead of considering what it thought it to be in "the public's best

interest."

Petitions to Review Commission Orders-Petitions to review Commission

orders arise from Commission administrative proceedings and from Commission orders on reviewof disciplinary action by national securities exchanges and

the National Association of Securities Dealers, Inc. (NASD). Like appeals in injunctive actions, administrative appeals frequently involve issues central to the

Commission's enforcement program and thus to the integrity of the securities

markets. For example, in the last year,courts upheld Commission orders finding

violations of NASD rules and imposing sanctions where securities salesmen sold

unregistered securities to the public without the knowledge of their employer,1 14

or made unsuitable recommendations and engaged in excessive trading of a

client's account 115

37
Commission Participation in Private Litigation-The Commission also participates as a friend of the court in selected private litigation that involves significant

securities law issues. This is an important supplement to the enforcement program. Because the Federal securities laws provide for private remedies as well as

governmental enforcement actions. decisions in private cases may have precendential effect in the Commission's own regulatory activities.

In January 1984. the Supreme Court. in Daily Income Trust, Inc. u Fox,

adopted the position urged by the Commission and held that a security holder in

an investment company is not required to make a demand on the directors of that

company before bringing suit under Section 36(b) of the Investment Company

Act The court agreed that suits under Section 36(b) are an important mechanism allowing security holders to challenge fairness of compensation paid by an

investment company to its investment adviser.116

The Commission also expressed its views in two cases at the specific invitation

of the United States Court of Appeals for the Second Circuit In Psimenos u E.F.

Hutton & Co.• the court held that a Federal court had jurisdiction over a commodities transaction initiated by the plaintiff, a foreign national, outside of the

United States, but consummated on an American market,'!" The court stated

that execution of the transaction (involving a domestic futures contract) on an

American commodities exchange, which it described as the culminating act of a

fraudulent scheme that directly caused loss to the foreign national, was conduct

sufficient to warrant the assertion of jurisdiction and the application of United

States law. In CRA Realty Corporation u Iii-South. Inoestments.u" the Commission urged that trading by a brokerage firm in an issuer's common stock does

not give rise to short-swing trading liability under Section 16(b) ofthe Exchange

Act if that trading is incidental to the brokerage firm's market-making activity in

debentures which are convertible into the issuer's common stock. The court

agreed, stating that such a construction of the statute will encourage marketmaking activity in debentures, thus enhancing the depth and liquidity of the

market for those securities.

The Commission urged the court in Salcer u Envicon Equities Corp; 119

which involved allegations of fraud in the sale of tax shelter investments, to hold

that the amount of damages recoverable by investors should not be reduced by

the amount of tax savings previously realized by the investors. The court disagreed with the position urged by the Commission and concluded that the

"actual damages" language of Section 28(a) of the Exchange Act requires that

any tax savings realized by investors in a tax shelter investment must be deducted

from damages.

In Berner u Lezzarro.t-? the United States Court of Appeals for the Ninth

Circuit held, as urged by the Commission, that, by reason of their fiduciary

obligations, securities professionals and corporate officers who have allegedly

engaged in fraud may not shield themselves from liability by clairninq that the

investors they defrauded were equally at fault. In that case a stockbroker and the

president of a corporate issuer conspired to manipulate the price of the issuers

stock by issuing false information concerning the issuer. The defendants argued

that the plaintiffs should not be allowed to recover because the plaintiffs believed

they were trading on inside information. an act which could have been illegal itself

had the information been true. The court held that an equal fault ("in pari de38
licto") defense does not apply where the facts show that the plaintiff is not equally

responsible for his own injury. The court was not persuaded "that a duped investor is equally at fault in the fraud perpetuated against him by his broker or an

insider." The court reasoned that the deterrent effect of the threat of private

investor actions against brokers or corporate insiders in these circumstances

protects the investing public against abuses by those persons.

In a case reversed and remanded by the Supreme Court to the United States

Court of Appeals for the Fifth Circuit, 121 the Commission urged on remand, as it

had earlier, that an injured investor may recover damages under Section 1O(b) of

the Exchange Act and Rule 10b-5 for market manipulation of an exchange-listed

security, even though Section 9 of the Act, under which the investor was precluded from recovering, also prohibits manipulative conduct involving exchangelisted securities. The Commission argued that this conclusion gives controlling

weight to the dominant policy of Congress to provide complete and effective

sanctions under the Federal securities laws and prevents a gap in investor protection by avoiding a disparity of treatment between victims of manipulation depending on whether they are injured through manipulation of exchange-listed or overthe-counter securities. The case is still pending.

The Commission also continued its policy of supporting the availability of

private equitable relief under the Williams Act. In Gearhart Industries Inc. u

Smith International Inc.,122the United States Court of Appeals for the Fifth

Circuit held that a private right of action is available to an issuer corporation to

obtain equitable relief for violations of Sections 13(d) and 14(e) of the Exchange

Act. The court agreed with the Commission that district courts have the equitable

discretion to order remedies beyond corrective disclosure in appropriate circumstances. The Commission had argued that such equitable relief can be necessary

to afford shareholders adequate protection against harm from violations of the

Williams Act.

In Austin Municipal Securities, Inc. u National Association of Securities

Dealers, Inc.,123 the United States Court of Appeals for the Fifth Circuit is considering whether the NASD and its officials are absolutely immune from damages

suits alleging torts committed during the NASD disciplinary process. The court

also is considering whether Federal antitrust laws apply to the NASD's disciplinary

process in view of the pervasive regulatory structure created by the Exchange Act.

The Commission has filed a brief urging the court to hold that the NASD and its

officials are absolutely immune from damages suits and that the antitrust laws are

impliedly repealed as to the NASD disciplinary process.

Definition of a Security-The questions of what constitutes a security continues to be litigated. This year, in SEC u Professional Associates, the Commission prevailed in upholding on appeal the entry of a preliminary injunction against

an association and its principal that had sold to the public more than $15 million

in unregistered investments denominated individual trust accounts, units in an

escrow account, and interests in joint ventures.P" The United States Court of

Appeals for the Sixth Circuit agreed with the Commission that, notwithstanding

their labels, the three types of instruments were in reality securities in the form of

investment contracts.

The United States Courts of Appeals are currently split on whether the sale of a

controlling or 100% stock interest in a corporation is a securities transaction. This

39
year the Supreme Court granted review on this issue125 consistent with the

Commission's position expressed in response to the court's invitation for the

views of the government. Although that case subsequently was settled, review by

the Supreme Court is now being sought in two other cases raising the same

issue. In one of these cases.F" the court of appeals agreed with the Commission's argument as amicus curiae that, where conventional common stock is

transferred, the protection of the antifraud provision of the securities laws should

not depend on whether the defrauded purchaser bought a small or large percentage of the corporation's stock. In the other case, the court of appeals reached the

opposite concluslon.V?

Challenges to the Commissions Authority Under the Investment /vioisers

Act-In three separate challenges to the Commission's authority under the Investment Advisers Act to protect the investing public from abusive practices by

publishers of investment advisory services, the courts have upheld the Commission's statutory authority as not inconsistent with the First Amendment guarantees of free speech and free press.

In SEC u Lowe, 128 the United States Court of Appeals for the Second Circuit

held that the Commission may revoke the registration of an advisory publisher

who had repeatedly been criminally convicted for misconduct in connection with

his advisory business. The court held that the registration provision of the Act

constitute a valid regulation of a profession and also that the publication of

investment advice constitutes commercial speech entitled to only limited protection under the First Amendment. In SEC u Suter,129the Seventh Circuit likewise

held that a securities advisory publication was commercial speech not subject to

full First Amendment protection. The adviser in Suter had engaged in such

fraudulent conduct as fabricating testimonials, misrepresenting his education

and securities background, and repeatedly double billing his customers. The

Commission also revoked the same adviser's registration, and the adviser has petitioned the Seventh Circuit for review of that order.P? In SEC u \.\.all Street

Publishers' Institute, Inc.,131 the district court entered an order requiring the

defendant to register with the Commission as an investment adviser and enjoining further violations of antifraud provisions of the Federal securities laws.

Commission Action Under RuLe 2(e)-Under Rule 2(e) of its Rules of Practice, the Commission may suspend or bar from practicing before it professionals

who have willfully violated the Federal securities laws or engaged in improper

professional conduct. Accountants and lawyers play a critical role in the disclosure of full and accurate information to the investing public, and the ability to

discipline those who have engaged in violative conduct is necessary to protect the

Commission's processes.

In the last year, the Commission instituted nine Rule 2(e) proceedings against

18 individual accountants and three accounting firms. Respondents in seven

proceedings resigned or have been suspended from practice before the Commission. Under the Commission's orders in these proceedings, before these

professionals may be readmitted to practice, they must demonstrate that they will

be subject to adequate supervision and that they have undertaken further professional education. The two remaining proceedings are pending.

Litigation Involving Requests for Access to Commission Records-Although

the Commission received numerous Freedom of Information Act (FOIA) and

40
confidential treatment requests in fiscal 1984, only one of those requests resulted

in the filing of a court action against the Commission. The Commission received

1,743 requests under the FOIA for access to Commission records, an increase of

21% over fiscal 1983. Approximately half of the 1984 requests were for investigatory files. The commission also received 2,391 requests for confidential treatment

from persons who submitted information, an increase of 30% over fiscal 1983. In

fiscal 1984, 89 requestors appealed the denial or partial denial of FOIA requests

to the Commission's General Counsel, who has delegated authority to decide

such appeals. Additionally, 14 confidential treatment requesters appealed the

denial of their requests. In the only court action filed against the Commission in

1984 seeking the information denied under the FOIA, the district court upheld the

Commission's denial of access.

The Commission was served with 40 discovery subpoenas in fiscal 1984, twice

the number served in 1983, in private actions in which the Commission is not a

party. These private parties seek information from Commission investigatory files

or testimony from present or former Commission employees related to their

pending litigation.

Litigation Against the Commission and Its Staff-During 1984, the Commission and its staff were defendants in 12 district court actions in which persons

sought to enjoin Commission law enforcement efforts or to obtain damages

awards. The Commission prevailed in each decided case; two cases are still

pending.

In O'Brien u SEC,132 an action instituted against the Commission and its

employees in fiscal year 1982, the Supreme Court reversed a court of appeals

decision which held that, absent special circumstances, the Commission must

notify "targets" of its non-public investigations whenever it issues subpoenas to

third parties. In a unanimous decision, the Supreme Court held that notice to

"targets" is not required by the Constitution, the statutes governing the Commission's investigative power, or prior decisions of the Supreme Court In its opinion,

the Court expressly recognized the Commission's broad authority to investigate

possible violations of the securities laws.

During fiscal 1984, the Commission's joint authority with the Commodity Futures Trading Commission (CFTC) over futures on stock indices under legislation

enacted in fiscal 1983133was challenged for the first time. The Chicago Board of

Trade (CBTP34 challenged the joint action of the CFTC and SEC in publishing an

interpretation relating to applications for designation as contract markets for

futures contracts on nondiversified stock indices composed of securities of domestic issuers (or options on such futures contracts) under the standards of

Section 2(a) (1)(B) of the Commodity Exchange Act (CEA).135The CBT argued

that the guidelines are contrary to the express statutory provisions of the CEA and

were promulgated in violation of the Administrative Procedure Act. Urged by the

Commission and the CFTC, the district court dismissed the case under the

doctrines of exhaustion and ripeness. A motion for reconsideration filed by the

Chicago Board of Trade is currently pending.

In addition, 15 actions were filed under the Right to Financial Privacy Act

seeking to block the Commission from obtaining access to customer records at

banks and other financial institutions. In fiscal 1983, only five such actions had

been filed. In 13 of the cases, the district court found that the Commission was

41
properly seeking the subpoenaed records for a legitimate law enforcement inquiry and enforced the Commission's subpoenas. The two remaining actions

were settled in the Commission's favor prior to judgment

Finally, four motions were filed in the district courts and the courts of appeal

under the Equal Access to Justice Act seeking attorneys fees and expenses.

Three of those motions were decided in the Commission's favor; one is pending.

Significant Legislation

Financial Services Industry-Vice Presidential Task Group and Glass-Steagall

Legislation-During fiscal year 1984, the Chairman participated as a member of

the Task Group on Regulation of Financial Sevices, chaired by Vice President

Bush. The Task Group resulted in part from the Chairman's proposal that a oneyear task force be formed to review the regulatory structure for the securities,

banking, thrift, and insurance industries; that financial services be regulated by

functional activities rather than by outmoded industry classification; that overlapping, duplicative, and conflicting regulatory activities be consolidated; and that

excessive regulations within and between agencies be eliminated.

Early in the fiscal year, the Task Group announced that it would endorse

proposals to substantially reorganize the Federal regulatory system for depository

institutions. The proposals would repeal the exemptions in the Securities Act for

registration of securities issued by banks and savings and loan associations and

transfer to the SEC administration of the periodic reporting, proxy solicitation,

and short-SWing profits provisions of the Exchange Act as they relate to such

institutions. These initiatives would consolidate administration of securities disclosures requirements for banks and savings and loan associations, resulting in

more uniform financial disclosure to public shareholders and securities analysts

and facilitating evaluation of comparative investment risks. Delays in conforming

regulations governing banks and savings and loan association filings with those

applicable to other issuers would be eliminated and duplication of agency staff

requirements would be reduced. The Commission would become the repository

for filings of all publicly held banks, savings and loan associations, and holding

companies, as it is for all other publicly owned companies.

Mortgage-Backed Securities-The Commission testified in support of legislation to facilitate the development of the private secondary mortgage market The

Commission staff also provided technical assistance to Congress in this area. The

legislation was signed by the President on October 3, 1984. The legislation is

designed to encourage offerings of mortgage-backed securities by private issuers, and could have a significant impact on the long-term capital markets.

The Hot Issues Report-On December 15, 1983, the Chairman and the Director of the Division of Enforcement testified before the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Affairs, on the

subject of problem hot issues. At the request of Chairman Timothy E. Wirth of the

Subcommittee on Telecommunications, Consumer Protection, and Finance of

the House Committee on Energy and Commerce, the staff prepared an extensive

report on this area. The report was transmitted to Congress in August 1984.

The Insider Trading Sanctions Act-As proposed by the Commission, the

Insider Trading Sanctions Act (ITSA), developed by the Office of the General

42
Counsel with assistance of the Division of Enforcement, authorizes the Commission to seek a civil penalty of up to three times the profit gained or loss avoided as

a result of insider trading transactions. (Authority to obtain injunctive and other

equitable relief against such conduct is not affected.) ITSA also increased the

maximum fine for a criminal violation of the Act from $10,000 (established in

1934) to $100,000.

As amended by the Congress, ITSA, in addition to the above, (1) prevents

circumvention of existing prohibitions of insider trading by explicitly prohibiting

unlawful conduct in derivative securities such as options; (2) adds commodities

law violations as a basis for statutory disqualification under the Exchange Act; (3)

extends the Commission's authority to bring administrative proceedings to remedy violations of Section 14 of the Exchange Act; and (4) amends Section

15(c)(4) of the Exchange Act to clarify the Commission's authority to proceed

administratively against officers or directors or other individuals who cause a

failure to comply with Sections 12, 13, 14, or 15(d) of that Act, as well as against

the issuer. ITSA was signed by President Reagan on August 10,1984.

Tender Offer Reform Act-As proposed by the Commission, the Tender Offer

Reform Act, developed by the Office of the General Counsel with the Division of

Corporation Finance would, during certain tender offers, restrict certain activities

of tender offers, including the granting of "golden parachute" compensation

agreements; the defensive reacquisition by an issuer of its own securities; and the

defensive issuance of securities constituting more than 5% of a class of securities

or more than 5% of the issuer's aggregate voting power.

The Commission's proposal also would amend the beneficial ownership reporting requirements of Section 13(d) of the Exchange Act. Finally, it would

prohibit the purchase by an issuer of any of its securities at a price above the

market from a greater than 3% holder of such class who has held such securities

for less than two years, unless prior security holder approval is obtained or an

offer of at least equal value is made to all security holders. This latter provision is

designed to curb the so-called "greenmail" practice.

The Commission's proposal was introduced in both the Senate and the House

of Representatives. Portions of the Commission's proposal were added to the

banking bill (The Financial Services Competitive Equity Act), passed by the

Senate in September 1984. The Commission's proposal, as amended by the

Committee on Energy and Commerce, was, in August 1984, ordered reported to

the full House of Representatives.

Shareholder Communications Act-As proposed by the Commission, the

Shareholder Communications Act, developed by the Office of the General Counsel and the Division of Corporation Finance, would amend Section 14(b) of the

Exchange Act to authorize the Commission to regulate the dissemination of

proxy materials by banks, associations and other entities in the same fashion as

the Commission now regulates the dissemination of proxy materials by brokerdealers. This proposal contains a one-year delayed effective date. It was introduced in both houses of Congress and was added to the Tender Offer Reform Act

by the House Committee on Energy and Commerce.

43
Corporate Reorganizations

The Commission acts in a statutory adviser's role in reorganization cases under

Chapter 11of the Bankruptcy Code to ensure that interests of public investors are

adequately represented. In these cases, administered in Federal court, a debtor

usually continues to operate under the court's protection while it attempts to

rehabilitate its business and work out a plan to pay its debts. Reorganization plans

often provide for the issuance to creditors and shareholders of new securities in

exchange for part of all of their claims or interest in the debtor under an exemption from registration under the Securities Act provided by the Bankruptcy Code.

The Commission may raise or present its views on any issues in a Chapter 11

case, but it may not initiate an appeal. Although Chapter 11 relief is available to

businesses of all sizes, the Commission generally limits its participation to cases

involving debtors that have securities registered under the Securities Act.

In these cases, and in those pending from prior years, the Commission presented its views on a variety of issues including: (1) the need for appointment of

additional committees to represent classes of public debt holders or equity security holders; (2) the need for appointment of a trustee to direct the debtor's

affairs or an examiner to investigate prior conduct of management and the scope

of the examiner's investigation; (3) questions conceming the administration of the

estate including proposed sales of major assets; (4) the adequacy of disclosure

statements required to be transmitted to creditors and investors when their votes

on a plan are solicited; (5) the interpetation of provisions of the Code relating

to the payment of fees sought by counsel and other professionals; (6) interpretive

questions concerning applicability of the securities laws to bankruptcy proceedings.

Committees-Committees are empowered to consult with a debtor in possession in the administration of a case and to participate in the formulation of a plan.

With court approval, official committees are permitted to employ, as a cost of

administration, one or more attorneys, accountants, or other agents to assist the

committee in performing its duties. In addition to a committee to represent

creditors holding unsecured claims, the Code also allows the court to appoint

additional committees for stockholders and others where necessary to assure

adequate representation of their interests in a case. During the fiscal year, the

Commission moved or supported motions for the appointment of committees to

represent investors in 12 Chapter 11cases. Committees were appointed in all but

one.

In a case having significance for the representation of publicly held debt securities, In re The Charter Co., et al.,136 the bankruptcy court agreed with the

Commission that indenture trustees are eligible to sit as voting members of a

committee where the indenture trustee determines that such participation is

necessary to represent the interests of debenture holders. The Commission had

opposed a motion seeking their removal, on grounds of conflict of interest,

arguing that there was no inherent conflict between fiduciary responsibilities of a

trustee to represent indenture debtholders and fiduciary responsibilities of a

member of the committee also to represent other creditors of the estate. The

Commission pointed out that, like other members of a committee, if an actual

conflict arose on a particular matter, the indenture trustee may simply recuse

44
itself, relinquish its voting rights or resign.

Trusteesand Examiners-Under the Bankruptcy Code, the court may appoint

a trustee either "for cause," including fraud, dishonesty, or gross mismanagement of the debtor's affairs by current management, or in the interests of creditors or equity security holders, or other interests of the estate. The trustee's

primary duties are to operate the debtor's business, conduct and report to the

court the results of the investigation of the debtor and file a plan. Where there is

no trustee, an examiner may be appointed, on request of a party in interest, if the

appointment is in the best interest of the estate, and shall be appointed where, in

general, unsecured debts exceed $5 million. Generally, an examiner's duties are

limited to conducting and reporting to the court the results of his investigation.

The Commission participates on questions concerning the appointment of trustees and examiners and the scope of their duties because of the important role

that these independent fiduciaries play in protecting the interests of public investors. This fiscal year,the Commission supported successful motions to appoint a

trustee in one case and an examiner in one case.

In In re Dreco, Inc.,137a case having significant implications for the Commission in this area, the Commission moved for the "mandatory" appointment of an

examiner because of, among other allegations, claims against the debtor's current management made in a private securities fraud litigation. The bankruptcy

court denied the motion on the ground that the Commission lacked standing to

move for the appointment of an examiner. A petition for writ of mandamus by the

Commission seeking review of the denial of its standing was denied by the district

court, which concluded that while the Commission could raise the issue of the

need for the examiner, it lacked standing to invoke the mandatory provision. The

Commission determined not to seek further appellate review at this time based

on the facts of the case, and deferred consideration for a more appropriate case

in which to test its standing.

Under the Bankruptcy Code, the scope of an examiner's investigation is left to

the court's discretion. In a case raising significant issues concerning the judicial

approach to determining the scope of that investigation,138 the Commission

argued that, at the outset of an examiner's appointment, it is premature to limit

the scope of inquiry. Rather, the Commission urged that the court should direct

the examiner to file a preliminary report within 120 days making recommendations concerning the appropriate scope of his investigation and its projected cost.

The bankruptcy court rejected this approach and ordered limited inquiry.

Estate Administration-In In re Baldwin-United Corporeuion.P" the bankruptcy court issued orders authorizing the debtors to honor indemnification

provisions of corporate by-laws and to advance expenses for legal representation,

as an administrative expense, for certain present and former directors and former

officers named as defendants in class action securities litigation. In appeals taken

from these orders, at the request of the district court, the Commission filed a brief

on this issue.

The position urged by the Commission attempted to reconcile two competing

public policy concerns-the importance of outside directors to publicly held

corporations and the longstanding policy of the bankruptcy laws of equality of

45
treatment among creditors of the same class, except when expressly authorized

by statute. The Commission argued that indemnification claims for pre-petition

conduct of officers and directors must be treated like all other unsecured claims

and therefore any post petition indemnification payments must be justified on

findings that such payments were in the best interests of the estate.

The district court adopted the Commission's legal analysis of the Bankruptcy

Code and remanded to the bankruptcy court for an evidentiary hearing to determine, with respect to the current directors, whether the estate derived sufficient

benefit from the continued services of the directors to justify the anticipated

amount of advances for legal fees. With respect to former officers and directors

who no longer serve the debtors, the district court disagreed with the Commission's position that the bankruptcy court could, if the court determined that a

consolidated defense was in the best interests of the estate, authorize the advance

of legal fees as loans provided that the adequate protections were afforded in

order to assure that these persons are ultimately treated the same as other

unsecured creditors.

Also in the Baldwin-United case, the debtor sought to enjoin the Commission's law enforcement investigation until the court-appointed examiner filed his

final investigation report. The debtor claimed that the Commission's investigation

would unduly burden the estate with costs of responding to the Commission's

request for testimony and documents, would divert attention of the company's

executives from working on a plan to reorganize the company, and would duplicate the examiner's investigation. The Commission disputed the factual assertions and the jurisdiction of the bankruptcy court to stay its investigation.

Subsequently, the Commission entered into a settlement with the debtor which

permitted the investigation to continue.

In Lionel Cotporeuion.v'? the Commission urged that legal standards permitting sale of a major asset of the estate outside of a plan of reorgamzation must not

undercut the disclosure, voting and confirmation standards in Chapter 11 designed to protect the interests of creditors and public investors. The Court of

Appeals for the Second Circuit agreed with the position urged by the Commission that, without an adequate business justification, major assets may not be

sold outside the context of a reorganization plan.

Plans of Reorganization/Disclosure Statements-A disclosure statement is a

combination proxy and offering statement used in connection with the acceptance of a plan of reorganization which often includes the exchange of new

securities for claims and interests of creditors and shareholders in the debtor. The

Bankruptcy Code provides that adequate disclosure is to be made without regard

to whether or not the information provided would otherwise comply with the

disclosure requirements of the Federal securities laws. But, in recognition of the

Commission's special expertise on disclosure, bankruptcy rules require the service of the Commission on all disclosure statements and the Bankruptcy Code

expressly recognizes the Commission's right to be heard on the adequacy of

disclosure, although denying the Commission the right to appeal disclosure

issues.

Bankruptcy rules require that disclosure statements filed by corporate debtors

be transmitted to the Commission. During the fiscal year, the Commission received approximately 3,000 disclosure statements filed in Chapter 11 cases in46
volving both privately held and publicly held corporations. The Commission staff

reviews disclosure statements to determine whether the plan proposed involves

the issuance of securities consistent with the exemption from registration in the

Bankruptcy Code or compliance with the Federal securities laws. The Commission also reviews disclosure statements to determine whether there is adequate

disclosure concerning the proposed plan. During the fiscal year the Commission

reviewed 1,200 disclosure statements, the great majority of them only cursorily.

Generally, the Commission seeks to resolve questions concerning disclosure

through staff comments to the plan proponent. If those cannot be resolved

through this process the Commission may object to the disclosure statement in

the bankruptcy court.

During the fiscal year the Commission commented on disclosure statements

cited in 31 cases, ten of which resulted in objections filed in the bankruptcy court.

One significant objection the Commission has pressed this year in two cases, In

re LioneL Cotporetionr" and In re SheLter Resources COrp,142is the failure to

include financial projections to support opinions that the plan of reorganization is

economically feasible. Both cases are still pending.

In two cases the Commission objected to plan confirmation because of Commission law enforcement concerns. In In re Taurus Oil CO.,143the Commission

objected to confirmation of the debtor's plan on the grounds that a proposed

securities transaction was not exempt from Securities Act registration by virtue of

the exemption from registration found in the Bankruptcy Code. The court agreed

with the Commission and directed registration of the securities as a prerequisite

to plan confirmation.

In WJods Communication Corp.,144 the Commission objected to confirmation

of a plan of an assetless publicly held shell corporation which contemplated no

business operations but sought to employ the discharge provisions of Chapter 11

to discharge claims of creditors through a de minimis payment. The stated

purpose of the plan was to emerge from Chapter 11as a publicly traded company

without assets or liabilities, and to acquire operating businesses through the

issuance of securities. The Commission's objection was premised on a concern

that adequate information would not be available to the market by virtue of the

court's confirmation of the plan. Further, the Commission viewed the use of

Chapter 11 by corporate shells to cleanse themselves of liabilities as an abuse of

the reorganization process. (After the close of the fiscal year,the court agreed with

the position urged by the Commission and denied confirmation of the plan.)

Fee-Related Questions-From time to time the Commission expresses views

on particular legal and policy questions relating to fees in order to assure that

adminstrative costs of bankruptcy, borne by public investors, are consistent with

the provisions of the Bankruptcy Code. For example, in In re Victor Technologies.

Inc.,145 the Commission argued, and the court agreed, to adhere to the long

standing policy, developed under the former Bankruptcy Act, of paying only a

portion of the requested interim allowances because of the inability of the court

to determine the necessity and value of the services rendered prior to the conclusion of the case. The Commission urged that absent special circumstances, the

award should be limited to 75% of the request, based on normal billing rates.

In two other cases, the Commission expressed its views on fee questions, in

response to judicial requests for assistance. In In re North America Coin &

47
Currency.146the bankruptcy court, as urged by the Commission, denied counsels' requests for the payment of a "bonus" in addition to reasonable compensation, In Southern Industrial Banking Corporetion.r'? the bankruptcy court, as

urged by the Commission, concluded that the Bankruptcy Code confers jurisdiction on the court to determine the reasonableness of fees to be paid, not by the

estate, but by the debtor's successor for legal and accounting services rendered

to the outside investor group which proposed and funded the debtor's reorganization. The court also concluded that the standard for review of the fees is the same

"reasonable compensation" standard governing awards from the estate.

Commission Standing to Appear as a Party in Interest-Occasionally the

Commission has determined that pursuit of certain ancillary equitable relief for

violations of the Federal securities laws against companies undergoing reorganization is more appropriate in bankruptcy court than in a separate district court

proceeding. On those occasions the Commission seeks to intervene as a party in

interest under Section 1109(b) of the Bankruptcy Code with the right to appeal,

rather than in its advisory status under Section 1109(a).

The Commission sought to assert such standing in two cases during the past

fiscal year. In TaurusOil Co., noted above, the Commission sought to intervene

under Section 1109(b) to object to confirmation of a plan because the plan

contemplated a securities transaction in violation of Securities Act registration

provisions. The court denied the Commission party in interest standing but

granted the relief requested by the Commission.

In another case,148the Commission, in its own law enforcement action, had

frozen $4 million and had sought imposition of a constructive trust on these

monies, which it alleged had been obtained by fraudulent sale of unregistered

securities. While the enforcement action was still pending the defendants filed

petitions for reorganization under Chapter 11. The Commission subsequently

sought to intervene in the bankruptcy court in order to have standing to pursue

the constructive trust. The bankruptcy court denied the Commission's right to

intervene, stating that the Commission's exclusive role in reorganization cases is

limited to its advisory role under Section 1109(a). An appeal to the United States

Court of Appeals for the Ninth Circuit on this ruling is pending. Subsequent to

this appeal the Commission has commenced an adversary proceeding in the

bankruptcy court against the bankruptcy trustees seeking to impose a constructive trust for the benefit of defrauded investors.

48
Public Utility Holding Companies

Composition

Under the Public Utility Holding Company Act of 1935 (Holding Company Act),

the Commission regulates interstate public utility holding company systems engaged in the electric utility business or in the retail distribution of gas and the

natural gas pipeline companies and non utility companies within a registered

holding company system.

There are presently 13 registered holding companies with aggregate assets, as

of June 30,1984, of $72.7 billion representing an increase of $6.6 billion, or 10%,

over the previous 12-month period. Total operating revenues, as of June 30,1984,

were $34.6 billion, a $3.3 billion or 10-1/2% increase over the previous year.In the

13 systems, there are 65 electric and/or gas utility subsidiaries, 74 non utility

subsidiaries and 20 inactive companies, for a total of 172 system companies

operating in 24 states, including the parent companies but excluding seven

power supply company subsidiaries. Table 32 in the Appendix lists the systems

and Table 33 lists their aggregate assets and operating revenues.

Financing

During fiscal year 1984, the Commission approved approximately $2.8 billion

of senior securities and common stock financing of the 13 registered systems.

Of this amount, approximately $2.4 billion was long-term debt financing, the

remaining $400 million was common and preferred stock. Over $1.4 billion of

pollution control financing and $4.3 billion of short-term debt financing for the

registered holding company systems was approved. The pollution control financing exceeded the cumulative pollution control financings approved by the Commission between fiscal year 1980 and 1983. The short-term debt, on the other

hand, reflected a 15% decrease over the authorized amounts in fiscal year 1983.

Table 34 in the Appendix presents the amounts and types of securities issued by

the holding company systems under the Holding Company Act

Fuel Programs and Service Companies

During fiscal year 1984, the Commission authorized $740 million for fuel

exploration and development activities of the holding company systems. Since

1971, the Commission has authorized expenditures of over $7.3 billion for fuel

programs of holding companies subject to the Holding Company Act (see Table

36 and 37 in the Appendix).

At the end of calendar year 1983, 12 subsidiary service companies provided

managerial, accounting, administrative and engineering service to 11 of the 13

holding companies registered under the Holding Company Act. Billings for services rendered to the holding company systems amounted to $1.2 billion or

3.54% of the total revenues generated by the electric and gas operating utilities.

49
The subsidiary service companies are heavily labor-intensive, employing 17,147

people, and have assets of over $630 million. Table 35 in the Appendix lists the

subsidiary service companies with billings, total assets, total personnel, and the

number of operating utility companies served.

The Commission's examination of service company and fuel procurement

activities through the accounting jurisdiction under the Holding Company Act of

nonutility businesses has resulted in savings to consumers during the fiscal year

of approximately $22.7 million.

Novel Financings and New Business Activities

During fiscal year 1984, the Commission authorized Central Powerand Light to

enter into a leveraged preferred stock financing.I49 This is a new series of sinking

fund preferred which is sold to a special-purpose trust to be established and

financed by, and for the benefit of, a group of corporate investors. The trust

purchases the preferred stock with funds raised by equity contributions from the

corporate investors and loans from institutional lenders (in a ratio of approximately 25% equity to 75% debt). The loans are without recourse to the investors

and are secured by the preferred stock. The corporate investors, as beneficiaries,

receive all preferred stock dividends, less amounts required to service the trust's

debt.

Connecticut Light and Power Company and Western Massachusetts Electric

Company have been given Commission approval to issue a new variety of pollution control bond called a variable rate demand bond or a low floater bond.'>?

After an initial period, the interest rate is determined weekly by a remarketing

agent based on an agreed upon index. Bond holders havethe right to tender their

bonds at principal, prior to a new rate period. The quid pro quo for the company

for accepting a variable interest rate is that the initial interest rate will be

substantially less (300-500 basis points) than for a fixed interest rate pollution

control bond.

Central and SouthWest Corporation also has filed an application (File No.

70-6997) to create a factoring subsidiary that would purchase the accounts

receivable (factoring) of the System's operating subsidiaries. These accounts

receivable would be purchased at a discount and CSW Credit will obtain

financing for these transactions from the parent and bank credit. Profits from

the factoring of the subsidiaries would accrue directly to the parent holding

company.

50
Management, Economic Analysis and

Program Support

Key 1984 Management and Program Developments

Fiscal 1984 marked an important milestone for the Commission, the securities

industry, and public investors. In May, after competitive bidding, the Commission

awarded a contract to Arthur Andersen and Company to conduct a pilot program

(EDGAR) to test the receipt and analysis of a limited number of corporate filings

electronically-the first step toward realization of an operational electronic disclosure program.

Emphasis in 1985 will be on expanding and improving EDGAR's analytic capabilities. During 1985, the Commission expects to solicit proposals on the contract for the long-term, operational system.

In a related effort, the Executive Director's Office conducted a study to determine the potential impact of EDGAR on the market for securities information.

The study revealed substantial financial benefits for investors, issuers, and the

securities industry. In addition, the study found a sizable and potentially lucrative

market for the range of services to be provided by EDGAR. Data generated by the

study are being used in support of the Commission's deliberations on financing

EDGAR and in preparing a Request for Proposal for the operational program.

In June, the Commission celebrated its 50th Anniversary. This included a

reception for alumni and staff at 450 5th Street and a dinner for 1,500 present and

former staff that featured presentations by all living former Chairmen. At the

dinner, the Commission's official 50-year history was formally presented. In conjunction with the Anniversary, the Commission sponsored its second Major Issues

Conference dealing with a range of topics regarding the operation of the nation's

financial markets in the 1980's. Among the issues discussed were the convergence of the financial service industries, the impact of technology on the

securities markets, and regulation of corporate mergers and acquisitions. Over

700 people attended the Conference.

During the year, the Executive Director's Office conducted management reviews of the Office of the General Counsel, the Office of the Administrative Law

Judges, and the Commission's personnel procedures. In addition, the staff prepared a cost-benefit study on proceedings under Chapter 11 of the Bankruptcy

Code, redesigned the Name Relationship Search System, and conducted a comprehensive analysis of regional office productivity.

Economic Research and Statistics

Changes in the marketplace have increased the number and complexity of

economic issues coming before the Commission and have greatly complicated

analysis of impacts of SEC regulation.

Research and technical support are required to evaluate the economic aspects

51
of the Commission's regulatory program. This task is carried out by the Office 01

the Chief Economist and the Directorate of Economic and Policy Analysis. The

economics staff evaluates rule proposals, established policy and the capital markets. Staff economists also conduct statistical monitoring of major programs

affecting the securities industry and markets and publish findings in the SEC's

Monthly Statistical Review.

During fiscal 1984, proposals to introduce more than two dozen new products

were reviewed, including options and futures on stock market indices and industry stock groups. The number of new products and services is expected to grow.

New and more complex market structures and trading systems are expected to

evolve. The economics staff helps the Commission assess the economic aspects

of major policy issues relating to these evolutions and develops monitoring procedures to evaluate the operations of the markets.

During fiscal 1984, the economic staff reviewed 80 rules and rule proposals.

Rule reviews emphasized the economic costs and benefits of alternative approaches to regulation. In addition, advice was given to the operating divisions on

requirements of the Regulatory Flexibility Act (RFA), particularly focused on economic effects of proposed rules and alternatives for reducinq regulatory burdens

on small business entities. In fiscal 1984, the economic staff reviewed 21 RFA

analyses and 25 RFA certifications.

Economic research projects completed during fiscal year 1984 included an

examination of the effects of the net capital and the reserve/segregation rules

(financial responsibility rules) on the capital structures of broker-dealers. This

study analyzed factors affecting long-term trends in the capital structure and

capital needs of broker-dealers, and assessed the impact of recent amendments

to the financial responsibility rules, showing $550 million in freed-up capital

during the first year.

The economics staff continued to monitor the effects of trading in Rule 19c-3

securities (those securities not subject to exchange off-board trading restrictions)

and the development of automated trading facilities in the OTC and exchange

markets. Another major review calculated that $15.5 billion of securities had been

offered under the recently restructured private and limited offering exemptions

from Federal registration (Regulation D). The study indicated that certain changes

introduced by Regulation D have substantially aided issuers in raising capital.

Staff economists analyzed the Tender Offer Advisory Committee's recommendations, the Commission's response to the recommendations and the ensuing legislative package. Three major studies resulted. One, a study of two-tier and

partial tender offers, focused on the empirical evidence concerning these types

of tender offers. Another study examined the impact of targeted share repurchases (greenmail) on stock prices. In the third study, the staff surveyed the

extent of beneficial block ownership in U.S. corporations and examined possible

changes to beneficial ownership reporting based upon the Advisory Committee

Report.

Other issues analyzed during fiscal 1984 included proxy initiatives, shelfregistration of corporate securities, and the impact of corporate charter amendments to thwart takeovers. In a study to determine the effects of optional variable

sales loads the staff examined mutual fund performance, the relative growth of

52
load and no-load funds, sales and distribution expenses and revenues from fund

sales by broker-dealers.

Information Systems Management

EDGAR is only one aspect of the Commission's continuing effort to accommodate its increasing workload through technological innovation. Under its

Productivity Improvement by Computer (pIC) program, the number of microcomputers employed by the staff was expanded from 30 to 100 during 1984, a

dramatic expansion accompanied by an intensive training program that reached

nearly 500 staff members over the year. The Commission's User Support Information Center continued to provide the staff with technical assistance in adapting

computer technology to an ever increasing number of operational activities. The

benefits of microcomputer technology have been highly visible: improved litigation support, market analyses, and support to regional personnel monitoring the

"hot issues" markets.

During 1984, the Commission completed work on a fully interactive and integrated payroll system. The culmination of three years of developmental work, this

system is being considered by the Office of Management and Budget (OMB) as a

government-wide prototype. Also during 1984, the staff developed a computerized complaint letter system and automated the agency's Securities Violation

Bulletin, facilitating monthly, rather than quarterly, publication. Finally, the

staff developed a system to provide daily market transaction data to the Division of Enforcement. Because this in-house system now provides data

previously acquired from a private vendor, the Commission is saving approximately $72,000 per annum.

Financial Management

During fiscal 1984, the Commission collected a record $121 million in fees for

deposit to the General Fund of the Treasury. This is the second year in succession

and only the third year in its history that the Cornrnissron has collected fees in

excess of its annual appropriation. The 1984 figure represents 129% of the

agency's appropriation and eclipses by $23.4 million the previous record amount,

collected in 1983. Fees were derived from four sources: securities registered

under the Securities Act of 1933 (49%), transactions on securities exchanges

(31%), miscellaneous filings and reporting fees (19%), and registration of brokerdealers (1% ).

The agency continued to improve its financial management procedures in

furtherance of the government-wide Reform 88 initiative and the recommendations of the President's Private Sector Commission on Cost Control. Through an

electronic funds transfer system (EFTS) for the transmission of fees from the

securities exchanges, nearly $37 million in fees were transmitted to interest bearing Treasury accounts in 1984, saving the Federal government over $50,000 in

interest revenues.

The staff processed over 39,000 checks from filers and approximately 17,500

invoices, the latter a 6% increase over 1983. In addition, the agency continued its

excellent record in meeting the requirements of the Prompt Payment Act, incur53
ring only one interest penalty.

Steps were taken to improve the financial management capabilities of line

divisions. In particular, the staff redesigned the series of financial management

reports provided to division directors and office heads to better meet their need

for periodic summary data on various resource allocations. Another internal

management improvement, initiated by the Comptroller, was the introduction of

General Accounting Office-approved statistical sampling techniques to streamline audits of travel documentation.

Facilities Management

During fiscal 1984, administrative personnel achieved compliance with the

space reduction requirements of Executive Order 12411. Under a plan approved

by the General Services Administration (GSA), physical alterations necessary to

bring the Commission's headquarters and regional offices into compliance with

the order's 135 square foot per employee standard were completed. By year end,

15,600 square feet of space had been eliminated, resulting in a saving of

$200,000. Completion of all alterations will occur during 1985.

Since 1982, when the Commission first occupied its consolidated headquarters building, the staff has continued to upgrade and refine safety and security

procedures. During fiscal 1984, the Commission acquired state-of-the-art motion

detection and alarm systems to better secure proprietary and sensitive information at the headquarters building. The Commission also acquired equipment and

developed procedures to assist in the emergency evacuation of handicapped

employees.

Operating expenses were reduced during the year by replacing and eliminating

obsolete equipment, acquiring surplus printing equipment and furniture from

other agencies at no cost, and substituting external contracting services for certain costly in-house operations. In all, these steps have saved an estimated

$150,000 during fiscal 1984.

A 1984 OMB survey of government printing operations rated the Commission's

printing plant as one of the best among Federal agencies. During 1984, the

printing staff produced nearly 43 million printed pages, and increased productivity by 5% over 1983. Administrative personnel also handled 1.5 million pieces of

mail during the year.

Finally, the staff continued to improve administrative support for the regional

offices. In particular, nationwide telecopying capability was improved with the

installation of new equipment in three regional offices.

Personnel Management

Faced with a rapidly expanding workload, high priority on productivity improvements continues. Personnel actions are executed only after careful analysis

of their ultimate impact on overall division or office operations. During fiscal 1984,

over 7,200 personnel actions were processed. The Commission renewed efforts

to minimize the adverse effects of "grade creep," particularly through a program

to comply with OMB's directive that Federal agencies reduce staff at the GS 11-15

levels by 2% in 1985 and 1986. Further, the Commission has pursued an aggres54
sive policy of position management by reviewing the classifications of 210 positions during fiscal 1984.

In fiscal 1984, the performance appraisal system was fully redesigned. Staff was

familiarized with the more demanding written standards through a comprehensive instruction program.

The personnel staff performed a comprehensive review of the position management and classification practices of the Division of Investment Management,

and abbreviated on-site reviews of all regional and branch offices. Where necessary, practices were modified to conform with Commission-wide personnel standards.

Consistent with the commitment to improving the skills and abilities of the staff,

training was provided to 1,020 individuals. In addition, the program of employee

assistance continued during fiscal 1984 with seminars on health care and retirement.

Public Affairs

The objective of the Office of Public Affairs is to communicate information on

Commission activities to those interested in or affected by Commission actions.

Both on-going programs and special projects were used to achieve the objective

during 1984.

The SEC News Digest, published every business day, provides information on

virtually all SEC actions: issuer filings, acquisition reports, rule changes, actions

against individuals or corporate entities, releases, events of interest and upcoming Commission meetings. It is available in the Public Reference Room, and is

published commercially. Press releases prior to, and press briefings after, Commission meetings provide insight Into proposed and adopted changes in policies

and regulation, and are also issued on upcoming events, on-going programs

and/or special projects. In all, 58 news releases were issued during the year.

Information on Commission actions is disseminated every business day through

compilation of Digest notices of administrative actions, litigation releases and

other appropriate material. Where appropriate, Commission actions are brought

to the attention of the national and regional press.

Publication of an annual report provides information on Commission activities

to Congress, the securities bar and other interested parties. Through the Depositary Library System, the report is made available to selected colleges and universities throughout the country. A regular newsletter was published for Commission

employees, and approximately 63,000 requests for information from members of

the public were handled in 1984. More than 300 foreign visitors learned about the

SEC during the year, in programs coordinated by the Office.

Special projects during the year included support for the 50th Anniversary of

the Commission, especially the conception, coordination and publication of a

history entitled "Good People, Important Problems and Workable Laws, 50 Years

of the U.S. Securities and Exchange Commission." The office also assisted on the

Major Issues Conference, the third SEC Forum on Small Business Capital Formation, and the Practicing Law Institute, and updated "Eagle on the Street," an

audiovisual presentation on the Commission. Finally, the Office began the transition to the EDGAR system.

55
Consumer Affairs

During fiscal 1984, the Commission's consumer affairs staff handled more

than 30,000 complaints and inquiries, an increase of more than 8% over 1983. Of

these, 48% involved investor conflicts with registered broker-dealers, 30% concerned issuers of securities, and 4% pertained to mutual funds. The remainder

were related to transfer agents, banks and investment advisers. The increase in

complaints and inquiries largely reflects the high volume of trading in the securities markets.

The staff carefully reviewed each complaint or inquiry. Matters appearing to

entail violations of the Federal securities laws were referred to an appropriate line

division for direct action. With matters not appearing to involve securities law

violations, the staff assisted investors by forwarding complaints to either an appropriate self-regulatory authority or to the entity that was the subject of the

complaint In many instances, the staff was successful in achieving an informal

resolution of the problem. During fiscal 1984, the staff also prepared materials to

assist investors with the American Telephone & Telegraph Co. divestiture, the

Washington Public Power Supply System default, and the Baldwin United Corporation annuities default

During fiscal 1984, 1,743 Freedom of Information Act (FOIA) requests and

2,391 requests for confidential treatment were handled, increases over 1983 of

21% and 30%, respectively. The requests for confidential treatment were typically

made in connection with proprietary corporate information, and were carefully

evaluated to prevent the indiscriminate and unwarranted release of information

exempt from the FOIA.ln addition, the staff processed 51 Privacy Act requests. To

ensure conformity in the administration of FOIA, Privacy Act and Sunshine Act

requirements, a seminar was conducted for headquarters and regional office

staff. Finally, the Commission's Public Reference Room processed 198,000 requests for information, an increase of 15% over 1983.

Equal Employment Opportunity

Hiring of women and minorities has increased significantly. Since 1976, the

number of female attorneys at the Commission has increased from 11% to 32% ;

the number of minority attorneys rose from 5% to 10%. Currently, women comprise nearly 50% of the Cornrmssions workforce, and minorities, 30% .

The Commission, in cooperation with the Securities Industry Committee on

Equal Employment Opportunity, continued to sponsor a scholarship program for

deserving minority students pursuinq careers in the securities industry. Seven

were awarded during the year.

The contributions and achievements of minority groups were recognized with

special programs during Hispanic Heritage Week, Asian-Pacific Heritage Week,

Women's Week, Afro-American History Month, and on the birthdate of Dr. Martin

Luther King. In addition, the staff organized a series of workshops and clinics in

observance of National Secretaries Week

Finally, the Commission continued its program of EEO instruction for the staff.

During a two-day training program for the headquarters staff, more than 100

individuals were instructed in the principles of equal opportunity law and affirm a56
tive action, the prevention of discrimination and sexual harassment in the workplace, and methods for improving employment opportunities for minorities and

women.

Although the Commission is prohibited from accepting reimbursement from

regulated entities, the 1983 Securities Exchange Act amendments gave the Commission the authority to accept payment and reimbursement from other entities

to defray the cost of travel and subsistence expenses incurred by Commissioners

and staff for participation in meetings and conferences concerning functions or

activities of the Commission. During 1984, Commissioners participated in 31

events at a cost of $5,915 to the government The Commission was reimbursed in

the amount of $12,484 by other entities. Overall, staff participated in 217 meetings/conferences reimbursed at $71,747; Federal costs incurred amounted to

$11,206.

57

Commissioners and Principal Staff

Officers

(As of September 30, 1984)

Commissioners

John S.R. Shad, Chairman

James C. Treadway,Jr.

Charles C. Cox

Charles L. Marinaccio

Aulana L. Peters

Secretary: George A. Fitzsimmons (until August 1984)

Acting Secretary: Shirley E. Hollis (August 1984-

Executive Assistant to the Chairman: Linda C. Quinn

Term Expires

1986

1987

1988

1985

1989

Principal Staff Officers

George G. Kundahl, Executive Director

Kenneth A. Fogash, Deputy Executive Director

John J. Huber, Director, Division of Corporation Finance

WilliamC. Wood, Associate Director

Mary E.T. Beach, Associate Director

Catherine Collins McCoy,Associate Director

Ernestine M.R. Zipoy,Associate Director

Amy L. Goodman, Associate Director, EDGAR

John M. Fedders, Director, Division of Enforcement

John C. Sture, Associate Director

Gary G. Lynch, Associate Director

Frederick B. Wade, Chief Counsel

Alexia L. Morrison, Chief Litigation Counsel

Richard G. Ketchum, Director, Division of Market ReguLation

Richard P. Wessel, Associate Director

Mark Fitterman, Associate Director

Richard Chase, Associate Director

Kathryn B. McGrath, Director, Division of Investment Management

Gerald Osheroff, Associate Director

Jeffrey L. Steele, Associate Director

Aaron Levy,Director, Office of Public Utility Regulation

Grant Guthrie, Associate Director

Daniel L. Goelzer, General CounseL

Paul Gonson, Solicitor

EIisse Walter,Associate GeneraL Counsel

Jacob H. Stillman, Associate General CounseL

Linda D. Fienberg. Associate General CounseL

59
Mary M. McCue, Director; Office of Public Nfairs

Chiles T.A. Larson, Deputy Director

A. Clarence Sampson, Chief Accountant

Edmund Coulson, Deputy Chief Accountant

Jeffrey L. Davis, Director; Directorate of Economic and Policy AnaLysis

Terry M. Chuppe, Associate Director

Charles W.Bryson, Associate Director

Gregg A. Jarrell, Chief Economist

WilliamS. Stern, Director; Office of Opinions and Review

Herbert V. Efron, Associate Director

R. Moshe Simon, Associate Director

Warren E. Blair, Chief Mministrative Law Judge

Lawrence H. Haynes, Comptroller

Herbert S. Silbert, Assistant ComptroLLer

Richard J. Kanyan, Director; Office of Mministrative Services

James C. Foster, Director; Office of PersonneL

WilliamE. Ford, II,Assistant Director

Wilson Butler, Director; Office of Applications and Reports Services

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

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

John Faith, Deputy Director

Cecilia Srodes, Director of LegisLative Nfairs

James A. Clarkson, III,Director of RegionaL Office Operations

Phillip H. Savage, Director of Equal Employment Opportunity

From the Minutes of August 28, 1984 Commission Meeting

The Commission notes with deep sorrow and regret the death of George A.

Fitzsimmons, Secretary of the Commission, on August 25, 1984. Mr. Fitzsimmons joined the Commission's staff in 1968 as a trial attorney in the Division of

Trading and Markets. He was appointed Secretary of the Commission by Chairman Ray Garrett, Jr. in 1973. Mr. Fitzsimmons served the Commission with great

dedication and was a trusted adviser to all of his colleagues. The Commission

and its staff extend their deepest sympathy to Mr. Fitzsimmons' family and his

many friends. Chairman John S.R. Shad said, "George was one of the most

highly regarded and well liked members of the senior staff. His institutional memory of past Commission actions has been an invaluable resource to the Commission. He will be greatly missed by all of us."

60
Biographies of Commissioners

John S.R. Shad

John Shad was appointed by President Reagan and sworn-in by Vice President

Bush as the 22nd Chairman of the U.S. Securities and Exchange Commission on

May 6,1981. His term expires in 1986.

John Shad resigned as Vice Chairman of the board of the E.F. Hutton Group

and from the boards of seven NYSE listed corporations to join the SEC. He

initiated Hutton's investment banking activities in 1963, which, under his direction,

grew into over a five billion dollar annual principal amount of corporate financings

and mergers.

He has served on the boards of 17 publicly owned corporations; received the

Investment Banker of the Year (1972) and other awards and honors; is a graduate

of the University of Southern California, the Harvard Business School and the

New York University Law School; a member of Beta Gamma Sigma and Phi

Kappa Phi; the author of articles on corporate finance and mergers; and has

taught Investment Banking at the NYU Graduate Business School.

He was born in Utah. While attending college, he worked nights as an aircraft

riveter. During World War II, he served in the Pacific and China as a naval officer.

After graduating from the Harvard Business School in 1949, he began his business career in New York City as a securities analyst.

James C. Treadway, Jr.

James C. Treadway,Jr., became the sixty-first Member of the Commission on

September 13, 1982. His five year term expires June 5, 1987.

At the time of his appointment, Mr. Treadway was a partner with the Washington

and New York law firm of Dickstein, Shapiro & Morin, where he had been engaged in the practice of securities and corporate finance law,representing corporate issuers, officers and directors. In addition, he had represented a U.S. and a

foreign securities exchange, investment banking firms and investment companies. He is the author of various articles on the federal securities laws.

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

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

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

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

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

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

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

Order of the Coif and Omicron Delta Kappa.

61
Charles C. Cox

Charles C. Cox was sworn in as the sixty-second Member of the Commission

on December 2,1983. His term expires June 5, 1988.

Mr. Cox had been Chief Economist at the SEC since September 1982. Prior to

that, he was Assistant Professor of Management at Texas A&M University

(1980-82), Assistant Professor of Economics at Ohio State University (1972-80)

National Fellow at the Hoover Institution at Stanford University (1977-78) and a

consultant to a San Francisco law firm (1978-80).

He received a BA degree magna cum laude with distinction in economics

from the University of Washington in 1967 and masters and doctorate degrees in

economics from the University of Chicago (1970 and 1975). He is the author of

numerous articles in leading economic and other publications.

Mr. Cox was born in 1945 in Missoula, Montana.

Charles L. Marinaccio

Charles L. (Lindy) Marinaccio was sworn in as the sixty-third Member of the

Commission on May 24, 1984. He fills the unexpired term of Barbara S. Thomas,

which expires June 5, 1985.

Mr. Marinaccio served as General Counsel of the U.S. Senate Committee on

Banking, Housing and Urban Affairs, one of the Congressional Committees

which oversees the activities of the SEC, from May 1975 to 1980 and thereafter as

Minority General Counsel. As Counsel to the Committee, Mr. Marinaccio worked

closely with Senators on both sides of the aisle and their staffs on financial

institutions, securities and international trade legislative and oversight matters. He

has also worked on SEC oversight matters. Legislation in which he played a key

staff role includes landmark legislation affecting financial institutions such as the

International Banking Act, lMF legislation, the 1980 Deregulation Act, the GarnSt. Germain Act of 1982, and the Foreign Corrupt Practices Act, administered by

the SEC.

Prior to servmg as Banking Committee Counsel, Mr. Marinaccio was with the

Department of Justice. He was Director of the Executive Secretariat of the Law

Enforcement Assistance Administration (October 1973 to May 1975) and Trial

Attorney, for the Antitrust Division (May 1965 to May 1969) and for the Organized

Crime and Racketeering Section of the Criminal Division (October 1963 to May

1965).

He also served on the Federal Reserve Board staff from May 1969 to October

1973 as Advisor to the Division of Supervision and Regulation and as Senior

Attorney in the Legal Division. There he was responsible for, among other matters, the implementation of the Financial Institutions Supervisory Act on serious

problem bank cases.

Mr. Marinaccio began his career in April 1962 as a law clerk to Chief Judge

Hood and Chief Judge Cayton (retired) at the District of Columbia Court of

Appeals. He joined the Judges' staff immediately after earning a J.D. in law with

honors from George Washington University Law Center: He had earned a BA in

history and government at the University of Connecticut at Storrs (1957).

62
He is past Chairperson of the Federal Bar Association Section on Financial

Institutions and the Economy and a member of the Executive Council of the

Banking Law Committee, which he has served as Chairman. He has also been

Deputy Chairman for the FBA's Continuing Legal Education of the Section on

Financial Institutions and the Economy.

Aulana L. Peters

Aulana L. Peters was sworn in as the sixty-fourth Member of the Commission

on June 11, 1984. Her term expires June 5, 1989.

Until her appointment, Mrs. Peters was a partner with the Los Angeles law firm

of Gibson, Dunn £,. Crutcher, which she joined as an associate in 1973. As a

member of that firm's Litigation Department, she specialized in business and

commercial litigation with emphasis on the securities and unfair competition

areas, particularly class action suits. About one-third of her law practice involved

cases of alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, representing both defendants and plaintiffs. She was also

involved in tender offer/proxy contest litigation.

She has frequently served on legal panels and has lectured for the California

Continuing Education of the Bar and others.

Mrs. Peters, who was born in 1941, is the first black appointed to the Commission. She earned a J.D. with honors from the University of California Law Center

in 1973 and a BA in philosophy from the College of New Rochelle in 1963.

63

Regional and Branch Offices

Regional Offices and Administrators

Region 1. New York, New Jersey-Ira L. Sorkin, Room 1102,26 Federal Plaza,

New York, New York 10278.

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

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

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

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

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

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

60604.

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

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

76102.

Region 6. North Dakota, South Dakota, Wyoming, Nebraska, Colorado, New

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

Region 7. California, Nevada, Arizona, Hawaii, Guam-Irving M. Einhorn, Suite

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

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

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

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

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

Wilson Blvd., Arlington, Virginia 22203.

Branch Offices

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

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

65
Miami, Florida 33131-Suite 1114,DuPont Plaza Center, 300 Biscayne Boulevard

Way.

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

Street.

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

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

66
Footnotes

ICorporate Reporting and Accounting cases include: In the Matter of Steven S.

Glick, Accounting and Auditing Enforcement Release No. 25 (March 23, 1984), 30

SEC Docket 199; In the matter of James E. Etue, et el., litigation Release No. 20

(February 3, 1984),29 SEC Docket 1255; In the Matter of Utica Bankshares

Corporation, Securities Exchange Act Release 20702 (February 29, 1984), 29 SEC

Docket 1479; SEC v. U.S. Surgical Corporation, et el., litigation Release No. 10293

(February 27, 1984),29 SEC Docket 1523; In the Matter of Thomas H. \Vilson, et el.,

Securities Exchange Act Release 20980 (May 21, 1984), 30 SEC Docket 890; SEC v.

Datapoint Cotp., et el., Litigation Release No. 10418 (June 18, 1984),30 SEC Docket

1168; SEC v The Barden Corp., et el., Litigation Release No. 10433 (June 26, 1984),

30 SEC Docket 1290; In the Matter of Stephen 0. Wade, et al., Securities Exchange

Act Release 21095 (June 25,1984),30 SEC Docket 1195; SEC v. Dlgilog, lnc., et ai.,

Litigation Release No. 10448 (July 5,1984),30 SEC Docket 1347, SEC v. Wheat,

Litigation Release No. 10464 (July 20,1984),30 SEC Docket 1552, SEC v. Stauffer

Cherrucel Company, Litigation Release No. 10493 (August 13, 1984),31 SEC Docket

251; In the Matter of Pan American lntemeuonel, ltic., Securities Exchange Act

Release 21278 (August 30,1984),31 SEC Docket 339, In the Matter of Srrutii &

Stephens Accountancy Corp., Securities Exchange Act Release 21298 (September

10, 1984),31 SEC Docket 445; SEC v Corda Dioersified Technologies, lnc., et el.,

Litigation Release No. 10518 (September 10, 1984),31 SEC Docket 544; SEC v.

lruemauonei Property Exchange, lric., litigation Release No. 10544 (August 16,

1984),31 SEC Docket 735; SEC v. Fraser, Litigation Release No. 10512 (August 30,

1984),31 SEC Docket 367; SEC v. Holben, et al., Litigation Release No. 10563

(October 12,1984),31 SEC Docket 890; In the Matter of Coopers & Lybrand, et al.,

Secunties Exchange Act Release 6542 (July 5, 1984),30 SEC Docket 1310; SEC v

'MJrdtronix, lnc., Litigation Release No. 10199 (November 14, 1983),29 SEC Docket

281; SEC v. Electromedics, lnc., et et., Litigation Release No. 10204 (November 21,

1983),29 SEC Docket 407; SEC v. Chennel lndustnes, Lid., et al., Litigation Release

No. 10213 (November 30,1983),29 SEC Docket 470; In the Matter of Touche Ross &

Co, Securities Exchange Act Release 20364 (November 14, 1983),29 SEC Docket

179, In the Matter of Accounting For Gains and Losses, Securities Exchange Act

Release 20266 (October 6, 1983),28 SEC Docket 1577; SEC v. A I BLISSand

Company, et el., Litigation Release No. 10274 (January 30, 1984),29 SEC Docket

1175, SEC v. IntraWest Financial Corp, et el., Litigation Release No 10294 (February

28,1984),29 SEC Docket 1527; SEC v. Burns, et el., litigation Release No. 10298

(March I, 1984), 29 SEC Docket 1531; In the Matter of Prorneuon Inc, Secuntres

Exchange Act Release 6522 (March 10, 1984), 30 SEC Docket 204; In the Matter of

James H. Feldhake, et el., Secuntres Exchange Act Release 20824 (April 5, 1984),30

SEC Docket 236, In the Matter of Organized Producing Energy Corp., Secuntres

Exchange Act Release 6527 (May I, 1984),30 SEC Docket 577, In the Matter of \Villle

L. Mayo, Securities Exchange Act Release 6529 (May I, 1984), 30 SEC Docket 589;

In the Matter of Hereafter Productions Ltd Ptnrship., Securities Exchange Act

Release 6496 (November 2,1983),29 SEC Docket 67; SEC v Zoe Products, Inc,

Litigation Release No. 10280 (February 7,1984),29 SEC Docket 1266, In the Matter

of Action Service, lnc., Securities Exchange Act Release 6524 (April 17, 1984),30

SEC Docket 404; SEC v. R W Peters Rickel & Co., Inc., March 12, 1984; SEC v

Columbte Management Company, lnc., Litigation Release No. 10404 (May 31,1984),

30 SEC Docket 989; and, In the matter of Carl Letbouiitz, Securities Exchange Act

Release 6528 (May I, 1984),30 SEC Docket 586.

21nsiderTradmg cases include: SEC v. Thayer, et el., Litigation Release No. 10251

(January 5, 1984),29 SEC Docket 887, SEC v. Courtois, Litigation Release No 10283

(February 12, 1984), 29 SEC Docket 1392; SEC v. Karanzalis, Litrqation Release No.

10325 (April 5, 1984),30 SEC Docket 313; SEC v. Brett, Litigation Release No. 10340

67
(April 13, 1984), 30 SEC Docket 478; SEC u Brant, et sl; Litigation Release No. 10386

(May 17,1984),30 SEC Docket 878; In the Matter of James L. Covello, Securities

Exchange Act Release 20826 (April 5, 1984),30 SEC Docket 266; In the Matter of E.

Jacques Courtois, Jr., Securities Exchange Act Release 20830 (April 6, 1984),30 SEC

Docket 324; SEC u Spiker, et el., Litigation Release No. 10444 (July 2,1984),30 SEC

Docket 1343; SEC u Tenney, et el., Litigation Release No. 10486 (August 7,1984),31

SEC Docket 181; In the Matter of Peter N. Brant, Securities Exchange Act Release

21136 (July 12, 1984), 30 SEC Docket 1374; SEC u Stein, Litigation Release No.

10479 (August 3,1984),31 SEC Docket 176; In the Matter of William E. Peterson, et

el., Securities Exchange Act Release 21113 (July 2,1984),30 SEC Docket 1311; and,

SEC u Dreiling, Litigation Release No. 10563 (October 12, 1984), 31 SEC Docket 890.

3Secunties Offering Violations cases include: SEC u Robert B. Martin, Jr., Litigation

Release No. 10157 (October 4,1983),28 SEC Docket 1643; SEC u William R. Mason,

Lmqation Release No. 10180 (October 26, 1983),29 SEC Docket 56; SEC u Ministers'

Investment Corp; Litigation Release No. 10190 (November 2, 1983),29 SEC Docket

116; SEC u Robert R. Hills, et ei., litigation Release No. 10200 (November 15, 1983),

29 SEC Docket 282; SEC u Mason Oil Company, lnc., Litigation Release No. 10210

(November 23,1983),29 SEC Docket 414; SEC u William A. Widgery, Sr; et ei..

litigation Release No. 10233 (December 14, 1983),29 SEC Docket 638; SEC u

Commonwealth Energy Inc., et aI., litigation Release No. 10249 (December 29,

1983),29 SEC Docket 845; SEC u Taco Eds Inc., Litigation Release No. 10252

(January 5,1984),29 SEC Docket 887; SEC v. American Gold Depository Corp.,

Litiqatin Release No. 10178 (October 21,1983),29 SEC Docket 55; SEC u Carter

Company, litigation Release No. 10279 (February 7, 1984), 29 SEC Docket 1264;

SEC u Butcher; et el., litigation Release No. 10272 (January 27, 1984),29 SEC

Docket 1172; SEC v Calzone Mming Company, lnc., Litigation Release No. 10273

(January 30, 1984),29 SEC Docket 1173; SEC v. Basic Earth Science Systems, lnc.,

Litigation Release No. 10285 (February 14,1984),29 SEC Docket 1394; SEC u Sunco

Resource & Energy Ltd. Inc., Litigation Release No. 10314 (March 22, 1984), 30 SEC

Docket 133; SEC v. Maverick Oil Company, et el., Litigation Release No. 10316

(March 26, 1984),30 SEC Docket 201; SEC u Harvard Investment Trust, et el.,

litigation Release No. 10332 (April 6, 1984),30 SEC Docket 395; SEC v. North

American tntemeuonet Cotp., Litigation Release No. 10207 (November 23, 1983),29

SEC Docket 412; SEC v. Netelkos, litigation Release No. 10395 (May 25, 1984),30

SEC Docket 979; SEC v. Purchasmg Consultants, Inc., Litigation Release No. 10324

(April 4, 1984),30 SEC Docket 312; SEC v. Allen, October 5, 1983; SEC u Beard, et

al .. Litigation Release No. 10347 (Apn119, 1984),30 SEC Docket 485; SEC u

Rexmoor Properties, Inc, Litigation Release No. 10358 (April 26,1984),30 SEC

Docket 572; SEC v. Marketmg VIorkshop Inc., litigation Release No. 10593,

November 7, 1984; SEC v. Intercontinental Technologies Corp; et ai, litigation

Release No. 10455 (July 12, 1984),30 SEC Docket 1355; SEC v. Organized

Producmg Energy Corp., et el., litigation Release No. 10361 (May 1, 1984),30 SEC

Docket 690, SEC u Ability Information Systems, lnc., Litigation Release No. 10378

(May 14, 1984),30 SEC Docket 872; In the Matter of Herman Friedman, Securities

Exchange Act Release 20899 (April 26, 1984), 30 SEC Docket 532; SEC u Allen, et

el., Litigation Release No. 10476 (August 2,1984),31 SEC Docket 63; SEC v. JJ

Petroleum, et el., litigation Release No. 10480 (August 6,1984),31 SEC Docket 177;

SEC v. Stines, et et., Litigation Release No. 10481 (August 2, 1984),31 SEC Docket

177; SEC v. Gamty, et ei., Litigation Release No. 10498 (August 15,1984),31 SEC

Docket 257; SEC v. Contemporary Properties, lnc.. et al., Litigation Release No.

10508 (August 28, 1984),31 SEC Docket 362; SEC v. Champion Sports

Management, lric., et al., Lrtrqation Release No. 10513 (August 30,1984),31 SEC

Docket 368; In the Matter of Howard Bronson & Co., et al , Securities Exchange Act

Release 21138 (July 14, 1984),30 SEC Docket 1386; SEC v. Hanson, et el., Litigation

Release No. 10359 (April 27, 1984),30 SEC Docket 687; In the Matter of Verrilli,

Altschuler; Schwartz, Inc, Securities Exchange Act Release 21308 (September 11,

1984),31 SEC Docket 475; In the Matter of San Saba Nu-Iech, lnc., Securities

68
Exchange Act Release 6549 (September 19, 1984),31 SEC Docket 552, SEC u San

Saba Nu-Tech, Inc., et al., Litigation Release No. 10531 (September 19,1984),31

SEC Docket 625; SEC u Starmark Industries, Inc., et aI., Litigation Release No. 10533

(September 19, 1984),31 SEC Docket 627; SEC u Organic B10 Conoerstons, Inc.,

Litigation Release No. 10524 (September 5, 1984), 31 SEC Docket 620; SEC u

Chambers, July 11, 1984; SEC u. Miller; Litigation Release No. 10537 (September 20,

1984),31 SEC Docket 631; SEC u. Bauer; Litigation Release No. 10567 (October 17,

1984),31 SEC Docket; SEC u. Ascenzi, et al., Litigation Release No. 10541

(September 28, 1984),31 SEC Docket 686; In the Matter of Executive Investment

Corp., et ai., Securities Exchange Act Release 20379 (November 16, 1983), 29 SEC

Docket 236, In the Matter of Butcher & Singer lnc., Securities Exchange Act Release

20569 (January 16, 1984), 29 SEC Docket 987; In the Matter of Rooney Pace, Inc.,

Securities Exchange Act Release 20689 (February 23, 1984),29 SEC Docket 1427; In

the Matter of Bernard Feintuch, Securities Exchange Act Release 20759 (March 16,

1984),30 SEC Docket 67; In the Matter of Lewis Scala, Securities Exchange Act

Release 20760 (March 16, 1984),30 SEC Docket 68; In the Matter of Harry Poole,

Securities Exchange Act Release 21177 (July 27, 1984),31 SEC Docket 5, SEC u.

Agron, et al., litigation Release No. 10543 (September 28,1984),31 SEC Docket

732; SEC u. Food Source, Inc., litigation Release No 10566 (October 17,1984),31

SEC Docket 893; SEC u. Westside Habilitation Center Inc., Litigation Release No.

10349 (April 19, 1984),39 SEC Docket 488; In the Matter of Lester Kuznetz,

Securities Exchange Act Release 20906 (April 30, 1984),30 SEC Docket 617; SEC u

Steven R. Babbidge and ASSOCIates,et al., Litigation Release No. 10430 (June 25,

1984),30 SEC Docket 1287, SEC u. Tax & Financial Programming, Inc., et ei.,

Litigation Release No. 10510 (August 29,1984),31 SEC Docket 364; SEC u. Gay

International, ltic., et el , litigation Release No. 10514 (September 4, 1984),31 SEC

Docket 434; In the Matter of Bangs Securities, Inc., et el., Securities Exchange Act

Release 21167 (July 24, 1984), 30 SEC Docket 1492; SEC u. Cooper; Litigation Release

No. 10576 (October 24, 1984),31 SEC Docket 957; In the Matter of Edward Allan

Harsh, Securities Exchange Act Release 21364 (September 28,1984),31 SEC Docket

695; SEC u. Fielding, litigation Release No. 10415 (June 13,1984),30 SEC Docket

1092; SEC u. American Principals Holdings, lric., Litigation Release No. 10419 (June

18,1984),30 SEC Docket 1171;SEC u Chadron Energy Cotp., et el., Litigation

Release No. 10422 (June 6, 1984), 30 SEC Docket 1173; In the Matter of Westar

Financial lnc., Securities Exchange Act Release 6532 (May 7, 1984), 30 SEC Docket

730; and, SEC u. Kandahar Resources Ltd; litigation Release No. 10348 (April 19,

1984),30 SEC Docket 486.

4Regulated Entitles and Associated Persons cases include: In the Matter of Murphy,

Hauser; O'Connor & Quinn, Securities Exchange Act Release 20465 (December 9,

1983),29 SEC Docket 556; In the Matter of R.E. Boulton & Co., Inc. et al., Securities

Exchange Act Release 20370 (November 14, 1983),29 SEC Docket 212; In the Matter

of Development Corporation for Israel, Secunties Exchange Act Release 20434

(December I, 1983),29 SEC Docket 435; SEC u Hanover Square Securities Corp.,

lnc., Litigation Release No. 10261 (January 13,1984),29 SEC Docket 1046; SEC u.

California Municipal Investors, litigation Release No. 10277 (February 6, 1984), 29

SEC Docket 1263; SEC u. Gattini & Co., Litigation Release No. 10300 (March 3, 1984),

29 SEC Docket 1589; In the Matter of A.G. Becker Paribas Incorporated, Securities

Exchange Act Release 20876 (April 19, 1984),30 SEC Docket 449; SEC u Southeast

Securities of Florida, Litigation Release No. 10323 (April 3, 1984), 30 SEC Docket

311; SEC u. Kaufman & Co., Litigation Release No. 10368 (May 4,1984),30 SEC

Docket 816; In the Matter of Harlan Roberts & Roff Inc., Securities Exchange Act

Release 20568 (January 16, 1984),29 SEC Docket 986; SEC u Lylog International

Energy Cotp., et el., Litigation Release No. 10381 (May 14, 1984),30 SEC Docket 873;

In the Matter of Don P. Matheson & Co., lnc., Securities Exchange Act Release 20837

(April 9, 1984),30 SEC Docket 336; In the Matter of RFG Options Company, et el.,

Securities Exchange Act Release 21024 (June 6, 1984),30 SEC Docket 1019; In the

Matter of Marsan Securities Co., lnc.. et el., Securities Exchange Act Release 21077

69
(June 31, 1984),30 SEC Docket 11, In the Matter of Halpert, Oberst & Company, et

al., Securities Exchange Act Release 21080 (June 21, 1984),30 SEC Docket 1139;

SEC v. Jones, et al., Linqauon Release No. 10416 (June 14, 1984),30 SEC Docket

1092; SEC v First Interwest Secunties Corp., litigation Release No. 10425 (June 20,

1984), 30 SEC Docket 1177; SEC v Frederick S Todman & Company, Litiqation

Release No. 10505 (August 21, 1984), 31 SEC Docket 321; In the Matter of June S.

Jones Co., et al., Securities Exchange Act Release 21214 (July 6, 1984),31 SEC

Docket 141; In the Matter of Frederick S. Todman & Co., et el., Securities Exchange

Act Release 21258 (August 20, 1984),31 SEC Docket 275; SEC v. Securities Corp. of

Washmgton, Litigation Release No. 10565 (October 15, 1984),31 SEC Docket 892; In

the Matter of Donald Sheldon & Co., lnc., et el., Securities Exchange Act Release

21367 (October 4,1984),31 SEC Docket 697; In the Matter of Blinder Robinson &

Co., lnc.. Securities Exchange Act Release No. 34-21123 (July 6, 1984), 30 SEC

Docket 1355; In the Matter of LoUIS Morgan, Securities Exchange Act Release 20247

(October 3, 1983),28 SEC Docket 1545; In the Matter of Rourke O'Brien, Securities

Exchange Act Release 20322 (October 24, 1983),29 SEC Docket 10, In the Matter of

DaVId J. Rapaport, Securities Exchange Act Release 20445 (December 5, 1983),29

SEC Docket 495; In the Matter of G. Weeks & Company, Inc., et el., Securities

Exchange Act Release 20467 (December 9, 1983),29 SEC Docket 570; In the Matter

of Carlton R. Jorgensen, et el , Securities Exchange Act Release 20473 (December

12, 1983),29 SEC Docket 577; In the Matter of Don A. Williams, Securities Exchange

Act Release 20466 (December 9, 1983), 29 SEC Docket 569; In the Matter of Velma

Shaw Myers, Securities Exchange Act Release 20518 (December 12, 1983), 29 SEC

Docket 799; In the Matter of Link-Up + ISecurities, Inc, Securities Exchange Act

Release 20383 (November 17, 1983),29 SEC Docket 250, In the Matter of Boennmg

& Scattergood Inc, Securities Exchange Act Release 20246 (September 30, 1983),28

SEC Docket 1542, SEC v MV Securities, Inc., litigation Release No. 10289 (February

21, 1984),29 SEC Docket 1454; In the Matter of Langhemnch & Fender, Inc;

Secuntres Exchange Act Release 20541 (January 10, 1984),29 SEC Docket 901; In

the Matter of John A. Strang is, Secunties Exchange Act Release 20714 (March 5,

1984),29 SEC Docket 1547; In the Matter of Charles D. Digh, Securities Exchange

Act Release 20781 (March 22,1984),30 SEC Docket 84; SEC v. American

Commercial Securities, Litigation Release No. 10346 (April 19, 1984),30 SEC Docket

484; In the Matter of Catherine M. Scott, Secunties Exchange Act Release 20934

(May 7, 1984), 30 SEC Docket 744; In the Matter of George F. Speicher, III, Securities

Exchange Act Release 20935 (May 7, 1984),30 SEC Docket 747; In the Matter of

Oswald Serrano, Secunties Exchange Act Release 20907 (April 30, 1984),30 SEC

Docket 618; In the Matter of Thomson McKinnon Securities lnc., Securities

Exchange Act Release 20908 (ApnI30, 1984),30 SEC Docket 619; SEC v. Tacoma

Securities, inc; et al., Litigation Release No. 10440 (July 2,1984),30 SEC Docket

1340; SEC v. Fischer, Lrtiqation Release No. 10451 (July 9,1984),30 SEC Docket

1422, In the Matter of Dennis R. Roncace, Securities Exchange Act Release 20887

(April 23, 1984),30 SEC Docket 506; SEC v. Scott, Litigation Release No. 10037 (June

15, 1983),28 SEC Docket 203; In the Matter of Joseph A. Geraci, III, Securities

Exchange Act Release 21181 (July 27, 1984),31 SEC Docket 12; In the Matter of

Laurence M. Gibney, Securities Exchange Act Release 21218 (August 8, 1984),31

SEC Docket 145; In the Matter of James R. Stephens, Securities Exchange Act

Release 21296 (September 7, 1984),31 SEC Docket 439; In the Matter of Marvin W

Heagar, Jr; Securities Exchange Act Release 21355 (September 27, 1984),31 SEC

Docket 652; In the Matter of Keith R. Abrams, Secunties Exchange Act Release

21338 (September 21, 1984),31 SEC Docket 635; In the Matter of Walter Gregory

Fries, Securities Exchange Act Release 21363 (September 28, 1984),31 SEC Docket

694; In the Matter of Tacoma Securities Iric., et el., Secunties Exchange Act Release

21114 (July 2,1984),30 SEC Docket 1313; SEC v. Belmont Reid & Co., Inc., et el;

litigation Release No. 10555 (October 5, 1984),31 SEC Docket 824; SEC v. Dlugash,

et el., Litigation Release No. 10182 (October 27, 1983),29 SEC Docket 58; In the

Matter of Prudential-Bache Securities, lnc., Securities Exchange Act Release 20380

70
(November 17, 1983), 29 SEC Docket 240; In the Matter of George E. Lawson,

Securities Exchange Act Release No. 20579 (January 18, 1984),29 SEC Docket 996;

In the Malter of Hill Securities, ltic., Securities Exchange Act Release 20617

(February 2, 1984), 29 SEC Docket 1195; In the Matter of Robert M. Sterling,

Securities Exchange Act Release 20641 (February 10, 1984), 29 SEC Docket 1328; In

the Malter of Thomas L. McGhee, Securities Exchange Act Release 20852 (April 12,

1984),30 SEC Docket 355; In the Matter of c. E. Carlson, Inc., et el., Securities

Exchange Act Release 20905 (April 30, 1984),30 SEC Docket 617; In the Matter of

Thomas L. Deqtrorumo, Securities Exchange Act Release 20923 (May 20,1984),30

SEC Docket 653; In the Malter of A. G Becker Inc, April 17, 1984; In the Matter of

Fitzgerald, DeArman & Roberts, lnc., Securities Exchange Act Release 21137 (July

12, 1984), 30 SEC Docket 13; In the Matter of Hanauer, Stern & Co., lnc., Securities

Exchange Act Release 21313 (September 11, 1984), 31 SEC Docket 483; In the Matter

of Phillip Keith, Litigation Release No. 934 (September 27, 1984), 31 SEC Docket

680; In the Matter of David A. Feldman, Securities Exchange Act Release 20664

(February 17,1984),29 SEC Docket 1405; In the Matter of William L. Blair, Securities

Exchange Act Release 20697 (February 27, 1984), 29 SEC Docket 1473; SEC u

Manzella, Litigation Release No. 10333 (April 6, 1984),30 SEC Docket 396; SEC v.

Smolen, Litigation Release No. 10288 (February 17,1984),29 SEC Docket 1454; In

the Matter of Burton R. Sax, et el., Litigation Release No. 910 (April 30, 1984), 30 SEC

Docket 664; In the Matter of Raymond John Manzella, Securities Exchange Act

Release 20155 (June 15, 1984),20 SEC Docket 1104; In the Matter of Eugene

Graceffa, Securities Exchange Act Release 21283 (September 4, 1984),31 SEC

Docket 389; In the Matter of Morris Ruggles, Litigation Release No 935 (September

28, 1984), 31 SEC Docket 724; In the Matter of Thomas M. Hahn, Securities

Exchange Act Release 21345 (September 24, 1984),31 SEC Docket 645; SEC v

Om ie, Inc., et ei., Litigation Release No. 10539 (September 24, 1984),31 SEC Docket

683; SEC v. Blair, Et al., Litigation Release No. 10236 (December 19,1983),29 SEC

Docket 694; SEC u Malloy on the Market, lnc., et al., Litigation Release No. 10250

(December 30, 1983), 29 SEC Docket 885; In the Matter of Investors Portiolio

Management, lnc., Securities Exchange Act Release 20535 (January 6, 1984), 29

SEC Docket 8; In the Matter of Alfred C. Rizzo, Litigation Release No. 897 (January

11, 1984), 29 SEC Docket 950; SEC v Suter, et al., Litigation Release No. 10309

(March 14, 1984),30 SEC Docket 51; SEC v. The Oxford Corp., et al., Litigation

Release No 10318 (March 27,1984),30 SEC Docket 202; SEC v. Henderson,

litigation Release No. 10344 (April 17, 1984),30 SEC Docket 481; In the Matter of

Orchards Accounting & TaxSenxce, Securities Exchange Act Release 20478

(December 13, 1983),29 SEC Docket 586; SEC u Brawner, et al., litigation Release

No 10367 (May 3,1984),30 SEC Docket 697; SEC u Orchards Accounting & Tax

Service, litigation Release No. 10383 (May 16,1984),30 SEC Docket 876; In the

Matter of Stratton Management Company, Securities Exchange Act Release 20865

(April 16, 1984),30 SEC Docket 417; In the Matter of William H Brawner, et al.,

litigation Release No. 912 (May 30, 1984),30 SEC Docket 685; SEC u Options

Strategy Associates Ltd., et al., Litigation Release No. 10443 (July 2, 1984),30 SEC

Docket 1343; SEC u Investments Management Co., Litigation Release No. 10388

(May 21, 1984), 30 SEC Docket 930, In the Matter of Molloy on the Market Inc., et

el., Investment Advisers Act Release No. 916 (June 25,1984),30 SEC Docket 1281,

SEC v.Porter Finencuil Services, Inc., et al., Litigation Release No. 10482 (August 6,

1984),31 SEC Docket 178; In the Matter of Jay Erroll Weinberg, Litigation Release

No. 918 (July 13, 1984),30 SEC Docket 1468; In the Matter of John E. Ugums,

Securities Exchange Act Release 21156 (July 20,1984),30 SEC Docket 1481, In the

Matter of Dennis Howard Harris, et el., Securities Exchange Act Release 21165 (July

23,1984),30 SEC Docket 1489; In the Matter of Bond Timing Services, Inc.,

Litigation Release No. 920 (July 23,1984),30 SEC Docket 1543; In the Matter of

Porter Finenciei Services, Inc., et al., litigation Release No. 921 (July 24, 1984),30

SEC Docket 1548; In the Matter of Bishop, Beldunn, Rewald, Dillingham & W:mg,

Litigation Release No. 924 (August 14, 1984), 31 S~C Docket 247; In the Matter of

71
Financial News Associates, Litigation Release No. 927 (August 29,1984),31 SEC

Docket 359; In the Matter of Capital Matters, Lid; Litigation Release No. 930

(September 11,1984),31 SEC Docket 541; SEC u Shultz, Litigation Release No.

10585 (November 2, 1984; In the Matter of John ~sley English, et aI., Litigation

Release No. 933 (September 24, 1984),31 SEC Docket 679; In the Matter of David

M. W:>lfenden, Litigation Release No. 940 (September 28,1984),31 SEC Docket 725;

SEC u W:>lfenden, Litigation Release No. 10546 (September 28, 1984),31 SEC

Docket 736; SEC u Financial News Associates, Litigation Release No. 10511 (August

29,1984),31 SEC Docket 366; SEC u Bayswater Realty [, Capital Corp., Litigation

Release No. 10191 (November 3,1983),29 SEC Docket 156; SEC u Tep Fund lnc.,

Litigation Release No. 10244 (December 23, 1983),29 SEC Docket 841; In the Matter

of Van Cleef Jordan [, W:>odof CT, Litigation Release No. 885 (October 3, 1983),28

SEC Docket 1615; In the Matter of Seaboard Associated, Inc., Securities Exchange

Act Release 20867 (April 16, 1984), 30 SEC Docket 420; In the Matter of Rapholz, et

al., Litiqation Release No. 922 (July 30,1984),30 SEC Docket 1471. In the Matter of

The Archer Group, lnc., et al., Litigation Release No. 923 (August 13, 1984),31 SEC

Docket 242, and, In the Matter of Corporate Registrar [, Transfer Co., Securities

Exchange Act Release 20765 (March 19, 1984),30 SEC Docket 71.

5Market Manipulation cases include: SEC u Popkin, Litigation Release No. 10203

(November 17, 1983), 29 SEC Docket 285; SEC u Major Exploration, Inc., et al.,

Lmqation Release No. 10257 (January 11,1984),29 SEC Docket 961; SEC u

Gahagan, Litigation Release No. 10258 (January 11, 1984),29 SEC Docket 963; SEC

u Haase, Litigation Release No. 10268 (January 26, 1984),29 SEC Docket 1099; SEC

u Universal Energy Cotp., et el., Liuqation Release No. 10299 (March I, 1984), 29

SEC Docket 1532; SEC u Cymalicolor Corp., et al., LItigation Release No. 10437

(June 27, 1984),30 SEC Docket 1294; In the Matter of Martin I. Saposnick, et el.,

Securities Exchange Act Release 21105 (January 27, 1984),30 SEC Docket 1221; SEC

u Fitzgerald, Litigation Release No. 10456 (July 12,1984),30 SEC Docket 1259; SEC

u Great American Financial, ltic., Litigation Release No. 10468 (July 23, 1984), 30

SEC Docket 1557; In the Matter of Jack R. Drtben, Securities Exchange Act Release

21326 (September 17,1984),31 SEC Docket 570; SEC v. New Star Corporeuon,

Litigation Release No. 10564 (October 15, 1984),31 SEC Docket; and, In the Matter of

M. H Meyerson [, Company, lnc., Securities Exchange Act Release 20653 (February

14, 1984),29 SEC Docket 1349.

6Changes in Corporate Control cases include: In the Matter of Heights Finance

Corp., et el., Securities Exchange Act Release 20354 (November 7, 1983),29 SEC

Docket 126; SEC u Smith, Lrtiqatron Release No. 10242 (December 21, 1983),29 SEC

Docket 669; In the Matter of Harvey Katz, et el., Secunties Exchange Act Release

20893 (ApnI25, 1984),30 SEC Docket 517; SEC v. Mesa Petroleum Co., Litigation

Release No. 10343 (ApnI16, 1984),30 SEC Docket 480; SEC u Dorchester Gas

Corporeuon, LItigation Release No. 10255 (January 9, 1984),29 SEC Docket 957;

SEC u Enterprise Technologies lnc., Litrqatron Release No. 10264 (January 18, 1984),

29 SEC Docket 1048, SEC v. McElroy, et al., Litigation Release No. 10462 (July 19,

1984),30 SEC Docket 1474; SEC u Massey, et aI., Litigation Release No. 10223

(December 6,1983),29 SEC Docket 551; SEC u Carter Hawley Hale Stores, lnc.,

Litigation Release No. 10366 (May 2, 1984), 30 SEC Docket 695; SEC u Reichart,

Litiqatron Release No. 10404 (May 31, 1984),30 SEC Docket 989; and, SEC u Greater

Columbia Bancshares, tnc., Litigation Release No. 10475 (July 19, 1984),31 SEC

Docket 62.

7Related Party Transactions cases include. SEC v Benson, et ei., Litigation Release

No. 10319 (March 30, 1984),30 SEC Docket 306.

8Contempt proceedings include: SEC v. MPG, Lid., Litigation Release No. 10327

(April 5, 1984),30 SEC Docket 315; SEC u Jetfilm Corp., LItigation Release No. 10397

(May 25, 1984),30 SEC Docket 982; SEC v Diversified Growth Corp; et aI., Litigation

Release No. 10335 (April 10, 1984),30 SEC Docket 398; and, SEC u Homestead Oil

Company, October 18, 1983 .

9Delinquent Filing: Issuer Reporting cases included: SEC u The Telemine

72
Company, Inc, litigation Release No. 10175 (October 20,1983),28 SEC Docket

1750; SEC v. Brougham lndustrtes, Inc., Litigation Release No. 10186 (October 31,

1983),29 SEC Docket 112; SEC v. Computer Image Corporation, litigation Release

No. 10214 (November 30, 1983),29 SEC Docket 472; SEC v. The Little Mint, Inc.,

Litigation Release No. 10330 (ApnI6, 1984),30 SEC Docket 394; SEC v. Ieieiite

Computer Corporation, Litigation Release No. 10278 (February 6, 1984),29 SEC

Docket 1263; SEC v. Associated Medical Deinces, Inc., Litigation Release No. 10290

(February 21, 1984), 29 SEC Docket 1456; SEC v. Greater Heritage Corp., litigation

Release No. 10373 (May 11, 1984), 30 SEC Docket 868; SEC v. Southern Reserve,

Inc., Litigation Release No. 10387 (May 17,1984),30 SEC Docket 880, SEC v. 7VC

Image Technology, lnc., Litigation Release No. 10371 (May 9,1984),30 SEC Docket

818; SEC v. Petroleum Investments, Ltd., et aI., Litigation Release No. 10372 (May 10,

1984),30 SEC Docket 819; SEC v. Btilund, Ltd; litigation Release No 10447 (July 5,

1984),30 SEC Docket 1346; SEC v. Proiessionai Investors Cotp., Litigation Release

No. 10394 (May 22, 1984),30 SEC Docket 934; SEC v. ~states !talo Co., Litigation

Release No. 10391 (May 21,1984),30 SEC Docket 932; SEC v. Magic Marker

lndustnes, Inc., Litigation Release No. 10472 (July 25, 1984),30 SEC Docket 1560;

and, SEC v. Southern States Cotp., Litigation Release No 10501 (August 20, 1984),31

SEC Docket 319

10Delinquent Filing: Forms 3 & 4 cases Include: SEC v. Buckmaster, litigation

Release No. 10308 (March 13, 1984),30 SEC Docket 50; SEC v. Culver, Litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50; SEC v Irani, litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50; SEC v. Johnston, litigation

Release No. 10308 (March 13, 1984),30 SEC Docket 50, SEC v. Kelly. Litigation

Release No. 10308 (March 13, 1984),30 SEC Docket 50; SEC v. Kelton, Litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50, SEC v. Moe, litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50; SEC v. Mounts, Litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50; SEC v. Reiqeluth, litigation

Release No. 10308 (March 13, 1984),30 SEC Docket 50; SEC v. Sultan ian, Litigation

Release No. 10308 (March 13, 1984),30 SEC Docket 50; SEC v. Sweeney, Litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50; SEC v. Weinstein, Litigation

Release No. 10308 (March 13, 1984), 30 SEC Docket 50; SEC v. Boren, litigation

Release No. 10315 (March 26, 1984), 30 SEC Docket 200; SEC v Broder, litigation

Release No. 10315 (March 26, 1984),30 SEC Docket 200; SEC v. Dudley. litigation

Release No. 10315 (March 26,1984),30 SEC Docket 200; SEC v. Harvey. Litigation

Release No. 10315 (March 26, 1984), 30 SEC Docket 200; SEC v. Headnck, Litigation

Release No. 10315 (March 26,1984),30 SEC Docket 200; SEC v. Hoey. Litigation

Release No. 10315 (March 26,1984),30 SEC Docket 200; SEC v Hospital

Corporation of America, Litigation Release No. 10315 (March 26, 1984), 30 SEC

Docket 200; SEC v. Izard, Litigation Release No. 10315 (March 26, 1984),30 SEC

Docket 200; SEC v. Jacobs, Litigation Release No. 10315 (March 26, 1984),30 SEC

Docket 200; SEC v Mosteller, Litigation Release No. 10315 (March 26, 1984),30 SEC

Docket 200; SEC v. Nicol, Litigation Release No. 10315 (March 26, 1984),30 SEC

Docket 200; SEC v. Polk, Litigation Release No. 10315 (March 26, 1984),30 SEC

Docket 200; SEC v. Santoni, Litigation Release No. 10315 (March 26, 1984),30 SEC

Docket 200; SEC v. Bank of Amenca N. I & SA., et al., litigation Release No. 10469

(July 23, 1984),30 SEC Docket 1558; SEC v. Keogh, Litigation Release No. 10469

(July 23, 1984), 30 SEC Docket 1558; SEC v. Lee, Litigation Release No.1 0469 (July

23,1984),30 SEC Docket 1558; SEC u The Savings & Profit Sharing Fund of Sears

Employees, Litigation Release No. 10469 (July 23,1984),30 SEC Docket 155; SEC u

~rtln, Litigation Release No. 10469 (July 23, 1984), 30 SEC Docket 1558; and, SEC

u lMJodson, Litigation Release No. 10469 (July 23, 1984),30 SEC Docket 1558.

llSEC u U.S. Surgical Corporation, et el., supra.

12SEC u Intrawest Financial Corp; et el., supra.

13SEC v. Datapoint Corp; et al., supra.

14See,e.g., SEC v. Brett, supra; SEC v. Thayer, supra; and SEC v. Karanzalis,

supra.

73
15See,e.g., SEC u Spiker; supra.

16SEC v Kerenzeus, supra.

17SEC u Courtois, supra.

18See, e.g., SEC u Thayer; supra.

J91d.

20SEC u Brant, et al , supra.

2JSEC u Beste Earth Science Systems, Inc., supra.

221nthe Matter of Robert M. Sterlinq, supra.

231nthe Matter of Rooney Pace lnc., supra.

241nthe Matter of Thompson McKinnon Securities lnc., supra.

251nthe Matter of A.G Becker Inc., supra.

26SEC v MV Secunties, lnc., supra.

27SEC u Popkin, supra.

28SEC u MilJor Exploreuon, lnc., supra.

29SEC u Cymaticolor Corp., supra.

30SEC u Enterprise Technologies, lnc., supra.

3JSEC u Dorchester Gas Corporation, supra.

32SEC u Massey, supra.

33Securities Exchange Act Release No 21186 (July 30,1984).

34SEC u Certain Unknown Purchasers of the Common stock of, and Call

Options for the Common Stock of, Santa Fe Intemeuonei Corporation, No. 81 Civ.

6553 WCC (S.D.N.Y., 1981).

35Securities Act Release No. 6534 (May 9, 1984),30 SEC Docket 705.

36Secunties Act Release No. 6535 (May 9,1984),30 SEC Docket 724.

37SecuritJesAct Release No. 6545 (August 9, 1984),31 SEC Docket 71.

38SEC,Ad.DIsory Committee on Tender Offers, Report of Recommendations (July

8, 1983).

39SecuritJes Exchange Act Release No. 21079 (June 21, 1984),30 SEC Docket 1129.

40Securities Exchange Act Release No. 20264 (October 6, 1983), 28 SEC Docket

1530.

41Securities Act Release No. 6508 (February 10, 1984), 29 SEC Docket 1269.

42Securities Act Release No. 6518 (March 22, 1984),30 SEC Docket 61.

43Securities Exchange Act Release No. 20784 (March 22, 1984),30 SEC Docket 88.

44Securities Act Release No. 6520 (March 23,1984),30 SEC Docket 137.

45Securitles Act Release No. 6538 (June 15, 2984), 30 SEC Docket 1096.

46SecuritJesAct Release No. 6550 (September 19,1984),31 SEC Docket 559.

47Section 101 of the Codification of Financial Reporting Policies.

48Statement of Financial Accounting Standard Nos. 76, 77, and 80,

Exunqutshment of Debt, Reporting by Transferors, for Transfers of Receivables with

Recourse, and Accounting for Futures Contracts issued November 1983, December

1983 and August 1984, respectively.

49Financial Reporting Release No. 17 (April 25, 1984),30 SEC Docket 491.

50Securities Act Release No. 6514 (February 23, 1984),29 SEC Docket 1319.

51Securities Act Release No. 6513 (February 15,1984),29 SEC Docket 1314.

52Fmancial Reporting Release No. 15 (December 22,1983),29 SEC Docket 642.

53Financial Reporting Release No. 16 (February 15,1984),29 SEC Docket 1286.

54Staff Accounting Bulletin No. 54 (November 3, 1983), 29 SEC Docket 154 ("push

down" accounting); Staff Accounting Bulletin No. 55 (November 30,1983),29 SEC

Docket 475 (allocation of expenses to subsidiaries, divisions or lesser business

components); Staff Accounting Bulletin No. 56 (February 6,1984),29 SEC Docket 1260

(disclosures about reserves mandated by Federal banking agencies); Staff Accounting

Bulletin No. 57 (July 18, 1984),30 SEC Docket 1477 (accounting for contingent sales

warrants).

55public Oversiqht Board, Audit Quality: The Profession's Program.

56public Oversight Board, Annual Report (1983-1984) at 11.

5749th Annual Report at 16.

581d.

74
59POB Report at 19.

60Securities Exchange Act Release No. 20902 (April 30, 1984),30 SEC Docket 605.

61Securities Exchange Act Release No. 20581 (March 1, 1984),29 SEC Docket 1106.

62Securities Exchange Act Release No. 20581 (March 1, 1984), 29 SEC Docket 1106

(Depository Trust Company); Securities Exchange Act Release No. 21002 (May 29,

1984),30 SEC Docket 945 (Midwest Securities Trust Company;).

63Securities Exchange Act Release No. 21421 (October 22,1984),31 SEC Docket

913.

64Securities Exchange Act Release No. 20365 (November 14, 1983),29 SEC Docket

203.

65Securities Exchange Act Release No. 20976 (May 18,1984),30 SEC Docket 887

(National Securities Clearing Corporation); Securities Exchange Act Release No. 21120

(July 6,1984),30 SEC Docket 1351 (Midwest Clearing Corporation and Pacific Cleannq

Corporation); Securities Exchange Act Release No. 21164 (July 23,1984),30 SEC

Docket 1488 (Depository Trust Company).

66SEC, Report of the Division of Market Regulation '1984 Securities Processing

Roundtable (May 31, 1984).

67Securities Exchange Act Release No. 20423 (November 29,1983),29 SEC Docket

422; Securities Exchange Act Release No. 20437 (December 2,1983),29 SEC Docket

489; Securities Exchange Act Release No. 20716 (March 6, 1984),29 SEC Docket 1551;

Securities Exchange Act Release No. 20717 (March 6, 1984),29 SEC Docket 1552;

Securities Exchange Act Release No. 20718 (March 6, 1984),29 SEC 1553; Securities

Exchange Act Release No. 21141 (July 12, 1984), 30 SEC Docket 1398; Securities

Exchange Act Release No. 21153 (July 19, 1984),30 SEC Docket 1454.

68Securities Exchange Act Release No. 20822 (April 4, 1984),30 SEC Docket 234.

69Securities Exchange Act Release No 20799 (March 29, 1984),30 SEC Docket

166.

70Securities Exchange Act Release No. 21049 (June 15, 1984),30 SEC Docket 1098.

71Securities Exchange Act Release No. 20715 (March 6, 1984),29 SEC Docket

1550.

72Securities Exchange Act Release No. 20943 (May 9,1984),30 SEC Docket 757.

73Securities Exchange Act Release No. 20357 (November 8,1983),29 SEC 133

74SecurIties Exchange Act Release No. 20655 (February 15, 1984),29 SEC Docket

1353.

75Securities Exchange Act Release No. 20948 (May 10, 1984),30 SEC Docket 767.

76Securities Exchange Act Release No. 20895 (April 25, 1984),30 SEC Docket 527.

77Securitles Exchange Act Release No. 21199 (August 3,1984),31 SEC Docket 74

78SecurIties Exchange Act Release No. 20406 (November 22,1983),29 SEC Docket

314.

79Securities Exchange Act Release No. 20397 (November 18, 1984),29 SEC Docket

300.

80Securities Exchange Act Release No. 21375 (October 5,1984),31 SEC Docket

768.

810n June 25, 1984 the Spokane Stock Exchange filed with the Commission an

application for exemption from registration as a national secunties exchange pursuant to

Section 5 of the Exchange Act. The Commission has not yet acted upon this application.

82SecUrIties Exchange Act Release No. 21013 (June 1, 1984),30 SEC Docket 1005.

83Securities Exchange Act Release No. 21062 (June 18, 1984),30 SEC Docket ]]]3.

84SecuritIes Exchange Act Release No. 20337 (October 31,1983),29 SEC Docket

76; Securities Exchange Act Release No. 20843 (April 9, 1984),30 SEC Docket 345.

85Securities Exchange Act Release No. 20767 (March 20,1984),30 SEC Docket 72.

86Securities Exchange Act Release No. 21159 (July 20,1984),30 SEC Docket 1484.

87Securities Exchange Act Release No. 20844 (Apnl l l, 1984),30 SEC Docket 347

88Securities Exchange Act Release No 20673 (February 17, 1984),29 SEC Docket

1410; Securities Exchange Act Release No. 21331 (September 19,1984),31 SEC Docket

577.

89Securities Exchange Act Release No. 20519 (December 30,1983),29 SEC Docket

75
848 (Depository Trust Company, Midwest Securities Trust Company, Midwest Clearing

Corporation, Pacific Securities Depository Trust Company); Securities Exchange Act

Release No. 21227 (August 9,1984),31 SEC Docket 152 (Midwest Securities Trust

Company); Securities Exchange Act Release No. 20983 (May 22, 1984), 30 SEC Docket

895 (Options Clearing Corporation).

90Securities Exchange Act Release No. 20615 (February 1,1984),29 SEC Docket

1124 (pacific Clearing Corporation).

9lSecurities Exchange Act Release No. 21335 (September 20,1984),31 SEC Docket

579.

92Securities Exchange Act Release No. 21336 (September 20,1984),31 SEC Docket

581.

9349th Annual Report at 27.

94Securities Investor Protection Act Release No. 113 (October 21,1983),29 SEC

Docket 48.

951nvestment Company Act Release No. 14036 (July 13,1984),30 SEC Docket 1434.

961nvestment Company Act Release No. 14132 (September 7,1984),31 SEC Docket

507.

971nvestment Company Act Release Nos. 14133, 14134 (September 7,1984),31 SEC

Docket 512.

9Blnvestment Company Act Release No. 13920 (May 2,1984),30 SEC Docket 675.

991nvestment Company Act Release No. 14080 (August 6,1984),31 SEC Docket

105.

100SecuritJesAct Release No. 6479 (August 12, 1983),28 SEC Docket 899.

IOISecuritJesAct Release No. 6502 (December 23,1983),29 SEC Docket 704.

102SecuritJesAct Release Nos. 6526 (April 25, 1984), 30 SEC Docket 494 and 6546

(August 30, 1984), 31 SEC Docket 323.

103SecuritJesAct Release No. 6510 (February 15, 1984), 29 SEC Docket 1276.

I04Securities Act Release No. 6498 (November 14,1983),29 SEC Docket 166.

105Securities Act Release No. 6500 (December 7, 1983), 29 SEC Docket 480.

106lnvestment Advisers Act Release No. 888 (October 21,1983),29 SEC Docket 48.

1071nvestmentAdvisers Act Release No. 899 (February 15,1984),29 SEC Docket

1389.

lOBSECu Materia, [1983-84] Fed. Sec. L. Rep. (CCH) ~99,583 (S.D.N.Y. 1983),

appeal docketed, No. 84-6043 (2d Gr. Feb. 7, 1984).

109664 F.2d 12 (1981), af{'d after remand, No. 82-1273 (2d Gr. Feb. 8, 1983)

(unpublished order), cert. denied, 104 S. Ct. 193 (1983).

110SECu IMJrld Gamblmg Corp., No. 83-6102 (2d Gr. 1983).

IIISEC u Youmans, 729 F.2d 413 (6th Gr. 1984), pet. for cert. pending sub nom.

HolIday u SEC, No. 84-140 (S. Ct.July 26,1984).

1l2SEC u Cayman Islands Reinsurance Cotp., Nos. 83-6277 and 6287 (2d Cir,

1984).

113SECu Randolph and Blackard, No. 83-2070 (9th Cir. 1984).

114Carter u SEC, No. 82-7287 (9th Crr 1983); Riberio u SEC, No. 82-7396 (9th

Cir. 1983)

115Erdos u SEC, No. 84-7033 (9th Crr, 1984).

116Dally Income Fund, lnc. u Fox, 104 S. Ct. 831 (1984).

117Pslmenos v. E.F. Hutton & Co., 722 F.2d 1041 (1983).

llBC.RA. Realty Corporation v. TrI-SOUth Investments, [Current] Fed. Sec. L. Rep.

(CCH) 91,546 (2d Or. 1984).

1l9Salcerv. Envicon Equities Corp; Nos. 84-7183, 7185, 7187, 7189 & 7191 (2d.

Gr. Sept. 19, 1984).

120730 F.2d 1319 (9th Or. 1984).

121Chemetron Corp. u Business Funds, Inc., 682 F.2d 1149 (5th Cir. 1982),

vacated and remanded, 103 S. Ct. 1245, on remand, 718 F.2d 725 (5th Cir.) (petition

for rehearing en banc granted).

122Nos.84-1483 & 1620 (5th Or 1984).

123No.84-1237 (5th Gr. 1984).

76
124SECv. Professional Associates, 731 F.2d 349 (6th Cir. 1984).

125VistaResources v. The Seagrave Corp., No. 83-1084 (cert. dismissed) (S. Ct..

Aug 9. 1984).

126Ruefenacht v. OHalloran et al., 737 F.2d 320 (3rd Cir. 1984). petition for cert.

filed, No. 84-163 (S. o. July 31. 1984)

127Landreth Timber Co. v Landreth, 731 F.2d 1345 (9th Cir. 1984), peuuon for

cert. filed, No. 83-1961 (S. Ct., June 1, 1984).

128725 F.2d 892 (2d Cir. 1984). petition for cert. granted, No. 83-1911 (S. Ct., Oct.

1, 1984).

129732 F.2d 1294 (7th Cir. 1984).

130Suter v. SEC, appeal pending, No. 83-3011 (7th Cir 1984).

13INo. 82-2000 (D.D.C), appeal docketed, No. 84-5485 (D.C Cir, 1984).

1320'Bnen v. SEC, 704 F.2d 1065 (9th Cir, 1983); reo'd 52 U.S.L.w. 4815 (June 18.

1984)

13347 Pub. L. No. 97-303, 96 Stat 1409; Pub. L. No. 97-444.96 Stat 2294 See also

7 U.S.CQa(iv) (1983 Supp.).

134Chicago Board of Trade v. CFTC and SEC, appeal pending, No. 84-c-1141,

(N.D. 111.).

1357U.s.C 2(a).

136No.84-289-BK-GP (Bankr. M.D Fla.).

1371nre Dreco, Inc., et al., No. H-83-1131 (Bankr. S.D. Tex.).

1381nre Pizza Time Theatre, No. 584009411M (Bankr. N.D. CaL).

139No.1-83-02495 (Bankr. S.D. Ohio).

140Nos.82-B-10318-20 (Bankr. S.D.N.Y.),reo'd and remanded, 722 F.2d 1063 (2d

Cir. 1983).

141No.82 Bkcy. 10318-20 (Bankr. S.D.N.Y.).

142No.B 82-3316 (Bankr. W.D. Ohio).

143No.83-B-2852-MC (Bankr. D. Colo.).

144No.84-00757-6 (Bankr. E.D. Mich.).

145No.584-00374-ACl (Bankr. N.D. CaL).

146No.B-82-2549-PHX-RGM (Bankr. D. Ariz.).

147No.383-372 (Bankr. E.D. Tenn.).

148Thomas D. Carter, No. 83-7645-RJK (Bankr. CD. Cal. 1984), appeal pending,

No. 84-6328 (9th Cir.).

149Holding Company Act Release No. 23095 (October 24,1984),29 SEC Docket

20.

150Holding Company Act Release No. 23366 (July 12.1984),30 SEC Docket 1405.

77

Glossary of Acronyms

A1CPA-American Institute of Certified Public Accountants

Amex-American Stock Exchange

SSE-Boston Stock Exchange

CBOE-Chicago Board Options Exchange

CBT-Chicago Board of Trade

CEA-Commodity Exchange Act

CFTC-Commodity Futures Trading Commission

CRD-Central Registration Depository

EDGAR-Electronic Data Gathering Analysis and Retrieval

EFTS-Electronic Funds Transfer System

FASB-Financial Accounting Standards Board

FCPA-Foreign Corrupt Practices Act

FOIA-F reedom of Information Act

FRR-Financial Reporting Release

GAAP-Generally Accepted Accounting Principles

GSA-General Services Administration

ITS-Intermarket Trading System

ITSA-Insider Trading Sanctions Act

MOSS-Market Oversight and Surveillance System

MSE-Midwest Stock Exchange

MSRB-Municipal Securities Rulemaking Board

NASM-North American Securities Administrators Association

NASD-National Association of Securities Dealers

NASDAQ-National Association of Securities Dealers Automated Quotation

System

NMS-National Market System

NSCC-National Securities Clearing Corporation

NYSE-New YorkStock Exchange

OCC-Options Clearing Corporation

OECD-Organisation for Economic Co-operation and Development

OMB-Office of Management and Budget

OTC-Over-the-Counter

Phlx-Philadelphia Stock Exchange

PIC-Productivity Improvement by Computer

POB-Public Oversight Board

PSE-Pacific Stock Exchange

RFA-Regulatory FlexibilityAct

SAB--Staff Accounting Bulletin

S&L-Savings and Loan Association

SECO-SEC-Only Registration Program

SECPS-SEC Practice Section

SIC-Special Investigations Committee

SIPC-Securities Investor Protection Corporation

SRO-Seif-Reguiatory Organization

ULOE-Uniform Limited Offering Exemption

79

Appendix

THE SECURITIES INDUSTRY

Income. Expenses and Selected

Balance Sheet Items

Broker-dealers that are self-regulated

through their membership in a national secunties exchange or the National Association of Securities Dealers earned revenues

of $37.1 billion in 1983,28 percent above

the 1982 level.' Almost 38 percent of this

increase in revenues stemmed from the

growth of commission revenue, which increased by $3.1 billion.

Trading gains on firms' securities accounts grew $984 million but declined to

23 percent of total revenues. Profits from

1Due to changes in FOCUS reportIng

requirements, consolidated mformation

for 1981IS not available.In order to provide

consistent information, new financial data

APPENDIX

underwriting increased $1.4 billion and

rose as a percent of total revenues from

nine percent in 1982 to 11percent in 1983.

Securities commission income increased

42 percent while mutual fund sales increased 138 percent

Expenses grew by $7.2 billion to $31.9

billion in 1983. Revenue and Expenses increased by the same percentage (29%)

but still produced a pre-tax income of $5.2

billion, up 27 percent from the preceding

year.

Assets rose by $51.8 billion to $253.1

billion and liabilities grew $48.7 billion to

$237.0 billion. Ownership equity increased $3.2 billion during 1983 to $16.1

billion at year's end.

were developed for pnor years and Table 1

now presents unconsolidated data for all

years.This data are not comparable to the

Table 1 of previous years

83
Table 1

UNCONSOLIDATED FINANCIAL INFORMATION FOR BROKER.DEALERS'

1979-1983

(Millions of Dollars)

1979 1980 1981 1982" 1983P

A Revenues

1 Securities Commissions $ 4,737 $ 6,800 $ 6,589 $ 7,370 $ 10,485

2 Gam (Loss) In Trading 2,909 4,309 5,401 7,668 8,652

3 Gain (Loss) In Investments 732 807 635 867 1,184

4 Profit (Loss) from Underwrlllng

and Seiling Groups 930 1,594 1,860 2,688 4,117

5 Revenue from Sale of Investment

Company Securities 197 278 342 629 1,495

6 All Other Revenues 4,452 6,196 9,545 9,579 11,160

7 Total Revenues $ 13,957 $ 19,984 $ 24,372 $ 28,801 $ 37,093

B Expenses

8 All Employee Compensation and

Benefits (Except Registered

Representatives Compensation) $ 2,475 $ 3,402 $ 3,951 $ 4,714 $ 6,459

9 Cornrmsstons and Clearance Paid

to Other Brokers 845 1,079 1,104 1,299 1,808

10 Interest Expense 3,058 3,893 6,506 6,452 6,927

11 Regulatory Fees and Expenses 75 100 121 149 201

12 Compensation to Partners and

Vollng Stockholder Officers 664 883 1,056 1,179 1,555

13 All Other Expenses (Including

Registered Representatives'

Compensation) 5,188 7,574 8,845 10,935 14,985

14 Total Expenses $ 12,305 $ 16,931 $ 21,583 $ 24,728 $ 31,935

15 Pre-Tax Income $ 1,652 $ 3,053 $ 2,789 $ 4,073 $ 5,158

C Assets, uebitmes and Capllal

16 Total Assets $ 87,068 $120,152 $155,063 $201,275 $253,112

17 Liabilities

a Total liabilities (excluding

subordinated debt) 79,537 109,742 142,865 186,028 233,922

b Subordinated debt 1,296 1,859 1,869 2,306 3,078

c Total liabilities (17a + 17b) 80,833 111,601 144,734 188,334 237,000

18 Ownership EqUity 6,235 8,551 10,329 12,941 16,112

19 Total liabilities and Ownership

EqUity $ 87,068 $120,152 $155,063 $201,275 $253,112

Number of Firms 4,824 5,283 5,714 6,165 7,300

P Preliminary

A= Revrsed

Note Includes only those broker-dealers self-regulated through their membership In the National Assocation of Securities

Dealers or a registered secunnes exchange

'Due to changes In FOCUS reporting requirements. consolidated Information for 1981 IS not available In order to provide

consistent Information, new nnancral data were developed for prior years and Table 1 now presents unconsolidated data for all

years Thrs data are not comparable to the Table 1 of previous years

Source FOCUS Report

84

~
Table 2

UNCONSOLIDATED ANNUAL REVENUES AND EXPENSES FOR BROKER-DEALERS

DOING A PUBLIC BUSINESS

1979-1983

(Millions of Dollars)

1979 1980 1981 1982R 1983 p

Revenues

Securities Commissions $ 4,518 $ 6,454 $ 6,163 $ 7,129 $ 9,905

2 Realized and Unrealized Gains

or losses In Trading and

Investment Accounts 3,378 4,686 5,481 8,138 9,141

3 Commodities Revenues 481 669 699 731 945

4 Profits or losses From Underwntlng and Selling Groups 900 1,519 1,797 2,673 4,044

5 Revenues From Sale of Investment Company Secunties 179 274 338 625 1,476

6 Margin Interest 1,669 2,136 2,884 2,060 2,161

7 All Other Revenues 2,038 2,993 5,320 6,536 7,337

8 Total Revenues $ 13,163 $ 18,731 $ 22,682 $ 27,892 $ 35,009

Expenses

9 Salanes and Other Employment

Costs for General Partners and

Voting Stockholder Officers $ 600 $ 793 $ 944 $ 1,095 $ 1,420

10 All Other Employee Compensation

and Benefits (Except Registered

Representatives' Compensation)' 2,353 3,116 3,749 4,592 6,230

11 Commissions and Clearance Paid 791 949 972 1,231 1,623

12 Interest Expense 2,957 3,778 6,016 6,389 6,412

13 Regulatory Fees and Expenses 65 85 103 137 172

14 All Other Expenses I 4,944 7,251 8,389 10,722 14,385

15 Total Expenses $ 11,710 $ 15,972 $ 20,173 $ 24,166 30,242

16 Pre-Tax Income $ 1,453 $ 2,759 $ 2,510 $ 3,726 $ 4,767

17 Number of Firms 2,479 2,613 2,836 3,256 3,674

P Preliminary

R~Revlsed

, Registered representatives' compensation IS Included III "All Other Expenses. because It IS not reported separately on Part IIA

of the FOCUS Report

Note Figures may not sum due to roundmq

Source FOCUS Report

85

~
Table 3

UNCONSOLIDATED BALANCE SHEET FOR BROKER-DEALERS

DOING A PUBLIC BUSINESS YEAR-END, 1979-1983

(Mllllons of Dollars)

1979 1980 1981 1982R 1983P

A Assets

1 Cash $ 2,078 $ 2,611 $ 2,671 $ 4,636 $ 3,765

2 Receivables from other broker-dealers

a Secunties failed to denver 3,138 3,881 3,280 6,257 5,899

b Securities borrowed 4,319 7,752 9,228 15,936 18,195

c Other 827 1,177 1,906 2,700 3,549

3 Receivables from customers 16,942 23,464 21,076 24,762 32,135

4 Long posmons In sscunnes and

commodities 23,757 33,001 41,714 71,408 77,339

5 Securities owned not readily

marketable 67 121 104 155 220

6 Securities borrowed under subordrnated agreements and partners'

rndrvidual and capital secunnes

accounts 74 90 90 90 98

7 Securities purchased under agreement to resell 26,630 32,888 45,222 52,733 77,725

8 Secured capital demand notes 292 305 309 306 330

9 Exchange memberships 171 213 216 286 310

10 Other Assets 4,320 5,579 6,771 9,716 12,127

11 Total Assets $82,615 $111,082 $132,587 $189,985 $231,692

B LJab1fllles and EqUIty Capital

12 Bank loans payable

a Secured by customer collateral $ 4,284 $ 3,892 $ 3,633 $ 2,843 $ 4,442

b Secured by firm collateral 5,554 5,592 7,583 8,749 15,673

13 Securities sold under repurchase

agreements 27,105 34,949 55,679 77,330 89,739

14 Payables to other broker-dealers

and clearing orqaruzatrons

a Secunnes failed to receive 3,080 4,095 3,298 6,766 4,823

b Securities loaned 3,843 7,184 8,273 14,029 15,698

c Other 829 1,105 1,418 2,529 4,168

15 Payables to customers 9,613 14,833 12,705 16,400 18,782

16 Short posmons In securities

and commodities 14,492 21,160 18,698 30,960 40,489

17 Other habihtres 7,097 9,444 11,001 16,211 20,361

18 Total Ilabllitles excluding

subordinated habuites 75,896 102,254 122,288 175,817 214,175

19 Subordinated habumes 1,198 1,648 1,698 2,158 2,729

20 Total Liabilities $77,094 $103,902 $123,986 $177,975 $216,904

21 Equity Capital $ 5,521 $ 7,180 $ 8,601 $ 12,010 $ 14,788

22 Total traburnes and EqUity Capital $82,615 $111,082 $132,587 $189,985 $231,692

23 Number of firms 2,479 2,613 2,836 3,256 3,674

P Prehmmary

R~ Hevrsed

Source FOCUS Report

86

-

~
Securities Industry Dollar In

1983 For Carrying and Clearing

Firms

Data for carrying and clearing firms

only are presented here to allow for more

detail, as reporting requirements for introducing and carrying and clearing firms

differ and data aggregation of these two

types of firms necessarily results in loss of

detail. Carrying and clearing firms are

those firms which clear securities transactions or maintain possession or control of

customers' cash or secunues, The 87 percent of industry revenues earned by carryIng and clearing firms in 1983 suggests

that this group is a suitable proxy for the

Industry.

Securities commissions and trading

gains accounted for 27 cents and 24

cents, respectively, of each revenue dollar

In 1983. Together these two items accounted for 51 cents of each revenue dollar earned in 1983 as compared to 52

cents in 1982. In terms of dollars, they accounted for $16.3 bilhon of the $32.2 billion of total revenues earned by carrying

and c1eanng firms. Margin interest income

accounted for seven cents of each revenue

dollar in 1983 compared WIth eight cents

In 1982.

Total expenses consumed 87 cents of

each revenue dollar earned in 1983, an increase over the 1982 level of 86 cents. The

industry's pre-tax profit margin of 13 cents

per revenue dollar in 1983 showed no significant change from 1982.

Interest expense, again the single largest

expense item, rose In 1983 by five percent

to absorb 21 cents of each revenue dollar,

which compares to 24 cents in 1982. In

dollars, interest expense amounted to $6.7

billion, $343 million more than the year

before. Employee-related expenses (registered representatives' compensation and

clerical and administrative employees' expenses) consumed 37 cents of the revenue dollar in 1983, three cent above the 34

cent level in 1982. Registered representatives' compensation while increasmq by 42

percent over the 1982 level, absorbed 21

cents of each revenue dollar in 1983 compared to 18 cents in the previous year. In

dollar terms, employee-related expenses

accounted for $11.9 billion of the $28.0

billion of total expenses. Other expense

categories consumed about the same proportion of the industry revenue dollar in

1983 as they did in 1982.

Total assets of broker-dealers carrying

and clearing customer accounts rose by

$44.9 billion to $236.3 billion In 1983.

About 89 percent of this Increase in assets

can be attributed to three items: resale

agreements rose $24.9 billion, receivables

from customers grew $8.1 bilhon, receivables from other broker-dealers increased

$7.0 billion.

Total liabilities, including subordinated

debt, increased $42.4 billion or 24 percent

to $222.8 billion with increases in repurchase agreements of $12.6 billion and

short positions in securities of $8.8 billion.

Owners' equity rose 23 percent from $11.0

billion in 1982 to $13.5 billron and total

capital increased 25 percent to $16.3 billion from $13.0 billion In 1982.

87
OJ

OJ

Securities Industry Dollar In 1

For Carrying/Clearing Firms

Investment Company

SeCUritIes 3.6

Investments 3.0

CommodIties 2.9

SOURCES OF REVENUE

All Olher Revenues 5 8

7.1

General Partners

Compensation 3.5

CommUnicatIon and

Dala Processmg 6.4

E

NOT/. hlcludl's tn/ormatIOn for fIrms thaI carr)' customrr ace aunts or clear sccuntt('s transactr

SOURCE X 17A 5 FOCUS REPORTS
Table 4

UNCONSOLIDATED REVENUES AND EXPENSES FOR BROKER-DEALERS

CARRYING/CLEARING CUSTOMER ACCOUNTS

(MIllions at Dollars)

1982R 1983P 1982-1983

Percent of Percent at Percent

Dollars Total Revenues Dollars Total Revenues Increase

Revenues

1 Secunnes Cornrrussrons $ 6,164 239% $ 8,537 265% 385%

2 Gam (Loss) In TradIng 7,160 278 7,790 242 88

3 Gam (Loss) In Investments 691 27 972 30 407

4 Proftt (Loss) from Underwntmq

and Selltng Groups 2,563 99 3,792 118 480

5 Revenue from Sale of Investment

Company Secunnes 470 18 1,174 36 1498

6 MargIn Interest Income 2,070 80 2,275 71 99

7 Comrnodmes Revenue 720 28 946 29 314

8 Other Revenue Related to

secunnes Business 4,466 173 4,859 151 88

9 Revenue from All Other Sources 1,492 58 1,894 58 269

10 Total Revenues $25,796 1000% $32,239 1000% 250%

Expenses

11 RegIstered RepresentatIves

Cornpensatron $ 4,642 180°/0 $ 6,610 205% 424%

12 Clencal and Admmistranve

Employees' Expenses 4022 156 5314 165 321

13 Cornrrussrons and Clearance PaId

to Others 931 36 1,245 39 337

14 Interest Expense 6,357 246 6,700 208 54

15 Cornmurucanon and Data ProcessIng 1,680 65 2,067 64 230

16 Occupancy and Equipment 947 37 1,268 39 339

17 Cornpensanon to Partners and VotIng

Stockholder Othcers 891 35 1,137 35 276

18 All Other Expenses 2,837 110 3,640 113 283

19 Total Expenses $22,307 865% $27,981 868% 254%

Pre-Tax Income

20 Pre-Tax Income $ 3,489 135% $ 4,258 132% 220%

Number at FIrms 1,287 1,330

P Prehmmary

R~Revlsed

Note Includes information for firms that carry customer accounts or clear securities transactrons

Source FOCUS Report

89

~
Table 5

UNCONSOLIDATED BALANCE SHEET FOR BROKER-DEALERS

CARRYING/CLEARING CUSTOMER ACCOUNTS

(Millions of Dollars)

YearEnd YearEnd % Change

1982" Percent 1983P Percent 1982-1983

Assefs

1 Cash $ 4,504 24% $ 3,659 15% (188)%

2 Receivables From Other

Broker-Dealers 26,271 137 33,275 141 267

a Securities Borrowed 16,152 84 20675 88 280

b Other Receivables 10,119 53 12,600 53 245

3 Receivables From Customers 24,n4 129 32850 139 326

4 Resale Agreements 53,738 281 78.610 333 463

5 Long PosrtronsIn Securities

and Spot Commodmes 75,504 389 77.800 329 44

6 Other Assets 7,669 40 10141 43 322

7 TotalAssets $191,460 1000% $236,335 1000% 234 %

LJabliltles and EqUIty

Caplfal

8 Bank Loans $ 11,619 61% $ 20.728 88% 784 %

a Secured by Customer Sec 2,819 15 4465 19 584

b Secured by Propnetary Sec 8,800 46 16263 69 848

9 Payablesto Other Broker-Dealers 20921 109 22,120 94 57

a Secunties Loaned 14,082 74 17,044 72 210

bOther Payables 6,839 36 5.076 22 (258)

10 Payablesto Customers 16.574 87 19,238 81 161

a Free Credit Balances 7,850 41 6,901 29 (121)

b Other Credit Balances 8724 46 12,337 52 414

11 RepurchaseAgreements 82.678 432 95,240 403 152

12 Short POSItionsIn Securtties 30,190 158 30,027 165 293

13 Subordmated Debt 1,992 10 2,781 12 396

14 Other trabumes 16,496 86 23691 100 436

15 TotalLiabumes 180,470 943 222,825 943 235

16 Owners' EqUity 10,990 57 13,510 57 229

17 Total lIabllllies

and Owners' EqUity $191,460 1000% $236,335 1000% 234 %

TotalCaprtal $ 12,982 $ 16,291 255 %

Number of Firms 1,287 1,330

P Prehmlary

R~Revlsed

Source FOCUS Report

Broker-Dealers, Branch Offices,

Employees

The number of broker-dealers filing

FOCUS Reports rose from 6,100 in 1982

to 7,300 in 1983. During the same period,

90

the number of branch offices increased

from 9,314 to 11,381. The number of fulltime personnel employed in the securities

industry rose from 244,665 to 296.000 in

1983, a 21 percent Increase.

~
Broker-Dealers and Branch Offices

2.000 4.000 6,000 8,000 10,000 12,000

1975

1976

1977

1978

1979

1980

1981

1982

1983

I 1.079

16267

I , . 1.315

16290

I

1.602

t 0-198

I 1-1822

1589l

I

1.82.

I 66;q

I

15283

1 69b8

I

1 571.

1769,

I

16165R

lqj/-l

I

1 7300P

111I8!

, I I

I"

P Pcctnmnorv

Broker Dealers ___ I Branch Ou.c es

SOURCE FORM X 17A 10 AND FOCUS REPORTS

91
Table 6

BROKERS AND DEALERS REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF

1934-EFFECTIVE REGISTRANTS AS OF SEPTEMBER 30, 1984 CLASSIFIED BY

TYPE OF ORGANIZATION AND BY LOCATION OF PRINCIPAL OFFICE

Number of Registrants

Sole

Total Propne- Partner- Corporatorsmps ships nons:

Alabama 44 3 1 40

Alaska 3 0 0 3

Arizona 52 1 1 50

Arkansas 52 2 0 50

California 1,159 297 106 756

Colorado 241 11 10 220

Connecticut 145 16 17 112

Delaware 11 0 1 10

Distnct of Columbia 45 3 4 38

Flonda 380 17 11 352

Georgia 110 2 3 103

HawaII 22 0 0 22

Idaho 13 2 0 11

illinOIS 2,661 1,716 293 652

Indiana 65 6 1 58

Iowa 47 3 1 43

Kansas 40 4 3 33

Kentucky 19 3 0 16

Louisrana 74 4 4 66

Marne 15 0 2 13

Maryland 81 4 1 76

Massachusetts 232 31 14 187

Michigan 100 4 3 93

Minnesota 119 4 1 114

MISSISSiPPi 27 1 1 25

MIssouri 105 9 2 94

Montana 8 1 0 7

Nebraska 27 0 1 26

Nevada 16 4 1 11

New Hampshire 9 1 0 8

New Jersey 299 54 30 215

New MexIco 18 2 0 16

New York 2,478 767 381 1,350

North Carolina 60 4 0 56

North Dakota 5 0 0 5

Oruo 135 5 11 119

Oklahoma 65 5 0 60

Oregon 45 0 1 44

Pennsylvama 419 24 103 292

Rhode Island 19 5 1 13

South Carolina 35 2 1 32

South Dakota 4 0 0 4

Tennessee 100 3 3 94

Texas 440 33 9 398

Utah 53 2 1 50

Vermont 10 3 1 6

Virglma 75 8 2 65

washington 119 6 2 111

West Virginia 9 1 0 8

Wisconsin 94 8 2 84

Wyoming 10 1 0 9

Total 10389 3,080 1,010 6,299

Forelgn2 25 2 2 21

Grand Total 10,414 3,082 1,012 6,320

'Includes all forms of orpamzanon other than sole propnetorsrups and partnerships

2Reglstrants whose principal offices are located ,n foreign countnes or other junsdrcnons not listed

92
Table 7

APPLICATIONS AND REGISTRATIONS OF BROKERS AND DEALERS

AND INVESTMENT ADVISERS

Fiscal Year 1984

BROKER-DEALER APPLICATIONS

Applications pending at close of preceding year

Applications received dunng fiscal 1984

DIspoSitIOn of Applications

Accepted for lillng

Returned

Withdrawn

Denied

Total applications disposed of

Applications pending as of september 30. 1984

BROKER-DEALER REGISTRATIONS

Effective registrations at close of preceding year

Registrations effective dunng nscal 1984

Total Registrations

Registrations terminated dunng liscal 1984

Withdrawn

Revoked

Cancelled

Total registrations terminated

Total registrations at end of fiscal 1984

INVESTMENT ADVISER APPLICATIONS

Applications pending at close of preceding year

Applications received dunng fiscal year 1984

Total appucanons for d.sposmon

Disposrtron of appncanons

Accepted for filing

Withdrawn

Returned

Denied

Total applications disposed of

Apphcanons pending as of September 30. 1984

INVESTMENT ADVISER REGISTRATIONS

Effective registrations at close of preceding year

Registrations effecbve dunng fiscal 1984

Total reglstrabOns

Registrations terminated dunng fiscal 1984

Withdrawn

Revoked

Cancelled

Total reglstrabons termmated

Total registratIOns at end of fiscal 1984

191

2.769

2.002

722

6

0

2.730

230

9.154

2.002

11.156

488

0

254

742

10,414

141

3,420

3.561

2.534

5

756

1

3.296

265

7.043

2.534

9.577

401

0

93

494

9.063

93
Table 8

APPLICATIONS AND REGISTRATIONS OF MUNICIPAL SECURITIES

DEALERS AND TRANSFER AGENTS

FIscal Year 1984

MUNICIPAL SECURITIES DEALERS APPLICATIONS

Apphcatrons pending at close of precedIng year

Apphcations received dunng fiscal 1984

Total applications for drsposmon

Disposmon of Apphcanons

Accepted for filln9

Returned

Denied

Total apphcatrons disposed of

Appncatrons pending as of September 30, t 984

MUNICIPAL SECURITIES DEALERS REGISTRATIONS

EffectIVe reglstrallOns at close of precedIng year

Registrations effective dunng fiscal 1984

Total registrations

Registrations terminated dunng fiscal 1984

Withdrawn

Cancelled

Suspended

Total regIstratIons terminated

Total regIstratIons at end of nscat 1984

TRANSFER AGENTS APPLICATIONS

Applications pending at close of preceding year

Applications received dunng fiscal year 1984

Total apphcanons for drsposmon

DISpoSition of applications

Accepted for ""ng

Returned

Withdrawn

Denied

Total sppncanons disposed of

Apphcanons pending as of September 30, 1984

TRANSFER AGENTS REGISTRATIONS

EffectIve registratIons at close of preceding year

RegistratIons effective dunng fIscal 1984

Total registrations

ReglstrallOns terminated dunng fiscal 1984

Withdrawn

Cancelled

Suspended

Total registrations terminated

Total registrations at end of frscal 1984

94

4

28

32

27

4

0

31

1

378

31

409

10

0

0

10

399

6

103

109

102

6

0

0

108

1

1,040

102

1,142

21

2

0

23

1,119
Self Regulatory Organizations:

Revenues, Expenses, Pre-Tax

Income and Balance Sheet

Structure

In 1983 the total revenues of self-regulatory organizations ("SROs") rose over $112

million (27.8%) to $516.3 million, representing the largest yearly increase in several years. The New York Stock Exchange

(NYSE), National Association of Securities

Dealers (NASD) and American Stock Exchange (Am ex) accounted for over 70 percent of SROs' total revenues. Most SRO

revenues came from listing, trading and

market data fees. The NYSE reported total

revenues of $216.8 million of which approximately 60% was made up of listing

and trading fees. NASD reported total revenues of $75.1 million. A little over 53% of

this figure was derived from service fees

and member assessments. Amex reported

a total revenue figure of $73.1 million. Approximately 70 percent of these revenues

were derived from transaction and communication charges. Chicago Board Options Exchange (CBOE) transaction fees,

which accounted for 80% of their total revenues in 1983, accounted for all of the

growth in their total revenues.

The total expenses of all SROs were

$434.3 million in 1983, an increase of

17 percent over 1982. The Midwest Stock

Exchange (MSE), Intermountain Stock Exchange (ISE) and Spokane Stock Exchange (SSE) had the largest percentage

increases in total expenses. Conversely, the

Boston Stock Exchange (BSE) was able to

reduce expenses nearly 7 percent.

Aggregate pre-tax income of all SROs

surged to $82.0 million in 1983, an increase of over 149 percent. The PSE is the

only exchange to show a decrease in pretax income. The NYSE reported pre-tax

income of $37.6 million, an increase of

136% over the previous year. NASD's pretax income of $16.1 million represented a

five-fold increase over the previous year.

The Cincinnati Stock Exchange (CSE) reported its pre-tax loss from $58,000 in

1982 to $16,000 in 1983. And the BSE had

pre-tax income of $255,000 in 1983 compared to a pre-tax loss of $788,000 in

1982.

The total assets of all SROs were $883.3

million in 1983, an increase of 33 percent

over 1982. The NYSE's total assets were

$250.5 million, an increase of over 31 percent since 1982. BSE's total assets declined from $17.2 million in 1982 to $8.5

rnilhon, a decrease of more than 50 percent. CSE's total assets declined by 6 percent from 1982.

The aggregate net worth of SROs rose

to $309.0 million from $258.8 million in

1982, an increase of 19 percent, The CSE,

NASD and MSE showed the largest percentage increases over the previous year.

The largest dollar increases were experienced by the NYSE with $17.3 million and

the NASD with $16.1 rnilhon.

Aggregate clearing corporation service

revenue increased by $10 million in 1983

due to the substantial increase in equity

securities trading volume. The approximately 40% increase in volume of transaction processed resulted in only a 16%

increase in clearance services revenue because of the automated efficiencies of the

National Clearance and Settlement System.

Total depository services revenue for

1983 increased approximately 45% to

$101 million. This resulted primarily from a

50% increase in the number of shares represented by immobilized certificates in the

nationally interfaced depository systems.

Contributing significantly to this Increase

was greater institutional utilization of depository services. This increased usage

was induced by exchange and NASD rules

that, beginning January 1983, effecitively

required members and their customers to

use the facilities of a registered securities

depository for the confirmation, affirmation and settlement of Institutional trade

transactions in depository eligible securities. The value of institutional depository assets held in the nauonal depository

system was an estimated $1.1 trillion at the

end of 1983. These assets were held for

963 U.S. banks, including 99 of the largest

100 banks in managed trust assets.

Another area of depository service

95
growth in 1983 was In municipal securities.

Nearly 50,000 municipal issues were depository-eliqible at the end of 1983 compared with approximately 20,000 a year

earlier and less than 4,000 at the end

of 1981. Stimulating growth in c1eanng

and depository service for municipal

issues was the implementation in mid1983 of the Tax Equity and FIscal Responsibility Act which required that municipal

bonds with maturities of more than one

year be In registered rather than bearer

form to retain their tax-exempt status. Additionally, greater use of depository services for municipal securities is expected

because of amendments to the Municipal

Securities Rulemaking Board Rules G-12

and G-15 approved by the Cornmission in

the fourth quarter of 1983. These amendments require, beginning August 1984, the

use of automated trade confirmation/affirmation and comparison services for municipal securities transactions and, beginmng February 1985, depository and

clearing corporation delivery and settlement of the vast majority of municipal

transactions. Implementation of these rules

IS expected to add sigruficantly to the use

of depositories for municipal issues which,

at the end of 1983, cornpnsed 5% of the

value of securities in depositories.

Aggregate clearing and depository expenses for 1983 increased by $40 million,

or 22% over 1982 levels. Most of the increases are attributable to the labor-intensive nature of depository activities which

resulted in an $18 million increase in depository employee costs. The $10 million

increase in occupancy costs is largely attributable to the Depository Trust Company's $6.4 million occupancy cost increase resulting from acquisition of additional vault and office space. Additionally,

MIdwest Securities Trust Company contracted for additional vault facilities at a

cost of $2.2 million in order to accommodate its municipal bond program. Midwest's increase is attributable primarily to

the Pacific Securities Depository Trust

Company (PSDTC) offering Midwest's

bearer bond system on a piggyback basis

96

to PSDTC participants.

PSDTC and PCC incurred pre-tax losses

in 1983 of $0.7 and $1.2 million, respectively. These losses would have been substantially greater had their parent corporation, the Pacific Stock Exchange (PSE),

assessed PSDTC and PCC for their $0.3

and $0.8 million pro-rata share of administrative and financial services costs provided by PSE. Subsequently, in an effort to

reduce expenses, PCC and PSDTC decided to consolidate operations in San

Francisco.

Combined clearing and depository net

worth increased modestly to $23 million.

In addition to net worth, participant clearing fund contributions provide financial

protection to the depositories and clearing

corporations in the case of a participant

default Participant clearing funds remained at approximately $210 million for

depositories and $200 million for the

equity clearing corporations while the Options Clearing Corporation's (OCC) clearing fund declined from $370 million at the

end of 1982 to $210 million at the end of

1983. acC's clearing fund had risen in late

1982 proportionate with a surge in trading

volume. OCC determined that the increased trading volume did not warrant a

proportionately higher clearing fund in

part because OCC also held $7.5 billion in

margin deposits at the end of 1982. Therefore, acc changed its formula for determining the requisite fund contribution,

reducing it to its present level.

Equity clearing corporations' settlement

system balances increased 300% because

of the unsettled when-issued trades in secunties of the American Telephone and

Telegraph Company (AT&T). The relative

price stability of those issues and the daily

mark-to-the-market procedures of the

clearing corporations' settlement systems

reduced the risk associated with the $2 billion net system balance in AT&T issues.

The actual volume of shares processed

was approximately three times that of the

system balances because of the netting effect of the settlement system.
Wen

en

(7)00(')

~C"')M -e- ONOr---

(")C")C")C")

<OC\lON

,.....,..... ..... 00

0"'" co <0 <t:ilrir-:o

VNM~

M

2

E

s

9"

s

:ll

lii"O L:" _<n

;; <n" .3 a:

nil

a:

<Ovt--o

,.....(OlO(\J

0)1'--,.....1'--

cOo"":C\i

C\I-.:t<OO>

v...-r---,....

,....C\I,.....M

C'J"":"":"":

cn vi r-, (") U')CONCO

N

'"

ll} MO'>

M COf'-..

o C")U'>

eDeDM&rl

(0 U') ,.....

tOt--NOl

<0,.....,.....(")

v...-OlCO

C\icrio::ieD

C\l,.....,.....,.....

a::llJ')I,{)CX)

OC\lVCO

v...-(OtO

a5LfioC"5 Il)cot--.,....

C\I.,....,.....C\1

COvM(O

OHl) ex) 0 mNOO

MaimeD

MMM<O

0000

MC\I(")"I;f

(\1<0001'--

".... ......C\JO')

co MOM

uiC\i"":

,.....C\JOO>

Noaa

,.....OlCDCO

c?oi"":u5

NC\I("')C')

("),......:t(O

.... CO...-Ll) C\lt--r---.,....

r-:a5aicri

(ONv co

(\1(0 v""" o ...... C?t--

NWo)oi

C\lNC\I (")

'"

"'~CO CX)U1N.....-

NCOOlv

"':"':"':00

'"

C')OJCX)<.o

(fl...-NO

O)C\IQ)C\1

eONN"':

NC'")M M

'"

97

......

~

'"
o

al.

0>

0>

;;;

g

"!

;;; '"

<0'"

0> <0io

"'~'" 0>0>(\1

0>(\1(\1

.,.: .....-C\i

<0

0>

co

-:

"-'"'"

0"- 0

0 <0 r-, 0

"":N cO

r----(fj ci .,.

~ ~~ s --ri cD

98

~~~ ~

'" '"

'"
99
Table 11

MUNICIPAL SECURITIES RULEMAKING BOARD

STATEMENTS OF REVENUES AND EXPENSES AND

CHANGE IN FUND BALANCE

for the years ended September 30, 1984 and 1983

Years Ended September 30

1984 1983

Revenues

Assessment fees $ 830,034 $ 943,938

Annual fees 220,125 197,400

lrutral fees 29,800 24,200

Investment Income 113,950 133,521

Board manuals and other 31,216 21,201

1,225,125 1,320,260

Expenses

Salanes and employee benents 556,150 570,566

Board and committee 377,915 337,300

Operations (Including deprecianon

and amortization) 202,666 182,199

Education and cornmurucanon 228,097 212,930

Protessional services 61,603 15,803

1,426,391 1,318,798

Revenues over expenses 1,462

Fund balance, beginning of year 1,413,132 1,410,987

Fund balance, end of year $1,211,866 $1,412,449

100
EXEMPTIONS

Section 12(h) Exemptions

Section 12(h) of the Exchange Act

authorizes the Commission to grant a

complete or partial exemption from the

registration provisions of Section 12(g) or

from other disclosure and insider tradmg

provisions of the Act where such exemption is consistent with the public interest

and the protection of investors.

For the year beginning October I, 1983,

six applications were pending, and an additional 17 applications were filed during

the year. Of these 23 applications, nine

were granted, and seven were withdrawn.

Seven applications were pending at the

close of the year.

Exemptions For Foreign Private

Issuers

Rule 12g3-2 provides various exemptions from the registration provisions of

Section 12(g) of the Exchange Act for the

securities of foreign private issuers. Perhaps the most important of these is that

contained in subparagraph (b) which provides an exemption for certain foreign issuers which submit, on a current basis,the

material specified in the rule. Such material includes that information about which

investors ought reasonably to be informed

and which the issuer: (1) has made public

pursuant to the law of the country of domicile or in which it is incorporated or organized; (2) has filed with a foreign stock exchange on which its securities are traded

and which was made public by such exchange; and or (3) has distributed to its

security holders. Penodically,the Commission publishes a list of those foreign issuers which appear to be current under the

exemptive provision. The most current list

is as of October 5, 1983 and contains a

total of 445 foreign issuers.

Rule 10b-6 Exemptions

Exchange Act Rule 10b-6 is an antimanipulative rule that prohibits trading in

securities by persons interested in a distribution of such securities. During the fiscal year, the Commission granted 20

exemptions pursuant to paragraph (h) of

Rule 10b-6 under circumstances indicating that proposed purchase transactions

did not constitute manipulative or deceptive devices or contrivances comprehended within the purposes of the rule.

FINANCIAL INSTITUTIONS

There were 2,331 companies registered

under the Investment Company Act of

1940 as of September 30,1984. New registrations totaled 256, with 54 registrations

terminated during the fiscal year. This

compares with 1983 fiscal year figures of

2,181 total registrations, 287 new registrations and 50 terminations.

101
Table 12

COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY

ACT OF 1940 AS OF SEPTEMBER 30, 1984

Number of Registered Companies Approximate

Market Value

of Assets of

Active InaclJvea Total Active

Companies

(Millions)

Management open-end ("Mutual Funds") 1,522 41 1,563 $181,441

Vanable annurty-separate accounts 72 4 76 1,346

All other load funds •. 1,450 37 1,487 180,094

Management closed-end 169 55 224 5,023

Small BUSiness Investment companies 39 7 46 197

All other closed-end companies 130 48 178 5,004

Unrt Investment trust 511 24 535 62,393

Vanable annuity-separate accounts 159 1 160 2,686'>

All other Unit Investment trusts 352 23 375 59,707

Face-amount cernncate companies 5 4 9 1,464

Total 2,207 124 2,331 $250,321<

a Inactive refers to registered companies which as of September 30, 1964, were In the process of being liquidated or merged, or

have filed an application pursuant to Section 8(t) althe Act for dereglstratlon, or which have otherwise gone out of existence and

remain only until such time as the Oomrrussion Issues an order under secnon 8(f) terminating the" registration

b Includes about 3 1 billIOn of assets of trusts which Invest In secunnes of other Investment companies, SUbstantially all of them

mutual funds

c Total assets include only those assets reported to the Cornrmssron as of November 5, 1984

102
Table 13

COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY

ACT OF 1940

Approximate

market \/Blue

of assets

Registered Registered RegistratIOn Registered 01 active

Fiscal year ended at beginning dunng terminated at end of companies

September 30 01 year year dUring year year (millions)

1941 0 450 14 436 $ 2,500

1942 436 17 46 407 2,400

1943 407 14 31 390 2,300

1944 390 18 27 371 2,200

1945 371 14 19 366 3,250

1946 366 13 18 361 3,750

1947 361 12 21 352 3,600

1948 352 18 11 359 3,825

1949 359 12 13 358 3,700

1950 358 26 18 366 4,700

1951 366 12 10 366 5,600

1952 368 13 14 367 6,800

1953 367 17 15 369 7,000

1954 369 20 5 384 8,700

1955 384 37 34 387 12,000

1956 387 46 34 399 14,000

1957 399 49 16 432 15,000

1958 432 42 21 453 17,000

1959 453 70 11 512 20,000

1960 512 67 9 570 23,500

1961 570 118 25 663 29,000

1962 663 97 33 727 27,300

1963 727 48 48 727 36,000

1964 727 52 48 731 41,600

1965 731 50 54 727 44,600

1966 727 78 30 775 49,800

1967 755 106 41 842 58,197

1968 842 167 42 967 69,732

1969 967 222 22 1,167 72,465

1970 1,167 187 26 1,328 58,337

1971 1,328 121 98 1,351 78,109

1972 1,351 91 108 1,334 80,816

1973 1,334 91 64 1,361 73,149

1974 1,361 106 90 1,377 62,287

1975 1,377 88 66 1,399 74,192

1976 1,399 63 86 1,376 80,564

1977' 1,403 91 57 1,437 76,904

1978 1,437 98 64 1,471 93,921

1979 1,471 83 47 1,507 108,572

1980 1,507 136 52 1,591 155,981

1981 1,591 172 80 1,683 193,362

1982 1,683 305 45 1,944 281,644

1963 1,944 287 50 2,181 330,458

1984 2,181 256 54 2,331 250,321"

, Began Fiscal Year Ending September 30,1977

Total assets Include only those assets reported to the Commission as of November 5, 1984

103

"
Table 14

NEW INVESTMENT COMPANY REGISTRATIONS

Management open-end

Variable annuities

All others

Sub-total

Management closed-end

S61CS

All others

Sub-total

Unit Investment trust

Variable annumes

All others

Sub-total

Face amount certificates

Total Registered

Table 15

INVESTMENT COMPANY REGISTRATIONS TERMINATED

Management open-end

Vanable annurnes

All others

Sub-total

Management closed-end

SBIC's

All others

Sub-total

Unit Investment trust

Vanable annumes

All others

Sub-total

Face amount certmcates

Total terrmnateo

104

1984

4

193

197

1

15

16

10

33

43

o

256

1984

o

34

34

o

7

7

o

13

13

o

54
SECURITIES ON EXCHANGES

Market Value and Share Volume

The total market value of all equity securities transactions on registered exchanges totaled $1.0 trillion in 1983. Of

this total, $957 billion, or 94 percent, represented the market value of transactions

in stocks and $60 billion, or almost all of

the remaining six percent, the market

value of options transactions. The value of

equity transactions on the New YorkStock

Exchange was $816 billion, up 59 percent

from the previous year. The market value

of such transactions rose 38 percent to

$47 billion on the American Stock Exchange but increased 43 percent to $155

billion on all regional exchanges combined. The volume of trading in stocks on

all registered exchanges totaled 30 billion

shares in 1983, a 36 percent increase over

the previous year, with 80 percent of the

total accounted for by trading on the New

YorkStock Exchange.

The number of contracts traded on options exchanges declined two percent during 1983 to 134 million contracts and the

market value of such contracts increased

11 percent to $60 billion. The volume of

contracts executed on the Chicago Board

Options Exchange decreased seven percent to 71 million;trading on the American

Stock Exchange went down 8 percent;

Philadelphia Stock Exchange contract volume expanded 22 percent; and Pacific

Stock Exchange contract volume went up

18 percent.

105
0

w

CJ

z

«

:J:

0

)(

w

m

w

a:

;:)

0

w

m

c

w

ex:

w

Im

a

w Ii>

ex: "C

e

Z ..

., 0 ::J

co 0

s: m ... CI> W s :c ...J l!! « -c m

0

;:) s

0

W

IL

0

w

:iE

;:)

...J

C

Z

«

w;:)

...J

IW

ex: «

:iE

106

:;; ., ~oE

::J => Z (J)

...

J:

o

ir

'5CDf?

-t:~.!:2

:;;

~o~

::J => (J) z ...

z

-c

a:

a:

wmE

-f.2.!!:!

., :;; 13

~o~ ::J e . Z 8

1),

z

0

i=n,

0 a;CD~

~.2.!!

:;; '" ~"O~

::J .c Z (J)

(J)

'"

o

(J)

a>lD'E

-t:.2~

...JwWf.l,? ... - ~~3Jg ~<{~8 :; -

~~~g8~ CO .....OLO LO"'"

c?aSr--:C\i"":"":

..... C")M ..... C\l .....

(")vC»<OC\lr-...

NMOOlLOO)

MC)C»lt)-O)

N«i«i~"":N

t!~~~f6~

~~~~~rti

<0"'" tOv U') ....

"'=t co ..... C')v 'V (\I"II#'OO)(,,)C\I ,.....cn_~C\lN_T""_

C')r--m,....MN

v"'=tLONNCO

C"),.... 10 C") V T"".

(0""'0)<0<00

~VNO<OLO '"

'" l!! McovNC\I 0>

"":..,fc15oir-:-.i e

'" '" <OtDo)~~~ s:

\l x w ci5 "C

u; l!!

e ~ffi~~t;;C\i S!

'" ,g ..... o ..... co,....C")

'" c?ooiLtim-.i a:

'" oWCOC»Lt)O) », 0> co,.... <OtOv ~gfg~g~ .0 s:

'"

s:

u

x 0

W

'"

CD

t--l/)<DLOMLO

ONCO..-NC?

O)(X)(O MaC") "0 (")a>tDOMW c 0> co v co .....C\J v

'" vCDvCJ)v ..... a: oiciuiuiC'lici

;;: ................ NM ..

l!!

m

OlOOLOg ...... <Da>oia:i"':oi

.....vvCX)C")C"> N ..... 1X:l(O (J) ..... ma)llioC'oir-:

vC)r-..moU')

NC\lv'O:;t(OO)

t!~~~~~

_tOLOCO .....v

g.,: on N": 0:; <OO ......C\J(J)

C\JC")C\l,...,or--.

o)MNN"':"':

tDC\lNMLO ...... C'\lC")IOU')(Oq

<0000 ..... 00000

m m'"

'"to '"

cD

~OOOfif+OOOO

o m N

t--OOOO""COOOO

'" 0"'''' ... om", C\i <0 as -e

reooo~ti')&:f0OO

LO COL{)M

..,f Moi~ ..,. CD'" '" ...

..... oaoolt'l<OOOCO

8_~ q on ~'" ;:::

'"

,....OOOO,....C")OOv

0

m f6l\l iii

g aiai .,: ..,. ... ..,. 0 "'~ r-, on M'Lt'i on

'"

vC\lC\lt'\f<DC")(J)(O ...... O vf'.O(J)(X)f'.QJw ......

vCl),....C\JvMU')CDCO

criu5r--:C'liCfioLri.r-=o;

OO)i,l)<Oi,l)""'<O "'~ <ONOCO '" C\i .r-=.q.r-=

'"

<OOovO)('I')ov"",cocoo

~~co~~~~~~

C\iai0 NNN«S.r-=...: O) .....i,l)i,l).....coo ov OV('l')U')N-'OIOtO)

"':tD~c5LO,....--t:i

('I') CO ...... C\I .....

CD

COOovO)U')U')C\I<ocoov

tn~a;~!::~~~~a;

~~g~~~g,..:~~ CO('l')U')NO)OO ,....

«S~"':ciui"':o 'd- <O __ MN Lri

'" CD

'" ",0>

Ole

CI) & ~CD &i~ CD

g>~ &~an ~~ ~~tO~~~~w~£g

ow£w~w.J::..:.:g><Q.

~t5~g~tj~~ti5~~

~E~Cligg~cc~g(ij

Cb~B_i'i5~g..2Ecn~

~Bcn~cn5(i5~5:g0 lf5~~~~~-gE~B ES £"2 u:ES! 8..<: ~:-:. !J:;~~!,-£(J)!J

~~~

~

~

~~~

~

~

~ ~~ ~

~ ~ ~~~ "'"

~ ~ ~ ~ ~ ~ ~ ~

~ '" ~

~ ~~~~ ~

~~~ ~

~ ~

~

~

~~ ~~

~
NASDAQ (Volume and Market

Value)

NASDAQ share volume and market

value information for over-the-counter

trading has been reported on a daily basis

since November 1, 1971. At the end of

1983, there were approximately 4,500 issues in the NASDAQ system, an increase

of 22 percent during the year. Volume for

1983 was almost 16 billion shares, up 89

percent from over the eight billion shares

traded in the previous year. This trading

volume encompasses the number of

shares bought and sold by market-makers

plus their net inventory changes. The market value of shares traded in the NASDAQ

system was $188 billion at the end of 1983.

Share and Dollar Volume by

Exchange

Share volume in 1983 for stocks, rights,

and warrants on exchanges totaled 30 billion, an- increase of 30 percent from the

previous year. The New York Stock Exchange accounted for 80 percent of the

1983 share volume; the American Stock

Exchange, seven percent; the Midwest

Stock Exchange, six percent; and the Pacific Stock Exchange, four percent

The market value of stocks, rights, and

warrants traded was $958 billion, an increase of 59 percent over the previous

year. Trading on the New York Stock Exchange contributed 85 percent of the total;

the American Stock Exchange accounted

for three percent and the Midwest Stock

Exchange trading reached six percent of

the overall trading volume.

107
Dollars Btlhons

750

Market Value Of Securities Traded On

All <J.S.Stock Exchanges

9583

700

650

600

550

500

450

400

350

300

250

BStocks. RIghts

& Warrants

Options

108

200

150

o

1973 74 75 76 77 78 79 80 81 82 1983

~
Table 17

SHARE VOLUME BY EXCHANGES'

In Percentage

Total Share Volume

Year (Thousands) NYSE AMEX MSE PSE PHLX SSE CSE Other 2

1935 681,971 7313 1242 191 269 110 096 003 776

1940 377,897 7544 1320 211 278 133 119 008 387

1945 769,018 6587 2131 177 298 106 066 005 630

1950 893,320 7632 1354 216 311 097 065 009 316

1955 1,321,401 6885 1919 209 308 085 048 005 541

1960 1,441,120 6847 2227 220 311 088 038 004 265

1961 2,142,523 6499 2558 222 341 079 030 004 267

1962 1,711,945 7131 2011 234 295 087 031 004 207

1963 1,880,793 7293 1883 232 282 083 029 004 194

1964 2,118,326 7281 1942 243 265 093 029 003 144

1965 2,671,012 6990 2253 263 233 081 026 005 149

1966 3,313,899 6938 2264 256 268 086 040 005 123

1967 4,646,553 6440 2841 235 246 087 043 002 106

1968 5,407,923 6198 2974 263 264 089 078 001 133

1969 5,134,856 6316 2761 264 347 122 051 000 119

1970 4,834,887 7128 1903 316 368 163 051 002 069

1971 6,172,668 7134 1842 352 372 191 043 003 063

1972 6,518,132 7047 1822 371 413 221 059 003 064

1973 5,899,678 7492 1375 409 368 219 071 004 062

1974 4,950,833 7847 1027 439 348 182 086 004 067

1975 6,381,669 8092 896 405 325 154 084 013 031

1976 7,125,201 8003 935 387 393 141 078 044 019

1977 7,134,946 7954 973 395 371 149 066 064 028

1978 9,564,663 8008 1075 358 314 150 060 015 021

1979 10,977,775 7978 1082 329 338 164 054 027 028

1980 15,584,209 7995 1079 383 280 151 056 032 024

1981 15,969,398 8068 932 460 287 155 051 037 010

1982 22,500,576 8119 696 506 362 218 048 042 008

1983 30,316,014 8000 729 548 353 220 065 001 085

'Share volume for exchanges Includes stocks, nghts, and warrants

20ther includes all exchanges not listed above

Source SEC Form R-31

Table 18

DOLLAR VOLUME BY EXCHANGES'

m Percentage

Total Dollar Volume

Year (Thousands) NYSE AMEX MSE PSE PHLX SSE CSE Other 2

1935 $15,396,139 8664 783 132 139 088 134 004 056

1940 8,419,772 8517 768 207 152 111 191 009 045

1945 16,284,552 8275 1081 200 178 096 116 006 048

1950 21,808,284 8591 685 235 219 103 112 011 044

1955 38,039,107 8631 698 244 190 103 078 009 047

1960 45,309,825 8380 935 272 194 103 060 007 049

1961 64,071,623 8243 1071 275 199 103 049 007 053

1962 54,855,293 8632 681 275 200 105 048 007 054

1963 64,437,900 8519 751 272 239 106 041 006 066

1964 72,461,584 8349 845 315 248 114 042 006 081

1965 89,549,093 8178 991 344 243 112 042 008 082

1966 123,697,737 7977 1184 314 284 110 058 007 068

1967 162,189,211 7729 1448 308 279 113 066 003 054

1968 197,116,367 7355 1799 312 265 113 104 001 051

1969 176,389,759 7348 1759 339 312 143 067 001 031

1970 131,707,946 7844 1111 376 381 199 067 003 019

1971 186,375,130 7907 998 400 379 229 058 005 024

1972 205,956,263 7777 1037 429 394 258 075 005 027

1973 178,863,622 8207 606 454 355 245 100 006 027

1974 118,828,272 8362 439 489 350 202 123 006 029

1975 157,555,469 8504 366 482 325 172 118 017 016

1976 195,244,815 8435 387 475 382 168 093 053 007

1977 187,393,082 8396 460 479 353 162 073 074 003

1978 249,603,319 8435 617 419 284 163 061 017 004

1979 300,728,389 8365 693 382 285 180 056 035 004

1980 476,416,379 8354 732 432 227 159 051 040 005

1981 491,017,044 84 74 541 504 232 160 050 040 000

1982 603,361,387 8528 327 583 305 159 051 047 000

1983 958,304,168 8506 329 629 287 158 066 016 013

1Dollar volume for exchanges Includes stocks, nghts, and warrants

20ther ,ncludes all exchanges not listed above

Source SEC Form R-31

109
Special Block Distribution

In 1983, there were 85 special block distributions with a value of $2.2 billion.

Secondary distributions accounted for all

of these special block distributions.

Table 19

SPECIAL BLOCK DISTRIBUTIONS REPORTED BY EXCHANGES

(Value In Thousands)

secondary Dismounons Exchange Distnbutions Special Offenngs

YEAR Number Shares Value No Shares Value No Shares Value

sold sold sold

1942 116 2,397,454 $ 82,640 0 0 0 79 812,390 $22,694

1943 81 4,270,580 127,462 0 0 0 80 1,097,338 31,054

1944 94 4,097,298 135,760 0 0 0 87 1,053,667 32,454

1945 115 9,457,358 191,961 0 0 0 79 947,231 29,878

1946 100 6,481,291 232,398 0 0 0 23 308,134 11,002

1947 73 3,961,572 124,671 0 0 0 24 314,270 9,133

1948 95 7,302,420 175,991 0 0 0 21 238,879 5,466

1949 86 3,737,249 104,062 0 0 0 32 500,211 10,956

1950 77 4,280,661 88,743 0 0 0 20 150,308 4,940

1951 88 5,193,756 146,459 0 0 0 27 323,013 10,751

1952 76 4,223,258 149,117 0 0 0 22 357,897 9,931

1953 66 6,906,017 108,229 0 0 0 17 380,660 10,486

1954 64 5,738,359 218,490 57 705,781 $ 24,664 14 189,772 6,670

1955 116 6,756,767 344,871 19 258,348 10,211 9 161,850 7,223

1956 146 11,696,174 520,966 17 156,481 4,645 8 131,755 4,557

1957 99 9,324,599 339,062 33 390,832 15,855 5 63,408 1,645

1958 122 9,508,505 361,888 38 619,876 29,454 5 88,152 3,288

1959 148 17,330,941 822,336 28 545,038 26,491 3 33,500 3,730

1960 92 11,439,065 424,688 20 441,644 11,108 3 63,663 5,439

1961 130 19,910,013 926,514 33 1,127,266 58,072 2 35,000 1,504

1962 59 12,143,656 658,760 41 2,345,076 65,459 2 48,200 588

1963 100 18,937,935 814,964 72 2,892,233 107,498 0 0 0

1964 110 19,462,343 909,821 68 2,553,237 97,711 0 0 0

1965 142 31,153,319 1,603,107 57 2,334,277 86,479 0 0 0

1966 126 29,045,038 1,523,373 52 3,042,599 118,349 0 0 0

1967 143 30,783,604 1,154,479 51 3,452,856 125,404 0 0 0

1968 174 36,110,489 1,571,600 35 2,669,938 93,528 1 3,352 63

1969 142 38,224,799 1,244,186 32 1,706,572 52,198 0 0 0

1970 72 17,830,008 504,562 35 2,066,590 48,218 0 0 0

1972 229 82,365,749 3,216,126 26 1,469,666 30,156 0 0 0

1973 120 30,825,890 1,151,087 19 802,322 9,140 91 6,662,111 79,889

1974 45 7,512,200 133,838 4 82,200 6,836 33 1,921,755 16,805

1975 51 34,149,069 1,409,933 14 483,846 8,300 14 1,252,925 11,521

1976 44 20,588,432 517,546 16 752,600 13,919 22 1,475,842 18,459

1977 39 9,648,986 261,257 6 295,264 5,242 18 1,074,290 14,519

1978 37 15,233,141 569,487 3 79,000 1,429 3 130,675 1,820

1979 37 10,603,660 192,258 3 1,647,600 88,066 6 368,587 4,708

1980 44 24,979,045 813,542 2 177,900 5,101 4 434,440 7,097

1981 43 16,079,897 449,600 0 0 0 0 0 0

1982 76 40,024,988 1,264,492 0 0 0 3 717,000 11,112

1983 85 70,800,731 2,245,465 0 0 0 0 0 0

110
Value and Number of Securities

Listed on Exchanges

The market value of stocks and bonds

listed on U.S. exchanges at the end of

1983 was $2.5 trillion, an increase of 16

percent over the previous year. The market

value of stocks was $1.6 trillion, an increase of 14 percent during the year. The

value of listed bonds increased 16 percent

Stocks with primary listing on the New

York Stock Exchange had a market value

of $1.5 trillion and represented 95 percent

of the value of common and preferred

stocks listed on registered exchanges.

Those listed on the American Stock Exchange accounted for almost all of the remaining five percent of the total and were

valued at $80 billion an increase of three

percent over the previous year.

Table 20

SECURITIES LISTED ON EXCHANGES'

December 31,1983

EXCHANGES COMMON PREFERRED BONDS TOTAL SECURITIES

Market Market Market Market

Value Value Value Value

Registered Number (Million) Number (Million) Number (Million) Number (Million)

Amencan 831 $ 77,798 109 $ 2,284 262 $ 7,443 1,202 $ 87,525

Boston 79 1,389 0 0 1 6 80 1,395

Cmcmnan 5 173 3 53 5 37 13 263

Midwest 23 789 6 15 0 0 29 804

New York 1,469 1,475,308 784 46,852 3,479 889,665 5,732 2,411,825

PacifiC 59 1,920 28 610 53 2,181 140 4,711

Philadelphia 16 563 19 1,014 31 763 62 2,340

Intermountam 22 1 0 0 0 0 22 1

Spokane 31 41 0 0 0 0 31 41

Total 2,535 $1,557,982 949 $50,828 3,831 $900,095 7,315 $2,508,905

Includes Foreign

Stocks

New York 49 $ 61,875 5 $ 119 121 $ 8,398 175 $ 70,392

Amencan 49 22,394 3 113 7 267 59 22,n4

PacifiC 3 53 2 63 0 0 5 116

Total 101 $ 84,322 10 $ 295 128 $ 8,665 239 $ 93,282

1Excluding seeunnes which were suspended from tradmg at the end of the year, and secunlles which because of Inactivity had

no available quotes

Source SEC Form 1392

111
Table 21

VALUE OF STOCKS LISTED ON EXCHANGES

(81111ons of Dollars)

New York Amencan Exclusively

Dec 31 Stock Stock On Other Total

Exchange Exchange Exchanges

1936 $ 599 $ 148 $747

1937 389 102 491

1938 475 108 583

1939 465 101 566

1940 419 86 505

1941 358 74 432

1942 388 78 466

1943 476 99 575

1944 555 112 667

1945 738 144 882

1946 686 132 818

1947 683 121 804

1948 670 119 $30 819

1949 763 122 31 916

1950 938 139 33 1110

1951 1095 165 32 1292

1952 1205 169 31 140.5

1953 1173 153 28 1354

1954 1691 221 36 1948

1955 2077 271 40 2388

1956 2192 310 38 2540

1957 1956 255 31 2242

1958 2767 317 43 3127

1959 3077 254 42 3373

1960 3070 242 41 3353

1961 3878 330 53 4261

1962 3458 244 40 3742

1963 4113 261 43 4417

1964 4743 282 43 5068

1965 5375 309 47 5731

1966 4825 279 40 5144

1967 6058 430 39 6527

1968 6923 612 60 7595

1969 6295 477 54 6826

1970 6364 395 48 6807

1971 7418 491 47 7956

1972 871 5 556 56 9327

1973 7210 387 41 763.8

1974 5111 233 29 5373

1975 6851 293 43 7187

1976 8583 360 42 8985

1977 7767 376 42 8185

1978 8227 392 29 8648

1979 9606 578 39 1,0223

1980 1.2428 1035 29 1,3492

1981 1,1438 894 50 1,2382

1982 1.3054 776 68 1,389.7

1983 1,5222 801 66 1,6088

Source SEC Form 1392

112
Securities on Exchanges

As of September 30, 1983, a total of

7,270 securities, representing 3,064 issuers, were admitted to tradmq on securities

exchanges in the United States. This compares with 7,208 issues, involving 3,054

Issuers a year earlier. Over 5,400 issues

were listed and registered on the New York

Stock Exchange, accounting for 69.8% of

the stock Issues and 78.3% of the bond

Issues. Data below on "Securities Traded

on Exchanges" involved some duplication

since It includes both solely and dually

listed securities.

Table 22

SECURITIES TRADED ON EXCHANGES

Amencan

Boston

Chicago Board of Trade

Cmcmnan

lntermountam

Midwest

New York

PaCifiC Coast

Philadelphia

Spokane

Issuers

Q04

1.204

3

977

45

1,469

1.889

800

961

36

Registered

951

155

2

35

43

314

2,402

733

256

37

Stocks

Temporanly

exempted

2

Bonds'

Unlisted Total

28 979 267

1.116 1.271 8

1 3

988 1.003 38

2 45

1.278 1.592 29

2,404 2.998

213 946 135

842 1.098 97

2 33

'Issuers exempted under Section 3(a)(12) ot the Act, such as obligations of U S Government. the states, and cities. are not

Included In trus table

Table 23

UNDUPLICATED COUNT OF SECURITIES ON EXCHANGES

(September 30, 1984)

Issuers

Stocks Bonds Total Involved

Registered and Listed 3.811 3,436 7.247 3.047

Temporanly Exempted from registration 2 2 4 2

Admitted to unlisted trading pnvileqes 14 5 19 15

Total 3.827 3.443 7.270 3.064

1933 ACT REGISTRATIONS

Effective Registration Statements

During the fiscal year ending September

30, 1984, 5,089 registration statements

valued at $220 billion became effective.

This represented a decrease of almost

eight percent from the value and number

of effective registrations in 1983.

Among issuers whose registration statements became effective, there were 1,761

first-time registrants In fiscal year 1984, an

increase of 196 registrants (13 percent)

from the previous fiscal year's total of

1,565.

113
Table 24

EFFECTIVE REGISTRATIONS

(Millions of Dollars)

Cash Sale for Account of Issuers

Total Bonds,

Fiscal Year Number of Common Debentures Preferred

Statements Value Stock' and Notes Stock Total

Fiscal year ended June 30

19352 284 $ 913 $ 168 $ 490 $ 28 $ 686

1936 689 4,835 531 3,153 252 3,936

1937 840 4,851 802 2,426 406 3,634

1938 412 2,101 474 666 209 1,349

1939 344 2,579 318 1,593 109 2,020

1940 306 1,787 210 1,112 110 1,432

1941 313 2,611 196 1,721 164 2,081

1942 193 2,003 263 1,041 162 1,466

1943 123 659 137 316 32 485

1944 221 1,760 272 732 343 1,347

1945 340 3,225 456 1,851 407 2,714

1946 661 7,073 1,331 3,102 991 5,424

1947 493 6,732 1,150 2,937 787 4,874

1948 435 6,405 1,678 2,817 537 5,032

1949 429 5,333 1,083 2,795 326 4,204

1950 487 5,307 1,786 2,127 468 4,381

1951 487 6,459 1,904 2,838 427 5,169

1952 635 9,500 3,332 3,346 851 7,529

1953 593 7,507 2,808 3,093 424 6,325

1954 631 9,174 2,610 4,240 531 7,381

1955 779 10,960 3,864 3,951 462 8,277

1956 906 13,096 4,544 4,123 539 9,206

1957 876 14,624 5,858 5,689 472 12,019

1958 813 16,490 5,998 6,857 427 13,282

1959 1,070 15,657 6,387 5,265 443 12,095

1960 1,426 14,367 7,260 4,224 253 11,737

1961 1,550 19,070 9,850 6,162 248 16,260

1962 1,844 19,547 11,521 4,512 253 16,286

1963 1,157 14,790 7,227 4,372 270 11,869

1964 1,121 16,860 10,006 4,554 224 14,784

1965 1,266 19,437 10,638 3,710 307 14,655

1966 1,523 30,109 18,218 7,061 444 25,723

1967 1,649 34,218 15,083 12,309 558 27,950

1966 2,417 54,076 22,092 14,036 1,140 37,268

1969 3,645 86,810 39,614 11,674 751 52,039

1970 3,389 59,137 28,939 18,436 823 48,198

1971 2,989 69,562 27,455 27,837 3,360 58,452

1972 3,712 62,487 26,518 20,127 3,237 49,682

1973 3,285 59,310 26,615 14,841 2,578 44,034

1974 2,890 56,924 19,811 20,997 2,274 43,082

1975 2,780 77,457 30,502 37,557 2,201 70,260

1976 2,813 87,733 37,115 29,373 3,013 69,501

Translilon Quarter

July-Sept 1976 639 15,010 6,767 5,066 413 12,246

Fiscal Year ended

September 30

1977 2,915 92,579 47,116 28,026 2,426 77,568

19783 3,037 65,043 25,330 23,251 2,128 50,709

1979 3,112 77,400 22,714 28,894 1,712 53,320

1980 3,402 110,583 33,076 42,764 2,879 78,719

1981 4,326 144,132 49,276 40,163 2,505 91,944

1982 4,846 164,455 50,486 63,950 3,939 118,375

1983 R 5,503 240,058 77,403 80,718 9,339 167,460

1984 P 5,089 219,713 85,444 59,663 5,313 150,420

Cumulative Total 85,685 $2,072,500 $794,236 $682,358 $62,495 $1,539,089

R Revised

P Preliminary

'Includes warrants, shares of benencral Interest, certificates of parncipanon and all other equity Interests not elsewhere

Included

2For 10 months ended June 30, 1935

3The adoption of Rule 24f-2 (17 CFR 270 24f-2) effective November 3, 1977 made It Impossible to report the dollar value of

secunnes registered by Investment companies

Note The Total Cash Sale differs from earlier presentations due to changes In rounding procedures

114

=

=
Securities Effectively Registered With S.E.C.

1935-1984

250

200

BILLIONS OF DOLLARS

150

l':::::::::

100

50

o

1935 40 45 50 55 60 65 70

~~gg~;~gg~

iill!!I!!!!!!I!!!!!

75 80 1984

(Fiscal Years)

::::::In 1977 Fiscal Year End Changed From June To September

Data For Transition Quarter July-September 1976 Not Shown On Charts

Number Of Registrations 639

1/ Does Not Include Investment Companies As Of 1/1/78 Due To Rule Change

r= Revised

p> Prelim mary

115
a>

Cl C

s:'"U

a>

::I

a:o

Ia>

::I c

co

r:::::.

....

.......

t

s:'"Uco

an

cc

'"

... C) co co Q)

>-

co...

.~

Urn

an

C)

an

(J) zo

f=«

a:

li;

<.9 w

a:

LI- o

a: w

co

:JZ

uUJ-

(J)- .c

...,

--3=

"t:J

OJ

...

OJ

...,

rI)

--0)

OJ

0::: -OJ >--..., v

L1J

rI)

OJ

--...,

--...

=' v

OJ

(J)

an "0 M e en "0 .- C

::10

000

0

0

0 ::Cco It) <:t C") N

116

'"

~~

~

'"
Purpose and Type of Registration

Effective registrations for cash sale for

the account of issuers in fiscal year 1983

amounted to $150 billion, ten percent below the $167 billion registered a year earlier. Some $38 billion (25 percent) was

intended for immediate offerings, a decrease of $21 billion (36 percent) from fiscal 1983. Nearly all of this amount consisted of securities registered by business

to be offered to the general public. Such

registrations totalled $37 billion. a decrease of $20 billion (35 percent).

Of this $37 billion, debt securities and

common stock each accounted for $17

billion (46 percent) and preferred stock $3

billion (eight percent). Cash rights offerings (offerings to security holders) came

to $466 million, an increase of 121 percent

from the $211 million of such offerings in

the previous year. Immediate cash offerings by foreign governments in fiscal year

1984 totalled $99 million, a decrease of

$944 million (91 percent) from 1983.

Delayed and extended cash sales registered for the account of the issuer totalled

$113 billion (51 percent of all registrations).

Registrations pursuant to Rule 415, (or socalled "shelf' registrations) amounted to

$71 billion, or 63 percent of this amount

Securities registered for the account of issuers other than for cash sale (in conjunction with exchange offers, for example)

amounted to $63 bilhon in 1984, or 29

percent of all registrations. Registrations of

securities for secondary offerings (for the

account of secunty holders rather than ISsuers) amounted to $6 billion (three percent) of all registrations in fiscal year 1984.

Of these latter registrations, $2 billion (33

percent) were for cash sale and $4 billion

(67 percent) were for other secondary offerings.

The value of registrations aggregating

$220 billion In fiscal year 1984 consisted

of $64 billion in bonds, debentures and

notes, $9 billion in preferred stock and

$147 billion in common stock. Of the $64

billion of debt securities registered, $17 billion (27 percent) were registered for immediate cash sale to the general public for

the account of the issuer Delayed and extended cash sales accounted for $43 billion (67 percent). Thirty-four percent of

the $9 billion in preferred stock registrations consisted of immediate cash offerings, while delayed and extended registrations for cash sale for the account of issuer

comprised 24 percent of the total. The

$147 billion common stock volume consisted of $18 billion in immediate cash

sales, $68 billion In delayed or extended

cash sales, $56 billion of non-cash registrations for the account of the issuer and

$5 billion of secondary offerings.

117
Table 25

EFFECTIVE REGISTRATIONS BY PURPOSE AND TYPE OF SECURITY:

FISCAL YEAR 1984P

(M.lllons of Dollars)

Type of Secunty

Purpose of registrations Bonds,

Debentures Preferred Common

Total and Notes Stock Stock'

All registrations (estimated value) $219,713 $63,517 $9,139 $147,057

For account of Issuer for cash sale 150,420 59,663 5,313 85,444

Immediate offenng 37,663 16,666 3,085 17,912

Corporate 37,564 16,567 3,085 17,912

Offered to

General Public 37,098 16,555 3,076 17,467

Security Holders 466 12 9 445

foreign Governments 99 99 0 0

Delayed and extended cash sale and other Issues 112,757 42,997 2,228 67,532

For account of Issuer for other than cash sale 63,358 3,539 3,505 56,314

Secondary Offenngs 5,935 315 321 5,299

Cash Sale 2,118 0 25 2,093

Other 3,817 315 296 3,206

'Includes warrants, shares of beneficral Interest, certificates of parncrpanon and all other equrty Interests not elsewhere

Included

P Preliminary

118

=
Dollars Billions

90

Effective Registrations

Cash Sale For Account Of Issuers

1935-1984

80

p

,

, r ,

70

I

I

I

60 p

I

I

I

50

40

rl,

.... . . . j p

.' ............

1935 40 45 50 55 60 65 70 75

*80 1984

(Fiscal Years)

*In 1977 FIscal Year End Changed from June to September

Data for Transrnon Quarter Julv-September 1976 Not Shown on Chart

Bonds $5 1 BIllIon, Preferred Stock $ 4 Btllron, Common Stock $6 8 BIllion

r Hevrsed

p Preliminary

o

•

n

Common Stock""

"

\

30

10

20

119

'

==

=
Regulation A Offerings

Durmg fiscal year 1984, 91 offering

statements for proposed offerings under

Regulation A were processed and cleared.

Table 26

OFFERINGS UNDER REGULATION A (CLEARED)

Fiscal

1984 Fiscal Fiscal Fiscal

(Thru July) 1983 1982 1981

Size

$500,000 or Less 38 58 82 120

$500,001-$1,000,000 19 30 55 83

$1,000,001-$1,500,000 34 41 83 104

Total 91 129 220 307

Underwnters

Used 57 67 129 167

Not Used 34 62 91 140

Total 91 129 220 307

Offerors

ISSUing Companies 91 129 220 303

Stockholders 0 0 0 0

Issuers and Stockholders

JOintly 0 0 0 4

Total 91 129 220 307

ENFORCEMENT

Types of Proceedings

As the table reflects, the securities laws

provide for a wide range of enforcement

actions by the Commission. The most

common types of actions are injunctive

proceedings instituted in the Federal

district courts to enjoin continued or

120

threatened securities law violators, and administrative proceedings pertaining to broker-dealer firms and/or individuals associated with such firms which may lead to

various remedial sanctions as required in

the public mterest When an injunction is

entered by a court, violation of the court's

decree is a basis for criminal contempt

against the violator.
Table 27

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons SUbject to, Acts Constituting,

and Basis for. Enforcement Action

Broker-dealer, municipal securities

dealer. Investment adviser or associated person

Willful Violation of secunnes acts provrsion or rule, aiding or abett"'g such Violation. failure reasonably to supervise others. wrllful

misstatement or ormssion In filing With the Cornrmssron, convrcnon of or Injunction agamst certain cnmes or conduct

Registered secunnes association

Sanction

Censure or lmntatron on activities. revocation. suspension or denial of registration, bar or suspension from assocranon (1934

Act 9915B(c)(2)-(6) 15b(b)(4H6) Advisers Act 99203(e)-

(f))

Organization or rule not conforming to statutory requirements Suspension at registration or limitation of acnvmes, functions. or

operations (1934 Act 9 19(h)(1))

Violation of or mabuity to comply With the 1934 Act, rules there- Suspension or revocation of registration. censure or limitation of

under. or ItS own rules. unjustified failure to enforce compliance acuvmes, functions. or operations (1934 Act. 919(h)(1))

With the forego"'g or With rules of the MUniCipal Securities

Rulemak",g Board by a member or person associated With a

member

Member of registered securities

association, or associated person

Being subject to Commission order pursuant to 1934 Act. 9 15 Suspension or expulsron from the associanon, bar or suspen-

(b). Willful Violation of or effective transaction for other person sian from association With member of assocranon (1934 Act. 9

With reason to believe thaI person was Violating securities acts 19(h)(2)-(3))

provisions. rules thereunder, or rules of MUniCIpal Securities

Rulemak",g Board

National securities exchange

Organization or rule not conforming to statutory reouirernents Suspension of registration or limitation of acnvmes, functions, or

operations (1934 Act 9 19(h)(1))

Violation of or mabthty to comply With 1934 Act. rules thereunder

or Its own rules. uruusnned failure to enforce compliance With the Suspension or revocation of registration, censure or limitation of

forego"'g by a member or person associated With a member acnvmes, functions. or operations (1934 Act, 919(h)(1))

Member of national securities

exchange, or associated persons

Being subject to Cornrmssron order pursuant to 1934 Act. 9 Suspension or expulsion from excnanqe, bar or suspension from

15(b), Willful Violation of or effective transaction for other person assocranon With member (1934 Act. 99 19(h)(2)-(3))

With reason to believe that person was Violating secunnes acts.

provrsions or rules. thereunder

Registered clearing agency

Violalion of or Inability to comply wrth 1934 Act. rules thereunder. Suspension or revocation of registration, censure or limitation of

or Its own rules. failure to enforce compliance With Its own rules acnvmes, functions. or operalions (1934 Act, 919(h)(1))

by parnopants

Participant In registered clearing agency

Being SUbject to comrrussion order pursuant to 1934 Act, 9 Suspension or expulsion from cleanng agency (1934 Act. 9

15(b)(4). Willful Violation of or effect",g transaction for other per- 19(h)(2))

son With reason to believe that person was Violating provisions of

clearing agency rules

121
Table 27-Continued

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons SUbject to Acts Constrtutlng.

and Basis for. Enforcement Action

Securities information processor

Sanction

Violallon of or inability to comply wIth provisrons of 1934 Act or censure or operanonal hrmtanons, suspension or revocation of

rules thereunder reglstrabon (1934 Act. 11A(b)(6»)

Transfer agent

Willful violauon of or inability to comply with 1934 Act. 17 or Censure or nrrutanon of aenvmes, denial. suspension. or revoca17A. or regulations thereunder non of reg,slrallon (1934 Act. 17A(c)(3))

Any person

Willful violenon of secunnes act provision or rule. aiding or abet- Temporary or permanent prohibtnon from serving In certain eating such Violation. Willful misstatement In filing With Cornrms- pacmes for registered Investment company (Inveslment Comsion pany Act. 9(b»)

Officer or director of selfregUlatory organization.

Willful Violation of 1934 Act. rules thereunder. or the orqarnza- Removal from offIce or censure (1934 Act. 19(h)(4))

lions own rules. Willful abuse of authonty or unJusllf'ed failure to

enforce compliance

Principal of broker-dealer

Engaging In business as a broker-dealer after appointment of Bar or suspension from being or being associated With a brokerSIPC trustee dealer (SIPA. ~10(b))

1933 Act registration statement

Statement materially Inaccurate or Incomplete Stop order suspending effectiveness (1933 Act. B(d))

Inveslment company has not attained $100.000 net worth 90 Stop order (Investment Company. Act. 14(a))

days after statement became effectIVe

Persons subject to Seclions 12, 13

or 15(d) of the 1934 Act and person

associated WIth an Issuer.

Failure to comply With such provisions or haVing caused such Order directing compliance or to take steps effecling compliance

failure by an act of orrussron that one knew or should have known (1934 Act. 15(c)(4))

would contnbute thereto

Secuntles Issue

Noncompliance by Issuer With 1934 Act or rules thereunder

Public interest requues trading suspension

Registered Investment company

Denial. suspension of effective date. suspension or revocation of

registratIon on national secunues exchange (1934 Act. 120))

Summary suspension of over-the-counter or eXchange trading

1934 Act. 12(k))

Failures to file Investment Company Act registration statement Revocation of reglstrallon (Investment Company Act. B(e))

or reqinred report. "ling matenally Incomplete or misleading

statement of report

Company has not attained $100.000 net worth 90 days after Revocation or suspension of registration (Investment Company

1933 Act registration statement became effective Act. 14(a))

122

~

~~

~

~

~

~

~

~

~

~

~

~
Table27-Continued

TYPES OF PROCEEDINGS

ADMINISTRATIVE PROCEEDINGS

Persons SUbject to Acts Oonsututmq,

and Basis for, Enforcement Action

Attorney, accountant, or other

prolessional or expert

Sanction

Lack of reqoisne qualifications to represent others, lacking In Permanent or temporary denial of privilege to appear or practice

character or integrity, unethical Or Improper protesstonal con- before the Commission (17 C FR !i 201 2(e)(1))

duct, Willful Violation of securmes laws or rules, or aiding and

abetting such Violation

Attorney suspended Or disbarred by court, expert's license IS- Automatic suspension from appearance or practice before the

voked or suspended, convicnon of a felony or misdemeanor Commission (17 C FR !i 201 2(e)(2))

involVing moral turpitude

Permanent Injunction against or finding of secunnes Violation In Temporary suspension from appearance before Commission (17

CommiSSion-Instituted action finding of seeunnes Violation by C F R !i 201 2(e)(3))

Commission In administrative proceadmqs

Member of Municipal securities

Rulemaking Board

Willful Violation of secunties laws, rules thereunder, or rules of Censure or removal from office (1934 Act, !i 15B(c)(8))

the Board

CIVIL PROCEEDINGS IN FEDERAL DISTRICT COURTS

Persons Subject to, Acts Constnunnq,

and Basis for, Enforcement Action

Any person

Engaging In or about to engage In acts or practices Violating

secunnes acts, rules or orders thereunder (including rules of a

registered self-regulatory organization)

Noncompliance With provistons of the law, rule, or regulation

under 1933, 1934, or Holding Company Act, order ISSUed by

Cornrmssmn, rules of a registered self-regulatory organization,

or undertaking In a registration statement

securrtles Investor Protection

Corporation

Sanction

Injunction against acts or practices which constrtute or would

constitute Violations (plus other equitable relief under court's

general equity powers) (1933 Act, !i 20(b), 1934 Act !i 21(d),

1935 Act !i 18(1), Investment Company Act, !i 42(e), Advisers

Act,!i 209(e), Trust Indenture Act, !i 321)

Writ of mandamus, Injunction, or order directing compliance

(1933 Act, !i 20(c) , 1934 Act, !i 21(e), Holding Company Act !i

18(g))

Refusal to commit funds or act for the protection of customers Order directing discharge or obligations or other appropriate relief (SIPA, !i 7(b))

National securities exchange or

registered securities association

Noncompliance by ItS members and persons associated with ItS Writ of mandamus, Injunction Or order directing such exchanqe

members With the 1934 Act, rules and orders thereunder, or or association to enforce compliance (1934 Act, !i 21 (e))

rules of the exchange or association

Registered clearing agency

Noncompliance by Its participants With ItS own ru les

Issuer subject to reporting requirements

Failure to file reports required under!i 15(d) of 1934 Act

Wnt of mandamus, Injunction or order dlrecbng c1eanng agency

to enforce compliance (1934 Act,!i 21 Ie))

Forfeiture of $100 per day (1934 Act, !i 32 (b))

123
Table 27-Continued

TYPES OF PROCEEDINGS

CIVIL PROCEEDINGS IN FEDERAL DISTRICT COURTS

Persons Subject to Acts COnstituting,

and Basis for, Enforcement Action

Registered investment company or

affiliate

Sanction

Name of company or of security ISSUed by It deceptive or mrs- lnjuncnon against use 01 name (Investment COmpany Act,

leading 35(d»

Officer, director, member of advisory

board, adViser, deposltor, or underwriter of

investment company.

Engage In act or practice constituting breach of nduciary duty inJunellon against acting In certain capacities for Investment

InvolVing personal misconduct company, and other appropnate relief (Investment Company

Act, 36(a))

Any person having fiduciary duty respecting

receipt of compensation from Investment company.

Breach of fidUCiary duty InjunCllon (Investment Company Act, 36(a»

III CRIMINAL PROSECUTION BY DEPARTMENT OF JUSTICE

Basis for Enforcement Action

Any person

Willful Violation of secuntles acts or nules thereunder or Willful

misstatement In any document required to be filed by securities

laws and rules or by selt-requlatory organization In connection

With an application for membership, parncipanon or to become

associated WIth a member thereof

Sanction or Relief

Malumum penalties $100,000 fine and 5 years imprrsonrnent,

an exchange may be fined up to $500,000, a public-utihty holdIng company up to $200,000 (1933 Act, 30(b), 24, 1934 Act,

~!l21(d), 32(a), Holding Company Act, !l~ 18(f), 29, 1939 Act, !l

325, Investment Company Act, 42(e), 49, AdvIsers Act,

209(e), 217)

Any Issuer which Violates 30A(a) of Maximum penalty $1,000,000 fine (1934 Act, 32(c)(l))

the 1934 Act (foreign corrupt practices)

Any officer or director of an Issuer, of any stockholder acting on Maximum penalty $10,000 fine and 5 years tmpnsonment (1934

behalf of such Issuer who Willfully Violates 30A(a) of the 1934 Act, 32(c)(2»

Act

Any employee or agent (subject to the Jensoicnon of the United Maximum penalty $10,000 fine and 5 years Impnsonment (1934

States) of an Issuer found to have Violated 30A(a) of the 1934 Act, 32(c)(3))

Act, who Willfully earned out the act or practice constuuttnq such

VIolation

'Statutory references are as follows "1933 Act", the Secuntres Act of 1933, "1934 Act", the socunnes Exchange Act of 1934,

"Investment COmpany Act", The Investment Company Act of 1940, "Advisers Act", the Investment AdVIsers Act of 1940, "Holding

COmpany Act", the Public Utility Holding Company Act of 1935, "Trust Indenture Act", the Tnustlndenture Act of 1939, and "SIPA",

the secunnes Investor Protection Act of 1970

124

~

~

~

~~

~~ ~~

~ ~

~ ~

~ ~
Table 28

NATIONWIDE ENFORCEMENT PROGRAM

ENFORCEMENT CASES INITIATED BY THE COMMISION

DURING FISCAL YEAR 1984 IN VARIOUS PROGRAM AREAS

(Each case Initiated has been Included In only one category listed below, even though

many cases Involved multiple allegations and may fall under more than one category)

Program Area In Which

CIvil Action, Administrative

Proceeding, or 21 (a) Report

Was Initiated

Secunties Offenng Cases

CIvil

Actions' 2

Adrmrustratrve

Proceedings'

21(a)

Reports' Total'

% of Total

Cases

(a) Non-regulated Entity

(b) Regulated Entity

Total Securities Offering Cases

43 (167)

51 (209)

4 (7) (2) 48 (176)

17 (58)

(2) 65 (234) 22%

Broker-Dealer Cases

(a) Backoffice

(b) Fraud against customer

(c) Other

Total Broker-Dealer Cases

10 (13)

6 (40)

1 (2)

17 (55)

12 (28)

25 (51)

48 (102)

22 (41)

31 (93)

12 (23)

65 (157) 22%

Issuer Fmanc/al Statement and

Reportmg Cases

(a) Issuer Financial Disclosure

(b) Issuer Reporting Other

Total Issuer Financial Statement

and Reporting Cases

16 (52)

3 (4)

19 (56)

14 (22)

3 (3)

17 (25)

30 (74)

6 (7)

12"10

Other Regulated Entity Cases

4

4%

1%

1%

4%

4%

5%

4%

10"10

12%

101%3

15 (16)

31 (31)

12 (38)

11 (26)

11 (24)

28 (73)

(2) 6 (9)

1 (1)

(2) 35 (83)

(8)

(7)

114 (221) 2 (4) 253 (694)

3 (5)

2 (11)

7 (8)

4 (6)

16 (35)

3 (5)

1 (1)

12 (38)

2 (2)

14 (40)

9 (30)

9 (33)

9 (15)

4 (16)

4 (8)

(7)

137 (469)

15 (16)

31 (31)

183 (516)

Corporate Control ViolaMns

GRANDTOTALS

Fraud Agamst Regulated Entity

Contempt Proceedmgs (mcludmg

cIvil and cnmmal cases)

Related Party TransacUons

SUBTOTALS

Market Mampulatlon Cases

Delmquent Ftlmgs Issuer

Reporting

Delmquent Fllmgs

Fonms 3 & 4

(a) Investment Advisers

(b) Investment Companies

(c) Transfer Agents

Total Other Regulated Entity Cases

Insider Tradmg Cases

'The number of defendants, respondents or subjects IS noted parenthetically

2Th,S category Includes injunctive actions, court orders obtained pursuant to Section 21 (e) 01 the Exchange Act, and CIVIl and

cnrmnal contempt proceedmqs

3Percentages total more than 100% due to roundmg of figures

125

~ ~

~

~

~
Table 29

INVESTIGATIONS OF POSSIBLE VIOLATIONS OF THE ACTS

ADMINISTERED BY THE COMMISSION

Pending as of October 1, 1983

Opened In fiscal year 1984

Total

Closed In fiscal year 1984

Pending as of September 30, 1984

During the fiscal year ending September

30, 1984, 117 Formal Orders of Investigation were issued by the Commission upon

recommendation of the Division of Enforcement

Table 30

ADMINISTRATIVE PROCEEDINGS INSTITUTED DURING FISCAL YEAR

ENDING SEPTEMBER 30, 1983

Broker-Dealer Proceedings

Investment Adviser, Investment Company and Transfer Agent Proceedings

Stop Order and RegulatIon A Proceedings

Rule 2( e) Proceedings

Disclosure ProceedingS (Secllon 15(c)(4) of the Exchange Act)

Total Proceedings In fiscal year 1984

Table 31

INJUNCTIVE ACTIONS

754

341

1,095

345

750

71

20

6

12

5

114

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

Fiscal Year Acnons trunated

148

174

158

166

135

108

103

115

136

151

179

Defendants Named

613

749

722

715

607

511

387

398

418

416

508

Trading Suspensions

During fiscal year 1984, the Commission suspended trading in the securities of

4 companies. This compares with 11in fiscal year 1983. In most instances, the trading suspension was ordered either

126

because of substantial questions as to the

adequacy, accuracy or availability of public

information concerning the company's financial condition or business operations,

or because transactions in the company's

securities suggested possible manipulation or other Violations.
Foreign Restricted List

The Securities and Exchange Commission maintains and publishes a Foreign

Restricted List which is designed to put

broker-dealers, financial institutions, investors and others on notice of possible unlawful distributions of foreign securities in

the United States. The list consists of

names of foreign companies whose securities the Commission has reason to believe have been, or are being offered for

public sale in the United States in possible

violation of the registration requirement of

Section 5 of the Securities Act of 1933.

The offer and sale of unregistered securities deprives investors of all the protections afforded by the Securities Act of

1933, including the right to receive a prospectus containing the information required by the Act for the purpose of

enabling the investor to determine whether

the investment is suitable for him. While

most broker-dealers refuse to effect transactions in securities issued by companies

on the Foreign Restricted List, this does

not necessarily prevent promoters from illegally offering such securities directly to

investors in the United States by mail, by

telephone, and sometimes by personal solicitation. The following foreign corporations and other foreign entities comprise

the Foreign Restricted List,

1. Aguacate Consolidated Mines, Incorporated (Costa Rica)

2. Alan MacTavish, Ltd. (England)

3. Allegheny Mining and Exploration

Company, Ltd. (Canada)

4. Allied Fund for Capital Appreciation

(AFCA, SA) (Panama)

5. Amalgamated Rare Earth Mines, Ltd.

(Canada)

6. American Industrial Research SA,

also known as Investigation Industrial

Americana, SA (Mexico)

7. American International Mining (Bahamas)

8. American Mobile Telephone and

Tape Co., Ltd (Canada)

9. Antel International Corporation, Ltd.

(Canada)

10. Antoine Silver Mines, Ltd. (Canada)

11. ASCA Enterprisers Limited (Hong

Kong)

12. Atholl Brose (Exports) Ltd. (England)

13. Atholl Brose Ltd. (England)

14. Atlantic and Pacific Bank and Trust

Co., Ltd. (Bahamas)

15. Bank of Sark (Sark, Channel Islands,

U.K.)

16. Briar Court Mines, Ltd. (Canada)

17. British Overseas Mutual Fund Corporation Ltd. (Canada)

18. California & Caracas Mining Corp.,

Ltd. (Canada)

19. Caprimex, Inc. (Grand Cayman, British West Indies)

20. Canterra Development Corporation,

Ltd. (Canada)

21. Cardwell Oil Corporation, Ltd. (Canada)

22 Caribbean Empire Company, Ltd.

(British Honduras)

23. Caye Chapel Club, Ltd. (British Honduras)

24. Central and Southern Industries

Corp. (panama)

25. Cerro Azul Coffee Plantation (Panama)

26. Cia. Rio Banano, SA (Costa Rica)

27. CIty Bank A.S. (Denmark)

28. Claw Lake Molybdenum Mines, Ltd.

(Canada)

29. Claravella Corporation (Costa Rica)

30. Compressed Air Corporation, limited (Bahamas)

31. Continental and Southern Industries,

SA (panama)

32. Crossroads Corporation, SA (Panama)

33. Darien Exploration Company, SA

(Panama)

34. Derkglen, Ltd. (England)

35. De Veers Consolidated Mining Corporation, SA (panama)

36. Doncannon Spirits, Ltd. (Bahamas)

37. Durman, Ltd. Formerly known as

Bankers International Investment

Corporation (Bahamas)

38. Empresia Minera Caudalosa dePanama, SA (panama)

39. Ethel Copper Mines, Ltd. (Canada)

127
40. Euroforeign Banking Corporation,

Ltd. (panama)

41. Finansbanker a/s (Denmark)

42. First Liberty Fund, Ltd. (Bahamas)

43. General MinIng SA (Canada)

44. Global Explorations, Inc. (panama)

45. Global Insurance Company, Limited

(British West Indies)

46. Globus Anlage-Vermittlungsgesellschaft MBH (Germany)

47. Golden Age Mmes, Ltd. (Canada)

48. Hebilla Mining Corporation (Costa

Rica)

49. Hemisphere Land Corporation limited (Bahamas)

50. Henry Ost s Son, Ltd. (England)

51. Intercontinental Technologies Corp.

(Canada)

52. International Communications Corporation (British West Indies)

53. International Monetary Exchange

(Panama)

54. Intemational Trade Development of

Costa Rica, SA

55. lronco Mining & SmeltIng Company,

Ltd. (Canada)

56. James G. Allan & Sons (Scotland)

57. Jojoba Oil & Seed Industries SA

(Costa Rica)

58. Jupiter Explorations, Ltd. (Canada)

59. Kenilworth Mines, Ltd. (Canada)

60. Klondike Yukon Mming Company

(Canada)

61. KoKanee Moly Mines, Ltd. (Canada)

62. Land Sales Corporation (Canada)

63. Los Dos Hermanos, SA (Spain)

64. Lynbar Mining Corp., Ltd. (Canada)

65. Massive Energy Ltd. (Canada)

66. Mercantile Bank and Trust & Co.,

Ltd. (Cayman Island)

67. J P. Morgan & Company, Ltd., of

London, England (not to be confused with J. P. Morgan & Co., Incorporated, New York)

68. Norart Minerals Limited (Canada)

69. Normandie Trust Company, SA

(Panama)

70. Northern Survey (Canada)

71. Northern Trust Company, SA

(Switzerland)

72. Northland Minerals, Ltd. (Canada)

73. Obsco Corporation, Ltd. (Canada)

128

74. Pacific Northwest Developments,

Ltd. (Canada)

75. Pan-Alaska Resources, SA (Panama)

76. Panamerican Bank & Trust Company (panama)

77. Pascar Oils Ltd. (Canada)

78. Paulpic Gold Mmes, Ltd. (Canada)

79. Pyrotex Mining and Exploration Co.,

Ltd. (Canada)

80. Radio Hill Mines Co., Ltd. (Canada)

81. Rancho San Rafael, SA (Costa Rica)

82. Rodney Gold Mines Limited (Canada)

83. Royal Greyhound and Turf Holdings

Limited (South Africa)

84. S. A. Valles & Co., Inc. (Philippines)

85. San Salvador Savings & Loan Co.,

Ltd. (Bahamas)

86. Santack Mines Limited (Canada)

87. Security Capital Fiscal & Guaranty

Corporation SA (Panama)

88. Silver Stack Mines, Ltd. (Canada)

89. Societe Anonyme de Refinancement

(Switzerland)

90. Strathmore Distillery Company, Ltd.

(Scotland)

91. Strathross Blending Company limited (England)

92. Swiss Caribbean Development & Finance Corporation (Switzerland)

93. Tam O'Shanter, Ltd. (Switzerland)

94. Timberland (Canada)

95. Trans-American Investments, limited (Canada)

96. Trihope Resources, Ltd. (West Indies)

97. Trust Company of Jamaica, Ltd.

(West Indies)

98. United Mining and Milling Corporation (Bahamas)

99. Unitrust Limited (Ireland)

100. Vacationland (Canada)

101. Valores de Inversion, SA (Mexico)

102. Victoria Oriente, Inc. (Panama)

103. Warden Walker Worldwide Investment Co. (England)

104. Wee Gee Uranium Mines, Ltd. (Canada)

105. Western International Explorations,

Ltd. (Bahamas)

106. Yukon Wolverine Mining Company

(Canada)
Right to Financial Privacy

Section 21(h)(6) of the Securities Exchange Act of 1934 [15 U.s.C 78u(h)(6»)

requires that the Commission "compile an

annual tabulation of the occasions on

which the Commission used each separate subparagraph or clause of [Section

21(h)(2)] or the provisions of the Right to

Financial Privacy Act of 1978 [12 U.S.C

3401-22 (the "RFPA")] to obtain access to

financial records of a customer and include it in its annual report to the Congress." During the fiscal year, the

Commission successfully made five applications to courts for an order pursuant

to the subparagraphs and clauses of Section 21(h)(2) to obtain access to financial

records of a customer. In this application,

the provisions of Subsections

21(h)(2)(A)(iv), (A)(v), (B), and (D)(ii) were

relied upon. The table below sets forth the

number of occasions upon which the

Commission obtained access to the financial records of a customer using the procedures provided by: (i) Section 1104 of

the RFPA[12 U.s.C 3404], applicable to

customer authorizations, (ii) Section 1105

of the RFPA[12 U.S.C 3405], applicable to

admimstrative subpoenas; and (iii) Section

1107 of the RFPA [12 U.S.C 3407), applicable to judicial subpoenas.

Section 1104 Section 1105 Section 1107

1 310 31

129
POBUC OTIUTY HOLDING

COMPANIES

System Companies

At fiscal year 1984, there were 13 holding companies registered under the Public

Gtility Holding Company Act of 1935 of

which 12 are "active." In the 13 registered

systems, there were 63 electric and/or gas

utility subsidiaries, 74 non-utility subsidiaries, and 20 inactive companies, or a total

of 172 system companies includmq the

top parent and subholding companies.

The following table liststhe active systems.

Table 32

PUBLIC UTILITY HOLDING COMPANY SYSTEMS

Solely Registered Electnc

Registered Holding and/or

Holding Operating Gas Utility Nonutlilly Inactive Total

Companies Companies Subsldlanes Subsidiaries Companies Companies Other

Allegheny Power System

(APS) 1d 3 3 9 2"

Amencan Electnc Power

Company (AEP) 0 12 14 5 32 2"

Central and South West

Corporation (CSW) 1d 3 6 12 1b

Columbia Gas System

(CGS) 0 9 17 0 27 0

Consolidated Natural Gas

Company (CNG) 0 4 10 0 15 0

Eastern Utilities Associates

(EUA) 0 3 0 5 4C

General Public Utilities

(GPU) 0 6 2 10 0

Middle South Utilities

(MSU) 0 6 3 3 13 1b

National Fuel Gas Company

(NFG) 0 5 0 7 0

New England Electnc

System (NEES) 0 5 5 0 11 4c

Northeast Utilities (NEU) 0 5 5 6 17 4c

Philadelphia Electric Power

Company (PEP) 0 1 1 0 1 3 0

Southern Company (SC) 1 0 5 5 0 11 0

Total Companies 12 3 63" 74 20 172 18

'Oh,o Valley Elec Corp & Subs bArklahoma Corp cYankee Atomic Electnc Co

32% CSW 30% NEES, 31 5% NEU,

Indiana-Kentucky Elec Corp 34%MSU 45% EUA

electnc ulillty 34% Oklahoma Gas & Elec

378% AEP Connecticut Yankee Atorruc Power

125%APS Co 15% NEES, 44% NEU.

49 7% Other Companies 45%EUA

dWest Penn Power Co In APS and Vermont Yankee Nuclear Power

Southwestern Electnc Power Co Corp 20% NEES. 12% NEU

In CSW are both electnc 12"10 EUA

utilities and holding companies

Maine Yankee Atomic Power Co

20% NEES. 15% NEU. 4% EUA

Statutory utlhly subsidranes

130
Table 33

KEY FINANCIAL STATISTICS OF REGISTERED PUBLIC UTILITY

HOLDING COMPANY SYSTEMS

Name of Company

As of June 30, 1984 (000 omitted)

Total Assets Operabng Revenues

Allegheny Power System

Amencan Electnc Power Company, Inc

Central and South West Corporation

Columbia Gas System, Inc

Consolidated Natural Gas Company

Eastern Utilities Associates

General Public Utilities Corp

Middle South Utilities, Inc

National Fuel Gas Company

New England Electnc System

Northeast Utilities

Philadelphia Electnc Power Company

Southern Company, The

$ 3,605,510

13,136,247

5,979,371

4,618,003

3,393,959

631,266

6,079,915

11,561,377

968,786

3,364,985

5,185,675

62,563

14,077,699

Total $72,665,356

$ 1,724,926

4,794,092

2,761,090

5,168,705

3,638,358

342,247

2,602,883

3,090,979

1,097,544

1,467,155

2,026,870

10,907

5,873,596

$34,599,352

131

~
ggg8 0 g8ggg 0 0 000 0

0 0 0 000 0

0000 0 00000 0 0.. 000 0

t:E15 0000 cr ggggg ci 0 coci ci

o 0000 0 0 0 000 0

~~O 0000 0 0001/)0 0 0 000 0

O~"'O on oll"ic5C'icD on ci lI"icio on ('f')WC")...- '" ","'u> ev u> -'" '" '" - u>

'" '" .,.

0 0

c: 0 0 0 q 0 ci 0

E 0 0

E q q

0 ... -eo .,. N

o

s

en

0 0

-e 0 0

0 0

ci ci 0 0

0 0

en ci ci

:E Q. -e '" W

.,.

en

>

en

> 0000 0 0

Z '" 8ggg 0 0

rf c: 0> 0 0

Q e s gggg ci g ~E~ 0

:E MN"""I/) 0

'" ~U£ .nri""':cD on <J5

0 .,. ...-NCD":!" e0 co UQl '"

.,. C) ... "'!" Za: C') -<C Q) Ow

:0 5>:J:..J E~e 0 0 0 0 0 00 00

u.<C 0 0 0 0 0 00 00

0 0 0 q 0 00 00

o~ ~~3 ci ci ci 0 ci 00 00 c: 0 0 0 0 0 00 00

C) u: 0>",,,, 0 0 0 0 0 00 00

c:",.o ci ci on re on C'i.n ~g Z .9~~ '" 0 ... '" ... " (3 .,. '" Z

<C

Z

u:

0 0 0 0

0 0 0

:J '" 0 0 0

" ci ci ci

IXl c: 0 0 0

0 0 0 0

In ci on ci a. co

.,. '"

132

~ '"

~

~

~

~

~

~

_

•

~

~
0 000000 gOOOO 00000 0 0 0 gggggg 0000 ggggg 0 0 0 0000 0 0

~E.g ° ~g-ggg~ 00000 coccia 0 00000 00000 °

0 0

° m~o '" 00000 00000 0

a> lfi"':lfiN"Ll'iM' 8°";0"; ooootri cO '"-:

'" _Men 1.0 ..... 0(") 0 .....0,....("') C;; _M _

-"' ..... ..

'"

0 0 0 0 c 0 0

E 8 E 0

.,; <0 U '" "'

'"

'" -u

.9

Cfl

0 0 0

"0 0 8

°

0 0

° .S2 0 0

C/) l!! ° <$

11. ...

;;; W

IC/)

>

C/)

> 000 00 0

z '" 000 00 8

~e ~ 000 00

cicici 00 <$

s-o 000 88 0 000 M

158~ cillici gg ..; "0 o~ 11. Ii: <X>_'" :0:. (])

:J oli '" ;;;

0"-

C za: 0 -ce o Ow

I ...I>

'<t 0...1 00 00 0 0 0 00 0

C') 8 8 :I:ce E~ e 00 00 0 0 0 00 0

00 00 0 0 0 00 0

(]) 11.0 ~aE cia co 0 0 0 co 0

:0 OC/) 00 00 0 0 0 00 0

00 00 0 ..... 0 00

"' t!!1 OiL 0>",,,, "":0- o an- .,; ° ° cio ° sf ..; f5J!!.g -e- '" <'><'> -e- M Z ...J~O

(3 '" ;;;

z

ce

z

iL 0 0 0 0

0 0

0 0

0 0

0 0

0 8 8

::i '" 0 0 0 0 <$

ID "0 0 0 0 0 e: 0 0 0 0 8. ::::l 0 0 .,; 0 0 0

e, OJ "' '" ..... "' :!? '"

"'

...

>. >.

'" e: e: s: >. .. c-, .. .... e: e: 0. e: 0.

Eo .. ;>. 0" 0. E e

Q e: >.c 16~ 8.s E 8~ fij [~~~

~g r 8.8 U

E~5~~g ~>. J >. ~~a J!!ouoEc: >.00> >->., COa;- e: E a..cU [fij ~Q; 11.0 .. ~~.g~8~ "E~g~ 0. oU ()~~0. ~Ea.>.offiCJ) E ",OCfl 00_0 ........ mEoW ~oE~U(!)>. 0 n~ c 0 gu~u~~ _OaJ(ij o >.08 Q. u i E °0 Bgjgj O~WIDQO ~~C:~~ lij~~15 ~o. <~ .i5 gj :5C)C) <DWC/)Wa..a.. "'w Cl ga;a; ~!~!~~.;..J,&U):;:) 0. U 11. 15 0 -='5 ttl' al'Z 5cece~a.wu e c;; u:; 'ii~~arar 52:::::';; fij(l)EfijOlC, O~co~g.EE '"

x ~g jQ ~:e5~~ _oIDE«l e

o~gflffiill ~~g,.s~ E co ~a.. _<l:

~E!gg c ill~hH €515~5 £.g~~~S~ '" 0",

S<ClCl::.SCfl c E~ ~Cl::'ZZZ oux Z iii

Z Z Z Cfl ::. '"

133

~

° ~ °

~

~ "'

~

~

~

~ ~

'" "'''' ~

~ °

° ° ~~~ ~~

° '" ~ ° - -

~ ~ ~ ~ '"

~~ ~ ~~~ ~ '"

~~~~~ ~~ ~
Table 35

SUBSIDIARY SERVICE COMPANIES OF PUBLIC UTILITY HOLDING COMPANY SYSTEMS

AS OF DECEMBER 31, 1983

(In Millions)

Total Total Total Number of Operating

Name of Service Company Billings Assets Personnel Ut,lltJes Served

Allegheny Power Service Corporation $ 394 $ 32 706 3

Amencan Electnc Power Service Corp 1400 1812 2,319 12

Central and South WeS1 Service, Inc 324 186 362 5

Columbia Gas SyS1em Service Corp 535 205 729 9

Consolidated Natural Gas Service Corp 353 125 369 5

EUA Service Corporation 157 22 321 3

GPU Service Corporanon 539 315 761 3

GPU Nuclear Corporation 2961 374 2,618 3

MIddle South Services, Inc 720 1199 1,039 5

New England Power Service Co 798 101 1,555 7

Northeast UtilitIes Service Co 1926 714 3,190 5

Southern Company Services, Inc 2136 1302 3,178 5

Total $1,2243 $6307 17,147 65

134
o

N

-eo

N

CD

CD

CD

..

135

~

~
00 0

I I I I I I I !

0>

<Xl

'"

co

Ii

000

<0(00 M

..... CD q

;;;

co

I I I I I

I I I I

"''''

o

I I I I CD

co

CD

.,.

0>

I I I I I I I I

.,. '"

~@ Vr-..e» <0_(\1

I .....t-: ..... J ,.....ll')Ll) I I

0~m~ ~~(D

0 ....

""" ~'"

:Z'"

c c c c c c c c c

€€~€~~€~€

EEEEEEEEE

ovoOC»COOQO

OMCOr-..OVNCO

VNLOC")(J)«)(X)vCO f"COUlqU')v ..... C?"'l

~&9-~~(A.U}wU}~ fh

:e

0>

vC')N ..... O(J)CO,....,~ COCOCOCOCO,....,,....,....,....

~~~~~eeee

136

~~

I I I ~

~~~

J ~
CORPORATE

REORGANIZATIONS

During the fiscal year the Commission

entered its appearance in 33 reorganization cases filed under Chapter 11 of the

Bankruptcy Code involving companies

with aggregate stated assets of about

$132 billion and close to 150,000 public

investors. Includmg these new cases, the

Commission was a party in a total of 84

Chapter 11 cases during the fiscal year. In

these cases the stated assets totalled approximately $26.6 billion, and about

600,000 public investors were involved.

During the fiscal year, 20 cases were concluded through confirmation of a plan of

reorganization or liquidation, leaving 64

cases in which the Commission was a

party at year-end.

The Commission also continued its participation in pending reorganization cases

under Chapter X of the prior Bankruptcy

Act During the fiscal year, 24 Chapter X

cases were closed, leaving at year-end 13

open Chapter X cases

Table 38

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

IN WHICH COMMISSION ENTERED APPEARANCE

Fiscal

Debtor Distnct Court Year Filed

AlA Industnes, Inc ED PA 1984

Air Flonda System, Inc S D FL 1984

AIrlift Intemabonal, Inc SD FL 1981

AM International N D IL 1982

Amarex Inc WD OK 1983

Anglo Energy, Ltd SD NY 1984

AUas Mortgage Loan Co 4 ED CA 1982

Baldwin United Corp SD OH 1984

Bear Lake West, Inc 4 DID 1982

Braniff tntemanonat Corp , ND TX 1982

Bnggs Transportation D MN 1983

Bullion Reserve of N A 1 4 CD CA 1984

Charter Co MD FL 1984

Chnsban ute Center' 4 ND CA 1980

Colorual Discount Corp 1 4 SD IN 1982

Combustion EqUipment Associates, Inc 1 SD NY 1981

Commonwealth 011 Refining Co , Inc WD TX 1984

Computer Oomrnurucauons, Inc CD CA 1981

Computer Devtces, Inc D MA 1984

Consolidated Packaging Corp N D IL 1984

Continental AIrlines Corp SD TX 1984

Dreco Energy Service Ltd SD TX 1982

Emons Industnes, Inc SD NY 1984

Empire 011& Gas Co D CO 1982

Enterpnse Technologies, Inc SD TX 1984

FIdelity Amenca Fmaneral Corp 4 ED PA 1981

Flight TransportatIon Corp D MN 1983

General Resources Corp ND GA 1980

Geophysical Systems Corp. CD CA 1983

Goldblall Brothers, Inc 1 N D IL 1981

Gnwe Finance Company' D UT 1981

HardwIck Cos , Inc SD NY 1984

Haven Properties, Inc 4 D OR 1981

Honzon HOSPital, Inc 1 4 M D FL 1981

HRT Industnes, Inc 1 SD NY 1983

ICX, Inc D CO 1984

lntormanon DIsplays, Inc SD NY 1984

Intema1'llnst of App Tech , Inc DDe 1983

Interstate Motor Freight Systems WD MI 1984

Itel Corporation ND CA 1981

FIscal

Year Closed

1984

'984

1984

,984

1984

1984

,984

1984

1984

1984

137
Table 3a-Continued

REORGANIZATION PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

IN WHICH COMMISSION ENTERED APPEARANCE

Fiscal

Debtor Distnct Court Year Filed

KDT Industnes, Inc' S.D NY 1982

Robert C LaBme/Pro Assoc' ED MI 1983

Leisure TIme Products, Inc' ND IN 1982

Lewis Energy Corp 1 D CO 1982

The Lionel Corp SD NY 1982

Manoa Finance Co , Inc 4 o HA 1983

Mansfield TIre & Rubber Co ND OH 1980

Manville Corp SD NY 1982

Manon Corp SD AL 1983

Mldwestem Companies, Inc WD MO 1984

North Amencan Coin & Cur.' DAZ 1983

North AtlantIc AIrlines, Inc DVT 1984

Nucorp Energy Inc SD CA 1982

Osbome Computer Corp NO CA 1984

PaCIfIC Express Holding, Inc ED CA 1984

Park NurSing Center' ED MI 1980

Pizza TIme Theatre, Inc NO CA 1984

Rath Packing Co NO IA 1984

Revere Copper & Brass Inc SD NY 1983

Ronco Teleproducts, Inc NOlL 1984

Sambo's Restaurants, Inc CD CA 1982

Saxon Industnes. Inc SO NY 1982

Seatram lines, Inc SO NY 1981

Shelter Resources Corp NO OH 1982

SoU1h AtlantIC FInancIal Corp S D FL 1983

SoU1hem Industrial Banking Corp ED TN 1983

Standard Metals Corp o CO 1984

Stewart Energy Systems' DID 1982

Taco Eds, Inc ND OH 1984

Taurus 001 Corp. o CO 1964

Texas General Resources, Inc SO TX 1983

Tomlinson 001 Co , Inc SO NY 1984

UNA lndustnes NOlL 1982

Victor Technologies, Inc NO CA 1984

Visa Energy Corp DCO 1984

Whrte Motor Corp , NO OH 1980

Wickes Companies CD CA 1982

Wilnor Dnlling Inc 1 SO IL 1982

Wilson Foods Corp. , WD OK 1983

Woods Communcanon Corp. ED MI 1984

XOnlCS, Inc NO IL 1984

Fiscal

Year Closed

1984

1984

1984

1984

1984

1984

1984

1984

1984

1984

'Plan of reorganization connrmed

2Debtor liquidated under Chapter 7

3Chapter 11 case disrrnssed

'Debtor's secunbes not regIstered under Section 12(g) of the Exchange Act

As a result of connrmatron of plan debtor has become a reportmg company under Section 12(g)

138

•

•

•

•

•

•

•
Table 39

PENDING REORGANIZATION PROCEEDINGS UNDER CHAPTER X OF THE

BANKRUPTCY ACT IN WHICH THE COMMISSION PARTICIPATED

Fiscal Year 1984

SEC Notice of

Debtor Distnct Court Petition Filed Appearance Filed

Aldersgale FoundalJon, Inc 2 MD FL Sept 12, 1974 Oct 3, 1974

Bankers Trust Co 2 SO MS Dec 16, 1976 Apnl 5, 1977

Beverly Hills Bancorp CD CA Apnl u, 1974 May 14, 1974

Brethren's Home, The' SO OH Nov 23, 1977 Dec 27, 1977

Bubble up Delaware, Inc CD CA Aug 31, 1970 Oct 19, 1970

Citizens Mortgage Investment Trust' o MA Oct 5, 1978 Nov 1978 Continental Investment Corp 2 o MA Oct 31, 1978 Oct 31, 1978

Continental Mortgage Investors' o MA Oct 21, 1976 Oct 21, 1976

Diversified Mountaineer Corp 2 SO WV Feb 8, 1974 Apnl 24, 1974

First Baptist Church, Inc of Margate, Fla SO FL Sept 10, 1973 Oct 1973

GEBCO Investment Corp , WD PA Feb 8, 1977 March 24, 1977

Guaranty Trust Co WD OK Apnl 9, 1979 Apnl 9, 1979

Gulfco Investment Corp WD OK March 22, 1974 March 28, 1974

Harmony Loan, Inc' ED KY Jan 31, 1973 Jan 31, 1973

HawaII Corp 2 o HI March 17, 1977 March 17, 1977

Home-Stake Production Co NO OK Sept 20, 1973 Oct 2, 1973

King Resources Co' o CO Aug 16, 1971 Oct 19, 1971

Lake Winnebago Development Co , Inc WD MO Oct 14, 1970 Oct 26, 1970

Lusk Corp' DAR Oct 28, 1965 Nov 15, 1965

Mount Everest Corp , ED PA May 29, 1974 June 28, 1974

Nanonal Telephone Co , Inc o CT July 10, 1975 May 27, 1976

North Amencan Acceptance Corp , NO GA March 5, 1974 March 28, 1974

Omega-Alpha, Inc' NO TX Jan 10, 1975 Jan 10, 1975

Pan Amencan Fmancral Corp 2 o HI Oct 2, 1972 Jan 9, 1973

Pocono Downs, Inc' MD PA Aug 20, 1975 Aug 20, 1975

John Rich Enterpnses, Inc' o UT Jan 16, 1970 Feb 6, 1970

Reliance Industnes, Inc o HI May 24, 1976 Aug 10, 1976

Royal Inns of Amenca, Inc' SO CA Apnl 24, 1975 June 24, 1975

SIerra Trading Corp , o CO July 7, 1970 July 22, 1970

Stanndco Developers, Inc' WD NY Feb 5, 1974 March 7, 1974

Sunset Internabonal Petroleum Corp , NO TX May 27, 1970 June 10, 1970

TMT Trailer Ferry, Inc 2 SO FL June 27, 1957 Nov 22, 1957

U S FinanCIal, Inc 1 SO CA Sept 23, 1975 Nov 3, 1975

Washlng10n Group, Inc z MD NC June 20, 1977 July 25, 1977

Western Growth Capital Corp , DAR Feb 10, 1967 May 16, 1968

Westgate California Corp 1 SO CA Feb 26, 1974 March 8, 1974

Wonderbowl, Inc' CD CA March 10, 1967 June 7, 1967

'Reorganlzallon proceedings closed dunng fiscal year 1984

2Plan has been SUbstantially consummated but no final decree has been entered because of pending matters

139

"

' "

'

'

'
SEC OPERATIONS

During fiscal 1984, the Commission estimates that it will collect a record $111.5

million in fees for deposit into the General

Fund of the Treasury. Such fees will

amount to nearly 118% of the Commission's fiscal 1984 appropriation, compared

140

with 110% in fiscal 1983. The four sources

of fees were registration of securities under

the Securities Act of 1933 (53%), transactions on securities exchanges (34%), miscellaneous filings and reporting fees (12%)

and the registration of regulated brokerdealers (1% ).
Appropriated Funds vs Fees Collected

Dollars Millions

130

120

110

1972 73

I/ EstImated

74 75 76 77 78 79 80 81 82

141
'"

co

'"

g

o

co

co

<Ii

o

;;;

g

,.:

'"

o

o

o

<'i

s

i

0000

0000

0000

ltiaiair...:

~(o(oM

C\IvCOM

C\iC\iC\illi

'~+~

-eco

'"

o

8

<Ii

M

"!

0;

00000000

00000000

00000000 r--:C\ioe-Ja5ooo

"'tcoO)cnOQOO

Q)f"-.,T'""Ll)CJ)QOO

c?ltitric5"":c?"':oq:

+0)'0)+0) en

'"

<: ~g '"

'" co

'"

co. No

N

No

N

No

N

000

000

000

<oMe»

CO"'M

"' ........ cOMN

co ....

000

000

000

cicici .,."'''' MMCO

cn+ai

co co

g :5 g g

C\i N N N

888g

0000

M<D6w cnv"l:ttD

'~+C!.

00000000

00000000

00000000

llicicicicicicio

LOLOLOOLOLOLOO

~~~~r-;-~ci~ I"-- r-.. ...... co

0000

0000

0000

cicioci

OO(OV

MO)LOM

ocicii'oi

'co co

8

N

'"

co

"!

N

o

co

'"

co

8

o

o

s

<Ii

co

o

8

<i

co

s

N

8

o

<'i

'"ai

ll:

.!.

<: ~g

c

o

:;

'"

<: ~g

<:

o

:;

.!. "'<:

~g

.!. e ~g

g

en

z

o

fi

II.

o

a:

II.

II.

c(

~o

Q) Z

:oc(

~fa

::i

W

IW

CJ

o

:)

ID

142

-

'"

~ '"

'" '"

~

~ ~

~

'"

'"

~

~

'"

~

'" ~ ~

-

'"