Nineteenth Annual Report

of the

Securities and Exchange

Commission

Fiscal Year Ended June 30, 1953

JNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON: 1954

For sale by the Superlutendent or Docnmenls, U. S. GoveI'nment Prlntln& Office

Washillllfon 25, D. C. - Price 50 eents (Paper cover)
SECURITIES AND EXCHANGE COMRlISSION 

Headquarters Office 

425 Seoond Street NW. 

Washington 25, D. C. 

COMMISSIONERS 

RALPHH. DEM~ER, Chairman 


PAULR. ROWEN 


CLARENCE
 H. ADAMS 

J. SINCLAIRARMSTRONG 

A. JACKSON GOODWIN, JR.

ORVALL. DUBOIR,Se.e~eta~y 

January 15, 1954. 
LEITER OF TRANSMIITAL

SECURITIES AND EXCHANGE COMMISSION,

Washington, D. C., January 15, 1954.

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

Report of the Securities and Exchange Commission, covering the

fiscal year July 1, 1952 to June 30, 1953, in accordance with the

provisions of section 23 (b) of the Securities Exchange Act of 1934,

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

Investment Company Act of 1940, approved August 22, 1940; section

216 of the Investment Advisers Act of 1940, approved August 22,

1940; and section 3 of the act of April 25, 1949, amending the Bretton

"\V"oodsAgreements Act.

Respectfully,

RALPH H. DEMMLER,

Chairman.

THE PRESIDENT OF THE SENATE,

THE SPEAKER OF THE HOUSE OF REPRESENTATIVES,

Washington, D. C.

ill

TABLE OF CONTENTS

Page

Forevvord_________________________________________________________ xi

Commissioners and staff officers_____________________________________ xii

Regional and branch offices_________________________________________ xiii

Biographies of commissioners_______________________________________ xiv

PART I

ADMINISTRATION OF THE SECURITIES ACT OF 1933

Description of the registration process____________________________ 1

The registration statement and prospectus____________________ 1

Examination procedure______ 1

Time required to complete registration_______________________ 2

Volume of securities registered__________________________________ 2

Number of atatementa; ; __ 3

Type of industry 3

Type of offering____________ 4

Investment oompanies , , __ 4

Purpose of issue___________________________________________ 4

Registration statements filed____________________________________ 4

Exemption from registration under the act________________________ 5

Exempt offerings under regulation A_________________________ 6

Exempt offerings under regulation A-M______________________ 6

Exempt offerings under regulation B-oil and gas securities_____ 6

Disclosure problems in examination process_______________________ 7

Changes in rules, regulations and forma, __ 9

Identilyingstatement______________________________________ 9

Changes in rules providing exemptions_______________________ 10

Otherchanges_____________________________________________ 12

Litigation under the Securities Act_______________________________ 13

Injunctiveactions_________________________________________ 13

Participation as amicus curiae_______________________________ It)

PART II

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF

1934

Regulation of exchanges and exchange trading____________________ 18

Registration and exemption of exchanges_____________________ 18

Disciplinary action by exchanges____________________________ 19

Registration of securities on exchanges___________________________ 19

Purpose and nature of registration___________________________ 19

Examination of applications and reports______________________ 20

Statistics of securities registered on exchanges_________________ 21

Market value and volume of securities traded on exchanges_________ 22

Stocksonexchanges_______________________________________ 22

Bonds on exchanges________________________________________ 25

Over-the-counter market; 25

Special offerings on exchanges___________________________________ 26

Secondary distributions approved by exchanges___________________ 26

Unlisted trading privileges on exchanges__________________________ 27

Number of issues admitted to unlisted trading________________ 27

Volume of unlisted trading in stocks on exchan/tes_____________ 28

v

_

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VI TABLE OF CONTENTS

ADMINISTRATION OF' THE SECURITIES EXCHANGE ACT OF

1934-Continued

Unlisted trading privileges on exchanges-Continued Page

Applications for unlisted trading privileges____________________ 29

Changes in securities admitted to unlisted trading privileges., _ __ 29

Delisting of securities from exchanges____________________________ 29

Securities delisted by application , ___________________________ 29

Securities delisted by notifieation., ___________________________ 30

Manipulation and stabilization, _________________________________ 30

Manipulation_____________________________________________ 30

Btabihzation., ______ __________ _____________ ____ 31

Security ownership of corporation insiders ________________________ 32

Description of regulation , _ ____________ ___ 32

Publication of data contained in reports; _____________________ 32

Volume of reports filed and examined________________________ 32

Preventing unfair use of inside information___________________ 33

Solicitations of proxies, consents, and authorizations_______________ 33

Regulation of brokers and dealers in over-the-counter markets ___ ___ 34

Registration , _ _ ____ ____ ____ 36

Administrative proceedings , _ ______________________ _ __ 37

Broker-dealer inspections ___________________________________ 38

Investigations.; _ ________ __ 39

Financial reports , _________________________ ________ __ 39

Supervision of activities of National Association of Securities Dealers., , 39

~iembership______________________________________________ 39

Disciplinary actiona., , __________________ _ 40

Commission review of disciplinary action_____________________ 41

Commission review of action on membership__________________ 42

Changes in rules, regulations and forms__________________________ 42

Litigation under the Securities Exchange Act of 1934______________ 46

Participation as amicus curiae_______________________________ 48

Kaiser-Frazer investigation and litigation with Otis & Co_______ 50

PART III

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING

COMPANY ACT OF 1935

Integration and simplification-summary of dovelopments.,., _ _______ 52

Integration and simplification-individual systems_________________ 53

Financing of registered public utility holding company systems______ 74

Litigation under the Public Utility Holding Company Act of 1935___ 80

PART IV

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

ACT, AS AMENDED

Summary of activities__________________________________________ 85

Problems in the administration of the estate __________________ 85

Activities with respect to allowances_________________________ 87

Consummation of plan_____________________________________ 88
TABLE OF CONTENTS 

PART V 

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939 

Purpose of trust indenture regulation ............................. 
 Qualification procedure ......................................... 


PARTVI 

ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF 

1940 

Companies registered under the act .............................. Types of investment companies registered during the fiscal year ..... Applications for registration of Canadian investment companies ..... Sellimg literature ............................................... Ststistical data ................................................ Applications filed .............................................. 

Litigation under the Investment Company Act of 1940............1 

PART VII 

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT OF 

1940--.---------------------.-.---.-----.-.---.----.-----------

PAW VIII 

OTHER ACTIVITIES OF THE COMMISSION 


Court proceedings ............................................. 


Civil proceedings .......................................... 
 Criminal proceeding8 ....................................... 
 Com~laints and investieatiuns ................................... 
 Section of securities violations ................................... 
 Activities of the Commission in accountinz . and auditing .

............
 Office of opinion writing ........................................ 
 International and financial and economic matters .................. 
 Confidential treatment of applications, reports, or documents ........ 
 Statistics and special studles .................................... 


Capital marke ts........................................... 
 All new sccurit~es o5erings .............................. 
 Issues registered under Securities Act ..................... 


Investment companies ...................................... 


Cost of flotation ........................................... 
 Stockmarkets............................................. 
 Saving study .............................................. 
 Plant and equipment expenditures of United States business .... 
 Financial position of corporations... ......................... 
 Working capital position ................................ 
 Balance sheet and income statements ......................... 
 Recommendations for further legislation .......................... 


Personnel..................................................... 
 Fiscal affairs .................................................. 
 Publicatione................................................... 
 Information available for public inspection ........................ 
 Public hearings ................................................ 

VITI TABLE OF CONTENTS

PART IX

APPENDIX-STATISTICAL TABLES Pap

Table 1. Registrations fully effective under the Securities Act of 1933____ 124

Part 1. Distribution by months_________________________________ 124

Part 2. Breakdown by method of distribution and type of security

of the volume proposed for cash sale for account of issuera, 124

Part 3. Purpose of registration and industry of registrant___________ 125

Table 2. New securities offered for cash sale in the United States________ 127

Part 1. Type of offering---------------------------------------- 127

Part 2. Type of security________________________________________ 128

Part 3. Type of issuer__________________________________________ 129

Part 4. Private placement of corporate securities__________________ 130

Table 3. Proposed uses of net proceeds from the sale of new corporate

securities offered for cash in the United States______________ 132

Part 1. All corporate___________________________________________ 132

Part 2. Electric gas and water___________________________________ 133

Part 3. Communications________________________________________ 134

Part 4. Transportation other than railroads_______________________ 135

PartS. ~anufacturing----------------------------------------- 136

Part 6. Commercial and miscellaneous___________________________ 137

Part 7. Railroad_______________________________________________ 138

Part 8. Financial and real estate_________________________________ 1d9

Table 4. Summary of corporate securities publicly offered and privately

placed in each year from 1934 through June 1953____________ 140

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

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

1953, classified by type of organization and by location of

principal office , 141

Table 6. Market value and volume of sales effected on securities exchanges for the 12-month period ended Dec. 31, 1952, and the

6-month period ended June 30, 1953_______________________ 143

Table 7. Issues and issuers on stock exchanges as of June 30, 1953_______ 144

Part 1. Number of securities on each stock exchange--------------- 144

Part 2. Net number and amount of securities on all exchanges------ 144

Part 3. Net number of issuers represented on all exchanges--------- 144

Table 8. Reorganization cases under chapter X and section 77-B in which

the Commission participated during the fiscal year ended

June 30, 1953___________________________________________ 145

Table 9. Summary of cases instituted in the courts by the Commission

under the Securities Act of 1933, the Securities Exchange Act

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

Investment Company Act of 1940 and the Investment Advisers Act of 1940_______________________________________ 146

Table 10. Summary of cases instituted against the Commission, cases in

which the Commission participated as intervenor or amicus

curiae, and reorganization cases on appeal under chapter X

in which the Commission participated_____________________ 147

Table 11. Injunctive proceedings brought by the Commission under the

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

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

Act of 1940 which were pending during the fiscal year ended

June 30, 1953__________________________________________ 148

_
TABLE OF CONTENTS IX

Pace

Table 12. Indictments returned for violation of the acts administered by

the Commission, the ~il Fraud Statute (sec. 1341, formerly

sec. 338, title 18, U. S. C.) and other related Federal statutes

(where the Commission took part in the investigation and

development of the case) which were pending during the 1953

fiscalyear_____________________________________________ 151

Table 13. Petitions for review of orders of Commission under the Securities Act of 1933, the Securities Exchange Act of 1934, the

Public Utility Holding Company Act of 1935, and the Investment Company Act of 1940, pending in courts of appeals

during the fiscal year ended June 30, 1953_________________ 155

Table 14. Criminal contempt proceedings pending during the fiscal year

ended June 30,1953____________________________________ 156

Table 15. Cases in which the Commission participated as intervenor or as

amicus curiae, pending during the fiscal year ended June 30,

1953__________________________________________________ 156

Table 16. Proceedings by the Commission to enforce subpenas under the

Securities Act of 1933 and the Securities Exchange Act of

1934, pending during the fiscal year ended June 30, 1953____ 158

Table 17. Miscellaneous actions involving the Commission or employees

of the Commission during the fiscal year ended June 30, 1953_ 158

Table 18. Actions pending during fiscal year ended June 30, 1953, to enforce voluntary plans under section 11 (e) to comply with

section 11 (b) of the Public Utility Holding Company Act of

1935__________________________________________________ 159

Table 19. Actions under section 11 (d) of the Public Utility Holding Company Act of 1935 pending during the fiscal year ended June

30, 1953, to enforce compliance with Commission's orders

issued under section 11 (b) of that Act____________________ 161

Table 20. Reorganization cases under chapter X of the Bankruptcy Act

pending during the fiscal year ended June 30, 1953, in which

the Commission participated when appeals were taken from

district court orders_____________________________________ 162

Table 21. A 20-year summary of criminal cases developed by the Commission-1934 through 1953 by fiscal yea.rs________________ 163

Table 22. Summary of criminal cases developed by the Commission which

were still pending at June 30, 1953________________________ 164

Table 23. A 20-year summary classifying all defendants in criminal cases

developed by the Commission-1934 to June 30, 1953______ 164

Table 24. A 20-yea.r summary of all injunction cases instituted by the

Commission, 1934 to June 30,1953, by calendar year_______ 165

FOREWORD

This is the 19th Annual Report of the Securities and Exchange

Commission to the Congress summarizing the work of the Commission during the fiscal year July 1, 1952, to June 30, 1953. Occasional

references are made for the sake of completeness to developments

after June 30, 1953.

During this period the Commission was composed of Donald C.

Cook, Chairman (resigned June 17, 1953); Richard B. McEntire

(resigned June 1, 1953); Paul R. Rowen; Clarence H. Adams; J.

Howard Rossbach (resigned February 14, 1953); the present Chairman, Ralph H. Demmler, took office June 17, 1953.

Following the period covered by this report Commissioners J.

Sinclair Armstrong and A. Jackson Goodwin, Jr. took office July

16, 1953.
COMMISSIONERS AND STAFF OFFICERS

(As of January 15, 1954)

ComDJissioners TeT:;U~Te,

RALPH H. DEMMLER, of Pennsylvania, Chairman 1_________________ 1957

PAUL R. ROWEN, of Massachusetts______________________________ 1955

CLARENCE H. ADAMS,of ConnecticuL___________________________ 1956

J. SINCLAIR ARMSTRONG,of Illinois 2_____________________________ 1958

A. JACKSON GOODWIN,JR., of Alabama 3_________________________ 1954

Secretary: ORVAL L. DuBOIS

Stair Officers

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

ROBERT A. McDOWELL, Director, Division of Corporate Regulation.

ANTHONH. LUND, Director, Division of Trading and Exchanges.

WILLIAM H. TIMBERS, General Counsel. MYRON S. ISAACS, Associate

General Counsel.

EARLE C. KING, Chief Accountant.

LEONARD HELFENSTEIN, Director, Office of Opinion Writing.

EDWARD T. TAIT, Executive Assistant to the Chairman; Director, Division

of Administrative Management.

WILLIAM E. BECKER, Director of Personnel.

JAMES J. RIORDAN, Budget and Fiscal Officer.

I;Appolnted June 17, 1953, to tlll the vacancy created by the resignation of J. Howard Rossbach.

I Took office July 16, 1953, succeeding Richard B. McEntire.

I Appointed July 16, 1953, to tlll the vacancy created by the resignation of Donald O. Oook.

XU

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REGIONAL AND BRANCH OFFICES

Regional Administrators

Zone I-Francis J. Purcell, 42 Broadway, New York 4, New York.

Zone 2-Philip E. Kendrick, Post Office Square Building (Room 501), 79

Milk Street, Boston 9, Mass.

Zone 3- William Green, Peachtree Seventh Building (Room 350), Atlanta 5,

Ga.

Zone 4-Charles J. Odenweller, Jr., Standard Building (Room 1628), 1370

Ontario Street, Cleveland 13, Ohio.

Zone 5-Thomas B. Hart, Bankers Building (Room 630), 105 West Adams

Street, Chicago 3, Ill.

Zone 6-0ran H. Allred, United States Courthouse (Room 103), Tenth and

Lamar Streets, Fort Worth 2, Tex.

Zone 7-William L. Cohn, New Customhouse (Room 162), Nineteenth and

Stout Streets, Denver 2, Colo.

Zone 8-Arthur E. Pennekamp (Acting), Appraisers Building (Room 308),

630 Bansome Street, San Francisco 11, Calif.

Zone 9-James E. Newton, Securities Building (Room 202), Third Avenue

and Stewart Street, Seattle 1, Wash.

Zone 10-E. Russel Kelly, 425 Second Street, NW. (Room 107), Washington,

D.C.

Branch Offices

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

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

Street, Los Angeles 12, Calif.

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

XIII
COMMISSIONERS

Ralph H. DemmIer, Chairman

Chairman Demmler was born in Pittsburgh, Pa. on August 22,

1904 and has been a lifelong resident of that city. Chairman Demmler received an A. B. degree from Allegheny College in 1925 and an

LL. B. degree from the Law School of the University of Pittsburgh

in 1928. He was admitted to the Pennsylvania bar in 1928 and

thereafter specialized in corporate and banking law. Between 1928

and 1930 he was associated with C. E. Theobald, Esq. and between

1930 and 1938 with the firm of Watson & Freeman. He was a partner in the firm of Hirsch, Shumaker, Demmler & Bash from 1938 to

1941. Between 1941 and 1943 he served as trust officer of Commonwealth Trust Company of Pittsburgh. Between 1943 and 1953 he

was associated with the firm of Reed, Smith, Shaw & McClay, having

been a partner in that firm since 1948. On June 17, 1953, he took

office as a member of the Securities and Exchange Commission for a

term of office expiring June 5, 1957 and was designated Chairman of

the Commission by the President.

Paul R. Rowen

Commissioner Rowen was born in Brighton, Mass., October 7,1899.

He received an A. B. degree from Georgetown University in 1921,

attended Harvard Law School from 1921 to 1924, received an LL. B.

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

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

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

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

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

member of the staff of the Commission at its office in Washington,

D. C., and served as an attorney on the staff until 1939. Thereafter, Mr. Rowen was appointed regional administrator of the Commission's Boston regional office and served in that capacity for over

6 years. On May 28, 1948, he took office as a member of the Securities and Exchange Commission and on June 14, 1950,was reappointed

for a term of office ending June 5, 1955.

Clarence H. Adams

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

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

XIV
COMMISSIONERS xv

1931 he organized the securities division of the Banking Department

and became the first Securities Administrator of Connecticut, responsible for the administration of the Connecticut Securities Act, which

position he held until 1950. In 1945 he served as President of the

National Association of State Securities Administrators. His business

background includes membership in an investment banking firm in

Hartford, and he headed a lending institution in that city. On May 8,

1952, he took office as a member of the Securities and Exchange Commission for a term of office expiring June 5, 1956.

J. Sinclair Armstrong

Commissioner Armstrong was born in New York City on October 15,

1915, and resides in Chicago, Ill. He received an A. B. degree from

Harvard in 1938 and an LL. B. degree from the Harvard Law School

in 1941, being admitted to practice in Illinois in that year. Between

1941 and 1945 he was associated with the firm of Isham, Lincoln &

Beale. After approximately 1M years military service he returned

to that firm, becoming a partner in 1950. On July 16, 1953, he took

office as a member of the Securities and Exchange Commission for

a term of office expiring June 5, 1958.

A. Jackson Goodwin, Jr.

Commissioner Goodwin was born in Anniston, Ala. on October 18,

1911 and resides in that city. He received an A. B. degree from

Princeton University in 1934 and an M. B. A. degree from Harvard

Business School in 1936. Between 1936 and 1940 he was associated

with the investment banking firm of Dillon, Read & Co. Between

1946 and 1952, after 5 years military service during which, among

other duties, he served as an assistant and aide to Undersecretary of

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

as a Lieutenant Colonel, became associated with the Anniston National Bank of Anniston, Ala., as vice president and director. In

1952 and 1953 he was a Director of the Federal Reserve Bank of

Atlanta, Birmingham Branch, and a Director of the Life Insurance

Company of Alabama. On July 16, 1953, he took office as a member

of the Securities and Exchange Commission for a term of officeexpiring

June 5, 1954.

PART I

ADMINISTRATION OF THE SECURITIES ACT OF 1933

The Securities .Act of 1933 is designed to provide disclosure to

investors of material facts concerning securities publicly offered for

sale by use of the mails or other instrumentalities of interstate commerce, and to prevent misrepresentation, deceit or other fraudulent

practices in the sale of securities. Disclosure is obtained by requiring the issuer of such securities to file with the Commission a

registration statement, and related prospectus, containing significant

information about the issuer and the offering. These documents are

available for public inspection as soon as they are filed. In addition

the prospectus must be furnished to the purchaser at or before delivery

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

primary responsibility of the issuer and the underwriter; the Commission has no authority to dictate or control the nature or quality

of a security to be offered for public sale or to approve or disapprove

its merits or the terms of its distribution.

DESCRIPTION OF mE REGISTRATION PROCESS

The Registration Statement and Prospectus

.Any security proposed to be publicly offered may be registered

by filing with the Commission a registration statement on the appropriate form. The Commission has adopted several such forms

designed to disclose appropriately for the class of issues involved the

types of information prescribed in Schedule .Aof the .Act. Ingeneral

these forms must reveal the names of persons who exercise control

and direction of the business enterprise; their security holdings,

remuneration, options, and bonus and profit-sharing privileges; the

character and size of the business; financial statements, certified by

independent accountants; the capital structure; underwriters' commissions; pending or threatened legal proceedings; and the purpose

to which the proceeds of the offering are to be applied. The prospectus constitutes part of the registration statement and summarizes

the more important items of the registration statement proper.

Examination Procedure

The Commission is charged with responsibility of preventing the

sale of securities to the public on the basis of inaccurate or incomplete information. The staff of the Division of Corporation Finance

examines each registration statement for compliance with the standards of disclosure and usually notifies the registrant by an informal

letter of comment of any material respect in which the statement

apparently fails to conform to these requirements. The registrant is

27990O-G4--2 1
2 SECURITIES AND EXCHANGE COMMISSION

thus afforded an opportunity to file an amendment before the statement becomes effective. In addition, the Commission has power to

issue, after notice and opportunity for hearing, an order suspending

the effectiveness of a registration statement. No such orders were

issued during the 1953 fiscal year.

EffectiveDate of Registration Statement

Because speed in the processing of a registration statement is important to industry, the Commission completes its analysis in the

shortest possible time consistent with the public interest.

Congress provided for a lapse of 20 days in the ordinary case between the filing date of a registration statement and the time it may

become effective. The waiting period is designed to provide investors

with an opportunity to become familiar with the proposed security

before it is offered to them. In order to achieve this objective immediately upon the filing of a registration statement the information

therein is made available by the Commission to representatives of

financial news services, financial writers, and newspapers generally,

who disseminate such information to the public.

The Commission is empowered to accelerate the effective date so

as to shorten the 20-day waiting period where the facts justify such

action. In exercising this power, the Commission is required by the

statute to take into account the adequacy of the information already

available to the public, the complexity of the particular financing,

and the public interest and protection of investors.

Time Required To Complete Registration

The median time which elapsed between the filing and the effective

date for the 596 registration statements that became effective during

the 1953 fiscal year was 23 days, divided among the three principal

stages of the registration process approximately as follows: (a) from

date of filing registration statement to date of letter of comment, 12

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

amendment, 6 days; and (c) from date of filing first amendment to

date of filing final amendment, 5 days.

VOLUME OF SECURITIES REGISTERED

The amount of securities effectively registered during the 1953

fiscal year was $7,507,000,000, the second largest amount for any

fiscal year since securities have been registered with the Commission,

the high being $9,500,000,000 in the 1952 fiscal year.! Figures are

presented below on the volume of registrations for each fiscal year

since 1944 and the extent to which these registrations were for cash

sale for account of issuers. More detailed information for fiscal year

1953, including monthly figures, is given in table 1 of the Appendix.

I A discussion of all securities offerings, including issues registered under the Securities Act of 1933and

unregistered issues, appears on pages 115-17of this report, while statistical data thereon appear in tables

2--4 of the Appendl'- -, -
NINETEENTH ANNUAL REPORT 3

Effective registrations I

For cash sale for account of issuers

Fiscal year ended June 30 All registrations

Total Bonds Preferred Common

1953_______________________________________ 1952_______________________________________ $7,507 $6,326 $3,093 $424 $2,808

1951_______________________________________ 9,500 7,529 3,346 851 3,332

1950_______________________________________ 6,459 5,169 2,838 427 1,004

5,307 4,381 2, 127 468 1,786 1949 5,333 4,204 2, 795 326 1,083 1948 6,405 5,032 2,817 537 1,678 1947 6,732 4,874 2, 937 787 1,150 1946 7,073 5,424 3,102 991 1,331 1945_______________________________________ 3,225 2,715 1,851 407 456 1944 1,760 1,347 732 343 272

I FIgures in millions of dol1ars. Bonds include face-amount certificates. Common stock includes certifi estes of participation. Earller years are shown on p. 5 of the 16th Annual Report.

:Number of Statements

The amount registered in the 1953 fiscal year was represented by

593 statements covering 775 issues, compared with 635 statements

covering 881 issues during the previous fiscal year. The number of

statements differs slightly from that shown on page 5, as explained

in table 1 of the Appendix, note 2.

'Type of Registration

Of the dollar amount of securities registered in the 1953 fiscal year,

84.3 percent was for cash sale for account of issuers, 2.3 percent was

for cash sale for account of others than issuers, and 13.4 percent was

for other than cash sale. Comparative figures for the 1953 and 1952

fiscal years are as follows:

Regl3tered for

'Cash salefor account of issuers _

Cash salefor others than issuers _

.Other than cash sale _

1953

$6,325,580,000

172,433,000

1,008,804,000

195t

$7,529,287,000

209,673,000

1,760,623,000

Total _ 7,506,817,000 9,499,583,000

196t

$1,553,637,000

2,246,560,000

1,819,300,000

1,536,633,000

166,141,000

131,993,000

59,825,000

9,800,000

2,948,000

2,450,000

Type of Industry

Securities registered for cash sale for account of issuers classified

according to industry of issuer are shown in order of magnitude ill

fiscal year 1953 with comparable figures for 1952:

19611

$2,151,970,000

2,042,795,000

1,461,637,000

376,124,000

102,886,000

96,199,000

81,150,000

5,351,000

4,552,000

2,915,000

Financialand investment _

Electric,gas and water _ 1ianufacturing _

Transportation 1 and communication _

Foreign government _ Extractive _

Merchandising

Service _

Construction _ Real estate _

Total____________________________ 6,325,580,000 7,529,287,000

I Does not include issues, primarily railroad securities, subject to Interstate Commerce Commission

:fillngs and therefore exempt from registration.

__________________• _______________•____

__________________• ____________________ _______________________' _______________ ____________________• __________________

__________________• _______________• ____

•

_

-
4 SECURITIES AND EXCHANGE COMMISSION

Type of Offering

About 64 percent of the securities registered for cash sale for

account of issuers in the 1953 fiscal year were to be sold through

investment bankers pursuant to agreements to purchase for resale.

Over 26 percent were to be sold on a best-efforts basis. The term

"best-efforts" as used here means all offerings through investment

bankers other than through agreements to purchase for resale. The

remaining 10 percent were to be sold directly by issuers to investors.

Comparative figures follow:

Through investment bankers:

Under agreements to purchase for resale,

On "best-efforts" basis

By issuers to investors

1959

$4,029,756,000

1,654,290,000

641,533,000

1951

$4,373,737,000

1,390,517,000

1,765,034,000

Total 6,325,580,000 7,529,287,000

1951

$1,079,261,000

20,559,000

274,515,000

Management open-end companies

Management closed-end companies

Unit and face-amount certificate companies,

Investment Companies

Data on securities registered for cash sale by investment companies, although included with data on all securities registered for

cash sale, are presented here separately. This group of securities

amounted to $1.6 billion in the 1953 fiscal year and $1.4 billion in the

1952 fiscal year. The registrants of these securities are divided into

three main categories: (1) Open-end companies, (2) closed-end

companies, and (3) issuers of unit and face-amount certificates.

Comparative data for the 2 years are shown:

1959

$1, 112,893, 000

35,851,000

458,368,000

Total_____________________________ 1,607,112,000 1,374,335,000

Purpose of Issue

About 64 percent of the net proceeds of the securities registered

for cash sale for account of issuers was for new money purposes,

including plant, equipment and working capital. Almost 6 percent

was for retirement of debt and preferred stock. Over 28 percent

was for the purchase of securities, principally by investment companies. The remaining 2 percent was mainly for foreign governments.

The figures are shown in detail in Appendix table 1, part 3.

REGISTRATION STATEMENTS FILED

During the 1953 fiscal year, 621 registration statements were filed

covering aggregate offerings of $7,399,059,928, compared with 665

statements covering an aggregate of $9,045,035,056 in the 1952 fiscal

year. The 621 statements filed in 1953 included 152, or 23 percent,

by companies which had not previously registered securities under

the statute.

_

_

_

_

_
NINETEENTH ANNUAL REPORT 5

Particulars regarding the disposition of all registration statements

filed are summarized below.

NumiJer and disposition of registration statements filed

Prior to July I, 1952 to Total as of July I, 1952 June 30, 1953 June 30, 1953

Registration Filed statements: _________________________________________ 9,748 621 10,369

Effective-net __________________________________ 8,259 1596 Under stop or refusal order-net ________________ 8,853 W 184 0 184 Ithdrawn ___________________________________ 1,233 26 1,259 Pending at June 30, 1952______________________ 72 Pending at June 30, 1953______________________ ------------------ -------.---------. -----------._----- ----.------------- 73

Total _______________________________________ 9,748 ------------------ 10,369

Aggregate As dollar amount: filed _______________________________________ $78, 600, 187, 638 $7, 399, 059, 928 $85,999,247,566 As effective ___________________________________ 75,399,791,494 7,506,817,000 82, 906, 608, 494

1 This figure does not include three registration statements which were withdrawn alter becoming effective during the current year This figure does not include two registration statements which became effective prior to July I, 1952 and were withdrawn during the current year as they are counted ill the total number WIthdrawn (26).

Additional documents filed in the 1953 fiscal year under the Act

Nature of document: Number

Material amendments to registration statements filed before the

effective date of registration , ___ _______________________ 1, 114

Formal amendments filed before the effective date of registration for

the purpose of delaying the effective date_______________________ 839

Material amendments filed after the effective date of the registration

statement__________________________________________________ 757

Total amendments to registration statements _______________ 2, 710

Supplemental prospectus material, not classified as amendments to

registration statements, _________ ____ _____ ___ 1, 277

EXEMPTION FROM REGISTRATION UNDER THE ACT

The Commission is authorized under section 3 (b) of the Act to

adopt rules providing exemptions from the registration requirements

for security offerings not exceeding a maximum of $300,000. The

Commission has adopted six types of exemptions of small offerings,

including the exemption provided in new Regulation D made effective

toward the close of the 1953 fiscal year, as enumerated below:

Regulation A. General exemption for small issues up to $300,000 for issuers

(limited to $100,000 for controlling stockholders).

Regulation A-R. Special exemption for notes and bonds secured by first liens

on family dwellings or commercial property up to $100,000.

Regulation A-M. Special exemption for assessable shares of stock of mining

companies up to $100,000.

Regulation B. Exemption for fractional undivided interests in oil or gas rights

up to $100,000.

Regulation B-T. Exemption for interests in oil royalty trusts or similar types

of trusts or unincorporated associations up to $100,000 .

.Regulation D. Exemption for Canadian securities up to $300,000 for issuers

(limited to $100,000 for persons other than issuers).

•

• •
6 SECURITIES AND EXCHANGE COMMISSION

For a description of changes made during the year in certain or

these regulations reference is made to the discussion under Changes.

in Rules, Regulations, and Forms appearing below.

Exemption from registration does not carry exemption from the

civil liabilities for material misstatements or omissions imposed by

section 12or from the criminal liabilities for fraud imposed by section 17~

During the 1953 fiscal year the exemptions most frequently sought

were those provided by Regulations A and B, which call for a brief

disclosure of pertinent information which is far less complete than

that prescribed by the Act for a registered security. Under the revised Regulation A, the issuer must file with the nearest regional

office of the Commission, 10 days prior to the offering, a notification

on Form I-A, and a brief offering circular containing certain basic

minimum information, including financial data, which may be uncertified. Under Regulation B an offeror must file with the central

office of the Commission, eight days prior to the offering, an Offering

Sheet containing the prescribed basic information.

ture must be filed in advance of its use.

Any sales literaExempt Offerings under Regulation A

During the 1953 fiscal year 1,528 notifications were filed under

Regulation A to cover proposed offerings of $223,350,026, compared

with 1,494 notifications covering proposed offerings of $210,672,596

in the 1952 fiscal year. Included in the 1953 totals are 235 notifications covering stock offerings of $38,797,997 with respect to companies engaged in the oil and gas business. In addition there were

filed 1,562 amendments and 2,199 copies of sales literature.

For 1,521 of these small offerings, information is available to show

their size, sponsorship, and particulars regarding the underwriting, if

any. Thus, 746 covered offerings of $100,000 or less, 257 over

$100,000 but not over $200,000, and 518 over $200,000 but not over

$300,000. Issuers made 1,287 of the offerings, stockholders 227, and

issuers and stockholders jointly the remaining 7. Less than half,

scattered through all size groups, or 686, were underwritten, mostly

by commercial underwriters who marketed 608. Officers, directors

or other persons not regularly engaged in the underwriting business

handled the remaining 78.

Exempt Offerings under Regulation A-M

During the year five prospectuses were filed under Regulation A-M

covering assessable shares of stock of mining companies having an

aggregate offering price of $199,170. All were filed in the Seattle

Regional Office.

Exempt Offerings under Regulation B-Oil and Gas Securities

During the 1953 fiscal year 126 offering sheets and 31 amendments

thereto were filed with the Commission under Regulation B. These
NINETEENTH ANNUAL REPORT 7

filings were examined by a specialized Oil and Gas Unit which collaborates with the staff of the Commission generally in the solution

of the technical and complex problems peculiar to oil and gas securities. The following formal actions were taken with respect to the

filings under Regulation B.

Action taken on filings under Regulation B

Temporary suspension orders-Rule 340 (a)___________________________ 6

Orders terminating proceedings after amendment______________________ 4

Order consenting to withdrawal of offering sheet and terminating proceeding_____________________________________________________________ 1

Orders terminating effectiveness of offering sheet_______________________ 3

Orders accepting amendment of offering sheet (no proceeding pending) ___ 24

Order consenting to withdrawal of offering sheet (no proceeding pending)., 1

Total number of orders_______________________________________ 39

Oonfidential reports oj sales.-As an aid in determining whether

violations of law have occurred in the marketing of securities exempt

under Regulation B, the Commission obtains confidential reports of

actual sales made pursuant to such exemption. During the 1953fiscal

year, 2,389 such reports covering aggregate sales of $1,678,898, were

filed.

DISCLOSURE PROBLEMS IN EXAMINATION PROCESS

Following are a few examples of disclosure problems arising in the

examination of registration statements during the 1953 fiscal year.

Latent deject in seller's title to interests in oil or gas rights.-The

issuer, an individual, filed a registration statement under which he

proposed to offer participating interests in the production of two wells

which were being drilled for the production of gas. The prospectus

stated that the issuer had exclusive drilling rights to certain property

and merchantable title to the gas and petroleum to be conveyed to

purchasers of the interests. It was not disclosed that the issuer had

purportedly acquired the rights to be transferred by assignment from

another person, who held them under an agreement which provided

that neither the agreement nor any privilege thereunder could be

transferred without the consent of the grantor, and that the grantor

had refused to consent to such assignment. In a letter of comment

the Division of Corporation Finance took the position that the prospectus should disclose these facts. Following discussions between

the Division's staff and representatives of the issuer the registration

statement was withdrawn.

Excessive reserve estimates oj oil and gas ojferors.-Separate registration statements filed by an oil company and a gas company were

_alike in that both contained estimates of reserves which appeared to

be unreasonably high on the basis of an analysis made by the Commission's petroleum engineer. The registration statement of the
8 SECURITIES AND EXCHANGE COMMISSION

crude oil producer, as originally filed, stated the company had an

estimated total of 3,081,516 barrels of crude oil from its present wells,

its undrilled locations, and secondary recovery methods not currently

.in successful operation. By amendment the portion of reserves

allooable to secondary recovery methods was deleted and the other

.reserves were reduced, showing a revised total estimate of 1,032,189

barrels.

The registration statement of the gas company, as originally filed,

stated that the company had consolidated net natural gas reserves

of 267,276,707,000 cubic feet and natural gas liquid reserves of

2,322,220 barrels. After receipt of the staff's comments the company

filed an amendment revising those overall natural gas reserves to

134,000,000,000 cubic feet and 848,000 barrels, respectively.

Misleading summaries of earnings.-The summary of past earnings

is one of the most important items in the prospectus. In the course

-of its examination the staff makes appropriate inquiry with respect

to all uncertified interim periods in such summaries to determine the

-existenoe of any unusual conditions affecting the propriety of the

presentation and the necessity for inclusion of an appropriate previous

period. If it appears that a significant decline in earnings may have

occurred, unaudited interim figures to the latest practicable date

.and for the same interim period in the previous year are requested.

In one case the prospectus, as originally filed, included a summary

of earnings for nine fiscal years and a statement that the figures

for the subsequent 2-month period would be furnished by amendment .

..AB a result of staff inquiries the summary of earnings was revised to

-state that estimated net earnings for the quarter ended January 31,

1952 was approximately $1,000,000, compared with a net loss of

between $1,000,000 and $2,000,000 for the quarter ended January 31,

1953, before adjustments for refund of prior years' Federal taxes on

income, and between $500,000 and $1,000,000 after such adjustments.

The importance of this disclosure was heightened by the fact that

net earnings in the three previous full fiscal years had dropped from

$15,136,000 to $9,786,000 and then to $7,049,000 successively in those

years. In addition the summary of earnings was revised to state that

the company's sales for the quarter ended January 31, 1953 approximated $13,300,000 whereas comparable sales for the same quarter in

the preceding five years ranged from a low of approximately

$15,200,000 to a high of approximately $40,400,000.

Inadequate accounting records.-Companies in the promotional

stage present problems resulting from the indifference of the typical

promoter to the need for adequate accounting records. The following

is an extreme example of this type of situation.

A company proposing to engage in locating, exploring, and producing mineral ores in a foreign country filed a registration statement,
NINETEENTH ANNUAL REPORT 9

from which financial statements were omitted with an explanation

that the company was new, had not been operating, and had no books.

At the insistence of the staff, financial statements examined by

independent certified public accountants were furnished. These

statements and the accompanying certificate of the certifying accountants reflected a contract of the registrant to issue 600,000 shares

to the promoter. They also disclosed that 497,500 shares had been

issued, and that action was being taken to cancel 215,000 shares

because of the failure to deliver title to mineral rights under the

agreement pursuant to which the shares were issued.

Property acquisitions from. promoters in exchange for stock.-The

balance sheet of a corporation in the promotional stage disclosed

that land and construction in progress had been acquired for capital

stock of the registrant, and recorded substantial appraisal increases

of each of these items. The text of the prospectus and notes to the

:financial statements disclosed that the promoters had acquired the

properties at a cost of $257,000. Ten days later they exchanged the

properties for 249,000 shares of $1 par value stock and a few days thereafter sold 180,000 of these shares at their cost of $1.06 per chare. The

properties were recorded on the books in the aggregate amount of

$514,750 with offsetting credits of $249,000 to capital stock and

$265,750 to appraisal surplus, reflecting an appraisal made by the

executive vice president of the company. The independent certified

public accountants recited the facts with respect to the appraisal in

their certificate and stated that they were not in a position to renderan opinion in regard to such revaluation. At the request of the staff

the financial statements were revised to eliminate the writeup of the

properties to the extent of the excess over the promoters' cost. The

revised statements were certified, without qualification, as being in

conformity with generally accepted accounting principles.

CHANGES IN RULES, REGULATIONS AND FORMS

During the 1953 fiscal year important changes were made in the

rules, regulations, and forms used in the administration of the Securities Act. In all cases the adoption of such changes was preceded by the publication of proposals inviting public comment.

Consideration was given to all suggestions received.

Identifying Statement

On October 27, 1952, the Commission adopted rule 132 under the

Securities Act of 1933, and a statement of certain related policies

having to do with acceleration of the effective date of registration

statements. This action was designed generally to provide a means,

consistent with the statutory prohibition against selling effort before

the effective date of the registration statement, for achieving more

widespread dissemination of information during that period and t(}
10 SECURITIES AND EXCHANGE COMMISSION

further the aim of obtaining prospectuses which are reasonably concise and readable.

Rule 132.-This rule permits the use of a brief "identifying statement," which is intended for use as a screening device to locate persons who might be interested in receiving the proposed form of

prospectus pursuant to rule 131 (the "red herring prospectus") or the

final prospectus. The identifying statement is not intended to be a

selling document. The rule is in the form of a definition of the

terms "sale" and "offer" for purposes of section 5 only. The antifraud provisions are not affected.

Among other things, the identifying statement may set forth, in

summary form, the title of the security, and certain other salient

facts regarding the offering. It must state from whom copies of the

prospectus or proposed prospectus may be obtained.

Changes in Rules Providing Exemptions

Revision oj Regulation A.-On March 6, 1953, this regulation was

amended in material respects. One of the principal changes effected

is the addition of a requirement that an offering circular containing

certain minimum information, including financial information, must

be employed in the distribution of securities under this regulation.

This new requirement makes possible more effective enforcement of

the anti-fraud provisions of the statute. The revised regulation

contains an innovation in the Commission's rules providing exemptions by permitting the use of limited written advertisements or other

written communications prior to sending the offering circular. This

provision permits persons to obtain inquiries from persons who may

be interested in receiving the offering circular.

Provision is also made in the revised regulation for denying or

suspending the exemption in certain cases, such as where the Commission finds that the terms and conditions of the exemption have not

been met or that the offering circular is fraudulent.

The revised regulation exempts offerings by an issuer up to a

maximum of $300,000. However, in computing this amount there

must be included all securities of the issuer and its predecessors and

affiliates currently being offered under this regulation or sold pursuant to an offering thereunder commenced within one year as well

as all securities sold in violation of the registration provisions of the

Act within one year. Offerings on behalf of anyone person other

than the issuer are limited to a maximum of $100,000 but, subject to

this limitation, a number of persons other than the issuer may offer,

in the aggregate, a maximum of $300,000.

The revised regulation also provides for the filing of semiannual

reports showing the progress of the offeringuntil the offeringhas been

completed or terminated.
NINETEENTH ANNUAL REPORT 11

Adoption oj Regulation D for Canadian offerings.-on March 6,

1953 the Commission adopted an exemption from the registration requirements of the Securities Act of 1933 for offerings of securities, not

exceeding $300,000 in anyone year, made by Canadian issuers or by

domestic issuers having their principal business operations in Canada.

The recently ratified amendments to the extradition treaty between

the United States and Canada, which are designed to cover fraud

offenses of the type indictable in this country under section 17 (a) of

the Act or under the Mail Fraud Statute, has made feasible the promulgation of this exemptive regulation.

The provisions of this new Regulation D are essentially the same as

those incorporated in the revised Regulation A as described above.

However, in order to give full effect to the civil liability provisions of

the Act, the regulation requires that each nonresident connected with

an offering made thereunder must file a written irrevocable consent

and power of attorney which would authorize the commencement of

'any civil action arising out of any offering under the regulation by

the service of process upon the Commission, which forwards copies

thereof to the appropriate person.

Regulation D requires the filing with the Commission at least 15

days before any offering is made, of copies of a Notification on Form

1-D and an offering circular. If the offering circular is thereafter

revised or amended, copies of the revised or amended circular must

be filed with the Commission.

Amendment oj Rules 314. and 334. oj Regulation B.-Under rule

314 of Regulation B as previously in effect, no exemption was available under the regulation for any oil or gas interests unless it appeared

that the operating lessee would own an unincumbered 40 percent

working interest in the tract at the conclusion of the sale of the issue

to be offered. The result of the rule had been to require registration

of some very small issues in which no substantial public interest had

been involved, merely because the operating lessee at the conclusion

of the offering would not own a 40 percent working interest in the

tract. Accordingly, the Commission amended the requirement, effective December 12, 1952, to make it inapplicable to issues not in excess

of $30,000, provided the smallest interest separately offered is not

less than $300.

Rule 334 of Regulation B under the Securities Act of 1933, as previously in effect, provided that oil or gas interests involving noncontiguous tracts of land may be included in the same offering sheet

under the regulation only if the interests offered were producing

landowners' royalty interests and if certain other conditions were

met. The purpose of this rule was to guard against investors being

misled through the inclusion in a single offering sheet of interests in
12 SECURITIES AND EXCHANGE COMMISSION

different tracts which might vary greatly in present or prospectivevalue due to their location with reference to other tracts. However,

it had been found that in certain instances the rule had operated with

unnecessary stringency and had resulted in the filing of separateoffering sheets with respect to nonproducing interests in different

noncontiguous tracts in order to obtain the exemption. Where, for

example, all of the tracts involved are located a considerable distance

from any tract tested or proposed to be tested, there may be no discernible difference in the value or prospective value of the several

tracts and consequently in such a case it appears appropriate to include such tracts in a single offering sheet. Accordingly, the Commission amended the rule, effective May 25, 1953, so as to provide

that nonproducing landowners' royalty interests in noncontiguous.

tracts may be included in a single offering sheet where it appears that

all of the tracts have equal possibilities.

Revision oj Regulation A-R.-The Commission amended, effective

May 25, 1953,Regulation A-R under the Securities Act of 1933, which

exempts from registration under the Act certain notes secured by afirst lien on real estate. The previous exemption was available only

for notes secured by liens on residential property, whereas the revised regulation applies to notes secured by liens on either residential

or commercial property. The maximum amount of notes which may

be offered under the revised exemption has been raised from $25,00(}

to $100,000. The revised regulation provides that the principal

amount of each note to be offered thereunder shall not be less than

$500 and the total number of notes on any single property shall not

exceed 125. The revised regulation also provides that the aggregate

unpaid principal amount of all indebtedness secured by all liens on

the property shall not exceed 75 percent of the appraised value of

such property. The revised regulation, like the previous one, does.

not require the filing of any papers or documents with the Commission.

Other Changes

Amendment oj Rule 427.-This rule had provided that information

contained in a prospectus used more than 13 months after the effective date of the registration statement should include certified financial

statements as of a date not more than 12 months prior to the use of

the prospectus. That requirement compelled the preparation of

audited financial statements more than once a year in those cases.

where an offering was involved which continued beyond the 13-month

period. The rule was amended effective June 3, 1953, to permit the

use of unaudited financial statements as of the latest practicable

date, and certified financial statements as of the end of the preceding fiscal year, if the fiscal year of the registrant has ended within 9o.

days prior to the use of the prospectus. In such case certified financial
NINETEENTH ANNUAL REPORT 13

:statements as of the latest fiscal year, when available, must be substituted for the unaudited financial statements or added to the

prospectus.

Adoption oj Form 8-8.-Qn June 16,1953, the Commission adopted

Form S-8, a simplified form for registration under the Securities Act

of 1933 of securities offered pursuant to employees stock purchase

plans. Many such plans provide an opportunity for the accumulation by employees of securities of the employer upon favorable terms

and provide for some form of contribution by the employer for the

purpose of assisting the employee to participate in the plan. In consequence, the investment decision to be made by the employee is of

a substantially different character than is involved where securities

are offered primarily for the purpose of raising capital.

The new Form 8-8 is available to companies which file reports

pursuant to sections 13 or 15 (d) of the Securities Exchange Act of

1934 and which have created stock purchase plans providing for

periodic contributions by the employer for the benefit of participating employees. The form may not be used, however, unless participating employees may at any time withdraw at least the cash and

securities representing their contributions, nor may it be used for the

registration of securities offered primarily for the purpose of raising

capital. Registration under the new form involves the filing of a

short prospectus consisting, in the main, of a brief description of the

plan and the securities offered thereunder, and certified financial

statements which include a summary of earnings, a balance sheet as

of the close of the issuer's latest fiscal year and an income statement

for such year. The employer company sponsoring the plan will be

required to deliver with the prospectus a copy of the most recent

annual report to stockholders and, thereafter, to transmit to employees participating in the plan copies of all material distributed

from time to time to stockholders. This material, other than the

prospectus, however, is not deemed to be "filed" under the Act except

to the extent incorporated by reference in the prospectus.

LITIGATION UNDER THE SECURITIES ACT

Injunctive Actions

It is sometimes necessary to resort to the courts to obtain compliance

with the Securities Act. Such action is generally taken when it

appears that continued violations and resultant damage to the public

is threatened.

A substantial number of cases requiring injunctive action relate to

oil and gas and mining promotions. A characteristic illegal promotion

was that involved in S. E. O. v. Charles William Grader and Oil

Hunters, Inc? The Commission's complaint charged that a highJ N. D. Toms No. 2438.
14 SECURITIES AND EXCHANGE COMMISSION

pressure fraudulent mail. campaign to tens of thousands of persons

throughout the country was being employed in the sale of stock of

Oil Hunters, Inc.; that defendants made references to "200-to-l

profits" realized on investments in successful oil ventures, suggesting

a similar expectation in the purchase of Oil Hunters, Inc. stock; and

falsely stated that the company selected only high class drilling properties which would have a real chance of producing oil and would yield

"king-size, grand-price profits" and that the drilling of a well on the

company's leased properties offered possibilities for the finding of

"gigantic, stratigraphic entrapments of oil" similar in size to the

famed East Texas oil field. The defendants consented to a final

judgment enjoining them from further violating the anti-fraud

provisions of the Securities Act.

S. E. C. v. C. C. Julian Associates, Inc. and Harry Arthur Penn 3

was another oil and gas promotion in which an extensive mail campaign was used. The complaint alleged that the selling literature

being used contained incomplete, ambiguous and deceptive statements

concerning services previously rendered to such persons by the

defendant Penn and the opportunity for recoupment of losses and

for profit through the purchase of the stock of the defendant corporation. A final judgment by consent was obtained.'

Other actions brought by the Commission for injunctions for violation of the Securities Act dealt with various other types of securities.

In S. E. C. v. E. P. Floren 5 the Commission's complaint charged the

defendant with selling shares of Baby Care Pharmacies, Inc. and

Baby Care Institute, Inc. without having a registration statement in

effect, and with making false representations concerning tne source

of the stock, the use to be made of the proceeds, the prices at which

such shares could be resold in the future, and the profits to be expected

from the investment. A permanent injunction was entered by

consent.

In S. E. C. v. Thomas W. MacKenzie and Automatic Telephone

Dialers, Inc.,6 the defendants were charged with selling MacKenzie's

personally owned stock without complying with the registration provisions of the Securities Act and with making false representations

concerning the ownership of the stock, the proceeds to be received by

the company, the listing of the stock on a stock exchange, the extent

of the development of the product, the existence of contracts for the

use, production and sale of the product, and the experience of the

promoter. The defendants consented to the entry of a preliminary

injunction.

IN. D. Texas, No. 2493.

'Asimilar case involving oil and gas securities, S. E. C. v, Glenn F. McButneg, N. D. W. Va., No. 36S-F,

was pending at the close of the year.

IN. D. III., No. 52C2501

D. N. J., No. 38-53.

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N~ETEENTH ANNUAL REPORT 15

In S. E. O. v. Stanford E. Phillips 7 a judgment was entered by

consent permanently enjoining Phillips, individually and doing

business as Attorneys Messenger and Process Service, from further

violating the anti-fraud provisions of the Securities Act in the sale of

promissory notes to finance a messenger service.

The Commission also obtained a final judgment and decree by

consent permanently enjoining Evergreen Memorial Park Association

and Thomas A. Morris,s its president and controlling stockholderfrom violating the registration provisions of the Securities Act. The

defendants had sold cemetery lots in wholesale quantities for investment purposes. To induce these purchases by the investing public,

defendants had undertaken to resell these lots at retail on behalf of

wholesale investors at stated prices which would yield large profits on

said investments within relatively short periods. The court found

that the transactions involved sales of securities in the nature of

"investment contracts" subject to the provisions of the Securities Act.

Defendants were also required by the decree to make good their

previous undertakings to resell the lots of prior wholesale investors

without making any charge for the service and to repurchase nonsalable lots, to deposit specified amounts of money in a perpetual care

trust fund for the maintenance of the cemetery property in accordance

with the requirements of applicable state law and the defendant

corporation's charter and sales agreements with wholesale investors,

to maintain necessary books and records in accordance with accepted

accounting principles, and to submit to the Commission semi-annual

reports showing compliance with the court's decree.

Injunctions were also obtained in several other cases for sales of

securities without registration. Among these are S. E. O. v. R. H.

Rucker and Wabash Oil Company,9 S. E. O. v. Silver Bell Mines 00.,10

S. E. O. v. Francis J. Suendemam,'? S. E. O. v. Magar Home Products

Inc., John R. Kauffman, and Thomas E. Myers,12 S. E. O. v. Robert

L. Burch,13 S. E. O. v. Jack Haskins and Fred At. Haley.a

Several actions brought under the Securities Act of 1933 which

are discussed in the 18th Annual Report 15 were the subject of further

proceedings during the current fiscal year. In S. E. O. v. Chinchilla,

Inc.16 an injunction was entered restraining the defendants from

violation of the registration and fraud provisions of the Act. In

S. E. C. v. Mines and Metals 00rp.17 the Court of Appeals for the

7 W. D. Wash., No. 3342.

IE. D. Pa., No. 11821.

W. D. Okla. No. 5580.

'0 E. D. Wis., No. 5787.

11 D. Mass., No. 53-U00-S.

N. D. m., No. 5202238.

11 N. D. Texas, No. 2455.

11 E. D. Tenn., No. 2069.

11 Pp. 28-29.

11 N. D. TIL, No. 520387.

11 200 F. 2d 317.

•

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16 SECURITIES AND EXCHANGE COMMISSION

Ninth Circuit affirmed the order of the District Court for the Southern

District of California requiring the defendant to produce certain

books and records in connection with a pending Commission investigation. An application for certiorari was denied. 18

In S. E. O. v. Ralston Purina Oompany, the Commission sought

an injunction prohibiting the company from selling its stock to its

more than 500 employees without registration under section 5 of the

Securities Act. The district court denied the injunction, holding

that such sales were exempt under section 4 (1) of the Act, as not

constituting a public offering, and the Court of Appeals for the Eighth

Circuit affirmed. 19 The Supreme Court reversed the action of the

lower court,20holding that the number of persons to whom an offering

is made is immaterial, that the crucial test is whether the offerees are

persons who "need the protection of the Act," that "employees are

just as much members of the investing 'public' as any of their neighbors in the community." The opinion concluded with the statement

that "The employees here were not shown to have access to the kind

of information which registration would disclose. The obvious opportunities for pressure and imposition make it advisable that they be

entitled to compliance with section 5."

Participation as Amicus Curiae

Appellate court rulings involving significant interpretations of the

Securities Act were handed down during the :fiscalyear in two cases

in which the Commission participated as amicus curiae. In Blackwell v. Bentsen 21a complaint, which asserted civil causes of action

under section 12 (2) of the Securities Act for fraud, alleged that

defendants had sold plaintiffs 20-acre tracts of purported citrus land

in an 800-acre development in the Rio Grande Valley of Texas together with management contracts pursuant to which defendants

undertook to cultivate and develop the acreage, and to harvest and

market the crop. According to the complaint, defendants had

represented that plaintiffs would be getting into an 800-acre unit

which would be developed uniformly by defendants' citrus experts

for the joint benefit of all investors, that defendants would take care

of everything, and that plaintiffs would "only have to sit back and

reap the dividends." The Court of Appeals for the Fifth Circuit,

agreeing with the views expressed by the Commission, held that the

complaint alleged sufficient facts to establish that the transactions

involved sales of "investment contracts," which are "securities"

under the Act, and not merely sales of realty. The court ruled, also,

that the alleged uses of the mails to deliver the warranty deeds and

u345 u. s. 941.

18th Annual Report, p. 29

346 U. S. 119.

II 203F. 2d 690 (1953).reversing the [udgment of the United States District Court for the Southern Dlstrlct of Texas, previously discussed in the 18th Annual Report, p. 29.

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•
NINETEENTH ANNUAL REPORT 17

management contracts and to obtain the payments contracted for

were sufficient to bring the case within the purview of section 12 (2).

In Wilko v. Swan,22 a majority of the Court of Appeals for the

Second Circuit, disagreeing with the Commission, upheld a compulsory

arbitration provision in a form agreement between a securities firm

and a customer. The court action brought by the customer against

the securities firm under section 12 (2) for alleged fraud in the sale

of securities, accordingly, was ordered stayed, and the customer's

claim was referred to arbitration. The Commission, as amicus

curiae, supported a petition for a writ of certiorari which was granted

on June 1, 1953.23 The case was pending in the Supreme Court at

the close of the fiscal year.

., 201 F. 2d 439 (1953),reversing the order of the United States District Court for the Southern District

of New York, previously discussed In the 18th Annual Report, p, 30.

23345 U. S. 969.

279900--54--3
PART I1 


ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 


1934 

The Securities Exchange Act of 1934 is designed to insure the maintenance of fair and honest markets in securities transactions on the 

organized exchanges and in the over-the-counter markets. Accordingly 

the Act provides for the regulation of such transactions and of matters 

related thereto. It requires that information as to the condition of 

corporations whose securities are listed on a nat,ional securities .exchange shall be made available to t,he public and provides for the 

registration of such securities, such exchanges, brokers and dealers 

in securities, and associations of brokers and dealers. It also regulates 

the use of the nation's credit in securities trading. While the authority to issue rules regarding such credit is lodged in the Board of 

Governors of the Federal Reserve System, the administration of these 

rules and of the other provisions of the Act is vested in the Commission. 

REGULATION OF EXCHANGES AND EXCHANGE TRADING 

Registration and Exemption of Exchanges 

At the close of the 1953 fiscal year the following 16 exchanges were 

registered as national securities exchanges: 

American Stock Exchange Philadelphia-Baltimore Stock ExBoston Stook Exchange change 

Chicago Board of Trade Pittsburgh Stock Exchange 

Cincinnati Stock Exchange Salt Lake Stock Exchange 

Detroit Stock Exchange San Francisco Mining Exchange 

Los Angeles Stock Exchange San Frsncisco Stack Exchange 

Midwest Stock Exchange Spokane Stock Exchange 

New Orleans Stock Exchange Washington Stock Exchange 

New York Stock Exchange 

Four exchanges were exempted from registration at the close of 

the fiscal year: 

Colorado Springs Stack Exchange Richmond Stock Exchange 

Honolulu Stock Exchange Wheeling Stock Exchange 

Information pertinent to the organization, rules of procedure, 

trading practices, membership requirements and related matters of 

each exchange is contained in its registration or exemption statement, 

and any changes are required to he reported promptly by the exchanges. During the pear the various exchanges reported numerous 

changes, the more significant of which included the following: 

The New York Curb Exchange changed its name to the American 

Stock Exchange effective January 5, 1953. 

la 


20 SECURITIES AND EXCHANGE COM1.fiSSION

Examination of Applications and Reports

Applications for registration of securities and periodic reports are

examined by the staff of the Division of Corporation Finance to

determine whether fair and adequate disclosure has been made.

Where examination shows a need for correcting amendments, they

are requested. The results achieved by these examinations may be

illustrated by reference to a few filings reviewed during the 1953 fiscal

year.

A Canadian mining company filed an application for registration

to which were attached as exhibits two engineering reports containing

an optimistic dollar estimate of the value of total future production

based on unacceptable procedures in valuing mineral content per ton

of ore and in estimating reserves. The company had not yet produced any commercial ore but was nevertheless constructing a mill

costing $1,500,000. The stock of the company, which was traded

on two Canadian exchanges, had shown an extraordinary price rise,

apparently resulting from the publication of such engineering reports.

Objections were raised by the staff of the Commission to the reports,

and the company proposed to overcome them by filing an amended

application deleting the reports. However, in view of the previous

widespread dissemination of the information contained in the reports

the company was advised that the amended application should

nevertheless indicate that the conclusions of the engineering reports

were not justified by the exploratory work, should state unequivocally

whether or not commercial ore reserves existed on the property and

state that the construction of a mill under the circumstances would

be contrary to accepted mining practice. The company was unwilling to make these disclosures, the exchange withdrew its certification of approval and the application was withdrawn.

In an application for the registration of additional shares a registrant

described a merger resulting in the acquisition of the assets of another

company by the issuance of preferred stock of the registrant in

exchange for all of the common stock ofsuch company, which was to be

dissolved and its plant operated as a division of the registrant. The

net assets to be obtained after assumption of liabilities amounted to

$1,667,00U less than the aggregate par value of the registrant's

preferred stock to be issued. The registrant indicated it would

charge off this difference of $1,667,000 to earned surplus. The

registrant was advised that the proposed accounting treatment appeared to be inappropriate in the circumstances since it appeared

that the plan was developed primarily for the purpose of acquiring

additional plant. Accordingly the registrant filed an amendment

in which it was stated that the difference would be added to the
NINETEENTH ANNUAL REPORT 21

cost of buildings. The registrant stated that the other company was

acquired in order to obtain urgently needed building space and that

the past earnings of the acquired company did not justify capitalization of any part of the consideration as having been paid for goodwill

or for any other intangible. Acceptance of the originally proposed

accounting would have resulted in an understatement of the assets to

be acquired and thereafter in an understatement of depreciation

charges, with a corresponding overstatement of income.

The balance sheet included in an application by an oil company

for registration of its shares showed the stockholders' equity in the

company at $4,365,383. Comparison of this balance sheet with one

as of a year earlier indicated that the property account and capital

surplus had each been increased by some $2,100,000 during the year.

In a letter of comment this apparently unjustified property write-up

was questioned. Thereafter revised financial statements were

prepared by a new firm of certified public accountants in which the

property accounts were restated at more realistic values as of the date

of inception of the company, and depletion and depreciation reserve

provisions and balances were computed on the basis of revised valuations, showing the stockholders' equity at $1,099,571, approximately

one-fourth of the amount shown in the application as originally

filed.

Statistics of Securities Registered on Exchanges

At the close of the 1953 fiscal year, 2,210 issuers had 3,653 security

issues listed and registered on national securities exchanges. These

securities comprised 2,651 stock issues totaling 3,904,577,424 shares,

and 1,002 bond issues totaling $23,509,748,966 in principal amount.

These figures reflect net increases for the year of 18 issuers, 27 stock

issues, 233,722,158 shares, 38 bond issues, and $2,099,644,615 in

principal amount of bonds over the corresponding amounts at the

close of the 1952 fiscal year. During the fiscal year 71 new issuers

registered securities on exchanges while the registration of all

securities of 53 issuers was terminated.

The following table shows for the fiscal year the number of applications filed under section 12 and of reports filed under section 13 and,

pursuant to undertakings contained in registration statements filed

under the Securities Act, under section 15 (d) of the Securities

Exchange Act:

Applications for registration of securities on national securities exchanges __ Annualrepo~

Currentrepo~

Amendments to applications and annual and current reports

779

2,959

13,126

1,072

_

_

_
22 SECURITIES AND EXCHANGE COMMISSION 

MARKET VALUE AND VOLUME OF SECURITIES TRADED ON 


EXCHANGES 


The unduplicated totd market value on December 31, 1952, of all 

securities admitted to trading on one or more of the twenty stock 

exchanges in the United States was $241,697,600,000: 

Number Market noCuc 

Stocks: iaavea Dec. 31, la68 

Pien. York Stock Exchange. ................. 1,522 $120,536,200,000 

Americt~n Stock Exchauge ................... 793 16,911,300,000 

All ot,her exchanges ......................... 731 3,060,500,000 

3,046 140,508,000,000 

Bonds: 

Ncw York Stock Exchange.. ................ 958 100,255,735,000 


American Stock Exohengc................... 83 772,314,000 


All other exchanges 33 161,551,000 

1,074 101,189,600,000 

Total stacks and bonds .................... 4, 120 241, 697,600,000 


The New York Stock Exchange and American Stock Exchange 

figures are as set forth by those exchanges. There is no duplication 

of issues between those two exchanges, but many of the issues traded 

on them are also admitted to trading on one or more of the 18 other 

exchanges in addition to those shown for such other exchanges. The 

number of issues includes a few vhich are suspended or inactive, and 

whose market value, if any, is not computed. 

St& on Exchanges 

The $140.5 billion aggregate market value of all stocks available for 

trading on the exchanges at the close of 1952 ' compared with $129.2 

billion at the close of 1951 and with $82 billion at the close of 1948. 

Stocks on the New York Stock Exchange accounted for about $53.6 

billion, and on the American Stock Exchange for about $5 bilIion of 

the increase since December 31, 1948, while t'he market value of 

stocks available for trading only on the remaining 18 stock exchanges 

remained about the same. 

The number of stock issues listed on t,he New York St,ock Exchange 

hes shown a tendency to increase over the years, as contrasted with 

the number of issues on the other stock exchanges: 

I A8 01June 30, 1953, the Nen York Stock Erohange reported aggrekatemsrkst values ofd113,30B,WO,MO 

tor aU stoces and S99,454,W4WOfor dl bond8 llsted thereon. Worts as of that date are not available ior 

the Other exchanges. 
NINETEENTH ~AL REPORT

Net number of stock issues on exchanges

23

I

Stocks Admitted to trading only on other Unduplilisted on exchanges cated total

June 30 New York hsted and

Stock unlisted

Exchange Listed UnlISted Total on all

exchanges

1943 1,250 1,516 515 2,031 3,281 1914_______________________________________ 1,270 1,405 504 1,909 3,li9 1945_______________________________________ 1,293 1,3n 469 1,846 3,139 1946 _______________________________________ 1,351 1,323 432 1, i55 3,106 194i _____________.. ________________________ 1,3n 1,304 402 1, i06 3,083 1948_______________________________________ 1,425 1,248 389 I,63i 3,062 1949 _______________________________________ 1,462 1,210 380 1,590 3,052 1950_______________________________________ 1,484 I,18i 36i 1,554 3,038 1951. ______________________________________ 1,495 1,183 354 I,53i 3,032 1952 _______________________________________ 1,528 1,192 342 1,534 3,062 1953 _______________________________________ 1,539 I,2Oi 331 1,538 3,On

Listed stocks include issues registered, issues temporarily exempted from registration, and issues listed

on exempted exchanges. Unlisted stocks are those admitted to unlisted trading on registered and exempted

exchanges without hsting and registration on any other exchange. Stocks listed on the Amencan Stock

Exchange numbered 455 in 1943, 433 IU 1950, and 498 in 1953, all as of June 30, reversing a downward trend.

New listings only on the regional exchanges are not sufficiently

numerous to balance the losses of local issues while new admissions

thereon of stocks also listed on one or the other of the New York

exchanges continue in heavy volume. The new listings only on the

regional exchanges during 1952 included 5 preferred stocks, with an

aggregate market value of about $30 million, listed on the Philadelphia-Baltimore Stock Exchange to qualify them for the investment of trust funds in Pennsylvania, and 5 common stocks whose

aggregate market value was less than $15 million. In the same period, 124 stock issues listed on the New York Stock Exchange or the

American Stock Exchange were admitted to trading on one or more

-of the regional exchanges. The aggregates were as follows, shares

and market values being computed as of December 31, 1952:

Stock admissions on regional exchanges during 1952

Issues Shares Market value

New listings only on regional exchanges ___________________________ 10 3,339, i60 $44, 63i, 000 ;8imnltaneous New York and regtonal Iistings ___________.. ________ 16 Ii, i46, 59i 326, 363, 000 New regional listings of stocks already hsted in New York ________ 15 30,278,628 519,000, 000

New York listed stocks admitted to unlisted trading on regional exchanges _______________________________________________________ 93 460, 021, 422 18, 49i, 385, 000

134 5Il, 386, 40i 19, 38i, 385, 000

Portlon only on regional exchanges _____________.. _________________ 10 3,339, i60 44,63i,000 Portion also on New York Stock Exchange ____.. _________________ 104 454,861,643 18,863, 4i4, 000 .Portion also on American Stock Exchange ________________________ 20 53,185,004 4i9, 274, 000

134 511,386,4Oi 19, 38i, 385, 000

Duplication in the above table amounts to 1 issue of 4,015,598

shares and $46,681,000 market value, which appears as a new listing

on one regional exchange and a new unlisted admission on another.

Otherwise, the figures show the net additions of issues newly listed

__________________________• ____________
24 SECURITIES AND EXCHANGE COMMISSION

or admitted to unlisted trading on the regional exchanges during

1952. Of the issues shown, 109 were newly admitted to trading on 1

regional exchange, 22 on 2, 2 on 3, and 1 on 4.

The consolidation of industry into units of national importance

and the growing availability of their shares for trading on both the

New York and the regional exchanges have brought about a heavy

concentration of trading volumes in a small proportion of the total

available stock issues. At the close of 1952, 179 stocks listed on the

New York Stock Exchange were also available for trading on 4 or

more of the 8 largest regional exchanges: Boston, Cincinnati, Detroit,

Los Angeles, Midwest, Philadelphia-Baltimore, Pittsburgh, and San

Francisco. The dollar volume of stock sales on these 8 exchanges

during 1952 was reported at $1,323,000,000 or 98.6% of the total on

all 18 regional exchanges. Of this $1,323,000,000, over one-third was

accounted for by 29 stocks available on all 8 exchanges, over one-half

by 79 stocks available on 6 or more of the 8 exchanges, and over twothirds by the entire 179stocks available on 4 or more of the 8 exchanges.

Stock volumes and their percentage distribution on the stock exchanges were shown for the years 1935-51 inclusive by tables and

charts on pages 41-43 of the Commission's 18th Annual Report.

Comparative figures for the calendar years 1951 and 1952 and for

the first six months of 1953 are set forth below.

Percentage distribution of stock volumes on exchanges

1951 1952 1st half 1953

Total shares sold 1 863,918,401 732, 400,451 409, 762, 352

PercenJ PercenJ Percent New York Stock ______________________________ 74.40 71.21 74. 20 American .----- 14. 60 16. 08 15.37

2 New York exchanges -- -- -- Midwest 89.00 87.29 89.57 ________________________________ 2.10 2.43 2.22 San Francisco stock.; Boston 2.12 2.50 2.33 .70 .73 .62 Los Angeles 1.42 1.35 1.40 Philadelphia. Baltimore Detroit .72 .82 .70 _______________________________________

Olncinnati .58 .55 .52 ____________________________________ .08 .09 .09 Pittsburgh .16 .16 .13 All other exchanges 3.12 4.09 2.42

18 regional exehangea., ______________________ 11.00 12. 71 10.43

Dollar volume ____________________________________ $21,306, 087, 000 $17,395, 116,000 $9, 346, 294, 000

Percent PercenJ Percent New York Stock American 85.48 84.86 85.41 -7.56 7.39 7.0:!'

2 New York exchanges -- -- -- Mid west 93.04 92.25 92.43 ______________________________________ 2.30 2.67 2.10 San Francisco Stock __________________________ 1.07 1.16 1.15 Boston ________________________________________ 1.06 1.11 1.01 An~eles .99 1.04 .94 Philade phla- Baltlmore.., _____________________ Detroit. .86 .96 .m .36 .43 .44 Cincinnatl. ___________________________________ .11 .12 .12 Pittsburgh ____________________________________ .11 .15 .15 All other exchanges ___________________________ .10 .11 .09

18 regional exchanges -- -- -- 6.96 7.75 7.57

I Includes warrants and rights.

_______• ____________• _____• _____

____________• __________________

________________• _____

•_____

______•• ___________• _____ __•_____________________________________

_____________________________• _____

_________________• _____

•• _______________• __________________

________• __________________

___• __• ____• __________________ __________________• _____• ____________

___• __________________

~ _________________ • _____________•• _

___• __________________________________

___________• ____________
NINETEENTH ANNUAL REPORT 25

Bonds on Exchanges

The New York Stock Exchange is the principal market for bond

trading on the exchanges. The relative proportion of bond volumes

on that exchange has risen over the years, from less than threequarters of the total on all the stock exchanges in 1935 to around

97% in 1952. The course of bond volumes, other than in United

States Government bonds, on the New York Stock Exchange in

recent years has been as follows:

10-year bond record on the New York Stock Exchange

[Face and market values in $ billions]

Face value Face value Market Average of bonds of bonds value of sale pnee

listed sold dur- bonds sold per $1,000

Dec. 31 ing year during year bond

1943. $19.3 $3 59 $1. 78 $497 1944 17.6 2.92 1.83 627 1945 16.5 2.51 1. 72 685 1946 16.7 1 49 1.11 748 1947 17.7 1 18 .87 744 1948 ._. 18 5 1.11 .80 719 1949 ._ 19.5 .88 .66 752 1950 ._ 19.7 1.23 1.00 814 1951. 20 1 .92 .80 871 1952 21. 6 .87 .77 886

The "face value of bonds listed" excludes United States Government and subdivision issues, amounting, for example, to approximately $79.8 billion United States Government and $1.1 billion State

and City of New York securities as of December 31, 1952. The

annual volumes as shown exclude sales of United States Government

bonds, reported at $46.2 million on the Exchange for the decade, but

include sales in the subdivision issues, of which, however, only the

issue of New York City Transit Unification 3s of 1980 is active on

the Exchange.

Domestic corporation bonds are the principal components of the

amounts shown in the table as listed. These have risen from $16.4

billion face value at the close of 1943 to $19.1 billion December 31,

1952.2

OVER-THE-COUNTER MARKET

An estimate of the value of stocks traded over the counter in

various categories has been developed by the Commission and is

referred to at page 40 of the 18th Annual Report. Supplementing

this information, it has been estimated that at the close of 1952,some

3,500 domestic issuers whose stocks are traded over the counter and

who reported having or appeared to have more than 300 stockholders,

had outstanding stocks having a value of approximately $28 billion,

divided among $10 billion industrial, $7 or $8 billion bank, $4.5 billion

utility, $4 billion insurance and $1.5 billion finance, real estate and

I A1l of June 30, 1953, the amount was $19.6 billion.

_______• ____• ___________•• _______• _________________

____________• _____________________________• _________

____________•• _______________• _________• ____________

__• _________• ____________• ___• ___• ________• ___• _____

__• _________• ____________________• ________• ___• _____

____________ ______________• ____________• ___• _____ _______• ____• ___• ____________• ______• _________• ___ ________________• ____________• ___• ____________• ___

_________•• ____• ________________• __• _______••• _____ _________________________________• __________________
26 SECURITIES AND EXCHANGE COMMISSION

miscellaneous. About 500 of these issuers had outstanding stocks in

excess of $10 millions and 34 had stocks in excess of $100 million.

These totals are exclusive of investment companies, stocks admitted

to unlisted trading privileges on stock exchanges and Canadian and

other nondomestic issues.

SPECIAL OFFERINGS ON EXCHANGES

The origm, mechanics and amounts of special offerings

exchanges have been described in previous annual reports.

data follow: TWELVE MONTHS ENDED DEC. 31, 1952

on stock

Current

NUMBER OF SHARES Aggregate Value of

Exchange Number shares sold special

made In (thousands eomnnssion

origmal Sub- Sold of dollars) (thousands

offer scrihed of dollars)

---

All exchanges: Total _____________________________ 22 394,838 421,733 357,897 9,931 203" Completed ____________________ 18 346,438 410,788 346,952 9,626 197 Not completed ________________ 4 48,400 10,945 10,945 305 6 American Stock Exchange: Completed _____________________ 0 0 0 0 0 0 Not completed ____________________ 1 20,000 2, 275 2, 275 11 1 Midwest Stock Exchange: Com pleted ________________________ 1 4,890 4,890 4,890 145 2 Not comp1eted ____________________ 1 10,000 5,000 5,000 193 3 New York Stock Exchange Completed ________________________ 16 338,478 402,828 338,992 9,372 192 Not comp1eted ____________________ 2 18,400 3,670 3,670 101 2 San FranCISCo Stock Exchange: Completed ________________________ 1 3,070 3,070 3,070 109 3 Not completed ____________________ 0 0 0 0 0 o I

SIX MONTHS ENDED JUNE 30, 1953

All exchanges: Tota1 12 334,369 274,669 273,411 6,034 1 Completed ____________________ 10 169,369 173,009 173,009 5,658 140 Not completed ________________ 2 165,000 100,700 99,442 376 I> New York Stock Exchange: Completed ________________________ 9 164,869 169,469 169,469 5,628 1 Not completed ____________________ 1 5,000 6,000 4,742 335 5 San FranCISCO Stock Exchange: Com p1eted I 4,500 4,500 4,500 30 2 Not completed .. __________________ 1 160,000 94,700 94, 700 41

SECONDARY DISTRIBUTIONS APPROVED BY EXCHANGES

The following table shows the amounts of secondary distributions

which exchangeshave approved for member participation and reported

to the Commission. The mechanics of such secondary distributions

and amounts thereof in past years are shown in previous annual

reports.

____________• ________________

____________________• ___
J\TJNETEENTH ANNUAL REPORT

TWELVE MONTHS ENDED DEC. 31, 1952

27

NUMBER OF SHARES

Value of

Exchange Number shares sold made Available (thousands In orrginel for dIS- Sold of dollars) offer tnbutlon

All exchanges' Total. . _. 76 4,145,508 4,346,348 4,223,258 149,117 Completed. _______________________._ 69 3,910,611 4,099,761 4,102, «n 145,898 Not completed 7 234,897 246,587 121,257 3,219 Amencan Stock Exchange: Completed _. _. 8 378,620 392,843 393,483 11,096 Not completed. 1 21,160 21,160 5,000 23 Detroit Stock Exchange: Completed ._. 2 2, 700 2,700 2,700 44 Not completed 0 0 0 0 0 MIdwest Stock Exchange: Completed ._. 12 89,594 91,394 91,394 1,852 Not completed _. ________________________ 1 10,000 10,690 10,281 115 New York Stock Exchange Completed_. .. 47 3,439,697 3,612, 824 3,614,424 132,906 Not completed 5 203,737 214,737 105,976 3,081

SIX MONTHS ENDED JUNE 30, 1953

All exchanges:

1,981,3021 TotaL 36 1,931,014 1,907,933 50,954 Completed ._ 30 1,622,946 1,661,439 1,678,054 47,199 Not completed ._._ 6 308,068 319,863 229,879 3,755 American Stock Exchange. Completed 6 123,550 129,550 129,550 896 Not completed 2 178, 125 188,120 181,560 2, 168

Cincinnati Stock Exchange: Completed . . 1 9,015 9,772 9,772 98 Not completed 0 0 0 0 0 Detroit Stock Exchange: Completed ._. 2 3,500 3,500 3,500 67 Not completed ._ 0 0 0 0 0

Midwest Stock Exchange: Completed _. _._ _. 2 7,700 7,700 7,700 174 Not completed ._._ 0 0 0 0 0 New York Stock Exchange: Completed .• 19 1,479,181 1,510,917 1,527,532 45, 964 Not completed ._ _._. 4 129,943 131,743 48,319 1,587

UNLISTED TRADING PRIVILEGES ON EXCHANGES

Number of Issues Admitted to Unlisted Trading

Securities are said to be admitted to unlisted trading on the stock

exchanges when the admission to trading is approved by an exchange

without application by or agreement with the issuer. Such admissions are governed by section 12 (f) of the Securities Exchange Act,

whose respective clauses are referred to in the following text and tables.

In the tables, the "Clause I" stocks are those admitted to unlisted

trading prior to March 1, 1934, and they are shown in two categories,

those which are "unlisted only" and those which are also listed and

registered on a stock exchange other than that where they are admitted

to unlisted trading. The "Clause 2" stocks are those admitted to

unlisted trading pursuant to applications by stock exchanges conditioned on an existing listing and registration on some other stock

exchange. The "Clause 3" stocks are those admitted to unlisted

trading pursuant to grants of applications by stock exchanges conditioned upon the availability of information SUbstantially equivalent

to that filed in the case of listed issues. The following table, for

comparative purposes, also shows the number of listed stock issues

on each stock exchange.

___• _____________• ______• _______

_____ • ________________

_____________• ______• _____

_________________• _______

_____________• ________ _____ __________________• _______

_________________• __ _______

________________ ________••

________________________••

_____________• ________• ____________

_____________• __________

_________• ________

_________________• ________• ___

_____________• ________• ___

___• _______ _____• ___ ____•• __

_________• _________• __• ___

___• ________• ____ _____•• ___

________• ____• ____• ___ ••

•______•• ________••• _•• _________________ •• ___

___•___• ___•• __••• _•••• _•••• •••••• __• ________ •••
28 SECURITIES AND EXCHANGE COMMISSION

Number of stock issues available for trading June 30,1953

On an unlisted basis pursuant to the following clauses of section 12 (f) of the seeunnes Exchange Act of 1934:

Ona

Stock exchange listed Listed and registered basis I Un1Jsted on another exchange only'

Clause 1

I Clause 1 Clause 2 Clause 3'

American _________________________________ 498 249 54 3 3 Boston ____________________________________ 103 1 157 148 0 Olneago Board of Trade ___________________ 8 3 2 0 0 CmcmnatL _______________________________ 57 0 0 69 0

g~l~~~?_~ _~~~~~== : : .: .: .: .; .: 14 0 0 0 0

122 0 14 96 0 Honolulu __________________________________ 57 31 0 0 0

tITd ~;!~= :-_= .:; .: .:

165 1 39 144 0 403 0 0 98 0 New Orleans ______________________________ 3 9 4 2 0 New York Stock __________________________ 1,539 0 0 0 0 Phlladelphra- Baltimore ____________________ 116 4 263 140 0 Pittsburgh ________________________________ 61 0 16 57 0 Richmond _________________________________ 27 0 0 0 0 Salt Lake _________________________________ 97 3 0 0 1 San Francisco Mmmg _____________________ 41 0 0 0 0 San Francisco Stock_______________________ 211 36 68 78 0 Spokane _____________________ 25 5 1 1 0

;be~~i~~~~~ _~.:.: .:

41 0 0 2 0 16 0 0 3 0

Total

3,604 342 I 618 841 4

1 Includes issues registered, issues temporsnly exempted from registration, and ISSUeslisted on the 4

exempted exchanges. None of these ISSUeshas any listed status on any domestic stock exchange, except that 9 of the 36 San FranCISCO Stock Exchange issues are also listed on an exempted exchange. , One of the American Stock Exchange ISSUesand the issue on Salt Lake Stock Exchange became listed on a registered exchange, leaving 2 ISSUesWIth only an unlisted status. 'DuplIcatIOn of issues among exchanges brings the figures to more than the actual number of issues

Involved.

Volume of Unlisted Trading in Stocks on Exchanges

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

stock exchanges during the calendar year 1952 aggregated 48,931,973

or about 8 percent of the total share volume reported on the 20

exchanges.

Unlisted share volume on exchanges in 1952

Listed and registered Reported Un1Jsted on another exchange Stock exchange unlisted only total Clause 1 Clause 1 Clause 2 Clause 3

American. __________________________________ 30,507,592 23,611,427 6, 243, 765 629,500 22,000 Boston ______________________________________ 2, 857, 046 10,573 1,825,449 1,021,024 0 Chicago Board of Trade _____________________ Cincinnati. 0 0 0 0 0 _________________________________274, 505 0 0 274, 505 0 Colorado Springs ____________________________ Detroit 0 0 0 0 0 ______________________________________ Honolulu 1,426,507 0 207,424 1,219,083 0 ____________________________________48,472 48, 472 0 0 0

~d ~ette:~

2, 392, 202 4,720 895,661 1,491,821 0

New Orleans 3,887,466 0 0 3, 887,466 0 ________________________________45,230 33,261 2, 114 9,855 0 New York Stock ____________________________ 0 0 0 0 0 Philadelphia- Baltunore ___________________ 3,115,184 37,029 2, 033, 616 1,044,539 0 Pittsburgh __________________________________395,095 0 208, 991 186, 104 0 Richmond ___________________________________ Bait 0 0 0 0 0 Lake ___________________________________ 960 347 0 0 613 San Francisco Mining _______________________ 0 0 0 0 0 San Francisco Stock _________________________3,795, 805 2, 075, 227 917,741 802,837 0 Spokane ____________________ 171,107 168, 087 3,000 20 0

;~h:f~~~~: _~======== .; .; .;

13,974 0 0 13,974 0

828 0 0 828 0

48,931,973 25,989,143 12, 337, 761 10,581,556 23, 513

= == == ====

= == = == == = == == =====

•_____________

== = ======= ===== ==== ' ______________________________

•

________ ===== ============== === ===== ==

•__

•________________

====== === == ==
NINETEENTH ANNUAL REPORT 29

The volumes are as reported by the stock exchanges or other reporting agencies, and are less than actual in some cases, particularly

with respect to the American Stock Exchange figures, which exclude

odd lots and other items not reported on the stock tickers. The

figures are exclusive of volumes in short-term rights. The volumes

shown under Clause 3 include 11,060shares "unlisted only" and 12,453

shares in stocks which are listed and registered on another exchange.

Applications for Unlisted Trading Privileges

Pursuant to applications filed by the exchanges under clause 2 of

section 12 (f) and approved by the Commission during the fiscal year,

unlisted trading privileges were extended as follows:

Numbf1'

Stock exchange: o/sloOO Boston _

Cincinnati _ 20

Los Angeles _ 10

~idwest _ 27

16

Philadelphia-Baltimore _ Pntsburgh _ 18

3 San Francisco _ 12 Spokane _ 2

Total _ 108

Changes in Securities Admitted to Unlisted Trading Privileges

The usual considerable number of notifications of minor changes in

securities admitted to unlisted trading was received during the fiscal

year from the stock exchanges pursuant to paragraph (a) of rule

X-12F-2.

Applications for continuance of trading in unlisted issues after

more important changes than those contemplated under paragraph

(a) of rule X-12F-2 are made under paragraph (b) thereof, and were

limited during the fiscal year to 2 by the American Stock Exchange.

An application with respect to stock of Simpsons, Ltd. was granted

in full, and an application with respect to Arkansas Natural Gas

Corporation successions was granted in part.

DELISTING OF SECURITIES FROM EXCHANGES

Securities Delisted by Application

During the fiscal year ending June 30, 1953, the Commission

granted 20 applications filed by various national securities exchanges

and issuers of listed securities pursuant to section 12 (d) of the

Securities Exchange Act and rule X-12D2-1 thereunder to strike

securities from exchange listing and registration. The applications

included 12 by exchanges, covering 13 stock issues, and 8 by issuers,

covering 9 stock issues of which 1 was on 2 exchanges. In many of

the cases, the amount of securities available for trading had become so

reduced, by reason of the concentration of holdings in the hands of
30 SECURITIES AND EXCHANGE COMMISSION

controlling stockholders or the exchange into new issues, as to make

continuation of listing undesirable. In other cases, such as open-end

investment company stocks, exchange trading had become inactive

over the years. Some of the applications by exchanges were based on

the failure of issuers to file reports and their prospective liquidation.

Securities Dclisted by Notification

Securities which have been paid at maturity, redeemed or retired

in full, or become exchangeable for other securities, may be removed

from listing and registration on a national securities exchange by the

exchange filing a notification with the Commission to that effect.

Notifications effecting the removal of 132 separate issues were filed

and, since in some instances the same issue was removed from more

than one exchange, the total number of removals, including duplications, was 164. Successor issues to those removed became listed and

registered on exchanges in many cases.

In accordance with the provisions of rule X-12D2-1 (d), the

American Stock Exchange removed 5 issues from listing and registration when they became listed and registered on the New York Stock

Exchange.

MANIPULATION AND STABILIZATION

Manipulation

Provisions to eliminate manipulative practices in the securities

markets are included in the Securities Exchange Act. The Commission's analysts continuously watch the tickers of the leading

exchanges and the quotation sheets of the exchanges, newspapers and

other media for unusual market activity and unexplained price

deviations. Activity in the over-the-counter market is examined as

it is reported in a national quotation service. Less obvious changes in

price or volume are revealed by charts which are kept on all securities

which have an actively quoted market.

Investigations are undertaken when unusual price movements

apparently bear no relation to the published news or when unusual

market behavior indicates the probability of manipulative practices.

The Commission's investigations are private in order to prevent any

unfair reflections upon individuals or securities.

As soon as unusual market activity is observed, all the known information regarding the security is re-examined and a decision made

as to the necessity for an investigation. Investigations take two

forms. The "quiz" or preliminary investigation is designed to detect and discourage incipient manipulation by a prompt determination of the reasons for unusual market behavior. When the "quiz"

discloses no violations of the anti-manipulative or fraud provisions of
NINETEENTH ~AL REPORT 31

191 14

116 10

81 4

the securities acts it is closed. If any violations are revealed, the

information obtained in the "quiz" is made available to the proper

division of the Commission or to the appropriate outside agency for

punitive or corrective action. When facts are uncovered which require more intensive investigation, formal orders are issued by the

Commission. In a formal investigation, members of the Commission

staff are empowered to subpoena pertinent material and to take testimony under oath. The following table shows the number of

"quizzes" and formal investigations initiated in the fiscal year 1953

and the number closed or completed during the period:

Trading investigations

Formal

Quizzes mvestigations

Pending June 30, 1952

Initiated durmg fiscal year

------ Total to be accounted for

Closed or completed during fiscal year

Changed to formal during fiscal year 114 3 4

Total disposed or. ._______________________ 118 3

Pending at end of fiscal year ===WI==U

The markets for securities about to be sold to the public are watched

very closely. In this connection the markets for 1552 issues in the

amount of $225,275,000 offered pursuant to Regulations A and D

under the Securities Act were carefully checked for market grooming. Over 500 other securities having a market value of more than

a billion dollars were kept under special daily observation during the

1953 fiscal year for periods of 10 to 30 days, largely because It public

offering under a registration statement was proposed with the right

to stabilize reserved by the underwriter or issuer.

Stabilization

The Act vests in the Commission the right to regulate stabilizing

practices. The Commission has permitted various stabilizing practices to facilitate the raising of capital. Because of the high manipulative potential inherent in stabilizing operations, however, all such

operations are kept under most careful observation by the Commission.

During the fiscal year stabilization was effected in connection with

registered stock offerings aggregating 29,340,046 shares with an aggregate public offering price of $623,525,000, and bond issues having a

total face amount of $19,644,500. To accomplish this stabilization

460,635 shares of stock were purchased at a cost of $9,429,938 and

bonds having a face amount of $103,500were bought by the stabilizers.

More than 12,000reports of stabilizing transactions were received and

examined during the year.

• _
 

_
 

__• • _
 

_
 

• • _ • _

•
32 SECURITIES AND EXCHANGE COMMISSION

SECURITY OWNERSHIP OF CORPORATION INSIDERS

Description of Regulation

Section 16 (a) of the Securities Exchange Act provides that every

person who is directly or indirectly the beneficial owner of more than

10 per cent of any class of equity security which is listed and registered on a national securities exchange, or who is an officer or a

director of the issuer of any such security, shall file with the Commission and the exchange a statement of his beneficial ownership of all

equity securities of the issuer and additional statements Indicating

changes in such ownership. The Public Utility Holding Company

Act and the Investment Company Act contain similar provisions.

Publication of Data Contained in Reports

Recognizing that a vast majority of public stockholders do not

have ready access to the statements filed with the Commission and

the various exchanges, the Commission summarizes and publishes the

data contained in the reports in a monthly Official Summary of

Security Transactions and Holdings which is sold to interested persons.

Volume of Reports Filed and Examined

The number of ownership and transaction reports filed during the

1953 fiscal year increased by more than 1,200 over the previous year.

The volume has steadily grown from 14,972 reports filed during the

1943 fiscal year to 22,333 in 1953.

The following table shows the number of reports filed during the

1953 fiscal year.

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

certain other affiliated persons filed and examined during the fiscal year ended

June 30,1953

Description of report Origin'aI Amended T tal reports reports 0

----------------------1---------

Securities Exchange Act of 1934: I Form 4 Form 5

Form 6

18,259

708

2,228

318

o

3

18, 577

708

2, 231

Total_ _ ________ ____ ______ ___ _ __ 21, 195 321 21,516

Public Utility Holdmg Company Act of 1935.• Form U -17-1.

Form U-17-2

Total

Investment Company Act of 1940: a Form N -30F L

Form N -30F -2

TotaL

31

362

393

75

348

423

o

o

o

o

1

31

362

393

75

349

424

Grand totaL___________ 22, 011 322 22,333

I Form 4 is used to report changes in ownership; Form 5 to report ownership at the time any equitr se- curity is first listed and registered on a natronal seeunties exchange; and Form 6 to report ownership of

persons who subsequently become officers, directors, or principal stockholders of the issuer .

Form U-l7-1 is used for luitial reports and Form U-17-2 for reports of changes of ownership.

a Form N-30F-1 is used for luitial reports and Form N-30F-2 for reports of changes of ownership.

_

_

_

===

_

_

_

=== - _
 

_
 

_

•
NINETEENTH ANNUAL REPORT 33

Preventing Unfair Use of Inside Information

For the purpose of preventing the unfair use of information which

may have been obtained by an insider by reason of his relationship

to his company, Section 16 (b) of the Securities Exchange Act, 17 (b)

of the Public Utility Holding Company Act, and 30 (f) of the Investment Company Act provide for the recovery by or on behalf of

the issuer of any profit realized by the insider from certain purchases

and sales, or sales and purchases, of securities of the company within

any period of less than 6 months. The Commission is not charged

with the enforcement of the civil remedies created by these provisions, which are matters for determination by the courts in actions

brought by the proper parties. The Commission has participated as

amicus curiae in a number of suits instituted under these provisions

where questions of statutory interpretation are involved.

SOLICITATION OF PROXIES, CONSENTS, AND AUTHORIZATIONS

Nature of Proxy Regulation

Pursuant to sections 14 (a) of the Securities Exchange Act, 12 (e)

of the Public Utility Holding Company Act of 1935, and 20 (a) of the

Investment Company Act of 1940 the Oommission has adopted

Regulation X-14 relating to the solicitation of proxies, consents

and authorizations in connection with securities of companies subject

to those statutes requiring the disclosure of certain information at the

time proxies are solicited. The regulation also contains provisions

enabling security holders to communicate with other security holders

when management is soliciting proxies, either by arranging for the

distribution of their own proxy statements or through the inclusion

of their proposals in the proxy statements of management.

Copies of proposed proxy material are required to be filed with

the Commission in preliminary form at least 10 days prior to the date

of the proposed solicitation. Where preliminary material fails to

meet the disclosure standards, the management or other group responsible for its preparation is notified informally and given an

opportunity to avoid such defects in the preparation of the definitive

proxy material.

Statistics Relating to Proxy Statements

During the 1953 fiscal year the Commission received material relating to 1,817 solicitations of security holders' proxies as well as

"follow-up" material used in 99 of these cases. These figures show

little change when compared with 1,818 solicitations and the use of

"follow-up" material in 158 instances during the preceding fiscal

year.

Much more detailed information about proxy solicitations has

been compiled on a calendar year basis. The total number of

27990o-ri4---4
34 SECURITIES AND EXCHANGE COMMISSION

solicitations made in 1952 was 1,803. Nearly 99 percent of these, or

1,776 were made by management and the remaining 27 by nonmanagement groups. Of the proxy statements filed by management

45 included, as required under the regulation, 70 proposals of 29

different stockholders who were not connected with the management.

In 1951 there were 40 such minority stockholder proposals.

The business of electing directors is the purpose for which proxies

are most often sought. In 1952, there were 1,623 stockholders'

meetings where such election was an item of business, and 160

meetings not involving such election, while the 20 remaining solicitations sought consents and authorizations which did not involve

any meeting or any election of directors.

The wide range and frequency of items of business other than

election of directors on which stockholders' action was sought in 1952

are shown below. Number

ofprorv Item of business other than election of directors statements

Mergers, consolidations, acquisitions of businesses, and purchases and

sales of properties., _______________________________________________ 65

Issuance of new securities, modification of existing securities, recapitalization plans other than mergers or consolidations, _____________________ 228

Employee pension plans.i. . __________ _ ____ 108

Bonus and profit-sharing plans, including stock options_________________ 145

Indemnification of officers and directors ______________________________ 7

Change in date of annual meeting____________________________________ 10

Approval of independent auditors.L, , _____________ __ 441

Miscellaneous amendments to by-laws and other matters _______________ 321

REGULATION OF BROKERS AND DEALERS IN OVER-TIlE-COUNTER

MARKETS

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

of brokers and dealers who use the mails or instruments of interstate

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

markets. Exemption from registration, however, is provided for

those brokers and dealers whose business is exclusively intrastate or

exclusively in exempt securities. Jurisdiction to deny or revoke

registration is vested in the Commission under section 15 (b) of the

Act; to suspend or expel brokers and dealers from membership in a

national securities association under section 15 A; and to suspend or

expel from membership on a national securities exchange under section

19 (a). In proceedings ordered to determine whether any such sanction should be invoked, the respondent is given notice of the specific

charges of misconduct and afforded opportunity for hearing thereon.

The following tabulations reflect certain data with respect to

registrations of brokers and dealers and administrative proceedings

involving the various sanctions above referred to.
NINETEENTH ANNUAL REPORT

Broker-Dealer Reqistrauon. Stattstics

Effective registrations at close of preceding fiscal year

Registrations suspended during preceding fiscal year

Applications pending at close of preceding fiscal year

Applications filed during fiscal year

35

3,997

1

35

1532

TotaL ______________________________________________________ 4, 565

Applications withdrawn during year

Applications cancelled during year

Registrations withdrawn during year

Registrations cancelled during yeaL

Registrations revoked during year ,

Registrations effective at end of year

Applications pending at end of year

11

1

311

97

35

4,053

57

TotaL 4, 565

I ThIS includes applications of 49 Canadian and 2 Japanese hrokers and dealers.

Statistics of administrative proceedings to deny and revoke registration, to suspend

and expel from membershrp in a national securities association or an exchange

Proceedings pending at start of fiscal year to:

Revoke registration. ___________________________________________ 7

Revoke registration and suspend or expel from NASD 1 or exchanges; 9

Deny registration to applicant , _______ _ __ __ ____ 0

Total proceedings pending____________________________________ 16

Proceedings instituted during fiscal year to:

Revoke registration., , __________________________________________ 67

Revoke registration and suspend or expel from NASD I or exchanges , 9

Deny registration to applieants , _________________________________ 4

Total proceedings instituted___________________________________ 80

Total proceedings current during fiscal year _____________________ 96

Disposition of proceedings

Proceedings to revoke registration:

Dismissed on withdrawal of registration__________________________ 8

Dismissed on cancellation of registration., , _______________________ 4

Dismissed-registration permitted to continue in effect; ____________ 2

Registration revoked, __________________________________________ 31

Total______________________________________________________ 45

Proceedings to revoke registration and suspend or expel from NASD or

exchanges:

Registration revoked and firm expelled from NASD___________________ 3

Registration revoked-no action taken on NASD mcrnbership.c.L; , 3

Total______________________________________________________ 6

I The National ASSOCIatIOn of Securrties Dealers, Inc. IS the only national securtnes association registered

WIth the Oomnnssion ,

_

_

_

_

_

_

_

_

_

_

_
36 SECURITIES AND, EXCHANGE COMMISSION

Statistics of administrative proceedings to deny and revoke registration, to suspend

and expelfrom membership in a national securities association or an exchange-Con.

Proceedings to deny registration to applicant:

Dismissed on withdrawal of application__________________________ 3

Dismissed-registration permitted , __ ___ ______ ____ __ ____ 1

Total______________________________________________________ 4

Total proceedings disposed oL________________________________ 55

Proceedings pending at end of fiscal year to:

Revoke registration.L;., _______________ ______ __ 29

Revoke registration and suspend or expel from NASD or exohangea.; 12

Deny registration to applicants__________________________________ 0

Total proceedings pending at end of fiscal year__________________ 41

Total proceedings accounted for_______________________________ 96

Registration

The problem of registration of brokers and dealers with principal

offices outside the United States raises important questions both with

respect to the enforcement of civil liabilities arising out of violations

of the Act and with respect to the enforcement of sanctions which the

Commission may invoke against such violations. 3 At the year-end

51 nonresident firms were registered, 49 of them being Canadian firms.

Rights arising because of violations may be unenforceable against

non-resident broker-dealers or individual partners in such firms where

it is impossible to obtain service upon such persons. In order to

afford to the Commission and others the same opportunity to enforce

rights or duties against such persons as they have in the case of

resident broker-dealers and resident partners in such firms, the

Commission promulgated rule X-15B-7.4 This rule requires each

non-resident broker or dealer, general partner, and managing agent

to file with the Commission a written irrevocable consent and power

of attorney, designating the Commission as an agent upon whom may

be served any process, pleadings, or other papers in certain civil suits

or actions brought in the United States.

The Commission also adopted four forms, designated as 7-M,

8-M, 9-M, and 10-M, to be used for the filing of irrevocable consents

to service by the various persons subject to the rule.

I The Commission's investigative work with respect to the antifraud provisions of the Acts has included

many investigations of mail and telephone campaigns by Canadian brokers and dealers to sell unregistered

securities to residents of this country. While many of the investigations disclosed gross misrepresentations

and the employment of other fraudulent schemes and devices the enforcement of enmmal penalties against

the wrongdoers was a "catch as catch can" matter. Crimlnal indictments were obtained in many instances

but apprehension and arrest of those indicted was possible only when they could be found within the borders of the United States. However, following prolonged negotiations by our government an amended

extradition treaty between the United States and Canada was ratified by both governments and became

effective on July 11,1952. The amended treaty permits extradtnon of persons indicted for securities frauds

in this country.

4 Securities Exchange Act release No. 4825(April 22, 1953).
NINETEENTH ANNUAL REPORT 37

.All but two of the 49 Canadian firms mentioned above filed applications after the adoption by the Commission of Regulation D discussed at page 11, above. Fifteen of these firms became registered

before the close of the year, one withdrew its application after the

Commission had instituted proceedings to deny registration, and two

others withdrew their applications shortly after they had been filed,"

Administrative Proceedings

Four proceedings on the question of denial of registration were instituted during the year. Three of these proceedings were dismissed on

the withdrawal of the applications. In the fourth, the order for proceedings charged that 1.NelsonDennis had transacted businessin violation of law without being registered as a broker-dealer pursuant to section 15(b) of the Securities Exchange Act, that he had sold unregistered

stock of Ameranium Mines, Limited, in violation of section 5 (a) of

the Securities Act of 1933, and that Dennis was enjoiued under New

York law from the further sale of Ameranium stock. Since Dennis

admitted these allegations, the only question was whether it was necessary in the public interest to deny registration. The Commission's

opinion concluded as follows: "Experience has demonstrated that

promotional appeals to our investing public made from Canada by

means of the mass mailing and telephone techniques have most frequently provided a medium for over-reaching. We must approach

such cases with the utmost caution and, therefore, have searched this

record carefully. However, we find no showing of actual fraud has

been made. We note further that the Ameranium stock distribution

was applicant's first and only venture in the securities business. Applicant has not been charged with any infraction of Ontario's securities

regulations, and since May 2, 1952, he has not engaged in the sale of

securities in the United States. Ameranium has since filed a registration statement with us pursuant to the Securities Act covering the

shares previously sold by applicant in the United States and additional

shares, and this statement is now pending. Moreover, applicant has

stated that, if his application for registration is permitted to become

effective, he will make every effort to comply with Federal and state

requirements, and to that end will retain counsel to advise him with

respect to such requirements. Accordingly, we do not believe that the

public interest requires denial of registration." 6

A total of 45 proceedings on the question of revocation of registration were disposed of during the fiscal year. In 30 proceedings registration was revoked because of the failure of the firms to file financial

reports pursuant to rule X-17A-5, and 6 revocations were based on

_findings of fraudulent conduct .

After the close of the year registrations of 14 additional firms became effective; denial proceedings were

Instituted against 13 of the remaining applicants. Two of the latter subsequently withdrew their applications .

Securities Exchange Act release No. 4769(November 20. 1952).

•

•
38 SECURITIES A..1I/"DEXCHANGE COMMISSION

Two administrative proceedings decided during the year involved

charges of manipulation of the market in anticipation of the distribution of an offering of stock on the over-the-counter markets. In

proceedings against Floyd A. Allen & Co., Inc., the Commission

found that the respondent and certain of its associates had artificially

raised the price of the outstanding stock of Loven Chemical Company

by publishing bids at successively higher prices and effecting purchases

at such higher prices. Subsequently, respondents sold the new stock

to customers at the raised prices by means offalse and misleading statements. The Commission revoked the firm's broker-dealer registration

and expelled it from membership in the National Association of Securities Dealers, Ino.'

The other proceeding was brought against R. L. Emacio & Company, Inc. on similar charges. The Emacio firm had negotiated with

Silver Crescent Mining Company for the sale of new stock of that

company. In anticipation of the distribution of the new stock, the

Emacio Company, through its president Emacio and another associate,

acquired control of the market for the old shares and raised the market

for such shares. The Emacio Company then sold the new shares at

the raised prices. The Commission found that in addition to carrying

out this manipulative scheme to raise the price for the purpose of

distributing the new shares at the higher prices Emacio and his associate made many false and misleading statements in the sale of the

stock. The Commission revoked the registration of Emacio & Company and expelled the firm from membership on the Spokane Stock

Exchange."

Broker-Dealer Inspections

Under section 17 (a) of the Securities Exchange Act, which authorizes the Commission to make reasonable periodic, special, or other

examinations of the books and records of brokers and dealers, the

Commission makes inspections to determine whether brokers and

dealers are complying with the requirements of the securities acts.

During the fiscal year, the Commission's regional offices reported on

686 such inspections, 525 of which were inspections of members of the

National Association of Securities Dealers, Inc. As has been the

experience in previous years, a substantial number of violations of

the rules and regulations were uncovered. These violations included

noncompliance with the Commission's capital and hypothecation

rules and with Regulation .T prescribed by the Board of Governors

of the Federal Reserve System. In a limited number of instances

brokers and dealers were taking secret profits. As in other years,

there were transactions in which the reasonableness of the price

charged to the customer in relation to the current market price was

, Securities Exchange Act release No. 4881 (June 16, 1953).

• Securities Exchange Act release No. 4880 (June 16, 1953).
NINETEENTH ANNUAL REPORT 39

open to question, and miscellaneous violations in large number which

would be difficult to classify because of their variety.

The Commission does not necessarily take formal action against a

broker or dealer who appears from these inspections to be violating

the Acts. If the violations appear to be inadvertent or the result of

misinformation, the Commission affords the broker-dealer an opportunity to correct his practices if possible or to assure the Commission that he will not persist in them.

Investigations

Investigations of brokers and dealers may result from the inspections, complaints from customers, or information received from sources

such as state securities commissions, securities exchanges and associations, and better business bureaus. After the completion of an investigation, the staff analyzes the evidence developed and where

appropriate recommends that the Commission institute injunctive

action, proceedings to revoke registration or to suspend or expel from

membership in a national securities exchange or association, or reference to the Department of Justice for criminal prosecution. The

following schedule shows the number of such investigations during

the fiscal year.

Pending July 1,1952___________________________________ 181

Commenced during year____ __ _ _ __ __ __ _ _ ___ _ _ _ __ _ __ _ _ 162

343

Closed during year ___ __ _ _ __ _ __ _ __ __ __ _ _ ___ _ _ _ 158

Pending July 1, 1953___________________________________ 185

343

Financial Reports

Rule X-17 A-5 under the Securities Exchange Act requires brokers

and dealers to file annually reports of their financial condition.

During the 1953 fiscal year, 3,936 reports of financial condition were

filed. These reports are examined and analyzed to determine whether

the broker-dealer was in compliance with the capital requirements

prescribed by rule X-15C3-1. If a broker-dealer is found not to comply, he is generally afforded a reasonable time in which to correct his

financial condition so that it meets the requirements. If he fails to

do so the Commission takes such action as may be appropriate for

the protection of customers.

SUPERVISION OF ACTIVITIES OF NATIONAL ASSOCIATION OF

SECURITIES DEALERS, INC.

Membership

The National Association of Securities Dealers, Inc. (NASD) continued as the only national securities association registered as such

with the Commission. Membership increased by 84 during the fiscal
40 SECURITIES AND EXCHANGE COMMISSION

year to 3,034 at June 30, 1953 as a consequence of 284 admissions to,

and 200 terminations of, membership. At June 30, 1953 there were

registered with the NASD as registered representatives 35,577 individuals, including generally all officers, partners, salesmen and other

persons associated with or employed by member firms in capacities

which involve their doing business directly with the public. The

number of individuals so registered increased by 2,524 during the

fiscal year as a result of 5,127 initial registrations, 2,079 reregistrations

and 4,682 terminations of registration.

Disciplinary Actions

The Commission received from the NASD, in the 1953 fiscal year,

reports of final disciplinary action by the Association in 68 cases in

which formal complaints had been filed against members. These

cases fell into three broad categories. The first category included 45

complaints filed against various members on the grounds that they

had not offered to the public, at the public offering price, shares

acquired in an initial public offering. Three of these complaints

were subsequently dismissed on findings by the appropriate committees

that the firms concerned had not violated the Association's rules, as

interpreted by the Association, designed to prevent this practice of

"free riding." In the remaining 42 cases the Committees found

violations by the respondent firms. One of these firms was fined

$500; the others were censured and some were also required to submit

a statement pledging future compliance and observance of the Rules

of Fair Practice.

The second type of case included 14 complaints against members

only on charges of violations of various other rules, 2 of which were

subsequently dismissed on findings that no violations had occurred.

In the remaining 12 cases violations were found as alleged in the

complaints and various penalties were imposed. Five members were

expelled; 3 were suspended for periods of 1, 2 and 3 weeks; and 4

firms were fined an aggregate of $2,310.

The remaining nine disciplinary actions involved complaints against

members as well as their registered representatives. One such case

was subsequently dismissed on findings that no violations were

involved. In four cases complaints were dismissed against the member firms; but the registrations of the firms' registered representatives

were revoked. In other cases one firm was fined $1,500 and its

representative $500; another firm was fined $1,000 and its representative $500; another firm was fined $1,000 and the .firm and two of its

representatives were suspended for 30 days. In the last of these

cases fines aggregating $15,000 were imposed upon one firm and five

of its representatives; in addition the registrations of two representatives were revoked and one representative was suspended for 2 years.
NINETEENTH ANNUAL REPORT 41

The decision in this case was appealed to the Commission pursuant

to the provisions of section 15A (g) of the Securities Exchange Act

by Earl L. Combest who was fined $2,500and suspended as a registered

representative for 2 years. At the year-end, the matter was pending

before the Commission.9

The Commission referred to the NASD facts concerning the

business practices of members which tended to indicate possible

violations of NASD Rules of Fair Practice. At the beginning of

the fiscal year there were seven such matters pending before the

Association, and four such cases were referred during the year.

Reports on the disposition of nine cases were received from the Association during the year. In two, formal complaints were filed by the

Association, violations were found and penalties were imposed. The

remaining seven cases were disposed of by informal means, without

formal complaint procedure. Two cases were unreported at the

year-end.

Commission Review of NASD Disciplinary Actions

Section 15A (g) of the Act provides that disciplinary actions by

the NASD are subject to review by the Commission on its own

motion or on the application of an aggrieved party. The Commission

disposed of three such petitions during the year and at the year-end

two were pending.

Petitions for review in one such case were filed by Geo. J. Martin

Co., which had been expelled from the NASD, and by Irving A.

Shayne and Alfred Shayne, two salesmen of the :firmwhose registrations as registered representatives had been revoked. Alfred Shayne

later withdrew his petition," and the :firm and Irving A. Shayne

failed to perfect their appeals." Accordingly, the three petitions

were dismissed.

Another review arose from the expulsion of Tyson & Co., Inc.

~rom membership and the revocation of the registration as registered

representative of Albert B. Tyson, Joseph Tyson, and Gilbert Parker.

Albert Tyson filed an application for review but failed to perfect it

and accordingly it was dismissed." On review of Parker's petition,

the Commission concluded that he had violated designated NASD

rules and that such violations constituted conduct inconsistent with

just and equitable principles of trade and that the sanction imposed

on him was not excessive or oppressive." The petition was therefore

dismissed.

The other petition disposed of during the year was filed on behalf

of Standard Bond and Share Co. and its president and controlling

Securities Exchange Act release No. 4892 (July 8, 1953).

10 Securities Exchange Act release No. 4736 (July 28, 1952).

11 Sectmties Exchange Act release No. 4728 (July I, 1952).

Securities Exchange Act release No. 4742 (August 19, 1952).

II Securities Exchange Act release No. 4781 (December 17, 1952).

•

"
42 SECURITIES AND EXCHANGE COMl\USSION

person, William G. Stien. The firm had been fined $500, suspended

from membership for 30 days and Stien's registration as representative

of the firm was suspended for the same period. On findings that the

member and its representative had engaged in business conduct

inconsistent with just and equitable principles of trade and that the

penalties imposed by the NASD were not excessive or oppressive, 14

the Commission dismissed the petition.

Commission Review of Action on Membership

Section 15A (b) (4) of the Act and the by-laws of the NASD provide

that, except where the Commission with due regard to the public

interest approves or directs to the contrary, no broker or dealer

may be admitted to or continued in membership if he or any

controlling or controlled person is expelled or is currently under

suspension from such an association for violation of a rule prohibiting

conduct inconsistent with just and equitable principles of trade, or is

subject to an order of the Commission denying or revoking his brokerdealer registration, or was a "cause" of any such order of expulsion,

current suspension or denial or revocation. The Commission disposed

of two petitions seeking "approval or direction" pursuant to this

statutory provision during the year and at the year-end two such

petitions were still pending. IS

Such a petition was filed by the NASD for approval of the continuation in membership of Delaware Fund Distributors, Inc. notwithstanding a disqualification arising from action by the Commission

against Van Alstyne, Noel & Co., which controlled Distributors.

The petition was later withdrawn, with notice to the Commission of

the dissolution of Delaware Fund Distributors, Inc., and the proceeding was dismissed."

Another petition was filed by the NASD on behalf of an applicant

seeking to retain membership while employing George T. Anderson

as a controlled person. Anderson had been a partner of Junger,

Anderson & Co. and a "cause" of the order of the Commission revoking that firm's broker-dealer registration. On review of the

record, and after notice and opportunity for hearing, the Commission

concluded that it was necessary in the public interest to deny the

relief requested and by order disapproved the application."

CHANGES IN RULES, REGULATIONS, AND FORMS

Amendment oj proxy rules.-Effective December 11, 1952,the Commission adopted certain amendments to its proxy rules for the purpose

of clarifying the rules in certain respects and providing certain new

securities Exchange Act release No 4761(October 15, 1952).

The pending cases concerned petitions filed on bebalf of' (1) Frankhn Distributors. Inc. (Sec. Bxch,

Act release No 4818)and (2) a member firm seeking approval of its continuance as a member with William

A. Spanier as an employee and controlled person. Securities Exchange Act release No. 4811.

11 Secunties Exchange Act release No 4807(February 24, 1963).

IT Securities Exchange Act release No. 4782(December 29,1952).

"

"
NINETEENTH ANNUAL REPORT 43

requirements where previous requirements had proved to be inadequate.

Under the amended rules, the form of proxy must include a specifically designated blank space for dating the proxy. They also

prohibit the solicitation of any undated or postdated proxy or any

proxy which provides that it shall be deemed to be dated as of any

date subsequent to the date on which it is signed by the security

holder.

The previous rules permitted the management of a company to

omit from its proxy material stockholder proposals which are submitted primarily for the purpose of enforcing a personal claim or

redressing a personal grievance against the issuer or its management.

The amended rules also permit the omission of stockholder proposals

submitted primarily for the purpose of promoting general economic,

political, racial, religious, social, or similar causes.

The requirements with respect to showing remuneration in the

proxy statement have been revised generally. Under the revised

requirements, salaries, fees, and commissions may be combined with

bonuses and shares in profits so as to show the aggregate remuneration

for specified persons or groups. The requirements as to showing

deferred remuneration have been made more explicit as to the information required.

Where action is to be taken with respect to a bonus, profit sharing,

pension, retirement or other remuneration plan or with respect to

the granting or extension of options, information is required to be

given which will show adequately what similar provisions have

already been made for the benefit of directors, officersand employees.

Amendment oj Form lO.-The instructions as to exhibits in Form

10 for registration of securities on exchanges under the Securities Exchange Act Wereamended, effective December 12, 1952, to simplify the

requirements relating to the filing of copies of options, warrants or

rights under certain circumstances. Since the exhibit requirements of

Forms 8-K and 10-K are keyed to those of Form 10, the amendment

also effected a similar simplification in the filing of exhibits to reports

on those forms.

Amendment oj R'Il1eX-12A-4 and rescission oj Form AN-4.-Rule

X-12A-4, providing an exemption from registration under section 12

of the Securities Exchange Act of 1934 for certain short term warrants,

was amended, effective December 29, 1952, for the purpose of simplifying the exemption procedure. The rule as it was previously in effect

required the filing with the Commission of a statement on Form AN-4.

The amendme It substitutes for this requiremen, a provision that the

exchange on which the warrants are to be traded shall notify che

Commission when the warrants have been admitted to dealing. Form

AN-4 was rescinded. The amendment also deletes from the rule a
44 SECURITIES AND EXCHANGE COMMISSION

requirement, applicable in certain cases, that the exchange's quotations of transactions in the warrants and members' confirmations to

purchasers shall indicate that the security subject to the warrants is

neither admitted nor in process of admission to dealing on any

national securities exchange.

Amendment of Rule X-12A-5.-Rule X-12A-5 under the Securities

Exchange Act of 1934 provides that whenever by operation of law or

otherwise any instrument evidencing a security listed or admitted to

unlisted trading privileges on a national securities exchange has come

to evidence another security in substitution for or in addition to the

original security, the substituted or additional security shall be exempt

from registration pending the effective registration of, or the granting

of unlisted trading privileges for, such exempted security on the exchange. Among the securities temporarily exempted under this rule

are new securities, or additional amounts of the original security,

resulting from the reclassification of the original security by charter

amendment or the declaration of stock distributions and stock dividends, and securities resulting from reorganization plans. Securities

sold for cash or securities issued under voluntary exchange offers are

not entitled to the temporary exemption provided by this rule.

Previously, transactions on the exchanges in securities temporarily

exempted by this rule could be made only on a "regular way" or

"when distributed" basis because, by its term.s, the rule was applicable only to issued securities. The rule was amended, effective March

20, 1953, so that any unissued security m.ay be admitted to "when

issued" trading on a national securities exchange provided that upon

the issuance of such security trading therein would be lawful under

this rule and that all necessary action, other than the filing or recording of charter amendments or other documents with the appropriate

state authorities, has been taken to authorize and assure the issuance

of any such security. This amendment makes it unnecessary tor

issuers or exchanges to effect registration uoder Regulation X-12D-3

on Form 2-.J to permit "when issued" trading in such unissued securities. Form 2-J will continue to be used for the registration for

"when issued" trading in certain unissued securities not entitled to

the temporary exemption under rule X-12A-5.

Amendments to Instruction Books for Forms 12-K and 12A-K.-The

Commission adopted certain amendments to the instruction books for

annual report Forms 12-K and 12A-K under the Securities Exchange

Act of 1934, discontinuing the provisions of those forms which permitted companies reporting to the Interstate Commerce Commission

on its Form A to file certain selected schedules of such form with

their annual reports on Forms 12-K and 12A-K, in lieu of filing

complete copies of their Form A reports. The Commission found
NINETEENTH ANNUAL REPORT 45

that this procedure had been followed by a very limited number

of companies.

Amendment oj rules under Section l6.-During the 1953fiscal year

the Commission made extensive changes in the rules issued under

section 16 of the Securities Exchange Ac«. These changes were designed to clarify and enlarge the requirements relating to the reporting of transactions by directors, officers and 10 per cent scockholders

and to grant exemptions where experience with the administration of

the section indicated that exemptions were desirable. The changes

made were as follows:

Rule X-16A-l was amended to require holders of options, puts,

calls, spreads and straddles to file the reports required by section

16 (a). Rule X-16A-3 was amended to require any person who is a

member of a partnership which owns securities of an issuer of which

he is an officer, director or 10 percent stockholder to report all holdings and all changes in the beneficial ownership of equity securities

of that issuer held by the partnership. The former rule permitted

the person filing the report to elect whether he should file such reports

or reports reflecting his individual interest only. Rule X-16A-4

was amended in order to clarify the prior rule, and to reduce the

period of time during which the exemptions specified in the rule

were effective from two years to one year. Rule X-16A-8 established

for the first time a complete set of instructions to guide trustees in

filing reports. Rule X-16A-9 is a new rule providing all exemption

for transactions in which the amounts involved are so small that

there appears to be no public interest in requiring reports of the

transactions when they occur. Rule X-16A-IO was adopted in

order to exempt from section 16 (b) those transactions which need

not be reported pursuant to the requirements of section 16 (a).

Rule X-16B-2 was amended to broaden the prior rule governing

distributions of securities by providing that the exemption would

be available for transactions of purchase and sale in the course of a

distribution of a block of securities on behalf of a security holder not

standing in a control relationship to the issuer. The prior rule was

applicable only when the distribution was on behalf of the issuer or

a person standing in a control relationship to the issuer. Rule

X-16B-3 was amended to broaden the exemption applicable to

acquisitions of stock pursuant to a bonus or similar plan so that

nontransferable options might have the benefit of the rule. Rule

X-16B-5 was amended in order to clarify a rule that had been the

subject of many requests for interpretation. The clarification was

not intended as a change in the substance of the rule.
46 SECURITIES AND EXCHANGE COMMISSION

LITIGATION UNDER THE SECURITIES EXCHANGE ACT OF 1934

Following is a summary of the more significant aspects of the civil

litigation in the courts in which the Commission participated during

the fiscal year.

During the fiscal year the Commission obtained a preliminary

injunction against the broker-dealer firm of J. Arthur Warner and Co.

and others." Defendants were alleged to have obtained the trust

and confidence of customers who were unfamiliar with securities and

finance by falsely representing that the customers would receive

impartial investment advice with respect to the purchase and sale

of securities and that the defendants would at all times act in the

best interests of customers, whereas defendants grossly overtraded

the accounts of the customers for the purpose of taking large commissions and large profits for the defendants, to the great financial

loss of customers.

It was also charged that the defendants, without the knowledge

or consent of customers, arranged for collateral bank loans to finance

the purchase of additional securities for such customers, and induced

the customers to sell high-grade, conservative securities, to withdraw

funds from savings banks, and to sell United States savings bonds,

to entrust the proceeds and funds to the defendants to purchase other

securities on the false representation that they were as safe as government bonds and deposits in savings banks and to purchase specific

securities on the basis of numerous fraudulent representations as to

safety of principal, capital appreciation, and increased income.

At the request of the Commission, the court entered an order

restraining the defendant J. Arthur Warner & Co. Inc. from permitting the withdrawal of capital from the corporation pending the

further order of the court. The Commission asked the court to

notify the customers of the firm, at the proper time, of the manner

in which the affairs of the customers were handled by the defendants

and to give the customers an opportunity to establish any claims

they may have for redress."

Injunction proceedings were also instituted against Lawrence J.

Raymond, Malcolm L. Saunders, and James J. MacKnight,20 partners

of Raymond & Company, a registered broker-dealer. Defendants

organized and became the sole trustees of a Massachusetts voluntary

trust operating under the name of Collective Trading Fund. The

customers of Raymond & Company were induced to purchase shares of

the Fund on the representation that they were purchasing shares of

an investment trust, the assets of which would be invested in sound,

marketable securities and that the Fund was entirely separate from

the partnership of Raymond & Company. Defendants commingled

CIvil Action No. 51-1036, D. Mass

See part VIII for a dsscriptron of the criminal action instituted in connection with this case.

CIvil ActIOn No. 52-1181, D. Mass.

"

"

"
NINETEENTH ANNUAL REPORT 47

the assets of the Fund with the capital of Raymond & Company.

The investors were not told that the capital of Raymond & Company

was substantially impaired and that, without appropriating the

assets of the Fund, the broker-dealer firm would be insolvent. Purported dividends were paid to shareholders of Collective Trading

Fund which, the Commission charged, were a return of capital and

not income. Pursuant to the Commission's request a temporary

restraining order was entered and a receiver appointed for Raymond

& Company and defendants were restrained from disposing of the

assets of the Fund. A decree permanently enjoining Saunders

and MacKnight from further violating the provisions of the statutes

was entered and the case was dismissed as to Raymond, who died

during the pendency of the litigation.

Failure to maintain and keep current the books and records as required by the Commission's rules and the failure to permit a representative of the Commission to have access to such books and records

for the purpose of examination led to the filing of a complaint against

Edward H. Martin, individually and doing business as E. H. Martin

and Co., a registered broker-dealer." In addition, the complaint

charged that a report of financial condition required by the Commission's rules and filed by Martin was false and misleading in that it

failed to disclose certain liabilities. Upon motion of the Commission

the court entered a temporary restraining order and appointed a receiver to conserve the assets of the defendant. The defendant failed

to answer the Commission's complaint and a final judgment was

entered upon such default and the receivership continued.

The Commission filed a complaint against W. ECM'leLutts, doing

business as W. E. Lutts & Company," a registered broker-dealer,

charging that the defendant had been soliciting and accepting the

deposit of money and securities from customers and representing that

he was ready and able to accept customers' orders and to make prompt

settlement, without disclosing that his liabilities exceeded his assets

and he was unable to meet his current liabilities. The complaint

further charged that the defendant had not made and kept current

books and records relating to his business as required by the rules of

the Commission, that he submitted false financial statements to the

Commission, and that he converted to his own use securities which had

been entrusted to him for safekeeping. The defendant consented to

the entry of a final judgment permanently enjoining him from further

violations of the statute.

In S. E. O. v. Zippin & Oompany,23 the Commission charged that

Zippin & Company, a registered broker-dealer, had engaged in a

course of business which operated as a fraud and deceit in that its

21 CiVIl Action No. 2245, D. N. Mex.

CiVIl Acnon No. 1081, D. ~. H.

"Civil ActionNo 53C5-3, N. D. Ill.

"
48 SECURITIES AND EXCHANGE COMMISSION

liabilities exceeded its assets and it was unable to meet its current

liabilities, and it had made untrue and misleading statements concerning its financial condition. At the request of the Commission a

temporary restraining order was entered and a receiver appointed.

Subsequently, the defendant consented to the entry of the final judgment permanently enjoining the company from further violations of

the statutes.

In S. E. O. v, Stanley Pelz &; 00., Inc. and Stanley A. Pelz,24 the

complaint alleged that the defendants permitted the firm's aggregate

indebtedness to exceed 2000 per centum of its net capital in violation

of the Commission's rules. The defendants had been warned several

times to bring the firm's financial condition into line with the Commission's requirements but failed to do so. The defendants consented

to the entry of a final judgment.

In a broker-dealer revocation proceeding against Henry P. Rosenfeld and others, Samson Wallach, Sr., a salesman of Rosenfeld, had

been found by the Commission to have violated the antifraud provisions of the Securities Act and Securities Exchange Act and to have

been a cause of the order revoking Rosenfeld's registration. He filed

a petition for review contending that the Commission had no jurisdiction to name as a respondent a salesman not registered as a brokerdealer. The Court of Appeals for the District of Columbia sustained

Wallach's petition for review." On remand the Commission dismissed the administrative proceeding as to Wallach. While the

matter was in litigation, Wallach became sales manager for another

registrant, Securities National Oorporation. After a further proceeding

the Commission, relying on the record and findings in the Rosenfeld

case and certain additional evidence, revoked the registration of

Securities National Corporation because of Wallach's association with

it.26 Securities National and Wallach filed petitions with the Court

of Appeals for the District of Columbia to review this action. These

petitions were dismissed on ptocedural grounds, the court holding,

among other things, that since Wallach had declined to become a

party to the administrative proceeding he could not invoke the

review jurisdiction of the court."

Participation as Amicus Curiae

During the fiscal year the Court of Appeals for the Ninth Circuit

handed down its decision in Frati v. Robinson 28 in which the Commission participated as amicus curiae. The court, agreeing with the

views expressed by the Commission, held: (1) that rule X-lOB-5

Civil Action No. 7\}-188, S. D. N. Y

.. 202 F. 2d 462 (1953)

.. Secunties Exchange Act release No. 4866 (May 29, 1953).

17206 F. 2d 486, 488 (1953) .

.. 203 F. 2d 627 (1953), reversing the judgment of the Umted States District Court for the Western Distnct

of Waslungton, previously discussed in the 18th Annual Report, p, 77.

" •

•
NINETEENTH ANNUAL REPORT 49

under section 10 (b) of the Securities Exchange Act applies to all

fraudulent and deceptive securities transactions involving the use of

the mails or instruments of interstate commerce, and is not limited,

as defendants contended, to transactions in securities traded on

exchanges or traded over the counter by professional brokers and

dealers; (2) that a private civil action for damages may be maintained by a seller of securities injured by a violation of rule X-lOB-5;

(3) that alleged uses of the mails to effect payment for, and to obtain

delivery of, the purchased securities were sufficient under rule X-lOB5, and that it was not necessary that the mails or instruments of

interstate commerce be used to transmit the particular misrepresentation complained of; and (4) that the statute of limitations reference

in a rule X-10B-5 action for damages is the statute of limitations of

the forum jurisdiction applicable to actions for fraud.

In Falco v. Donner Foundation, Inc.29 an action was brought pursuant to section 16 (b) of the Securities Exchange Act to recover

profits resulting from certain purchases and sales of Pittsburgh Steel

Company equity securities by the defendant, a 10 percent stockholder. Both the purchases and sales involved in the litigation were

executed simultaneously. The stockholder plaintiff in the action

computed substantial profits by adding dividends which had been

declared to the price at which the securities were sold. The Commission filed a brief amicus curiae taking the position that, although

the transactions were subject to section 16 (b), the prices at which

they were executed gave rise to no profit. The court agreed with

the views expressed by the Commission. An appeal to the United

States Court of Appeals for the Second Circuit is pending.

In Pellegrino v. Wright the Commission argued, amicus curiae, that

section 16 (b) did not impose a penalty, and that therefore the right

of action survived after the death of the defendant. The District

Court for the District of Maryland agreed with this construction and

refused to dismiss an action brought under that section against the

estate of an officer who had engaged in short-term trading in the

securities of his company."

Further proceedings were had during the 1953 fiscal year in two

section 16 (b) cases discussed in the 18th Annual Report," In

Jefferson Lake Sulphur Go. v. Walet the United States Court of

Appeals for the Fifth Circuit affirmed the decision of the District

Court granting judgment in the full amount claimed by the plaintiff."

In Pellegrino v. Nesbit33 the United States Court of Appeals for the

Ninth Circuit reversed a decision of the United States District Court

.. Civil Action No. 76-284, s.:n.:N. Y

.. No. 5940.

II p. 78.

u202 F. 2d 433.

II 203 F. 24 (63.

279900-54-5

-

•
50 SECURITIES Am>' EXOlIANGE C.OMMlSSION

for the Southern District of California which refused to permit a

security holder to intervene in a section 16 (b) action. That. case

was remanded to the District Court for appropriate proceedings. .,

Kaiser-Frazer Investigation and Litigation with Otis & Co.

The Commission's investigation into the circumstances surrounding

the failure of a stock offering by Kaiser-Frazer Corporation in early

1948 has resulted in an extensive series of administrative and court

proceedings. Accounts of prior proceedings appear in the 15th,s4

16th,35 and 18th36 Annual Reports of the Commission. At the

beginning of the present fiscal year there were pending before the

Commission an administrative proceeding to determine whether the

registration of Otis & Co. as a broker-dealer should be revoked and

whether it should be suspended or expelled from the NASD, and an

appeal by Otis & Co. from an order of the NASD suspending it from

membership for 2 years.

After the United States District Court for the Southern District of

New York had entered judgment in favor of Kaiser-Frazer in that

corporation's suit against Otis & Co. for breach of its underwriting

contract," the Commission sought and obtained a temporary restraining order from the United States District Court for the Northern

District of Ohio restricting various activities by and with respect to

Otis & CO.38 Shortly thereafter, Otis & Co. filed a petition in the

same court for reorganization under chapter X of the Bankruptcy

Act.39 In its order approving the reorganization petition, the court

restrained all persons from commencing or continuing any actions or

proceedings against the debtor. The Commission, appearing specially in its capacity as the agency charged with the administration of

the Securities Act and the Securities Exchange Act, sought clarification or, if necessary, modification of this order so as to preclude any

question of the propriety of its continuing the prosecution of the two

administrative proceedings pending before it and the injunction action

pending in the District Court. In an order dated April 7, 1952, the

reorganization court construed its previous order as prohibiting the

prosecution of all three proceedings, but modified the order to permit

further prosecution of the Commission's injunction action. The Commission filed a notice of appeal to the United States Court of Appeals

for the Sixth Circuit insofar as the order restrained the Commission

from continuing the prosecution of the two administrative proceedings

pending before it.40

.. pp. 73-77.

.. pp. 5&-59.

It pp. 79-80.

17 Kaiser-Frazer Oorporauon v, Otis &0 Co., CCH Fed. See.L. Serv., par. 90510.

liS. E. C. V. otu &0 Co et al , Civil Action No 28371.

II In re Otis &0 Co., Bankruptcy No. 68511.

41 S. E. C. v, George Hazlett, Trustee, et al., No. 11596.
NINETEENTH ANNUAL REPORT 51

Before the appeal was argued, the United States Supreme Court

denied a petition by Kaiser-Frazer Corporation for a writ of certiorari

to review a decision by the United States Court of Appeals for the

Second Circuit which reversed the judgment against Otis & Co. in the

New York breach of contract action.". Thereafter the reorganization

court granted Otis' motion for dismissal of the proceedings under chapter X and removed the injunction provisions contained in its order approving the petition for reorganization as modified by its order of April

7. On January 8, 1953, the Commission filed a motion in the Sixth

Circuit to vacate or reverse the April 7 order of the reorganization

court on the ground that the controversy was moot and, on February

2, 1953, the Court of Appeals entered an order vacating the order

appealed from. On May 6, 1953, the United States District Court

entered an order dismissing the Commission's action for an injunction.

Meanwhile, on March 23, 1953, the Sixth Circuit had issued its

opinion affirming the approval of the settlement of the stockholders'

actions which had been instituted against Kaiser-Frazer after the

collapse of its stock offering in 1948.42

On March 25, the Commission directed the resumption of its

broker-dealer proceedings against Otis & Co. and, at the same time,

ordered a further public investigation into the 1948 Kaiser-Frazer

stock offering, such investigation to cover the facts and circumstances

surrounding the preparation, filing and review of the registration

statement. After motions by Otis & Co. in the broker-dealer proceedings to direct Commission counsel to incorporate testimony previously

taken and to quash subpoenas or to dismiss the proceedings were

denied, the hearings were resumed on May 5. After a brief session on

that date, the hearings were adjourned until May 26 and thereafter

several days of testimony were heard.

On June 10, 1953, James F. Masterson and D. Bernard Heffernan,

who had been subpoenaed to appear as witnesses in the proceeding

against Otis & Co., filed an action in the United States District Court

for the Eastern District of Pennsylvania in which they sought to

quash the subpoenas and to stay all proceedings pending the disposition of their complaint." The court issued a rule, returnable on

June 24, to show cause why the application for a stay should not be

allowed and ordered all proceedings to be stayed meanwhile. On

June 16, the court issued an order clarifying the rule to show cause to

stay only the return date of the subpoenas served on the plaintiffs in

the action. On the same date, the Commission filed a motion to

dismiss the action and an answer to the rule to show cause."

u 195 F. 2d 838, certiorari denied, 344 U. S. 846.

"Mrulter30n et al. v. Pergament, 203 F.2d 315. A petition to the Supreme Court for a writ of certiorari

was denied on October 5, 1953

.. Civil Action No. 15372

.. On August 21, 1953. after the close of the ftseaI year, the court ordered the complaint dismlssed for

lack of [unsdletron,

•
PART III

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING

COMPANY ACT OF 1935

The Public Utility Holding Company Act of 1935 provides for three

areas of regulation of public utility holding company systems. The

first embraces those provisions of the Act which require the physical

integration of the public utility and related properties of a holding

company system and the simplification of intercorporate relationships

and financial structures of the system. The latter includes the removal of unnecessary holding company complexities, the correction of

inequitable distribution of voting power among security holders, and

the strengthening of the financial position of the system. The second

area covers financing operations of holding companies and their subsidiaries, acquisitions and dispositions of properties and securities by

such companies, their accounting practices and servicing arrangements

and other intercompany transactions in holding company systems.

The third includes a group of provisions of the Act designed to insure

that newly created holding company or affiliate relationships shall

meet prescribed standards and certain other provisions of the Act

requiring a very limited degree of surveillance over exempt holding

company systems.

INTEGRATION AND SIMPLIFICATION-SUMMARY OF DEVELOPMENTS

At the beginning of the fiscal year 1953, there were forty active

registered holding company systems. In addition, there were .five

registered holding companies which had disposed of all of their utility

subsidiaries and were in the final stages of liquidation. These comprised a total of 437 companies of which 57 were predominantly holding companies, 192 were electric or gas utility companies and 188 were

engaged in various other businesses. The 57 holding companies were

registered as such and, in addition, three utility companies and one

other company were also registered as holding companies.

By June 30, 1953 the number of active registered holding company

systems had been reduced to 35. In addition there were 12 registered

holding companies which no longer had any utility subsidiaries. Eight

of the latter number were in process of final liquidation. The aggregate of all companies included in the foregoing totaled 385, of which

48 were holding companies, 173 were electric or gas utilities and 164

were nonutility companies. r ./"

The .fiscalyear 1953 witnessed substantial progress in clearing up the

remaining problems under section 11 of the Act. Forty-six companies

with aggregate assets of $788 millions were divested by registered

holding company systems.

52

-
 
NINETEENTH ANNUAL REPORT 53

Electric, gas and nonutility companies divested as not retainable under the Public

Utility Holding Company Act of 1935 and not subject to the Act as of June 30, 1953

Dec. 1. 1935 to June 30. 1953 July 1. 1952 to June 30. 1953

Type of companies Number Number of Assets I of Assets I

companies companies

Electric utility _________________________________ 251 $9,071, 553. 596 11 $619,349, 751 Gas utility _____________________________________ '151 738, 171,238 5 77,494, 191 N onutility _____________________________________ 410 1.681,812. 137 '30 91.646, 645

TotaL ___________________________________ 812 11. 497. 536, 971 46 788. 490. 593

I As of year end next preceding date of divestment and before deduction of valuation reserves . 5 compames (Southern Natural Gas Corp and subsidiaries) WIth assets of $92.803.147, previously classi- fied as gas companies divested hut still subject to the Act, ceased to be subject to the Act as of Apr 8, 1953, and these cumulative totals have been adjusted accordmgly Assets of 10 small companies are not avatlable,

INTEGRATION AND SIMPLIFICATION-INDIVIDUAL SYSTEMS

American Power & Light Co.

Since the Commission issued its order on August 22, 1942, requiring

American Power & Light Co. to dissolve, numerous plans have been

filed by the company under section l1(e) of the Act for the purpose

of compliance with this order. These developments are described in

previous annual reports.

During the past fiscal year the company filed a plan providing for

its final liquidation by means of the distribution of its remaining assets

totaling approximately $7,000,000 to the holders of its common stock,

the only securities of the company remaining outstanding. These

assets consisted of cash, United States Government securities and 10

percent of the outstanding common stock of Portland Gas & Coke

Company. The Commission approved the plan on March 31, 1953,1

and on May 15, 1953, the United States District Court, District of

Maine, also approved the plan and directed its enforcement." No

appeal was taken.

On September 2, 1953, the company distributed to the holders of

its common stock $0.95 per share in cash, plus one share of Portland's

common stock for each 43 shares of Power & Light's stock held. This

resulted in the disposition by Power & Light of all of its holdings of

Portland stock.

American Natural Gas Co.

On September 3, 1952, the Commission ordered hearings reconvened 3 for the purpose of taking testimony on the question of the retention of the Milwaukee Solvay Coke Company in the American Natural

Gas Company System. In its order dated December 30, 1947, approving a plan for the reorganization of United Light and Railways

Company and American Light & Traction Company (now American

I Holding Company Act release No.l1791.

2 Civll Action No. 131. unreported,

I Holding Company Act releases Nos. 11464, 11512.

•

•

• •
54 SECURITIES AND EXCHANGE COMMISSION

Natural Gas Company) the Commission had reserved jurisdiction to

pass upon this question, because it was anticipated that Milwaukee

Gas Light Company, the immediate parent of Solvay, would convert

to natural gas in which event the retain ability of the coke and gas

manufacturing facilities of Solvay might become questionable under

the standards of section l1(b)(I) of the Act.' The matter was pending

at the end of the fiscal year.

American Water Works & Electric Company, Inc.

As described in the 18th Annual Report, the United States District

Court, District of Delaware, entered its order on September 17, 1952,6

approving and directing enforcement of the Commission's order of

March 17, 1952,6approving the payment of a premium of $10 per

share, plus compensation for delay, on the $6 Cumulative Preferred

stock of Water Works. The company had previously liquidated and

dissolved in compliance with section l1(b). The additional payments

were made on November 12, 1952.

Central Public Utility Corporation

This system had consummated four reorganization plans under

section Ll Ie) prior to January 1953. In brief, this accomplished the

liquidation of substantial amounts of system debt, the retirement of

the publicly held preferred stock of Consolidated Electric and Gas

Company, a subsidiary holding company, and the recapitalization of

the top holding company on a one stock basis. These plans and the

United States district court enforcement proceedings in connection

therewith are described in the 18th Annual Report. Following the

consummation of these four plans the Commission granted applications for orders under section 5(d) of the Act declaring that Consolidated Electric and Gas Company; 7 and Christopher H. Coughlin,

W. T. Crawford and Rawleigh Warner, Voting Trustees under a voting

trust agreement dated August 1, 1932,for the common stock of Central

Public 8 had ceased to be holding companies.

During the past year Central Public Utility Corporation, the top

holding company, .filedanother plan which provided for the distribution to its common stockholders of all of its holdings of the common

stock of Central Indiana Gas Company and for the dissolution of two

wholly owned subsidiaries, Central Natural Gas Corporation and

Islands Gas and Electric Company," Hearings were held on the plan

in June 1953, but at the end of the fiscal year the matter had not been

determined by the Commission.

, Holding Company Act release No. 7951

•Inre American Water Woru & Eledric Co., Inc., et aI., 107 F. Supp. 350 (D. Del. 1952)•

Holding Company Act release No. 11095.

, Holding Company Act release No. 11694.

Holding Company Act release No. 11732

Holding Company Act release No. 11898.

•

•

•

•
NINETEENTH ANNUAL REPORT 55

On February 2,1953 the Commission approved a plan under section

11 (e) which provided for the dissolution of Central Securities Transfer

Company, an inactive subsidiary of Central Public."

Cities Service Company

Previous annual reports of the Commission have summarized the

numerous proceedings under section 11 which had as their ultimate

objective the disposal by Cities Service Company of all of its public

utility interests. The 18th Annual Report described the plan for the

reorganization of Arkansas Natural Gas Corporation ("ARKNAT"),

a registered holding company subsidiary of Cities, which was approved

by the Commission on October 1, 1952. Subsequently, the Commission applied to the United States District Court, District of Delaware,

for an order approving and enforcing this plan.

Objections were filed with the court by the Public Common Stockholders Committee and the Class A Stockholders Committee, who

attacked the Commission's findings approving the terms of the settlement of claims against Cities, particularly the claims arising out of the

marketing of ARKNAT's Class A stock in the years 1929-30. The

court was called upon to decide whether it was appropriate for the

Commission to dispose of the claims controversy in its consideration

of the amended plan rather than through the processes of litigation

and whether the fairness of the settlement provided by the amended

plan was supported by substantial evidence. The district court

affirmed the Commission's determinations with respect to both questions and directed enforcement of the plan." Upon appeal by the

Public Common Stockholders Committee, the order of the district

court was affirmed by the United States Court of Appeals, Third

Circuit, which pointed out in its opinion that the stockholders had

not been affected adversely by the plan and that they should not be

heard to complain." A petition for certiorari was denied."

In connection with the effectuation of the plan the Commission acted

on a number of subsidiary matters. On May 4,1953, the Commission

approved an application of Arkansas Fuel Oil Corporation, formerly

ARKNAT, to sell to the public $23,000,000 of debentures." Subsequently, due to failure of the company to receive any bids, the

application was amended to propose the issuance and sale of

$23,000,000 of 60 day notes." The Commission approved the amendment, and its order was approved by the district court."

I. Holding Company Act release No. 11693.

II Inra Arka1l.la3 Natural GaB Corp., 109 F. SuPP. 522 (D. DeI. 191>3).

n Inre Arka1l.laB Natural GaB Corp., et al .. 204 F. 2d 797 (3d Cit. 191>3).

IJ-U. S.- (Octoher26,191>3).

Holding Company Act release No. 11891.

II Holding Company Act release No. 11969.

II Holding Company Act release No. 11998.

"
56 SECURITIES AND EXCHANGE COMMISSION

A similar problem arose in connection with the proposed offering of

$25,000,000 principal amount of bonds by Arkansas Louisiana Gas

Company, formerly a subsidiary of ARKNAT. The company offered

these bonds at competitive bidding pursuant to _the provisions of the

original plan but rejected the two bids received because of high

interest costs. Subsequently it made application to the Commission

to approve .the elimination of this provision from the original plan

and indicated that it was considering alternative methods of obtaining

funds to retire its funded debt and to finance its construction program.

The Commission approved amendments to the plan covering new

financing proposals on July 22, 1953, and its order was approved by

the district court."

On October 7, 1953 the Commission issued an order pursuant to

section 5 (d) of the Act declaring that Arkansas Fuel Oil Corporation

had ceased to be a holding company."

After the close of the fiscal year, Cities sold its entire interest of

33,746 shares of common stock of Republic Light Heat & Power

Company, Inc. to National Fuel Gas Company, a nonaffiliated registered holding company," in compliance with the Commission's Order

of October 12, 1944 directing Cities to dispose of its utility investments." In addition, Cities has advised the Commission pursuant

to rule U-44 (c) that it had sold its entire interest in the capital stock

of Tri-City Gas Company on July 16, 1953.

Cities had pending at the close of the fiscal year an application for

approval by the Commission of the proposed sale by competitive

bidding of its holdings in The Gas Service Company. Because of

unfavorable market conditions, Cities has requested that the Commission defer action on the matter."

Derby Gas & Electric Corporation

Following the divestment by Ogden Corporation of its controlling

interest in Derby Gas & Electric Corporation in 1943, Derby Corp.

has functioned solely as a holding company over The Derby Gas and

Electric Company, Wallingford Gas Light Company, Danbury and

Bethel Gas and Electric Light Company and Derby Gas and Electric

Corporation of Connecticut, all of which subsidiaries are public utilities

under the laws of the State of Connecticut.

During the past fiscal year Derby Corp. filed a plan under section

11 (e) of the Act providing, among other things, for the merger of all

the companies in the system into a single operating utility company,

incorporated in Connecticut, whose name is proposed to be changed

to The Housatonic Public Service Company. Housatonic will have

J' Holding Company Act release No. 12070.

Holding Company Act release No. 12166-

JI Holding Company Act release No. 12061.

1017 S. E. C. 5

.. Holding Company Act release No. 12014.

"

•
NINETEENTH ANNUAL REPORT 57

authorized capital stock of $10,000,005, divided into 666,667 shares

with a par value of $15 each, and an authorized funded debt in a principal amount not exceeding $10,000,000. Upon completion of the

merger Housatonic will have no public utility subsidiaries and therefore will not be subject to the Act. Hearings on the plan were held,"

and on October 9, 1953, the Commission entered an order approving

the plan." The United States District Court, District of Connecticut

approved and enforced the plan on November 16, 1953.24

Eastern Utilities Associates

Except for increases in stock ownership in its subsidiaries, no changes

have occurred in the organization of the Eastern Utilities Associates

holding company system in the past fiscal year.

By order dated April 4, 1950, the Commission directed EUA either

to terminate its existence or to acquire a minimum of 90 percent of

the outstanding common stock of each of its subsidiaries and reclassify

its common and convertible shares into a single class of stock. In

the event the latter alternative was chosen, EUA was also directed

to cause Blackstone Valley Gas and Electric Company, one of its

subsidiaries, to dispose of its gas utility properties." As described

in the 18th Annual Report, EUA elected the second alternative in its

Amended Plan No.4, which the Commission approved in its order

dated December 18, 1952. The plan was approved and ordered enforced by the United States District Court, District of Massachusetts,

on February 10, 1953.26 No appeal was taken. Subsequently EUA

increased its holdings of the common stocks of all of its direct subsidiaries to amounts in excess of 97 per cent as required by the plan.

To finance the acquisition of publicly held stock of one of its subsidaries EUA borrowed $9,000,000 from commercial banks. It is expected that these loans will be refunded with $7,000,000 of collateral

trust bonds and other funds as provided by the plan.

The plan also provided for certain supervision over the selection of

the initial Board of Trustees of EUA to take officefollowing the recapitalization of the company. However, after approval of the plan by

the district court, the parties to the proceedings did not agree to the

nominations to the new Board of Trustees submitted by EUA to the

Commission. Accordingly, the Commission denied a supplemental

application on February 26, 1953, for approval of the new Board."

Subsequently, upon petition of EUA, the district court entered a

further order which suspended, among other things, the operation

of the plan's provision for the selection of EUA's reconstituted Board

2t Holding Company Aot release No. 11834.

21 Holding Company Act release No. 12165.

"In re Derby Gas Electric Corporation, unreported (D. Conn. No. 4624,1953).

saHolding Company Act release No.lI784.

"'In re Eaatern Utllit,a ABlociata, unreported (D. Mass. No. 52-1457,February 10, 1953).

n Holding Company Act release No. 11733.

'"
58 SECURITIES ..AND EXCHANGE COMMISSION

of Trustees and granted the company leave to file an amendment with

the Commission proposing to increase the size of EUA's board and to

omit the regular annual meeting of shareholders in 1953. The Commission's order of May 14, 1953/8 approving this amendment was

ordered enforced by the district COurt.29

Electric Bond and Share Company

As a result of numerous plans of reorganization, Electric Bond and

Share Company had reduced its holdings by the beginning of the

fiscal year to interests in four companies, Ebasco Services, Inc. (100

percent), Two Rector Street Corporation (100 percent), American &

Foreign P wer Company (54.6 percent), and United Gas Corporation

(22.5 percent), plus other miscellaneous investments. Such plans and

the proceedings before the Commission and the courts relating thereto

have been summarized in previous annual reports.

On June 13, 1952, the company filed a final comprehensive plan

which was designed to complete the resolution of its problems under

section 11 of the Act. This plan, which provided for the transformation of Bond and Share to an investment company, was described in

the 18th Annual Report. The Commission was unable to find the

plan fair and equitable to the persons affected thereoy and, accordingly, withheld its approval pending the filing of appropriate amendments.s" Among the objectionable features of the plan were the

provisions for a discount of at least 25 percent on the price at which

Bond and Share was to offer its holdings of United Gas stock to its

stockholders, the provision for a three year period within which to

distribute the United Gas stock, the absence of cumulative voting

provisions in Bond and Share's charter, and a provision that Bond

and Share would become exempt as a holding company pursuant to

section 3 (a) (5) automatically upon completion of the proposed

distribution of United Gas stock. Satisfactory amendments Were

filed and on February 20, 1953, the Commission approved the plan

as modified."

On application by the Commission to the United States District

Court, Southern District of New York, opponents of the plan contended that the Commission lacked power to permit Bond and Share

to embark upon an investment program before it became entitled to

an exemption under section 3 (a). The district court agreed with

this view." The Commission filed a motion for reargument, after

which the court ordered the proceedings returned to the Commission

and authorized Bond and Share to file appropriate amendments to

the plan. The plan was subsequently amended by placing certain

j8 Holding Company Act release No. 11923.

In re Ea3tern Utll,t1a A88OClatU, unreported (D. Mass. No. 52-1457, May 18, 1953).

JO Holding Company Act release No. 11675.

II Holdmg Company Act release No. 11725.

II In re Electric Bond and Share Co., unreported (8. D. N. Y. No. 83-49, June 19, 1953).

"
NINETEENTH ANNUAL REPORT 59

.additional restrictions on the investment program of Bond and Share

until such time as the company should have secured an exemption

from the provisions of the Act and by the insertion of a commitment

by Bond and Share to file and prosecute diligently an application for

such exemption within a prescribed period of time following disposition of certain of its portfolio securities. The plan as modified was

approved by the Commission on July 15, 1953.33 Shortly thereafter

the district court approved the amended plan and directed its enforcement."

The plan as finally approved provides, among other things, that

Bond and Share's holdings of United Gas common stock will be

reduced to less than 5 percent of the total amount outstanding,

that within 60 days after completion of the disposition program

embodied in the plan Bond and Share shall file with the Commission

an application for exemption under section 3 (a) (5), and that, during

the period from the effective date of the plan to the date exemption

is granted, Bond and Share "ill conform to the substantive requirements of the Investment Company Act of 1940 limiting' its investments to those normally permitted for registered, closed-end, nondiversified investment companies. On October 5, 1953, Bond and

Share distributed 892,561 shares of United Gas stock to its stockholders.

An appeal involving Bond and Share which had been pending in

the United States Court of Appeals, Second Circuit, for nearly 2

years was disposed of during the fiscal year. Pursuant to plans

filed in 1945 and 1946 which were approved by the Commission and

ordered enforced by the district court, Bond and Share had paid to

the holder of each share of its $5 preferred stock $100 in cash and

also had delivered to each such holder a certificate evidencing the

right to receive any additional amounts which the Commission or

the courts might approve or direct. Subsequently, the Commission

determined that no additional amounts should be paid to holders of

the certificates. Appellants, a group of $5 Preferred Stockholders of

the company, had appealed from an order of the district court declaring these certificates to be void. After a protracted period of failure

on the part of the appellants to prosecute the action the Commission

moved successfully to dismiss the appeal."

Electric Power & Light Corporation

The Findings, Opinion and Orders of the Commission dated April

21 and May 23, 1952,36 approving and denying claims for fees and

expenses submitted by the numerous participants in the proceedings

for the reorganization and dissolution of Electric Power & Light

II Holding Company Act release No 12055.

"In re Eltctrlc BOfid and Share Ca., unreported (S. D. N Y. No. 83-49, July 16, 1953).

U In re Electric BOfid and Share Co., unreported (C. A. 2 No. 22028, June 4, 1953).

,. Holding Company Act relesses Nos. 11175 and 11278.
60 SECURITIES AND EXCHANGE COM:MISSION

Corporation were described in the 18th Annual Report. Prior to

the close of the preceding :fiscalyear, the Commission had applied to

the United States District Court, Southern District of New York,

for approval and enforcement of these orders. The application was

opposed by several fee claimants whose claims had been allowed by

the Commission in reduced amounts. The district court, in its order

dated February 18, 1953,37sustained the Commission's determinations. Four of the fee claimants :filed notices of appeal from the

district court's order with the United States Court of Appeals, Second

Circuit on April 10, 1953.38 No decision had been rendered at the

close of the fiscal year.

'Engineers Public Service Company

The Commission's Findings, Opinion and Order dated March 26,

1952, approving and denying fees and expenses claimed by participants in the proceedings for the reorganization and dissolution of

Engineers Public Service Company 39 was described in the 18th

Annual Report. On May 8, 1952, the Commission made application to the United States District Court, District of Delaware for

approval and enforcement of its order. No decision had been rendered

at the close of the fiscal year.

General Public Utilities Corporation

General Public Utilities Corporation is the top holding company

which emerged from the reorganization of the former Associated Gas

and Electric Company system. Steps taken in earlier years to bring

about integration and simplification of this system are summarized

in the 15th and 16th Annual Reports. In the 18th Annual Report

there was described the order of the Commission dated December 28,

1951,40in which, among other things, GPU was directed to dispose

of its interests in Northern Pennsylvania Power Company and its

subsidiary, Waverly Electric Light and Power Company.

During the past fiscal year the GPU submitted proposals to comply

with the Commission's order and also :filedan application requesting

that certain portions thereof be modified so as to permit the company

to retain the electric properties of Northern Pennsylvania Power

Company and the Waverly Electric Light and Power Company as

part of its integrated electric system in Pennsylvania and New Jersey.

The two proceedings were consolidated and hearings were held on

September 15, 1953.41 The matter is pending before the Commission.

International Hydro-Electric System

The IRES system has been operated since 1944, pursuant to sect~on II Cd)of the Act, by Bartholomew A. Brickley as Trustee under

f1 In re Eledric Power ct Light Corp., et al., unreported (S. D. N. Y. No. 49347, February 18, 1953).

II C. A. 2 No. 22, 766, April 10, 1953.

.. Holding Company Act releases Nos. 11096 and 10306.

41 Holding Company Act release No. 10982.

f1 Holding Company Act release No. 12056.
NINETEENTH ANNUAL REPORT 61

appointment by the United States District Court, District of Massachusetts. A description of the system at the time of its registration

and the earlier steps taken by the Trustee toward the eventualliquidation and dissolution of IRES and subsequent proposals to become

an investment company are discussed in the 15th and subsequent

annual reports.

As noted in the 18th Annual Report the Commission issued its

Findings, Opinion, and Order on June 5, 1952, approving the execution by the Trustee, upon satisfactorily resolving the tax problems

involved, of definitive contracts for the sale of all of the propert. es

of Eastern New York Power Corporation ("ENYP"), a subsidiary,

and the interests of IRES in two small subsidiaries." On March 12,

1953, the Trustee requested approval by the Commission of definitive

contracts made by him pursuant to the order of June 5, 1952. The

Trustee also requested authorization to apply the proceeds derived

from the sale of the aforementioned properties and securities (i) to

the retirement of ENYP's first mortgage 3X percent bonds due in

1961 in the principal amount of $7,886,000, and (ii) to the retirement

of the 30,000 shares of preferred stock of ENYP of the par value of

$100 per share or as a distribution to IRES as the holder of all of

ENYP's common stock, or both, and as respects any amounts so

received by IRES, to apply the same to the payment of its bank

indebtedness in the principal amount of $6,050,000. The proposal

was authorized by the Commission on April 13, 1953,43and approved

by the United States District Court, District of Massachusetts on

June 5, 1953.44 After the close of the fiscal year, on an appeal taken

by the City of Plattsburg, New York, from that portion of the District Court's order which approved a contract between the Trustee

for the sale of certain properties to New York State Electric and Gas

Corporation, the decision of the District Court was affirmed."

Other sales of properties were approved by the Commission on

April 28, 1953,46and by the district court on June 16, 1953. Representatives of the Class A stockholders of IRES objected to approval

of the proposal on the grounds, among other things, that the sale of

the properties was no longer necessary because of changed conditions,

that competitive conditions had not been maintained, and that the

proposed sale price was inadequate. These objections were overruled

by the court."

On September 30, 1953, after the close of the fiscal year, the Commission approved Step III of the amended plan filed by the Trustee

"Holding Company Act release No. 11299

.. Holding Company Act release No. 11840.

Unreported (D. Mass. No. 2430, June 5,1953).

II CUll of PlatUbuTf/ v. Bri£klell,- F. 2d, -(C. A. 1, 1953).

II Holding Company Act release No. 11873.

Unreported (D. Mass. No. 2430, June 16, 1953).

•

"

"
62 SECURITIES AND EXCHANGE COMMISSION

which provided for (1) the retirement of IRES' outstanding cumulative preferred stock, $3.50 series, $50 par value, by the issuance to

the holders of each share thereof of 5H common shares of Gatineau

Power Company, together with a cash payment in an amount equal

to the excess of any dividends paid on such Gatineau stock over

the amount of quarterly payments in liquidation paid on the preferred

stock from April 15, 1953, to the effective date of the exchange; and

(2) for the nomination and election of a new board of directors of

IHES.48 The Commission denied a petition for rehearing and related

relief." Thereafter the district court approved Step III. 50

Interstate Power Company

Interstate Power Company (Del.) is an operating company which

is also a registered holding company. It and its two subsidiaries are

engaged principally in the electric utility business in Minnesota, Iowa,

Wisconsin, Illinois, and South Dakota.

During the 1953 fiscal year the company has submitted proposals

to the Commission for the solution of its existing section 11 problems

which relate to the retainability of certain gas and transportation

businesses along with its electric utility system. The Delaware company proposed, among other things, to sell its interest in its larger

subsidiary, Interstate of Wisconsin, to Wisconsin Power and Light

Company, a nonaffiliate." At the close of the fiscal year the matter

was pending before the Commission.

Long Island Lighting Company

In 1949 the Commission approved a comprehensive plan pursuant

to section 11(e) providing for the consolidation of Long Island, then

a registered holding company, and its two subsidiaries and for tbe

recapitalization of the surviving consolidated corporation. 52 The plan

was ordered enforced by the district court on February 10, 1950.53

A detailed description of this plan appears in the 16th Annual Report.

On February 3, 1953, the Commission issued its Findings, Opinion

and Order approving and denying applications for fees and expenses

claimed by the various participants in the reorganization proceedings."

The committee representing the preferred stockholders of Long Island

submitted claims for compensation which included an item representing expenditures incurred by the committee subsequent to the consummation of the plan in connection with a solicitation of proxies for

the nomination and election of the initial board of directors of the

new Long Island company. The Commission denied this request on

.. Holding Company Act releases Nos. 12150 and 12193.

.. Holdmg Company Act release No 12204.

.. Unreported (D. Mass Civrl No. 2430, November 16,1953).

Holding Company Act release No. 12078.

Holding Company Act releases Nos 8449,9473.

"In re Long Island LlUhtmg Company, et al .. 89 F. Supp. 513 (E. D. N. Y. 1~50)

.. Holding Company Act release No. 11695.

"

"

•
NINETEENTH ANNUAL REPORT 63

the ground that the committee's activities regarding solicitation of

proxies was unnecessary and that no valid reorganization purpose

had been served thereby, since the plan itself specified the election

procedures to be followed.

On February 25, 1953, the Commission filed a supplemental application with the United States District Court, Eastern District of

New York, for approval and enforcement of its order. On May 11,

1953, that court entered its order approving the Commission's determinations with respect to all fee claimants except the committee.

The court reversed and remanded that portion of the Commission's

order which denied an allowance to the committee for reimbursement

of proxy solicitation expenses." In its order the court stated that

the Commission's findings of fact and conclusion of law were not

supported by substantial evidence and were not arrived at in accordance with legal standards. The court added that the expenses in

question arose out of the furnishing of desirable information to a

substantial group of stockholders and that, accordingly, the validity

of the committee's claim should have been recognized.

The Commission has filed an appeal from the decision of the district

court with the United States Court of Appeals, Second Circuit."

Market Street Railway Company

Market Street Railway Company was formerly a nonutility subsidiary of Standard Gas and Electric Company. By order dated

October 24, 1950, the Commission had approved a plan for the liquidation and dissolution of Market Street pursuant to section 11 (e).

On November 21, 1950, the United States District Court, Northern

District of California, Southern Division, approved and directed

enforcement of Step I of the plan." This step provided for the settlement of certain claims between Market Street and its affiliates, the

payment of certain fees and expenses to participants in the reorganization proceedings, the payment of a partial liquidating distribution

of $15 per share to the holders of the company's 6 percent cumulative

Prior Preference Stock, and dissolution.

Step II provided for the subsequent payment of such fees and

expenses in connection with the plan as might be awarded by the

Commission, and the distribution of remaining cash of the company

to the holders of Prior Preference Stock. On May 13, 1953,the Commission approved an amendment to Step II, which in substance provided for a second partial distribution of $3.50 per share to the Prior

Preference stockholders, the payment of fees and expenses to certain

participants in the reorganization proceedings, and the distribution

of the remaining cash to the Prior Preference stockholders. The

.. In re Long Island Llghtmg Company, et ai" unreported (E. D. N. Y. No.lOU3, :May 11,1953).

lie. A. 2 No -, (1953),

., Unreported, CIVIl Actron 1\0 29723.
64 SECURITIES AND EXCHANGE COMMISSION

amendment made no provision for severance payments to former

employees of Market Street." Upon application by the Commission,

the district court approved the amendment and directed its enforcement on July 3, 1953.59

An appeal from an order of the Commission denying the application

for fees and expenses by an attorney participant in the Market

Street reorganization proceedings was terminated during the fiscal

year. In its order approving the plan for liquidation of Market

Street, the Commission denied the claim for fees and expenses submitted by an attorney for a stockholders' committee, who had been

instrumental in affecting the settlement of intercompany claims

between Market Street and Standard Gas, but whom the Commission

found had lost his independence in representing his client. The district court found that the facts of the case did not warrant the denial

in toto of the attorney's fees and remanded the matter to the Commission with instructions to determine the appropriate amount of

such fee. The Commission appealed to the United States Court of

Appeals, Ninth Circuit. On Decernber Ifi, 1951, the court of appeals

reversed that portion of the district court's order which related to the

denial of the attorney's fee application by the Commission. After

reargument of the matter, the court of appeals changed its determination and affirmed the decision of district court on December 22,

1952.&0 No petition for a writ of certiorari was filed.

Middle South Utilities, Inc.

Middle South Utilities, Inc., a holding company organized in 1949,

acquired from Electric Power & Light Company the latter's interests

in Arkansas Power & Light Company, Louisiana Power & Light

Company, Mississippi Power & Light Company, New Orleans Public

Service Company, Inc. and Gentilly Development Company, Inc., a

real estate company.

On March 20, 1953, the Commission issued an order under section

11 (b) (1) directing Arkansas Power to dispose of its steam business

and directing Louisiana Power and Mississippi Power to dispose of

certain water properties." On July 7, 1953, Gentilly was liquidated

and dissolved.

Niagara Hudson Power Corpora tion

The final plan for consolidation and dissolution of the Niagara

Hudson system, which is described in the 16th Annual Report,

brought about the consolidation of the numerous companies of this

system into the present Niagara Mohawk Power Corporation and the

subsequent dissolution of Niagara Hudson .

.. Holding Company Act release No. 11900.

"In re Marka Street Railwav Co., unreported (N. D. Callf. No:29723, July 3,19531

.. In reMarket Strut Railwav:Co., F.:Supp.,~- alfirmed ub.:nom.;S. E. C.:v. Cogan,201F.2d 78 (C. A.

9, 1951).

II Holding Company Act release No. 11782.

•

- ••
NINETEENTH ANNUAL .REPORT 65

In its Memorandum Opinion and Order dated January 14,1953, the

Conuaission authorized and directed Mohawk, as successor in interest

to Niagara Hudson, to pay fees of $428,895 and expenses of $443,598

to various participants in the reorganization proceedings." The fees

allowed several claimants were in amounts less than those requested,

and the claims of others were denied. The application for additional

compensation by a law :firm representing three corporate holders of

Niagara Hudson common stock was denied on the ground that the

:firm did not contribute to the developments or modification of the

plan, and that the firm did not represent the common stockholders as

a class. The Commission also denied in toto the application of

United Corporation, the former parent of Niagara Hudson, for reimbursement of the fees and expenses paid to counsel and other experts

which it had employed in connection with the proceedings. In its

opinion, the Commission stated that United had a statutory duty to

bring about the compliance of its subsidiaries with the standards of

section 11 and for that reason United, and not its subsidiaries, should

bear the expense of such compliance. The Commission also observed

that compliance by its subsidiaries was a necessary prelude to compliance by United itself.

On March 12, 1953, the Commission made application to the United

States District Court, Northern District of New York, for approval

and enforcement of its order. The law firm and United filed objections. On September 15, 1953, the district court affirmed the Commission's order and directed its enforcement." As of October 29,

1953, no appeal had been taken.

Northern New England Company

New England Public Service Company

As a result of simplification proceedings instituted by the Commission under section 11 (b) (2) New England Public Service Company

("NEPSCO") and Northern have been in the process of liquidation

and dissolution. A summary of prior proceedings relating to this

system is set out in the 18th Annual Report. On February 13, 1953,

the Commission approved the amended plans for the final liquidation

and dissolution of Northern and NEPSCO.M The United States

District Court, District of Maine, approved the plan and ordered it

enforced on March 25, 1953.6li No appeal was taken. The plans

provided for the distribution of NEPSCO's portfolio stocks to the

holders of its preferred and common stocks in the approximate proportion of 82 percent to the preferred and 18 percent to the common.

They also provided for the acquisition by Northern, of the portfolio

stocks of NEPSCO allocable to it as the owner of 32.5 percent of

a Holding Company Act release No. 11667.

II In re Niagara Hudstm. Pwer Corp., F. SuPP. (N. D. N. Y., 1953)

.. Holding Company Act release No. 11711.

651n re Northem Ntll" England Companv,111 F. Supp. 354 (D. Me. 1953).

279900-54--6

- - •
66 SECURITIES AND EXCHANGE COMMISSION

NEPSCO's common stock and for the distribution of its remaining

assets to its single class of shareholders. Pursuant to the plans the

assets of both companies, other than cash reserved for reorganization

expenses, have been distributed to their respective security holders.

The North American Company

The plan for the final liquidation was described in the 18th Annual

Report. Upon application by the Commission, the plan was approved

and ordered enforced on December 11, 1952, by the United States

District Court, District of New Jersey." No appeal was taken and

the plan is in process of consummation.

Shortly before the close of the preceding fiscal year, the Commission

approved a plan filed by North American pursuant to section 11 (e)

providing for the dissolution of its investment company subsidiary,

North American Utilities Corporation." This plan was described in

the 18th Annual Report. The United States District Court, District

of Maryland, found the plan fair and equitable and issued its enforcement order on September 16, 1952.68 No appeal was taken.

Northern States Power Company (Minn.)

Northern States Power Company (Del.)

Northern States Power Company (Mian.) is an operating-holding

company engaged, either directly or through its subsidiaries, in the

electric and gas utility business in the States of Minnesota, Wisconsin,

North Dakota, and South Dakota. The system also provides steam

heating, telephone and water services. Approximately 89 percent of

the total consolidated operating revenues of the system are derived

from sales of electricity, 9 percent from gas, and 2 percent from

heating, water, and telephone services.

On September 22, 1952, the Commission instituted proceedings

pursuant to section 11 (b) (1) to determine which of the electric or gas

utility properties of the system constitute integrated systems and

which of the nonutility businesses, if any, could be retained under the

standards prescribed by the Act.69 Hearings were commenced January 28, 1953/° and subsequently the Commission granted the company's motion that these proceedings be consolidated with those

relating to the company's "application for exemption as a holding

company pursuant to section 3 (a) (2) which had been filed on

March 5, 1953. Extensive hearings have been held in the consolidated proceedings."

On June 6, 1952, the Commission filed an application with the

United States District Court, District of Minnesota, for approval and

MIn re The North American Co, et al., unreported (D. N. J. No. 1073-52, Decemberll, 1952).

Holding Company Act release No 11390. .

.. In re North American Uttlsiies Corp, et al., unreported (D. Md. No. 5935, September 16, 1952).

Holdmg Company Act release No. 11498.

Holdmg Company Act release No. 11533.

71 Holding Company Act release No 11762.

"

"

"
NINETEENTH ANNUAL REPORT 67

-enforcement of its order dated April 8, 1952, approving and denying

iees and expenses claimed by the participants in the various proceedings which led to the dissolution of Northern States Power Company

(Del.), formerly a parent of the Minnesota company." A discussion

-of this order and the accompanying memorandum, findings, and

opinion appears in the 18th Annual Report. The court rejected the

-Commission's determination as to the amount of fees to be allowed to

four of the 6 claimants who had filed objections, but sustained the

-Commissiou's position as to the other 2 fee applications." The

'Commission and Standard Gas and Electric Company appealed from

this decision to the United States Court of Appeals, Eighth Circuit.74

The matter was pending in the court of appeals at the close of the

fiscal year.

Pennsylvania Gas & Electric Corporation

As indicated in the 18th Annual Report, the Commission on June 5,

1952,75disapproved a plan which had been submitted by Pennsylvania

-Gas & Electric Corporation ("Penn Corp") to effect its liquidation

and dissolution. In an amended plan, submitted in September 1952,

Penn Corp undertook to make distributions to its stockholders in the

proportions specified by the Commission. It also proposed to change

the form of the allocations so as to distribute separately the common

stocks of its two operating subsidiaries, North Penn Gas Company

and Crystal City Gas Company." The amended plan provided that

the preferred stockholders of Penn Corp would receive all the common

stock of North Penn and 35 percent of the common stock of Crystal

City; and that the Classes A and B stockholders of Penn Corp would

receive 52 and 13 percent, respectively, of the Crystal City common

stock. Penn Corp's preferred stockholders would also receive a cash

payment equivalent to the accrual of dividends thereon from December 31, 1950, to the date of consummation of the plan. After further

hearings, the Commission approved the plan as amended on December 15, 1952.77

Upon application by the Commission to the United States District

Court, District of Delaware, the amended plan was unopposed and

the court approved the plan and ordered it enforced on January 27,

1953.78 No appeal was taken. Penn Corp's board of directors

designated February 19, 1953, as the consummation date of the plan.

Holding Company Act release No. 11145.

73 In re Northern State. Pouier Co, unreported (D. Minn. No. 26i3, Opinion dated January 12, 1953, and

-order dated March 3, 1953).

7. CA-8 Nos. 14871 and 14872

71 Holding Company Act release No. 11298.

"Name since changed to Corning Natural Gas Co.

71 Holding Company Act release No. 11600.

18In Re Penn8ylvania Ga8 ell Electric COTp, et al., unreported (D. Del. No 1513, January 27, 1953).

"
68 SECURlTIES AND EXCHANGE COMMlSSION

Republic Service Corporation

By the beginning of 1948 the Republic Service Corporation system

had been reduced in size to a point where it consisted solely of five

electric utility subsidiaries, all of which were organized and doing

business in the State of Pennsylvania, and one service company

subsidiary incorporated in Delaware.

In its order dated April 29, 1948, the Commission approved a plan

:filedby Republic under section 11 (e) in which the company proposed,

among other things, that Republic organize a new Pennsylvania

corporation to take over all of Republic's assets and liabilities and

issue a single class of new common stock to Republic, which would

deliver all of such stock to the holders of its own preferred stock and

thereafter dissolve. The plan further provided that the new Pennsylvania corporation would apply for an exemption pursuant to section

3 (a) (1) as an intrastate holding company system. The plan was

approved by the Commission 79 and ordered enforced by the United

States District Court, District of Delaware, on May 28, 1948.80 On

August 23 of that year, before the plan had been consummated,

Republic amended its plan, with the court's permission, so as to defer

until not later than December 31, 1953, the organization of the new

Pennsylvania corporation and thereby retain for Republic's stockholders the tax benefits accruing from certain capital loss carry-overs.

The plan also provided that, in lieu of the formation of the new

Pennsylvania corporation, Republic would continue in operation

temporarily as a holding company and recapitalize on a one-stock

basis by distributing 70,324 shares of new $10 par value common stock

to the holders of its outstanding preferred stock. The amended plan

was approved by the Commission," ordered enforced by the district

court by order dated September 17, 1948,82 and subsequently was

consummated. Jurisdiction was reserved by the Commission over

the formation of the new Pennsylvania corporation and related

matters.

Subsequently, Republic sold 1 of its 5 electric utility subsidiaries

and caused the merger of three others. At the beginning of the fiscal

year 1953, the company had interests in only 3 subsidiaries: Brockway

Light, Heat & Power Company, Cumberland Valley Electric Company and Republic Service Management Company.

On November 25, 1952, the Commission approved a proposal of

Republic to exchange its interest in Brockway for 20,150 shares of the

common stock of General Public Utilities Corporation ("GPU"). In

connection with this transaction, Republic consented to the imposition

71 Holding Company Act release No. 8170.

10 In re RepublIC Sercice Corporation, unreported (D. Del. No. 569,May 28, 1948).

11 Holding Company Act release No. ~.

12 In re Republic Service Corporation, unreported (D. Del. No. 569,September 17, 1948).

-
 
NINETEENTH ANNUAL REPORT 69

by the Commission of a condition that it dispose of the GPU stock

within one year or cease to be a holding company.f

Southern Company

.As described in the 18th Annual Report the Commission approved

a plan filed pursuant to section 11 (e) in which it was proposed that

Birmingham Electric Company be merged into Alabama Power Company. M Both companies were subsidiaries of Southern. On November 26, 1952, the United States District Court, Eastern District of

Alabama, approved the plan and ordered it enforced." No appeal

was taken.

Southern Natural Gas Company

Southern Natural Gas Company operates a natural gas pipeline

system extending from gas fields in Texas, Louisiana, and Mississippi

to markets in Alabama, Georgia, and Mississippi.

During the past fiscal year Southern filed a plan pursuant to section

11 (e) providing for the divestment of its entire interest in Alabama

Gas Corporation, which was the company's only public utility subsidiary. The plan proposed that the common stock of Alabama be

distributed pro rata to the holders of the common stock of Southern

at the rate of 0.24306 shares of Alabama stock for each share of

Southern stock. The Commission approved the plan on March 4,

1953,86and on April 8, 1953, after the distribution of Alabama stock

had been completed, the Commission entered a further order pursuant

to section 5 (d) declaring that Southern had ceased to be a registered

holding company."

Standard Power and Light Corporation

Standard Gas and Electric Company

Philadelphia Company

As reported in the 18th Annual Report, Steps I and IA of the

Standard Gas and Electric Company plan were approved by the

Commission on October 1, 1952.88 Step I accomplished the retirement

of Standard Gas' $7 and $6 Prior Preference stocks and Step IA

effected the final settlement of all intercompany claims as between

Standard Gas and its parent, Standard Power. These steps reflected

a compromise effected among representatives of the various participants in the proceedings. These steps were approved and ordered

enforced by the United States District Court, District of Delaware,

on November 7, 1952,89and the distributions required by the plan

were made on December 1, 1952.

a Holding Company Act release No. 11603

.. Holding Company Act release No. 11548.

.. In re Alabama Power Companv. unreported (E. D. Ala. No. 7070, November 26,1952).

II Holding Company Act release No. 11748.

17 Holding Company Act release No. 11824.

IS Holding Company Act release No. 11510.

II In re Stand~rd Gar and EhcIrie Co., d aI., unreported (D. Del. No. 1497, November 7, 1952).

•
70 SECURITIES AND EXCHANGE COMMISSION

Previously, on July 24, 1952, the Commission had approved a plan

of Standard and Philadelphia Company ("Philadelphia") for the

partial liquidation of Philadelphia designed to provide Standard Gas

with 1,004,958 shares of common stock of Duquesne Light Company

substantially all of which was required to carry out Steps I and IA of

the Standard Gas plan described above." .

The compromise which made possible the consummation of Steps I

and IA also covered Step II of the Standard Gas plan, pursuant to

which its $4 Cumulative Preferred stock was retired by the exchange

for each share thereof of four shares of common stock of Duquesne

Light Company. Subsequently, the Standard Gas plan was further

amended by the filing of Steps IIA and IrB representing the results

of an agreement reached after extended discussions between representatives of Standard Gas and its stockholders and representatives

of the publicly held common stock of Philadelphia, who had alleged

certain acts of mismanagement of Philadelphia on the part of Standard

Gas and claimed that they were entitled to better treatment than that

accorded Standard Gas in the liquidation of Philadelphia. Steps IrA

and IIB provided for the retirement of the publicly held common stock

of Philadelphia and also proposed alternative means for furnishing to

Standard Gas shares of Duquesne common stock required for the

consummation of Step II of its plan. The plan, as thus amended,

provided for the retirement of the publicly held common stock of

Philadelphia on the basis of a distribution to them for each share of

such stock of 0.885 shares of Duquesne common stock with Standard

Gas receiving the balance of the net assets of Philadelphia. This

treatment resulted in the public common stockholders being accorded

a slightly greater participation than would have been the case if they

had shared on a pari passu basis. This plan was approved by the

Commission on March 13, 1953,91 and was approved and ordered

enforced by the United States District Court, District of Delaware,

on April 20, 1953.92 No appeal was taken and the plan was consummated on April 27, 1953.

The outstanding securities of Standard Gas at June 30, 1953,

consisted only of its common stock of 2,163,607 shares. There has

been no final determination of its liability for Federal income and

excess profit taxes for the years 1942 through 1950, and there are

major items of dispute between the Treasury Department and the

system companies as to the amounts of such tax liabilities. In

addition, claims aggregating over $6 million for fees and expenses for

services rendered by the various participants in the proceedings

involving Standard Gas and Philadelphia under section 11 have been

asserted against those companies. .

.. Holding Company Act release No. 11400.

Holding Company Act release No. 11765.

OJ In TO St~ndard Gaaand Elwric Co et al , unreported (D. Del. No. 1497, April 20, 1953).

"

•
NINETEENTH ANNUAL ~EPOR'I 71

At June 30, 1953, Standard Gas owned all of the 5,040,440 shares

of the outstanding common stock of Philadelphia, 16,903 shares of

the common stock of Duquesne, 3,178 shares of the common stock of

Oklahoma Gas and Electric Company and 46,834 shares of the

common stock of Wisco..'lsinPublic Service Corporation. Its other

assets include cash, the capital stocks of two inactive nonutility

subsidiaries, a short term note of Philadelphia in the principal amount

of $2,500,000, and whatever potential value may be realized in the

event of any reduction of Federal tax liabilities for past periods.

As described in the l Sth Annual Report, the Commission in April

1952 approved the first major plan for the simplification of the

corporate structure of the Philadelphia holding company system which

provided for retirement of the 5 and 6 percent noncallable preferred

stocks of the parent company." This plan was approved and ordered

enforced by the United States District Court, Western District of

Pennsylvania, on October 7, 1952.94 No appeal was taken and the

plan was consummated on November 1, 1952. The next step in

the simplification of Philadelphia took the form of a plan for the

retirement of the company's $5 Cumulative Preference stock. TIlls

was approved by the Commission on December 31, 1952,95and the

plan was approved and ordered enforced by the United States District

Court, Western District of Pennsylvania on January 30, 1953.96

No appeal was taken and the plan was consummated on February

2, 1953, by the exchange of 3.6 shares of Duquesne common stock

for each share of Philadelphia's $5 preferred stock.

This plan completed the retirement of Philadelphia's preferred

stocks, and the company's outstanding securities at June 30, 1953,

consisted of 5,040,440 shares of common stock, all of which is owned

by Standard Gas, $3,500,000 principal amount of 37{percent bank

loan notes maturing August 21, 1954, and the $2,500,000 note due

to Standard Gas. Philadelphia owned 1,360,524 shares, or approximately 23 percent of the 6,000,009 outstanding shares of Duquesne

common stock; 24,264 shares, or 4.41 percent of the 4 percent Cumulative Preferred stock of Duquesne, 547,678 shares, or 50.9 percent of

the common stock of its nonutility subsidiary, Pittsburgh Railways

Company; all of the common stock of Equitable Auto Company, a

subsidiary service company; and certain real estate in the City

of Pittsburgh.

The proposed sale of Philadelphia's office building in the City of

Pittsburgh described in the 18th Annual Report was consummated in

the spring of 1953. The building was sold to the Mellon National

Bank and Trust Company and leased by the purchaser to Duquesne

.. Holding Company Act release No. 11155

.. In re PhIladelphia Co , et 01., unreported (W. D. Fa. No. 10781, October 7,1962).

II Holding Company Act release No. 11650.

If In re Phil.:Jdelphia Co., et 01•• unreported (W. D. Fa. No. 10781. April 17, 1953).

•
72 SECURITIES AND EXCHANGE COMMISSION

for a period of 35 years. The proceeds from such sale were used to

discharge the mortgage on said property and to reduce Philadelphia's

bank loan notes to $3,500,000. Objections to this plan had been

raised on the ground that competitive conditions were not maintained in the sale of the property. The Commission held, however,

that competitive conditions had been sufficiently maintained to satisfy the requirements of the Act and it approved the plan on March

23, 1953. The United States District Court, Western District of

Pennsylvania, approved the plan and directed its enforcement on

.A.pril17, 1953.97

On May 18, 1953, the Commission approved a plan submitted by

Standard Power for the retirement of its outstanding issue of 34,054

shares of $7 Cumulative Preferred stock on a voluntary basis, at the

redemption price and dividend arrearages aggregating $212.82 per

share, payable on the basis of three shares of Duquesne common

stock and five shares of Wisconsin common stock, both at market

value, plus cash." Approximately 62 percent of the preferred stock

was tendered for exchange and the remainder was called for redemption in cash. Since this plan provided solely for voluntary actions

by the affected parties, no application to the district court for enforcement was necessary. The remaining outstanding securities of Standard Power consist of two series of common stock and short term bank

loan notes in the principal amount of $1,500,000.

In connection with the latter plan Standard Power has advised the

Commission of its intention to request a modification of the Com.

mission's 1942 order requiring the company to liquidate and dissolve,

so as to permit the company to continue in business as a registered

investment company. No application or declaration in this respect

has been filed with the Commission.

The United Gas Improvement Company

The 18th Annual Report contains a description of the plan for

reorganization of The United Gas Improvement Company ("UGI"),

which provided in substance for the transformation of UGr into a

Pennsylvania operating utility company. Following approval of

the plan by the Commission on September 18, 195299 and the entry

of an order by the district court on November 12, 19521 directing its

enforcement, the various steps of the plan, with minor exceptions,

were consummated by July 31, 1953. No appeals were taken.

On September 18, 1953, UGr filed an application with the Commission pursuant to section 5 (d) requesting an order declaring that

the company has ceased to be a holding company. The application

was granted on October 2, 1953.2

07 In re Philadelphia Co., et al., unreported CW. D. Pa. No. 10781.April 17,1953).

II Holding Company Act release No. 11921

.. Holdlng Company Act release No. 11495.

I In re United Gru ImprODemmt Companv, unreported (E. D. Pa. No. 14236,November 12, 1952).

2 Holding Company Act release No. 12159.

•
NINETEENTH ANNUAL REPORT 73

United Publie Service Corporation

Application was made to the United States District Court, District

of Delaware, for approval and enforcement of the plans which had

been approved by the Commission in 1948 and 1952 providing for

the liquidation and dissolution of United Public Service Corporation

by distribution of the company's assets to its stockholders," The

plan also contained detailed provisions for the location of security

holders, as well as provisions designed to permit any person having

a claim against the company, but as to which the plan contained no

specific provision, to file proofs of such claims in the enforcement

courts, and have them disposed of as the latter might direct. The

United States District Court, District of Delaware, approved the

plan and ordered it enforced on October 31, 1952.4 No appeal

was taken.

Wisconsin Electric Power Company

Wisconsin Electric Power Company is an operating-holding company controlling a utility system which furnishes electricity in Wisconsin and Michigan, natural gas in Wisconsin and steam heating service

in Wisconsin.

In 1950 the Commission instituted proceedings pursuant to section

11 (b) (1) to determine what properties could be retained in WEPCO's

electric holding company system. No determination of this issue has

been made. In the meantime the company filed a voluntary plan pursuant to section 11 (e), which the Commission approved December 24,

1952,0 providing for the sale of WEPCO's subsidiary, Milwaukee

Electric Railway & Transport Company, of its transportation properties which the record made in the section 11 (b) (1) proceedings

clearly showed were not retainable in the system. These were to be

sold to the Milwaukee & Suburban Transport Corporation, a nonaffiliated company, for a consideration consisting of $4 million cash,

$3 million principal amount of 5 percent secured promissory notes and

$3 million par value of 5 percent cumulative preference stock of Suburban Transport. In this connection the Commission authorized Milwaukee Railway to retain the securities received from Suburban

Transport on a temporary basis. The sale was consummated on

January 28,1953.

The remaining problems of WEPCO under section 11 relate to the

retention of certain gas and auto parking facilities with the electric

business of the system. Hearings on these matters are in progress.

I Holding Company Act releases Nos. 8514 and 11500.

'In re United Public SerPiceCorp, unreported (D. Del. No. 1499, October 31, 1952).

I Holding Company Act release No. 11641.
74 SECURITIES AND EXCHANGE COMMISSION

FINANCING OF REGISTERED PUBLIC UTILITY HOWING COMPANY

SYSTEMS

Aside from reorganizations and dispositions of properties undertaken in compliance with section 11, the financing operations of

registered holding company systems have accounted for the major

portion of the transactions required to be acted upon by the Commission under the Act. In spite of the continued contraction of systems as a consequence of the operation of section 11, the volume of

financing by these systems in 1953 reached almost the same level as

that recorded for 1952.

During the 12 months ended June 30, 1953, 311 matters were

presented for determination pursuant to sections 6 and 7 of the Act,

relating to the issuance of securities and assumptions of liability and

alterations of rights of securities holders by registered holding companies and their subsidiaries. A total of 320 matters were disposed of

during the year, including a few carried over from the latter part of the

preceding year. All but 36 related to issuances of securities. In the

fiscal year 1952, 352matters were presented for determination and 374

were disposed of. All but 32 of the latter related to the issuance of

securities.

The following table sets forth for the fiscal years 1952 and 1953 the

volumes of securities of various types sold for cash, or issued in exchange for refunding purposes, by registered holding companies and

their subsidiaries under sections 6 and 7 of the Act. Portfolio sales

and issuesin connection with reorganizations are excluded.
NINETEENTH ANNUAL REPORT 75

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76 SECURITIES AND EXCHANGE COMMISSION

The increase of 15 percent in the number of issues sold in 1953,

accompanied by a 10 percent decrease in dollar volume, is accounted

for principally by recurring issues of small amounts under blanket.

authorizations for long term construction commitments and intercompany stock purchase agreements. Of the total sales of securities of $993,328,444by registered holding companies and their subsidiaries in 1953, $719,295,659 were purchased by stockholders of top

holding companies and by outside purchasers. This represented the

net external financing of registered systems for the year. The balance of $274,032,785 represented direct purchases of subsidiaries'

securities by their respective parent holding companies. Approximately one-half of the latter amount consisted of additions to the

common equity of the subsidiaries. Nearly 83 percent of the $145,-

015,261 of securities sold by holding companies were common stocks.

The continuation of the high level of financing activity by registered

systems during 1953 followed the pattern of the electric and gas

utility industries as a whole. This is demonstrated by the following

table which summarizes the volume of securities sold for cash in the

past 2 years by all electric and gas utilities, including holding companies and gas transmission companies. Because of the inclusion of

the last mentioned two types of companies for the first time this year,

these tables are not comparable with those appearing in previous

annual reports.

Security issues sold for cash or issued in exchange for refunding purposes by all

electric and gas utilities, including holding companies and gas transmission com- panies. Secondary offerings and intercompany sales excluded

[Dollar figures in millions]

Fiscal year 1952 Fiscal year 1953

Amount Percent Amount Percent

Bonds. ___.• _________.•. ____.. _.•.• _____. _.....••• ____.. $1,534 55 $1,393 51 Debentures. •. _. . ._ .• . .• 276 10 281 1~ Notes •.. ... ..• . . _. .• 75 2 151 e Preferred stocka., . . _. .• . 393 14 343 lZ Common stocks .• . . ._. . . 532 19 584 21

Total. . 2, 810 100 2, 752 100

The net external financing of $719 million completed by registered

systems in 1953 accounted for 26 percent of the total volume of

financing of $2,752 million for the entire electric and gas utility industries of the country. The following table shows the volumes of the

various types of securities included in these amounts.

___' ______ ____ ______• ______• __ _

_ __	 _•• _____________ _____ _••• _ _____• ____ _________ _ __•________• _____

___ ________ ___• _____ ___ __• _____

____• _____________• _______•• ________• _____
NINETEENTH ANNUAL REPORT 77

Security issves sold for cash or is81tedin exchange for refunding purposes by aU

electric and gas utilities, including holding companies and gas transmission

companies, during the fiscal year 1958. Secondary offerings and intercompany

sales excluded

[Dollar figures In millions]

Registered systems Companies not subject to 1935 Act subject to 1935 Act Total

Type of security all comAmount Percent panies Amount Percent

--- --- --- --- "Bonds _______________________________________________ Debentures __________________________________________$363 50 $1,030 51 $1,393 87 12 194 9 281 N otes . ...• •. ._ 12 2 139 7 151 Preferred stocks ____________________________________ 70 10 273 13 343 Common stocks _____________________________________ 187 26 397 20 584

TotaL --- 719 100 2,033 100 2, 752

As in previous years, registered holding company systems and the

industry as a whole have continued to sell ample amounts of common

stock thereby maintaining the fiscal position which has been characteristic of this business since the close of WorId War II.

On the basis of industry estimates of construction expenditures

for 1953 and 1954, it was anticipated that the volume of permanent

:financing by electric and gas utilities for the fiscal year 1953 would

register some increase over 1952. The projected increase in outlays

for new plant facilities materialized, but sales of long-term securities

to finance these additions declined slightly as noted above. The

difference was made up from retained earnings and temporary borrowings. This is illustrated by the following summary table:

Construction expenditures and security salesfor the electric and gas utility industries

[Dollar figures in billions]

Fiscal year 1953 FIscal year 19t2

Amount Percent Amount Percent

--- --- ---

Oonstruction expenditures:

Gas Electric ________________________________________________________ $2.8 70 $2 4 65

1.2 30 1.3 35

--- --- --- --- Total expenditures _______________________________________4.0 100 3 7 100

--- --- --- --- :Sources of capital: Sales of long-term securities 2.8 2.9 Less retirements .2 ---------- .1 ----------

Net sales --- --- --- 2.6 65 2.8 75

Retained earnings, depreciation accruals and temporary accommodations 1.4 35 .11 25

--- -wG'--3-.-7 Total capital addltion _______________ --- 4.0 100

The construction expenditures recorded for the fis-calyear 1953

established 8. new high record and industry projections indicate a

further modest increase in 1954. Consequently, it appears reasonable to expect a continuation of the high level of utility financing

which has been in evidence during the past 2 years.

---

______________________•____ ___ ________ •
 

_________________________________________ --- --- --- ---

___________________________________ --- -- ---- -----

______•_________________________ ---------- ---------- ______________________________ -_____--- ----

_____________________ •_____•________-____________ ---

________________________ •_________•______

•____________________
78 SECURri'IES AND 'EXCHANGE <JOMMISSION

Until recently it has been the policy of the Commission in the

administration of the Act to require that sales of additional common

stock by registered holding companies be made by means of rights

offerings to their common stockholders except where it could be shown

that unusual circumstances were present," During the year the

Commission directed its staff to undertake a detailed study of the

results of several rights offerings by a group of companies subject to

the Act and another group not subject to the statute. As a consequence of this reexamination of the problem the following new policy

was announced: ,,* * * it is our view that, while there are many

advantages to a rights offering, these advantages are not so conclusive

as to warrant a strict policy in favor of rights as against an underwriting by competitive bidding without an offer to stockholders.

Accordingly, it will be the policy * * * not to insist upon a rights

offering where management can make a showing that an underwriting by competitive bidding without an offer to stockholders would

be preferable." 7

It is still too early to evaluate the effects of this change of policy.

Subsequent to the announcement, six: companies subject to the Act

have offered common stock by means of rights and two have sold

their shares to the public through competitive bidding.

As indicated by the following table, the rights offering procedure

has been employed in the majority of common stock financings by

registered holding company systems and by all other electric and gas

utilities during the fiscal year 1953:

Common equity financing by registered holding company systems and by all other

electric and gas utility companies, includmq holdinq companies and gas transmission companies for the fiscal year 1953. Secondary offerings and predominantly

intercompany transactions excluded

[Dollar figures III milhons]

Registered holding All other electric Total electric and

gas utlllty indus- company systems and gas utillties tnes Type of ofienng

Number Volume Number Volume Number Volume of ISSues of Issues of issues

--- --- --- --- --- Rlghts .___________________________________10 $104 30 $246 40 $350 Pub hc ____________________________________ 4 81 17 151 21 232

--- --- --4- To tal. ______________________________ 14 185 71-m --6-1 1--sBz I

At least 60 percent of all common stock offerings by the electric

and gas utility industries since 1948 have been effected by rights

offerings.

There have been two other observable developments in the pattern

of rights offerings during 1953. The number of rights offerings underHolding Company Act release No. 9730.

7 Letter dated Apnl 8, 1953, from Director, Division of Public Utilities (now Division of Oorporate Regulation) to each registered holdmg company. system, by directton of the Comrmsslon,

•
.NINETEENTH Al'lNUAL REPORT 79

taken without the benefit of underwriting has increased substantially

in proportion to the number of underwritten transactions, and in the

latter category there has been a noticeable tendency toward omission

of the additional subscription privilege. These trends are illustrated

by the following table.

Rights offerings of common stocks by all electric and gas utility companies including

holding companies and gas transmission companies. Secondary offerings and

predominantly intercompany transactions excluded

[Dollar figures in millions]

Fiscal year 1953 FIScal year 1952

Banking arrangements WP WOP WP WOP

Number Volume Number Volume Number Volume Number Volume of ISSues of issues of ISSues of ISSues

--- --- --- --- --- --- ---

Underwritten ...•... •.. 8 $76 22 $185 13 $103 18 $IQO

Not underwritten ...••.. 6 22 4 67 5 41 1 2

--- --- --- --- --- --- --- --- TotaL .• •.•.•••••. 14 98 26 252 18 144 19 192

WP-With oversubscription pnvilege,

WOP-Without oversubscnption pnvilege,

Sales of securities by registered holding companies and their subsidiaries pursuant to sections 6 and 7 and portfolio sales by registered

holding companies under section 12 (d) are required to be made at

competitive bidding in accordance with the provisions of rule U-50.

Certain special types of sales, including issues of less than $1 million,

short term bank loans, issues the acquisition of which have been

authorized under section 10 and pro rata issues to existing security

holders, are automatically exempt from the competitive bidding

requirements under clauses (1) through (4) of paragraph (a) of the

rule. In clause (5) of paragraph (a), the Commission retains the

right to grant exemptions by order where it appears that competitive

bidding is not necessary or appropriate to carry out the provisions of

the Act.

A table showing numbers of issues and amounts of the various

classes of securities sold at competive bidding since the effective date

of the rule and for the fiscal year 1953, is set forth below:

Sales of securities pursuant to rule U-50

May 7, 1941, to June 30, July 1, 1952, to June 30, 1953 1953

Number of Amount I Number of Amount 1 issues issues

Bonds ....•••••• ••••.•.••••••• •••... 343 $5,286,144,000 26 $302,700,000 Debentures .... _._. ._•. .• _. . ._.•.... 39 948,938,000 2 85,000,000 Notes .......... _. ........ _._. . . 9 '75,500,000 1 6,000,000 Preferred stock ...... .•....... ... .. ._. 94 811,227,700 8 63,500,000 Common stock .• ._•. 94 918,769,268 10 141,717,067

Total. _______________________________ 579 8, 040, 578, 968 47 598,917,067

- 1Amounts shown represent principal amount of bonds, debentures and notes, par or stated value of pre- ferred stocks, and proceeds of sale of common stocks.

_

_

__ __________ ___ _ ___ ____ _ _______________ __ ___ _____ ___ ______ _

• •___ ____ ________

•___
80 SECURITIES AND EXCHANGE COMMISSION

As previously indicated, a total of $993 million of securities were

sold for cash in the fiscal year 1953 by registered holding companies

and their subsidiaries. The difference of $394 million between this

amount and the $599 million of securities sold at competitive bidding

is accounted for by $307 million of securities automatically exempt

pursuant to clauses (1) through (4) of paragraph (a) of the rule and

$87 million of issues exempted by order. During the past fiscal year

five issues were exempted from competitive bidding requirements by

orders. One issue of bonds privately placed by Electric Energy, InC.,8

accounted for $65 million of this amount. The following table summarizes the numbers of issues and volumes of securities exempted in

this manner from the effective date of the rule to June 30, 1953.

Sales of securities exempted from competitive bidding requirements pursuant to the

provisions of par. (a) (5) of rule U-50 1 by orders of the Commission entered from

May 7, 1941, to June 30, 1953

Underwritten Nonunderwrltten Total

Number Amounts. Number Amounts. Number Amounts' of issues of issues O[ISSUes

---- Bonds. .•••••• 4 $27, 027, 500 60 $686 635, 768 64 $713 663,268 Debentures .. ....•• ... 3 83,425,000 5 36,779,939 8 120, 204. 939 N otes .. _. _____..... ___.... __.• 20 35,194,158 20 35,194,158 Preferred stock .•.. __.. _.. ____ 11 65,878,703 23 257, 610, 344 34 323, 489, 047 Common stock. __..... _..... _ 33 278, 484, 644 47 190,886, 161 80 469, 370, 805

Total_. _. _....• _..... __ 51 454,815,847 155 1,207, 106, 370 206 1,661,922, 217

I Exclusive of sutomaue exemptions afforded by clauses (I) through (4) of par. (a) ofruJe U'50, , Proceeds to seller before expenses.

LITIGATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT

During the fiscal year 1953 the Commission participated in more

judicial proceedings involving issues arising under the Act than in

any previous year. The court proceedings numbered 44, as compared

with 22 in the fiscal year 1952 and 18 in the fiscal year 1951. Of the

44 proceedings, 12 had been pending at the beginning of the year and

32 were initiated during the year. The following is a summary

description of such proceedings:

Applications to district courts under section 11 (e)_______________________ 26

Applications to district courts under section 11 (d)_______________________ 2

Appeals from orders of district courts under section 11 (e)________________ 6

Petitions to review Commission orders under section 24 (a) _______________ 6

Petitions to Supreme Court for writ of certiorarL________________________ 2

Proceeding in which Commission intervened , 1

Mandamus proceeding by Commission., ____ _______________ _______ ]

Total________________________________________________________ 44

This was au authortzatlon of a long term commitment to finance construction. Only small amounts

have been taken down under this agreement.

•••••• _ _••••••• _ _ ___ ___'

---~------ --------------

_

•
NINETEENTH ANNUAL REPORT 81

Thirty-two of these 44 were finally adjudicated, and in each such

instance the position of the Commission was upheld. The remaining

12 cases were pending at the close of the fiscal year.

Proceedings Under Section 11 (e)

The following table summarizes the disposition by United States

district courts during the fiscal year 1953 of applications for orders

to enforce plans approved by the Commission pursuant to section 11

(e):

Applications pending July 1, 1952_________________________________ 5

Applications filed July 1, 1952, to June 30, 1953_____________________ 21

Applications approved and plans ordered enforced, no appeals taken c 19

Applications approved and plans enforced-appeals taken to United

States courts of appeal; ___ ________ _______ ____ _____ 3

Applications disapproved and rehearing requested-plan remanded and

amendments filed___ _________ ________ ___ 1

Applications pending, June 30,1953_______________________________ 3

Total____________________________________________________ 26 26

Information about the cases tabulated above and the 6 additional

cases pending on appeal from orders by the district courts under

section 11 (e) is included in the descriptions of the progress of the

various holding company system reorganizations and in the appendix

tables.

Petitions To Review Orders of the Commission Pursuant to Section 24 (a)

The Commission participated in 6 proceedings during the past

fiscal year which were initiated by petitions to United States courts

of appeal to review its orders pursuant to section 24 (a). Three were

pending at the beginning of the fiscal year and 3 were initiated during

the year. One of the 6 petitions was withdrawn, 3 were dismissed

and 1 was pending in the court at the close of the fiscal year. A

petition for a writ of certiorari was filed with the United States

Supreme Court to review the decision of the court of appeals in the

sixth case.

One of the petitions involved an order of the Commission dated

February 6, 1952, denying Electric Bond and Share Company relief

from its previous commitment to dispose of its holdings of 27 percent of the common stock of United Gas Corporation." After extended proceedings in the United States Court of Appeals, District

of Columbia Circuit, in which there were motions for intervention

and motions to extend time to answer and file briefs, the petitioner

ultimately filed a motion to withdraw the petition. The court granted

this motion.'?

In a second proceeding the United States Oourt of Appeals, District

of Columbia Circuit, dismissed a petition filed by certain dissenting

Bolding Company Act release No. 11004. ID In re ElectriC Rona and Share Co., unreported (D. C. Cir. No. 11380, December 8, 1952).

279900-54--7

, ,

•
82 SECURITIES AND EXCHANGE COMMISSION

stockholders of Portland Railroad Company, an indirect subsidiary

of New England Public Service Company, who sought review of

orders entered by the Commission in 1944 and 1951 directing termination of a lease under which Central Maine Power Company, the

immediate parent of Portland, operated the latter's properties."

The court of a-ppeals pointed out that the period of appeal for the

1944 order had lapsed, and that, even if it thought it had some measure

of authority to review the proceedings it would not exercise such

jurisdiction because it found no abuse of discretion on the part of

the Commission."

Another petition for review involved certain orders of the Commission approving a plan for the corporate simplification of The

United Corporation." This plan was described in the 18th annual

report. Certain stockholders of United filed a petition in the United

States Court of Appeals for the District of Columbia Circuit, in which

they attacked various provisions of the plan and sought enforcement

in that court of other provisions which were conditioned upon district

court enforcement. The court of appeals held that it had jurisdiction

to review the entire order, including those provisions subject to

enforcement by a district court, and on the merits affirmed the Commission's order in its entirety.'! Two petitions for a writ of certiorari

for review of the court of appeals' decision were filed by the petitioners

with the United States Supreme Court on June 27, 1953. On October

12, 1953, the Supreme Court granted certiorari, limiting the scope of

its review to the question of the jurisdiction of the court of appeals."

A petition by Randolph Phillips requesting the court of appeals to

set aside or modify orders of the Commission allowing and denying

certain fees and expenses claimed by petitioner for services alleged

to have been rendered in connection with proceedings for reorganization of The United Corporation was dismissed."

A third petition for review of an order of the Commission involving

The United Corporation was pending in the United States Court of

Appeals, District of Columbia Circuit, at the close of the fiscal year.

In this case petitioners, who are stockholders of United, requested

the Court of Appeals to set aside the order of the Commission dated

May 2, 1952,17approving an investment program for United under

section 9 (c) (3) of the Act and its order dated June 24,1952, approving

a proposal of United to make a public offering of its entire holdings of

the common stock of South Jersey Gas Company. The court ordered

these proceedings stayed in part pending the conclusion of other

11 Holdmg Company Act releases Nos. 5506 and 10895.

It Skow/ugan Saoings Bank et a. v. S. E. C., 201 F. 2d 702 (D. C. Cfr. 1952).

11 Holding Company Act releases Nos 7191, 10614, and 10643.

It Downing et aI. v. S. E. C., 203 F. 2d 611 (D. C. Cir. 1953). Rehearing denied.

11- U. S. (1953).

IIPhillip, v. S. E. C., unreported (D. C Clr. No. 11511, October 9,1952).

J7 Holdmg Company Act releases Nos. 11209 and 11349.

-
NINETEENTH ANNUAL REPORT 83

proceedings in the same court with respect to United." As described

in the 18th Annual Report the holdings of South Jersey common stock

have been sold.

Another petition requested a review of the Commission's order of

July 24, 1952r approving a plan for reorganization of Philadelphia

Company, which provided, among other things, for a distribution of 1

share of common stock of Duquesne Light Company in exchange for 5

shares of common stock of Philadelphia. Petitioners, the 6 percent

Cumulative Preferred Stockholders Protective Committee, requested

the court of appeals to set aside the Commission's order. Subsequently, the petition for review was dismissed on stipulation of the

parties."

Petitions to United States Supreme Court for Writs of Certiorari

Two petitions for certiorari were filed with the United States

Supreme Court during the year for review of orders by United States

Courts of Appeals relating to orders issued by the Commission in

connection with proceedings under section 11 (e) of the Act.

In one case involving a plan for the reorganization of The United

Corporation, described above, the Supreme Oourt granted certiorari,

limiting the scope of its review to the question of the jurisdiction of

the court of appeals."

The second petition arose out of an order of the Commission dated

May 5, 1951,22denying the claim of James F. Masterson, an attorney,

for additional compensation for services in connection with the proceedings for the reorganization and dissolution of North American

Light and Power Company. Following application for enforcement

of that order, the United States District Court, District of Delaware,

directed the Commission to grant Masterson an additional award of

$10,000,23which determination was affirmed by the United States

Court of Appeals, Third Oircuit." On October 12,1953, the Supreme

Court denied the petition for certiorari."

Participation as Intervenor

The Commission moved and was granted permission to intervene

in proceedings initiated by a complaint filed against the Long Island

Lighting Company in the United States District Court, Eastern

District of New York, by Ennis M. Nichols, individually and on

behalf of other stockholders of the company. Among other things,

the complainants sought damages in the sum of $27,500,000 for

losses alleged to have been suffered by them as a result of the consumII Downing et al. v, S. E. C. (D. C. Cir., No. 11478, order dated September 19,1952).

II Holdmg Company Act release No. 11400.

"SheronlU et al. v, S. E. C. (3d Oir. No. 10876, dismissed October 14,1952).

It U. 8.- (October 12, 1953)..

,.. Holding Company Act release No. 10533.

,.. 101 F. 8upp. 931 (D. Del. 1951); 106 F. Supp. 686 (D. Del. 1952).

"S. E. C.V. MIUUr'on, 202 F. 2d 638 (3d 011'.1953).

SIS. E. C. v. MaattT'on. - U. 8. - (1953).

-
84 SECURITIES AND EXCHANGE COMMISSION

mation of a plan for the reorganization of the Long Island system in

1949 and 1950 which had been approved by the Commission and by

the district court under section 11(e).26 On January 22, 1953, the

district court sustained the Commission's position and dismissed the

action on the ground that it violated the injunction provision of the

district court's order of February 17, 1950, enforcing the plan."

After the close of the fiscal year, the decision of the district court was

affirmed by the United States Court of Appeals for the Second Circuit.28

Miscellaneous Proceedings

During the fiscal year the Commission instituted an action in the

United States District Court for the Eastern District of Pennsylvania

to compel the Philadelphia law firm of Morgan, Lewis & Bockius to

file the 'informational statements which Section 12 (i) of the Act and

Rule U-71 thereunder require of all persons who "present, advocate

or oppose any matter affecting any registered holding company or

any subsidiary company thereof" before, inter alia, the Commission

or any member, officer or employee thereof. In refusing to file these

statements the law firm had contended principally that Section 12 (i)

is inapplicable to lawyers practicing before the Commission absent

proof of "lobbying." The:firm also interposed other defenses, including a claim that Section 12 (i)is unconstitutionally vague and indefinite.

The proffered defenses were rejected by the District Court which

granted the Commission's motion for summary judgment." Defendants appealed to the United States Court of Appeals for the Third

Circuit shortly after the close of the fiscal year.

Sf Holding Company Act releases Nos. 9473 and 9510. In r~ Long I,land Lil/hting Companl/, 89 F. ~upp.

613 (E. D. N. Y. 1950).

27 Nichola et al. v. Long I,'and Lil/hting Co., et al., unreported (E. D. N. Y. No. 13054,January 22,1953).

11- F. 2d- (November 12,1953)

8. E. C. v, Morl/an, Lew" &: Bocklua et al.; 113 F. Supp.85 (E. D. Pa, 1953).

•

•
PART IV

PARTICIPATION OF THE COMMISSION IN CORPORATE

REORGANIZATIONS UNDER CHAPTER X OF THE

BANKRUPTCY ACT, AS AMENDED

Chapter X of the Bankruptcy Act provides a procedure for reorganizing corporations (other than railroads) in the Federal courts.

The Commission's duties under Chapter X are, at the request or

with the approval of the court, to provide the court and investors

with independent expert assistance on the various legal and financial

questions that arise in the proceeding and to prepare advisory reports

-on plans of reorganization. The Commission has no statutory right

of appeal in a Chapter X proceeding, but it may participate in appeals

taken by others.

The Commission acts in a purely advisory capacity. It has no

authority either to veto or to require the adoption of a plan of reorganization or to render a decision on any other issue in the proceeding.

Its recommendations are made for the benefit of the judge and the

security holders, affording them its disinterested views in a highly

complex area of corporate law and finance. Generally, the Commission participates only in proceedings in which there is a substantial

public investor interest.

SUMMARY OF ACTIVITIES

The Commission participated during the 1953 fiscal year in 55

proceedings involving the reorganization of 80 companies with

aggregate stated assets of $561,930,000 and aggregate stated indebtedness of $339,452,000. During the year the Commission with court

approval filed notices of appearances in 4 new proceedings under

Chapter X involving 7 companies with aggregate stated assets of

$7,761,000 and aggregate stated indebtedness of $3,661,000. Proceedings involving 10 principal debtor corporations and 7 subsidiary

debtors were closed during the year. At the close of the year, the

Commission was actively participating in 45 reorganization proceedings involving 63 companies with aggregate stated assets of

$539,598,000 and aggregate stated indebtedness of $326,551)000.

Problems inthe Administration of the Estate

A fundamental aim of Chapter X is to make available to the court,

the parties and the security holders full and accurate information regarding the debtor's affairs. The independent trustee customarily

transmits to security holders, pursuant to Section 167 (5), a report on

the history and financial condition of the debtor, the operation of its

8G
86 SECURITIES AND EXCHANGE COMMISSION

business, and the desirability of its continuance. Such reports enable

security holders to consider suggestions for a plan of reorganization

or proposed plans of others and aid the court in considering problems

before it. The Commission has consulted through its staff with

trustees in connection with their investigations and the preparation of

their reports.

The Commission generally renders assistance to the trustee, the

court and security holders in connection with the varied problems that

arise in the administration of the estate. Of these, the most important

have involved the discovery and prosecution of causes of action against

former management or other .fiduciaries who may have misused their

positions of trust. In this .field of activity, the Commission had

occasion to express its views on several jurisdictional aspects of reorganization law during the past year. In one case the Commission supported the contention that the Chapter X trustee had power to prosecute and the reorganization court could entertain causes of action

on behalf of debenture holders against their indenture trustee, based

upon alleged breaches of trust, where the debenture holders constituted

only one of several classes of creditors. The Commission took the

view that, since the indenture trustee had .filedan accounting as well as

claims against the estate based upon the balance of an unpaid promissory note and indenture trusteeship fees, the Chapter X court had

summary jurisdiction in respect of the causes of action asserted by

the Chapter X trustee in answers and counterclaims to the claims and

accounting. The Commission's view was upheld by the District

Court, and affirmed on appeal.'

Another case in the same field involved the question of the jurisdiction of the Chapter X court over certain Swiss banks upon the trustee's

petition for an accounting and other relief. The Commission argued

that the court had summary jurisdiction over the Swiss banks because

they had .filed proofs of claim and received interim distributions on

bonds and because of their active role in the Chapter X proceeding.

The District Court dismissed the trustee's petition and on appeal

the Court of Appeals for the Second Circuit held that the receipt by the

banks of the interim distribution and the papers .filedin that connection

had conferred jurisdiction upon the reorganization court but that this

jurisdiction was lost when the banks failed to .file the additional

proofs of claim under the terms of a so-called bar order." Petitions

for certiorari are pending.

The Commission has taken the position that, absent an acute

emergency, a sale of substantially all of the income-producing assets

of a Chapter X debtor may and should be incorporated in a plan of

reorganization. This method affords public investors the safeguards

I In re Solar Mmnufaclurinu Corp .• 200 F. 2d 327 (C. A.. 3, 1952), certiorari denied IUb nom; Marine Midland

Tru3t Companv v. Me Girl 345 U. B. 940 (1953).

I ConwOV v, Union Bmnk of Switzerland, 204 F. 2d 603 (C. A. 2,1953).
NINETEENTH ANNUAL REPORT 87

of plan procedure which would not prevail if such sales were treated

as an administrative matter. In the Toy Pop Oorporation ease," an

offeror agreed to pay the trustee a specified price for all of the debtor's

remaining assets "subject to the approval of the Court." However,

when the trustee filed a plan providing for a sale of the assets at public

auction at not less than the agreed price, the offeror attempted to

withdraw his offer. At the hearing on confirmation of the plan no

other bids were made. The District Court held that the offeror could

withdraw from the agreement because, until court approval, the contract lacked mutuality and was therefore not binding. On appeal,

in an amicus brief, the Commission urged that the contract provision

"subject to the approval of the Court" was a commitment by the

offeror that the contract would be the subject of a plan providing for

a public sale, which was to be subject to approval and confirmation

by the court. The Commission pointed out that the holding of the

District Court would expose sales plans to such contingencies as would

seriously impair the effectiveness of that method of solving the problems of public investors. It was noted that sales plans commonly

incorporated a definite negotiated proposal used either as an upset

price submitted for approval, acceptance and confirmation followed

by a public sale, or as the opening bid of a public sale held in the

course of and as part of the plan hearings, the highest offer being

substituted for the original by amendment to the plan.

The Court of Appeals reversed the order of the District Court 4 and

held that the condition making the contract "subject to the approval

of the Court" could not be held to require approval of the agreement

"without exposing the property to public bidding for a better price."

The Court of Appeals stated that in view of section 216 (10) a contract

of sale entered into with a Chapter X trustee, subject to the approval

of the court "foreshadows, if it does not presuppose, competitive

bidding usually at a public auction."

Activities with Respect to Allowances

The Commission makes specific recommendations to the courts

respecting allowance for fees and expenses. The Commission itself

receives no fees or expenses from estates in reorganization and is

primarily concerned with the fairness of the result to the parties and

the public investors.

In one case during the past year where appeals were taken from an

order of the District Court making certain allowances," the Commission

argued that the fees awarded were excessive in view of the limited

size of the estate, the small amounts realized by creditors and the

amount of services required, and that the allocation of fees was unfair

IS. D. N. Y.

'In re TOVPop CorporatIon,204 F. 2d 907 (C. A. 2, 1953)

In re Solar Manufacturing Corporation, Nos. 11052, 11053, and 110M (0. A. 3, 1953).

•

•
~8 SECUR~TIES AND EXCHANGE COMMISSION

in that the awards to certain representatives of security holders and

creditors were so low in relation to the benefits performed as to be

contrary to the aims of the statute to encourage contributions by

security holders and creditors. The Commission also pointed out

that the District Court's awards were not based upon specific findings.

The Court of Appeals remanded the matter to the district judge for

specific findings.

In another case the district judge in a detailed opinion 6 acknowledged the assistance rendered by the Commission in the evaluation

of the services rendered by the various applicants. The court observed that, although not conclusive, the detailed statement of the

Commission indicated a "careful study * * * and a reasonable

valuation of the services rendered, * * *" and that it consequently

should be given "great weight."

Consummation of Plan

The Commission gives detailed scrutiny to the corporate charters,

bylaws, trust indentures, and other instruments which are to govern

the internal structure of the reorganized debtor. In general the Commission strives to assure to investors the inclusion of protective features

and safeguards which its experience has shown to be desirable.

AJ.other matter with which the Commission has been concerned in

connection with the consummation of plan of reorganization is the

problem of unexchanged securities. The Commission has been

anxious to assure that all security holders obtain the new securities

or cash distributable to them under the plan of reorganization. Chapter X provides that a period of not less than five years following the

final decree may be fixed by the judge within which security holders

may make the exchange called for by the plan, after which they are

barred from any participation. After some experience with the operation of this provision the Commission concluded that in the larger

cases five years may be too short a period and that a longer period

would be more appropriate, depending upon the facts.

The Commission has requested the courts to make provision in the

final decree for diligent efforts by trustees to locate missing security

holders. The Commission has also recommended that before the

bar date is permitted to become effective reports should be filed

of efforts made to locate such security holders, and if adequate efforts

have not been made, the time be extended. In several cases, the

extension of time granted by the court has been efficacious in reducing

the number of security holders who fail to make the exchange. In

some cases, exchanges or securities were complete, or nearly so, as a

result of the activities of the Commission.

'In re International Power &curuiu Corp. (D. N. J. No. 1602a, April 24, 1953).
PART V

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939

PURPOSE OF TRUST INDENTURE REGULATION

The Trust Indenture Act of 1939 requires that bonds, notes,

debentures, and similar securities publicly offered for sale, except as

specifically exempted by the Act, be issued under an inde rture which

meets the requirements of the Act and has been duly qualified with

the Commission. The Act operates by requiring the inclusion in

indentures to be qualified of specified provisions which provide means

by which the rights of holders of securities issued under such indentures may be protected and enforced. These provisions relate primarily to the corporate trustee which must possess designated

standards of eligibility and qualification so as to provide reasonable

financial responsibility and to minimize con:fl.ictinginterests. The

Act outlaws exculpatory provisions used in the past to eliminate all

liability of the indenture trustee and imposes on the trustee, after

default, the duty to use the same degree of care and skill as a prudent

man would use in the conduct ot his own affairs.

QUALIFICATION PROCEDURE

Provisions of the Trust Indenture Act were drafted so as to integrate this regulation closely with the requirements of the Securities

Act. Registration pursuant to the Securities Act of securities to be

issued under a trust indenture subjec to the Trust Indenture Act is

not permitted to become effective unless the indenture conforms to

the requirements of the latter Act, and necessary information as to

the trustee and the indenture must be contained in the registration

statement. In the case of securities issued in exchange for other

securities of the same issuer and securities issued under a plan

approved by a court or other proper authority which, although

exempted .rom the registration requirements of the Securities Act,

are not exempted from the requirements of the Trust Indenture Act,

the obligor must file an application for the qualification of the indenture, including a statement of the required information concerning

the eligibility and qualification of the trustee.

The Commission's work of examination and qualification of indentures during the 1953 fiscal year is shown in tabular form below.

89
90 SECURITIES AND EXCHANGE COMMISSION

Number and disposition of indentures filed under the Trust Indenture Act

Deseription Number Aggregate

amount

Indentures pending June 30, 1952._ ..•••...•••...•••...••••....•...•••.•..•• 9 $251, 500, 000

Indentures flied during flscaI year ....••... ....... .. .• _. .. .••..•. 144 2, 751, 444, 110

TotaL. _. . •. _. . .•. ... 153 3, 002, 944, 110

Disposition during fiscal year"

Indentures qualified ..... _. .....•.•..••.... _._ .•..•..•..•• ...•.•.•.... 141 2,837,655, 670

Indentures deleted by amendment or withdrawn ... .... •.••....• •... 4 50,339,600

Indentures pending June 30,1953._._ ....... .. ..... ..... .....•..•. 8 114, 948, 840

TotaL ._ •.. . .. •.•• •. •••..• .... .. 153 3, 002, 944, 110

The nature and number of documents containing additional

material relating to trust indentures which were also filed with the

Commission and examined by the staff during the 1953 :fiscalyear for

compliance with the statutory standards are shown below.

Document: NumbtT

Trustee statements of eligibility and qualification__________________ 182

Amendments to trustee statements of eligibility and qualificatdon.L; ; 16

Supplements 8-T, covering special items of information concerning

indenture securities registered under the Securities Act.__________ 141

Applications for findings by the Commission relating to exemption

from special provisions of the Trust Indenture Act.______________ 10

Reports of indenture trustees pursuant to Section 313 of the Trust

Indenture Act_______________________________________________ 864

_

_ _ ~ __ _•• __ __

____• ______• _••• ___• ____•• ____'" ___ ____ __ __"'" _

_ _ _

_ __ _

_ __ _ _ _

__ •• __•• __• ________• __ ______ _ _ __ __ ___ __
PART VI

ADMINISTRATION OF THE INVESTMENT COMPANY ACT

OF 1940

The Investment Company Act of 1940 provides for the registration

and regulation of investment companies, that is, companies engaged

primarily in the business of investing, reinvesting, and trading in

securities. The Act requires, among other things, disclosure of the

finances and investment policies of these companies in order to afford

investors complete information with respect to their activities, prohibits such companies from changing the nature of their business or

their investment policies without the approval of their stockholders,

bars persons guilty of security frauds from serving as officers and

directors of such companies, regulates the means of custody of the

assets of investment companies, prohibits underwriters, investment

bankers, and brokers from constituting more than a minority of the

directors of such companies, requires management contracts to be

submitted to security holders for their approval, prohibits transactions

between such companies and their officers and directors except with

the approval of the Commission, regulates the issuance of senior

securities of such companies, and prohibits pyramiding of such

companies and cross-ownership of their securities. The Act requires

face amount certificate companies to maintain reserves adequate to

meet maturity payments upon their certificates.

COMPANIES REGISTERED UNDER THE ACT

As of June 30, 1953, 369 investment companies were' registered

under the Act, and it is estimated that on that date the aggregate

value of their assets was approximately $7,000,000,000. This represents an increase of approximately $200,000,000 in such valuation

over the corresponding total at the beginning of the 1953 fiscal year.

During the nearest comparable period for which data are available,

the 12 months ended March 31, 1953, about 216 registered open-end

management and closed-end management investment companies

reported to the Commission sales to the public of approximately

$764,000,000 of their securities and redemptions and retirements of

approximately $219,000,000, leaving a net investment by the public

in such companies of approximately $545,000,000, compared with a

corresponding net investment for the preceding 12-month period of

approximately $425,000,000.

91
92 SECURITIES AND EXCHANGE COMMISSION

The investment companies registered at June 30, 1953, are classified

as follows:

Management open-end 166

Management closed-end 100

lJnit___________________________________________________ 87

Faceamount 16

Total 369

TYPES OF INVESTMENT COMPANIES REGISTERED DlJRING THE

FISCAL YEAR

During the 1953 :fiscalyear, 17 new investment companies registered

under the Act, of which 8 were open-end management companies

(companies which redeem their shares on presentation by the stockholders) and 6 were closed-end management companies (in which the

shareholder can realize on his security only by selling it in the open

market). Two unit type companies and one face amount company

were also registered.

Of the 8 open-end management companies which registered under

the Act during the 1953 :fiscal year 2 were organized to invest primarily for income consistent with the greatest possible safety of

principal, 1 was organized expressly to seek capital appreciation with

a lesser emphasis upon income, and 1 was unique in that it proposed

to subject up to 25 percent of its investment securities to "puts and

calls." Of the 6 closed-end companies which registered during the

year, 2 were organized to provide media for investment of American

funds in industry in the State of Israel and 2 were industrial companies

which disposed of their business assets and employed the proceeds in

security investments. The 1953 fiscal year marked the :firstregistration with the Commission since 1941 of a face amount certificate

company, a type of investment company selling investment contracts

by the terms of which a specified sum is agreed to be paid to the investor if he makes stipulated monthly payments over a period of years.

APPLICATIONS FOR REGISTRATION OF CANADIAN INVESTMENT

COMPANIES

. While foreign investment companies are not forbidden under the

Investment Company Act from purchasing and selling investments in

this country, they must obtain an order by the Commission permitting

them to register under the Act in order to sell their own securities in

the United States. Such an order may be issued by the Commission

only if it :finds that "by reason of special circumstances, it is both

legally and practically feasible effectively to enforce the provision of

the title against such company and that the issuance of such. order is

otherwise consistent with the public interest and the protection of

investors." During the 1953 fiscal year certain applications were

pending on behalf of investment companies incorporated under the

laws of Canada seeking authority to register under the Act and to
NINETEENTH ANNUAL REPORT 93

sell their securities in this country. These applications present complex legal and other problems, the resolution of which involves many

questions of public policy and the protection of investors.

SELLING LITERATURE

During 1950 the Commission promulgated a Statement of Policy

as to various types of statements commonly employed in the sale of

shares of open-end investment companies which it would thereafter

regard as misleading. In giving effect to this policy the Commission

has been greatly aided by the National Association of Securities

Dealers, Inc. The Association with the assistance of the Commission's staff has been engaged in the preparation of a book of interpretations and explanations of the meaning of such Statement of Policy

and what is permissible and not permissible thereunder. It is believed

that the publication of such a book will do much to simplify the work

of explaining and interpreting the Statement of Policy.

During the fiscal year the Commission's staff continued its explora1

tion with the National Association of Securities Dealers of the per- '

missible scope under the Securities Act of so-called II institutional !

literature" of open-end investment companies, that is, advertisements,

circulars and other written material which describe open-end investment companies generally without naming any particular company.

Much of this literature has made extravagant and misleading claims

in respect of the merits of investment in such companies. Discussions

have centered upon the possibility of a rule to be promulgated by the

Commission which would permit advertising by brochures, describing

such companies, their types and purposes in a factual manner, before

the solicitation of a purchase by an investor, in order to enable the

investor to appraise these companies generally prior to any offer to

purchase the securities of a specific company.

STATISTICAL DATA

The number of documents filed under the Act by registered investment companies, and changes occurring in the number of such companies, during the fiscal years ended June 30, 1952 and 1953 are

tabulated below:

Number of registered Investment companies: At beginning of year Registered during year

Terminating registration during year At end of year;

KInd and number of documents filed: Notlf!catlons of reglstration Registration statements Amendrr ents to registration statements Annual reports, •.. .

~=e:.'e~;~ts~.~~ r~~.~r_ts:~~:::::::::::::::::::::::::::::: .: ~::::::::::::: Perlo"ic reports containing financial statements to stockholders. ._ Copies of sales literature

Fiscal year ended

June 3G1952 1953

368 367 13 17

14 16 367 369

13 17

16 16

29 26

245 246

17 26

871 888 625 8M

2, 106 1,769

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_

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_ _ __ •	 • • _

~

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94 SECURITIES AND EXCHANGE COMMISSION

APPLICATIONS FILED

One of the functions of the Commission in its regulation of investment companies is to determine whether applications for exemption

filed under various provisions of the Act meet the statutory standards.

During the fiscal year a total of 71 applications were filed under the

various provisions of the Act, including 24 seeking exemption of

proposed transactions between investment companies and affiliates

and 18 seeking a determination that the applicant had ceased to be

an investment company within the meaning of the Act. Since there

were 42 1 applications pending at the beginning of the year, a total

of 113 applications required examination and consideration by the

Commission during the year. Sixty-four were disposed of and 49 were

pending at the close of the year. The various sections of the Act

under which these applications were filed, and the number disposed

of in each category, are shown in the following table.

Applications filed with and acted upon by the Commission under the Investment

Company Act of 11)40during fiscal year ended June 30, 1953

Pending Disposed Pending Sections Description of applteable seettcns July I,. Filed June 30, 1952 or 1953

----------- 2,3,6 Status and exemption matters ._ _. 9 22 22 9

7 (tl) Registration of foreign Investment companles, ________ 2 3 1 4 8,35 Matters re compliance with registration requtrements. 0 1 0 1

8 (f) Tem tnatton of regtstration _______. ________. ________.. . 18 15 10

9,10.16 Regulation of affiliatioT'sof directors, olllcers, employ. ees, mvsstment advisors, underwriters, and others •• 13 0 0 113

11,25 Regulation ofsecurity exchange offers and reorganlza- tlon matters ___ . _______. ________ 2 0 2 0 17 Regulation of transactions with affihatedpersotiS::::: 8 24 23 9

18,19,21, Requirements as to capital structures, loans, dlstrlbu22,23 ttons and redemptionSb

8Dd related matters. . 1 1 1 1

20,30 Proxies, reports, and ot er documents reviewed for , compltance. _. _._. ._._. _._. ._._ 0 1 0 1 28 Regulatton of face amount certificate compantes 0 1 0 1

TotaL. .. _._. _. . .. --- -------- 42 71 64 49

I These applleanons were filed under sec. 9 (h) orthe .Actby the several officersand directors of a company In state court receivorslnp.

During the 1953 fiscal year the Commission reviewed its previous

position that section 17 of the Act did not apply to mergers and consolidations of affiliates of investment companies. That section,

generally speaking, prohibits purchases and sales of securities and

other property between affiliates of registered investment companies

and such investment companies or their controlled companies unless

the Commission by order finds the transaction to be fair and consistent with the policies of the investment companies concerned and

the purposes of the Act. In Matter of Phoenix Securities Oorporation,

9 S. E. O. 241 (1941), the Commission had previously determined

that mergers and consolidations were not "sales" or "purchases"

within the scope of section 17 and were therefore outside the jurisdiction of the Commission even though they are effected by affiliates of,

I This tlgore represents an adjustment of the corresponding count of 41 shown In the preceding annual

report.

__ ••• _____________••

_______

• ___ _________________

••• ___

__ _______••• _____________ _____
NINETEENTH ANNUAL REPORT 95

or concern the assets of, registered investment companies or their

affiliates. This decision was based primarily upon the Commission's

previous interpretations of the word "sale" in its administration of

the Securities Act. However, in Matter of E. 1. duPont de Nemours

and Company, Investment Company Act release No. 1837 (1953),

decided during the 1953 fiscal year, the Commission reexamined its

previous position and came to the conclusion that, because of the

essentially different scheme and purpose of the regulation imposed

by the Investment Company Act, the public interest and the protection of investors demanded a construction of section 17 which would

require the approval by the Commission of the merger and consolidation of companies affiliated with or controlled by investment companies.

One of the more complex applications under the Act was filed in

connection with the merger of Capital Administration Company, Ltd.

into Tri-Continental Corporation. involving section 17 (a) as to the

merger itself (the companies being affiliated) and section 18 (d) as to

the issuance of additional warrants of Tri-Continental in connection

with the merger. The chief problem was the fairness of the issuance

of specified amounts of common stock and warrants of Tri-Continental

for the Class A and Class B stocks of Capital Administration, which

had unique provisions. The Commission, in granting the requested

exemptions, found the terms of the merger reasonable and fair and

permitted the issuance of additional warrants necessary for consummation of the plan,"

LITIGATION UNDER THE INVESTMENT COMPANY ACT OF 1940

On December 8, 1952, the Commission filed a complaint in the

United States District Court for the Southern District of New York

charging certain individuals, directors and officers of three registered

investment companies, with gross misconduct and gross abuse of

trust pursuant to section 36 of the Investment Company Act and

violations of sections 12 (d), 17 (a) and 18 of that Act. The complaint seeks the removal of these individuals from their positions

as officers and directors, an injunction against further violations of

the Act, and the appointment of a receiver to reorganize and liquidate

one or more of these investment companies. Certain preferred stockholders have intervened in support of the Commission's complaint.

An answer was filed on behalf of the defendants, admitting virtually

all the factual allegations of the complaint but denying the legal

conclusions. S. E. C. v. Home and Foreign Securities Corporation,

et al., S. D. N. Y., Civil Action No. 80-382.

The Commission's complaint alleges that, contrary to their fiduciary

duty, the individual defendants have managed the assets of the investment companies in such manner as to yield no substantial income,

J Investment Company Act release No. 1845(March 6, 1953).
96 SECURITIES AND EXCHANGE COMMISSION

and no reasonable expectation of income, for the payment of dividends

on the preferred stocks in the foreseeable future and so as to increase

unfairly and disproportionately the risks and burdens of these preferred stocks. It is further alleged that the individual defendants

have caused the investment companies and their subsidiaries to engage

in excessive borrowing and the pyramiding of control and to enter

into transactions in violation of the Investment Company Act, with

consequences prejudicial to the interests of public security holders

of these investment companies. The defendants, the complaint

alleges, have benefited from their position as members of the management of these companies by enlarging and perpetuating their control

over the investment companies and of 'the subsidiary companies,

from which the individual defendants receive substantial salaries.
PART VII

ADMINISTRATION OF THE INVESTMENT ADVISERS

ACT OF 1940

The Investment Advisers Act of 1940 requires the registration as

investment advisers of persons engaged for compensation in the business of advising others with respect to securities. The Commission

is empowered to deny registration to or revoke the registration of any

adviser who, after notice and opportunity tor hearing, is found by the

Commission to have been convicted or enjoined because of misconduct

in connection with securities transactions or to have made false

statements in his application for registration. The Act makes it

unlawful for investment advisers to engage in practices which constitute fraud or deceit, requires investment advisers to disclose the nature

of their interest in transactions executed for their clients, prohibits

profit-sharing arrangements, and prevents assignment of investment

advisory contracts without the client's consent.

Statistics of investment adviser registrations--1953 fiscal year

Effective registrations at close of preceding fiscal year 1,048

Applications pending at close of preceding fiscal year___________________ 12

Applications filed during fiscal year__________________________________ 123

Total 1,183

Registrations cancelled or withdrawn during year

Registrations denied or revoked during year

Registrations effective at end of year

Applications pending at end of year

80

1

1,093

9

Total 1,183

Of the registered investment advisers 263 represented in their

applications that they engage exclusively in supervising their clients'

investments on the basis of the individual needs of each client. The

services of 381 others are chiefly through publications of various types.

A total of 235 investment advisers are registered also as brokers and

dealers in securities. Most of the remainder offer various combina-

~ionsof invest-nent services.

During fiscal 1953, the Commission instituted proceedings under

the Invest-nent Advisers Act to revoke the registration of Amleto

Gudenzi and under the Securities Exchange Act to revoke his brokerdealer registration. The Commission found that respondent and his

son, who was employed in respondent's business as manager, were

279900--54----8 97

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98 SECURITIES AND EXCHANGE COMMISSION

permanently enjoined by a decree of the Supreme Court of the State

of New York from engaging in or continuing certain conduct and

practices in connection with the purchase and sale of securities and

that his son had been convicted of a felony involving the purchase

and sale of securities arising out of the conduct of the broker-dealer

and investment advisory business of respondent. Both the injunction

and the conviction were based on misappropriations of securities and

funds of customers by the son, to whom respondent had given a

blanket power of attorney. The registrations of Gudenzi as an

investment adviser and a broker-dealer were revoked.
PART VIII

OTHER ACTIVITIES OF THE COMMISSION

COURT PROCEEDINGS

Civil Proceedings

At the beginning of the 1953 fiscal year there were pending in the

courts 19 injunctive and related enforcement proceedings instituted

by the Commission to prevent fraudulent and other illegal practices

in the sale of securities. During the year, 22 additional proceedings

were instituted and 28 cases were disposed of, leaving 13 proceedings

pending at the end of the year. In addition the Commission participated in a large number of reorganization cases under Chapter X of

the Bankruptcy Act, in 23 proceedings in the district courts under

section 11 (e) of the Public Utility Holding Company Act, and in 16

miscellaneous actions, usually as amicus curiae, to advise the court of

its views regarding the construction of provisions of statutes administered by it which were involved in private lawsuits. The Commission

also participated in 39 appeals. Of these, 10 came before the courts

on petition for review of an administrative order, 10 arose out of corporate reorganizations in which the Commission had taken an active

part, 4 were appeals in actions brought by or against the Commission,

7 were appeals from orders entered pursuant to section 11 (e) of the

Public Utility Holding Company Act, and 8 were appeals in cases in

which the Commission appeared as amicus curiae.

Complete lists of all cases in which the Commission appeared before

a Federal or State court, either as a party or as amicus curiae, during

the fiscal year, and the status of such cases at the close of the year,

are contained in the appendix tables.

Certain significant aspects of the Commission's litigation during the

year are discussed in the sections of this report devoted to the statutes

under which the litigation arose.

CriJninal Proceedings

The statutes administered by the Commission provide for the transmission of evidence of violations to the Attorney General, who may

institute criminal proceedings. The Commission, largely through its

regional offices, investigates suspected violations and, in cases where

the facts appear to warrant criminal prosecution, prepares detailed

reports which are forwarded to the Attorney General. Commission

employees familiar with the case often assist the United States attorneys in its presentation to the grand jury, the conduct of the trial, and

the preparation of briefs on appeal. The Commission also submits

parole reports prepared by its investigators relating to convicted

offenders. Where an investigation discloses violations of statutes

99
100 SECURITIES AND EXCHANGE COMMISSION

other than those administered by the Commission, the Commission

advises the appropriate Federal or State agency.

Indictments were returned against 2,184 defendants in 505 cases

developed by the Commission prior to JUly 1, 1953.1 These figures

include 23 defendants in 14 cases in which indictments were returned

during the 1953 fiscal year. At the close of the fiscal year, of .468

cases disposed of as to 1 or more defendants, convictions had been

obtained in 409 cases," or over 87 percent, against a total of 1,179

defendants. Convictions were obtained of 19 defendants in 12 cases

during the fiscal year."

In addition, two defendants in one case were found guilty of criminal contempt for violating an injunctive decree' and in two other

cases the parole of one defendant and conditional release of another

were revoked as a result of Commission investigations.

A judgment of conviction was affirmed on appeal in one case as to

one defendant and the convictions of two defendants were reversed

for trial errors in two other cases, but convictions were obtained

in both of these cases upon retrial." After the close of the fiscal year,

the convictions of seven defendants in another case were all sustained

on appeal.

As in prior years, the criminal cases developed and prosecuted

during the fiscal year covered a wide variety of fraudulent conduct.

They included frauds relating to mining and oil and gas ventures,

insurance company promotions, the operation of purported investment

plans, the promotion of inventions and new businesses and the manipulation of securities on a national stock exchange, as well as fraudulent

practices on the part of securities brokers and dealers and their representatives and an investment adviser. In a number of fraud cases,

the defendants also were charged with willfully violating the registration provisions of the Securities Act.

Convictions for the fraudulent sale of securities in connection with

oil and gas ventures were obtained in U. S. v. Floyd J. W~lson6 (N. D.

Tex.) and U. S. v. Joseph Popkins, et al. (W. D. Tenn.). Wilson and

Popkins entered pleas of guilty and were sentenced to prison terms of

5 and 3 years, respectively. The defendants in these cases were

charged with making false representations concerning ownership of

the oil and gas leases involved, drilling operations, oil producing

I A condensed statistical summary of all criminal cases developed by the Commission from fiscal year 1934

through fiscal year 1953is set forth in appendix table 21. The status of crImlnal cases developed by the

Commission which were pending at the end of the fiscal year is set forth in appendix table 22.

The 59remaining cases, which resulted in acquittals or dismissals as to all defendants, included a number

where the indictments were dIsmIssed because of the death of defendants involved .

One of these cases is still pending as to one defendant .

Another criminal contempt case against a single defendant was pending at the close of the year. See

Criminal Contempt Proceedings, table 14.

One defendant entered nolo contendere plea, the other, who was found gnI1ty after the end of the fiscal

fear, has appealed agaln.

A codefendant in this case was aequttted,

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NINETEENTH ANNUAL REPORT 101

potentialities of the properties, value of the securities being sold and

numerous other matters.

Other oil and gas promotions in which indictments are pending are

U. S. v. George F. Vasen (N. D. Ill.); U. S. v. Ben H. Frank (W. D.

Okla.); U. S. v. Ralph Frank Hamilton (D. Mont.) i U. S. v. Melton

E. Lightfoot (S. D. Fla.); and U. S. v. Francis N. Campbell (N. D.

Ill.).

In the Vasen case, which is said to involve the second deepest well

in existence, the well having reached a depth of 20,450 feet, it is

charged that the defendant made misrepresentations such as that the

well was going through an "Atlantic Ocean of Oil," that geologists

believed that the producing formation extended completely across the

state of Mississippi and possibly up to Pennsylvania, and that the oil

sands encountered assured production of thousands of barrels of oil

per day. The Frank case includes charges of misrepresentation concerning a so-called "magnetic logger" device which was held out to

investors as insuring 100 percent accuracy in the location of oil pools.

In the Hamilton and Lightfoot cases, the defendants are charged with

misrepresenting to investors, among other things, the likelihood of

returns on their investments and the use which was to be made of the

funds obtained from them. In the Campbell case, the indictment,

among other things, charges the defendant with employing the fraudulent "Ponzi" technique, in that, in order to induce investors to make

additional investments, he caused to be returned to them as "dividends" a portion of their prior investments.

The "Ponzi" device also was employed in U. S. v. Peter E. Picotte

(E. D. Mo.), where the defendant was sentenced to a 5 year prison

term for the fraudulent sale of notes in connection with the promotion

of an insurance business financing scheme." In U. S. v. Floyd W. Beck

et al. (W. D. Mo.), where prison terms of 4 years and 3 years were

imposed on two defendants and a third defendant was placed on probation for 3 years for the fraudulent sale of preferred and common

stock of United Insurers Service Company of Missouri, a corporation

falsely described by the defendants as an insurance company.'

The defendant in U. S. v. Theodore E. Lobman (N. D. Ill.) entered

a plea of guilty of charges that he fraudulently sold stock and other

securities relating to spurious profit-sharing plans purportedly controlled by him," Fictitious profit-sharing opportunities also are included as part of the fraudulent scheme charged in the indictment

pending in U. S. v. Hardy Joseph Owens et 01. (S. D. Fla.). The defendants are alleged to have established dummy corporations whose

capitalization consisted of worthless checks and represented that they

were engaged in negotiating many business transactions in which inI For additional details concerning this case, see 18th Annual Report p, 174.

• For additional details concerning this case, see 18th Annual Report 1'. 172.
102 SECURITIES .AND EXCHANGE COMMISSION

vestors might profitably participate, when, in fact, such negotiations

were either non-existent or were not being carried on in good faith

with any intent to consummate them. In U. S. v. LeRoy Williams

Ross (S. D. Okla.), another pending case, the indictment charges that

in the sale of stock of Gulf Coast Oil Processing, Inc., the defendant

made false representations concerning the establishment and financing

of a tung oil plant through funds purportedly available from the defendant, the Reconstruction Finance Corporation and money obtained from investors.

Fraud in the sale of stock of the American Patent Protective Association, Inc., and the Association for Promotion of Patented Articles,

Inc., and other securities is charged in the pending indictment in U. S.

v. Adolph F. von Soden et al. (D. Nev.), which involved the alleged

promotion of a "Dust Collector and Air Purifier," a "Ribbon-Reinking

device," a "Tweezer-Lite" and other patented devices purportedly

owned by the Association for Promotion of Patented Articles, Inc."

A gold mining promotion, involving the sale of stock of Yankee

Mines, Inc. resulted in conviction of all three defendants in U. S. v,

Troy E. Becker et al. (D. Idabo). Becker and his co-defendants entered pleas of guilty to fraud charges which included alleged misrepresentations concerning the availability of ore deposits on the properties controlled by Yankee Mines, Inc. and the use to be made of the

proceeds received from investors, as well as other matters. The defendants were sentenced to 3 year suspended prison terms and placed

on probation for 5 years.

An alleged manipulation of the stock of Universal Laboratories, Inc.

is involved in the pending indictment in U. S. v. David L. Shindler et al.

(S. D. N. Y.). The defendants are charged with effecting on the New

York Stock Exchange a series of transactions creating actual and

apparently active trading in and raising the price of the common stock

of Universal Laboratories, Inc., for the purpose of inducing others to

buy that stock.

A conviction for fraudulent conduct on the part of a broker-dealer

was obtained in U. S. v. Kenneth B. Hill (D. Mass.). Hill entered a

plea of guilty to an information charging him with the sale of forged

securities and the filing of a false financial statement with the Commission. In U. S. v. RU8seUK. Barnes (S. D. Cal.), the defendant, a

securities salesman for a broker-dealer firm, pleaded guilty to a fraud

indictment which charged him with converting funds received from

customers for the purchase of securities and with paying fictitious dividends and profits to such customers for the purpose of concealing his

conversions.

The indictment pending in U. S. v. J. Arthur Warner e~ at. (D.

Mass.) charges the broker-dealer firm ofJ. Arthur Warner & Company,

After the close of the fiscal year Adolph F. and Mary VOD Soden were both found guilty. A third defend.

ant was acquitted by thc court.

•
NINETEENTH ANNUAL REPORT 103

Inc. (now known as Doubling Company, Inc.), and certain of its

representatives with having engaged in a course of business which

operated as a fraud and deceit upon the firm's customers. Among

other things, the indictment charges that the defendants obtained the

trust and confidence of persons inexperienced in securities matters

who were induced to become customers of the firm and that, contrary

to the best interests of these customers, the defendants overtraded and

"churned" their customers' accounts for the purpose of increasing their

own commissions, fees, and profits."

The first criminal convictions for violation of the antifraud provisions of the Investment Advisers Act of 1940 were obtained during

the fiscal year in U. S. v. Howard C. Hageman et al. (S. D. N. Y.).

Hageman and two corporate codefendants entered pleas of guilty to

charges that they employed a scheme to defraud their investment

advisory clients. Hageman was sentenced to a two year prison term.

The corporations were each fined nominal amounts. According to the

indictment, the defendants, under the pretext of rendering impartial

investment advice to their clients, induced them to purchase the stock

of Hageman Properties, Inc., on the basis of false representations concerning the value of the assets owned by the corporation, the profitableness of its operations, its financial condition and other matters; and

also concealed from them that the defendant Hageman had suffered

substantial losses in connection with the operation of various of the

properties transferred by him to Hageman Properties, Inc., had

organized this corporation in an attempt to salvage his previous unsuccessful financial operations and had transferred these properties to it at

prices greatly in excess ot the cost ofsuch properties to him.

In the Matter oj Francis D. Graves and Earl E. Brown (E. D. Wash.),

both respondents were found guilty of criminal contempt for violating

an injunctive decree, entered March 5, 1951, enjoining them from

further violations of the registration and antifraud provisions of the

Securities Act. The respondents entered pleas of guilty to charges

that, in contempt of the decree, they had continued to sell interests in

certain mining and timber leases in Idaho by means of untrue statements relating to such matters as the ownership of the leases, the use

to be made of the proceeds received from the sale of interests and the

amount and value of the ore on the properties.

Another criminal contempt action is pending in U. S. ex rel. SEC v .

E. Randall Henderson (E. D. Mich.). Henderson is alleged to have

continued to sell a variety of unregistered oil securities to residents of

Tennessee, Arkansas, Kentucky, and Indiana, in violation of an injunctive decree prohibiting him and others from selling fractional undivided

interests in oil and gas rights and like securities without such securities

being registered with the Commission under the Securities Act.

10 The indictment Int hls case was returned shortly sfter the close ofthe fiscaJ year.
104 SECURITIES AND EXCHANGE COMMISSION

On appeal, a conviction for the fraudulent sale of securities in the

promotion of an allegedly new type of lawnmower was affirmed in

Bobbro.ffv. U. S., 202 F. 2d 389 (C. A. 9,1953).11 Intwo other appellate cases, Price v. U. S., 200 F. 2d 652 (C. A. 5, 1953), and Henderson

v. U. S., 202 F. 2d 400 (C. A. 9,1953), (petition for rehearing by appellant on basis of other alleged errors denied, 204 F. 2d 126) convictions

were reversed for certain trial errors, but in each of these cases the

defendants were convicted upon retrial. In the Price case, after reversal of his conviction, the defendant was fined $5,000 upon his plea

of nolo contendere to charges that he violated the registration provisions

of the Securities Act in the sale of investment contracts involving

Texas oil and gas lease assignments." The defendant in the Henderson

case, upon retrial after the close of the :fiscal year, was again found

guilty by a jury of violating the mail fraud statute in connection with

sale of fractional undivided interests in oil and gas rights relating to

certain Louisiana properties." Henderson, who was sentenced to a

five year prison term and fined $1,000, has appealed again.

Subsequent to the close of the fiscal year, judgments of convictions

of all seven defendants were sustained on appeal in Llanos et al. v,

U. S., 206 F. 2d 852 (C. A. 9, 1953). This case involved a scheme to

defraud residents of the Territory of Hawaii, principally plantation

laborers, in connection with the sale of securities issued by the

defendants."

COMPLAINTS AND INVESTIGATIONS

Each of the Acts administered by the Commission contains provisions authorizing investigations of possible violations thereof. These

investigations are conducted primarily by the regional offices under

the administrative supervision of the principal officewhich also, when

possible, makes available members of its staff to assist in the more

complex investigations.

Investigations are classified as preliminary or docketed. A preliminary investigation is initiated when information is received

indicating a possible violation of one of the Acts and is usually conducted by telephone inquiries, interviews or a limited amount of

correspondence. This frequently will disclose either that no violation

has occurred, or that there may have been an inadvertent violation

through misunderstanding of the law. The inquiry in many cases

serves to educate inadvertent violators and to bring about compliance

before any damage or loss results to the investing public. Should

II For additional details concerning this case, see 17th and 18th Annual Reports, pp. 152and 173,respectively. In this case retrlalls pending on certain counts in which Bobbrolland a codefendant are named and

as to which the jury disagreed on the first trial.

IIFor additional details concerning this case, see 18th Annual Report, p. 175.

II For additional details concerning this case, see 17th Annual Report, p. 151.

H For additional detaUs concerning this case, Bell 17th and 18th Annual Reports, pp. 153 and 173.

respectively.
NINETEENTH ANNUAL REPORT 105

the preliminary investigation reveal a wide-spread public interest

or the likelihood of a substantial violation, the case becomes docketed

and a full scale investigation is undertaken.

The Commission is authorized, under the various Acts, to issue

subpoenas and to delegate this power to its employees. An officer

designated by the Commission in a particular case may issue a subpoena requiring the production of books, records, and other documents

for examination, and may require the attendance of witnesses to

testify under oath, which the officer is empowered to administer.

This delegation is made by the Commission in specific instances

through the issuance of an order, limited to the persons named

therein as officers and to the purposes of the particular investigation,

and only upon a showing to the Commission that necessary evidence

cannot be otherwise obtained. During the fiscal year 56 such orders

were entered.

Upon completion of an investigation, a report is prepared in the

regional office which is transmitted to the principal office with the

recommendation of the Regional Administrator for the institution

of appropriate action, or for closing the investigation if the evidence

does not appear to warrant action by the Commission. These reports

and recommendations are reviewed in the principal officebefore being

presented to the Commission.

The statutes administered by the Commission provide for civil

proceedings to enjoin violations, reference of evidence to the Attorney

General where the evidence warrants criminal prosecution, and administrative proceedings with respect to registered securities and brokerdealers. In addition to those mentioned, the Commission also refers

evidence of violations of other federal statutes and state laws to

appropriate federal or state authorities. During the fiscal year,

references were made to other authorities in 44 instances.

The following table reflects the investigative activities of the Commission during the fiscal year:

Investigations of possible violations of the Acts administered by the Commission

Preliminary Docketed Total

Pending June 30, 1952_______________________________________________ 343 729 1,072 New esses ___________________. _________. __. ___________. _____________ 204 212 416

Transferred from preliminary _______________________________________ ___ ~w _________ 46 46

Total ._. 547 987 1,634

Closed . . _. 277 243 020

Transferred to docketed .. _. . 46 ----~--_. 46 Pendlng at June 30, 1903 ._ .. . 224 744 968

•

__________________________ ____________________• _______

__ ________ ________________________________________• _______

______________________________ __________ --- _________ __________________• ___________
106 S~CURITIES AND EXCHANGE COMMISSION

SECTION OF SECURITIES VIOLATIONS

The Commission maintains in the Office of the General Counsel a

Section of Securities Violations for assistance in the enforcement of

the various statutes which it administers and to provide a further

means of preventing fraud in the purchase and sale of securities.

This Section has developed files which serve as a clearing house for

information concerning persons who have been charged with violations

of various Federal and State securities statutes which the Section

maintains. The specialized information in these files has been kept

current through the cooperation of the United States Post Office

Department, the Federal Bureau of Investigation, parole and probation officials, State securities commissions, Federal and State

prosecuting attorneys, police officers, Better Business Bureaus, and

members of the United States Chamber of Commerce. By the end

of the 1953 fiscal year these records contained data concerning

58,211 persons against whom Federal or State action had been taken

in connection with securities violations.

During the past year alone additional items of information relating

to 4,387 persons were added to the records of this Section, including

information concerning 1,692persons not previously identified therein.

Extensive use is made of this clearing house of information. During

the past year, the Commission received 3,330 securities violations

letters or reports and dispatched 2,236 communications to cooperating

agencies.

ACTIVITIES OF THE COMMISSION IN ACCOUNTING AND AUDITING

The several Acts administered by the Commission provide that

dependable, informative financial statements, which disclose the

financial status and earnings history and potentialities of a corporation or other commercial entity, shall be made a part of registration

statements, applications for registration, and periodic reports required

to be filed with the Commission.

The Acts administered by the Commission and rules adopted thereunder provide that the financial statements required to be filed with

the Commission shall be certified by independent public accountants.

The value of certification by qualified accountants has been conceded

for many years, but the requirement as to independence, long recognized and adhered to by some individual accountants, was for the

first time authoritatively and explicitly introduced into statutes. Out

of these provisions and the administration thereof by the Commission

there have grown concepts of accountant-client relationships that

have strengthened the protection afforded investors.

The Commission has prescribed uniform systems of accounts for

companies subject to the provisions of the Holding Company Act,ll;

II Umform SY8ttm of Account, for Mutual &rtJiet Campania and Sublidiary &rtliet Campania (effective

August I, 1926); Uniform Sylltm of AccounU for Public Utility Bolding Compania (effective January 1, 1937;

amended effective January I, 1943).

•
 
:ND."'ETEENTH ANNUAL REPORT 107

has adopted rules under the Securities Exchange Act governing accounting and auditing of securities brokers and dealers, and has

promulgated rules contained in a single, comprehensive regulation,

known as Regulation S_X,16which govern the form and content of

financial statements filed in compliance with the various Acts. These

regulations are implemented by the Accounting Series releases, of

which about 75 have been issued, designed to make public from time

to time opinions on accounting principles for the purpose of contributi ig to the development of uniform standards and practice in major

accounting questions. The rules and regulations thus established,

except for the uniform systems of accounts, prescribe the accounting

to be followed only in certain basic respects. In the large area not

covered by such rules the Commission's principal reliance for the

protection of investors is on the determination and application of

accounting principles and standards which are recognized as sound and

which have attained general acceptance.

Changes and new developments in financial and economic conditions affect the operations and financial status of the several thousand

commercial and industrial companies required to file statements with

the Commission. The Commission, therefore, must be informed of

changes and new developments in these fields and must make certain

that the effects thereof are properly reported to investors. The

Commission's accounting staff therefore engages in study and research

designed to establish and maintain appropriate accounting procedures

and practices. Furtherance of these activities requires constant contact and cooperation between the staff and accountants both individually and through such representative groups as, among others, the

American Accounting Association, the American Institute of Accountants, the Controllers Institute of America, and the National

Association of Railroad and Utilities Commissioners, as well as other

governmental agencies.

During the year the Commission found it necessary to give consideration to a change in procedure recommended by the American

Institute of Accountants with respect to the accounting for options

granted by corporations to their employees and officers to purchase

stock of such corporations. These option arrangements, which have

been adopted by an increasing number of industrial companies filing

financial statements with the Commission, are found in a variety of

forms. While some of the plans have given the optionees the unrestricted right to exercise the options immediately, others have required

that the optionees remain in the employ of the company for a specific

period before they have the unrestricted right to exercise the options,

and still others have been granted the right to purchase a specified

'number of shares each year over a period of years provided the

II Adopted February 21, 1940 (Accounting Series release No. 12); revised December 20, 1950 (Accounting

8el'lesrelease No. 70).
108 SECURITIES AND EXCHANGE COMMISSION

optionees are in the employ of the company upon each such option

date.

Prior to 1950 many of these plans fixed the purchase price at substantially less than the market price of the stock optioned at the date

the option was granted. Because of the change in the income tax

law in 1950 with respect to the saxability of optioned stock, many

corporations have changed their methods of granting options. Some

of the plans adopted since that date continue to set the option price

at varying amounts under the market price, but in most instances

the option price is substantially the same as market.

The fact that such plans afford benefits to the participating employees which are susceptible of monetary expression has been recognized in court decisions and in the varying treatments which have

been accorded such options under the Internal Revenue Code.

Under these circumstances the Commission has required financial

statements filed with it to reflect amounts corresponding to the

benefit to the optionees as charges against income of the issuer in the

period or periods in which the optionees first obtained the unrestricted

right to exercise their options, a procedure concurred in by the accounting profession, as indicated by Accounting Research Bulletin

No. 37, issued in November 1948 by the American Institute of Accountants. As of a recent date this bulletin was revised to indicate

that the date on which an option is granted is the date that should

be used in determining such compensation and that the amount of

compensation to be recorded in the accounts of the corporation should

be the excess of the fair value of the optioned stock over the option

price as at that date.

In view of the revision of Accounting Research Bulletin No. 37,

the Commission deemed it necessary and appropriate to give consideration to the adoption of a rule requiring a corporation which grants

options to its officers and employees to acquire its capital stock,

thereby incurring costs in the form of compensation to the optionees,

to account for such costs, at the time the optionees have complied

fully with the terms of the option, by charging corporate income with

an amount equal to the fair value of the stock over the option price

at that date. This would continue in effect the procedure the Commission had required in the past.

The Commission announced its intention of promulgating such a

rule in a public release and invited all interested persons to express

their views thereon. After further consideration of the question

in the light of the comments received the Commission deemed it

inappropriate to prescribe a procedure for determining the amount of

cost, if any, of these stock options to be reflected in profit and loss

or income statements filed with the Commission. However, in order

that investors may be apprised of the monetary significance of the

concessions made by registrants to officers and employees through
NINETEENTH ANNUAL REPORT 109

the granting of stock options, the Commission, on November 3,

1953, adopted rule 3-20 (d), to be added to Regulation S-X, which

requires full and complete disclosure of all stock option arrangements

in financial statements filed with the Commission."

During the fiscal year the Commission issued its Findings, Opinion

and Order in a proceeding instituted under rule II (e) of its Rules of

Practice against Haskins & Sells, a firm of certified public accountants,

and Andrew Stewart, a partner in that firm. The Commission found

that respondents had failed to devote the care and inquiry required

by the circumstances in connection with the preparation and certification of balance sheets for use in a registration statement filed by

Thomascolor, Incorporated, grossly overstating intangible assets and

attributing to apparently potentially productive items material

amounts which should have been shown as promotion services. The

Commission concluded that it was necessary to deny respondents the

privilege of practicing before the Con-mission for a period of ten days.

OFFICE OF OPINION WRITING

The Office of Opinion Writing aids the Commission in the preparation of :findings,opinions, and orders promulgated by the Commission

in contested and other cases arising under statutes administered by

it. These statutes provide for a wide variety of administrative proceedings which require quasi-judicial determination by the Commission. Formal opinions are issued in all cases where the matter to be

decided, whether substantive or procedural, is of sufficient importance to warrant a formal expression of views.

The Office of Opinion Writing is an independent staff office which

is directly responsible to the Commission. It receives all assignments

and instructions from and makes recommendations and submits its

work to the Commission directly. In the preparation of opinions

assigned to the Office of Opinion Writing, the members of this office

do not consult with members of the operating division actively participating in the proceedings and it is an invariable rule that those

assigned to prepare such an opinion must not have had any prior

participation in any phase of the proceedings with respect to which

the opinion is to be prepared. Commission experts are from time to

time consulted on technical problems arising in the course of the

preparation of opinions and :findings, but these experts are never

individuals who have participated in the development of the case.

The :findingsof fact, opinions, and orders adopted and promulgated

by the Commission serve as an aid and guide to the bench and bar.

With minor exceptions (e. g., certain opinions dealing with requests

for confidential treatment) all are publicly released and distributed

to representatives of the press and persons on the Commission's

mailing list.

11 A.ccountlng Series release No. 76.
110 SECURITIES AND EXCHANGE COMMISSION

The creation of the Office of Opinion Writing as an independent

staff unit in 1942 was based on the view that the exercise of the Commission's adjudicatory functions in many types of cases made it

appropriate that it be assisted in that function by members of its

staff who were independent of units engaged in investigation or

prosecution of cases. The desirability of this arrangement was subsequently given express recognition in specific provisions of the

Administrative Procedure Act, which in certain types of cases requires

that there be a separation between quasi-prosecutory functions and

quasi-judicial functions. The existence of the Office of Opinion

Writing thus facilitated the Commission's compliance with the separation of function requirements contained in that Act.

In addition to its primary function, the Office of Opinion Writing

is given assignments of a general nature which are not inconsistent

with the objective of the separation between the investigatory and

quasi-judicial functions, for example, supervising the preparation of

the Commission's annual report to the Congress.

INTERNATIONAL FINANCIAL AND ECONOMIC MATTERS

During the fiscal year registration statements covering $198.275,539

of securities issued by foreign issuers, government and private, wero

filed under the Securities Act. Of this amount $184,710,539 represented Canadian offerings, and the balance of $12,565,000 represented

the offerings of two private foreign issuers.

The Commission had representation on the Staff Committee of tho

National Advisory Council on International Monetary and Financial

Problems, and on the United Nations Economic Committee of the

Department of State. The Commission furnished information to

other departments of government and to the International Bank for

Reconstruction and Development concerning the effect of a Brazilian

decree governing treatment of United States investors in that country.

Consultations were held on a proposed law for the treatment of

foreign investors to be adopted by the government of Greece, and

on a law for the modification of securities proposed by the government of the Federal Republic of Germany. The Commission's Foreign Economic Adviser has also consulted with the Office of Alien

Property with respect to Japanese and German bonds which had

been vested by that agency.

In September 1952 a delegation representing the government of

Japan informed the Commission of the progress in the settlement of

Japan's prewar bonded debt and sought information as to the requirements applicable to new bonds to be offered under the settlement.

On February 27, 1953, negotiations for the settlement of the prewar external German debts, in which the Commission had participated through representation on the Interdepartmental Committee

on German Debts, were concluded by the signing of the Agreement
~NETEENTH ~AL REPORT 111

on German External Debts. This Agreement and other agreements

with the Federal Republic of Germany were forwarded to the Senate

for ratification on April 10, 1953, and referred to the Committee on

Foreign Relations. The Commission's Foreign Economic Adviser

testified before that Committee.

After discussions in which the Commission participated, the German govemment enacted on August 25, 1952, a law for the Validation of German Foreign Currency Bonds. Thereupon representatives

of the Commission and the State Department prepared drafts of the

implementing ordinance, and of the agreement between the United

States and Germany regarding the validation of German dollar bonds.

These drafts were discussed with representatives of the financial community so that implementation of the German validation law would

be adapted to the practice of United States securities markets. Validation procedures are necessary to prevent the sale or the settlement

of German dollar bonds previously purchased for retirement, but

which had disappeared when the Soviet armed forces occupied Berlin

in 1945. To prevent the sale of these looted bonds in the United

States markets, the Commission on two occasions during the fiscal

year publicly renewed its request that brokers and dealers refrain

from dealing in German dollar bonds until the establishment of validation procedures and the filing of appropriate reports with the

Commission.

The then Chairman of the Commission headed a mission to Germany early in 1953 to discuss (1) resumption of trading in German

securities on United States markets, especially the requirements of

registration and the filing of information under the Securities Act and

the Securities Exchange Act; (2) extension by the German Federal

Republic of the bar dates for validation of German securities denominated in reichsmarks; and (3) problems relating to the application

in the United States of German law for validation of securities denominated in foreign currencies. Following these discussions the implementing ordinance under the German Validation Law for German

dollar bonds was approved by the two governments and, following

informal consultation with the Foreign Relations Committee of the

Senate, the Executive Agreement regarding validation of German

dollar bonds was signed in Bonn on February 27, 1953. On June 9,

1953, the Validation Board for German Dollar Bonds announced the

opening of its offices at 30 Broad Street, New York City. Holders of

German dollar bonds may present them to that Board for validation.

During the fiscal year the Department of State and the Commission renewed discussions of the proposed treaty for the validation of

Austrian dollar bonds.

A member of the Commission acted as an adviser to the United

States delegation at the Annual Meeting of the Board of Governors
112 SECURITIES AND EXCHANGE COMMISSION

of the International Bank for Reconstruction and Development and

the International Monetary Fund held in Mexico City in September

1952.

The International Bank in October 1952 offered in the United

States $60 million 3~ percent bonds due October 15, 1971. The bonds

were offered at 98 by an underwriting group of 139 members. It is

reported that purchases of this issue were made by persons in 34 states

and the District of Columbia and in 8 foreign countries. Domestic

purchases accounted for 65 percent of the total issue and were made

principally by savings banks, life insurance companies, and pension

and trust funds. During the year the Bank also offered 50 million

Swiss franc 3~ percent bonds due 1962. These bonds were offered

in Switzerland in November 1952 at a price of 98~. In the distribution of these issues of bonds, the Bank made available a prospectus

giving information about the Bank's structure and operation. It

also filed with the Commission, pursuant to Regulation BW adopted

by the Commission under the amendment to the Bretton Woods

Agreements Act, information comparable to that which would be

required if its securities had been registered under the Securities Act

and the Securities Exchange Act.

The Commission does not at this time recommend any change in

the exempt status of securities of the International Bank.

CONFIDENTIAL TREATMENT OF APPLICATIONS, REPORTS, OR

DOCUMENTS

The Commission is empowered to grant confidential treatment,

upon application by registrants, to certain types of information which

would otherwise be disclosed to the public in applications, reports,

or other documents filed under Acts administered by the Commission.

Accordingly, rule 485 under the Securities Act provides that information as to material contracts, or portions thereof, filed as a part of

a registration statement will be held confidential by the Commission

if it determines that disclosure would impair the value of the contracts

and is not necessary for the protection of investors. Other rules

prescribe the holding of information confidential where disclosure

thereof would be detrimental to the national security and under

other circumstances.

The number and disposition of applications for confidential treatment pending during the year under specified statutes are tabulated

below.

Applications for confidential treatment-1953 fiscal year

Number Number Number

Act under which filed pending Number Number denied pending

July 1, received granted or WIth- June 30,

1952 drawn 1953

Securities Act of 1933________________________________ --- --- --- --- 2 28 25 2 3 Securities Exchange Act of 1934______________________ 2 18 15 4 1 Investment Company Act of 1940____________________ 0 75 75 0 0

TotaL _________________________________________ --- --- --- --- --- 4 121 115 6 4
NINETEENTH ANNUAL REPORT 113

The total of 121 applications filed during the year compares with a

total of 145 filed in the preceding year.

STATISTICS AND SPECIAL STUDIES

The Commission has a considerable amount of financial data

concerning American corporations accumulated in connection with

its administrative functions and publishes certain statistical series,

which are used by the Congress, other governmental departments,

investment and financial institutions, and the general public. The

statistical series which have been prepared during the last fiscal

year are described below.

CAPITAL MARKETS

AU New Securities Offerings

The Commission has continued its monthly series on new securities

offerings which is published in the Statistical Bulletin, and a quarterly

series which is published in release form and contains a brief analysis

of the data. These statistics show the volume and character of all

new securities offered for cash sale in the United States, including

both registered and unregistered securities, and public and private

offerings.

According to these data, corporations offered for cash sale during

the fiscal year securities having a value of $9 billion, the largest amount

of new issues in any year since 1929, and exceeding the amount offered

in the 1952 fiscal period, which was the previous record volume in

recent years, by $800 million. These figures are exclusive of sales

by investment companies and other issues sold continuously, such as

special offerings to employees. Thus the figures differ from statistics

of issues effectively registered under the Securities Act shown in other

sections of this report. There are other important differences as well.

For example, the series on offerings includes only issues offered for

cash sale for the account of issuers, includes not only issues publicly

offered but also those privately placed, and includes other issues

exempt from registration under the Securities Act, such as intrastate

offerings and railroad securities. The statistics on new cash offerings

are given in tables 2 through 4 of the appendix, and more details on

the coverage of the series appear in the footnotes to the tables. The

chart on page 114 shows the classification of all new corporate offerings according to type of security, public and private offering, and

uses of net proceeds.

The $9.4 billion of corporate securities offered in the 1953 fiscal

year compares with $8.6 billion in the 1952 fiscal year and $6.7 billion

in the 1951 year. The amount of net proceeds from securities offerings designated for plant and equipment expenditures by all companies totaled $6.0 billion while the amount used to supplement

working capital was $2.1 billion. In addition, $1.2 billion was to be

279900-54-9
114 SECURITIES AND EXCHANGE COMMISSION

NEW SECURITIES

OFFERED FOR CASH IN THE UNITED STATES BY CALENDARYUR, 1934-1953

.-on NOCUOS OOLLA"'lllUOH$

'0

I

NEW CORPORATE SECURITIES CLASSIFIED BY TYPE OF SECURITY

BOffOS

uoss HtOCt:lo. 00 •• 811.UOfI'

'0

o

'0

NEW CORPORATEBOND ISSUES, PUBLICLY OFFERED AND PRIVATELY PLACED

o ..'VATO

.PUBLIC

'0

o

N(T PROCEEDS

DOLLARS elLI.I ONS

'0

NEW CORPORATE ISSUES CLASSIFIED BY INTENDED USE DFNET PROCEEDS

j

--- REFUNDING AND

ALL OTHER PURPOSES

WORKING CAPITAL

PLANT AND EQUIPMENT

JUT PROGUOS DOU.AR, I'LLIONS.

'0

o

1934 36 38 40 42 44 46 48 50 52.J1

o

--~

=-
NINETEENTH ANNUAL REPORT 115

used for refunding outstanding securities, repayment of bank loans

and other purposes.

Of total corporate securities issued in the 1953 period, 58 percent

was publicly offered and 42 percent privately placed. Private placements reached a new record for such transactions, totaling $4.0

billion. Separate statistics on private placements of corporate issues,

classified by type of security and industry of issuer, appear in appendix

table 2, part 4, while comparisons of the volume of public and private

offerings are given in appendix table 4.

Including both public and private offerings, debt financing by corporations amounted to $7.5 billion, preferred stock issues, $500 million,

and common stock, $1.4 billion. The distribution of offerings among

the various industry groups was as follows: manufacturing, 34 percent;.

electric, gas and water, 30 percent; financial (exclusive of net sales byinvestment companies) and real estate, 14 percent; communication, g.

percent; and the balance of 14 percent composed of issues in the rail--

road, other transportation, commercial and miscellaneous categories;

The noncorporate securities included $14.2 billion of U. S. Government securities, $4.5 billion of state and local securities, $300 million

of Federal agency securities and $200 million foreign government

issues.

Issues Registered Under Securities Act of 1933

Statistics of all securities registered under the Securities Act of

1933 are published at quarterly intervals in the Statistical Bulletin.

and a discussion of the data for the fiscal year ended June 1953appears.

in part I of this report. In addition, appendix table 1 presents infor..

mation on the number and volume of registrations by months and

also classifies the issues registered according to method of distribu ..

tion, industry of issuer, purpose of registration, and use of net proceeds.

Investmenr Cempanfes

Data are published quarterly in the Statistical Bulletin for over

200 management investment companies registered under the Investment Company Act of 1940. The statistics include purchases and

sales of their own securities, portfolio changes, and aggregates of

securities and assets, segregated by open-end and closed-end types.

Sales, net of repurchases, of the issues of these companies amounted

to half a billion dollars in the fiscal year ended June 1953, approximately the same as in the preceding fiscal year.

Cost of Flotation

Data are collected on the costs of selling securities, including

issues registered under the Securities Act and issues placed privately.

These data cover commissions and fees of investment bankers and

other expenses incurred in marketing securities, such as fees to

attorneys, accountants, taxes, printing expenses, etc.
116 SECURITIES AND EXcHANGE COMMISSION

STOCK MARKETS

Statistics are regularly compiled and published in the Statistical

Bulletin on the market value and volume of sales on registered and

exempted securities exchanges, round-lot stock transactions on the

N ew York exchanges for accounts of members and nonmembers, oddlot stock transactions on the New York exchanges, special offerings

and secondary distributions. Figures on round-lot and odd-lot stock

transactions are also published weekly with the release on stock market

indexes.

The indexes of stock market prices were continued during the 1953

fiscal year. These indexes are based upon the weekly closing market

prices of 265 common stocks listed on the New York Stock Exchange,

and are composed of seven major industry groups, 29 subordinate

groups, and a composite group. These data are published in the

Statistical Bulletin and are also released weekly.

SAVING STUDY

The Commission compiles and releases at quarterly intervals estimates of the volume and composition of individuals' saving in the

United States. The study shows aggregate value of saving in each

quarter and also the form in which the saving was made such as

investment in securities, expansion of currency holdings, bank

deposits, etc.

The estimates show that during the fiscal year ended June 30,

1953 individuals saved more in liquid form than at any time since the

end of the war, the amount totalling $17.1 billion. Individuals

added $8.4 billion to their equity in life insurance and government

pension reserves, such as Social Security funds, increased their currency and bank deposits by $7.4 billion, made net purchases of

-seeurities totalling $8.2 billion and in addition, increased their shares

in savings and loan associations' by $3.5 billion. During the same

period individuals added substantially to their debt, increasing

mortgage debt by $6.3 billion and other debt by $4.1 billion.

PLANT AND EQUIPMENT EXPENDITURES OF U. S. BUSINESS

The Commission, with the Department of Commerce, continued

the joint series of quarterly releases on the plant and equipment

expenditures of United States business other than agriculture. Shortly

after the close of each quarter these releases present industry totals

on the actual capital expenditures of that quarter and anticipated

expenditure,s for the next two quarters. In addition, a survey is

made at the beginning of each year of the plans of business as regards

expansion during that year. These data have provided an index of

present and future activity in the capital markets and of business in

general.
NINETEENTH ANNUAL REPORT 117

The survey indicates that during the fiscal year ended June 1953,

American business, exclusive of agriculture, spent a record amount

of $26.9 billion for expansion of plant and new equipment. According

to their plans at mid-1953, manufacturing companies expected to

make plant and equipment expenditures of $12.7 billion in the calendar

year 1953, about 6 percent above the 1952 amount. A larger increase

was expected in the expenditures of nondurable goods industries than

of manufacturers of durable goods as compared with 1952.

FINANCIAL POSITION OF CORPORATIONS

Working Capital Position

The series of quarterly releases on the working capital position of

all United States corporations, exclusive of banks and insurance

companies, was continued. These releases show the principal components of current assets and current liabilities and an abbreviated

analysis of the sources and uses of corporate funds. These data are

important in measuring the liquid position of the corporate segment

of the economy taken as a whole.

At the end of June 1953, the net working capital of United States

corporations reached a record of $88.2 billion. At that date corporations held $29.2 billion of cash and $19.2 billion of United States

Government securities, these together amounting to 52.3 percent of

their current liabilities.

Balance Sheet and Income Statements

The Commission, with the Federal Trade Commission, continued

the joint series of quarterly industrial financial reports, which were

developed as an extension of the working capital series. Complete

balance sheet data and an abbreviated income account have been

published for manufacturing companies since the first quarter of 1947.

Data are shown for various size groups of corporations and for minor

industry groups. The financial report program includes data on

profits.

RECOMMENDATIONS FOR FURTHER LEGISLATION

The Commission has under study a number of legislative proposals

relating to the Acts it administers which have been received from

various groups in the field of securities and finance. These legislative

proposals are largely concerned with technical changes in these Acts.

It is expected that these proposals shortly will be submitted to the

Executive Officeof the President and to the appropriate Congressional

committees for consideration.
118 SECURITIES AND 'EXCHANGE COMMISSION

PERSONNEL

.As of June 30, 1953, the personnel of the Securities and Exchange

Commission consisted of the following:

Commissioners (2 vacancies) _ ______________ __ 3

Staff:

Headquarters ofIice 502

Regional ofIices 268

770

Total________________________________________ 773

During the fiscal year 1953, a further reduction in its appropriation

compelled the Commission to reduce its staff from 866 to 773. This

was accomplished by reduction in force and by not filling vacancies

which arose through normal turnover. This reduction continued a

downward trend which has seen average employment drop to a figure

which is less than half of what it was in 1941. Since June 30, 1950,

the Commission has reduced its payroll by 225 persons, or 22.5

percent. The appropriation for the 1953 fiscal year permitted an

average employment of 814 and in fiscal 1954, the Commission's

appropriation will allow an estimated average employment of 750.

As is apparent from the preceding discussions of the work of the

Commission, these decreases in personnel have not been accompanied

by commensurate decreases in duties.

To increase the efficiency and economy of operations, the Commission effected several organizational and operating changes in the

fiscal year 1953.

In May 1953, the Commission separated the administration of its

regulatory functions under the Investment Company Act of 1940

from the administration of the disclosure and reporting requirements

of that Act by transferring the regulatory functions from the Division

of Corporation Finance to the Division of Public Utilities, which was

redesignated the Division of Corporate Regulation. Reductions in

the staff of the Division of Corporation Finance suggested the desirability of a redistribution of the workload within the Commission in

order to ensure that the analysis of registration statements covering

new security offerings and new listings on securities exchanges be

conducted as expeditiously as possible.

, In June 1953 the Commission transferred from the Division of

Corporate Regulation to the Office of the General Counsel the responsibility for conducting judicial proceedings before the district

courts with respect to the enforcement of orders approving reorganization plans and other orders of the Commission under the Public

Utility Holding Company Act. \.

-
NINETEENTH ANNUAL REPORT 119

During the :fiscal year 1953, the Commission was able to effect

further economies in the operation of its duplicating facilities by

renting special reproduction equipment.

On February 4, 1953, the Commission adopted a comprehensive

regulation restating the ethical principles which govern the conduct

of members and employees and former members and employees of

the Commission. The regulation, which represents in large part a

consolidation of rules which had been in existence during prior years,

includes a general statement of policy following essentially language

used by a Subcommittee of the Senate Committee on Labor and Public

WeHare in its report on Ethical Standards in Government, and in

the related bill, S. 2293, 82nd Cong., 1st Sess., 1951. The regulation

also deals more specifically with limitations on outside or private

employment, securities transactions, disclosure to superiors of personal

interests which might conflict with official duties, negotiation for

private employment by persons interested in matters pending before

the Commission, and practice before the Commission by former

members and employees of the Commission.

FISCAL AFFAIRS

Appropriation and Expenditures

The following is a summary of the appropriation and expenditures

for the :fiscalyear 1953 as compared to the :fiscalyear 1952:

Fiscal year1953 1952

Approprtatton $5, 245, 080 $5,813,480 Expenditures .. _. .. 5,243,672 5,811,440

Unexpended balance. 1,408 2,040

Fees and Revenues

The following fees were collected in the :fiscalyear 1953:

Character of fee:

Registration of securities issued

Qualification of trust indentures

From registered exchanges

Sale of copies of documents or portions thereof,

Miscellaneous collections

$812,969

1,400

363,567

18,088

3,346

Total 1,199,370

Fees are turned over to the General Fund of the Treasury and are

not available for expenditure by the Commission.

_______________________________ • ____• ______••• _____________________ __________ ____________________________________________________

__________________•• ___•__•__________________________

_

_

_

_

_
120 SECURITIES AND EXCHANGE COMMISSION

PUBLICATIONS

Publications issued during the fiscal year include:

The Work of the Securities and Exchange Commission, August 12, 1952.

Monthly Statistical Bulletin.

Bound Volumes Nos. 20, 21, 22, and 23 of Commission's Decisions and

Reports.

Twelve monthly issues of the Official Summary of Securities Transactions

and Holdings of Officers, Directors, and Principal Stockholders.

The Eighteenth Annual Report of the Commission.

List of Securities Traded on Exchanges under the Securities Exchange Act

of 1934, as of December 31, 1952.

List of Companies Registered under the Investment Company Act of 1940,

as of December 31, 1952.

Registered Public Utility Holding Companies, June 30, 1952.

Quarterly Financial Report, U. S. Manufacturing Corporations. (Jointly

with Federal Trade Commission). First, third and fourth quarters 1952.

Quarterly Financial Report, U. S. Wholesale and Retail Trade. (Jointly

with Federal Trade Commission). 1950-1951 and third and fourth quarters of 1952.

Working Capital of United States Corporations, Quarterly.

Volume and Composition of Saving, Quarterly.

New Securities Offered for Cash, Quarterly.

Plant and Equipment Expenditures of U. S. Corporations, Quarterly. (Jointly with Commerce Department).

INFORMATION AVAILABLE FOR PUBLIC INSPECTION

The Commission maintains Public Reference Rooms at the headquarters office in Washington, D. C., and at its Regional Offices in

New York City and Chicago, TIL

Copies of all public information on file with the Commission contained in registration statements, applications, declarations and other

public documents are available for inspection in the Public Reference

Room in Washington. During the fiscal year 2,284 persons made

personal visits to the Public Reference Room seeking public information and an additional 22,196 requests for registered public information and copies of forms, releases and other material of a public nature

were received. Through the facilities provided for the sale of reproductions of public information, 1,743 orders involving a total of

119,081 page units were filled and 673 certificates attesting to the

authenticity of copies of Commission records were prepared. The

Commission also mailed 381,659 copies of publications to persons requesting them.

There are available in the New York Regional Office copies of

recent filings made by companies which have securities listed on exchanges other than the New York exchanges and copies of current

periodical reports of many other companies which have filed registration statements under the Securities Act of 1933. During the

fiscal year, 10,319 persons visited this Public Reference Room and

more than 7,300 telephone calls were received from persons seeking
NINETEENTH ANNUAL REPORT 121

public information and copies of forms, releases and other material.

In the Chicago Regional Office there are available copies of recent

filings made by companies which have securities listed on the New

York exchanges.

Copies of recent prospectuses used in the public offering of securities

registered under the Securities Acts are available in all Regional

Offices, as are copies of active broker-dealer and investment adviser

registration applications and Regulation A Letters of Notification

filed by persons or companies in the respective regions.

Copies of certain reports filed with the Commission are also available

at the respective national securities exchanges upon which the securities of the issuer are registered.

PUBLIC HEARINGS

The following public hearings were held by the Commission under

the Acts indicated during the fiscal year:

Number

01

hearing_ Securities Act of 1933_ _ _ __ _ _ __ ___ _ __ _ __ _ _ __ _ _ __ __ __ _ _ __ _ __ __ _ __ __ __ 4

Securities Exchange Act of 1934_____________________________________ 23

Public Utility Holding Company Act of 1935_________________________ 36

Investment Company Act of 1940___________________________________ 4

Formal hearings pursuant to Rule II (e) of the Rules of Practice_________ 2

69

PART IX

APPENDIX

STATISTICAL TABLES

123
124 SECURITIES AND EXCHANGE COMMISSION

TABLE I.-Registrations fully effective under the Securities Act of 1933

PART!.-DISTRIBUTION BY MONTHS, FISCAL YEAR ENDED JUNE 30, 1953

[Amounts In thousands of dollars ']

All effectively registered Proposed for sale for account of Issuers

Year and month

Number of Number of Amount NumberoC Number of Amount statements issues statements Issues

195t July __________________________ 50 71 602, 257 44 55 486,362 August, ______________________ 34 39 156,405 30 33 118,980 September ____________________ 39 52 756,952 38 43 593,960 October _______________________ 37 63 362,206 33 45 337,420 November ____________________ 35 44 515,139 31 33 378,915 December. ___________________ 39 50 246,741 32 38 170,313

19511 1anuary ______________________ 41 49 702, 074 38 42 597,004 February _____________________ 48 58 684, 589 44 50 627,528 March. _______________________ 71 102 800,711 68 94 753,932 ApriL ________________________ 72 89 867,765 68 77 798,521 May __________________________ 62 89 1,070,626 56 69 782, 438 1 nne __________________________ 65 79 741,352 61 69 680,204

Total, fiscal year 1963___ 1593 775 7,506, 817 543 648 6,325,580

PART 2.-BREAKDOWN BY METHOD OF DISTRIBUTION AND TYPE 'OF SECURITY OF

THE VOLUME PROPOSED FOR CASH SALE FOR ACCOUNT OF THE ISSUERS, FISCAL

YEAR ENDED JUNE 30, 1963

[Amounts In thousands of dollars ']

Type of security

Method of distribution and group to whom o~ered Preferred Common' All types Bonds 3 stock stock

All methods of dlstribution _____________________________ 6,325,580 3,093,015 424,253 2, 808, 312

~~ ~:r~;p~~~~rs---~~======================== ===== 4,580,835 2, 587, 526 313,445 1,679,864

1,486,821 503,489 108,174 875,158 To other special groups _____________________________ 257,923 2,000 2, 633 263,290

Tbrough Investment bankers ___________________________ 5,684,047 3,070,226 408,613 2, 205, 207

By purchase and resale _____________________________ 4,029,756 2,737,311 402, 113 890,332

To general public ______________________________ 2,934. 644 2, 234. 274 302, 285 398,085 To security holders _____________________________ 1,093,937 503,037 99,528 491,372 To other special groups _________________________ 1.175 300 875

On best efforts basts ________________________________ 1,654, 290 332, 915 6,500 1,314, 875

To general public ______________________________ 1,570,976 332, 915 1,500 1,236,561 To security holders _____________________________ 83,066 ---.-------- 5,000 78,066 To other speclal groups _________________________ 248 --------.--- .------.- ... 248

By Issuers ______________________________________________ 641,533 22,789 15,639 603,105

To general publle __________________________________ 75,216 20,337 9,660 45,219 To security holders _________________________________ 309,818 452 3,646 305,719 To other special groups _____________________________ 256,500 2,000 2, 333 252, 167

See footnotes at end of table.

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NINETEENTH ANNUAL REPORT 143

TABLE 6.-Market value and volume of sales effected on securities ex.changes for the

1~-month period ended December 31, 195~,and the 6-month period ended June 30

1953

[Amounts in thousands)

PART 1.-12 MONTHS ENDED DEC. 31, 1952

Stocks I Bonds' Rights and warrants Total

market

value Market Nnmher Market Principal Market Number (dollars) value of shares value amount value of units (dollars) (dollars) (dollars) (dollars)

---- ---- ---- ---- ---- Registered excbanges., , 18,178,365 17,327,702 626,922 791,442 899,125 59,221 104,601 ---- ---- ---- ---- American ____________________ 1,305,3Cl 1,273,9r.2 111,515 19,934 28,647 11,465 6,289 Boston ...... _. ____...... _____ 193,795 191,936 4,288 17 15 1,842 1,034 Chicago Board _____.......... (') (') (I) ---------- ----.----- ---------- ---------- Clnoinnatr. __. _______...... __ 21,443 21,395 589 7 12 41 43 DetroiL _______. _____. _.... __ 75,025 74,957 3,796 ---------- ---------- es 207 Los Angeles ___.. _. ____.. _._ .. 181,097 180,73,5 9,429 ---------- ---------- 362 460 Midwest .. _________. _____.. __ 464,225 462,094 14,585 413 372 1,718 3,197 New Orleans .. ____.. _________ 1,822 I,774 54 48 45 ---------- ---------- New York .... _.. ___.... _. ___ 15,531,422 14,720,397 431,821 769,491 868,447 41,534 89,741

Philadelphia-Baltunore .... __ 166.730 165,322 4,655 420 598 988 1,325 Pittsburgh ___. _____. __.. __.. _ 25,825 25,825 1,148 ---------- ---------- ---------- ---------- Salt Lake ______. _____________ 2,762 2,762 21,885 ---------- ---------- ---------- ---------- San Francisco Mrnmgv., , ____ 452 452 5,119 ------928. ---------- ---------- ---------- San Francisco Stock._._._._ .. 202,043 199,912 16,017 810 1,203 2,305 Spokane .... _. ______________. Weslungton 964 964 1,777 ---------- ---------- ---------- ---------- _________. ______._ 5,459 5,275 244 184 179 ---------- ---------- ---- ---- ---- ---- Exempted exchanges .. 7,626 7,472 878 154 170 ---------- ---------- ---- ---- ---- ---- Colorado Springs ... __... _.... 73 73 131 ---------- ---------- ---------- Honolulu .. _.. _...... __.. ____ 6,505 6.351 720 154 170 ---------- ---------- Richmond. ____________. _. ___

Wheeling 559 559 11 ---------- ---------- ---------- ---------- ________________._._ 489 489 16 ---------- ---------- _.-------- ----------

PART 2_ MONTHS ENDED JUNE 30, 1953

Registered exchanges ___ 9,767,721 9,323,121 352,261 425,554 496,504 19,046 56,999 ---- ---- ---- ---- American. ___. _______________ 666,130 650,141 61,094 10,279 19,659 5,710 1,895 Boston __.. __.. ___________. ___ 94,510 94, 455 2,120 ---------- ---------- 55 411 Chicago Board .. _... ____.... _ 4 4 (I) Omcmnati. ---------- ---------- ---------- ---------- __________________ 11,584 11,200 346 880 650 4 14 Detroit . 41,461 41,435 2,OC6 ---------- ---------- 26 104 Los Angeles. ____________•. ___ 87,616 87.588 5,500 ---------- ---------- 78 242 Midwest ___. _____________. ___ 252,469 252,206 8,045 65 65 198 1,054 New Orleans. ____.. ______. ___ 736 734 28 2 2 (3) 3 New York ........ ___________ 8,396.635 7,969,676 251,628 414,171 475,463 12,788 52,424

Phrladelphia-Baltirnore , _____ 90,619 90,506 2,481 104 167 81 396 PIttsburgh .. ___.' _.. ________. 14,388 14, 388 542 ---------- ---------- ---------- ---------- Salt Lake .. ______. _______.. __ 774 774 5,894 ---------- ---------- ---------- ---------- San Francrsco Mining ____.... 202 202 2,615 ---------- ---------- ---------- ---------- San FrancISCO Stock .. ____... _ 107,943 107,453 9,299 399 345 91 262 Spokane __. __________. _______ 339 339 571 ---------- --_._----- --_.------ ---------- W ashington ____. _____. ____. __ 2,239 2,070 92 154 153 15 194

---- ---- ---- ---- Exempted exchanges __. 4,165 4,127 503 38 41 ---------- ---------- ---- ---- ---- ---- Colorado Springs ___. ______.. _ 42 42 54 -.-------- ---------- ---------- ----._---- Honolulu . , ___. ______. _______ 3,555 3,517 434 38 41 ---------- ---------- Richmond ______.. ___... _____ Wheelmg. 264 264 5 ---------- ---------- ---------- .--------- ___________________ 304 304 10 ---------- ---------- ---------- ----------

I "Stocks" include voting trust certificates, American depositary receipts, and certificates of deposit .

"Bonds" include mortgage certificates and certificates of deposit for bonds. Smce Mar. 18, 1944, United

States Government bonds have not been included III these data. , $500 or Jess.

I 500 shares or less.

N OTE -Value and volume of sales effected on registered secuntles exchanges are reported in connection wrth fees paid under sec. 31 of the Securrties Exchange Act of 1934. For most exchanges tbe figures represent

transactions cleared during the calendar month. FIgures may drflcr from comparable data m tbe staus- tical Bulletin due to reVISIOns of data by exchanges,

American Stock Exchange was New York Curb Exchange until January 1953.

'

_

__________• ________ ___

•

---------~
144 SECURITIES AND EXCHANGE COMMISSION

TABLE 7.-lssues and issuers on stock exchanges!

PART I.-NUMBER OF SECURITIES ON EACH STOCK EXCHANGE JUNE 30, 1953

Stocks Bonds

R X U XL XU Total R X U XL Total

-- ---- ---- -- -- Amencan 497 1 309 --.--- 807 17 65 82 Boston 100 3 306 --._-- 4C9 19 ----.- 19 Chicago Board of Trade 8 5 --._-- 13 CincinnatL ----;;- 56 1 69 ---i4- -----. 126 1 .----- 6 Colorado Springs

Detroit --._.- 14 .----- ---._- 120 2 110 ---;;7- Honolulu 232 .-----

--164- 31 88 .----- 8 8 Los Angeles 1 184 --._-- 349 4 .----- 4 MIdwest. 403 .--_.- 98 --._-- 501 15 .----- 15 New Orleans. 3 15 -._--- --.--- 18 1 2 3 New York Stock 1,536 3 --.--- 1,539 945 7 .----- 952 Philadelphia- Baltimore 112 4 405 521 48 -.---- .----- 48 Pittsburgh 58 3 73 134 1 .----- 1 Richmond 27 27 .-.--- ----.- Salt Lake . 96 1 4 ---_.- 101

San Francisco Minmg 41 .. 41 -_.--- San FranCISCOStock. 205 6 182 393 20 20 Spokane . 25 7 ---_.- 32 -_.-.-

Wbeelmg

Washington, D. C 32 9 2 43 10 -p---- 10 16 3 19 .. ------ ------ ------

Symbols: R-rcgistered; X -temporarily exempted from registration; Us--unhsted on a registered exchange; X~lIsted On an exempted exchange; XU-unlisted On an exempted exchange.

PART 2.-NET NUMBER AND AMOUNT OF SECURITIES ON ALL EXCHANGES

JUNE 30, 1953

Stocks Bonds'

Issues Shares Issues Principal

amount

Registered. 2,651 3, 904, 577, 424 1,002 $23, 509, 748, 966 Temporarily exempted from registration 18 10,788,390 7 60,848,000 Unlisted on registered exchanges . 301 380, 775, 734 63 420, 430, 698 LISted on exempted exchanges. 77 35,658.052 8 22,000.000 Unlisted on exempted exchanges 30 3,063,584 0 0

Total. 3,077 4, 334, 863, 184 1,080 24.013,027.664

PART 3.-NET NUMBER OF ISSUERS REPRESENTED ON ALL EXCHANGES JUNE 30, 1953'

Registered .• _. 2, 210 Temporarily exempted from registranon .__ 16

Unlisted on registered exchangca., , 280

LIsted on exempted exchanges ._________ 66

Unlisted on exempted exchanges 28

Total 2,600

I Issues exempted under sec. 3(a)(12) of the secunties Exchange Act, such as those of the United States

and Its subdivisions, are not mcluded herem. , For tbe purpose of obtammg net figures, each security in pt. 2 and each Issuer ill pt. 3 of these tables is

counted but once, in the first of the 5 categories mentioned above wbere It appears, e. g , an Issue registered

on several exchanges and admitted to unlisted trading on several others IScounted but once and only under

"Registered" Tbe number of bond issues includes 7 WIth an aggregate £15,650,280 and 1 of 24,046,600 Cuban pesos

prmeipal amount, whioh amounts are not shown ill tbe dollar total.

-- -- -- ________________________

__________________________ ------ ------ ------ ------ ------ ------ _________ _____________________ ------ ------ ------ ------ ------ ________________ ------ __________________________ ------ ------ ------ ________________________ ------ ------ ------ ------ ------ ------ _____________________ ------ ------ ------ _______________________ ------ ------ ------ ___________________ ------ ------ ------ ________________ ------ ------ __________ ------ ------ ------ ______________________ ------ ------ ------ _______________________ ------ ------ ------ ------ _______________________ ------ ------ ------ ------ ------ ------ ___________ ------ ---- ------ ------ ------ ------ ------ ------ ____________ ------ ------ ------ ------ ------ ________________________ ------ ------ ------ ------ ------ ------ _______________ ________________________ ------ ------ ------ ------ ------ ------ ------ -- --- ------

'

___________• ________________________________

______•________ __ ____________________

_________________________

______________• ________

__• _____________• __________________________

••

_ ___ _______ ______ _ _ _ _____ •

• • • • •

• • • • •• __••

•
NINET~ENTH ANNUAL REPORT 145

TABLE 8.-Reorganization proceedings in which the Commission participated

during the fiscal year ended June 30, 1953

Debtor District court

PetitlonFiled Approved

Securities

and Exchange Commission

notice of appearance

filed

June 10,1940

Do.

Sept. 12,1949

Do.

Oct. 24,1949

July 7,1949

Feb. 19,1945

May 22,1942

July 25,1951

Aug. 1,1941

Dec 27,1948

May 23.1949

Apr. 28,1952

Oct. 13,1952

Do.

July 7,1952

Sept. 11,1951

Jan. 3,1949

July 7,1949

Do.

Aug. 6,1941

Oct 29,1940 Mar. 17,1948

June 20,1949

June 8,1949

May 15,1952

Do.

Do. Jan. 4,1939

Do.

Jan. 6,1940

May 29,1948

Do

Jan. 28,1942 Feb. 28,1951

American Acoustics, Inc . D. N.L. Mar.21,1947 May 5,1947 Apr. 21,1947

American Bantam Car Co __. __._ .. .. W. D. Pa .. . Apr 19.1950 Apr 19,1950 May 29,1950 'AmericanFuel&PowerCo . __ E D.Ky .. . Dec. 6,1935 Dec. 20,1935 May 1,1940

Buckeye Fuel Co .. . do ._. __. Nov. 28,1939 Nov. 28,1939 Do. Buckeye Gas Service Co . do . .do . __do .__ Do. Carbreath Gas Co . . . do . do .do ._ Do.

Inland Gas Distributing Co ._. . do., ._do . do ... .. Do.

American Silica-Sand Co., The._. __. N. D. I1L_. Feb 16,1951 Mar. 5,1951 May 10,1951 Blackhawk Brewing Co . __.. S. D. Iowa Jan. 4,1952 Jan. 7,1952 Mar. 7,1952

Brand's Restaurant Control Corp . S. D. N. Y. Aug 2,1939 Aug. 10,1939 Aug. 30,1939

Calumet & South Chicago Railway Co __ N. D. I1L. ._ June 29,1944 Sept 18,1944 Oct. 20,1944 Central States Electnc Corp __. E. D. Va .___ Feb. 26,1942 Feb 27,1942 Mar. 11,1942

Chicago City Railway Co . . N. D. I1L.. Nov. 27,1939 Sept. 18,1944 Oct. 20,1944

Chicago Railways Co_ . ._. . .. do. .. Oct. 15,1938 . do .... Do.

Chicago & West Towns Railways, Inc .do . __. June 30,1947 July 1.1947 July 24,1947 Childs Co . ._. S. D. N. Y______ Aug 26,1943 Aug. 27,1943 Aug. 26,1943

Consolidated Caribou Silver Mines, Inc, D. Colo... .__ Nov. 14,1952 Nov. 14,1952 Jan. 21,1953 Dallas Parcel Post Station, Inc . N. D. I1L. Sept. 22,1950 Scpt 22,1950 Oct 26,1950 'Federal Facilities Realty Trust.. . __do .. Dec 26.1934 Apr. 25,1935 Oct 29,1940

Franklin County Coal Corp E. D. IlL Oct. 3,1952 Oct 3,1952 Oct 3.1952

General Publrc Utilities Corp S. D. N. Y ._. Jan. 10,1940 Jan. 10.1940 Jan. 15,1940 Associated Gas & Electric Corp. . .do __. . __do .. _._._. .. do . Do.

Hankey Baking Co __.. .. . W. D. Pa .. Sept 16.1952 Sept. 16,1952 Nov. 7,1952

'Hotel Martin Co. of Utica_. . N. D. N. Y June 6,1935 June 19.1935 June 24,1939

Industrial Office Buildmg Corp. . D. N. L._. Oct. 3,1947 Oct 3.1947 Oct 10,1947 'Inland Gas Corp . . E. D. Ky ,.; Oct. 14,1935 Nov. 1,1935 Mar 28,1939

IntemationalPowerSecuntlCsCorp D.N.J .. . Feb. 24,1941 Feb. 24,1941 Mar. 3,1941 International Ry Co . .. W. D N. Y . July 28,1947 July 28,1947 Aug 4,1947

Keeshm Freight Lines, Inc . N. D. I1L. . Jan 31,1946 Jan. 31,1946 Apr 25.1949 Keeshin Motor Express Co., Inc .... do .. do . do __.... __ Do.

Seaboard Freight Lines, Inc .. do________ ____do do________ Do. National Freight Lines, Inc_________ .do .. .do .. . do .. Do.

Kellett Aircraft Corp . E D. Pa .... Oct. 18,1946 Oct. 18,1946 Dec. 4,1946

'Kentucky Fuel Gas Corp. E. D Ky __. Oct 25.1935 Nov. 1,1935 Mar. 28,1939

Kerotest Manufacturmg Co W. D. Po __.. Mar 23,1953 Mar. 23,1953 May 4,1953

Las Vegas Thoroughbred Racing Asso- D Nev __ .. __ Jan 22,1952 Mar. 1,1952 Feb. 27,1952

ctation, 'Midland United Co . __ D DeL . .. June 11,1934 June 9,1934 Midland Utilities Co .. do do .. ._. do ..

Momence Milk Cooperative Assoeia- E. D. I1L June 18,1949 June 18,1949

non, Moorhead Knitting Co M. D. Pa __.___ JUlIe 19,1941 June 24,1941

'National Realty Trust. ._ .. N. D I1L. __. Dec 26,1934 Apr. 25,1935

Neville Island Glass Co., Inc . W. D. Pa Mar 1,1948 Mar. 1,1948 New Union Building Co. . E D Mich May 6.1949 May 6,1949 Norwalk Ttre & Rubber Co, The D. Conn May 20,1949 May 20,1949 Nu-Enamel Corp. . N. D. IlL. . Mar. 20,1952 Mar. 21,1952

~~to~~~1~i~:n<5:'Or~~I-?0-r~~~~~: :::::~~::::::::::: :::::~~::::::~: :::::~~::~~:::: 'Pittsburgh Railways Co. __. W. D. Pa May 10,1938 May 10,1938

Pittsburgh Motor Coach Co .:_. _. do . do . do __

PIttsburgh Termmal Coal Corp_._._._._ . __._do. . Dec 4,1939 Jan. 2,1940

Pratt's Fresh Frozen Foods, Inc D.N.J Apr. 13,1948 Apr. 13,1948 Pratt's Distributors, Inc . do.. May 17,1948 May 17,1948

Quaker City Cold Storage Co . __ E. D. Pa.; Dec. 17,1941 Feb 13,1942

Qumcy Station Post Office Building N. D. IlL July 18,1950 July 24,1950

Corp. R. A. Security Holdings, Inc .. E. D. N. Y . May 7,1942 July 31,1942 Sierra Nevada Oil Co. . . D. Nev June 22,1951 June 22,1951

Srlesian American Corp . S D. N. Y July 29,1941 July 29,1941

Solar Manufacturmg Corp D. N. L Dec. 14,1948 Dec. 14,1948

South Bay Consrhdated Water Co, Inc. S. D. N. Y Apr. 26,1949 Apr. 26, 194~ Tele-Tone RadIO Corp D. N. L Feb. 7,1952 Apr. 21,1952

Tele-Tone National Corp ... . do., July 21,1952 July 21,1952 Tele-Tone New York Corp. do__. do do. .•

RICO'I'elevlsion Corp do . . June 3,1952 June 3,1952

Texas Gas Utlhties Co .. W. D. Tex Sept. 4,1951 Sept. 21,1951 'I'hird Avenue 'Transit Corp ._ S. D. N. Y Oct. 25,1948 Oct. 25,1948 Surface 'I'ransportanon Oorp.; . do June 21,1949 June 21,1949 Westchester Street Transportation do .do, ._. __. __do., _

Co., Inc, Westchester Eleetrro Railroad Co . __do.i . do ._ .. do _

Warontas Press, Inc . do ._______ Sept. 8,1949 Sept. 8,1949

Yonkers Railroad Co __... . __. do., June 21,1949 June 21,1949

'I'riruty Buildings Corp. of New York., do. Jan. 18,1945 Jan. 18,1945

'Instltuted under section 77-B.

279900-54-11

__ •

__•__

_

_
146 SECURITIES AND EXCHANGE CO:MMISSION

TABLE 8.-Reorganization proceedings in which the Commission participated during the fiscal year ended June 30, 1953-Continued

Petltlon- securities

and ExDebtor

change District court Commission

Filed Approved notice of appearance

filed

Union League Club of Chicago __________ N. D. TIL ______ Feb. 14.1950 Feb. 14.1950 Apr. 10,1950 U. S. Realty & Improvement Co ________ S.D.N.Y ______ Feb. 1,1944 Feb. 1,1944 Feb. 7,1944 Warner Sogar Corp __________________________do ___________June 7,1940 July 9,1940 July 9,1940 Washington Gas & Electric Co _______________do ___________ 8eft. 29,1941 S~t. 2\l,1941 Oct. 14, 1941 Wilkes-Barre Railway Corp _____________ M. D. Pa _______ Ju y 1,1943 J y 1,1943 July 15,1943 Wilkes-Barre Railway Co ________________do ________________do _____________do ________ Do. Wilkes-Barre Trackless Trolley Co __ _____do ________________do _____________do ________ Do. Wyoming Valley Autobus Co ____________do ________________do _____________do ________ Do. Wyoming Valley Public Service oe. _____do ________________do _____________do ________ Do.

TABLE 9.-Summary of cases instituted in the courts by the Commission under the

Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, and the Investment Advisers Act of 1940

Total Total Cases Cases .Cases Total Cases cases In- cases pendmg pending instituted cases closed stituted closed pending

Types of cases uptoend uptoend at end at end during during during

of1953 ofl952 1953 1953 ofl953 ofl953 fiscal fiscal fiscal 1953 fiscal fiscal fiscal fiscal year year year year year year year

--- --- --- --- --- --- Actions to enjom violations of the above acts ________________ 636 623 13 18 21 39 26 Actions to enforce subpenas under the Securities Act and the Securities Exchange Act._ 55 55 0 1 1 2 2 Actions to carry out voluntary

plans to comPjt with section ll(b) of the olding Com-

~h~~us-actlons~ : ::::::

108 98 10 11 14 25 15 17 15 2 2 2 4 2 --- --- --- --- --- --- --- Total ____________________ 816 791 25 32 38 70 45

~
NINETEENTH ANNUAL REPORT 147

TABLE lO.-Summary of cases instituted against the Commission, cases in which

the Comm~ssion participated as intervenor or amicus curiae, and reorganization cases on appeal under ch. X in which the Commission participated

6

o

Total Total Oases Oases Oases Total Cases cases In- cases pending pending instituted cases closed sUtuted closed pending

Types of cases uptoend up to end at end at end during during during of1953 ofl952 1953 1953 of1953 enssa fiscal fiscal fiscal 1953 fiscal fiscal fiscal fiscal

year year year year year year year

--- --- --- -------

Actions to enjoin enforcement

of Securities Act, Securities

Exchange Act BI1d Public

Utility Hedding Company

Act with the lIXce&tionof

supP.6D88lssaed by e Oom- 64 64 0 0 0 0 JD.lSSIOIl ______________________

Aotlons to=enforcement of or comp oe with submission penas lssaed _____________________ by the Com8 8 0 0 0 0 0

Petitions for review of Commission's orders by courts of

appeals under the various acta administered by the Oommlssion __________________ 171 167 4 6 4 10

MisoellBlloous actions against the Oommlssion or officers of

the Oommlssion BI1dcases in

which the Commission participated !is intervenor or 164 156 8 13 5 18 10 amJCUS cunae _________________

Appeal cases under ch. X in

which the Commission par- ticipated _____________________ 132 125 7 1 9 10 3

Total ____________________--- --- ---- --- --- --- ---- 539 520 19 20 18 38 19
148 SECURITIES AND EXCHANGE COMMISSION

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TABLE 20.-Reorganization cases under ch, X of the Bankruptt;y Act pending

during the fiscal year ended June 30, 1953, in which the Commission participated

when appeals were taken from district court orders

Name of case and United States

Court of Appeals Nature and status of case

Central States Electric Oorp., debtor;

Sidney S. Hems et al. v. Thomas

C Egan et al. Joseph L. O'Brien,

petitioner (4th circuit).

Industnal OfficeBuilding Corp.,

debtor; Howard Grad and Bernard J. Grad, appellants (3d circuit).

Inland Gas Corp., et al., debtors;

Paul E. Kern, appellant (6th eir- euit),

Inland Gas Corp., et al., debtors;

Vanston Committee, Green Committee, Paul E. Kern and Clmton

M. Harbison, Trustee, appellants

(6th circuit).

International Power Securities Corp.,

debtor; Common Stockholders'

Comrruttee and John D. Craven, Its attorney, appellants (3d circuit). Las Vegas Thoroughbred Racing

Assn., debtor; Henry Leigh Hunt,

et aI., appellants (9th oircuit).

Pittsburgh Railways Co., debtor;

Estate ofJoseph Nemerov, deceased

and Prichard, Lawler, Malone, and

Geltz, appellants (3d circuit).

Silesran-Amerroan Corp., debtor;

FranCIS X. Conway, Trustee, et al.,

appellants (2d circuit).

Solar Mannfacturing Corp., debtor;

The Marme Midland Trust Oo.,

appellant (3d circuit).

Solar Mannfactming Oorp., debtor; Samuel Marion, Milton M. Unger

and Edward Endelman, and Morton Stavis, appellants (3d Circuit).

Appeals from order of Apr. 23, 1953, authorizing allowances to cer- tain persons and firms and denymg a fee to O'Brien. Statement

of SEC, May 22 and May 28, 1953, ill response to motions for

leave to appeal. Supplementary statements of SEC, June 30 and

July 9, 1953, in response to bners filed by Kelly Committee.

Opmion, July 16, 1953, dcnying motions for leave to appeal.

Pending.

Appeal from order of Feb. 11, 1953, disallowmg the claims of the

appellants. Pending.

Appeal from order of Oct. 6, 1952, dlsmissinll appellant's petition

for instructions to Trustee to file a clarm agatnst Inland Gas Corp.

and denying motion to appoint an independent trustee or m the alternative to appoint independent counsel for Trustee of Kentucky Fuel Gas Corp. Commission filed bnel June 26, 1953, in

support of dtstrret conrt order. Pending.

Appeals from order of Feb. 12, 1953, approving the amended plan

of reorganization. Pending.

Petition for leave to appeal from order of May 19, 1953, granting

final allowances. Statement of SEC, June 29, 1953, in opposition

to petition for leave to appeal. Appeal dismissed. Closed.

Appeal from order of Oct. 13, 1952, denying petition on behalf of

landowners, approving adoption of lease by Trustee and determming lease to be m good standing. Appeal withdrawn. Closed.

Appeal from orderofJune 13, 1952,granting separate final allowances

to petitioners and Maurice J. Dix. Answer of Oommisslon July

24, 1952, to petition for leave to appeal. Oomrmsston filed brief ill

opposition July 1952. Petition denied Ang. 4, 1952. Closed.

Appeals from order of June 17, 1952, dismissmg petition of Trustee

for an accounting and other relief agamst the Swiss Banks. Com- mission filed brief Jan. 23, 1953,supporting appeals. Reply brief

of Commission filed Mar. 3, 1953. Opinion Apr. 13. 1953, affirm- mg the order of the distnot court. Petition for rehearing denied

June 8, 1953. Pending.

Appeal from order of Mar. 3, 1952, denying 2 motions of appellant to

dismiss counter-elaims asserted by Trustee of Debtor to claims

filed by appellant as creditor and to accounting by appellant as

former mdenture trustee for debtor's debenture holders. Commission filed brief Sept. 17, 1952,in support of district court order.

Order affirmed Dec. 3, 1952. Petition for writ of certiorari filed

Mar. 2, 1953, by The Marine Midland Trust Co. of New York.

Commission's brief in opposition filed Apr. 10, 1953. Pending.

.l.ppeals from order of Mar. 17, 1953, fixing final allowances. State- ment of Commlsston m support of,petition of Samuel Marion for

leave to appeal dated Apr. 20, 1953. Commission's brief filed

May 28, 1953, in support of appeals. Pending.
NlNETEENTH ANNUAL REPORT 163

TABLE 21.-A 20-year summary of criminal cases developed by the Commission1934 through 1.953 by fiscal years

[See table 23 for classification of defendants as broker-dealers, etc.]

Number

Number Number of these

Number of persons of such defend.

of cases as to casesm Number ants as to Number

referred whom which of de- Number Number whom of these

to De- prosecu- indict. fendants of these of these proceed. defend- Fiscal year partment tion was ments indicted defend- defend- mgs were ants as to

of Justice recom- were ob- in such ants con- ants ac- dismissed whom

in each mended tamed by cases 1 victed qUItted on monon cases are

year in each United of pendmg t

States United year attorneys States

attorneys

---- ---- ---------------- ---- 1984__•. _. __._. __._._ 7 36 3 32 17 0 15 0 1935.. _._. ____. __... _ 29 177 14 149 84 5 60 0 1936_. __._ ....... _... 43 379 34 368 164 46 158 0 1937_" _... _.... __. __ 42 128 30 144 78 32 34 0 1938_. _._. __._ .. _._._ 40 113 33 184 75 13 44 2 1939.. _._._ .... _._. __ 52 245 47 292 199 33 60 0 1940___.. ___._ .. _.. __ 59 174 51 200 96 38 66 0 1941.. _..... __._ ..... 54 150 47 145 94 15 36 0 1942.. .......• _._ ... 50 144 46 194 108 23 48 15 1943__... _._ ....... __ 31 91 28 108 61 10 33 4 1944.. _...... _.... _._ 27 69 24 79 47 6 19 7 1945..•.. _...•. _.... _ 19 47 18 61 36 10 14 1 1946_. _._._. _________ 16 44 14 40 13 8 4 15 1947..•....... _.. _... 20 50 13 84 9 5 13 7 1948.. _______. _______ 16 32 15 29 20 3 5 1 1949____._. ____._. ___ 27 44 25 57 17 13 13 14 1950.. ___. ___________ 18 28 15 27 20 1 5 1 1951.. ___._. ______. __ 29 42 24 48 26 5 5 12 1952_. ___________._._ 14 26 13 24 12 1 0 11 1953..•. ____________. 218 32 11 19 3 2 1 13

-------- -------- ------------ ---- TotaL. 611 2,051 505 2,184 1,179 269 '633 103

I The number of defendants in a case is sometimes increased by the Department of Justice over the number

against whom prosecution was recommended by the Commission. For the purpose of this table, an mdividual named as a defendant ill 2 or more mdictrnents in the same case is counted as a smgle defendant

See table 22 for breakdown of pending cases .

Sill: of these references as to 19 proposed defendants were still being processed by the Department of

Justice as of the close of the fiscal year. 468 of these cases have been completed as to 1 or more defendants. Convienons have been obtained in

409 or 87.4 percent of such cases. Only 59or 12.6 percent of such cases have resulted in acquittals or dismissals

as to all defendants .

Includes 46 defendants who died after Indictment.

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164 SECURITIES AND EXCHANGE COMMISSION

TABLE 22.-Summary of criminal cases developed by the Commission which were

st~ll pending at June 30, 1953

Number Number of such defendants as to

ofsuch whom cases are still pendmg and

Number of defendants reasons therefor

Cases defendants as to whom in such

cases cases have Not yet been Awaiting Awaiting completed appre- trial appeal hended

Pending, referred to Department of Jusuee m the fiscal year. 1938 ., 1 2 0 2 0 0 1939 . 0 0 0 0 0 0 1940. ., 0 0 0 0 0 0 1941. 0 0 0 0 0 0 1942____________________ 2 18 3 14 1 0 1943_______________________ .. __ 2 8 4 3 1 0 1944______________ . ______. _____ 2 8 1 7 0 0 1945________________________._ 1 1 0 1 0 0 1946___________________________ 4 16 1 15 0 0 1947______________________ 3 9 2 7 0 0 1948_______________________ . ___ 1 1 0 0 1 0 1949____.• _________. ___________ 5 14 0 4 10 0 1950___________________________ 1 3 2 0 0 1 1951._________________ . ________ 4 15 3 0 5 7 1952___________________________ 5 11 0 0 3 8 1953_____________. _____________ 8 13 0 0 13 0

Total _______________________ 139 '119 16 53 34 16

SUMMARY Total cases pending ._____________________________45

Total defendants t , ._____________ 138

Total defendants as to whom cases are pending 1____________________________________________________ 122

I Except for 1953,indictments have been returned in all pending cases. Indictments have not yet been

returned as to 19 proposed defendants in 6 cases referred to the Department of Justice in 1953. These are refiected only m the recapitulation of totals at the bottom of the table.

TABLE 23.-A 20-year summary classifying all defendants in criminal cases developed

by the Commission-1934 to June 30, 1953

Number as to whom cases were Number as Number Number Number dismissed to whom

indIcted eonvieted acquitted on motion cases are of United pending States

attorneys

Registered broker-dealers I (Including principals of such tirms) _________________ 335 208 23 95 9

Employees of such registered broker- dealers ________________.____. ___________ 113 59 15 37 2

Persons in general secunties business but not as registered broker-dealers (includes

A8~f~~¥:~~~~_~~~~~:~~=============== 694 355 57 256 26

1,042 657 174 245 66

Total _____________•• ______________•_ 2,184 1,179 269 633 103

, Includes persons registered at or prior to time of Indictment, J The persons referred to m this column, while not engaged m a general business in securities, were almost

WIthout exception prosecuted for VIOlationsof law involvmg securities transactions.

_______ ______•__•____•___ ______________________•___ _________•____ __________ ______________•	 ________' __ ' ______

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NINETEENTH ANNUAL REPORT 165

TABLE 24.-A 20-year summary of all injunction cases instituted by the Commission,

1934 to June 30, 1953, by calendar year

Number of cases msntutsd Number of cases ill which by the Commission and injunctions were granted the number of defend. and tbe number of de- Calendar year ants involved fendants enjoined 1

Cases I Defendants Cases I Defendants

1934.•..•....... .•... ....... .• .... .. 7 24 I 2 4 1935.•..•.........•...•...... .. .. ... _. .. 36 242 17 56 1936.•...... _._ .. •. ._ .• ._._ .. •... ... 42 110 36 108 1937_•. ... ...•. ...... .... ._ .• 96 240 91 211 1938.•.. _. .. "_'_' ..•. ..... _. _" _" .. .. 70 152 73 153 1939_•.. .. _. .• _._ ..• _. ,,_, _"_ .. _. .. 57 154 ei 165 1940_•. _._ .. _. _._._. .• _. . _" _""" 40 100 42 99 1941...•.... _. _'" .• "'_' _._., . .• 40 112 36 90 1942_ .• ""_,,,_,_ "_" _._ .. _.' ._ .• 21 73 20 54 1943_....... "'_ ... . ._" . _' . 19 81

I 18 72 1944_....... .. _. . ._ .. .. . . . I~ 80 14 35 1945_... _._ ....... .. _. . .. ... _. .. .. 21 74 21 57 1946.••.. ..• . . ..• _. . . .• 21 45 15 34 1947_. ....•.. .. "_' .• _" ._ •. _. ., _"_" 20 40 20 47 1948_•.... ..... ...• ... .•..... _" ...... 19 44 15 26 1949_•.. _. ._ .. _. .... _. .. .. ",_, .. •.. 25 59 24 55 1950........• _. ""'_" .. •. .... .... 27 73 26 71 1951_•....... ..• , ...... , ..... .... _. 22 67 17 43 1952... •. _. ....... _.-- ..•.• ..... 27 103 18 50 1953 (to June 30)•.•.....•.. ..••... ........ 8 11 15 48

TotaL .••....•••.. ,""""'" ....•..... 636 1,890 I 581 I 1,478

SUMMARY

I Cases Defendants

AetlOns mstituted .............•...................•....•........... ..•... 636 1,890

Injunctions obtamed ..• ...•...•...•.. ,. .. _' ... .... .... .... .... 574 1,478 Actions pendmg _. •. •.... _"" ......•.....••..... .......... _. _." . ... 6 ,27

Other dISPOSitIOns• _. -. - - 56 3S5

Total_ •.•..•.•...•........ ..• ..•..•• ..••...•.•.... •..... ...... ... 636 1.890

I These columns show dISpOSitIOn of roses by year of dISpOSitIOnand do not necessarily reflect the dISPOSIuon of the cases shown as having been instituted in the same years Includes 7 eases which were counted twice in this column because uijunctrons against dtfferent defendants

in the same eases were granted ill different years Includes 1 defendant in 1 ease ill which mjuncuons have been obtained as to 8 codefendants .

Includes (a) aeuons dismissed (as to 320 defendants), (b) acnons discontmued, abated, vacated, aban- doned, or settled (as to 51 defendants), (c) actions ill whieh iudgrnent was demed (as to 11 defendants);

(d) actions ill which prosecuuon was stayed on stipulation to discontinue misconduct charged (as to 3

defendants).

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