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NIITH AIIUAL REPORT

of the

5 E CUR I TIE SAN 0 .E X C HAN GEe 0 MM" 5 5 1Q,N

FISCAL YEAR ENDED dUNE 38, 19'3

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Page

ADMINISTRATION OF THE SECURITIES ACT OF 1933 • • • • • • 1

ADMINISTRATION OF THE SECURITIES EXCHANGEACT OF 1934. 9

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COMPANYACT OF 1935 • •• 24-

PARTICIPATION OF THE COMMISSION IN CORPORATE REORGANIZATIONS UNDER

CHAPTER X OF THE BANKRUPTCYACT, AS AMENDED. • • • • •• 47

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939.

ADMINISTRATION OF THE INVESTMENT COMPANYACT OF 1940

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT OF 1940.

OTHER ACTIVITIES OF THE COMMISSION UNDER THE VARIOUS STATUTES:

50

52

56

The field of accounting and auditing.

Litigation. • • • • • • • • •

Complaints and investigations

.....

. . 1

57

61

62

Reports of officers, directors, principal security holders

and certain other affiliated persons. • • • • • • • • • • • 64

Confidential treatment of applications, reports, or documents 65

Inspection of registered information by the public.

Publications. • • • • • • • • • • • • •

Public hearings • •

Personnel • • • • •

Fiscal affairs ••

APPENDIX TABLES. • • •

...... 66

67

68

68

69

A-I to

A-64

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•
LETTER OF TRANSMITTAL

SEaJRITIES .AND EXCHANGE OJMMISSION,

Philadelphia 3. Pa•• January 28, 194.4..'

Sir:

/ I have the honor to transmit to you the Ninth Annual

Report of'the Securities and Exchange Camnission, required by the

provisions of'Section 23 (b) of'the Securities Exchange Act of

1934, approved June 6, 1934, Section 23 of'the Public utility

Holding Company Act of'1935, approved August 26, 1935, Section 46

(a) of'the Investment Company Act of'1940, approved August 22,

1940 and Section 216 of'the Investment Advisers Act of 1940, approved August 22, 1940.

We have f'ollowed the war-time policy that we initiated

last year of'presenting our report as concisely and economically

as possible.

Respectf'ully,

Ganson Purcell,

Cha» rman

•

THE PRESIDENT OF THE SENATE

THE SPEAKER OF THE HOUSE OF REPRESENTATIVES

Jiashin~ton. D. C.

•
SECURITIES AND EXCHANGE COMMISSION

Centra.l Office

18th and Locust Streets

Philadelphia 3, Pa.

COMMISSIONERS

Ganson Pltrcell, Chai man

Robert E. He~

Sumner T. Pik.e

EdmundBurke, Jr. y Robert H. 0IBrien

Orval L. DuBois, Secretary.

Atlanta, Georgia

Baltimore, Maryland

Boston, Massachusetts

Chicago, Illinois

Cleveland, Ohio

Denver, Colorado

Fort Worth, Texas

NewYork, NewYork

San Francisco, California

Seattle, Washington

•

LOCATIONOFREG10NALOFFICES

Palmer Building (Room415)

Balt:iJnore Trust Building (Room2410)

Shi.lmlut Bank Building (Room426)

Bankers Building (Room630)

Standard Building (Roam1608)

Midland Savings Building (Roam822)

United States Courthouse (Roam103)

Equitable Building (Roam 2006)

625 Market street (Roam1301)

1411 Fourth Avenue Building (Room810)

y Resigned October 19, 1943.
\

PART I

ADMINISTRATION OF THE SECURITIES ACT OF 1933

GENERAL SCOPE OF REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933

The Securities Act of 1933 provides for full disclosure of pertinent information

regarding securities public~ offered for sale in interstate commerce or through the

mails, but does not confer upon the Commission the power to approve or pass upon the

merits of aQY security. The Act is also designed to prevent misrepresentation, deceit

and other fraudulent practices in the sale of securities. Issuers of securities to be

publicly offered and sold in interstate commerce are required to file registration

statements with the C~ission. These registration statements must contain specified

information on the proposed offering and are available for public inspection. An integral part of the requirements of each statement is a prospectus setting forth in condensed or summarized form the more essential information contained in the registration

statement. The Act provides that the prospectus must be made available to all prospective purchasers of the security. The Commission's registration and examination procedures, and its power to issue stop-order proceedings to suspend the effectiveness of

the registration statement have been described in previous annual reports.

NEW RULES, REGULATIONS AND FORMS FOR REGISTRATION UNDER THE SECURITIES ACT OF 19.33

A material simplification of forms and reporting requirements under the Securities

Act of 1933 was effected during the past fiscal year in connection with a general p. ogram which is discussed in the following section.

General~lification of registration and re~rting requirements under various

Acts.-The C~sion announced on December TIr," 19, "bl a comprehensivesIiiiplification

of a number of registration and. reporting requirements under various Acts which it administers, particularly the Securities Act of 1933, the Securities Exchange Act of 1934,

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

These changes incorporated many of the suggestions received from representatives of the

securities industry which had been under consideration for some time. The Commission's

study leading to these c~es was accelerated by the proposed revision of its proxy

rules, announced at the same time, and discussed elsewhere in this report. Subsequent

experience shows that this general streamlining and coordination of registration and

reporting forms has resulted in considerable savings of paper work without material

lessening of the protection to investors afforded by the statutes. The principal revisions are:

1.

2.

3.

A new general form has been adopted for registration of commercial and industrial companies under the Securities Act of 1933, permitting the filing of the

prospectus as a principal part of the registration statement, thus eliminating

much. duplication between the prospectus and the registration statement proper.

A registration statement filed under the Securities Act of 1933 becomes a

basic document under the simplification program so that securities covered by

the statement be listed on a stock exchange by filing copies of the registration statement. If a company is required to file annual reports with the

Commission, these reports may consist principally of copies of its registration

statement under the Securities Act of 1933, its annual report to stockholders,

or a thirteen-months' prospectus. One result is that a company's ~al report

to stockholders, its prox,r statement and its annual report to the Commission

may, if the company- so elects, be substantially the same document.

A number of changes have been effected in the requirements for financial statements designed to simplif'y the presentation of such data.(y These changE:s are

discussed in more detail infra.

1/ Securities Act of 1933 Release No. 2887.

y Securities Act of 1933 Release No. 2889.

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4. Under the Securities ExchangeAot of 1934, the procedure tor registration ot

additional securities on an exchange and tor registration on an additional exchange has been simplified by the revision of Forms 8-A and 8-G.

S. The Annual Supplement FormUSSfor registered holding companies has been revised to eliminate 23 out of a total of 42 items or sub-d, tams and 6 ou:t of a

total of 13 exhibits or sub-exhibits. In addition, mau;r of the remaining

items and instructions thereto have been amendedto decrease the quantity of

1n!"ormati01!lrequired.

6. Two skeleton forms have been adopted for the use of public utility holding

companies registered under the Public utility Holding CompanyAot of 1935 in

filing annual reports under Sections 13 and 15 (d) of the Securities Exchange

Act of 1934. These forms permit such companies to file copies of their annual

supplements in lieu of furnishing th~ information required in. the forms heretofore used by such corporations. However, such companies must file the

financial statements required by Form10-K and the financial statements must

be prepared in accordance with Regulation S-X.

The newprogram also includes simplified forms for the registration of securities

of closed-end and open-end managementinvestm.ent companies and unit investment trusts

which permit suoh companies to file a registration statement consisting of little more

ithan a pro8f)ectus.

The use of the new forms included in the silup1ification program is entirely' permissive, except that the new FormU5Sunder the Public utility Holding CompanyAct of

1935 is intended to supplant the existing form until f'urther notice. Any" companymay

use them or may follow the procedure heretofore in effect. The Commissionpointed out

in its announcementthat it will give careful consideration to any- criticisms or suggestions nth regard to the use of the new forms.

Amendmentsof rules under the Securities Act of 1933 resu.lt~ from simplification

program.-A number of amendments..ere announced'OnDeC'eiiiDer22, , !/to the rutes

under the Securities Act of 1933 as a part of the comprehensive revision of the reporting requirements. These are described later in this report.

Rttles goverJ!!ng exempt issues aaended.-Regu1.ation A was amendedto clartl'y the

circumstances under 1d1ichit is available far the exemption frOJl.the Securities Act of

1933 of an issue of securities which nae once been effectively' registered under that

Act. Schedules A to F prescribed by Rule 330 of Regulation B "Irere amendedby el:Uninating the requirement that information regarding the maximum offering price be disclosed,

and by sub5ti tuting in the appropriate schedules the requirement of statements of the

aggregate tl'WIlberof oil and gas interests offered for sale, and of the percentage of

production which will be ownedby the operating lessee or lessees, unencumbered, upon

completion of the sale of the issue offered.

The Commissioneliminated the r.equiremant of a statement of the maximum offering

price fram the schedules beeanse it had been informed that salesmen have somet:iJnesused

such statement as a representation to invest<trs of a value approved by the COIIIIl1ssion.

The only f'unc1iionof this requirement was to disclose to the COIIlIIlissionthat the aggregate offerinR price did not exceed $100,000. The action taken makes no change in the

Rules, and all the conditions upon which the exemption is based, including the $100,000

limitation, remain unchanged.

!ISecurities Act of 1933 Release No. 2888.
- 3 -

DISCLOSURES RESULTING FROM EXAMINATION

As in previous years, through its examination procedure the Commission secured

fair and accurate disclosure of material information required in registration statements and prevented the use in many of these documents of information which was Misleading and inaccurate.

STOP-oRDER POWER NOT USED DURING YEAR

For the first time in the 10-year history of the administration of the Securities

Act of 1933, during the entire fiscal year there occurred no instance wherein the sale

of securities was prohibited by the Commission through the issuance of a stop or refusal order. y

STATISTICS OF SECURITIES REGISTERED UNDER THE SECURITIES ACT OF 1933

The followtng table indicates the disposition of registra~~on statements filed

under the Securities Act of 1933, as amended:

Disposition of Registration Statements

Statements filed •••••• Statements effective • • • • Statements withdrawn net

Stop or refusal orders net

In process of examination or awaiting

amendments:

At close of year ended June 30, 1942

At close of year ended June 30, 1943

To June 30,

1942

5025

4006

802

182

35

July 1, 1942,

to June 30,

1943

150 (a)

115 (b)

29 (c)

o

Total

5175

4121

831

182

41

a. Does not-include one registration statement filed prior to this period but

withdrawn and reflied during this period.

b. Does not include 13 registration statements effective at the beginning or during this period, which were withdrawn.

c. Does not include one registration statement withdrawn and refiled during this

period.

A total of 471 amendments y to registration statements were also filed and examined during the past fiscal year, compared with a corresponding total of 755 during the

preceding year.

y During the succeeding 4-1/2 months of the current fiscal year, through November 15,

1943, likewise no stop or refusal order has been issued.

y These amen~ents include 308 classed as "pre-effective" and 163 as "post effective,"

and do not take into account 345 others of a purely formal nature classed as "delaying" amendments.

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Certain registrants under the Securities Act of 1933 also filed during the year,

pursuant to Section 15 (d) of the Securities ExchangeAct of 1934, 3~7 11 annual reports and 129 amendmentscheret o, and 241 11 quarterly reports and 10 amendmentsthereto, all of which required. examination.

In addition, the following supplemental prospectus material was filed during the

past fiscal year under the Securities Act of 1933:

116 prospectuses were filed pur-euanb to Rule 800 .(b) which required the filing of

such information within 5 days after the commencementof the public offering.

115 sets of supplemental prospectus material were filed by registrants to show

material changes occurring after the commencementof the offering.

314 sets of so-called l3-months prospectuses were filed pursuant to Section 10 (b)

(1) of the Act.

Thus during the past fiscal year there were filed in the aggregate 545 additional prospectuses of these 3 classes.

At the sametime, 113 supplementary statements of actual offering price were filed

as required by Rule 970; and there were 20 instances where registrants voluntarily

filed supplemental financial data.

SECURITIESEFFECTIVELYREGISTERED

During the fiscal year ended June 30, J.943, 123 statements covering 189 issues of

securities of an aggregate value of $659,480,000were effectively registered under the

Securities Act of 1933. Registrations were heaviest toward the end of the period, nth

the final six months accounting for about 68 percent of the mnn.berof issues and 72

percent of the value. Those registered for sale for accounts of the issuers (primary

distributions) amountedto $485,928,000, of 1Ihich 3.8 percent was to be paid for cost

of flotati on. Themajor element in reported cost of flotation was compensationto distributors, amountingto 3.2 percent of gross proceeds. other expenses amountedto only

0.6 percent.

Abreakdownof the major componentof compensationto distributors and a comparison

nth preceding years for comparable categories of securities indicates that there has

been a gradual diJninution in this major item of cost. Compensationto investment

bankers on the issues handled by them, excluding issues of investment trusts on which

costs are not reported in comparablemazmer,were as follows in terms of percent of

gross proceedsl

Year

Ended Preferred Common

June 30 Bonds Stock Stock

1939 2.0 6.4 16..9

1940 1.9 7.2 16.4

1941 1.8 4.1 14.4

1942 1.5 4.1 10.1

1943 1.7 3.6 9.7

Although the rate of compensationrose in 1943 for the aggregate of bonds registered for

sale to the public through investll\ent bankers, this was due to an increase in the proportion of lower quality bonds, Compensationwas generally lower for those of comparable quality, as shownby the following breakdown:

!I 61 of the above annual reports and the 241 quarterly reports were filed pursuant to

Section 30 of the Investment Company Act of 1940 also.
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Quality ~es y

Year

Ended Below

J1D1e.30 First Second Third Fourth Fifth Fifth Unrated

1939 1.3 2.0 2.1 2.3 3.1 4.7 6.0

1940 I.S 1.9 2.0 2.3 9.4 17.5

1941 1.7 1.6 1.S 2.0 3.1 5.5

1942 1.1 1.6 1.3 1.6 3.4 7.3

1943 0.6 1.3 1.2 2.0 2.S 12.1

The Commission's enconragementof cCDpetitive bidding apparently was responsible

for someof the decline in this element of cost of notation. e<.pensation on cOlllp8titivelT bid bond issues ran less than the average canpensation of their respective quality groups. Beloware shownaverage rates of compensationto distributors in terms of

percentage of gross proceeds for bond issues sold through competiti.ve bidding canpared

with the average rates for the other issues in their respective quality groupe;

Year

Ended

June .30

1941

1942

194.3

Comp.

Bidding

Yes

No

Yes

No

Yes

No

First

Grade

0.8

1.3

0.6

Second

Grade

0.5

1.7

Third

Grade

1.1

1.6

0.9

1.SFourth

Grade

1.8

2.1

1.2

2.1

1.8

2.5

Fif'th

Grade

.3.2

3.6

Publicity given to rates of compensation on issues registered under the Act ItIl1Y also

have contributed to the general decline in the major componentof cost of notation.

A breakdownof the minor cCDponentof other expenses of notation is shownbelow,

based on those registration statements in which expenses were reported in sufficient

detail to enable classification according to the possible effect of registration requirements. It may be noted that the types of expenses which wonld have been incurred

in any event but ~ch might have been partially affected by the Act-printing and engraving; legal, accounting, and engineering fees; and miscellaneous expenses-amounted

to little more than half of one percent of gross proceeds. The SECregistration fee,

.n1ch of coarse is entirely attributable to the Act, amountedto but one one-hundredth

ot! one Percent of gross proceeds.

!IThe grades are according to the classification of the bonds by the investment rating

services: FirSt grade corresponds to Koady's Aaa, Standard aDd Poor's U., Fitch

AAA;second grade to Aa, AI, AA;etc.

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Breakdown of Expenses

Not attributable to registration

Listing fees

Federal taxes

State taxes and fees

Trustees, transfer agents, etc.

Total

.13 .14 .12 .13 .17

.16 .17 .12 .13 .22

.07 .07 .06 .07 .07

lOl .01 .01 .00 .01

.06 .08 .06 .08 .06

Total .43 .47 ,.37 .41 .53

Partly attributable to registration

Printing and engraving

Legal fees

Accounting fees

Engineering fees

Miscellaneous

Wholly attributable to registration

SECregistration fee .01 .01 .01 .01 .01

Total "other expenses" .74 .71 .60 .64 .80

Theminor componentof other expenses than compensation varied considerably from

the average as affected by the size of issue. The tabulation below of these expenses

in percent of gross proceeds is based on the statements of all bonds registered for

sale by investment bankers to the public (exclusive of investment trust issues).

Size of Issue

Year ($000,000)

Ended Under

June 30 50 & over 20 - 50 5 - ;20 1 - 5 1

1939 0.4 0.5 0.8 1.1 2.2

1940 0.4 0.5 0.7 1.2 1.8

1941 0.4 0.5 0.6 1.2 2.2

1942 0.4 0.5 0.7 1.4 1.9

1943 0.5 0.4 0.8 1.5 3.2

The net proceeds accruing to the issuers after payment of cost of notation aggregated $467,609,000. The principal applications of these net proceeds were planned as

follows: 61 percent for the retirement of indebtedness and preferred stock; 2.3percent

for purchase of securities for investment and affiliation,. mostly the former; 9 percent

for increase of working capital; and 5 percent for expansion of plant and equipment.

Electric light, power, heat, gas, and water utilities accounted for $173,189,000 or

36 percent of the newissues of securities registered for sale. Registrations by-financial and investment companies amountedto $117,072,000 or 24 percent of the total. This

was the highest proportion accounted,for by this group in fiscal year except one.

Manufacturing companies and transportation and communicationcompanies accounted for unusually low proportions, 18 percent and 2 percent respectively. Nearly two-thirds of

the newissues registered for sale during the year were in the form of bonds, and all

except 3 percent were planned for- sale thrOUghinvestment bankers.

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Detailed statistics on securities effectively registered under the Securities Act

of 1933 are given in Appendix -'fables1 and 2 and on all new issues offered for cash

sale in the United States (including those exempt from registration) in Appendix Tables

3 and 4.

EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933

The Commission's statutory power to exempt from the registration requirements of

the Securities Act of 1933 security issues up to and including $100,000, and its procedures and rules established thereunder, were described in its Seventh Annual Report,

pages 175-179. In connection with such exempt issues, there were filed with the Commission during the past fiscal year a total of 353 Letters of Notification, pursuant to

Regulation A, and 74 amendments thereto, representing an aggregate offering price of

$17,986,987. That part of these offerings which related to oil and gas leases and securities of companies engaged in various phases of the oil and gas business accounted

for 54 of these Letters of Notification with an aggregate offering price of $1,062,724.

At the same time there were received and examined 532 Offering Sheets, pursuant to

Regulation B, and 504 amendments to such Offering Sheets, relating to fractional undivided interests in oil and gas rights with an aggregate offering price of

$12,B66,457.72. The following table indicates the action taken with respect to these

Offering Sheets:

Various Actions on Filings under Regulation B

Temporary suspension orders (Rule 340 (a» ••••••••••••••••• Orders terminating proceeding after amendment. • • • • • • • • • • • • • • • Orders consenting to withdrawal of offering sheet and terminating proceeding

Orders terminating eff"ectiveness of"of"f"eringsheet (no proceeding pending)

Orders consenting to amendment of offering sheet (no proceeding pending) •• Orders consenting to withdrawal of offering sheet (no proceeding pending).

Total orders • • • • • • • • • . • • • • • . . • • • • • • • • • • •

92

67

13

49 • • 366

39

• 626

In addition, the Commission received and examined during the year confidential

written reports pursuant to Rules 320 (e) and 322 (d) of Regulation B in the total

amounts of 3,627 on Form I-G and 1,361 on Form 2-G.

INVESTIGATION OF OIL AND GAS SECURITIES TRANSACTIONS

During the year investigations were conducted with respect to a total of 187 oil

and gas properties or proposed securities offerings. Where these investigations show

evidence of a violation of the criminal provisions of the Securities Act of 1933, the

results are transmitted by the Commission to the Department of Justice, and criminal

proceedings are instituted in the discretion of the Attorney General of the United

States. In the event such proceedings are instituted, the Commission's attorneys and

engineers Who participated in the investigation leading up to the proceedings assist

the United States attorneys in the preparation of the cases for pres\::ntationto the

grand jury and for trial.

A tabular summary of the Commission's oil and gas investigations follows:

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-8-

Oil and Gas Inve8'ti.gations

status Preliminary Inf'ormal Formal

Pending 6/3J{ 42 • • • • • • 45 49 41

in:1.tiated 7 /42 to 6/30/43 19 28 5

Total to be accounted ror. 64, 77 46

Changed to informal or formal

-Closed or compl~ted • • . . . . 42 33 15

Total disposed of. 42 33 15

Pending June 30, 1943 • • ..... 22 44 31

C~ ACTIONSINSTITUTEDBYTHECOlOUSSION!y

The Commissionduring the past fiscal year brought a IlUJIlberof actions, either to

enjoin violations of the registration or fiaud provisions of the Se-curitiee Act of 1933

or to enforce compliance with subpoenas, where attempts were made to camoufiage the real

nature of the transactions by making it appear that the subject matter of the sale was

real or personal property and hence not a security SUbject to the Act.

Typical of these cases was that involving Ocean Crab Pot Operators' Inc. v. :in

which the Commissionobtained an injunction restraining the sale ot crat pots coupled

with a profit sharing agreement.

In another case, Securities and Exc e Commissionv. Bourbon Sales comp~ V,

the CODIDlissionfiled an application wit the Uni a es District courtfore enforcement of a subpoena duces tecum issued by the COIIIDl1.ssionand directed to Bourbon

Sales Company. In its opinion ordering compliance nth the CCIIJDlission'ssubpoena, the

court determined that whiskey warehouse receipts coupled 1fl.th bottling contracts 1I8re

securities. Another subpoena enforcement case with similar facts was that 1DTolv1Dg

The Penfield Companyof California !!/.

Pending during the past year was an action involving C. M. Joiner, 1Ihere both the

District Court and the Circuit Court of Appeals upheld the contention of the defendants

that they were selling merely real estate leases. They rejected the COIIIIl1ssion' s contention that the defendants were selling an investment contract by virtue of the representation that a test well would be drilled which might greatly enhance the value at

the assignments 2/.

PROPOSEDAJlENIJlENTSOTHESECURITIESACTOF1933 ANDTHE

SECURITIESEXCHANGEACTOF1934

Reference was made :in the COIIIllission'sEighth Annual Report, pages 4 and 5, to

various proposals to amendthe Securities Act of 1933 and the Securities Exchange Act

of 1934. There were no hearings on these proposals during the past tiscal year.

!IAlso see infra Part VIII, Litigation, Civil Proceedings and Ap~dix Table 22.

y Securities and Exchange COIIBI1iss!onv ; Ocean Crab Pot Operators, Inc., U.S.D.C. Wash.

Defendants consented to entry of judgment.

21 U.S.D.C. W. D. Ky.

!!/ U.S.D.C. S. D. Cal.

2/ On November22, 1943, the SupremeCourt upheld the Commission's contention that.

defendants were selling securities within the meaning o-t the Act and reversed t~

lower courts. Securities and Exch5e Commissionv. C. )I. Joiner Leasing QfrP!r!:

tion, 320 U. S'-' 64 S.Ct. 120, BSL.ed. 62.

•

•
- 9 -

PART II

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 1934

REGISTRATION OF SECURITIES ON EXCHANGES

Reference is madeto the Sixth AnnualReport, pages 100-102, and previous annual

reports, for a description of the general purpose and nature of the statutory provisions

for the registration of securities on exchanges and the Commission'sprocedure in examining applications and reports for compliancewith the requirements of Sections 12 and

13 of the Securities ExchangeAct of 1934. It maybe noted that those provisions in

general seek to makeavailable to the public information regarding the condition of companies whose securities are traded on any national securities exchangeand to keep such

information up-to-date.

NEW RULES, REGULATIONS, AND FORMS FOR REGISTRATION OF SECURITIES ON EXCHANGES

Revisions of ~.-When the Commissionannouncedon December18, 1942, a

comprehensivestmplification of registration and reporting requirements under various

Acts'administered by it, which is discussed above, it also announceda revision of

certain of its rules applicable to all solicitations of proxies, pursuant to Regulation X-14, after January 15, 1943. Theprincipal changes are S1.ttIlIIlarized below:

1. Moreextensive information must be given on the compensationand dealings of

corporate managers, as well as a brief statement of the principal occupation

of all directors and a resume of the business experience of newcandidates.

2. Regular annual reports to stockholders must accumpanyor precede proxy statements. These annual reports to stockholders are not considered part of the

proxy material and need not be officially filed with the Commission.

3. Stockholders making proposals for action which are opposedby managementmust

be given not more than 100 words in the proxy in which to state their position,

provided the security holder gives the managementreasonable notice of his

intention.

4. The exemptionpreviously granted corporations making proxy solicitations without use of the mails or interstate commercewas abolished.

5. An exemption from the rules was provided for certain types of solicitations

through newspaperadvertisements.

The additional information required about managementincludes a list of all directors and officers, except officers (not directors) receiving less than $20,000 a year,

together with a statement of the amountsreceived in cash as well as under pension or

option plans. Information must also be given under the revised rules showingall loans

to of'ficers and directors not madein the ordinary course of business, together with a

brief description of all material transactions of officers and directors and their associates with the companyor its subsidiaries.

The Commissionhad previously authorized its staff to circulate the proposed revisions to its proxy rules for commentsand suggestions. The revisions madeby the Commission take into consideration the commentsthus received. On the other hand, a number

of the suggestions proposed by the staff were not adopted. Theywere: (1) that information of the type submitted in an annual report to stockholders including financial

statements be -included in the pr~ statement; (2) that minority stockholders be given

an opportunity to use the management'sproxy material in support of their own nominees

for directorships; (3) that persons soliciting proxies be denied the right to obtain

discretionary authority where security holders have not markedballots-while this propos~ was not adopted, a requirement of a clearer statement concerning the solicitation

~
of discptionary authority was included in the new rules; and (4)that compensation of 


officers who are not directors and who receive $20,000 or less be reported. 


The Coumission subsequently made public exerpts from letters of the Director of the 


Corporation Finance Division to officprs of corporations who had asked for interpreta- 


tions of certain provisions of the amended proxy rules. These interpretations are 


available in Securities Exchange Act of 1934 Release No. 3385, February 17,1943. 


The amendments of the Commission's proxy rules caused considerable discussion. 


Bills were introduced by lkpresentatives Wolverton and Boren designed to reinstate the 


rules as they had existed before the revision. Hearings on these bills were c~menced 


in June of 1943 before the House Committee on Interstate and Foreign Commerce. The 


hearings are presently in adjournment. 


SOLICITATION OF PROXIES, CONSENTS, AND AUTHORIZATIONS 


The Commission's Regulation X-14, adopted pursuant to the provisions of three of 


the statutes administered by it, requires that certain information be made available 


by companies to their security whose proxies, consents, or authorizations are 


solicited. 


During the year the Ccmmission received and examined both the preliminary and de- 


finitive material thus required with respect to 1,427 such solicitations. In addition, 


307 items of amendatov or supplemental soliciting material were received and examined. 


The Commission also continued its practice of furnishing every assistance to persons 


who desired to obtain in advance of the filing date informal opinions or suggestions as 


to the preparation of required material. 


Rule requiring report upon settlement --of nar contract renegotiations.-Rule X-13A-6, 

which remires the filw of a current re~ort on ~-on the occurrence of suecified 

events, ;as amended in relation to companies having war cbntracts subject to renegotiation proceedings under Section 403 of the Sixth Supplemental National Defense Appropriation Act, as amended, so as to require a report upon the settlenent of any such proceedings. No report is required, however, if effect was given to the settlement in the 

most recerrtly filed financial statements or if financial statements for the period 

covered by the settlement have not been filed. In the latter case, it is assumed, of 

course, that effect will be given to the settlement when financial statements for the 

period are filed. 

Tfie financial instructions for a number of the annual report forms mre amended 


where necessary to clarify the applicability of Regulation S-X thereto; and Rule 


X-3A12-1, no longer harlng practical application to the situation it was designed to 


relieve, was repealed. 


STATISTICS OF SECURITIES REGISTERED ON EXCHANGES 


Up to and including June 30, 1943, 2,965 issuers had filed a total of 5,651 appli- 


cations for registration of securities under Section 12 of the Securities Exchange Act 


of 1934and a total of 33,122 annual and current reports under Section 13 of the Act. 


As of June 30, 1943, the registration of the securities of 2,244 of the issuers was in 


effect, and the registration of the securities of the remining 721issuers had ceased 


to be effeotive. 


The number of applications, reports, and amendments filed with the Commission during the past year relating to the listing and registration of securities on national 

secnrities exchanges is as followar 

1/ 	See Sections 14 (a) of the Securities Exchange Act of 1934, 12 (e) of the Public 

Utility Act of 1935, and 20 (a) of the Investment Compq Act of 1940. 
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Applications for registration • • • • • • Applications for "when issued" trading ••• Exemption statements for issued warrants ••• Annual reports •••••••••••• Current reports • • • • • • • • • • • Amendments to applications and annual and current

reports. . . . . . . . . .

96

4

3 • • 2,073

2,344

721

More detailed statistics of securities registered on exchanges are contained in

Appendix Tables 7-13, inclusive.

TERMINATION OF REGISTRATION UNDER SECTION 19 (a) (2)

There were pending at the beginning of the year 3 proceedings instituted under

Section 19 (a) (2) of the Securities Exchange Act of 1934 which empowers the Commission,

after appropriate notice and opportunity for hearing, to deny, to suspend the effective

date of, to suspend for a period of not exceeding l~ months, or to withdraw, the registration of a security, if it finds that the issuer has failed to ccmply with any provision of th~ Act or the rules and regulations thereunder; and 16 proceedings were instituted during the year. The Commission ordered the secuxities of 11 of these issuers

withdrawn and the proceedings with respect to securities of two issuers dismissed; and

sU: proceedings were pending at the close of the year.

The withdrawal of registration was ordered in 10 of these cases because of the comp~IS failure to file the annual report required under the Act, and, in one case, involving Class "A" stock of Associated Gas and Electric Camp"any,y because of "false and

misleading" statements found by the Commission in the application for registration and

certain annual reports filed by the company. With that exception and one other involving a medium-sized brewery concern, the companies whose securities were thU1'withdrawn

from registration were small organizations consisting for the most part of inactive

mining companies.

WITHDRAWAL OR STRIKING OF SECURITIES FROM LISTING AND

REGISTRATION ON NATIONAL SECURITIES EXCHANGES

During the year ended June 30, 1943 there were filed with the Commission under Section 12 (d), by issuers or exchanges, applications -tor the withdrawal or striking of 56

issues from listing and registration on national securities exchanges. At the beginning

of the year applications for the removal of 10 issues were pending. During the year the

Commission granted applications involving 41 issues, dismissed without prejudice an applicat-10n involving 1 issue, and permitted an application involving 1 issue to be withdrawn. Applications for the removal of.23 issues were pending as of June 30; 1943.

During the year the Commission received from national securities exchanges certifications of removal involving 105 issues stricken from listing and registration because

of payment, redemption, or retirement.

AMENDMENT OF RULE X-12D2-2 (a)

Rule X-12D2-2 (a) was amended during the year to permit an exchange to remove, by

certification> without the necessity of application and hearing, the entire class of a

registered security when the instruments representing the security come to evidence

other securities, as for example in an exchange or substitution resulting from a stock

split-up, recapitalization, or merger.

11 Securities ~change Act Release No. 3285.
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UNLISTED TRADING PRIVILEGES ON NATIONAL SECURITIES EXCHANGES

On June 30, 1943, 1,560 stock and 217 bond issues had unlisted trading privileges

on the registered exchanges, counting each issue once ir it enjoyed the privilege on

one such exchange, twice if on two such exchanges, etc. The distribution of this count

among exchanges is shown under Column U of Appendix Table 13.

These totals included 1,295 stock and 186 bond issues under Clause (1), 260 stock

issues and 1 bond issue under Clause (2), and 5 stock and 30 bond issues under Clause

(3), of Section 12 (f) of the Securities Exchange Act of 1934. y The distribution of

this count of issues under Clauses (2) and () among exchanges is shown in Appendix

Table 14.

The total under Clause (1) shows a reduction of 46 stock and 6 bond issues since

June )0, 1942, and a reduction of 379 stock and 406 bond issues (including 100 stock

and 199 bond issues formerly on the New York Real Estate Exchange) since June 30, 1937,

following upon the substantial reduction prior to that date discussed on pages 17-18 of

the Third Annual Report of the Commission. This reduction is in line with original

expectations y as to this type of issue on exchanges.

Counting each issue but once, regardless of the number of registered exchanges

upon which it has unlisted trading privileges, the total is 1,027 stock and 217 bond

issues, as shown in Appendix Table 10. In particular, the exclusion of this duplication among exchanges reduces the count of 260 stock issues under Clause (2) to 155, the

latter figure being the precise number of issues currently "admitted to unlisted trading

under that Clause. Many of the net 160 stock and 31 bond issues admitted to unlisted

trading privileges under Clauses (2) and (3) are of companies whose issues, or whose

predecessors' issues, were admitted to trading upon the applicant exchanges in the past.

Many of the issues under Clause (1) and all of those under Clause (2), are listed

and registered on some registered exchange other than that upon which they enjoy unlisted trading privileges. Exclusion of such listed issues leaves a residue of issues

which have only an unlisted exchange status. This residue includes 474 stock and 163

bond issues under Clause (1), and 5 stock (all preferred stocks) and 30 bond issues

under Clause (3), representing a total of 479 stock and 193 bond issues, as shown in

Columns (2) and (4) of Appendix Table 10. This total shows a reduction of 258 stock

and 357 bond issues since June 30, 1937.

An application by the Chicago Rivet and Machine Company for the termination of unlisted trading privileges in its Cammon Stock, $4 Par Value, on the New York Curb Exchange 2/ was denied by the Commission during the past fiscal year y. The Exchange,

1/ Clause (1) covers continuance of privileges enjoyed prior to March 1, 1934; Clause

(2) covers extension of the privileges to issues listed on some other registered exchange; Clause (3) covers extension of the privileges to issues in respect of which

there is available from a registration statement and periodic reports filed pursuant

to the rules and regulations prescribed under the Securities Act of 1933 or the Securities Exchange Act of 1934 information substantially equivalent to that available

on listed issues. In Clause (3) cases the statute requires the imposition of such

terms and conditions as will subject the issuer, its officers, directors, and principal stockholders to duties substantially equivalent to those which would arise if the

security were fully listed and registered, except where the public interest and the

protection of investors would nevertheless best be served by extension of the privileges. In addition, under Clauses (2) and (J), certain conditions as to public distribution and public trading activity in the vicinity of the exchange must be

satisfied.

2/ See JlReport on Trading in Unlisted Securities upon Exchanges." and JlHearing\before the

Senate Committee on Banking and Ourrency", January 3 and February 11, 1936

respectively. 2/. Seventh Annual Report, p , 148.

Securities Exchange Act Release Nos. 3083, 3088 and 3395.

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upon the suggestion of the Commission,reduced the unit of trading in the security and

conducted a six-month test of the character of trading with the reduced unit. Uponthe

expiration of this period the Commissionfound that the character of trading had improved and was not of such nature as to require the termination of unlisted trading

privileges on that Exchange.

During the past fiscal year there were filed w.i. th the Commissionby exchanges 17

applications under Rule X-12F-2 (b) seeking a determination that an altered or substituted security 1mS substantially equivalent to a security theretofore admitted to unlisted trading privileges. Of these applications, 12 were granted, 3 were denied, and

2 were pending at the close of the year.

After t.he close of the fiscal Year the National Association of Securities Dealers-,

Ine , , in the first appeal to the courts from an order of the Commissionin an Unlisted

trading case, filed a petition with the United States Circuit Court of Appeals for the

Third Circuit for review of the CODIIIlission'sorder granting unlisted trading privileges

to two bond issues upon application of the NewYork Curb Exchange. y

UNLISTED TRADING EXEMPTED EXCHANGES

The Seattle Stock Exchangesuspended operations on October 1, 1942. The total

stock and bond issues admitted to unlisted trading on the 3 remaining exempted exchanges

which permit unlisted trading were 56 and 4 respectively, on June 30, 1943. The stock

issues included 53 under Clause (1) and 3 under Clause (2) of Section 12 (f) of the Securities ExchangeAct of 1934.

AJlENIlMENT OFRULEX-lOA-l

R11l.eX-IOA-l, dealing with short sales effected on a national securities exchange,

was revised to provide that in determining the price at which a short sale maybe effected in a security that has gone ex-dividend, Ex-right, or ex- other distribUtion,

all relevant sale prices for the security prioto to the "ex" date maybe reduced by the

value of suoh distribution.

SPECIALOFFERINGPLANS

On February 6, 1942;1the Commissionamendedits Rule X-IOB-2to permit special

offerings of blocks of stock on national securities exchanges where such offerings are

effected pursuant to a plan filed with and declared effective by the Commission,as related on page 9 of the Eighth AnnualReport.

Pursuant to the amendment,three exchanges adopted special offering plana I the

NewYork Stock Exchange, the NewYork Curb Exchange, and the San Francisco Stock Exchange. Briefly, these plans are exchange rules permitting the specfal, offering of a

block of stock through the facill ties of the exchange and during the regular trading

session when the regular market on the floor is believed incapable of assuring absorption of the block within a reasonable period of time and within a reasonable range of

prices. The offering is madeat a fixed price which is set within the frameworkof the

existing auction market. Membersacting as brokers for public buyers are paid a special

commissionby the seller which ordinarily exceeds the regular commission. Buyers obtain stock lfithout pa;ying any commission.

Special offerings on national seuuri ties exchanges numbered105 in the year ended

June 30, 1943. Of these, the NewYork Stock Exchangeaccounted for 93, with a total of

1,402,.612 shares offered and 1,376,418 shares sold, the latter having a market value of

$38,342,-000and affording revenue to buyer-s" brokers which totaled $717,000. On the New

York Curb Exchangethere were 10 special offerings totaling 50,661 shares, while the

42,311 shares sold were valued at $693,000 and carried total commissionsfor buyers'

brokers of nearly $18,000. The San Francisco Stock Exchangehad two special offerings

11 Securities ExchangeAct Release No. 3452, July 5, 1943.

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totaling 6,172 shares, nth sales of the sameamounthaving a value of $58,600, and

carrying special commissionsof $2,420.

The special offering plans of the three exchanges competeto somedegree with

secondary distributions of exchangestocks effected over the counter after the close of

the exchange session so-called "twil.i..gh:t offerings n Secondarydistributions approved by the exchanges numbered101 in the year ended June 30, 1943. They covered

4,830,698 shares of stock with a value 1129,370,000. Those appr-oved by the NewYork

Stock Exchangetotaled 39, with a total. 2,480,236 shares valued at $61,<;95,000. New

York CurbExchangeapprovals numbered40, ca.prising 2,227,778 shares valued at

$65,252,000. other exchanges approved.22, covering 122,684 shares valued at $2,123,000.

SPECIAL STUDIES

The Commission'sstaff continued ita study of the problems of the regional exchanges which it undertook in the preceding fiscal year, and continued its study of

characteristics of over-the-counter markets in exchange stocks, both, however, on a

sCDe1lhatcurtailed basis owing to loss of BIIlchof the personnel originally engaged in

'this ...ork.

SAVllIG STUDY

TheC<DIIIissionin the fiacal year ended June 30, 1943 continued its series of

quarterly releases on the volumeand c<8pOSitionof saving by individuals in the United

States. These releases showthe aggregate volumeof intividuals' savings; L,e., the

increase in their assets less the increase in their liabilities, exclusive of gains or

losses :from revaluation of assets: they showalso the componentscontributing to this

total., such as bank balances and C1llrency holdings, insurance, securities, consumers'

1Ddebtedness, and consumers' durable goods.

In addition to the estimates of sariDg by individuals, after the close of the fiscal. year, the ~sion also made public for the first time estimates of a few selected

cc.ponents of corporate saving. In Subsequentreports it is planned to present estimates

of corporate saving in considerably BOre detail. It is intended in this mannerto give

a picture of 'the fiDanc1.al.cond1:tionof corporations. In this way the volumeand most

signtl'icant ~s of all important sepents of the national. economywill be

avai.1able.

JIARKET SURVEII,T.ABCE .ABD TRADING INVESTIGATIONS

The Ccnwi ssion' s aim in its adndm stration of the statutory prohibitions of the Securities Exchange Act of 1934 against stock Jll8rketmanipulation is a sufficient policing

of the markets in order to accomplish the extinction of manipulatiOn lfithout interfering

with the legit:iJlate f'unctioning of those IIal"kets. Its methods of market surveillance

aDd its investigatory procedure are set forth at pages 91 et seq. of the Sixth Annual.

Jleport of the ee-ission.

Atabal.ar with respect to 'the Cmlnission's trading investigations follows:

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Trading Investigations

Pending June 30, 1942 • • • • • • • • • •

Initiated July 1, 1942 to June 30, 1943

Total to be accounted for • • • • •

Flying

quizzes !;!

4

123

I2'i

Formal

Investigations

12

18

Changed to formal • • Closed.or completed

Total disposed of • •

Pending June 30, 1943 • •

. . 12

49 EI

or

66

8£/

"8

22

!IA flying quiz is a quick informal survey of the trading in a security to determine if -Additional investigation is warranted.

Includes reference of cases to the Departmentof Justice and to various national

securities exchanges.

PEGGING, FIXING, AND STABILIZING OF SECURITIES PRICES

Dllring the fiscal year ended June 30, 1943, the COIIIIIlissioncontinued the administration of (a) Rule X-17A-2,which requires the filing of detailed reports of all transactions incident to offerings in respect of which a registration statement has been

.tiled under the Securities Act of 1933where any stabilizing operation is underlaken to

.tacilitate the offering; and (b) Regulation X-<)A6-1,governing stabilizing transactions

tn. securities registered on national securities exchanges effected to facilitate offerings of securities so registered in which the offering prices are represented to be "at

the JDarket"or at prices related to market prices.

Out of a total of 150 registration statements filed under the Securities Act of

1933 durirJi the past fiscal year, 69 contained a statement of intention to stabilize to

facilitate the offerings covered by such registration statements. Because of the fact

that a registration statement in somecases covers more than one offering, there were a

total. of 77 offerings of secur1ties in respect of which the statement required by Rule

82!7 of the Rules and Regulations under the Securities Act of 1933was madeto the effect

that a stabilizing operation was intended to be undertaken. Stabilizing operations were

conducted to facilitate 42 of these offerings. In the case of bonds, public

o.tferings of $142,750,000principal amountwere stabilized. Offerings of stock issues

aggregating 2,658,344 shares and having an aggregate estimated public offering price of

167,703,875 were also stabilized. Of the 42 stabilizing operations commenceduring the

past fiscal year, 35 had been completed and notices of termination of stabilization

filed nth. the Commissionand the remaining 7 were still in progress as of the close of

the fiscal year.

Also during the past. fiscal year, 7 notices of intention to st.abilize were filed

with. the Commissionon FormX-9A6-1pursuant. to the provisions of Rule X-9A6-3. The

offerings described in these notices, to ,facilitate'which stabilizing operations were

cODducted,involved stock issues aggregating 1,873,309 shares having an aggregate

initial public offering price of $25,826,310.

EXCHANGES REGISTERED AND EXEMPTED FROM REGISTRATION

During the past fiscal year there was no change in the number(19) of exchanges

registered with the Commissionas national securities exchanges. The Seattle Stock

EXchangesuspended operations as of October 1, 1942, for an indefinite period, or until

the membersshould feel that the fa~ilities'of said exchangewould again be needed; this

reduced the numberof active exemptedexchangesto five.

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OVER-THE-COUNTER REGULATION

BROKER-DEALER REGISTRATION STATISTICS

The following tabulation relates to broker-dealer registration under Sect1.ou 15 (b)

of the Securities ExchangeAct-Fiscal Year Ended June 30, 1943.

July 1, 1942 June 30, 1943

Effective registrations at close of preceding fiscal year 5,557

Applications pending at close of preceding fisc~L year. • • • • • • •• 39

Applications filed during fiscal year • • • • • • • •• 376

Total.. • • • • .. • • • • • • • • • • • • • • • • Sam

Applications withdra1lIl during year. • . • • • • • • 9

Registrations withdra1lIl during year • • • • •(. • • • • •• 959

Registrations cance.l.l.ed during year • • • • • • • • • • • 39

Registrations denied during year. . • • • • • . • • • . . . • • • 4

Registrations suspended during year • • • • • . • • • • • • • • • • • • 0

Registrations revoked during year y. . . . . . . . . . . . . . . . . . . .. 22

Registrations made inactive during year 2/. • • . . • • . . • • . • • • • • • 2

Registrations effective at end of year (except "hose put on inactive status). 4,913

Applications pending at end of year • • • • . • • • • •• 24

Total. . . . . . . . • . . . . . . . . . . . . • • . . • '5,9'72

BROKER-DEALER INSPECTIONS

A total of 830 broker-dealer inspections were reported by our regional offices during the fiscal year ended June 30, 1943. The tollowing tabulation shows someof the

lIlore iJDportant findings in these inspections:

74 inspections reported unsatisfactory financial condition rang1ng trOll insolvency to a condition not presently ser.iou.s but at least potentially

dangerous.

94 inspections reported non-compliance with Regulation T.

63 inspections reported non-compliance with our rules relat,ing to bwothecation of customers! securities. 40 of these involved finns whose financial

condition was not in question.

28 inspections reported secret profits involving misrepresentations as to the

prices at which customers! orders had been executed.

98 inspections reported transactions with customers in which priciDg praatioea

were questionable.

Infractions ot a minor nature are called to the attention of the firlll and cOIIPliance is generally premised. However, 53 inspections during the last year reported facts

which required further investigation for the purpose of determining whether arq of the

sanctions under the Act should be applied. '!'he C<Jmdssionbrought actioil to enjoin one

y 24 registrations were revoked during the year but 2 ot thea were under suspensicm at

the beginning of the year and the net figure of 22 revocations is thentore refiected

in the above tabulations.

3/ The registrations of 2 brokers and dealers whose whereabou.ts, despite care~ inquiry;

could not be ascertained, were placed on inactive status during the year. Registrations 'Oninactive status June 30, 1943, are 81, and are not included in the total.

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of these firma from f'Inother violations of our Acts and subsequent~ revoked the firm' B

registration as broker and dealer and as investJl1ent adviser and expelled the f'inl 1/

from membership in National Association of Securities Dealers, Inc. Y Against thIrteen other firms of the 5.3which required 1nvestigati~ proceedings on the ques'£ion of

revocation of registration were ordered; seven of these were membersof the National

Association of Securities Dealers, Inc. and accordingly our pl"'lJqe$dingsin these cases

included the question of suspension and exp1I1.s1.onfrom 1IleDlbershipin that association.

ADMINISTRATIVE PROCEEDINGS

The following table contains statistics relating to adm1.nstrative proceedings under

Section 15 (b) of the Securities ExchangeAct:

.. ... .. ... .. . . .

Total. • . . . . . • . . • . . • . . •

,

15

1

.35

6

57

=

.3

1

2

o

4

24

22

..l

l1 .. .

. . . ..

. . .. . .

. . .

..

. . . .. . . , .

.....

...

. . .

194.3

. . Total. • . • . -e • •.• • • • • • • • • •

July 1, 1942 June .30,

Rev9cation proceedings pending Ju4r 1, 1942

Denial proceedings pend:1ngJu4r 1, 1942 •••

Revocation proceedings ordered during year.

Denial proceedings ordered during year. • •

Revocation proceedings dismissed on withdrawal.

Revocation proceedings dismissed and not revoked.

Denial proceedings dismissed on withdrawal.. • • • • • • • • • • • • •

Denial proceedings dismissed and registration permitted ••••••

Registrations denied '1/ . • • • • • • • • • • • , • • . • • • •

Registrations revoked y. . . . . . . . . . . . Revocation proceedings pending June .30, 194.321

Denial proceedings pending June .30, 194.3••••••

!IIn the Matter of Frances J. Lubbe Securities ExchangeAct, Release No .3456

Investment Advisers Act, Release No .37

Y The activities of this Assoeiation, lIhich is the only national securities association

registered pursuant to Section 15Aof the securities ExchangeAct, are described

~.

y In the Matter of Jack Lew1.s Baker, doing business, as J. L. Baker, Semtrities Exchange

Act Release No. 3311.

In the Matter of William K. Archer and Edward G. lIader do business as Archer

Mader 0., ecur ties ExchangeAc Release No.

In the Matter of Foelber-pattersStrInc., Becurities ExchangeAct Release No .3324.

In the Matter of George Lewis 0hT <Jaidoing business as G. L. Ohrstrom & Co., Securities EXChangeAct Release No.34J

fJJeorge L. Ohrstr~ doing business as G. L. OhrstrOll & Co. was later admitted to

registration. See In the Jlatter of Gear e L. Ohrstran do business as G. L.

OhrstrOll '" Co., Securities ExchangeAct Release No.

SeRelease No. .3400.

21 See fol101rlng page.

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In the Matter of LawrenceR. Leeby &Co.

One of the more significant proceedings invol7ing revocation of registration as

a broker and dealer related to dealings in oil royalties by Lawrence R. Leeby, doing

4 cont'd/

In the Matter of Ernest S. Price, doing business as E. S. Price and Company,Securities ExchangeAct Release No. 3451.

In the Matter of Kimball, Ware&Go., Securities ExchangeAct Release No. 3401.

In the Matter of Samuel S. Alexander, Securities ExchangeAct Release No. 3398.

In the Matter of Brentlinger & Hoseat Inc., Securities ExchangeAct Release No.

3460.

In the Matter of Morris Lawrence Jacobs, doL=tgbusiness as M. L. Jacobs, Securities

ExchangeAct Release No. i 3437.i

In the Matter of .U'thur F. Bernstein do. business as -A. F. Bernstein &Co., Securities ExchangeAct .: Release No.3 5

lil the Matter of Duncan-John MacGillivray,. Jr'l dO~ business as MacGillivray and

Ct!!JlY; Securities ExchangeAct Release No. 335

In It Matter of Sltlt &3Slt~ Inc., Securities ExchangeAct Release No. 3335.

In We Matter of W~ & C01lI.P , ecurities ExchangeAct Release No. 3336.

In the Matter of Superior Investment Co., Securities ExchangeAct Release No. 3307.

In the Matter of Blanchard ~ecurrt!es Company,Securities Exchange Act Release No.

3312.

In the Maitter of John L. McDaniel, Securities ExchangeAct Release No. 3448.

In the Matter of William T Maloney, Securities ExchangeAct Release No. 3448.

In the Matter of Fischer I Company, Securities ExchangeAct Release No. 3277.

In the Matter of Bam B. Raitinan Securities ExchangeAct Release No. 3316.

In the Mat er The ore T. olden, Securities ExchangeAct Release No. 3404.

In t e Mater 0 J. Morton teiner, doing business as J. Morton Steiner Company,Securities ExchangeAct Release No. 3350.

In the Matter of Trost &Compagf,Inc., Securities ExchangeAct Release No. 3345.

In the Matter of Richard MahoneyCompany,Incorporated, SeCurities ExchangeAct Release No. 3180.

In the »atter of EmmetR. Ncnm~doing business as E. R. NawnCompany,Securities Exchange Act Release No. 328 •

In the Matt.er of Charles Hughes& Co., Inc., one of the proceedings pending at the

close of the fiscal year, involved the sale of securities by that f'irm to customers

at prices rar in excess of prevailing market prices. In its findings and opinion

issued on July 19, 1943 (Securities ExchangeAct, Release No. 3464)~ the Commission

held that the firm's sales of securities to certain customers at prices bearing no

reasonable relation to current market prices, without disclosure of information with

respect to the market prices, were fraudulent under 17 (a) of' the Securities Act and

Section 15 (c) (1) of' the Securities ExchangeAct, and ordered that its registration

under Section 15 (b) be revoked. Onpetition for review the Circuit Court of Appeals T Second Circuit, in a sweeping opinion sustained the Commission's findings and

affirmed the order, and also sustained the constitutionality of Section 15 (c) (1)

of the Securities ExchangeAct and the validity of Rule X-15 (c) (1). ( Fed.

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business as Lawrence R. Leehy & Co.!/ Leeby had engaged in the practice of selling

oil royalties to customers at prices as high as 150% over his concurrent cost. The two

principal customers were women who were not well versed in investment matters and who

depended exclusively upon Leeby's advice in all their securities transactions and relied

upon him to act in their best interests at all times.

This is the first proceeding involving pricing practices in oil royalties. While

the Commission's order revoking registration was based on the finding that Leeby, in his

transactions with two women customers, was charged with the high fiduciary duties of an

agent and that he violated these obligations repeatedly in taking secret profits at the

expense of these customers and in acting in his own interest which was clearly in conflict with theirs, the Commission also determined that the duty of fair dealing rests

on a dealer in oil royalties as it does on dealers in the more conventional types of securities. In long series of cases the Commission has held that a dealer in securities

impliedly represents that he will treat all customers fairly, that he will not exploit

their inexperience in securities matters or their reliance upon his integrity and that

the price at which he sells a security to a customer is a fair one in,relation to the

prevailing market. A finding that any such representation is false is a finding of

fraud. Since with respect to oil ra,ralties there is no market such as exists for corporate securities, it was necessary to resort to other tests to determine the fairness

of retail prices charged for oil royalties and the Commission toncluded, with certain

reservations, that "the least required of a dealer by the standards of fair dealing is

that, unless special circumstances appear, he must charge a price bearing a fair relationship to the current wholesale price". The Commission held that in charging retail

prices having no fair relation to the curr-ent wholesale prices, without disclosing the

magnitude of his mark-ups, Leeby omitted to disclose material facts necessary to make

his general representation as a dealer not misleading and that his conduct operated as

a fraud on his customers.

The proceeding is also noteworthy because of related action by the Commission

eliminating the disclosure of the maximum offering price from the offering sheets required under Regulation B. 2/ It was Leehy's practice to charge the maxilIlum offering

price in sales to customers,;"his defense being that this was the common practice among

oil royalty dealers. He dealt with his customers as though the maxinnnn offering price

were an established price to the public. Such practice is obviously in disregard of

the purpose of the maximum offering price, for its sole intended function is to determine whether the offering price of the entire issue is wi thin the $100,000 exemption

from the registration requirements of the Securities Act. In order, therefore, to

prevent misuse of the maximum offering price in the future, the Commission amended Rule

330 of Regulation B, striking the statement of the maximum offering price from the disclosures required. 21

In the Matter of W. K. Archer and Co.

After extended hearings In the Matter of W. K. Archer and Co., the Commission on

June 13, 1942 issued its findings and opinion and ordered revocation of the registration of this firm. The Commission held that certain of the firm IS activities were

fraudulent under Section 17 (a) of the Securities Act and Section 15 (c) (1) of the Securities Exchange Act, and that it had also violated Sections 7 (c) (2) and 15 (b) of

the Securities Exchange Act. On petition for review the United States Circuit Court of

Appeals, Eighth Circuit, on FebruaI"J 15, 1943, sustained the Commission's findings and

affirme~ the order. 4/ On June 7, 1943, the United States Supreme Court denied a petition for a writ of certiorari.

17 In 'the Matter of Lawrence R. Leeby & Co., Securities Exchange Act Release No. 3450.

3/ Regulation B of the Commission's Rules and Regulations under the Securities Act.

21 Securities Act Release No. 2925.

133 Fed. (2d) 795 (C.C.A. 8) (1943).

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In the Matter of Guaranty Underwriters, Inc.

On August 7, 1942, the Commissionordered that proceedings be held on the qllestion

of revocation of the broker-dealer registration of Gaaranty Underwriters, Ina. and on

the question of suspension and expulsion of this fina from.maDlbershipin the National

Association of Securities Dealers, Ino. HeariDgs were cODIIlencedon August 20, 1942, and

on the following day the comp~ purported to withdraw its registration aDd consented to

revocation of its registration. Y The Commissiontook the consent under advisement and

1llovedto proceed with the hearing. The COIIlp~ then made several. attempts by court action to stop the hearing.

1. The first action, before Judge Waller of the tJn1ted States District Court for

the Southern District of Florida, sought to enjoin Edward C. Jolms~; the ee-d.ssion1s

trial examiner from holding further heariDgs lUlder the C~ssion' s order. The action

was dismissed on the ground that the Circuit Court of Appeals had exclusive ju:ri.sdiction

to review orders of the Commission. 2/ The eClDp8.DY" appealed to the Circuit Court of

Appeals, Fifth Circuit, but later withdrew the appeal after stay of the hearing pending

appeal had been denied both by Judge Waller and by one of the Circuit Court judges.

2. On the day the Commission's hearing was to be reSlPiledthe ccmlp8!lT,without

notice to the Camn1ssionor the trial examiner, obtained an ex fuarts order i'I'cB Judge

McNeill of the Circuit Court of the Fourth Judicial Circuit Of e tate o£ Florida

which purported to restrain the examiner and the individual COJIIIId.ssionersof the Securities and Exchange Commissionfrom proceeding nth the hearing. The CCBd.8sionthen

brought suit, before Judge Waller of the United States District Court, to eDjoin the

enforcement of Judge McNeill's order; this was dismissed on the ground that section 265

of the Judicial Code prohibits federal courts ftoca enjoining state court proceedings. 'JJ

However, a writ of prohibition was obtained in the Sa:pI8Il8Court of Flonda against

Judge McNeill on the ground that he was without jurisdiction. !tI

3. The companythen petitioned the Circuit Court of Appeals, Fifth Circuit, to

review the Commission's refusal to terminate its proceedings. This action was dismissed

on the ground that the Commissionhad not yet issued a reviewable order. 21

4. The next action was before Judge Akerman, United states District Court for the

Southern District of Florida, from whomthe companyobtained, without netdce to the CODlmission or the examiner, a second exJarte order restraining the trial examiner from

proceeding with the hearing. Judge erman subseqUently vacated this order on the holding that Judge Waller's order (1, ~) was res judicata, Y and dismissed the complaint. The companyappealed fi"om~order arsndssiIig the complaint and Judge Akerman

ordered the Commission's hearing to be stayed pending appeal. The companyalso f:i!led a

!lew appeal from Judge Waller's order dismissing its original sUit for injunction (1,

~), The Circuit Court of Appeals, Fifth Circuit, affirmed both orders, holding that

Y At .the same time the companysent to the National Association of Securities nealers,

Inc. its written resignation frOM membership in that association.

31 Guaranty Underwriters, Inc. v. Johnson, unreported (S.D. Fla., Sept. 4, 1'942).

21 Guaranty Underwriters, Inc. v , Johnson, unreported (S.D. Fla., Sept. 19, 1942).

!tI Johnson v, McNeill, _Fla. __ ., 10 So. (2d) 143 (Oct. 23, 1942).

21 Guaranty Underwriters, Inc. v , Securities and Exchange Commission, 131 F. (2d)

(C.C.A. 5, Nov. 7, 1942).

Y Guaranty Underwriters, Inc. v, Johnson, unreported (B.D. Fla., Nov. 12, 1942).

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there was no legal. basiB :Cor"the actions and that there was no proper venue since the

examiner was not an inhabitant 0:C F1.orida. Y Subsequently, the Circuit Court denied

petition for rehearing. Y

RULE X-17A-5

Daring t;he SUJIIIlerof 1942, at t;he request; of representatives of the industry, the

Commissionundertook to assist in formulating a form of uniform f"inancial statement to

be used by all brokers engaged in the securities industry for reporting their financial

condition to regulator,y bodies such as the Commission,the various state securities

commissions, national securities exchanges, and the National Association of Securities

Dealers, Inc. The demand:Corsuch a uniform statement camefrom the industry because

regulator,y bodies used different forms and different approaches for the purpose of

obtaining financial. inf'ormation concerning brokers and dealers comingunder their jurisdiction. It was the consensus of everyonewho worked on the subject that the most

feasible wayto get a unif'01'IIl statement would be for the COIIIIIlissionto promulgate a rule

and adopt a form lIhich others might-a'Lso adopt. The Commission'srepresentatives engaged in extended conferences lIith representatives of the various state securities commissioners, the Rational Association of Securities Dealers, Inc., the national securities

exchanges and the Investment Bankers ASBociation, and succeeded in clearing a form of

financial report which was satisfactory to these agencies and organizations.

In November,1942, the Camnissionannouncedthe adoption of Rule X-17A-5pursuant

to which registered brokers and dealers, membersof national securities exchanges and

brokers and dealers -.ho transact a business through the mediumof a memberare required

to file each year, beginning in 1943, a report of financial condition. About 1,000 reports were filed fran January 1.to June 30, 1943.

RULEX-15C3-1

On October 29, 1.942, in announcing its dedsion not to approve the proposal of the

National Association of"Securities Dealers for an amendmento its by-laws which would

have established certain m:1n:i.DmJR net capital requirements for membersof that aSBociation, the Commissionannouncedthe adoption of its cnmrule, X-15C3--1,requiring every

registered broker and dealer to maintain net capital of not less than 5%of its aggregate indebtedness. However,the e:Cfective date of this rule was deferred pending the

adoption of appropriate definitions of net capital and aggregate indebtedness. JJ

In November1.942, the CCJIIIlission'sstaff drafted propt>seddefinitions of aggregate indebtedness and net capital. which, in accordance with established policy, were

submitted to the stock exchanges, state regulatory bodies, accounting societies and

membersof the industry for their camnent. Following commentsreceived from these

various groups, it was decided that no definitive action should be taken until the subject had been studied in the light of the financial statements filed pursuant to Rule

X-17A-5.y

!IGuaranty underwriters, Inc. v. Johnson, 133 F. (2d) 54 (C.C.A. 5, Jan. 15, 1943).

2/ Hearings were resumed follawll:1gdenial of petition for rehearing and on SepteJ1ber11,

1943, -the Camnission iBsued an order revok-t..ngthe company'sregistration on the basis

of detailed findings of fraud. Securities ExchangeAct, Release No. 3481. '{'hecompany did not appeal :fran this order.

Y Securities Exchange Act Re1.ease3322.

Y The analysis of financial reports filed during the calendar year 1943 indicates that

further conferences with the industry and state agencies rill be necessary before a

solution to the problem can be found.

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NATIONALSECURITIESASSOCIATIONS

The National, Association of Securities Dealers, Inc. (NASD)continued, during the

year under review, as the only national securities association registered as such with

the Canmission under the MaloneyAct. Membershipdeclined from approximately 2,593 on

June 30, 1942 to approximately 2,227 on June 30, 1943.

ENFORCEMENT ANDDISCIPLINARYACTIVITIES

During 1943 the NASDexamined the business practices of its entire membershipby a

uniform questionnaire system. Each memberwas required to submit, at a date chosen by

the Association, a transcript of fifty consecutive retail sales to customers, certain

types of transactions and transactions in certain types of securities being specifically

excluded. The returns were used for research purposes and were also individually considered by the appropriate District Business Conduct Camnittee to detennlne whether they

supplied any basis for disciplinary action agadnsf the unidentified member.'

The installation of this newmethod of inspection resulted in a temporary lag in

the Associaticn's enforcement program. Nevertheless, in the year endedjJune 30, 1943,

:!Uty-three fO!"lJlalcomplaints against memberswere disposed of. These arspositions included sixteen expulsions, five suspensions, sixteen fines, various lesser penalties.,

and six withdrawals and eight dismissals of complaints. Included in these disciplinary

actions were nine complaints which had their origin in facts disclQ:Jed in the course of

broker-dealer inspections by the Commission's staff, lfhich facts bad been referred to

the Association for appropriate action. Fifteen of the fifty-three cases had been

passed on by the National Business Conduct Connnittee of the Board of Governors acting

as an appellate body.

APPEALSTOANDREVIEWSBYTHESECURITIES EXCHANGECOMMISSION

During the fiscal year hearings were completed and briefs were filed on the socalled. "PSI" cases which had their origin in a public offering on D6cember7, 1939 of

138,000,000 First Mortgage, 4%bonds due September 1, 1969 issued by Public Service

COllIp8Dyof Indiana. After disciplinary decisions by the NASDagainst some seventy

..-bers, for alleged violations of the resale price maintenance provisions embodied in

the syndicate agreement, the CCIIUIlissionon its own motion called certain of these cases

for review. y

The Gamnission had under advisement as of J1Dle30, 1943 the record of a private

hearing in the first case of its kind, that of a memberwho had appealed to the CoIImis-'

sion for review of an adverse disciplinary decision by the NASD. Another such appeal

was pending before the COIID1lissionon June 30, 1943 but was subsequently withdrawn, without being perfected.

AMENDMENTS TO RULES

Substantial revision of 'existing By-Laws, Rules of Fair Practice and Code of Procedure became effective August 21, 1942, after the membership had voted approval and the

Commissionhad not disapproved. These amendments,with one exeption, were non-cOntroversial in substance, and made changes for simplicity or to cla.ri..f'y ambiguities. One

such proposal, however, which also had membership approval, lrOUldhave established-as a

cond1.tion to membership a mini.!num capital requirement of $5,000 for finns handling

customers' funds or securities and $2,500 for other firms. Because of its obligations

under Section 15Aof the Securities Exchange Act of 1934, the Commissionheld a public

g On December30, 1943 the Commission, on application of the Attorney General of the

United States, permitted the Department of Justice to intervene in this matter.

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hearing on the questions raised by this proposal. In its opinion y the Commission

disapproved of this proposal as not conforming to the statutory standards, although

it admitted that when it had been presented for informal consideration no objection

had been raised by the Commissionor its staff. The COlIIIIlissionat the same time

adopted Rule X-15C3-1,y df.scuaaed earlier in this report.

The Association also made a substantial revision in the methodused to compute

dues and assessments. In lieu of a classification system based on the number of

employees and the assessment of a numberof units corresponding to the classification,

a three-factor methodwa.ssubstituted. All firms, regardless of size or activity,

were assessed a basic lllembershipfee of $.30plus $.3for each full time employee. In

addition, ~derwriters were assessed .01%of underwriting participations in excess of

$100,000. A maximum fee of $5,000 per memberremained effective as did a fee of $10

for each branch office outside the NASDdistrict in which a member's principal office

was maintained.

CIVIL ACTIONS INSTITUTED BY THE COMMISSIONY

In Securities and Exc e Commissionv, Edwin Paul Woodman,individually and

dvb. a, Woodman& Co., and Securit es and ExchangeCommissionv, Frances J. tubbe, y

two actions brought by the COJIIDl1ss10n to enjo!iifUrther violations of the fraud provisions of the Securities Act of 19.3.3and of the Securities ExchangeAct of 1934, the defendants, both registered brcker-dealers, were charged, inter alia, with doing business

while insolvent, and with failure to reveal this fact to their customers. In its complaints the Commission,in order to do everything possible to insure that the assets

received as a result of fraudu1en~ practices would ultimately be distributed to investors, asked for the appointment of receivers which the court in each case granted.

During the year the Commissionfor the first time filed complaints for mandatory

injunctions against registered broker-dealers whorefused to permit representatives of

the Commissionto examine the books and other records which they are required to keep

pursuant to Rule X-17A-3under the Securities Exc~e Act of 1934. In each of these

cases, Securities and ExchangeCommissionv , Harlow, Kays & Co., Inc. 6/ and Securities

and ExchangeCommissionv. James W.Hoonan, d.b.a. J. W.Moonan& Co. '!J consent judgments in favor or the Commissionwere entered.

Y Securities ExchangeAct Release 3322.

3f Sfcurities ExchangeAct Release 3323.

Y Also see Part VIII, Litigation, Civil Proceedings.

y D. Mass. Preli.m.1l1aryinjunction entered Februa,zly23, 194.3; decree appo1nting permanent

receiver entered April 7, 1943; pending at close of fiscal year.

y S.D. rir., So. Div. Decree of permanent injunction and order appointing receiver

entered Maroh15, 1943.

Y D. Mass. Consent ju,dgmententered March15,. 1943.

7/ D. Mass. Consent judgment entered March15, 1943.

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PART III

ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

INTEGRATION AND CORPORATE SIMPLIFICATION OF PUBLIC UTILITY HOLDING COMPANY SYSTEMS

New and significant advances were made, during the past fiscal year, in the enforcement of the integration and corporate simplificaticn provisions of the Public Utility

Holding Company Act (Sections 11 (b) (1) and 11 (b) (2) respectively). The pattern of

enforcement has now reached the stage where the cO'"Jletion of the task of conforming the

various public utility holding company systems to he standards of Section 11 is in

sight. An encouraging development has been the a1-~arentrecognition by holding company

executives of the practical business advantages of compliance with the Act and the increasing cooperation that has developed in the formulation and filing of plans for

carrying out the requirements of the Act.

In the year enc' id June 30, 1943, the Commission instituted eight additional Section 11 (b) (1) and 19 Section 11 (b) (2) proceedings and at the close of the year 80

such proceedings were pending, 29 under Section 11 (b) (1) and 51 under Section 11 (b)

(2). These 80 proceedings involve practically all of the 52 public utility holding

company systems registered under the Act, although they do not necessarily cover all of

the Section 11 problems existing in such systems. Hearings have been completed in 21

of the pending Section 11 (b) (1) cases and in 35 pending Section 11 (b) (2) cases.

The records in nearly all of the remaining cases are approaching completion. As of

November 1, 1943, final orders have been entered covering all or a major part of the

issues involved in 21 Section 11 (b) (1) cases and in 26 Section 11 (b) (2) cases.

In steadily increasing numbers, the holding companies are filing applications and

plans under Section 11 (e) and other appropriate sections of the Act to comply with

Section 11 (b) and a large number of appli~ations and plans for complete or partial

compliance with Section 11 have been or are being consummated. The consummation of each

such case is usually the culmination of many months of detailed analysis and .fact-finding, generally involving complex issues. The momentum of bringing these proceedings to

a successfUl conclusion will increase at an accelerated rate because both the industr,y

and the Commission are now in a position to realize upon the time and effort already

expended.

The filing, approval and consummation of these plans are major achievements in the

financial and structural reorganization of the American utility industr,y. In th~ years

to come, a financially sound utility industry will be a source of strength and a stabilizing influence for the whole econo~. While there has been a steady improvement in

the financial condition of a substantial part of the operating utility industry since

enactment of the statute, a great many companies continue to be handicapped either by

their own corporate structures or by the existence above them of uneconomic and unwieldy

superstructures. The Commission has progressed so far in the task of unraveling burdensome complexities in holding company systems that there is a reasonable prospect of substantially completing the task in the near future. The experience of the Commission

shows that the problem of undoing the speculative excesses of the 1920's can be solved

only by constructive and forward-looking action. Steps already taken and yet to be undertaken to achieve corporate simplification and integration will result in a healthy

utili ty industry, will protect investors, and will encourage the flow of new money into

the industry, thus strengthening this important segment of our national economy.

In considering the progress that has been made in the financial and corporate reorganization of holding company systems, it is helpful to recall the poor financial

condition of a large portion of the industry when the Commission commenced its duties

under the Act. From September 1, 1929 to April 15, 1936, 53 holding companies went into

receivership or bankruptcy. These companies had a funded debt of $600,000,000, unfunded

debt of $230,000,000 and preferred and common s.ocks of $860,000,000. An additional 23

holding companies were forced to default on interest or offer readjustment or extension
- 25 -

plans. These companies had a total funded debt of $320,000,000, unfunded debt of

$15,000,000, and preferred and cOlIIIIlonstocks of $200,000,000. Thirty-six operating

public utility companies (all of them Bubsidiaries of holding companies) went into

receivership or bankruptcy, with total funded debt of $220,000,000, unfunded debt of

$17,000,000, and preferred and commonstocks of $108,000,000. In addition, 16

operating cOlllPaniesdefaulted on interest or-offered readjustment or extension plans;

these companies had debt of $120,000;000, and $32,000,000 of stocks. Thus the holding and utility companies 'Whosepoor financial condition had reached the breaking

point had approximately .2,750,0009000 of securities in the hands of the public.

As of December31, 1938, holding companies registered under the Holding Comparr,y

Act had outstanding $2,450,000,000 of preferred stocks. Of this total, more than half,

or $1,400,000,000, 1Rl8 in arrears in dividends, the total accumulated arrearages being

some $363,000,000. Even JII81'IiY utility operating companies were so overcapitalized that

they could not meet their preferred dividends. Of $1,750,000,000 of preferred stocks

of operating companies, approximately $500,000,000 were in default, the arrearages

aggregating $148,000,000. Of course both the industry and the Commissa-onhave been

'Workingactively to correct this situation. Substantial progress has been made in

cleaning up the problem of arrearages and unsound capital structures. Not only have

manycompanies been reorganized under the procedures made possible only by Section 11,

but, as indicated above, the Commissionand the companies are n~'Win a position,

through the vast amount of 'Workthat has been done, to bring to a successful conclusion pending reorganization proceedings involving some of the lJOrst situations in the

industry.

Status of section 11 Proceedings Involving Il&JorHOldingCompanySystems

"-

The sixteen largest holding companysystems registere:i under the Act have total

assets of $14,729,000,000 or nearly 88%of the total assets of all registered holding

cODlpan;ysystems. A brief sUIIIIIl81'yof the status of the more important aspects of the

Section 11 proceedings involving each of these major holding companysystems at the

close of the past fiscal year follows.

1. Electric Bond and Share Company

Electric Bond and Share is the largest system registered under the Holding Company

Act. The parent, Electric Bondand Share Company(Bondand Share), controls five major

sub-holding companies: Al!lerican& Foreign Power Compal'liY", Inc. (AmericanForeign),

American Gas and Electric Company(AmericanGas), AmericanPower and Light Compal'liY"

(ADm1.canhElectric Power & Light Corporation (Electric), and National Power & Light

Company(National).

On :M~ 9, 1940, the Commissioninstituted Section 11 (b) (2) proceedings with regard to Bond and Share am certain of its subsidiaries. l! Thelorder outlined a series

of complex issues to be resolved including the question of the necessity of continuing

the existence of one or more of the main Bub-holding companies. On August 23, 1941, the

Commissionfound that National served no useful function, that it served as the central

tier in a pyramid that enabled Bondand Share to control the National system with practically no investment, and that it violated Section 11 (b) (2) because it constituted an

undue and unnecessary complexity in the Bond and Share system. As a result, National

was ordered to dissolve. Considerable progress has been made in getting National's

affairs in shape for liquIdation. As a preliminary step, cash on hand was used to retire all bonds. The next step lIaS to eliminate the preferred stock. The major part of

this stock was retired by a voluntary exchange of commonstock of Houston Lighting &

Power Comp~ for it and by sale of the remainder of Houston stock and the use of the

!I Holding Company Act Release No.. 2051.

y Hold1.DgCompanyAct Release No. 2962 (9 S.E.C. 978).

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proceeds to retire the National preferred stock at $100 per share, plus accumulated

dividends. y The principal assets remaining for di;>position are the cODlll1onstock of

three operating companies: BirminghamElectric Company,Carolina Power & Light COIIlpany and Pennsylvania Power & Light Company.

The Commissioninstitut~d a Section 11 (b) (2) proceeding directed to Penns,ylvania

Power &: Light Companyon July 25, 1941 2/ but agreed to hold it in abeyance after National's president testified that the uttimate objectives sought by the Commission

could best be accomplished, after National had disposed of its various portfolio assets,

by a large contribution of cash from National to Penns,ylvania y. On August 5, 1942 y,

the Commission,acting under Section 11 (c), granted National an extension of one year

from August 22, 1942 for compliance with the order of dissolution but conditioned its

action upon National's filing plans for resolution of the voting power and accounting

problems of its subsidiaries. National filed such plans which were later amended. Subsequent to the end of the fiscal year the plan for Carolina Power & Light Company' was

approved by the COlIIJIlission.2I

OnAugust 22, 1942, Amerlcan and Electric were ordered dissolved. 6/ These two

companies appealed to the United States Court of Appeals for the First Circuit which

heard argument on the petitions on June 1, 1943.

The COJIIIJ1issioninstituted proceedings under Section 11 (b) (2) and various other

se-ctions of the Act directed to Americanand its subsidiary, Florida Power & Light Company (Florida), on July 10, 1941. Issues were raised as to the distribution of voting

power amongthe security holders of Florida, the existence of large amounts of writeups in its accounts, and the validity and rank of the $22,000,000 of its debentures

held by American. On September 17, 1941 respondents fHea a refinancing plan, in part

to meet the allegations in the CommissionJsorder for hearing. The matters were consolidated and hearings were held. After the end of the fiscal year the record was

closed and briefs and requested findings of fact were submitted. Prior to the final

determination of the matter by the Comission, however, .Americanand Florida submitted

amendmentsto theit' previous proposal. The proposal as so amended,which provided for

substantial adjUstments to the accounts of Florida, the surrender by Americanto Florida

as a capital contribution of $17,000,000 of the debentures held by it and certain other

securities, and the retirement of all publicly-held securities at their contract prices

from treasury cash and the proceeds of issuance of new securities, was approved by the

Commissionon December28, 1943. 7J

y On January 4, 1944, the Commissionauthorized the retirement of the last 12,000

shares of preferred. Holding CompanyAct Release No. 4811.

Y Holding CompanyAct Release No. 2906.

2/ Holding CompanyAct Release No. 3107, November3, 1941.

Y Holding CompanyAct Release No~3832.

21 Holding CompanyAct Release No. 4746, December11, 1943.

!:I Holding CompanyAct Release No. 3750. On September 1, 1943, the Commissionapproved

the sale by Electric of its entire commonstock interest in Idaho PowerCompaqyto

underwriters for resale to the Public. Electric received $10,361,250 for the stock.

Holding CompanyAct Release No. 4527.

7.1 Holding CompanyAct Release No. 4791.
-2:7-

In November1942, Americanfiled for permission to expend SlO,OOO,OOOof treasury

casb for the purchase of !l portion of its outstanding debenture bonds at not to exceed

$100. While -the plan was not filed under Section 11 or in purported compliance with

the order of dissolution, since Americanwas contesting the consti tutionali ty of the

former and the validity of the latter, it stated that the proposalllOO1d facilitate

compliance with Section 11 and with the order of dissolution, if upheld by the courts.

On February 24, 1943 the Commissiongave its permission to such purchases if limited

to the open market. y

United Gas Corporation, a subsidiary of Electric, .filed an application on May5,

1941 for permission to sell $75,000,000 principal amount of 3-1/4% first mortgage bonds

and to use '52,925,000 of the proceeds to payoff its obligations to Bondand Share.

On May31, 1941, the Commissionordered hearings on this application and instituted proceedings pursuant to Section 11 (b) (2). 3t The Section 11 (b) (2) proceedings raised

issues as to the validity and rank of the $52,925,000 debt claim held by Bondand Share,

the resolution of which was vi tal to the determination of whether the application for

retnnding should be granted. V Accordingly, a consolidated hearing was ~ered in

which testimony has been introduced bearing on all factors relevant to the status of the

debt claim. The record was closed on this issue after the fiscal year-end and the matter is pending.

On March 8, 1943, utah Power & Light Company,a subsidiary of Electric, filed a

refinancing plan and the COIDI1lissioninstituted Section 11 (b) (2) proceedings and consolidated the two matters. !!I

2. The North American Company

The COOIlIlissioninstituted proceedings pursuant to Section 11 (b) (1) with regard to

The North AmericanCompany(North American) and its subsidiaries on Varch 8, 1940. 21

Section 11 (b) (2) proceedings were ordered on December2, 1941, regarding North American

Light & Power Company(Light & Power), a subsidiary of North American, and on December

30, 1941, the COIDI1lissionordered £( the liquidation and dissolution of Light &Power on

the ground that its continued existence unnecessarily complicated the structure of the

North American system.

On April 14, 1942, the Commissionrendered a c~rehensive opinion and order in

the North AmericanSection 11 (b) (1) proceedings. '!J This order dealt not only nth the

holding- companysystem of North Americanbut also with the status under Section 11 (b)

(1) of the properties of each registered holding cOlllpaIJiYin the sYStem, including the

Y Holding CompanyAct Release No. 4133.

In June 1943, American asked that the order be modified to allow it to make purchases

at up to $106 on the ground that such purchases would result in a net saving to it.

Such permission was granted. Holding CompanyAct Release No. 4483.

Y Holding CompanyAct Release No. 2790.

V Holding CompanyAct Release No. 3301, January 31, 1942.

Y Holding CompanyAct Release No. 4157. The Commission's opinion approving the refinancing and providing for the recapitalization of Utah was issued on November29,

1943. Holding Compan;,yAct Release r,To. 4716.

2/ Holding CompanyAct Release No. 1° JO.

Y Holding CompanyAct Release No. 3233".

71 Holding CompanyAct Release No. 3405.
-28-

holding companysubsidiaries of Light & Powerbut excluding Light &: Poweritsel£ because

its liquidation had been previously ordered. The Commission's order required North

Americanto divest itself of substantially all its assets other than securities of ODe

integrated electric system, namely, that of union Electric Compau;y- of lIi.ssour1. North

Americanwas allowed fifteen days within which to state the choice of another prlnrlpal

system but it did not do so. Instead it filed a petl.tion :requesting a modification of

the order. This petition was denied on JUne 25, 1942. Y North A1aericanappealed to

the United States Circuit Court of Appeals for the SecondCircuit 'Whichat".f'1rmed the

COlIIIIlission'sorders on January 12, 1943. 3.1 OnMarch1, 1943, the Supreme Court agreed

to review the constitutional aspects of the dedsi' n y but on April 15, 1943 it indefinitely deferred hearing the case because of t lack of a quorum.y

North Americanhas disposed of substantially all its holdings ot Detroit Edison Ccapany COllllllonstock and a portion of its holdings of washington Railway and Electric C(BlPaDiY(which controls PotomacElectric Power Company)and in Pacific Gas and Electric

Compan;yby paying shares of stock of those companies as regu1ar dividends to North

AmericanIS COlllll1on s":,oekho'Ider-s , This policy enabled North AJIlaricmto use i t8 cash

earnings to reduce its outstanding debt from $70,000,000 to about '34;OOO,OOO~ As a

result, North A1aericanhas been enabled to refund its entire debt with a 2$ bank loan

maturing serially over a five-year period, thus effecting bIportant "interest saviDge.

The formulation and effectuation of a fair plan of liquj:dation for Light &: Power

is dependent upon the disposition of certain claims asserted against it by lllino1s

Iowa Power Company, one of its indirect subsidiaries (through Illinois Traction ee--

pany). 21 In the interim, however, steps have been taken toward the liquidation of

Light & Power. On July 10, 1942, the COJI!1lissionapproved an application pro'ri.ding fo-r

the retirement of the $3,376,500 publioly-held debent'U'es of Light &: Power.at the principal amount thereof plus accrued interest, without the payment of a redemption preIIIiUlll.

The City National Bankand Trust Company of Chicago, as Successor Trustee7 appealed to

the United States Circuit Court of Appeals for the Seventh Circuit contending that the

-debenture holders 1Iere entitled to the redemption premium. The court upheld the order

of the Commissionon March 5, 1943. 71

!I Holding C~ Act Release No. 3630.

y 133 F. (2d) US.

'JJ 63 S. Ct. 764.

!!/ On August 4, 1943, North Americansubmitted to the Commissiona plan of reorganization, the purpose of which was stated to be the immediate divestment by Borth

American of the majCIr part of its utility investments and its subsequent liquidation

and "dissoluti:on. HolUingCompany Aut Release No".~4486.

On August 22, 1941, the Commissioninstituted proceedings with respect to illinois

Iowa Power COlIIPaIJy" pursuant to section 11 (b) (2). (Holding C~ Act Release flo-.

2953). This proceeding has been retarded in view of the asserted clabls ot Dl1i1o!s

Iowa against Illinois Traction, Light &: Power and North American.

Holding Compa.t13" Act Release No. 3658.

'1/ 134 F. (2d) 65.

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In Ncmmber1942, Americanriled for permission to expend $10,000,000 of treasury

cash for the purchase of !l portion of its outstanding debenture bonds at not to exceed

$100. While -the plan was not filed under Section 11 or in purported ce-pliance with

the order of dissolution, since Americanwas contesting the constitutionality of the

former and the validity of the latter, it stated that the proposal would facilitate

compliance nth Section 11 and with the order of dissolution, if' upheld by the courts.

On February 24, 1943 the Commissiongave its permission to such purchases if' limited

to the open market. !I

United Gas Corporation, a subsidiary of Electric, riled an application on May5,

1941 for permission to sell $75,000,000 principal amount of 3-1/4% first mortgage bonds

and to use $52,925,000 of the proceeds to payoff its obligations to Bondand Share.

On May31, 1941, the Commissionordered hearings on this application and instituted proceedings pursuant to Section 11 (b) (2). 3/. The Section 11 (b) (2) proceedings raised

issues as to the validity and rank of the $52,925,000 debt claim held by Bondand Share,

the resolution of which was vi tal to the determination of whether the application for

refunding should be granted. 21 Accordingly, a consolidated hearing was ?rdered in

which testimony has been introduced bearing on all factors relevant to the status of the

debt claim. The record was closed on this issue after the fiscal year-end and the matter is pending.

On March8, 1943, utah Power & Light Company,a subsidiary of Electric, filed a

refinancing plan and the Commissioninstituted Section 11 (b) (2) proceedings and consolidated the two matters. y

2. The North AmericanCompany

The Commissioninstituted proceedings pursuant to Section li (b) (1) with regard to

The North AmericanCompany(North American) and its subsidiaries on Ilarch 8, 1940. ?/

Section 11 (b) (2) proceedings were ordered on December2, 1941, regarding North American

Light & Power Company(Light & Power), a subsidiary of North American, and on December

30, 1941, the Commissionordered !2/ the liquidation and dissolution of Light & Power on

the ground that its continued existence unnecessarily complicated the structure of the

North Americansystem.

On April 14, 1942, the Commissionrendered a comprehensive opinion and order in

the North AmericanSection 11 (b) (1) proceedings. 7.1 This order dealt not only with the

holding companysystem.of North Americanbut also with the status under Section 11 (b)

(1) of the properties of each registered holding companyin the system, including the

!I Holding CompanyAct Release No. 4133. _ In June 1943, Americanasked that the order be modified to allow it to makepurchases

at up to $106 on the ground that such purchases would result in a net saving to it.

Such permission was granted. Holding CompanyAct Release No. 4483.

Y Holding CompanyAct Release No. 2790.

21 Holding CompanyAct Release No. 3301, January 31, 1942.

Y Holding CompanyAct Release No. 4157. The Commission's opinion approving the refinancing and providing for the recapitalization of Utah was issued on November29,

1943. HolMng CompanyAct Release ~TO. 4716.

11 Holding CompanyAct Release No. lCJO.

Y Holding CompanyAct Release No. 3233.

7J Holding CompanyAct Release No. 3405.
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holding companysubsidiaries of Light & Pmrer but exclud1DgLight &: Powur1tsel£ because

its liquidation had been previously ordered. The Commission's order required North

Americanto divest itself of substantially all its assets other than securities of 0118

integrated electric system, namely, that of union Electric COIIp&1\f o V:lssourl. North

Americanwas allowed fifteen days within which to state the choice of another prineipal.

system but it did not do so. Instead it filed a pet).tion :requesting a modification of

the order. This petition was denied on June 25, 1942. !I North kaerican appealed to

the United States Circuit Court of Appeals for the Second Circuit which affirmed the

COIIIlIIission'sorders on January 12, 1943. 3/ OnMarch1, 1943, the SupremeCourt agreed

to review the constitutional aspects of the decisi'n Y but on Apri115, 1943 it indefinitely deferred hearing the case because of t 3 lack of a quorum.!I

North Americanhas disposed of substantially all its holdings ot Detroit Edison ee.-

pany COllll1lon stock and a portion of its holdings of washington Ra:llway and Electric Coapany (which controls PotomacElectric Power Company) and in Pacific Gas and Electric

CompaDirby paying shares of stock of those companies as regular dividends to North

American's COllllllon s~ockho'lder-a, This policy enabled North .Aaer.l.canto use l.ts cash

earnings to reduce its outstanding debt frOll $70,000,000 to about 134,-000,000. As a

result, North Americanhas been enabled to refund its entire debt with a 2j, bank loan

maturing serially over a five-year period., thus effecting filportant "interest savings.

The formulation and effectuation of a f'air plan of liqu1:dation for Light &: Power

is dependent upon the disposition of certain claims asserted aga:f:nst it by illinois

Iowa Power Compe.n:y,one of its indirect subsidiaries (through ll11nois Traction Ccapany).?1 10 the interim, however, steps have been taken toward the liquidation of

Light & Power. On July 10, 1942, the COJIIlJ1issionapproved an application prortd1ng fdr

the retirement of the $3,376,500 publioly-held debent'U'es of Light &: Power.at the principal amount thereof plus accrued interest, withou.t the payment of a redemption premium. Y

The City National Bank and Trust Companyof' Chicago; as SUccessor Trustee, appealed to

the United States Circuit Court of Appeals for the Seventh Circuit contending that the

debenture holders were entitled to the redemption premium. The court uphe1d the order

of the Commissionon March 5, 1943. 7.1

!IHolding COJIlPaIJ,y Act Release No. 3630.

y 133 F. (2d) 148.

V 6.3 S. ct. 764.

Y On August 4, 1943, North American submitted to the C~ss1on a plan of reorganization, the purpose of which was stated to be the immediate divestment by North

Aroer1ca.n of the major part of its utility investments and its subsequent liquidation

and "d1ssolutiun. Hoiding Company A"CtRelease No~4486.

V On August 22, 1941, the Commissioninstituted proceedings with respect to U1inois

IOIfaPower CompaDirpursuant to Section 11 (b) (2). (HoldiDgC<Dpat:v Act Re1ease No.

2953). This proceeding has been retarded in view of the asserted c1abl8 ot Dl1nois

Iowa against Illinois Traction, Light & Power aDd North .American.

Y Holding CompaIJ,yAct Release No. 3658.

71134 F. (2d) 65.
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3. The United Gas Improvement Company

The Commission instituted proceedings with regard to The United Gas Improvement Compa~ (D.G.I.) and its cubsidiarie~, pursuant to Section 11 (b) (1), on Narch 4, 1940. !I

Pursuant to a request by U.G.I., the Commission issued, on January 18, 1941, a statement

of tentative conclusions as to the application of the provisions of Section 11 (b) (1)

to the holding company system of D.G.I. in which it stated tentatively that the system's

single integrated public utility system was composed of the electric properties of its

subsidiaries in the Pennsylvania-Delaware-Maryland area. 2/ Divestiture orders were

issued on July 30,1941 and Uay 7, 1942 21 based upon this-interpretation. U.G.I. appealed these orders to the United States Circuit Court of Appeals for the Third Circuit.

The Court sustained the orders in a unanimous decision on November 17, 1943.

After argument before the Court but before its decision, D.G.I. and its subsidiary,

Philadelphia Electric Company, filed applications under Section 11 (e) for the purpose

of enabling the U.G.I. holding company system to effect partial compliance with Section

11 (b). The plan provided for the distribution to D.G.I.'s preferred and common

stockholders of $30,600,000 in cash and substantially all its stockholdings in Philadelphia Electric and Public Service Corporation of New Jersey, two subsidiaries with

combined assets of $1,200,000,000. The plan was filed in December 1942, was approved

by the Cormnission March 18, 1943 5/, by the common stockholders April 19, 1943, and was

declared effective as of June 18,-1943. By effecting the retirement in this manner of

its preferred stock, D.G.I. made possible the further distribution of investments or

cash to its common stockholders. ij

Immediately prior to the filing of the plan, the market price of U.G.I. common

stock was about $4 per share and, like many other holding company stocks, represented a

considerable discount from the interest of each holding company share in the market

value of the underlying investments. The coromon stock rose to $6 per share immediately

after the filing of the plan, and just before the distribution of the securities to

stockholders on August 19, 1943, it sold at $9-7/8 per share. As noted, the plan provided for the transfer to stockholders of direct ownership in the two principal subsidiaries of U.G.I., eliminating the interposition of the holding company, with its

attendant complexity and large expense.

4. The Commonwealth Southern Corporation

Section 11 (b) (1) proceedings were started with respect to The Commonwealth &

Southern Corporation and its subsidiaries on March 6, 1940. 7/ This proceeding was

later c.xmolidated with Section 11 (b) (2) proceedings instituted on April 8, 1941. Y

!IHolding Comp~ Act Release No. 1953.

Y Eolding Company Act Release No. 2500.

21 Holding Company Act Release Nos. 2913 and 3511.

Holding Company Act Release N?s. 4011 and 4043.

21 Holding Company Act Release No. 4173.

3/ Subsequent to the distribution of its interest in Philadelphia Electric and Public

Service, U. G. I. has effectuated a series of transactions which will enable it to

distribute, on or about ray 22, 1944, to its stockholders all its holdings of securities of Delaware Power & Light Company and subsidiaries, which have consolidated

assets of $52,334,642. Holding Company Act Release No. 4505.

V Holding Caupany Act Release No. 1956.

Holding Company Act Release No. 2679.

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On April 9, 1942 !/' the CCIB1ssion, lIDler Section II (b) (2), ordered COIIDIlomrealthto

reduce its outstaDd1ng preferred au:i c~on stock to a single class of cCllllllonstock.

Comaomrealthappealed the order to tile Circuit Court of Appeals for the Third Circuit

which, on Varch 31, 1943, upheld the C<mun1ssion'sorder in all respects. 31 COIIIIlonwealth filed a recapitalization plan on April 20, 1943; designed to C<mlply with the

order. The plan as originally filed prorldes for reclassifying the existing preferred

and c~ stocks into a single class of new cOllllllonstock and for the distribution to

its stockholders (or earlier sale) of the cOlBlllonstock of one of its northern subsidiarieS-a The plan contemplates that the remaining subsidiliries would contiItue to

be owned by Commonwealth,peDding the outcaae of the Section 11 (b) (1) proceedings.

The plan was pending at the close of the fiscal year.

5 Cities Service Canpany

On July 3, 1941, the CcmD1ssioninstituted a section 11 (b) (1) proteeding with respect to Cities Service C<JIIP&lV" (Cities), the top companyin this system, and all its

subsidiaries. 'J/ Hearings have been completed and CODIDlissionactdon on the case was

pendiilg at the close of the past fiscal year.

On lIarch 4, 1940, the COIIIIlissionstarted a proceeding under Section 11 (b) (1) 'With

reference to the holding caapatV"systems of Cities Service Power &Light Company(Power

&Light), principal holding callP8l\Ysubsidiary of Cities, and Federal Light & Traction

Company,principal holding companysubsidiary of Power &Light. Y The CODDDission's

decision in that case was rendered after the close of the past fiscal year. 21

By order dated August 29, 1942, a proceeding was instituted under Section II (b)

(2) regarding Power &.Light: and certain of its subsidiaries". W

On lIq 4, 1942, the ec.mn.saion instituted a Section II (b) (2) proceeding 'With repect to ~1re Gas and. Fuel Calpanyj a non-utility subsidiary of Cities 7J, and on

August 3, 1942, the C<JIIIIissionapproved a canprehensive plan for recapitalizing Empire

!IHolding Caupa!\YAct Release }lo. 3432.

31 ~ F. (za) 747.

Y Holding CoIIIpany Act Release 10. 2S67 .•

Y Holding Compan;yAct Release 10. 1954.

21 By orders dated August 17, 1943 and September 10, 1943 (Holding CompanyAct Release

Nos. 4489 and 4551), the CCDIllissionreqlJired Power &Light to limit the operations

of its system to its Ohio properties. Since then, Power & Light has disposed of its

interest in Public Service CaBpauJr of Colorado and. Durham Public Service CCIIIp&D;Y, and.

F(MieralLight and Traction has disposed ot its interest in Rawlins Electric Compan;y.

-Power&: Light f1l.ed a pet1.t1.onnth the Circuit Court of Appeals for the Third C1rC1I1tto renew the C~sion's section II (b) (1) orders, but subsequent17 withdrew

the peti tiOD.

Y Holding Caapan;y Act Release No. 3769. In December1943, Power & Light filed a SeC'-

tion 11 (e) plan designed to errect partial compliance with Section II (b) (2). The

pl'8ll proposes to ret1.re the public17-he1d senior securities or P~r &Light through

the use of treasury- cash and a $2a,ooo,OOO short-term bank loan. The proceeding on

the pian 1188 consolidated with the Section II (b) (2) proceeding.

7! Ho1d1DgCaIpaD,y Act Rel.eaae lio. 349S.

!IHo1diDgCaIp8I\yAct Release lio. Jn1.

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Approximately 24 percent of Empire's preferred stock was publicly-held, the balance of

the preferred stock and all the common stock being held by Cities Service Company. No

dividends had been paid on the preferred stock in more than ten years. Interest had

been paid regularly, however, on approximately $100,000,000 principal amount of intercompany debt owed by Empire and its subsidiaries to Cities. The approved plan providad

for the exchange of the publicly-held preferred stock for 3-1/2% sinking fund debentures

of Empire in an aggregate principal amount (over $20,000,000) equal to the par value of

the preferred plus accumulated dividends. The debts owed by Empire and its subsidiaries

to the parent company were subordinated to the new debentures. On the day before the

proceedings were instituted, the $6 preferred stock of Empire with dividend arrearages

of $57.50 per share sold on the market at $87 per share; three days after the plan was

approved, on August 8, 1942, the stock was quoted at $131.50 per share. On September

25, 1943, the equivalent market orice of that stock in terms of 3-1/2% debentures was

$157 per share.

6. Associated Gas and Electric Company

The Commission, on September 4, 1941, instituted a Section 11 (b) (1) proceeding

with regard to the Trustees of Associated Gas and Electric Corporation (Agecorp) who

controlled, directly or indirectly, 175 subsidiaries of which 68 were public utilities

as defined hy the Act. 11 The Trustees stated that their aim was to create out of the

system four groups of properties to be disposed of as units in the liquidation of

Agecorp. One of these four groups of properties is located in Florida and Georgia,

while the other three are in New York, Pennsylvania and New Jersey.

On August 13, 1942, the Commission issued an order requiring the Trustees to divest

themselves of all interest in a long list of utility and non-utility companies, reserving for future consideration questions relating to the composition of the groups of

properties as single integrated systems, additional systems, and permissible non-utility

businesses. y .

On February 3, 1941, the Commission initiated Section 11 (b) (2) proceedings

against General Gas and Electric Corporation (Gengas), a ~egistered holding company

subsidiary of Agecorp. 21 Subsequently, Section 11 (e) plans for the reorganization of

Gengas were filed by Gengas 4/ and by Agecorp 'jj, the hearings on which were consolidated with the Section 11 (bI (2) proceedings. The plan filed by Agecorp provided for

the distribution by Gengas of certain assets among its public security holders, after

which there would remain no claims against Gengas except those held by the Trustees of

Agecorp who proposed to turn in all their securities of, and claims against, Gengas and

receive in exchange an entire issue of new common stock. The record in this proceeding

was closed after the close of the fiscal year.

Section 11 (b) (2) proceedings were directed to Virginia Public Service Company,

a subsidiary of Gengas, on August 12, 1941. Y For the purpose of fairly and equitably

Y Holding Company Act Release No. 2983.

Y Holding Company Act Release No. 3729. By the end of the fiscal vear the Trustees had

divested themselves of all interest in 58 of the 113 companies (other than Utilities

Investing Trust and New England Gas and Electric Association and its SUbsidiaries)

listed in the Commission's order of August 13, 1942.

Y Holding Company Act Release No. 2543.

!t/ Holding Company Act Release No. 2~';i8, I'arch 7, 1941.

'jj Holding Company Act Release No. 4382, June 24, 1943.

~ Holding Company Act Release No. 2933.
32-

distributing voting power amongits security holders, Virginia, on April 18, 1942,

.filed a Section 11 (e) plan lIhich provided for the refunding o.f long-term debt, the

dissolution of three subsidiaries, the elimination of certain inflationary- items, and

the substitution of new no par commonstock for the outstanding preferred and CODIIIlon

stock of the company.Y OnMay22, 1942, dissolution of the three subsidiar1.es was

authorized and the accounting adjustments and refunding program were approved..y

On February 10, 1943, the Commissioninstituted Section 11 (b) (2) proceedings with

regard to Georgia Power & Light Company,another subsidiary of Gengas. Y Hearings were

held in this case beginning in March 1943 and the matter was pending at the close of the

fiscal year.

On June 14, 1943, a thoroughgoing reorganization plan was filed jointly by the

Trustee of Associated Gas and Electric Compal\Yand the Trustees of Associated Gas and

Electric Corporation.!Y' This plan, filed pursuant to Section 1l (r) of the Act, is

designed to extricate these companiesfrom bankruptcy proceedings which have been pending since January 10, 1940 in the United States District Court for -the Southern District

of NewYork under Chapter X of the Bankruptcy Act.

On June 4, 1943, Utilities EmployeesSecurities Compa.ny-(Uesco), a subsidia.ry of

Ageco and Agecorp, entered into an agreement with the Trustees of .Agecoand Agecorp,

Gengas, Associated Utilities Corporation, NewEngland Gas and Electric Association, and

Trustees under Pension Trust Agreementdated December14, 1937, as maended, .for the

voluntary liquidation_and dissolution of Uesco. Uescowas an investment cagpan;y, being

at the same time the largest single creditor of the estates of Agecoand Agecorp. It

had been organized by HowardC. Hopsonin 1931 as an investment meditml ror employees or

the companies in the Associated system. The investment of the employees was largely

through coerced salary deductions, and system operating, companies were al.so cmnpelled."to

make contributions. The plan filed under Section 11 (e) or the Act provided ror setting

up voluntary pension funds by the various system companies, paying or! employee and certain other security holders, and evolving a mechanismfor participation in the reorganization proceedings of the parent companies. The Commissionapproved the plan on Angast

12, 1943. -.

On September 30, 1941, the Commissioninstituted proceedings UDdersection 11 (b)

(2) with respect to NewEngland Gas and Electric Association (Negea), a registered

holding company. Subsequent to the close of the hearings but prior to a final. order o.f

the Commission,the 'l'rustees of Agecoand Agecorp and a subsidiary cOlllp8.IJ;y in the Associated system instituted &uits, in both a state court and a federal court, in Massachusetts against Negea. The suit in the state court involved consideration or the status

of indebtedness, in the amount of $14,583,290, which had been canceled in 1930 through

the issuance by Negea of equity securities. The suit in the rederal court involved an

accounting for alleged profits received by Negea in, and resulting from, the transrer or

certain stock and indebtedness of Electric Associates, Inc. from Agecorp to Negea in

1932.

It appeared to the Commissionthat the subject matter or the suits against Negea

were relevant to any detennination of a proper allocation of securities UDderan;yplan

of recapitalization of Negea. Hence, on February 17, 1943, the COIIIIIIisslonistituted

!(Holding CompanyAct Release No. 3454.

Y Holding CompanyAct Release No. 3562. The Commissionrendered its opinion on the

remaining issues in this proceeding on October 16, 1943. Holding CompanyAct Release

No. 4618.

Y Holding CompanyAct Release No. 4111.

Y Holding CompanyAct Release No. 4399. Hearings on this plan have recently been ceapleted and the matter is nowawaiting Commissiondecis1.on.

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further proceedings under various sections of the Act, including Section 11, tor the

purpose of determining (1) wnether, and to what extent, the Trustees of Agecoand

Agecorp and its subsidiary had valid claims against Negea, and (2) in the ever.~ that

any claims were deemedto be valid~ the rank of such claims in relation to the claims

of publicly-held securities of Negea. v

The issues in -this matter were subsequently broadened to include consideration o:f

whether and to what extent the Trustees of Agecoand Agecorp, and their subsidiaries,

have claims against Negea for unjust enrichment, if aI:\1, of Negea as the result of any

transfers or diversions to Negea of assets of the Associated system. The hearings

were in progress at the close of the fiscal year.

7. Standard Power and Light COrporation and Standard Gas and Electric Canpany

The Commissionstarted proceedings on March 6, 1940, pursuant to Section 11 (b) (l)~

with regard to Standard Power and Light Corporation, Standard Gas and Electric Company

(Standard Gas) and their subsidiaries. y Standard Gas admitted that the electric utility operations of its holding companysystem were not confined to a single integrated

system and agreed to dispose of all its holdings except the CCIDRon stock of Philadelphia

Company,which operates principally in and around Pittsburgh and :tramwhich Standard Gas

received appro:x:illlately35 percent of its corporte income in 1940. Reserving for future

consideration the question of whether the gas and non-utility properties of the Philadelphia Companymaybe retained with the electric, the Comnrissionapproved the retention

of this companyby standard and ordered the disposition of all other subsidiaries,

except the system service company.2/

The Commissionstarted proceedings on June 5, 1940, pursuant to Section 11 (b)

(2), with regard to Standard Power and Light Corporation. At the hearings, counsel

for Standard Power acknowledgedthat the companyperformed no use1'ul fUnctions. On

June 19, 1942, the COJIIIIlissionordered Standard Power co liquidate and dissolve. '2J An

extension of time has been granted for compliance with this order. 2/

On March 24, 1943, the Commissiongave notice that standard Gas had fUed a camprehensive plan pursuant to Section 11 (e) for the purpose of enabling it to comply

with the provisions of Section 11 (b). On the same date the Camnission instituted a

proceeding pursuant to Section 11 (b) (2) and consolidated the two hearings. '!I Hearings on the plan have been completed and the plan is under consideration.

On June 30, 1942, Southern Colorado PowerCompany(Southern Colorado)~ a subsidiary of Standard Gas, filed a plan of recapitalization pursuant to Section 11 (e) and,

on July 2, 1942, the Commissioninstituted Section 11 (b) (2) proceedings and consolidated the two. y

Y Holding CompanyAct Release No. 4124.

y Holding CompanyAct Release No. 1957.

21 Holding CompanyAct Release No. 2929, August 8, 1941 (9 S.E.C. 862).

Holding CompanyAct Release No. 2095.

y Holding CompanyAct Release No. 3607.

Y Holding CompanyAct Release No. 4416.

7/ Holding CompanyAct Release No. 4198.

Y Holding CompanyAct Release No. 3644, July 2, 1942. On August 23, 1943, the CaJBDission approved Southern Colorado's plan with modifications. Amendmentsto meet the

Commission's objections were filed on October 21, 1943. The Commissionapproved

the amendedplan on November24, 1943 and the United States District court in

Colorado approved the plan on December21, 1943.

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8. Columbia Gas & Electric Corporation

Proceedings initiated by the Commission on August 25, 1941 1/, with regard to

Columbia Gas & Electric Corporation (Columbia) and several of its subsidiaries, including Columbia Oil & Gasoline Corporation, pursuant to Sections 11 (b) (1) and 11 (b) (2),

were consolidated with a Section 11 (e) plan by order dated July 14, 1942. 2/ The plan

involved, among other things, the sale by Columbia Oil & Gasoline Corporation (Columbia

Oil), a subsidiary of Columbia, of its interest in Panhandle Eastern Pipe Line Company

(Panhandle), the transfer of its five oil and gasoline subsidiaries to Columbia Gas and

the liquidation of Columbia Oil. The Commission in an order V and opinion !!I dated

October 2, 1942, approved the plan. On Harch 23, 1943, the United states Circuit Court

of Appeals, Third CirCUit, affirmed the Commission's order 21 and six days later the

United States District Court for the District of Delaware entered its order approving

the plan. 6/ Columbia's relationships with certain of its su~sidiaries had invoved it

in a long series of legal difficulties. Among other results, consummation of Columbia's

plan had the effect of divorcing Panhandle from the Columbia system, a step which the

Commission had found to be necessar,y to effectuate the provisions of Section 11 (b)

(1), extricated some of the companies and other interested parties from problems which

they faced under the anti-trust laws and terminated a complex tangle of private

litigation.

9. Niagara Eud.son Power Corporation

The Commission instituted Section 11 (b) (2) proceedings in August 1942 with respect to Niarara Hudson Power Corporation, Buffalo Niagara and Eastern Power Corporation

and their subsidiary companies. ?! During the course of the hearings the Commission held

a public conference to explore tne means whereby dividend payments on the preferred

stocks of the two holding companies in the system, which were discontinued in the fall

of 1942, could be resumed. The management formulated an over-all plan of reorganization, filed in June 1943 under Section 11 (e) of the Act g!, providing for the consolidation of the principal public utility companies in the system and Buffalo Niagara and

Eastern Power Corporation into one operating company, and the dissolution of Niagara

Hudson Power Corporation. The plan further provides for the payment in cash of all

accrued and unpaid dividends. Hearings relating to certain aspects of the proposed reorganization were held from time to time before the New York Public Ser-vi.ce Commission

and completed toward the end' of 1943. 2/-,

10. International Hydro-Electric System

Proceedings uno8r Section 11 (b) (2) of the Act involving International HydroElectric System (IHES) were instituted on June 17, 1940. !2! IRES is a "assachusetts

trus~ which owns directly the equity in New England Power Association, also a registered holding company, and the equities in Gatineau Power Company, a Canadian public

utility company, and in two wholesale electric utilities operating in the United States.

1/ Holding Company Act Release No. 2963. 31 Holding Company Act Release No. 3668.

3/ Holding Company Act Release No. 3829. 1/ Holding Company Act Release No. 3885.

21 134 F. (2d) 822.

£I 50 F. Supp. 965.

ZI Holding Company Act Release No. 3754.

Holding Company Act Release No. 4387.

21 Hearings before this Commission are presently scheduled to commence on February 8,

1944.

10/ Holding Company Act Release No. 2122.

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On January 17, 1941, the Commission ordered that all of the commonstock and all of

the Class B stock of IRESheld by certain trustees for the benefit of International

Paper Companyand International Paper and Power Companybe surrendered to nIES for cancellation, the Commission having found such stocks to be of no value. 1/ On June 18,

1941, this order was complied with by the trustees and the Class B and-connnonstocks

were thereafter canceled.

On July 21, 1942 IRES itself. was ordered to liquidate and dissolve, the Commission

finding that IRES performed no useful function and constituted an unnecessary complexitv

in the system. 31

On ~arch 17, 1943, the Commission, pursuant to Section 11 (b) (2), ordered that

Massachusetts Utilities Associates CommonVoting Trust be liquidated and dissolved and

that Rhode Island Public Service Company,Massachusetts Utilities Associates, ~:assachusetts Power and Light Associates and North Boston Lighting Properties be eliminated

as sub-holding companies in the NewEngland Power Association and lliES system. 2/

Paul H. Todd, a stockholder and director of IRES, filed petitions on September 19,

1942 and December 20, 1942, in the United States Circuit Court of Appeals for the Sixth

Circuit, for the review of the Commission's order of July 21, 1942 directing the liquidation and dissolution of IHESand asking the court to remand the proceedings to the Commission for further investigation of certain alleged rights of action of IRES against

International Paper Company. The Commissioncontended that dissolution was the appropriate action in the light of the applicable statutory standards and that the alleged

claims against the Paper Companywould be fully explored but that such exploration was

not a necessary prerequisite to the issuance of the dissolution order. HIESintervened

in the review proceeding and supported the validity of the Commission's order. The

court denied the application to adduce additional evidence and dismissed the petition

for review, thereby sustaining the CommissionIs order. Y

Shortly after the close of the past fiscal year, IHFS notified the Commissionthat

because of the asserted claims against International Paper Companyand the imminence of

the maturity of its bonds it would be impossible for it to comply with the Commission's

order of July 21, 1942 without the aid of court enforcement. On August 12, 1943 the

Commission instituted a proceeding pursuant to section II (d) of the Act in the United

States District Court for the District of Massachusetts to enforce compliance with its

liquidation order and the District Court took jurisdiction over IRES. The investigation

of the alleged claims against International Paper Companyis nowin progress.

11. The Middle West Corporation

The Commission instituted Section II (b) (1) proceedings with regard to The Middle

West Corporation (Middle west) and its subsidiaries on March 1, 1940. Hearings in

this case have been completed and arguments have been presented. At the close of the

past fiscal year, the Commission's findings, opinion and order were in preparation.

In February 1940, two subsidiaries of The Middle West Corporation, Central and

South West Utilities Company(Central) and American Public Service Company(American),

filed a joint application proposing a consolidation of the two compcmi.es. On December

5, 1940 the Commission instituted proceedings under Section II (b) (2) and ordered

that the hearings in the two cases be consolidated. The major issue in the case centered around the question of whether the new corporation should issue any preferred

stock. The proponents of the plan submitted by the companies contended that preferred

!I 8 S.E.C. 485.

31 Holding CompanyA~t Release No. 3679.

2/ Holding CompanyAct Release No. 4168.

Y 137 F. (2d) 475 (CCA6, 1943).

Holding CompanyAct Release No. 1950.

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stock was necessary in the newcompanyin order to preserve the priorities of the holders

of the prior lien preferred stocks of Central and of the preferred stock of American.

The Commissionruled that the newcorporation could have only cammonstock. 1/ The respondents appealed to the United States. Court of Appeals for the District of-Columbia,

which upheld the Commissionon June 7, 1943. Y

The Commissioninitiated proceedings on June 9, 1941, pursuant to Section 11 (b)

(2), which raised issues as to the equitable distribution of voting power amongthe securi ty holders of The North West Utili ties Comparr.r(North West) system, and also as to

the continued existence of North West. 3/ The p:roceeding was consolidated, on June 11,

1941, with a plan of recapitalization of North Y\3stwhich had been submitted by North

West and Middle West. y

12. The United Light and Power Company

Three major Sp~tion 11 proceedings involving The United Light and Power Company

(United Light) wer- consolidated in 1941, namely: a Section 11 (b) (1) proceeding instituted on ~arch 8, 1940 5/, proceedings with respect to a recapitalization plan filed

by United Light Y and Section 11 (b) (2) proceedings started December6, 1940. ']j

United Light is the top holding companyastride two subsidiary tiers of holding

companies in an excessively pyramided holding companysystem. United Light performs

no necessary or useful function. Nodividends have been paid since the first quarter

of 1932 on its outstanding $60,000,000 preferred stock issue. Under the standards of

Section 11, its liquidation was necessary and was ordered by the Commission.8/ The

companysubsequently filed a number of applications covering action necessary-to accomplish liquidation, nowin its final stage. One of the most important steps involved

the distribution by United Light of its principal asset, all of the commonstock of a

subsidiary holding company,The United Light and Railways Company(Railways), to the

preferred and commonstockholders of United Light on a fair and equitable basis. The

original plan filed by the companyprovided that 91.2 percent of the cammonstock of

Railways should be distributed to the preferred stockholders of United Light and 8.8

percent to the commonstockholders. In an opinion rendered April 5, 1943, the Commission disapproved. this distribution but approved the plan when it was amendedto allow

the preferred stockholders approximately 95 percent of Railways' cammon.21 Commissioner

Healy dissented on the ground that the preferred stockholders were entitled to receive

all the assets. The order of the Commissionapproving the plan of distribution was conf'irmed by Judge Leahy of the United States District Court of Delaware on July 30, 1943

and is nowon appeal to the United States Circuit Court of Appeals, Third Circuit. !2./

y Holding Act Release No. 3580, June 4, 1942.

Y 136 F. (2d) Z73. On August 2, 1943, Central and Americanfiled an amendedplan of

Jlerger to be effectuated through the issuance of a single class of capital stock.

Holding CaIpauy Act Release No. 4498.

Y HoldiDg CaIpaD;y Act Release No. 2806.

!I Holding CaIpaur Act Release No. 2812. The Commission,in an op1tt1.ondated September

10, 1943, held that the proposed plan of recapitalization fell far short of effectuating the prortsions of Section 11 (b) and ordered that North West be liquidated.

Holding CaIpaJ\y Act Release No. 4552.

'jj Holding CmIpaDYAct Release No. 1961.

Y Holding CaIpau.y Act Release No. 2185, July 24, 1940.

7.1 Holding Caapau,yAct Release No. 2407.

Y Holding CaIpan,y Act R"lease No. 2636, March 20, 1941 (8 S.E.C. 837).

2/ Holding CaIpaD;y Act Release No. 4215.

!E/ see discussion or Litigation infra.

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The United Light and Power system has made substantial progress in cOIIlplyingwith

the Section 11 (b) (1) order which the Commissionissued With respect to this system on

August 5, 1941. Y United Light and Railways Company,on September 12, 1941, sold its

stock interest in Northern Natural Gas Companyto underwriters for resale. Proceeds

from the sale, $10,533,000, were applied on the purchase from United Light of common

stock of Iowa-illinois Gas and Electric Company-in order to facilitate the dissolution

of United Light. A mmlberof other divestments of properties by sub-holding companies

in this system, including the sal-e on OCtober 24, 1942 by American Light & Traction

Companyof its holdings in San Antonio Public Service Company,are summarizedin

Appendix Table 16.

13. Junerican Water Works and Electric Company,Inc.

This was the first registered holding companyto .file a corporate simpli.fication

plan pursuant to Section 11 (e). 31 The plan contemplated the e11m) nation of several

IIsee-onddegreelf holding companyrelationships, the cont1nuancieof which is forbidden

under the terms of SeC"tion11 (b) (2) of the Act. Its consummationwas contingent upon

the accomplishment of certain refinancing. No change in the actual physical utility

properties of the system was involved. The Commissionapproved the pl.an on December31,

1937, reserving for future consideration the question o.f adjustments of 1Irlte-ups o.f

system properties and investments. 2/ The refinancing was postponed because o.f changed

market conditions, and the major simpl.fication provisions o.f the plan have not been put

into effect.

14. Engineers Public Service Campan;r

Section 11 (b) (1) proceedings were instituted with regard to Engineers Public

Service Company(Engineers) and its subsidiaries on February 28, 194O.!!/ On July

23, 1941, the Commissionordered Engineers to dispose of its interest in Pnget Sound

Power & Light CODIpan;r and The KeyWest Electric COIIIpa'1y, and on the same date initiated

Section 11 (b) (2) proceedings against The Western Public Service COIlIp81Jy(a Maryland

corporationL a subsidiai"y of Engineers. 21 On December29, 1941, the COIIIIlission

approved the sale o.f WesternIs Nebraska and South Dakota properties. Western _then

redeemed its publicly-held securities and liquidated. Its remaining properties were

acquired,by The Western Public Service Comp~, a Delware corporation (Western, Del.),

a newly-formed subsidiary of Engineers, which also acquired the securities of Western's

subsidiaries, The Northern Kansas Power Companyand )(issouri service Company. Engineers accepted an order to divest itself o.f the properties ownedby western, Del. and

by The Northern Kansas Power Compan;rand Missouri Service Company. On September 16,

1942 the Commissionordered the divestment of the remaining properties in the Engineers

system except the electric utility properties of Virginia Electric and Power Company,

allowing Engineers, however, fifteen days within which to petition for leave to retain

instead the electric utility properties o.f Gulf' States Utilities Compan;r.7J Engineers

appealed to the United States Court of Appeals for the District of Columbia. Y

!IHolding CompanyAct Release No. 2923 (9 S.E.C. 833).

31 Holding CompanyAct Release No. 793, August 25, 1937.

Y Holding ComparJ37" Act Release No. 949 (2 S.E.C. 972).

!!/ Holding Company Act Release No. 1945.

Holding CompanyAct Release Nos. 2897 and 2898.

Holding ComparJ37" Act Release Nos. 3230 and 3245.

7J Holding CompanyAct Release No. 3796.

y For the court's opinion, rendered on November22, 1943, see 8UJIIIII8rY of litigation

inrra.

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On March16, 1943 and by supplemen~ order dated April V, 1943, the CoDllllission

approved a Section 11 (e) plan which had'been filed. by Engineers providing for the recapitalization of Puget SoundPower& Light Company.!I Puget had a seriously unbalanced capital structure lf1th two classes of preferred. stock on whicn dividend arrearages of over $18,000,000 had accumulated. The plan greatly simplified the company's

capital structure and put Puget in position to pq dividends to all its sbockho'ldera , y

The plan was approved by the United States District Court of Massachusetts on June 10,

19432/ and becameeffective September 13, 1943.

15. Northern States Power CCIIIpaIJy

On June 5, 1942, Northern States PowerCaapauy (Delaware) filed. a liqUidation plan

pursuant to Section 11 (e) for the purpose of enabling it to complywith the requirements of Section 11 (b) (2). On the samedate the CClllllissioninstitl1ted. proceedings with

respect to that companyand each of its subsidiaries pursuant to Section 11 (b) (2), 15

(f) and 20 (a). 4/ Extensive hearings were held in the consolidated proceedtngs and the

rae-ord was closed on August 5, 1943.

16. The United COrporation

On July 28, 1941, the Commissioninstituted proceedings under Sections 11 (b) (1)

and 11 (b) (2) with respect to The United Corporation, and consolidated such proceedings

for hearing with United's Secrtion 11 (e) plan fileq in March 1941._21 In its plan,

United proposed to reduce its holdings in each of its statutory subsidiaries to less

than 10 percent of the outstandi Dgvoting securities when such reduction would be advantageous in the opinion of its management. Pending such reduction, United proposed to

refrain :fromvoting the secrurities 1rl.thout the prior approval of the Commission. The

predominant portion of UnitedJ s portfolio comprises the call1llonstocks of four holding

companysubsidiaries: The United Gas ImproveEnt COIIIpaIJ,y, Public Service Corporation of

NewJersey, Niagara HudsonPowerCorporation and ColumbiaGas & Electric Corporation.

On August 14, 1943, after extensive hearings, the CamDissiondisapproved United's plan,

and, pursuant to Section 11 (b) (2), ordered that United change its existing capitalization to one class of stock and cease to be a holdi.Dgcompa.ny.

Statistical Summary of Enforcement of Section II

In the Appendixto this report there is included a group of tables which indicate

some of the progress that has been made in carrying out the objectives of Section 11 (b)

of the Holding CompanyAct. The information given in Parts 1, 2 and 3 of Table 16 relating to the electric, gas and non-utility subsidiaries which have been divested by

registered holding companiesfrom December1, 1935 to November15, 1943 is SUDDDarized

below:

!IHolding CompanyAct Release Nos. 4175 and 4255. CommissionerHealy dissented on the

ground that he could not find that the plan was fair and~table to the preferred

stoakholders of Puget.

3/ On September 25, 1943 the companyanncnmced.that an initial dividend had been declared on the newconaon stock which under the plan had been distributed to the

holders of the old preferred and commonstocks.

2/ Civil Action No. 230B.

Y Holding CompanyAct Release No. 3595.

21 Holding CompanyAct Release No. 29ff7.

Y Holding Compan;rAct Release No. 4478.

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SUMMARY

ELECTRIC, GAS AND NON-UTILITY PROPERTIES SOLD OR OTHERWISE DIVESTED

BY REGISTERED PUBLIC UTILITY HOLDING COMPANIES

December 1, 1935 to November 15, 1943

(See Appendix, Table 16 for details)

Number of Companies

Assets of Companies Divested

(000,000 omitted)

Non- ElecUtility tric

NonGas Utility Total

$ 646 $145 $ 0

1,216

$ 791

2 1,216 o

o 11

2 o

6

ElecGas

Divested by Exchange or Distribution of Securities to

Security Holders

No longer subject to Holding Company Act

Still subject to Holding

Canpany Act

2 34 104 --.!.1 19

$;2,749

D1vested by Sale of Property

or Securities W

No longer subject to Holding Company Act cJ

StUI subject to 'ifolding

Company Act

TOTAL DIVESTED

63 44

21 11!y

69 176 783, 182 123 1,088

138

$3,233

Partial Sales of Property Not Number of Companies

Included iii above Totals Making Such Sales Sale Price

Assets sold no longer subject

to the Act 35 :3 14 52 $ 73 $ 2 $ 11 $ 86

Assets sold stUl subject

to the Act 6 I I 8 1 I 1 3

Totals 41 4 15 60 $ 74 $ 3 $12 $ 89 = - !INorthern Natural Gas Company, which was a subsidiary in three different company

systems and itself a registered holding company having consolidated assets of

$63,178,222, was not included in the above summary; Lone Star Gas Corporation distributed its cammon stock investment therein to its own stockholders and United Light

and Power Comp~ sold its holdings for $10,533,612.

PI Includes all cases where total divestment was effected by sales of entire property

to one or more than one buyer.

s/ In the case of sales to more than one buyer, duplication was avoided by classifying

the cOmpany in accordance with the disposition of the majority of the assets sold.

Thes~ totals, unlike the totals for assets divested which are stated on a consolidated

basis, do not include an additional 87 companies which are subsidiaries of the electric, gas or non-utility companies' enumerated above and in the detailed tables. Of

these 87 companies, 52 are no longer subject to the Act and 35 are still subject to

the Act. . \

!IThere is a duplication of less ~han $1,000,000 between this figure and the assets of

electric or gas utilities divested as shown above.

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-lIJIt will be noted that 223 electric, gas and non-utility subsidiary companies with

total assets of approximately $3,233,000,000 have been divested in this period. This

includes 92 electric utility companies with total assets of $2,749,000,000, 60 gas

utility companies with total assets of $342,000,000 and 71 non-utility companies with

total assets of $142,000,000. Most of the electric utility companies and substantially

all the gas and non-utility companies were divested for the purpose of, or with a view

to, meeting "the integration requirements of-Section 11.

Of the total number of these divested companies, 187 cQMP,anies,with total assets

of $1;879,000,000, are no longer subject to the Holding Company Act and 36 companies,

with total assets of $1,354,000,000, are still subject to the Act by reason of their

relationship to other registered holding companies.

In addition to the divestment of companies, as such, the tables show that 60 other

subsidiary companies have sold parts of their electric, gas and non-utility properties'

for a total consideration of $89,000,000. The greater part of these properties are no

longer subject to the Act.

Reference is made to Appendix Table 17 which lists the subsidiar,yutility and nonutility companies, the control of which must be divested by their respecti~e parents

under Section 11 (b) (1) orders outstanding as of November 15, 1943. By virtue of these

orders, 14 holding company systems must divest themselves of their control over 211 subsidiary companies having aggregate total assets of $3,368,000,000.

In a number of holding company systems, there are holding companies which are merely

pyramiding devices and perform no useful function. Many of these have already'been

ordered dissolved after appropriate Section 11 (b) (2) proceedings. Table IS in the

Appendix lists the holding companies which are subject to dissolution or liquidation

under Section 11 (b) (2) orders outstanding as of November 15, 1943. The tabulation includes 14 holding companies and shows that 10 of these companies have 159 utility or

non-utility subsidiaries with total assets of approximately $2,600,000,000.

CIVIL LITIGATION

(1) Cases involving the integration and co

Section 11 b

lification requirements of

(a) Section 11 (b) (1) Integration

During the past fiscal year y the Circuit Court of Appeals for the Second Circuit

in North American v. S.E.C. 2/, unanimously affirmed an order of the Commission designed

to effectuate the requirements of Section 11 (b) (1) with regard to The North American

Company.

y Since the close of the fiscal year the Circuit Court of Appeals for the Third Circuit

unanimously affirmed an integration order in United Gas Improvement Company v. S.E.C.

F. (2d) November 7, 1943; and the United States Court of Appeals for""tJie'

District of Columbia, by a divided court, reversed and remanded an integration order

of the Commission in Engineers Public Service Co. v. S.E.C., F. (2d)~

U.S. App , D.C. , November 22, 1943, the reversal being confined to the

COiiiiiiission's construction of the "other businessll clauses of Section 11 (b) (1).

2/ 133 F. (2d) 148. The Supreme Court granted certiorari March 1, 1943, 318 U.S. 750;

briefs have been filed but argument has not been had because of the absence of a

quorwn.

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lif'icatlon and e table distribution of

All of the COJIIIIIission'sorders under Section 11 (b) (2) which were reviewed in the

courts during the past fiscal year were unanimously-affirmed. In Commonwealth& Southern Corp. v , S.E.C. Y7 the Circuit Court of Appeals for the Third Circuit upheld a

COJIIIIlissionorder"Ui1der Section 11 (b) (2) requiring the Commonwealth&Southern Corporation to recapitalize so as to have outstanding but a single class of stock, namely,

cOllll1onstock. In Central and South West Utilities compani v , ~. y, the United

States Court of Appeals for the District of C~lumbiauphe d a Commissionorder requiring QmtraL and South West Utili ties Companyand its subsidiary, AmericanPublic Service

Company7to wind up either of those two companies and recapitalize the remaining company on an all-common-stock basis. In Todd v , ~. V, the Circuit Court of Appeals

for the Sixth Circuit upheld a Commissi0I!order requirUlg International Hydro-Electric

S,ystem7a Massachusetts compa~, to liquidate and dissolve.

(c) Constitutionality of Section 11 (b)

In the four cases involving Section 11 (b) orders decided in the past fiscal year

and in the two cases subsequently decided, the constitutionality of Section 11 (b) of

the Act has been unanimously upheld. The Circuit Court of Appeals for the Second Circuit reached this decision in North AmericanComp~ v , S.E.C.!zI (Judges Swan, A. N.

Handand Ghase)7 the Third Circuit in Commonwealth& Soutlle'rii Corp. v. S.E.C. 5/ (Judges

BiggS7Maris and Goodrich) and in United Gas rovement C v , S.E~C. Y "[Judges

Blggs7 Maris and Jones)7 the Sixth Circuit in Tod v , S.E.C. (Judges Weeks, Simons

and Allen) and the Court of Appeals for the District of""COlumia in Central and Southwest Utilities Co. v, S.E.C. 8/ (Judges Miller, Edgerton and Arnold) and in Engineers

PUblic service Co. v; S.E.C. V (Judges Soper, A. L. Stephens and Miller).

(2) of securit

(a) Payment of debentures :In cash

In two cases, holding companies required to liquidate under Section 11 (b) had

outstanding unmatured debentures, and had cash available for their payment. Conmri.ssion

decisions approving the payment of such debentures without the payment of a voluntary

call premiumwere affirmed in NewYork Trust Co. v , ~. !Q£ and in City National

Bank and Trust Co. v ; S.E.C. -g;

y 134 F. (2d) 747.

Y 136 F. (2d) 273, _ U.S. App. D.C.

'J/ 137 F. (2d) 475.

!!/ 133 F. (2d) 148.

134 F; (2d) 747.

Y _ F. (2d) -' November7, 1943.

11 137 F. (2d) 475.

Y 136 F. (2d) 273, _ U.S. App. D.C. _.

2/ _ F. (2d) _, _ U.S. App. D.C. ---' November22, 1943.

!!y 131 F.. (2d) 274 (C.C.A. za).

!!I134 F. (2d) 65 (C.C.A. 7th).

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(b) Allocation 0:C securities and cash among classes or security holders

The Circuit Court of Appeals for the Third Circuit in Ifarqois v. ~. !/, unanimously a:r:CiImeda Commissiondecision approving as :Cair and equitable a plan :Corthe

liquidation 0:C ColtDDbiaOil and Gasoline Corporation; one or the considerations was the

existence o:c claims on behal.:C o:C ColumbiaOil against its parent campa.n;ywhich also

ownedall or its pre:Cerred stock. The plan was subsequently approved and enforced by

the United States District Court :Cor the District o:C Delaware in ColumbiaOil and Gasoline Corporation. y In Jacksonville Gas CCDpanyy, the District Court :Cor the Southern District of Florida approved.and enforced a plan o:C reorganization :Cor that company

1drl.challotted the bulk of the new securities to the companyls bondholders and the remainder, because 0:C a small amount o:C unpledged assets, to its debenture holders.

In Puget Sound Power & Light Cc:apa.ny, the District Court 0:C Jrassachusetts approved and enforced a reorganization plan :for Puget Sound Power & Light Company,allotting the bulk of a new issue 0:C cODlDlonstock to the junior preferred stockholders of

that companyand a small amountthereof to the old COJlllllonstockholders; the principle

determining bhe allocations was that used in The United Light and Power Companyy

discussed above. W

A Commissiondecision in Federal Water Service Corporation 7/limiting the participation of officers and directors in a reorganization to the cost of shares of pre.ferred

stock acquired 1dli1e efforts at reorganization were being madewas reversed by a divided

court in Chener, Corp. v; S.E.C. '21. Uponreview CZ!, the SupremeCourt (Justices Black,

Reed and Murphydissenting), held that the C<llllli.ssionhad based its decision solely upon

the application of principles o:C equity derived freD judicia1 decisions and. that such

judicial decisions did not go as far as the ea-tssion said they did; the Commission's

action, therefore, was not allowed to s~ since lIan administrative order cannot be

upheld unless the grounds upon which the Agencyacted in exercising its powers were

those upon which its action can be sustained... The matter was rewlDded.

(3) Cases involving the existence 0:C control or controlling influence

In f'our cases, Circuit Courts of' Appeals in the past fiscal year have aff'irmed

CalIIIission decisions denying applications of'.holding cl1llp8-Di es or subsid:iar,y companies

!/134 F. (2d) 822.

Y 50 F. Supp. 965.

Y 46 F. Supp. 852.

Y Unreported, llay 6, 1943.

Y Holding CompanyAct Release No. 4215.

W Af'ter the close of the fiscal year, the liquidation plan of United Light and Power

Caupan;ywas awroved and an order of' enforcement was entered by the United States

District Court for the District of Delaware, F. Supp. A reorganization

plan similar to that involved in the Puget Sound case was 8pPl"oved by the United

States District Court :Corthe District of Colorado in Southern Colorado Power Company, unreported, Oral Opinion, December21, 1943.

7/ 8 S.E.C. 893.

'21 128 F. (2d) 303, 75 U.S. App. D.C. 374 (1942).

21 ~. v. Chener]"Corp., 318 U.S. 80.

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for exemption on "the ground of an alleged absence of control or controlling innuence. y Two of these cases were in the Court of Appeals for the District of

Columbia: AmericanGas and Electric Companyv , S.E.C. 31 and Koppers United Company

v. S.E.C. V. The CIrcuit c01ii't of Appeals for the Second Circuit affirmed the Commission's decision in Hartford Gas Company'v. S.E.C. !!I, and the Third Circuit affirmed

a similar decision in Public Service Corporation of NEnrJersey v. S.E.C. 2/.

PUBLICUTILITY FINANCING

In the fiscal year ended June 30, 1943, the Commissionapproved 9J applications and

declarations pursuant to Sections 6 and 7 of the Act, pertaining to the issuance of securities totaling $612,579,363. For the preceding year, ~24 such applications were approved with respect to $631,661,484 of securities. The following table classifies the

securities involved in applications approved during the past fiscal year by type and

purpose of issue:

Type of issue &

Bonds

Debentures

Notes

Preferred

Common

Total

Purpose of issue.

Refunding

Reorganization

Exchangefor other securities

Acquisition of property or

other assets

Newfinancing

Miscellaneous

Total

Amount

1169,894,000

24,976,600

121,498,435

15,247,200

2802963>128*

$612,579,363

Amount

$159,993,160

139,727,684

216,881,01611-

65,462,000

17,942,500

1225732003

,6122579,363

Percent

'27.7

4.1

19.8

2.5

45.9

100.0

=

Percent

26.1

22.8

35.4

10.7

2.9

2.1

roo:o

* Includes $164,113,601 representing stock issued for the purpose of reclassifying existing commonstock. The bulk of this amountis accounted for by

2,369,076 shares of $1 Dividend Preference Commonstock and 8,160,154 shares

of new commonstock issued by Philadelphia Electric Caupanyin exchange for

its old common. The new securities had a combinedstated value of $137,816,005.

An additiop.al amountof $23,686,062 represents the reclassification of United

Light and Railways CompanycODlllonstock, preliminar,y to its distribution among

the preferred and cOllllflonstockholders of its parent, The United Light and Power

Company.

!IIn Pacific Gas am Electric ~any v. ~., F. (2d) after the close

of the fiscal year, the Circuit Court of Appeals tor the Ninth CirCuit affirmed by

an equally divided court a previous decision reported at 127 F. (2d.) 378, affinning

such a decision of the Camnission.

y 77 U.S. App. D.C. 174, 134 F. (2d) 633, cert. den. 319 U.S. 763.

Y _U.S. App. D.C. --' __ F. (2d)

!!/ 129 F. (2d) 794.

'jj 129 F. (2d) 899, cert. den. 317 U.S. 691.

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There liaS a sharp increase over last year of the percentage of total financing

comprising securities issued in exchange for other securities and in connection with

reorganizations. The percentages in question rose from 9.'$ to 35.4%and !"romo.~

to 22.S% , respectively. A corresponding increase' occurred in the proportion of total.

financing represented by commonstock, the proportion in 1943 being 45.9%as contrasted

nth 10.5%in 1942. These increases are the direct result of refinanciDgfl ste-rtng rrca

Section 11 proceedings. .

Continued progress was madeduring the past fiscal year in strengthening the fiDlincia1 structures of public utility operating companies and their parent holdiDg cc:wpan1es.

The manner in which that has been accomplished in other years has been set forth inprevious annual reports of the Commission(See, for example, the Seventh Annual. Report,

pages 90-98).

In passing on refinancing cases which camebefore it, the Commissiongave further

indication that it has not established a rigid formula for determining initial allowable

limits of senior securities for public utility operating companies. The ea..tssion's

policy in this regard has heretofore been set forth in its opinion in the El Paso case

early in 1941, where it was specifically stated that financial problema "must, of

course, be considered in the light of the circumstances surrounding the particular

transaction and we make no attempt here to lay downa hard and fa~t rule. II !I In those

cases in Whichit has not been feasible to limit senior securities initially to confor..

to long-range conservative standards of finance, it has been the CommisSion'spoliCT

to require the inclusion of safeguards lWhichnll result in the achievement of such 0bjectives over as short a period of time as possible.

Speaking generally, the improvementin public utility capital structures, .mtiODBd

above, has resulted from debt reduction, madeeither at the t:1mea refunding took place

or, lWherethat was impracticable, by provision for the retirement of debt through siDking fund or serial debt retirement programs, from the elimination of -.rite-ups~ 1'ra. increased provision for depreciation both as to current accruals and existing reserves,

from improvedmortgage indenture provisions, from the el:iJrlnation in 1II&DiY' instances or

preferred stock dividend arrearagea, and from the inclusion in corporate char1iers of

improved protective provisions with respect to preferred stock. All this has been accompaniedby a substantial decrease in the burden of interest on :fUnded debt and preferred stock dividend. requirements.

Competitive Bidding

During the past fiscal year an additional $140,582,128 of securities were sold at

competitive bidding pursuant to Rule U-50, lIhich prescribes public invitation of seal.ed

bids in connection with the sale of securities by registered public utility' holding

companies and their subsidiaries. This brings to $570,681,134 the total amouut thus

sold from May7, 1941, the date on which the rule becameeffective, to July 1, 1943. Y

The rule permits exemption from competitive bidding under specified or apprOpriate circumstances. A numberof such exemptions have been granted since the rule was adopted.

REGULATION OF SERVICE COMPANIES

Several important proceedings relating to service cOIIIpaniesand their practices

were successfully disposed of during the past fiscal year, resulting in annual savings

!IHolding CompanyAct Release No. 2535.

Y Detailed information on each issue sold at competitive bidding is contained in a

tabulation entitled "Competitive Bids Submitted for Security Issues Sold Pursuaut

to Rule U-50 under the Public Utility Holding Comp~ Act of 1935" released by the

Ccmnnissionunder date of September 8, 1943. Holding Compan;yAct Release No. 4538.

"
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?f mor~ than 11,250,000 t? the operating utility companies affected. These ,savings are

~n addf.tdon to those preV10usly reported. Certain principles and standards as to holdang comp~, set;ice ~ompany and operating company relationships were crystallized in

the ColumbJ.a EngJ.neerJ.ng COrporation case. The findings and opinion in this case

(Holding Company Act Release No. 4166) established the following principles:

(1) No operating company should be charged or have allocated to it, directly or

through the redium of a service company or by any other arrangement, including treasurer's or agent1s account, split-check system or other devices any

portion of the salaries or expenses of any person or p~rsons who are holding

company officers or employees, or Whose functions relate primarily to the

functions of supervision of the holding company system and review of the actities of operating companies, their officials and staffs.

(2) A corollary to the above principle is that no holding company officer or

person or perscns whose functions relate primarily to the holding cOmpany

functions of supervision of the holding company system and review of the activities of operating companies, their officials and staffs, should receive any

compensation or reimbursement of expenses from any operating company directly

or through a service company or any other arrangement including treasurer1s

or agent1s account and split-check systems.

(3) Each service company should confine itself to functions which the operating

subsidiaries cannot perform as efficiently and economically themselves. These

services should be :imited to services of an Iloperating naturell as distingu~shed from managerial, executive, or policy-forming functions.

These principles are directed towards preventing costs attributable to holding company functions from being passed on to operating companies by any means or device.

Following the termination of the Columbia Engineering Corporation case, proceedings

were initiated w:1.h respect to Cities Service Company, its two pUblic utility subsidiary

holding C'''''''''::.r-.ies, and four system mutual service companies. y' The respondents indicated that they would comply with the Columbia principles, and after the close of the

fiscal year they submitted proposals which the Commission approved. y The system's

revised servicing methods substantially reduced service charges to the system's utility

operating companies. A similar result was achieved in the American Gas and Power Company system 2/ and in the American Water Works and Electric Company system after appropriate action by the COIIDJlission.y

The case concerning American Water Works and Electric Company, et al, was initiated

at the request of the New Jersey Board of Public Utility Commissioners. The holding company and two of its subsidiary service companies had been rendering services for a

charge to system water operating companies. At the joint hearing held in Newark, New

Jersey, respondents proposed a comprehensive reorganization of their system servicing

arrangements to meet the issues raised by the New Jersey Board and the Commission. 21

11 Holding Company Act Release No. 4197.

3/ Holding Company Act Release No. 4432.

21 Holding Company Act Release No. 4395.

Y Holding Company Act Release No. 4749.

21 This was the second such proceeding which the Commission initiated at the request

of' a state public service commission. In August 1940 the Public Service Commission

of the State of Vermont requested a similar investigation of the central servicing

arrangements in the New England Power Association system resulting in a complete reorganization of the system1s central servic~ng arrangements, with substantial savings

to the Vermont operating companies and other system operating companies.
,,

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This proposed plan was reviewed at subsequent hearings at 'Whichthe Conn~cticut and

Pennsylvania state utility commissions were also represented. As a result of this

cooperative proceeding, substantial annual savi~ will result to the system's water

operating subsidiaries.

other servicing companycases during the fiscal year resulted in the segregation

of the '38rvicing activities for foreign subsidiaries in the Electric Bond&nd Share

Comp~ system (Holding OompanyAct Re1ttase No. 4070) and the abandomnentof system

service arrangements in the Associated Gas and Electric Companysystem. With respect

to the latter, the technical staff of the system service companyformed an independent

service companycalled Gilbert Associates, Inc. y A1ly future servicing business with

"the companies in the Associated ~tem will be on a competitive basis with other independent service companies. The remaining case involved a complete reorganization of

the servicing arrangements in the NewEngland Gas and Electric Association System. y

RULES AND REGULATIONS

Changes in the Cc.ad.ssion' s Rules and ReglJ1ations during the fiscal year were

ll:aii ted to five minor tl1Ilendmentsof existing rules, three of these amendmentsrelating

to Rule U-70 e:xemptingcertain persons from the provisions of Section 17 (c) of the Act.

An .eudment to Rule U-40 extemed the .emption from the requirements of Section 9 (a),

while sub....paragraph (6) of Rule U-45 (b) was amendedto meet changes in'the Revel1lleAct

of 1942 relating to consolidated tax returns.

As a war-time provision, a major revision was made in the Annual Supplement Form

U5Sfor regtstered holding calp&n1es eliJninating many of the items and expenditures

fcrmerly required to be furniShed. This simplification in the reporting requirements

under the Act 1Ia8 described earlier in this report.

}/ Hold1Dg O~an;y Act Release No. 3735.

'gJ Hol'4blg C<oepaayA~t Release No. 3790.
- 47 -

PART IV

PARTICIPATION OF THE COMMISSION IN CORPORATE REORGANIZATIONS

UNDER CHAPTER X OF THE BANKRUPTCY ACT, AS AMENDED

SUMMARY OFACTIVITIES

The Commissionacti~ly participated during the fiscal year in 139 reorganization

proceedings involving the reorganization of 168 companies(139 principal debtor corporations and 29 subsidiary debtors). 1/ The aggregate stated assets of these 168 companies

totalled $2,046,442,000, and their-aggregate indebtedness was $1,319,058,000. For the

first time the cases closed exceeded the new cases in which the Commissionfiled a notice of appearance, there baving been 29 cases closed and 16 newcases in which the Commission filed a not~ce of appearance. V As of JUne30, 1943 the Commissionw~sactively engagE~qHinJft6'I~organization proceedings involving the reorganization of 129 companies (~rincipal debtor corporations and 19 subsidiary debtors). The aggregate

stated assets of these 129 companiestotalled $1,745,156,000, and their aggregate indebtedness was $1,103,698,000. AppendixTable No. 17 classifies these debtors, together

with their assets and indebtedness, according to their respective industries, while

AppendixTable No. IS classifies them according to the size of their total indebtedness.

With respect to the 16 new cases in 1thich the COIIIIIlissionparticipated during the

year, its notice of appearance was filed at the request of the judge in two proceedings,

wh11ein the remaining 14 cases the Commissionentered its appearance upon the approval

by the judge of the CCIIIIIIli.ssion's motion to participate. Of these 16 newproceedings,

14 were inat itued under Chapter X and two under section 77B. The debtors involved in

these 16 proceedings had aggregate stated assets and aggregate indebtedness of apprOXimately $93,777,000 and $'70,693,000, respectively.

THE CCllMISSION AS A PARTY TO PROCEEDINGS

There-have been no significant changes in the past fiscal year in the policies or

practices of the Commissionin perfonning its functions under Chapter X. Five years of

experience by the Conunission,the Federal courts and attorneys with the operation of

Chapter X have produced a substantial numberof precedents on nearly all important procedural and interpretive questions. Fromthis store of experience through participation

in ma.Dy" cases, the CODIIlissionhas continued to afford substantial aid to parties, referees, special masters., and jUdges whofrequently call upon the Commissionfor advice

and suggestions. In this manner, the Commissionhas encouraged the developmentof uniformity in the interpretation of Chapter X and in the procedure thereunder. This work

has also been of value in saving the court officers and parties to the proceeding much

of the tUne, effort and expense that would be entailed in handling such questions

~. In addition, the Commissionhas continued, primarily through the method of informal suggestion and conference, to call to the attention of parties to the proceeding

8Dy'violations or lack of caupliance nth the procedural provisions of Chapter X,-

thereby avoiding teclmical and delaying objections at a later date.

It is, however, particularly with respect to substantive matters that the Conunission has concentrated its efforts thrau.ghout the year. It has given increasing attention 81Il0Dg other things to proposed corporate charters, by-laws, trust i1l.dentures, and

similar instrmnents so that the rights of investors will be clearly defined and appropriately protected after the reorganization proceedings are consummated, Here, too, the

11 Appendixtable-3l contains a complete list of reorganization proceedings in which the

COIlI11lission participated as a party during the year ended June 30, 1943.

U~der Section 265a of the Bankruptcy Act, as amended,the Commissionrec€ives copies

of every petition for reorganization filed under Chapter X and copies of other

specified documentsfiled in the proceedings.

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Cc.uission has relied largely an informal conferences for tne presentation of its views,

and, where these methods have proved inadequate, the questions requiring revision have

been brought to the attention of the court. At the same time the CoImrrl.ssionhas continued its efforts to assist the parties and the courts achieviDg equitable, financially sound, expeditiou.s and econanic readjustments by f'ilrnisb1ng detailed studies of

econanic factors affecting the debtor and competitive conditions arf"ectmg its particular

industry.

PLANS OF REORGANIZATION UNDER CHAPTER X

The Act requires as a condition to confirmation of a plan of reorganization that

the judge be satisfied that the plan is fair, eqllitable and feasible-. The

of a plan which meets these requirements is the main objective of arsy reorgani.zation proceeding. It may be recalled that the C<IIIIIlission' s primary function under Chapter X 16

to aid, the court in securing this objective.

In regard to appraisals of the fairness of plans, certain basic legal princip1.es

consistently urged by the CommissionUDderChapter X are nowfirmly established as a result of the SupIemeCourt decisions in the Los Angeles Lumbery and the Consolidated

RockProducts y cases. These principles require that a plan provide f'ul1 cClllpensatory

treatment for c1a1m.sand interests of creditors and stockholders according to their

legal and contractual Priority either in cash or new securities or both.

The requirement of feasibility relates to the economic soundness or workability of

the proposed financial structure. For that reason, in evaluating the feasibility of a

plan, the COIIIDlissionhas been particularly concerned with the adequacy of working capital, the relationship of funded debt or capital structure to property values, the

quacy of corporate earning power in relation to interest and dividend charges, and the

effect of the proposed new capitalization upon the company'sprospective credit.

A frequent obstacle to the adoption of a feasible plan arises lIhen the parties to

the proceeding, in order to effect tax savings, rei'use to reduce an excessive indebtedness even where a failure to do so lIOUldresult in an unsound capital structure. Nevertheless, the :fUll protection of se~v .holders demand-sthat the capital structure

shall not be so inflated as to hampersubsequent operations or compelreaort to another

reorganization. It is also of paramount concern to the Comm1.ssionthat the -new

ties shall not by their terms or otherwise be deceptive to subsequent parcbaser-s. lB

the light of the prior history of companiesin reorganization, it is clear that the

mission's insistence that plans should complywith reasonable standards '(4 t'easibllity

is fully justified. Thus, of the newcases in which the Commissionparticipated dur1ng

the fiscal year 1942, 17 of a total of 34 cases (or 50%)had previously been in reorganization, and, during the fiscal year 1943, 7 aut of 16 such cases (or about 44%) had a

siJD:ilar history.

ADVISORY REPORTS ON PLANS OF REORGANIZATION

Underthe provisions of the BankruptcyAct, a-s amended,the ee-dssion "'11&7 subJdt

formal advisory reports on plans of reorganization referred to it by the coarts-. The

purpose of an advisory report is to provide an ilIIpartial surve;y aDd critique O't tbe

plan not only for the use of the judge in determining whether ar not to apprO"l8the

plan but also for the assistance or security holders in reachiDg the4r deci.s1.onwith

regard to the acceptance or rejection of the plan.

!ICas! v. Los Angeles LUIIlberProducts Co., Ltd., 308 U. S. 106.

Y CoDBolidatedRock Products Co. v. DuBc)1s, 312 U.S. ilO.

CO!1B1m1a&tlan

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During the fiscal year, the Commissionprepared a formal advisory report with respect to a plan of reorganization in t.hc proceeding involving the Philadelphia & Western

Railway Company,and a1so d. sUJ:plef'lentaladvisory report in the proceeding involving

the Philadelphia & Reading Coal & Iron Compa?yin which an initial advisory report had

previously been filed.

APPEALS

Although the Commissionmaynot appeal in a proceeding under Chapter X, it may

participate in appeals taken by others, and it took part in 12 such appeals decided by

the court during the past fiscal year. Questions raised and decided in 5 of these cases

are indicated below.

In In re Plankinton Bldg. Co., y an appeal was taken from an order in a proceeding

under Chapter X for the reorganization of Plankinton Building Company,which had some

years before gone through a Section 77Breorganization. The order denied participation

in the Ctmpter X reorganization to holders of bonds of the debtor's predecessor corporation who had not exchanged their old bonds for securities of the present debtor in the

prior 77Bproceeding. The Commissionurged that the old borldhclders were entitled to

participate as creditors in the Chapter Xproceeding since their claims had been listed

by the Section 77Btrustee as fixed, liquidated in amountand not disputed, and had been

so allowed in the 77Bproceeding. The Circuit Court of Appeal.sfor the Seventh Circuit

upheld this position and reversed the order of the District Court.

In Brook1}nTrust Companyv , R. A. Security Holdings, Inc., 31 the CODIIIlission

urged that Congress intended to give persons, holding claims only against the property

of the debtor, the r i.ghi, to file an involuntary petition under Chapter X and that the

institution of such proceeding did not deprive the debtor of property without due process in violation of the Fifth Amendmentof the Constitu::'ion. The District Court sustained this position and the Circuit Court of Appeals for the SecondCircuit affirmed.

In In re CuyahogaFinance Co., 2./ there was involved the question whether the

Bankruptcy Court had jurisdiction in a Chapter Xproceeding to determine in a summary

action set-offs agafnsf the debtor Is obligation to a pledgee creditor, where such

creditor had possession of the assets and where it declined to file a claim or otherwise

consent to the jurisdiction of the court. The Circuit Court of Appeals for the Sixth

Circuit held, as urged by the CommissioTl,that the District Court had properly exercised

summaryjurisdiction in that case.

In In re Cosgrove-MeehanCoal Corporation, et al., Y the Circuit Court of Appeals

for the Third Circuit upheld the contention of the Commissionthat Section 2.49of the

Bankruptcy Act which prohibits an allowance of compensation to those parties whopurchase or sell claims against or stock of the debtor while acting in a representative

capacity applies also to a person whotraded in the debtor's securities prior to the

reorganization proceeding while he was a memberof a bondholders' committee.

In Abramsv , Cleveland Terminals Building Compan;y- 'i/ the Circuit Court of Appeals

for the Sixth Circuit affirmed an order of the court below which accepted the recommendation of the Commissionwith respect to an application of attorneys for. allowances based

upon services rendered in the reorganization proceedings, which recolllJflendationurged a

reduction of the amountsought from $172,000 to $18,000.

!I135 F. (2d) 273 (C.C.A. 7th, May3, 1943).

Y 134 F. (2d) 164 (C.C.A. 2nd, March4, 1943).

2./ 136 F. (2d) 18 (C.C.A. 6th, June 7, 1943).

4/ 136 F. (2d) 3 (C.C.A. 3rd, May24, 1943) as amendedon Denial of Rehearing June 17,

1943; cert. den. Oct. 25, 1943.

11 136 F. (2d) 537 (C.C.A. 6th, May31, 1943); cert. den. Nov. 15, 1943.
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PART V

ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939

The Trust Indenture Act of 1939 requires that bonds, note~debentures, and similar

securities publicly offered for sale, sold, or delivered after sale through the mails

or in interstate commerce, except as specff'Lca'l ly exempted by the Act, be issued under

an indenture which meets the requirements of the Act and has been duly qualified with

the Commission. The provisions of the Securities Act of 1933 and the Trust Indenture

Act of 1939 are so integrated that registration pursuant to the Securities Act of 1933

of such securities to be issued under a trust indenture shall not be permitted to become effective unless the indenture qonforms to the specific statutory requirements expressed in the Trust Indenture Act of 1939. The indenture is automatically "qualified"

when registration becomes effective as to the securities themselves.

With one minor exception, no changes were made during the year in the Canmission' s

rules and regulations under this Act. Rule T-7A-4 was amended merely to change the

hour from which the time of the effective date of applications is computed from 4:30

P.M., E.S.T., to 5:30 P.M., E.S.W.T.

STATISTICS OF INDENTURES QUALIFIED

The following tables show the number of indentures filed with the Counnission together with the disposition thereof and the amounts of indenture securities involved,

not only for the past fiscal year but also cumulatively for the period February 4, 1940,

through June 30, 1943.

Indentures Filed in Connection with Registration Statements

under the Securities Act of 1933

,,

, :r July 1, 1942, to

June 30, 1943,

inclusive

February 4, 1940, to

June 30, 1943,

:inclusive

1 ;

,1

f'

Indentures pending 6/30/42

Indentures filed

Indentures qualified

Indentures withdrawn

Refusal orders issued

Indentures pending 6/30/43

No.

8

28

21

2

o

12

Amount of

Offering

$293,234,800

357,494,800 EI

275,390,000

122,392,500 f!

o

238,839,600

No.

195 r:J

169

12

o

12

Amount of

OfferinS

$3,960,971,000

3,346,027,400 '"ij

291,695,500 if

e

238,839,600

" ) ,

) ~1

!IReduced to 27 by amendment.

Reduced to $347,994,800 by amendments.

Reduced to 192 by amendment.

Reduced to $3,559,578,000 by amendments.

y Reduced to $3,305,634,900 by post-effective amendment and withdrpal.

!I Reduced to $2,642,500 by amendments.

yReduced to $15,103,500 by amendments.

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Aplications Filed for Qualification of Indentures Cover'

Required To Be Registered under the Securities

July 1, 1942, to

June 30, 1943,

inclusive

to

Amountof Amountof

No. Offering No. Offering

Applications pending 6/30/42 1 $ 1,074,800

Applications filed 17 42,305,629Y 70 $297,135,982 b/

Applications effective 16 36,845,429 !!JI 65 283,569,582 !I- Applications withdrawn 1 4,920,000 4 11,562,500

Refusal order issued 0 0 1 2,010,500 E:!

Applications pending 6/30/43 1 1,615,000 1 1,6~5,000

!IIncludes one indenture of an indeterminate amount.

Reducedby amendmento $296,_747,082.

Refusal order rescinded and qualification madeeffective on July 6, 1940.

ADDITIONALINFORMATION RELATINGTOTRUSTINDENTURES

During the year the following additional material re~ating to trust indentures was

filed and examined for compliance with the appropriate standards and requirements:

12 indentures exemptfrom the Trust Indenture Act of 1939 but subject to the

Public utility Holding CompanyAct of 1935.

46 trustee statements of eligibility and qualification under the Trust Indenture Act of 1939 (41 on FormT-l for corporations, and 5 on FormT-2 for

individuals)

71 amendJoontsto trustee statements of eligibility and qualificatj on (62 "preeffective," and 15 "post-effective").

25 SUpplementsS-T, covering special itel'ls of information concerning indenture

securtties registered under the Securities Act of 1933.

5 applications for findings by the Connnissionpursuant to Sec. 310 (b) (1)

(ii)

5 applications, on FormT-4, for exemption pursuant to Sec. 304 (c).

_ 185 annual reports of indenture trustees pursuant to Sec. 313.

During the period February 4, 1940 through June 30, 1943 an aggregate of 321

trustee statements (273 for corporations and 48 for individuals) and 180 Supplements

S-T had been filed.

Underthe Trust Indenture Act there has been no litigation and there have been only

two refusal. order proceedings initiatd. In the first case, April 1940, the indenture

was amendedprior to the entry of an Jrder and in the second case, July 1940, the refusal order was rescinded and the trust indenture qualified.

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PART VI

ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF 1940

During the past fiscal year the CODRissionin its administration of' the IDYestaent

CompanyAct of 1940 !Iconcerned itself' primarily nth: (1) the registration of cc:apanies subject to the Act; (2) the disposition of applications filed pursuant to tbe

provisions of the Act; (3) the p~tion of rn1.es prescribing the type of periodic

information and reports required to be tiled with the Cem.dBsionand the type ot information and reports required to be transmitted to securi.ty holders, and (4) the prOJllUlgation of rules and forms to enable 1iIvestaent cCllpaniesto use their registration

statements under that Act as a basis for effecting registra.tiOll ot their secur1.ties

under the Securities Act of 1933, thus avoiding a duplicatiOll in registration statements and of' etfort and expenses upon the part of' :invest.mt c<llp&Dies.

Vost imestment cOlllpaniesregistered with the C~sion pursuant to Section 8 (a)

of the Act during the fiscal year ended June 30, 1941. However, 1.4 cOlllp8lliesfiled

notifications of registration during the past fiscal year. TIro of these 14 c<mIpan1es

were organized during the fiscal year and the others had not registered previously,

either because they- claimed an exemption f'r0lll the provisions of the Act or tor some

other reason.

Fran the effective date of the Act to the close of the last fiscal year 481 investment cClllpaniesof all types had registered under the Act. Ninety-one of these companies

by the close of the last fiscal year had for one reason or another ceased to be investment companies, so that at the close of the fiscal year 390 investment compan1.es-.ere

registered with the Commissionunder the Act. The total assets of these cClllpan1eswere

well in excess of two billion dollars at the close of the fiscal year.

Doring the preceding fiscal year the C<aDission adopted rules -.blch permit investment C<JRR8nies to file copies of information already filed under other 'Acts administered

by the CouRission in lieu of registration statements under -the Investment CaIpaD;y Act

of 1940, and thereby gave effect to the directive of the Congress as set forth in Section 8 (c) of the Act. The ee-ission also prOJllUlgatedseveral rules and f01'JllBUDder

which :investment companies are enabled to use their registration statements filed lIDder

the Iuvestm.ent CompanyAct of 1940 as the basis for registration mider the Securities

Act of 19J3. The purpose of these new rules and. forms was to e1iJrinate duplication ot

filings under the various Acts of'material already filed under one Act. In this connection the COllllllis~ionpraaulgated Font 5-4 under the Securities Act ot 19J3 for registJ:ation UDder that Act by closed-end JIaD8geDlentinvestment caapanies registered on Fora

N-8B-l.lJDderthe Investment Ca.pan;yAct of 1940; Form5-5 for registration UDder the

Securities Act of 1933 of open-end management:investaent ccwpanies registered an Fora

N-8B-l; and Forms-6 for registration under the Seca.rities Jet ot 19J3 or 1Dd.tirmtstmen1; trusts registered on Fona N-8B-2under the Investment ee.pm;y Act of -1.940. I1l addition, rules -.ere adopted to eMble :investaent calpani.es to t'Ue their- ammal nports

under the Investment Cc.pa.1V"Act of 1940 as their- amma1 reports 1DIder all Acts administered by the CCIBDlissionpursuant to which the clWlp8Jdeawere req1i1.red to me .... uoal reports.

PERIODlp REPORTS TO THE CDlMTSSIOIf AIID 1'0 SECURITY HOJ.DBRS

Section 30 (a) of' the Investaent ea.pau,y Act ot' 1940 prorldes that reg1sterecl1a-

'gesbleDt c~e8 mast tUe 8DDQall;y nth the ee-issian such :fDf'0lWlt1.an, doct_a"'~

and reports as cClllpanieshaYiDg securities registered OIl a naticmal. securities ........".

are reqaired to file with the ee-issiOll pursuant to Secti.oD 13 of' the Securiti .. BIicbllDgeAct of 1934. Section 30 (b) of the Investment ee..pa;, Act of 1~ a1ltho.r1sM

the ee-ission to require registered investment CIWIp8n1esto t'Ue reports OIl a .. _

annna] or quarterly basis so as to keep reaaanab:q- CUlrent the :lnf'cmmtian c~ fD

the registration statements of' such ca.pan:ies. Daring the preced1Dg fiBcal. 7UT ....

CCIIIIdssioil prOJllUlgated two period:$.c report f01'll8 applicable to ma:aaa-ut ~

Y Far a description of thIs A~t see SEmmth AmnIal Report page i. •

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companies. During the last fiscal year the Commissionpromulgated annual report forms

for unit investment trusts and other types of investment companies.

The annual report forms are designed to bring up to date, as of the close of each

fiscal year of the registrant, the information originally furnished by the registrant in

its detailed registration statement.

During the past fiscal year 215 annual reports and 9ll quarterly reports were filed

by registered investment companiesof all types.

Section 24 (b) of the Act requires the filing with the Commission,within ten days

after the use thereof, of copies of the full text of all sales literature employedby

various types of investment companiesregistered under the Act. Daring the past fiscal

year 1,069 pieces of sales literature were filed with the Commission.

Section 30 (d) of the Act provides that every registered investment compa:nyshall

transmit to its st.ockholdara, and file with the Commission,at least semi~y, reports contai njng certain prescribed information and financial statements. During the

fiscal year ended June 30, 1943, 1,078 periodic reports to security holders were filed

with the Commission.

APPLICATIONS FOR EXEMPTIONS OR EXCEPTIONS

Applications under Section 3 (b) (2) of the Act.-A canpanywhich comeswithin the

quantitative definition of an niiivestment company"as contained in Section 3 (a) (3) of

the Act mayapply to the Commissionfor an order, pursuant to Section 3 (b) (2) of the

Act, declaring it to be pri:marily engagedin a business other-than that of an investment

company. Such other business maybe conducted either directly or through majority--

ownedsubsidiaries or controlled companiesconducting similar types of businesses. During .the past fiscal year two such applications were denied, and one such application was

withdrawn. The Commissiongranted 6 applications pursuant to this section during the

fiscal year, and at June 30, 1943, 6 applications were pending.

other applications for exemptions.--Section 6 (c) of the Act confers upon the Canmission general exemptive powers if and to the extent that such exemptionis necessary

or appropriate in the public interest and consistent with the protection of investors

and the purposes fairly intended by the policy and provisions of this title.

Thirty-nine applications under this section were pending before the Caamissionduring the last fiscal year. Of these 39 applications, 21 were filed during the last fiscal year and 22 were disposed of by the Commissionduring that period.

Section 6 (d) of the Act authorizes the Commissionto f!Xemptsmall closed-end investment canpanies fromp.ny and all provisions of the Act it the securities of such companies are not sold outside the .states of incorporation and provided the exemptionis

not contrary to the public interest or inconsistent with the protection of investors.

Three applications under this section were pending before the COIIIIl1.ssionduring the

past fiscal year. All of these applications were filed during the year and -.ere pending

at the close of the fiscal year.

DISSOLUTION OF INVESTMENT COMPANIES AND WITHDRAWAL OF REGISTRATION STATmlENTS

Eleven registered investment companiesfiled applications with the Commissionduring the fiscal year seeking orders of the Commissiondeclaring that such ccmpanieshad

ceased to be investment companieswithin the meaningof the Act. These applications

were filed pursuant to Section 8 (f) of the Act, whichprovides that wheneverthe Commission, on its own motion or upon application, finds that a registered investment company has ceased to be an investment company,it shall so declare by order, and upon the

taking effect of such order the registration .of such companyshall cease to be in effect.
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The Ccmmd.ssionhad pending bei"ore it approxiJlatelT 21 Sectioil 8 (f') applications

during the fiscal. year. Of'these 21 applications, ll1lere granted and 10 were pending

at the close of -the fiscal year. The applications that 1Iere granted inTolved CC8-

panies which had formally dissobed and distributed all of' their assets to their security holders, caupanies 1drl.ch had merged nth other ccwpan1es and transferred all of

their assets to such other c(Dp:m1es, and ca-paui.es whose ou.tstand1ng securities were

owned by less than 100 persons and which 1Iere not _Jdug and did not presentlT propose

to make a public offering of their seeuri ties. The last categor,r of cOIIIpaniesmentioned is excepted f'r0lll -the def'initiOD of JliDvestIIent Calp8lJ;yJl by the provisions of

section 3 (c) (1) of the Act.

AFFIIJATED PERSONS OF llIVES'DIEI'.r calPABIES

Transactions between investaent C;'&jiliia: aDd !!!!!!: af'f'illated ersons. -:-Section

17 of the Act liiikes it unJ.8.1itU1lor any tea person or praIOter of' or principal.

lJDderwriter for a registered :i.DYest.ent cc.pau;y to sell to, or purchase securities or

other property or borrow money or other property rrc., the caapa.o;y or tm;y

cCIIIp&lJ1" controlled by it. Howefer, authority is given to the e<..ission to exempt, by

order, tm;y proposed transaction if' erldence establishes tJJa1; "the terms of such transaction, 1".lcluding the consideration to be paid or received, are reasonable and fair and

do Dot 1,nvolTe overreaching by auy person concerned, and that it is consistent nth the

policies of' the investment caapaJJy as recited !nits registration statement and with

the general purposes of the Act.

For the f'iscal. year ending J1me 30, 1943, there were filed or pending .from the

preced1:ag year 25 applica1iions "to exempt proposed transactions between affiliated per80118 and investment ce:-panies, or cmp8nies cODtrolled by thea. The COIIlIIlissiondisposed

at 11 ot such applications after hearings; one 1I8S 1dthdrmm nthmrt hearing, and 13

..ere pnd1Dg at the close of the year. 1Ibil.e these applicati~ ostensibly sought exaptiOll of a proposed transaction iDYolv.1:rJgthe purchase and sale of securities, the

d18poeition of' such applications often iDCl11dedsuch _tters as reorganizations and recapitalizations of investment caapanies lIS well as attillated nan-iDvestment caupanies.

-CIVIL AC'lICIlS IRStlTU1'EU BY THE CCWMISSIOIl

During this f'iscal year the c-.mission instituted two actioiis to restrain violations of the Investment COIIIp8lJYAct of 1940 and. to s8CQte the appo!nbDent' of a reeei ver'

UDdersection 42 (e) of'that Act.

The first ease, _Securities and ee-issi.on. v. United Funds ~ement

~oration, y saught to enjoin the ~f'icers ana d1ieCtOi"8 of UDi FUIid8

iliiileiit Corporation !rca acting in that capacity aDl to have a reeeinr appointed.

Shortly after the camenc8lll8lJt or "the ee-ission.l s action, the corpora"tion filed a

petition of' vol'Ulltary bankruptcy in the adjudica1;iCD of 1Ib:l1!hthe ee-issi.OIl appeared

as lIIIicus curiae. The ea.dssiem Is action has been C01lt:iJlb:ed- pending tbe disposition

ot this baDkruptq proceed1Dg.

IIIsees aDd Exc~ ~si<m v. fiaeall'aDds, Inc. Y tbe Cc.BiBsionls

calplairlt T.1.OlatioiiS8Ctian 22 (., GrtJli :tmeilaiit ee.pau;y Act ot 1940 and

ask8d IT appoi.n1:;Mntof a rece1nr. An iDjqaction was granted adI a reaeiTer 1188

appo1Jlted the court em J8!rIla17 12, 1943. Y

Y U.S.D.C. Western D18t. of' Jlo.

?I U.s.D. C. District of De1alrare.

V 1'h8 1'1nal d1e'tr1bation of' auets was 28, 1943.- "!'be aomt of'

tbe us,u at thfe t_ 1IU i:D. 8D:888 of the _t at tilt tbie of the o. BIiCt.alDt

of the ao\i.ClIl.

'-

.J

~

-

~

~

~

~ - ~

-
- 55 -

The Commissionobtained an injunction against James S. GJadish Y frail :further

violation of the registration provisions of the Investment CanpanyAct of 1940. In its

complaint, the Commissionalleged that Gladish had been using the mails and instromentali ties of interstate commercein selling, purchasing, redeeming or otherwise acquiring

face-amount oertificates of Guaranty IncOllleand Trust and effecting securities transactions for the trust without having the trust registered pursuant to the provisions of

the Investment CompanyAct of 1940.

!ISecurities and ExChm: Gamnissionv. Guaranty IncQlleTrust and James S. Gl.adish,

u.s.n.c. DlSt. of 0 • Defendants consented to entry of judgment.
- 56-

PART VII

ADMINISTRATION OF THE INVESTMENT ADVISERS ACT O~ 1940

ENFORcmmNT

As was pointed out in the last annual report, the Investment Advisers An t4 1940

does not confer ~on the Oanmission the authority or duty to makeperiodic ~cti<llir

of the records or registered investment advisers such as is conferred upon the C~

sian by Section 17 (a) of the Securities .ExchangeAct nth respect to registered brobi'8

and dealers. The CClDIIIlissionhas, to be sure, investigatory powers under Section 209 Ca)

of the Investment Advisers Act, but these powers maybe employed only 'Whenit appears

that the provisions of the Act have been or are about to be violated and the ee-i8BlS'8

enforcement If'orkunder the Act is therefore necessarily limited. The Oamni8sionis -.king a special report to Congress with recOIIDIlendationsin this matter.

INVESTMENT ADVISERSI REGISTRATIONSTATISTICS

The following tabulation relates to investment advisers I registrations t

July 1, 1942 June 30, 1943

On June 30,1943 there were 698 registered investment advisers consisting of 398

sole proprietors, 128 partnerships, 170 corporations and 2 others.

..... ,

r

.~

~2

7

79

1lDJ

-1

104

5

o

o

1

698

9

. ..

. . . . ...

..

. .

. . .:

. . . . . . . .. . . . .. . . .

Effective registrations at close of preceding fiscal year •••••

Applications pending at close of preceding fiseal year.

!.pplication!~ filed during fiscal year • • • • • • • • •

Total • • • • • • • . • • • • • • • • • • • •

Applications nthdrawn during year. • ••••

Registrations withdrawn during year

Registrations cancelled during year • • • • • •

Registrations denied during year.

Registradiions suspended during year ••••

Registrations revoked during year !I. . Registrations effective at end of year.

Applications pending at end of year • •

Total .... • • • • • • • • • • • • • • •

!lID the lIatter of P'reces J. Lu~be, Investment Adrtsers Act blaaa8 10. Y1.

-

•

-
-57-

PART VIII

OTHER ACTIVITIES OF THE COMMISSION UNDER THE VARIOUS STATUTES

LI'lIGATI(Il

Cirll. Proceedings

At the beginning o£ the fiscal year ended June 30, 1943, 11 civil proceed.iDgB instituted by the Commissionwere pending; during the year, the Commission1nstituted 37

additional proceedings, including 28 injunctive actions brought against 71 persons to

restrain them f'rClJl fraud:u1ent and othe7wise illegal practices in the sale of securities.

Of' this total of 48 proceedings, 26 were disposed of' during the fiscal year, including

23 eas-es which resulted in the entry of injunctions against 54 persons. Twenty-two

civil proceedings were pending at the end of the year.

Since its inception, the ComII:issionbas instituted a total of 471 cirtl. proceedings

and disposed o£ 455. Permanent injunctions have been obtained against 994 firms and

individuals.

Data nth respect to civil cases and appellate proceedings, including a brief de.,.

scription of all civil proceedings camnencedor pending during the fiscal year and their

status at the close of the year, together with all cMminal proceedings, are included in

Append1x Tables 20 to 30. SaBe o£ the more important of these civil cases haTe been

8UIIIIR&1"izedn the preceding parts of tlris report.

Criminal Proceed1ngs

The statutes a.dmin:iBtered by the Cc.rlssion provide for the tranSll:ission to the Department of Justice of evidence o£ violations of the cl"im1naJprorlrlOI18 of those

statutes. The Attorney General determines 1rbetber criminal proceed.iDgB 8ba11 be 1mrtituted. It is the COIIIIission'spolicy to make a thorough inTestigation of' alleged. dolations bef'ore referring a ease to the Department of Justice, and to f'arnish to the Department the results of such inwstigat10ns as in the GaIII:1ssion's opinion appear to warrant

prosecution. Thereaf'ter, if' criminal proceedings are instituted; the m.eabersof the Ccamission's staff whoparticipated in the investigation assist the united States attorneys

in the preparation of the cases far the grand jury and for trial, and in the writing of'

briefs on appeal.

During the fiscal year the enforcement of the federal securities laws became increasingly important by reason of the continued rise in national income, the accelerated

acCUllUlationof savings, and the CUlc<Ditantscarcity of consumergoods. In the absence

of vigorous policing activities, eccmadc conditions such as these would be highly

favorable to the operation of' :f'raudDlentsecurities promotions.

During a period of war lIben industrial activity is greatly expanded, lIhen indi"rlctual

savings are at a high level and when liar bond selling campaigns introduce security investments to m:1llions of new investors, conditions are conducive to an increase in

fraudulent securities practices. The C~ssion is, therefore, applyiDg extra and 1musual vigilance to prevent a rise in fraudulent securi-ties activities. So f'ar as 1M are

able to -discover they have been held in check.

Up to July 17 1943, a total. of' 2,223 defendants have bee!l indicted in cuee c:bn'8loped by' the Ca-ission. DIJr1Dg the past year indictments were returned aplDat 189 defendants. CoDvictions have been obtained against 1,013 Y defendan1is. M these, 126

def'endant8 were convicted dariDg the past year. This includes t1m def'endmta held in

crSminaJ c<miJeBptf'or vio1at1Dg deczees of' 1njuncticm obtained in aC'tions proeecuted by'

the Ca.1ssi.cm.. Of' these convicted defendants, almost two-th1rds had pleaded pUty or

no de.f'enae. 0Dl7 one-third or tba defendants stood trial.

Y Includes an adjUstaent of' conv1.ctims tar prior years reported late.
- 58 -

During the past fiscal year, in over 98%of the cases developed by the Commission,

the main defendants either were found guilty by a jury or pleaded guilty or no defense.

If minor defendants are included, the figures for the year are 126 convicted and 13

acquitted. In almost one-third of the cases disposed of during the past year, the indictment was returned and the case tried within the same fiscal period.

The nationwide character of the COJIDllission' s investigations is shownby the fact

that during the past year, as in previous years, the investors affected resided in each

of the forty-eight states. Cases were instituted or tried in approximately forty of the

federal district courts.

The status of all of the cases pending during the year and the major events in each

of the cases are set forth in AppendixTable 23. Most of the cases fell into the following general classifications: frauds on the part of certain broker-dealers, industrial

loan companyfrauds, stock market manipulations, miscellaneous investment companyfrauds,

vending machine promotions, whiskey warehouse receipt promotions, exploitation of natural resources, and promotions of inventions. :

An unusually high number of small loan companieswere involved in the cases prosecuted during the year. They were U. S. v ; Dewitt T. Simpson, al (Standard System

Investment Corp., Savannah, Georgia:r;tJ. S. v, Jesse MiChaer- (Industrial Loan Company,

Inc., Columbus, Ohio); U. S. v , Carl A:-5Chroeder, et al (Continental Finance Company,

Jersey City, NewJerseyT;U. S. v. Charles R. Beall;-etal (Carolina Industrial Securities Corp., Columbia, South Carolina); U. S. v , CliftoilM. Bisele, et al (Southeastern

Industrial Bankers, Inc., District of Columbia); U. S. v , Joseph M. LYdon;et al (Brokers

Acceptance Corp., Boston, Massachusetts).

The first of these cases is illustrative of some of the practices. Standard System

was a holding companylIhich had obtained control of a number of industrial loan companies operating in various cities in Georgia. Prominent business and professional men

whowere not aware of the schemewere persuaded to serve on the board of directors, thus

furnishing Standard Systemwith a respectabje facade. ActUally, control of the corporation was exercised by Dewitt T. Simpson, Alonzo P. Ricks and EdwardW. Brandon, whopaid

dividends out of capital, made fictitious book entries, and acted freely with the corporate funds. They were indicted in February, 1943 in Savannah, Ga., for violations of

the fraud provisions of the Securities Act of 1933, and for other statutory offenses.

All were convicted, and varying prison terms were imposed.

Charges of frauds by broker-dealers and stock market manipulation charges figured

prClllinently in the cases prosecuted during the year. The manipulation cases were U. s.

v. NormanW. Minuse, et al (Trading on the NewYork Curb Exchange in the stock of

Tastyeast, Inc.); U. 57 v:- RaymondR. Taylor (Trading on the Detroit Stock Exchange in

the stock of Midweit'"'I'brasive Co.); ~. v, EdmondB. Bronson, !!:.!! (Trading over-thecounter in the stock of Bagdad Copper Corp.); U. S. v, Heog: Lieberman, at al (Trading

on the NewYork Stock Exchaz\gein the stock of Julian & Ko enge, Inc.). --

In the first of thes-e cases, NormanW. Minuse and Joseph E. H. Pelletier were canvicted of conspiracy to violate the anti-manipulation provisions of the Securities Elcchange Act of 1934. The defendants were charged with operating a stock "jiggle" in the

Class A capital stock of Tastyeast, Inc., a security listed on the NewYork Curb Elcchange, and during the period of their activities the price of Tastyeast had risen tr<lll

1-5/8 to 4-1/8. The proceeding during the fiscal year constituted the second trial for

the defendants, a prior conviction for the same offense having been reversed on appeal. A second appeal is pending.

Frauds perpetrated by broker-dealers on their customers were involved in U. S. T.

Russell W. McDermott,Indianapolis, Indiana; U. S. v. Ray O. Braden, et al., ParkersbUrg, West V!iiiriia; U. S. v , E. E. Morrison,etal. (JlOiTisonBond cOiiIo~ Ltd

Oakland, Calif.); U. S":"V. phillip J. Liuzza, Ne'w'"Orleans,La.; u. S. v: E.'T. K~8'bf)!IJ !!. ale (E. T. Konsbeii & ce., Chicago, m.). - ------

~

-
59-

In the McDermottcase, one o-r the most 1JJIportantdecided during the year, the constitutionality of the margin requirement provisions of the Securities ExchangeAct of

1934 was upheld by the U. S. Court of Appeals for the Seventh Ci1"cuit. The determinati.QJ1is also notewort.by because it is the first court case predicl'I.ting fl-aud on excessive trading by a broker in a customer's discretionary account. In 1939, the CClllllission

learned of the 1mpending dissolution of a Chicago stock brokerage firm, and reports -.ere

received of irregularities in the firm.s Indianapolis office. An investigation followed,

and it'ft8 discovered that Russell W. McDermott"manager of the Indianapolis office, had

been pUty of serious violations of the margin rules, by means of a deceptive system of

"kited- checks and "free-riding. II He had also engaged in certain fraudulent practices.

1'be ~t Court of Appeals sustained his conviction (131 F. (2d) 313 (C.C.A. 7, 1942»,

end certiorari was denied by"the U. S. SupremeCourt (318 U. S. 765).

The )(~OA BondCmaDl case was the first instance of a conviction for hypothecatiOD at casCierB' securit: es in contra.vention of Section 8 (c) of the Securities ExcbaDge Act of 1934. E. E. Morrison and H. C. stone, who specialized in street 1JJIproveMDt bonds~ nth o:ffices in California, had sold bonds on a "when, as" and if issued"

bas1s~ and tbereat'ter" despite f'ull payment by"the purchasers, they had hypothecated the

bonds lI1.th- an Oakland. bank, in violation of regulations promulgated by the Commission.

TheT 1I8re indicted in San Francisco on September 16, 1942" convicted on pleas of nolo

contendere and JI8Iltenced on April 13, 1943.

0i1 llm1 gas leases were the underlying basis for investment in the following caseas

!!:....A. T. ROTE. Wilson (Wilson Drilling Company, Danville) Illinois); ~. v. Eugene

M. Sb;1r1ey, !i&, Indianapolis, Indiana; U. S. v; E. Randall Henderson, Memphis,

TetmesseeJ ~. v. ToddM. Pettigrew, et al (Western Plains Oil Corp., Rochester" New

York); h.2:. T. Joshua F. Simons, et !!\Peoples Gas & Oil Corp." State of Washington);

U. S. T. Gabriel Di~ et al (Plaquemines Land ce., NewOrleans; La.); u. S. v. W. H.

Koch et al (Patm1n odUctron ce., Casey" Illinois); U. S. v, H. R. EdWiirds 1/ (Edwards

PetrOl8li'ia"""tto.,OklahomaCity, Okla.») ~. v. George t:"'"1!reen (M1diest Petrorenm,

fichita~ Kansas).

Tbe vending machine cases included U. S. v. A. B. Block (National Automatic Venclora, Dallas, Texas); U. S. Y. Maurioe A:Lev1ne, et a1 (Paymaster Plan" Inc., Boston"

Mus.)} ~. v. Albert:""Jartis (J>arldiigMeter Corp.;-creveland, Ohio).

In the usual vending machine case, the promoter undertakes to sell vending machines

to the investor under an a+rangement whereby"the investor will :iJmnediatelylease the

machine back to the pranoter, who is to operate it for the new omer on a profit-sharing

basis. Thereafter" periodic payments, purporting to be profits, are made to the investor. Actually", such payments are made out of capital. The purpose is to induce the

pv.rcbase ot additional machines. This fraudulent pattern was the subject of the indict1II8D.tin the l.eT1ne case, lIhich involved the sale of cigarette and peanut vending maohines. Addition81. frauds were a+so charged. One of the de:fendants" Alfred D. Cohen"

bas been cOD.T1ctedand sentenced on a plea of guilty. The others are awaiting trial.

The C~sion IS interest in these cases arises from the fact that the transactions,

under the Securities Act of 1933, are essentially securities investments rather than

aere sales o:f personal property.

Vining cC8p~ stocks were often involved in the fraud cases. In a number of these,

the securities 1191"8 sold by residents of Canada operating from across the border without

cc.pliance nth the statutes of this country. The Commissionhae been cooperating with

the State Department and the Department of Justice in efforts to obtain ratification of

a pending treaty with Canada in order to permit extradition from Canada of those who

'Violate oar securities laws and other cognate statutes. The treaty was ratified by the

lJDited states Senate in 1942.

!1m F. (2d) 286; 312 U.S. 473; 131 F. (2d) 198; 317 n.s. 689.

-
-60 ...

The cases involving promotion of mines in this countr,y 'Were: U-.S. T. Patrick T.

~et al. (Rainbo Gold Minest Marysvale, \1lt:;ah);j U. S. v. Edmond B:'Bronson, 8t !!.

~Copper GoIIIpaDY, NewYork); ~. v. Pbillip~tter (SUetter MaCer JI:lnes

Josephine County, Olregon); U. S. v. AmosDowns, George Hawley, et ,!!., 133 F. {2dj 966

(HmRbolt "Consolidated llines~, Clear creek County, Colo.); U.S. v. Simon C. Bedr1.ck,

e1; ale (Desert Gold & Al'Wllimml,Alaska and Imperial County, c8iIl.). --PrOlRotion of m:1nesin Canada 'Wereinvolved in U. S. v. Jom Herck (I.aB81De"Gold

lI1.nes, Ontario, Canada); U. S. v. Edward S. Harrison, at al. (Pilot lloJibdmdte JIiJIea,

Ltd., Ontario! C8Dada); u:-S:- v. George ReynoldS, et aI:" t'ivon Gold Jfl.nes, Ltd., IIaD1irea1., Canada); ~. v, """J:"""""Samuel Wacker, !i&. TR"TEi FiDtmcial Indicator- 1'0I"a1t0,

Canada).

Among the cases involving charges of fraudulent trans~ctions in lfb1skeT warehoue

receipts 1I8I'8 U. S. v. Ed:1fard A. Sloane, et al. (A. D. Lowe & Associates, Chicago,

Dllnois); U. S. v. Mark A. Freeman, et &:" '(Consolidated .Associates~ Inc., Cbicago,

minois); ~. v. Frank J. Ryan, ~!l. (Research and InvestDlent Co •., lrilJRiDgtclD, :N.

Carolina) J ~. v. Jolm Factor, ale (um.ted Bottling & D1.striblltiDg CCIIp8D.;T,

Ch:1cago, D.linois, and cedar Rapids, Iowa)

Factor (iJake the Bmber) and a group of confederates, operating through tbe Uid.ted

Bottling and D1stributing Company,a Delaware corporation, defrauded some 250 imeBtars

to the extent of $1,000,000. 'l'he owners of 'Whiskeywarehouse receipts were induced to

exchange them for bot~ling contracts, by" the terms of which United Bottling was to hold

tbe whiskey until it matured, see to its bottling and distribution, and traDBlllit the

profits, less a stated service fee, to the investors. Actual.ly, United Bottling 1f8S &

lB8!'8 paper organization; and the confidence ring sold or hypothecated the 1d11.sk.eT "Warehouse receipts as soon as possession 1I8S obtained.. 0w1ng to the destrllct10a of corpO">-

rate records, an intensive, two-year investigation was necessary to secure eri.dence

S11f'ficient to convict. An indictment liaS returned in cedar Rapids, Iowa, 'IM1V" of the

victims of the fraud being Iowa residents. Eleven defendants pleaded gulltT ad received substantial prison sentences. Factor 1I8S sent to the Federal peniteilti&r7 at

Leavenworth for a term of ten yean.

Other cases during the year involved a social and .tra:ternal -organisation. (the

Mantle Club), companies promoting inventions, purported 1nYeBtlllentprogr.. in of

one land or another (such as land, mortgages, building and loan securitia, or stoCks

find bonds), a newspaper, a reference librar,y, the so-called f'ront-money racket, a stock-

.-rket tipster, sale of sh1p-shares, and promotion of a pinleas diaper.

The Mantle Club was organized by HughB. Monjar and was a nationwide tratema.1.

organizatIon 1dth 3b,000 members, devoted to moral betterment and other high ideals.

A deep sense of personal loyal.ty to Monjar was :fostered IIIRODg the ".. bersh!p. JIoDjar

1IU represented as 2. financially astute individual, It'Iiocould and would pecurd.ary

benefits to persons proving themselves lfortb;r. A large number of the club's Ji!ft8

were induced to JRake personal loans to Monjar. The S11JI ot $1,340,000 was raised in tb1.8

1IBID1er.

The Oommission's investigation resulted in the mdictllent of MonJar ad a 1iiiiIber of

his confederates. It YaS charged that Yonjar had converted most of the IlOJI8T to h:I.8

om use, and that he bad obta1rled the $1,340,000 loans by falsely representiug tbR b&

would assure the f'iDancial independence of those who put up their money. It was" a1.Iro

charged that Vantle Club memberswere induced to deal, to their disadvantaae'. with

enterprises cmrtrolled by llonjar and bis associate8. Jlonjar and ten co--deteDd8llts"'ftre

courlcted, and receift<l jail sentences totaling over twenty-three years, 8D4 :t:lDn

wtaJ 1:ng more tbIm $81, 000. Appeals are pending at the present t1me.

I:D. a 1'ront-a0De7 case (U. 8. v. Edward Hill, !!.), the scheme, as all.epd in the

1DRetII1eni;, inTo1ved getting SIII&1l. business men who needed additional capital. to ..n_ i1d.Ua1 ;pIJM1It OIl &CC01lIltof the expenses incident to the obtaining of pr1Yate 1'huinctna

~

~

•

~

~

~
or t~ tloat!ng of eeC\U'iti.es. The defemtants made a prvteue 'ot financiug operations,

it was ebarged, although &~ there 1Rl8 no htelltlcm of -reDdering the services praibed. Eleven the twel'ft defendants ban been cqarlcted on pleas of ga:llty- :diZ!0

conteM"C:m the .ost recent of theil being au s-al' J'O Lewis.. The twelfth det

b&8 nM apprehended.

In the sbi.p-sbares case (U. S. v, lIar.JIh Gilb*rt, .t. al.); the 1nveIrtor ot a mnr

'type bO&t.)"oalled the JlSea H;ydro No. 111, en 'R8 nppoied~a operate OD 1111 entirely

Jl81r pr1nc1ple, sold shares to the inTeetne public OIl the :t~ .. pretenses that a prev:tously proaoted Tessel 'WaS in S'11ccesstttl operation,. and. tbat the new ship 1I8S in pr0-

cess of Construct-iOllas a $4,000,000 lluer whioh lrOttld atta1Jl a speed at 80 to 100 .ue.

per hoar. The four defendants 1n this case plnded guilty. .

III the tipster caset- a railroad bond trader named John Hession, who bad been the

author of the newspapG'r co1\1111Il, "Streaks of Steel", 11&8 convicted tor violations of the

hand prCTrls1.c!ms of the Securities Act of 1933. The ind1.ctment cb8rged that he bad '

pretended to have ins:1de information derived frQB a goveXDiii$nt s~ce as to a~ion to be

taken by tbe Iutersta.te COJIIIIlerceCcamission in connection lI1th the reorganization ot a

certain railroad. It ft8 also charged that the dissemination of -tb1a and. other :talse

inf'ol'Jl&tion induced widespread purchases and a marked rise 1n the price of the bonds.

Re8siem baa taken an appeal

. In tJ. S. T. IJ&r!!l H.b!ivenor,. al. (General Ordnance,Co.) m bd1:ctment returned

in New York City charged t t in the s8ie of General Ordnance preferred stock., Hevenor

represen1led that a llew:type of aechanical fuse, designed for use on lD'rti-atrcraf't projectors,. bad 'been dne10ped bT the company and 1188 ready ror test1llg, whereas it 1188

charged that the cleve10paent work had been abandoned before cOIIIPletion. !b1s case _

not been tried...

The CC8IIIission,. during the ~iecal year ended J1me 30, 194:1, reeeiT8d apprax1Jlate~

l2,84O items of 1II8.U chssitied as Itcomplaint-enforclaent.'ll 'fbis correspondence dealing

w.1:thalleged. securities v:to1ations constitutes one or the Cc:amiss1onrs chief eourees O~

information concerning possible securities rtolations. Investigations made bT the e--

1I1.ss1.0I1"S awn staff and contacts maintained by the staff with other gotertilitllttal (J'ederal, state and local) or private agencies provide additioua1 inf'oraattou. .onoend.ltg

alleged violations. The following table 1nd1cates the extent of the ~01,1. ... 1!rY'eet1gat01T aetiv:tties c

81

@

647

1Imfstigat-ion

cases pendiDl

Jane 30, 1943

Investigations

in1.tiated or

docketed July

1, 1942:,. to

June 30, 1943

Investigation

-cases pending

July 1, 1942

In-.estigations

In-vestigat1oas

ud legal casea

closed (or

changed to

docketed Cas~8)

July 1, 1942to

June 30, 1943

Prel1mfnllJ7_!I ll9 sa 126

Docketed v 541 199 174

Tetal 660 . 2R1 300

!I:rm..tigatiau ca1T1ed on thr<7agh correspoa.deuce and li:ad.ted field YOrk.

J:lma8tiptiou asa1ped to field 1Jlft8t1gaton.

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The ee-ission' s Securities Violatiaa Files~ of a clearing house of inf'onlaticm concernii:1g f'raudulent secmrit.1es transact.1qas~ and establislied in connection

with ent'orcement and registration actirlties, baYe been aaintained and expanded during

the year through the conth:med cooperation of state securities COIlIIl1ssiemsand other

public agencies, members of 'the National. .Associatiaa of Better Business Bureaus, Inc.,

and aeabers of the United States Chamber of~. As of JuDe 30, 1943,. the Ccad:ssi.aa had asS8lllbled 1D these f'Ues data ccmcerning an aggregate of' 43,382 persons against

whc:a Federal. or State actiaa bad been taken in caanectiaa with securities Tiolatians.

DariDg the past fiscal year alOJ18additiooal i.1iaIs of infcml8ti.an re1atiDg to 6,004 such

persons -.ere added to these :tUes, 1ncbJdtng 1Dfcmaati<mconcerniilg 2,317 persons not

Pr8v.1onsly identified therein.

WfivITl&) OF 'tHE C(JOITSSI<I Ilf 'tHE FIELD OF A.CCOOlI'tIllG MID ADDI'lING

Ettect of the 'War

One of the most fJlportant problems con:froDt1ng acCO\Ultants during the past year

bas been 'tbat of detendn1ng too proper approach to be taken toward the special uncertainti.es which are inherent in the presentati.on of rmanci.al. statements under existing

wartble conditions. Accountants have been obllged to f'ace situations in which the entire business dane is novel, is subject to abnontal business and economic risks, and is

cODducted UDder novel legal. and contractual arrangements of uncertain incidence.

The Canm:ission has cooperated with the accounting prof'ession and with particular

registrants in 8."q)lor1ngthese prob1e.s aDd m developing appropriate techiques, procedures, and interpretations for deallDg with thea. cae of' the most iIDpartant and perT8Sive of these uncertainties has resulted :trca ~he statutor,y provision f'tir_ the re--

negotiat1on of war contracts of' ~n18S eugaged in war prodaction. The CCIIIIIliss10nhas

:!ollowed a pollCT of requesting that the .tblanc1al statements of' registrants disclose

the pertinent .tacts aboat the c~'s position with respect to renegotiation. In addition the ee-:ission, during the past;J88l", aaended 1ts requirements ~or filing interla

7ep0l"ts on Form 8-K so as to require the f'11:bJg of this fC1l'alJpOJl the settlement of' arrr

renegot1ation proceeding. InaSPIQchas the settle.ent of renegot1ation proceedings

elfJI1nates a material uncertaiDtJ" :relati.n to tlIe :t.f.mmc:l&lstate.ents, it was f'elt that

the f'act of settleJlEl!lt ~ed .tar Prc8pt disclosare in an 1nteriJI report. The provision

of' war and post-war reserves far the 'SpeCial ezpeDBes and losses attributable to wart1lle

prodnct1on has in the case of JUDY' registrants been a most dit.ticul.t accounting problem.

The C~rlan bas not attellpted to isne geueral rules gOTerD1ng the provision of such

reserves. HowYer, in Account1DgSeries Release No. 42 atteDtiaa 1I&S called. to the disclosures that shou.1d be made in financial statelllents with respect to such reserves and

the charges .ada in establisb1ng tm..

Accounting f'irms and business organizations have cont1mled to be faced with critical shortages of' personnel. The seri.owmess of' the situation pranpted the CCQlission

dur1ng tbe past year to 1mdertake a oalprehensive revision of its reporting requirements

1esigned to f'ac1litate the furmlsb1ng of f'inaDcial infOl'!Ut1on with a minimumburden and

expense. 1/ One such change pem:l.tted the cai.ssion or partial. aIlission, under certain

e1rcumstances, of' particular schddules supporting the f'inancial statements of' registrants. Also, money f'igures in fiDaDcial state.ents were pel'Jlitted to be sta.ted in

even thoosSDds with zeros CBitted. It was expected 'that these changes would permit substantial t1Jle sa'Y1ngin the f'ibal preparat1.on of schedules and financial statements.

J'arthBraore, it..as provided that f'inancial statements included in annual reports to

stockholders JIight, in SQ1lMt cases, be :f'11ed in lieu of' the .t'inancial statements required

to be .t'iled 1DIder certain amma.l report f'artIIBof' tbe Camrlssion. Financial statements

so filed JItlSt, however, substantial11' cc.ply with the requirements of'Regulation S-X.

The concept of' -substantial c<1Df'onnityRwas clarif'ied by an interpretative opinion of'

the Chief Aceoantant in A.ecoant1Dg5er1es Release No. 41. These several changes have in

aJ.l Cases been .. e pmI1.ss1.ve so as to avoid aar possi.ble hardship to registrants for

-- the pre-ez:1sting requ:bwellts -.aal.d, because of spec1a1 c1rcmIstances; be simpler.

!/8ecuritie8 Act or 1933 Bel.ease Ho. 2888.

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CiocJp«ration YUh Protessional Societies and others

The CtM1aaicm hu soqht to cooperate nth the ace<nmt1Dg prate.aiOll and to add

:its f'ull 1Dtl-..ce to tW at the proteasional societies and others in a joint effort to

aiDtain and n:1ee -.G&Ilting and a.d:1.tilig standards. As heretofore, the C~sslon, in

ita praalgat1cm: of 1"dI8a Gp1D:i.onson accounting ma"t'Mr'8, has, wherever praGtieab1e,

fDrlted the c~ or auggeati0JJ8 ot other Federal and. State agencies interested in

accounting, of cm.1ttees of protn8ional societies; and ot other interested persons.

Recipl"oca:rq, tile Oc.ms8iCll111ae beea invited to off'er suggest1.ons or ccaaent8 on proposed actions or ball~ or theae drganUati0118. '!'be benefits accruing f'r0ll1 such

cooperation have co:at1Jmed. to 1De quite aubS'tant1al.

Professional, Conchlct

. ~e!lt lltatus is reqcd.s1te tar 8l profeniOD&1 accountant if h1.a certifieatiClll

18 to &Ccc.pllah its :Intended Jf'l1'Pose ot providing an impartial ami upert rerlew of' the

~cia1. stateMRte ot a partica:lar CCIIp&lIT. The Oe-das1.on in i-ta replat1.<ms and

JMb1.1ehedreleases !Jaa -preYiouly indicated. partiC'll1ar relationships or conditions that

:a1ght d88t;ro,r independe!lce. Hcnnrtfl, the past year the Ccw-188'1.011 8118nded. ita

-ra188 to cocli.fT the principles to be applied in oonsidering qaestiiQD8 of :independence.

It appeared to be desirable to incorporate these principles in the publi absl rules and

regulations illrl..- ot cases in 1ih1ch substantial 8IIlomts due traa otticers and directara -.ere 8hoIID. separately in baJJmce sheets rued with the C~iOll ba.t, in the

biUnce sbeet ooata1necl in 'the amrvaJ report to stockholders, were 1nc1l1tWd withot1t

disclosure lIDder the CllPt1.o:l "AcCounts and notes receivable, les8 resenes.'" Accoantinc

5er1ea Release .0. "J7 UIfJl'ldecI the Ccmd.s8ion ts rules to ..a expllc1.t lIbat was prenously blpU,cit that in "deterw1n1ag whether an accCNll'tmt U :ba tact :independent

nth ftspect to & partieular cCIIPGT, appropriate COIl81derat1.OIl ahall 'be given to the

fl"OprietT of the :re1&tiOll8h:1ps &lid prut1~es 1nTolved in all Sft"t"ices perf'0l'l!1ed for the

cCMp8IQ' b.T nch U'COWIltat. ." '.rhf.s 811811daent resulted 1a mquiries f'rca the account-

:big prot88sioa as to 'Whether the C~8s1OD Is intention was to seeJc 'to d.etendne the

lIpropne-tT' of these relatiouh1ps 1D and of thellse1ns. '1'0 &TOida:q possible 1IiBinterpret&'t1aa of its polic;y, the COIID1.ssion,in Accounting Series Release Ho. 44, aaended

ta. rttl.e in qaeation to provide that in determining whether an accountant is in fact inde.peIldt.nt nth respect to a particular registrant Jfthe COIIlIlIission will gin appropriate

~eratiGD to all relevant circumstances ino1ud1ng evidence bearing 011 all relationbetwen the accountant and that registran't . II.

ACCOUl1tilli a!\d Auditing

Darillg the past year the ee:-1ssion rertsed its tJn1f'01"Il SyBtea of Accounts f1:1r

Public lftlll1;T )folett,. ac.pames. '!'he original system of accounts prescribed for public llt1l.1ty holci1.q e~u became effectiTe January 1, 1937 and. cont1Jmed :in effect

without cb10lp _tU the8e l'erlsial1B which were anneaneed in A.ccoanting Series Release .0. 39 bned Decaber 19, 1942. AzIloag other things the no systea of aceoants provided

that a di'rl.cWad rece1ftfl an stock ot a paying calpsny of the 88l'le class as the stock on

whiOh nch di'V14eDd was pd4 shOll1d not be treated as income. 1/ PrerlO1l8ly it had been

prorlded that nch d.i-r.l.d:enda eOQ].d.,1d.th1n certain l:1J1lits, be !nc1' sd in mccae ar

earud surplus at tile opt101l of tlta recipient. The other principal. substan'ti'Y8 changes

related to the ehow1Jlg ot 1nc~ taxes in the income statement, and the handJ1pg ot discoant and "PU"Cbase pJW1»wa OIl capital stock, and Itbasket" 1nvestaent accowmts in

lfIdch .,enral 1.Jnu-.ate carried at an unssgregated book 8Jl.OUIlt.

!IIn Sept.ber 1~, a bulletin was .ssued by the CODIIIIittee on AccORDt1Dg Procedure of

the Aaer1ca Institute ot AccOlUltantsindioating that a dividend of cc.wn stock declarect em. Cc.loD. stock was not 1nt"0Il8. On October 14, 1943, the Board at GOftrnora

of tM ... York Stock E10hange issued a statement on stock d1T1dends 1D1Ibich the

88M ~t1Cl1l was tak8Il.

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The Commissionalso amendedRegulation S-X to prescribe the manner in which original cost data and other components of utility plant are to be shownin the balance

sheets of public utility companies and consolidated balance sheets of public utilitT

holding companies which rile financial statements subject to this regulation. These

amendments, announced in Accounting Series Release No. 43., were predicated emthe belief

that the segregation of original cost, historical cost and other components of book

amounts of utility plant is, in the light of present trends- of rate regulation, of great

concern to investors.

More general questions of accountdng princjplee or practices were dealt 'With in several releases issued during the past year in the Accounting Series. Release No. 45

dealt with the accounting treatment to be accorded premiumspaid upon the redeJDPtionof

preferred stock. This release, issued on June 21, 1943, concluded that such premiums

should ordinarily be charged to earned surplus. Subsequently a cOllllllitteeof the American

Institute of Accountants raised a number of objections to the position taken. TheS'eobjections, which were first urged as to prel1ll1nary drafts of the release, are nevertheless being given further consideration by the Caamrl.ssion. Release No. 35 dealt with the

proper disclosure to be given in financial statements to provisions and conditions that

l1Jnit the availability of surplus for dividend purposes. Release No. 36 discussed the

treatment by an investment compan,yof interest collected on defaulted bonds applicable

to a period prior to the date on which such bonds and defaulted interest were purchased,

while Release No. 38 discussed the proper accounting treatment of the post-war refUnd of

federal excess profits taxes provided for in Seotion 250 of the RevenueAct of 1942.

Informal Consideration of Account3 Problems

Raised in the Cflse of Individu81 Registrants

The greatest part of the COIIIIII1ssion' 8 acoounting and au.diting activities stems fto<a

the examination of financial statements filed by particular registrants. )(eJlorancm

issued for the purpose of citing defiC'iencies or making suggestions for tuture reports

continue to play an imporant role in securing satisfactory financial statements for investors. Also accounting and auditing problems have been the subject of 1mNIlerable informal conferences between the COJIIJIliss1on' s staff and representatiTes of part1nlar

registrants. These conferences have proved to be an expeditiou8 means of 1"e801'Yiftg diffioul t or unusual questions 'Wi.th respect to which no speeific rules haft been issued or

the application of existing rules is uncertain.

REPORTSOFOFFICERS,DIRECTORS, PRINCIPALSECURmHOLDERS

ANDCERTAINOTHERAFFIT.IATEDPERSONS

The general purpose and scope of the ownership reporting requirements, prescribed

by Sections 16 (a) of the Securities ExchangeAct of 1934, 17 (a) of the Public Utility

Holding CompanyAct of 1935 and 30 (f) of' the Investment CODlp&nyAct of 1940 and the

CommissionIs rules, regulations, and f01"1l8promulgated thereunder, as well as the Commission's procedures for obtaining the filing of required reports, 8X81I!1n1ng them for

compliance with the statutes and the rules, obtaining amendedreports lIbere .ee88ar.Y,

and the publication of information contained in the reports, have been described in the

Sixth Annua] Report, pages 180-182, Eighth AmmalReport, page 47, and other previous

annual I"eports.

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Description of Report Fiscal Year ~943

. . .

. .

Securities ExchangeAct of 1934:

Original reports-Form 4, 10~657; Form5, 125; Form6, 576 •••••••• Amendedreports-Form 4, 911; Form5, 32; Form6, 62

Public utility Holding CompanyAct of 1935:

Original reports-Form U-17-l, f!7; FormU-17-2, 333••

Amendedreports-Form U-17-l, 3; FormU-17-.2, 22 ••

Investment CompanyAct of 1940r

Original. reports-Form N-30F-l, 265; FormN-30F-Z, S41 •••••••••• .Amendedreports-Form N-30F-l, 19; FormN-30F-2, 39. • • • • • • • • • • •

12,358

1,005

420

25

],,106

58

At ~he close of the past fiscal year, whenthe security ownership reporting requirements had been operative under Section 16 (a) for more than 8 years, under Section 17 (a)

for more than 7 years, and under Section 30 (f) for nearly 3 years, 8ft aggregate of more

than 200,000 original and amendedreports had been filed by 33,815 persons closely identified with the managementor control of industrial. utility, and investInent enterprises.

CONFIDENTIAL TREATMENT OF APPLICATIONS, REPORTS, OR DOCUMENTS

The Commissionhas power, as described in its Seventh AnnualReport, page 234, and

previous annual reports, to provide for the confiden,tial treatment, upon application by

registrants, of information corrtadned in reports, applicationa, or documentssuch as

prospectuses, proxy statements and registration statements, requi.1"edto be filed under

a number-of the acts which it administers.

In addition, as set forth in the Eighth Annual Report, page 6, rules have been

adopted by the Commissionpursuant to the securities Act of 1933, the Securities Exchange Act of 1934, and the Public utility Holding Com:p&V" Act of 1935.whichprovide

for the amission or confidential treatment, either on the COIIDIissionlsown1Il0tionor

upon application, of any such information which is inconsistent with the standards

of the Code of wartime Practices promulgated by the United States Office of Censorship. Since copies of the documentsfiled with the COIIIIIIissionunder Sections 12 and

13 of the Securities ExchangeAct at 1934, the not inconsiderable TolUll1eand the

nature of which are indicated earlier on this report, must also be filed with the securities exchanges, the Cammission bas continued. to obtain the cooperation of the exchanges in temporarily wit~old.ing If'r0lll public inspection their copies of these documents until the COIIIIDissionhas completed its preliminary examination of this material

and the exchanges have had an opportunity to delete fr(lll a.rq documentsuch information

as is specifically authorized or directed by the CCBIIlission. nmediatly thereafter

these documents are made available for public inspection. Wb1l.ethe general type of

ini'ormation 1fh1ch the Office of Gensorship in the Codeof wartime Practices d8ell&adversely to af'f'ect the -war program and which thus, under the CaDission J s additional

rules, is to be omitted or treated confidentially in doewaent. fUed under the three

statutes mentioned above, was summarizedin-Securities Act of 1933 Release NO'.27S1,

membersof the Commission's staff have rendered eYery possible' usistance to registrants,

in advance ot filing dates, in the preparation of docuaents in accordance with th9 objectives sought by these rules.

The following table indicates the numberof applications-including thereunder any

action taken by the Commissionon its awm motion under these newrules--receiTed and

acted upon during the past year, together with the numberpending at its close:

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Applications for Confidential Treatment-Fisdal Year Ended June 30, 1943

Number Number

pending Number Number Numberdenied pending Act under which filed July 1, r.eceived granted or withdrawn June 30,

1942 1943

Securities Act of 1933 !I 0 25 22 2 !?I 1

Securities Exc7 Act of

1934 c 47 58 43 36 26

Total 47 83 65 38 27

!I. These figures represent applications filed under Rule 171 and Rule 580.

Both ot these lfere withdrawn. Y These figu-res represent applications filed under Rule X-24b-2 and Rule %-6.

PUBLICATIONS

Public Announcements

Under the various Acts it is the Commission's duty to publish its decisions and

generally to inf'ana Congress and the public ot its activities. Its releases are classified into various categories so that a person may receiy-e the material relating only to

-those phases of the CCIlIIlIissionlswork in which he is interested. The COIIIIIdsstonhas

made an exhaustive check of its m:dl.ing lists to eliminate those no longer desiring

specified material.

The announcements issued during the past fiscal year :included 7B releases under the

Securities Act of 1933; IS? under the Securities Exchange Act of 19,34; 756 under the Public utility Holding Company Act of 1935; 143 under the Investment CompanyAct of 1940;

and 5 l1Uderthe Investment Advisers Act ot 1940. In addition, three releases were issued concerning the COIIIID1ssinnJ

activities a in corpora-te reorganizations and three rel-.a&e'S'Wereissued under the 1'rtlst Indenture Act ot 1939.

The Oamnission also continued the daily p'Ublication ot its Registration Record,

which presents a brief description of data filed under the Securities Act of 1933 and

-the '!'rust Indenture Act 'of 1939.

The following is a partial classification by subject matter:

Opinions and Orders 857

Reports on court actions 126

Statistical data 34

SUrvey tJeries 22

Accounting series 12

other Publications

Decisions and Reports ot the Commission~

Buckram-Bound:

Volume9 April 1, 1941 to August 31, 1941

(The Decisions and Reports of the Commissionmay be purchased 'trOll

the Superintendent of Documents, GovernmentPrinting Otfice,

1Yas~on, D. C., and a price list will be f'urnished upon request.)

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-!WB1'Y8 iaftes or the Official S~'1 or Security TnnsactiC1D8

IIDf1 HolM.. -or Officers; Directon and Priile1;)al stockholders.

81ph8bet1ca1 List of CcIIpauies Registered 1IJlder the IhTeataenL oc.- JIIIIO" Act f4 1~lt

.I1I1I1p~ Ltst of IJitvslM'Jrt, AdTtaen _Registered p1U'8UIlt to

Sle\1.<iIl 2CJJ or the In....taeut A.dT1Bers Act of 1940.

Ja Lbrt of OYer-the-Oounte1" Brokers lind Dealers -registered.

a~ t1Ie e-.t.M1_ u or Ju1T 31) 1942'.

LiSt of 88our1.ttea !nded 'GIl Ex:C'haIIpe under the Becurities EIOhange

.let; O! 1~ of Deeeaber 11, 1'942', together with Sappl__ thereto ..

(A ca.plfte lf8t of 'the ~B1.OI1J8 ]7tlblieatiODB". the Rules of Practice

or tIiIIr 9d4B to Pon8 1d.ll. be sent upon request IIade to the of'fice of- the

ee-r...... ~ PMl .... :Jpb:ial, Pa.)

DBPBtifl(l( OF REGIS'l'ERED INFOBIlATION' BY THE PUBLIO

Cop1M -er au pab11e iDt'oraatian on IDe nth the eo.iss1ou, appearing in registraUaa ~ app1b:ati.one, reports., declarations, and other publi.e docuaents,

Imd]etile t. ilUIIMtl:tiOll -m the Public Reference Roomor tbe CaIIIIl1ssionat

PhfbdelpMa~ .Pa.; DiIJ"fDg the past fisc&] 788I' .ore than 7,3-:n'..wers of the public

rliIJWd tId.8 l'abttc B8feNwe Rom! seeJaDg such infol"lllation, and thoasands ot letters

8JI11iel1!pJ1aDe caUs -.ere reeel~ 'requesting registered intorsation. (This is 8J:-

c1D1.w 'Of r8qaeIJt8 rar releaelS, ete.) The C~ssion, tbrongh tIJB h.c1llties pro-

~Cir the sale of publ.iC J"egistered mr01"lllation, filled aore than I,m orders

.fir photcieap&a or~, iIwol:r!Dg l.48.468 p&geS.

liii&GftIr _ practi.cab"1e, the ee-ission has sought to ake SOE of tbB public

fIlfanatiGB fi1$d 1d.~h-it anUable in its Tegicmal of'fices. :rn the llEnr

York "eel-o-J ~ at 120~, taeUities are p2'O'fided m the iDspection of

eerta1a pgh1:Ic iDtorw&ti-oa 011 :tne nth the O~S8ion. This lnclude8 -copies ot (1)

ach qHcati.-s tar pt5l'..-at regtstl'at1on of securities on all utiOD&1 securities

eRl-~ euept -u- ..... y~ S,t;oek BxobaDge aad the New York Curb Exchange; as haw

recabed. ~Dal. --rnat~_111. tlle QCllllinion, together with copies of SUJ'pleaental

~ 1IDil. ' uta 'thereto, (2t Il7JDItal. reports filed pursuant to the provisions

of 15 (d) of the S8'Curities Excbange Act of 1934, as saended, by issuers that

haft ACurl~ies lIDder the Becurities Act of 1933, as amended. Dur1ng the

put ft8eal 78a' 8,on .-bers of the public visited the lift York Office Public Refetesw:e ~- 8IIl1aare tbrm 3,7Ol.lIl8de telephone calls to this office, seekiDg regist8red. 'PiIb1b: iDf'0Iat1.ca, f~, releases" and other material.

lit t1at cMM&O ~-oul Of'fice, lIhicl1 i, located at 105 WestAdaliaStreet, there

are aan~ ror pabl.1e iDspect1.-on copiee of 'applications for ptllillBllentregistration

or .ectirlu.e .. tb8 ... Ydf'k stock EltchBnge and the ,New York Curb ExchaDgej which hIne

reaetWll fliIa1. e.*,n'ltioa in the Oc.aisBion, together with copies of all 'supp18ll8lltal

ftjMIt1ia'QIl "'.a.tJ! t.h8reto. DarfDg the fiscal year ended June 30, 1943, JIlorethan

2516'. '9riI'or 10ba pablie...-lB1ted the Oh:1cago Public Heferem=e Ro<a, and approxiaatelT

~ tel..... ~ ~ ""1~ tbere 8Dd2338 ~sts were .. tor registered int_watt -r~ .nltiu8., &lid pther 1II&terial.

. bl __ of UI8 ar..1a1Ult. offices there are available for fDspeetion

oapiea. at~_.8ued in pahm: ofteriDgw or securities emetiTflT registered

....ter tb8 Silcedttee .lI:t of 193-3,_ aended. Dapllcate copies of applications for

~ at brobt1I or dealer8 tzusiciiDI business on owr~tbe-eomter urkets,

teI&'eUiIII" wi1ih .1 'Va] ~t8 ~o, tUedUDder the 8eour1ties ~baDge A.ct

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of 19.34, are also available tor public inspection in the regional of'tlO8 having jUrisdiction over the zone in 'Whichthe principal o1"fice ot the broker or dealer Is. located.

Also, inasmuch as letters of not1!icatiOll under Regulation A 8X8111pt~ isRes 01"

securities fran the registration requirements 01' 'the Securities Act 01' 1933., aa ammded,

may be 1"iled with the regional o1"1"iceof the Ca.rl.ssion for the regiOll in which the

'issuer's principal place of business is located, copies ot such wateria1. are aftilable

tor inspection at the particular regional otrlce where it is rued.

During the past 1"iscal year duplicate copies ot applications tor registration 01' investment advisers, together nth supplemental statements tlJlkoeto filed under the Imestment Advisers Act 01' 1940, have been Ede aTallable tor public 1nspection in the regional otfices having jurisdiction over the zone in which the principal office of the investment adviser is located.

There are available tor inspection in the CCBliss1011'8 San Francisco -and Clnell111d

Regional Offices, in which are prortded ccgp1ete tacilitles f'or 'such registration 8Dd

qualification, copies ot registraticm statealents and applications tor qaalif'1cat1011 of

indentures :tiled at thosa regional otf'ices-.

Copies ot all applications f'or penaanent registration ot secur1:tiea 011D&ti~

securities exchanges are available f'or public inspection at the respectbe exch8tip uPon

which the securities are registered.

PUBLIC HEARINGS

The tollowing statistics indicate the number of' public heari:Dgs held by' the ee-us1.on f'roIIl July 1, 1935 to J1DIe.30, 1943:

7-1-.35 7-1-40 7-1-41 7-1-42

6-.300-40 6-3<>-41 6-3<42 6-3~ 'l'otala

Securities Act ot 1933 339 11 5 10 36,

Securities Exchange Act ot 1934 500 9S 84 S3 m

Public Utility Holding COIIIp8IJT

Act ot 19.35 lOIS 199 170 183 .1570

Trust Indenture Act ot 19.39 .3 5 0 1 9

Investment Advisers Act of 1940 0 5 5 0 10

1llvestment Company Act ot 1940 0 1.3.3 53 '. Z70

Total -

l867 402 3m 330 -

2996

PERSONREL

CCIIIIIl:issionerGanson Purcell was reelected CbainIan of the Cc:.B1Bsioa 011 Jqhe -:24

19431 for the period ending June 30, 1944. _ '

On June 6, 194.3, CoIIIIII1ssionerSaner T. Pike was reappointed 88 ~'OIler r.

the Wrm expir:fng' on- JUDe 5) 1948.

The Commissioners as 01' the close of the past tiscal. yeU' wre as tollDn.

Purcell~ GaasOll, Cbairan

Hea17, Robert B'.

Pike, Saner T-. '

Barke, EdJmnd Jr.

O'Bri8ll, Robert H.

As of the close ot the past tiscal. year the p~onne1 ot the C~s1.on 1IU 'Cc.-

prlsed of 5 COlIIDdss1onersand 1,283 employees, ot which 321. were &881gRed to the Regional. Offices. This is excluebe or 354 employees who were then f.u tbl JI11.1+"':-

ictt and were carried em-the P8\Y1"Olls 011 hrlOllgh status. .-11 IJRY-

~

~

•
- 69 -

As of January 1, 1944, the number of eMPloyeesin the military service increased

to 397. This does not include 13 employeeswhohave received honorable disoharges rrc.

the mUitary service and have returned to duty lfith the COIBIIlissionjand one employee

whose nalllewas dropped from the rolls of the COIIIrl13sionbecause of bis death lfhile in

+.hemilitary service.

Reorganization of the Divisions of the Headq\larters Office

A rather broad reorganization of the operating divisions of the COJIIIl1ssion' s headquarters office was put into eff'act on August 24, 1942. The-Legal Division, the ReOl'-

ganization Division and the Investment CompanyDivision were then abolished. The :rune..

tions and persOIJIlel of the Reorganization Division and the Investment Company Section of

the Investment CompanyDivision were combinedwith those of the Registration Division

and transferred to a new division known as the Corporation Finance Division. The personnel and !"unctions of t-he Investment Advisers Section of the Investment CompaDY'Division were transferred to the Trading and ExchangeDivision. A certain portion of the

investigative and interpretative staff of the Legal Division were transferred to the

Counsel's Office of the Corporation Finance Division. Twonew organizational ,units

were created, i. e., the Solio1tor's Office and the Opinion Writing Office. The remainder of the personnel of the Legal Division was transferred to those offices.

The immediate effects of this were substantial moneysavings in that it was then

possible to abolish manyvacant positions lfithout impairment to the CODIII11ssion' s work.

During the fiscal year, turther savings of man-powerresulted because the new arrangement of divisions and offices allowed greater use of experienced supervisors and keypersonnel and provided for the consolidation in one division of certain examination and

analytical work that previously had been performed in three divisions.

FISCAL AFFAIRS

Appropriations

Title

Sa1aries and Expenses

Printing and Binding

AJnoont

$4,850,000

60,000

$4,910,000

Obligations

$4,768,148

20,121

$4,788,269

Unobligated

Balance

$ 81,852

39,879

$121,731

Receipts for the Fiscal Year 1943

Character of Fee

Fees for Registration of securities

Fees under Trust Indenture Act

Fees !'ran Registered Exchanges

Fees for the Sale of Photo duplicates

lIiscellaneOllS

TOTAL

APPENDIX TABLES FOLLOW

Amount

$ 68,627,.28

1,600.00

111,404.21

11,606.72

l'Z7.46

$193,365.67

Table l..-&lg:1.St.ra't1OD11 1IDder the Sec:uritaes ~t of 1933 effect.! vJ.I during tile tiscal. year eDded JUIIe 3C, 194':-

Part 1.-liou-..hJ.y ~tiOIl8

(iolXlunta in thousaDda do~)

- -- . - -

All effeet1~ reC1lltered Propolled ~.r -.le tor acccnmt o~ 'u,-

Year aDd IIlOnth

lIlD1ber lfmDber o~ N1IIIIber

stat8El!ta iuaea statements of ill8U811 A:lIo1lllt

1942

J'~ 10 12 22,620 August 7 7

5 6 8,571

Septellber 10 17

29,353 5 5 9,825

October 10 11

frt,204 8 14 64,2'lO

lioveeer 4 5

36,m 7 7 .32,762

DeCellber 8 9

19.857 4 5 19,857

11.530 3 4 1,996

1943

JlIIIDlI%'J' 5 10 90.1.62 1

Feb1'ual:7 7 28 26,005

3 89,?OO

JIarch 22 24

3 23 22,247

Aprll.

57,435 15 17 54,073 9 10 90,578 8

May 18 41.

9 85,913

J'UDll 13 15

133,907 12 33 71,.424

73,955 9 9 25,290

Total ~illCB1 year 19JJ 123 189 659,4M 80 135 485,928

Tabla 1. Pa.-t. 2.-.l.tet.hod o! dist.r....bn'b.on aDe t~~ of securi"ty prO;>:JS6C. for Sa4€ for the account of issuers

(/.mounts an thousands of dc:.J.ars'

Type of eeeari ty

IIet.hod o~ d1.s1;r1bution

end gr'Ollp to 1IbolR o~rered All Secured 'hsecnred Pre!'erred COJlllllOIl oth~

types bonds bonds stock stock typea

All ..-tbodB o~ diBtr1bution 485,928 182,372 134,061 32,215 64,744 72,536

To gensral pabllc 460,5.32 182,372 133,635 28,5.32 J,B,f:Fn 67,296

To aecur1V holderll 16,?OO - 41.7 3,683 12,101 500

To ather lIp8C1al crouPS 8,696 - 9 - 3,946 4,71,1J

Thro1lgh blmkerlI 4'lO,'lO1 l82,372 133,485 30,619 56,930 67,296

By plIl"Ctaae aDd reNla 36i,840 182,357 132,485 28,095 18,904 - 'To geDertl1 pablle 349,0!l5 182,357 132,485 26,568 7,675 - To aecur1V holderll 12,755 - - 1,527 11,228 - To other spec1a1 gro1lplI - - - - - - On best ~ortll buia 108,861 15 1,000 2,524 38,026 67,296

To general pahlle l1Y1,861 15 1,000 1,524 38,026 67,296

To I18cmrlty holderll 1,000 - - 1,000 - - To other 8P8C1a1 groupe - - - - - - Byi_ 15,227 - 576 1,595 7,814 5,240

To pnereJ. pabllc 3,586 - 150 4IJJ 2,996 - To eecur1 ty holders 2,945 - 41.7 1,155 872 500

To ather IIpllCial groupe 8,696 - 9 - 3,946 J,,71,1J

l/ All dU;a are IIbo1m &II t.be effectiYe date registration with the sxception of ill_II subject to COIqlStiti_ biddUIc. 1Ihiah are bcl:aded in the period ciIIr1JIg which the reaults of the bidd1.Dg ...ere madeIa>own to the ColIIm1l1l1ion by

post-effectiYe &IIltlDl1Mn't.

1lauDd1Dg off figarea has relJD1ted in al1gtrt difierenceJI between the total3 and the actual WIIl8 of the oompolWlta.

JI :Incl.ud.. oert~icatell participation, certllicateB o~ ~ic1a1 interest, and warrants.

1Il0te.-Por earlier data F1ret to Eighth lleports of the Comm1lIllion.

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Table 6. Xa!rket Value and Volume of Sales on all ReRistered Securities Ell:ohangea

(In thousands)

For 12 !lonths Ended June 30, 1943

Total

Stocks 11 Bonds y Rights and warrants

Ell:change Ilarket Market Number Market Principal Jlarket Number

Value Value of Value Amount Value of

(Dol1arB) (Dollars) Shares (Dollars) (Dollars) (Dollars) Units

All Registered Exchanges 9,075,470 7,299,372 413,196 1,772,988 3,730,676 3,110 3,866

Baltimore stock Exchange 6,191 4,825 294 1,366 2,480 - - Boston stock Exchange 116,216 115,746 3,717 470 739 - - Chicago Board of Trade 19 19 15 ° ° - - Chicago Stock Exchange 139,l4l 139,l4l 8,6.48 ° ° - - Cincinnati Stock Exchange 5,756 5,680 310 76 75 - - Cleveland Stock Exchange 8,829 8,794 548 35 34 - - Detroit Stock Exchange 22,628 22,628 3,089 - - - - Los Angeles Stock Exchange 42,616 42,612 3,637 0

° 4 8

New Orleans Stock Exchange 678 599 109 79 77 - - New York Curb Excliange 744,007 587,124 61,302 154,445 220,042 2,438 3,034

New York Stock Exchange 7,849,813 6,234,470 315,222 1,614,703 3,5Q4.,731 640 753

Philadelphia Stock Exchange 54,020 54,010 3,221 10 10 - - Pittsburgh Stock Exchange 13,475 13,449 853 3 2 23 60

St. Louis Stock Exchange 3,863 3,526 222 3Y1 412 - - Salt Lake Stock Exchange 817 817 5,025 - - - - San Francisco Mining Exchange 54 54 1,163 - - - - San Francisco Stock Exchange 66,1.48 64,845 4,862 1,298 1,922 5 II

Standard Stock Exch. of Spokane 241 241 933 - - - - Washington Stock Exchange 958 792 26 166 152 - -

Breakdown of 12-month Totals by Kontba

1942 382,487 302,173 14,au 80,306 155,Ul 8 22

August 336,9.39 253,087 12,522 83,842 173,629 10 31

September 409,070 284;W7 15,368 124,075 316,526 8 13

OCtober 600,708 465,902 24,724 134,771 303,127 35 29

November 509,825 4ll,2B7 22,024 98,513 207,712 25 28

December 744,346 629,370 33,5Q4. 114,942 233,873 34 146

1943 January 652,177 507,407 27,952 144,736 329,565 34 115

February 749,198 614,523 38,091 134,433 276,381 242 366

!&arch 1,260,291. 998,016 62,046 261,519 581.,923 756 1,078

April. 1,227,658 a,012, 268 58,314 214,979 439,701 4ll 389

l&!V 1,187,229 969,857 60,701 216,442 429,012 930 1,340

June 1,015,542 850,495 43,9.39 164,430 284,116 617 309

11 "Stocks" includes voting trust certificates, American depositoI'7 receipts, and certificates of deposit for

stocks.

Y "Bonds" incl.udes mortgage certificates and certificates of deposit for bo1Jds.

Note: Value and volume of sales on registered securities exchanges are reported 111OODDect1onnth fees paid IIIIdea"

Section 16 of the Securities Exchange Act of 1934. For moat exch8Dges tbe figures repZ'ell4!l1t tranaact10D8

cleared during the calendar month. Figures ma,y di£fer from colllpll1'&blefigures 111tbe stat1at1o&l Bullet1D

due to revision of data by exchanges. For earlier data see the Eighth Annual Report of the COID1ssicm,

page A-9; the Seventh Annual R'3port, pages 288-295; tim Sixth Annual Report, pages ~-2113; tbe Firth ADnual

Report, pages 222-227; the Fourth Annual Report, pages 166-171; the Third Annual Report, insert fac1Dl paae

156; the second Annual Report, insert fac1ng page 116; and the First Annual Report, pages 81-91.

- ~
Table ?-.o1e I.....caed 14...... 111 _t.1M ca .. u-J. .000000U. achoIlgeo

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Ao cl 30. 1942 18 ot .hme 30, 194)

Socrur1Uoo roo-r. SecuriUo. laue,..

rano ImolYed Rq1nlll'ed Irm>1_

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II ~ted u.... .............................................. 21 13 22 13 12

1-.0 -.k1Dc 20 ol

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ol 19J4. 100 2l 89 21

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18 Ilmd&a ___ pollt.1cal _n.o1cDo -..or •....•........ 199 82 205 82

19 op1.t lonip _~1ao lor"" _q1JI& 9 8 8 7

20 r oflorolcn I'ri.ue1aouon 2 1 2 1

2l ofloreip I'ri- ia-. •.•.........••....••...•....•.••.•.• 80 47 79 47

22 _u. ol 1oeuero reorpn_ in1Dool_ proceed1ng.

or tM1r saccetNIOn .................................................. 100 52 98 54

23

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1DoolftG 1asuero 87 56 88 57

24 bo1d1Dg --m...................... ,....................... 4 4 4 4

(1) (2)

1I>tal. •••••••••••••••••••••••••••••••••••••••••••• 3,985 2.)06 3.866 2.250

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~ca3_1el_.

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..... OIl3 _Ie r_.

Table s.~Uoc. !IT_~r1... of 14""""" .ocurlU .. reg1_ on Il8t1oael _Uoo .. ol ".... 30, 1942 .r- 30, 194)

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Ialad. au..on Corporatl00 20.137.195 &leO'trll ... York

DliUrr -...u.J.ars ... Do~..,.. .a..oos.at_ :t.l PropC"ti .. , Iw:.- o. Hoo1 _to B~ &lseU{o Corpon.t1cm I••• tiTo

au ... B.1ecrb'1o .... oc1..-te. •• A. BoW •• C<apaIl;y - U........ .... P_r "-'" IsoUn

_. tto ....-to ....T""""I' ...... 01... 246.6831 ... ............. ... ... ad 8ta'tea. h1aJ:l4 r.rrr ~IO" I .a.. hrr,. Owl aDd t..... •• "..,. ..... Twk

r-.l IklW. Q.ao'tr1o 14Pf;" aDd PCMlllru4 Ial1.raM co. I. 4. Eleotrio .... Tort:

r-1 ad:tIl'. Hota! ~.. J .l. B.Wl 1_ Tort:

Iall~ .. B. Maoo1.t.n I. L Bo1_. "- - -.as- _to ... It..... 1la1'- - 225.000 1 Bail..,-- ow. -.d I.u. P....,.l-ma

-..c"'" --T _ ..A. 1la11woT- 8. _1_

-.as- ... I. A. llailnif- Woo .. Pomq1_

.Ill...... Jtat~. Ino. Iaaottn

1Iop1' _~. Ino. .... •• ... Ten:

Dtilltioo 1JlnotiJ>& ,...... l6.ae3.290 y. III.... 1:1Ac ... ... ante

y~ 1'01>110"- "-'v •. "- Ohio

au. s.r.ol .. JI'ORI' a: Ltpt. CapadJ" ~.036.6e7 ~9 ~7-"3

7.537.L65 Kl.oV1 .. au ---.. .... no.tn..

e:-qo Utili~_ CoTpOl'&o1... Sleot:rlo-- W.. t.r .- Clao C1~ I\ao1 C_ llitb1pa

4.ol;S.510 Cl. a..U1o- au .. Ioe ll10000rl 14Ft ... Traot1 ...

6.163.ll2S !~1't Obio -tor ~noti ... "-'Ir 3.821.~ &lHtr1o- Ou -,- 8~1 .... aootrl. 14... t

etill Eleotr1000 I" --

.....&11_ -. I.. 01&1 n-trt. Bl.atri.

_.. .... "-tT 14..... P_r_

4.163.032 __ 110_"_ a.ei:rl .. I.....rra.d,i: lorill eu.u. n.otr1o .. au t........... c.-Va. '_oo 14Ft P.... "-'v 12.oe4,,70 Hooltor lIai.

a-trto -l41IlC 17.]82 JIo.-.... .Qt:l ... aopl.. IlI._at> nootrlo 32.298.971 &leotr1.o- Water

Ilo4aa1 14Ft , ... ti... I4.722.697 Bolc1in<"-P"'V' .

&ri_ .... .- Iloo10)' 112.237 HoolO)' ,_.. _lIe "-'Ir 1,822.998 au lal.6l!9 rl'alWit Obi. _-"'''-'Ir 619.065 It.atri. 1.J(U1 ..

::.::-~ :".;~::":u...... ,Cap' 1,151.506 no.trio- W.wr- Ioe JU •• oart.

89.078 !n.zaait

_. _Y~' __ 01...

4.326.519 El.otr1o- Water ___..r-_ ..... niH

127.817 Bteotri. WaaJd"Cta OJpplo hblio S.m._ 625.616 n..trie

~-""o_ 15.971.915 E1.otrio- fn.DI.- n- MJ. •• -.rl

at.. .... Wolwa7,L1&trt,B_t. I: PCJn:r Bl.otrlo 1I1 0Ill"1 _~ .... "-tT &ledrlo __ 1.1llIl.170 - ............ 3.156.856 Ip-..o _ .... _1 _

7.739.6110 na Gu- 8'tfe»o frau. 1l1•• oui 8p~_01. _ .... nootrio __ tlWUlt 0.10 IItaft ~'t c.p.a", 11M,. 175,873 Ilea. LiD_ Leu-.:l Art &ODa-COlorUo

ao-u "lootrl. 166.257 HoolOT Ohi. Tol_ .... 1_ ... HoolOT 18.268 Col...... J"lP9.963 ____ , __ o1 ... _~ 01&1 au Co. le.tTl ... au

9.12lo.t Klann. ... au &ri....

-. Illootrlo 14Ft Pooor I 367. 7 1'n.mlt &ri.... -8&ld"-~_

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All O'.OYBIUIl 15. 1'l1a

rat&l Auft. .. ot 1Io141ac Deoab.r'l. 1~ ot CaIIplud .. Onl.na Diy .... eel

-... Date 117.- IJld1rl4aal S7a- c_ 1_

.. ToAlo Wahftot~ Ita-to ot CD ... t101l

_... _...

BDt;1DMn Public hmH CcIIp&Dy • 118.185.531 (~ Bl :Puo aDd J.-rea 'I'n.o't1on =- • S!.258 _~ri. T....

Bl Puo El.ctrio C~ (Deluare 4. 7.638- 1Io141a&...,.. - 111""0 ]ll.otri. (T.... ) 17. .902 Bloo.-I\7.- r ....... Ka:loo

Ou.lt' St&Ua Ut::l.l1t1" 68.831.613 Bl_.- au- I~ Water 'I'aaa-LcM111a:aa

n ou.rt S.rrio. 1.5'16.254 ~eo.- Ioe- ..... r n...rl-I-.

orthen. .. Pawer 26.362 Bleotri ...... 8aTaDD&h Blectric IliDl1 PCIlI'er CaIp&a;r' 17.ll!0.761 BI..0'trl .. Bd.Jn¥- B_ .... cl.

VirpD1& "l.otr1o IliDl1 POPl' YirclDlO-....... Carol1Jl (Gu aDd. 'franeportaticm. Propert1 •• ~) 10.751.062 n.ob1._ Gu- .,..- B_

WuUrDPublio a.nice ea.pa:a;y 1.684.319 lIlaotri.

r.dera.l W.ttlr &Del Ga. Corporation 124.093.958 1,113 2-10-10

Alablla

... Yon

W.ter

Water

Senic.

aeniN

Caapa.aJ

corpora"tioD. 32.09

9.827.366 1.353 .......

Bleotrt~

IIo141JIc .wr"-_

~-

__ Yon

CIdo.ter S.nice 8.380.825 _aur CIdo

8cna.nt~rllJ.g Brook .aur Sorrlce CcIapau;y 61.620.315 ....... Gao- BoldiDf; ..... .,.1nD1&

w..... Vlrp,m.a W.ter S.rTio. ec.parq- 12.174.099 t:.~ Roldlq: W.n YirpD1a

Borth _n.... 1.81;).1,10.036 3IP5 4-1lr-Il2

Badr-r .Auto Senioe 101,993 ud Sa Ita:tiu. Ibooaaln

Blu Rinr PowerCc:ap&Iv' 251.391 n.cRrlc Iam ..

Braddock L1£bt I: POMIr ~. Inc. ~.9lo6 Bbotr1e Vlrpma

Cabolda Me utaC'turon au CcD:pan:r 80.689 au (~a4) IU1Jl,cd.

cairo C1t7 a... ID&ot1n

Cap1't&l fnndt 68'~m t~rt.:t1OD D.C.olaJT1aDI

C.loo "-_ .et.riq lido

Central t.DI1D8l. Cc:a:parQo 7.189.919 ............. Ilbaou.ri

~l!J1 ............ Goa 14......... Cok. Co. taact:l.n

Cl..,..elaDd. EINtrlc IlI-.1nat1nlO 182.795~3 EleC'tr1e- Ben lido

_11 ..... 14lbt taact1n

!>eo&'blr El.ctrio C~ lDaotiYO>

GlaD. Eoho Park ee.pcq 171,!Q4 --~- ....,.- Gr_t Pall- r(Jlfer ee.pazIJ 512.521 1aD4 "-""" Vlrcizd..

B.erl ..Dat7 Electrio CCIIp&D1" 111'34';f:. Eleatdo ran.oe ee..1;mOUoa WbOOD.dn

IlllAob I-. Ponr CoIlpaJII' .825 nee.- au- ....... I.-

T_.- IIo1d1"C Co. 1m-.

l1UDo18 T.nUJal Ba1l.na4 55.536.- BaUroo4 1I1•• 0000-Il11.zKd..

llu-lo Traotioo "-""'1 23.588.5280 IIoU1Jlc "--

"'_0.nU1. OU 14cht .. Cob e...-. l.ot:1T1t

J_ll. 1ia1ba7 am 14..... I-.c't1:n

Dzw&a PCIII'erud 14.p.'t 7O:r:.337 n.c ... Gu- ............. t.- ~. ....... Pubu'o B.rnoe 2 ,4'/0 Il1ooU1o- 1Iu 1m-.

111_ lIlaotrlo 1la1_ .. T......,..n ~_ 5l.~~ T.-poriaUoa 'IIi._iIl

1111_ 14...... _t .. Traot1.. C_ 1aD4~ 111._ III...-ri p ... r .. 14pt 21.066.981 B1eo.- Gu- ... t- ...... I.. lI1.. oart

JIoatsc-elJ' Bu. I4Du. 1.0- 27._ t'nuportaU. ....,.- Motor ......,..n 805.* _11/* T__ \1_ 1Ilo_1l

BortIMI .... -.1 .... .... a_. ~.I78.222 BoldUc "-",,,,- l'lpou. t........ -I.D.k .-um.

Worth .-.n0ll:ll tJt:111t," .. ClIV1U .. CorporatlOll 5.0b2.~

--- - f'ao1,t1o au CI4 Bleotor1o aD! .... 1l55,Wo. BlN_ 8u- ~~~. "'.1.... 111.

Pooplo. Coal J1:.T19 Coalk1oa - p r1o Powr 112. 651 Bl...-. D.C.~lood

ft. B.1DaI'd Coal 10.000 Coal Bal. - ....x-u lIlaotrlo To~ 1laU_ _YO>

lJIIl... Blaotrio 10Dll.... __ 1~ "-""'1 1.191,_ 1aD4~

111..

V.moe au

.... YO>

_hiaet- 100_11."",. Co r

--p..,.e:-tJ 213.399- BoldUc~ - _acton 1la11_ .... E1.otrio 37.ns.6IJ6o 1Io1d1"C~ - •• at l-..". Coal "-"'" (Dola-...) £;.169 Coal k10a - ... t a-..". COol "-. ( .... J....,) 18. .506 Coal B_';"';'

W1..aou1n Bledr1a Power Caapaqr ~.888" 7)1 Bloo.- IIOWb& 1Ilo_

WbCODG.D0.. .. Bl-a-tr1a 33.213.537 SI.fld.o- ...

u

.UOOndD 1I.1obS.p.nPOIrC' Calp&7 31.473.S72 ElHUi. au

.hip"

OpeD Corporation 151.3&7.329 ~7

Ce:tnl Sta't •• p•• r I: Li,pt CoJ1'OraUOD. 6.~125<. B1eotri .. "Wac I.....au...._ , C.a:tral 8taw. vtll1-t1 .. Corpon;tioa 26.lI/pa BoldUc"- - Darl>T au .. n.ot .... 5.915.1IL4 BlMtrlo- au- .....

Du'bT

.... __

au BbO'trio Bloa1;r1oCorpora1ol0D. "-OIOJ 1,575,9fZ1. 1'16.819

Bo14l"C

aJ.aotzt. .....

"-'If -I111aolo -- anora 1_ lI1eotrio "-""" IM~ Blootri. 1_

X-..-.. P..... "- 511,lI9J 1" m... ........... .....

IIoWIlc Co. I.....m-.. ... lake

1JIt.er'ria1:e ...... r c:c.pq;, Id W1aOODolln 2.19li.6e lIla_. _~ ....

p_

14pt

..14pt

"-""

"-""" ~.-,o,.565

10,855.132

1Iu

Bl-....

.....- 1llH

-- _oart B~ri. P..... 5.~~ ateetzt. ... 1 .....

-.,.110

1I1

"rn

GVi .atan1

.. CorporaU_

... I4pt

Gaa

16106e3

3.lo4.171o

1Iu

1Iu ------- 41'B e-l~

11010_ III.~ .-. CoopaIQ' 951.1e9 Blondo Tlr~

-..u•• Jlawar CGIp&IIf 318.807 Bl-.... ftrp.l.

... ~r Col'pOl'at1oa. 3113.741 Bl...-o TlrclDlO

... WI' Corpon:t1011 .:1:.735 ..- TlrclDlO

Pap PClQr CaIpu;f 1. 39'! Bl...-o "'firpma

hbl10 hn10e 8."",8110 3676 7-8-/l2

oalt Pab110 s.nice 8.6lP.874 mM.- Gu- Water- t.. r-talaa

8_4 au ..... Elootrl. "- 377.372.019 291!9 II- 8-Ill

Calltom1a Orep Pnar CcIIp&J:I7 ~.599.478 BlecrtriD- .ar C.llr.m1a-Orop

a.praaa 4. 8enidN PabU,oaa 4. 10.

&.1adaa Md 0IID0a, 8. A. 3.073.960 a..dr1 ... I... b:r

00

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(Dola....

am)_. 89.800.372

24.270.769-

11.812

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z-aa

......... --oII;J

at-' llalba7 16.~790 1Iol.~'" CloUtNIIla ~_ .. _~ 25. 955 Blao.- ~olop -I~

90.~.0107 au neetrt. CClIIpUf" 1I1~. .~...- 8oa:U.ra Colorado Powr tt.:.516 n...-I\7

1ft.I.-.1. PeUe a.m. .. ColpDft.tt._ .060 &1ea.- au- .. 111.

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A-35

t'ataJ. "--'- .. ot -,I. 19I1 "U1ac .~ c:c.p.t_ ClrUn4 D1....... "-"'If

_I- - --- ~"'-.J. .,.- 1-.. .r "-'

-- r~ -... or .... t- or Open>!.. _.. ......

"-"t' • Arl_ P_r Il2.'lIl3.63I. 2913-35U 7-~ Corpozwtl_ • 6.223.~ n..0Crl~ au -- 5-7 JI~_UFt"-- 8.1'l5. .... _...- e--1t.1l vtlll'tl_ CorporaU. 1JI26.7060 "I""."'""'""'" --,,- - 9.268.,101 ... --"-"t' au -tolac "- 2,,150.179 au ---.......... ____ Up~"- 10.916.1116 .... r_ IQ.lil902ll ... __

-

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lIJiI.399.1llO -- l!923-~

.... 990$ ea.t~ r

'* ~ I11 ....... l'1pe u- "- l,,218.069 a..T~_ 1Il .... __ 1'__ "-

ai9.151 au Pro41llrt:loo 111....... all ....... m CM,o EJ.Mt;d.c 7b.8lI2,,91Io KlH.- _to- "-""" .... eM. _oUaMa Jl1I1WJoc "- 18.23) Ilool _o. 1Ila__

t... 4 Coal CGIp .... 3!i.617 I.. .... Ja ...... £l.ao'trto ,./lItl.9ltr Bl a... B.u IJd'-111 "-

lS.ClI!5.136 Eleot<ri ....... _ Cl'r _ C1.-J' lab ..- "- 919.1lll ..- --

1_

ct'r Irtok ad rua "- l"lIls.OllIo Bnok .... TS.h 1_

a.-d..-

__ o--olu... 14Ft ...."-au 1OIo.&;o.m ... .._- "'"158. ... Wla-. __ IIobq c_ -... I'~ ..... 1Ila__

1ItU1U.. 2,,9»olIa7 33'8 l-lo-lil ",",WtIoOU,,- l,,811.5!l2 ... IItlllU.

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,.,.&34 1_-........- ------ 5.536.267 386'

-.uo--"-'IJ 2.539.036 ... ~-."Aft.

10. I: 1D.e.-tri. Cc.p&IIIJ 2,,997.l5l KlH.- I.. Jl40 =-a..

_~ .. _~w ... 8J68.YoD.l56

Jarr,oq cazporU8_ .... ..

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DIVESIOD TII1lO00H tlIE C&IlIlfIHG oor OF SUCH OROEIIS Y

Total ~.ete u or 1Io1d111s Deo8lber 31, 19112 M\~ Date Sy.t8lll I.d"'idual Bya_ 1_. or COlIpO'II' Ccapan1e. Totala Hature o~ Bu.1De •• fta'te or ~n;t1OZl -... _or

.berloan Panr a: L1&ht Cc.p&D1 • 272.9B6.l66> ts66.358 .417 Holdiug CCl:llpa.ay - mo 8-22-lle BiS Bend Tranait Ccupq;y 52h.234 lraotiTo - Central Ariaora Li~ht and. Power CClllIparq 18.085.727 Electrio-- au Jrl....

Florida Power & L1p;ht Camp&D;y ~.889 n,,01;r1o- Gu Florida

Cona\D8l"' Water ... 1,179.953 Water norida Jtanea. a... an! Electric Comp&Il7 10.032.151 Electrio

Kinneeot.a ponr!: LiPJ:t 65.562.391 neotric- B-.t1n& Jl1

-.. ..wuooul:a. Montara POIJer CaIIp&U7. The 150.662,496•• Bl.c __ Ga8. B_~ W.ter 11...- Glaaier Production 10.537.318 au (Who1ooala)- Oil 11...- Inland Eal:pire Re1"1.Darles. Inc .. 2.6l4,010 Oil re.ft.mn& 11_ Koen-Leiok

Chief Pe"trolflUlll

IMuatriea,

ee-pan;y,Inc.Inc.

207.591

96.995 PetrolfIUJII

Petroleum 11-.. Gr-.t Pa11I: Tomuite Cclrmpalv 1.959.067 Beal •• tate 11..

Bebraaka PawSI' Compaz:ry h4,131.174 IleC'trio llebruka-Ie-.

IMIr )lexioa Electric Service CcepaDy 1.780.726 Eleotrio J.)lmc.J

Worthern Power CampatJ;y y '789.302 Eleatria Wiaocmain

!forthweateru nectric Campa,D.y 23.6IA,~ El.c1orlo-- Heat OrogoA-lruh1uctcm

Paoin.c POIfer « Lipt C<apa.rJ;y ~.958. Eleo.- Water- Itt.- RoldiD« Co. WuJ>1DPn-O...

R. S. 6: C•• Irr. Co., Iue , l!. A. ImpUon W.. hingtoZl

Pike Rapi" Pew.r CcDpaIJy, The 52.079 Inaot:l .... - Portlam Gu & Coke Company 26.217.474 Goa O... "",",,~qtcm Superior Water, Light and Power ec.p&Ilif 6.753.769 Eleo.- Gaa- Water .booa.e1A

Toxaa Bloctoric Serrlca Company 04.597.054 il.atrio T.".. 'lena Power 6: Light ee.paDf 69.896.1Jtl Electric Tou Te%UIPublio Util1t.ie. Corporation 3.232.706 Blee .... toe- Water T__

lop.... !ADd Caop...,. ,e4.~ Ineot;1...e - Util1t.i .. ULnd CClIIl:p&rO" 1.320.648 Real Eat.te norida

.aab:1~n Irrlption « DeTelopmetrt;Campan;y 346.135 ID8ot:l...e - Co1_1a HighlaDda """Pa'II' 123.508 IDaoti ...e - u...toa.e CazlpaQJ. The 123.004 In-oU .... - w.. hingtOl:1 Water pOlnir CcapaZV'. The 76.846.726*. Eleo.- W.ter- Heat .... h1Dct __ ldaho

Ch.lan V.lley Credit Corporation H. A. P1D1J1OinePru.1 t •• lIh1nr;toD

Spokue UDi ted Rail-.ya 1,835,381 !ram;portat1on W.. h1qtcm

Jaerioan Stat •• Utili ti_ Corporation 4.003.521' ~.lt?765 1Iold1",,~ - 4230 1r-9-lO Ed1eon Sault Elecrtr10 3.072.967 nectrio IliCll>1"...

Southern Calitbrnia .a"tel' Ccaparcr lO,~.m El.ctrio ...W..tar Calltonl1a

Bl.O'trlc Power I: Lipt Corporation 193.616.185* 745.364.314 Hold1Df:C_ - mo 8-22-lle .&.rk:aDSU Power I: Li~ 7l.1Tl.4lI2 Bbotrio- 0...- "t _.. Capitol Tl'aDaportatl ... 734.537 !nuport&tio:a. _.. Wh1to Ri..-er Power """Pa'II' 1.311.903 B1dro-l:1te -... Da1laa Fower & Llr;l>t 39.107.355 El.otrlo T.... Dallu RaU .. ,. 6: 'I'.zaiDal u,709.395 =-c~OIl T....

Gentilq D... l~~. Iae, 1.454.234 Loa1a1 ....

Lou1ai .... Power & Llt!J1; Caop...,. 10.785.277 B18o.- Gaa- !n.XISp. Louiai_

lIbd .. lppi Ponr I: LiEbt 39.325.842 Bleo.- Gu- W..ter ti.d.appl

... Orle&D8 Publlo Berrioe, Ino. 80.639.307 Bleo.- Gu- ~nuwp. Loai.t--.

OD1ted. Gu Corporat1OD 39.706.251-. Gu- Hold1.~ clIIpOD;J r.a.-II1 ... .... )(ulcaza d. Gaa. s. A. 3.262.314 Gao (Whole.ala) J(a:1oo

-.1 I..... SulplDlr 4.100.1163 Sulphur T.... Hov.atcm Gu Socurl ti.. Cacpany 5.881."167 I_oti .... - UD10n Producing 116.717.581< Gu (Whola.ala)- Oil r..... IA•.aI1•••

On1ted au r1;:o l4.ne Caap&... l41,O52,832*- au (1Iho1e•• l.)- G... oIJD. ! .... -IA.-II1e....

.&10.- na.

HOIlI.ton Gulf au Ca:apanJ 19.175.096 Gu (Who1.. ala)- Oil T.....

UDit.o. 011 Pipe L!_ Ccape.nJ 1.880.647 Oil frana ••ion IA.- Taaa- m•••

lItah Power & Llr;l>tCaop...,. 91.729.lO()oo Sloo.- Kt.- Boldine Co. _I~. utah Llpt and Traction Ce-apany 20.168.149 2'ru.p.- Bl.c.Faoiliti •• (Leu.) lJtah ... tern Colorado POIfer CmapclD7,The 9;J#a;619 E1ectrlo Col0n.4o

Gr.. t lake. Ut111tie. Cot1pIl.D7 672.5U. 1.694.~6 Ho1dl,,~ Caop_ - 3419 l-3l-ll2 Oh1o Gu. L1&ht & Coke ~, The 1.332.721 au Ohio

Parton Gaa CClIIIpIUJl' 263.398 Oaa I1l1no1.

Roch.U. au CocpaJV' 276.517 Gao !llinois

lllteruatlCD&l Iqdio-Electr1o Syat.el 86.252.213- 184.038.991 Bo1d1n~ ec.pm;y - 3679 17-a-lle Gat1De&uPower ec.pau, 147.U2.607*' Blectr1o- Bold1nr;

Ga~u

Yati.-u fnuai.a!oa.

El.ctric Liprt;

ee.pe.ny ~. Ltd.

1.219.7910

1.292.661 Bt.otz1.o

BI.otrio !nDa1ul01l -- 8&1.nt

Sa1Dt

Qats.n-,u

John

John

lfua

R1

B1

ee.pm.7.

....

....

r

r power

Storap

Ltd..

ee.pazw

ec.pmy m;m1.Loll 837

W.ter

!nuportat1oa

I.aaot1'ft

Storap

!=-do -- _1ll'rer-'l~~ Jl.566 1Dact1 ...e IIalatJ_ RealtJ' "-- - .000 I_crt:l'ft - Bud.on

CoriJlth

RlyU'

E1.otri. PonrLlr;l>t

Col'pon:t10Jl

& P..... 120,201 Bleetria _'10'" 27.~S12 Blectrlo- a-l "1:&te _.T-.-II.-.-u a,.t- p~rt1 •• , lno. 4. 852•• l1ootrio- lllltate -_'1_-- Indi.Ial 21....r ~. Tho 1lO.186 Wator Stara,.. _'I- e- I.1aD4 P .. r 100 baoU .... - lliWrTatiOD&l

W1md.p1eeoc"

DUll"

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6 Woolen J[t'&. Co.

13.669,811.

81,182

59.519.752

Water

RoldlD«

Storace

ca.p&D;J

-~- lII'/II 1..a7~ »c.imon Gu: a.nd Xl.otria 11.5le.Ill9* Bol41n&:~ - CllD&dianW•• ten ktural Gu,L1&bt,Hoat &

P'0IMr ecapa!V", Lbl. 12.l<O6.391 .. G&e- .abaal

DoIalta

Can&41an

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5.722.lP6

1102.355

11.413 1-.01:1

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Bzp1oratl_

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CaDada - ..6J:tob&au Xxploration ClXlIp&Dy.Ltd. 165.096 Bxplorat1on -

CaDada Bart!nre.t.rn tftillti .. , Ltd.. 7.003.183 Gu- •• tural

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10.092.4290

1,525.229"-

115.616

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ec.pOD;J --Idaho

- ~l1o" Ponr aDd. t .. 190.850 Water Idaho .. tator1,.C~ 26O.ol,3 Hat "a'tor Idaho Calitonl1a W_ 80m .. "-- 19.617.339 •• "tel" Calltonl1a Capitol CI.tJ' Water Co. 1.105.070 W.ter 111..

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Y )lorpl! Into Superior ..tel'. Lipt aDd Power in .April 19id

~t~:e~lC:) 0:_ 11~d&~. to~ :;. 1i=~f.a

th.,.. ... n P.o:UJlI prooeedlup lMu.. 1IaA't W "ot10D8

ll(b)(lr ODd1l(b)(2).

!obI. 18.-( .......... 04) .UBUc unUII IIOLDlI. ""IUlIIES SUBJECT10 DlSSDUJIIOil DB UQIJIDAIIal WD" SECT1C8 1l(b)(2)

OR1lLRS OOTS!AlDIHG .AS or NOVBlBER 15. 19tU. TOGEtHER WItH mE SUBSIm.l..Rl:ES 1IBICH WILL BE

DIVESTED !E:ROOGB mE ClRmIG OUf OF SUCa: OIilDERS Y

Total A... 'tII u of

DeeOJlher 31, Bold1Df1; 1st.2 "'-P_ 1170- IDdlndQal 40t ... Do .. 1170'- "-'If c..po.m. !~ I... .r .. tun ot Buaine .. st&t. ot Open:t:1on .-or llT4 ..

IDterDa"tl~ utlUtiea CorporatiOD

o..ral Water, au ., Electric (CoIltI4.)

Freeport "\or "-'If • 3'/0.267 IDd1aJ:a .ur .orb ".\or P.....,.l....ta 1ll2.850 W.ter Jen.,. Ihon "'ter ea.p., IZld10n0 621.6Uo Water LlOJ1SeU Water Pezm.l71Tama l62.lO5 ...... .... "'-PIIIJ'. 111". Pcmayl"'ania 1,182,067 Gu Sq "'OM ... .orb ... Yort 7.oa!,616 ...ter 1Ia1Dvt Bl.cUio & GN CorporatioD Calitbnua Jel.0020 Holding Ccapl.ay Cklah.- Bleo1;rla ... 'tel' CoIIpa .. - 'ft.ncb. .. ter W.ter Work8 CoIlprul;J 796.766 Electrio Oklo_ l#l.1lP ..:ter E:ent1l:cq

1Ia"~ ..- u""" "'-P_ 125. 72B.250. li26.565.01P Rold.ing B~ Blootrt" """"7 - 2962 8-23-41 CVc>l1D& Pa.or A Up' 35.565.653 £100 .. Tramp._ Heat Aloh_

c.pi'tal Cozp oraUon 91~.3'15 Eleo._ tZ"aMp. K.C ..s.C. 67.855 Real Bltate .......!...... 1t ...... t'ezm. .....

KaRem UId. 8au.tb. BIIthl~ Tnuportation Co. 662.~ Leaae. tnaap. PODDOylnn1& 53.4'/0 tram:portation -..rc teDd ~. !he P~lT ... 1a 1O.~ Real ktat. B41aOll IUwdDat1D& ot Eaton, The P-=-71nD1a Lobi'" Volloy !...-.~ 463.303 Leu.. el.ctrio proper1:J' PemaylTama 19.757.~ Eleotrio-o- tramp. P-mq1Tmia All .. Brid ...

~:~ 'roll Br1d&e Lobi'" Voll.,. PCM)"lTIIIl1a lie<}' c..p.." IAh1p Vall.,. Tnnaporta:t1011 cC111pa!17 Rool _to PCDa)'ban1a 817.619 TranaportatlClJl PeanqlYUd.a-N .J. llarr1o !...-. Caq>oo;r 208.310 t.ea. .. tranrportation Peml.S7lT&Jda "-"'" .... rot1"" 5.U16.9J2 Electric (Whol... le) PemLa7 !ean ..... 1nzda POIIar III LitPt eo.p.ur 266.609.518- Electric- Gas- H... t 11&&1. TCJIlUh1p Water CoIIp&zw PauylTm1a 36.461 W..ter hlmqballia Ra.1'tJ .t IIft' tment Pmu:rlTUlla 750,550-- Real £atat. W.. t: Pl't1:atoa,..£l:eter Rallroad ec.p..n;r Pema..,.lTaAia 793.274 .... lroo4 Suqaebama Ge.:I PemaybUlia 1.312.383 Jlon-C{len.tiDf; -

IH~ .RaaDob BiTer Pawer CcapADJ 1.6;4,606 Dnel. &: !raaa .. Line Virprda

I.. BD~ Public Serrice Cclalpa.Dy W I 46.680.846< 258.379.232 I Boldi"l; "-- Bacbport Water C~ - ?:m le4,136 I '1.ter 11&,.. Ce:atral Ka1De .Po-.r 119 ,ali .665"

I

Ei-atria .. au I<ai .. Qaaberland Secm1.ti CorporatioD. , 93.537 Real Estate Securitlec J<a1Do Ie.anebec water rawer CclII:palW B. A. Water Stan!:e 11'.. I.nl;1ar.dPole and Troa"~ Comouty lIoi"" J.4l.'/03 Pol. tr_t1'C~ Sal&_ Maine I PortlUll ilailroad S_"" UIp ..... "- 5.766.030 ~:ranapor....ticnL hin.

I 62.218 I Streea Ji'lCIW Control 1<&1""

I SkUIIbega: 'WAter PClIr8r Cc:apaDy 271.520 ... ter ii.igh~ Real Estat. &falae CeDtr&l Venaant Public Serri.ce Corporation 16.166.133 Electr1e- .. Vt._ I.B. )lepaoo Appllanae F1DanoeCorporatioD. 392.4l4 Kutua.l Senioe C<apa.:;r - I pace borri~. Inc. 67.553 Suhddi ..,.,. Service -

I Jf_ EDpand I~ustr1e_. Inc. 18.'309. Tf2* Holdlr.g Company ~'*00Wn Hill. - h,U7.874 Rayon hbJ'ios Il&u,. Bata llamltaotu.n.c.!: Co:Ipany 9.2Il~.685 Cotton and Rayon Fabrios li.a1~ Ba'te& l'Lbr1ca. lAC. 982.980 Sellin~ Agr.:zt

I - i .Echu'da llanutactur1n£ Cc:cpatty. The 4.59Ii. 721 Cotton Yllbrio lW. ..

I Hill _oturi"" """"""7 ~:I1l:~ CottOZl.Fabric. 1<&,_ I:~a l1bre ee.pa:c'7 Molded Pulpwood Product. llai::1e lIa1De s-board Paper eoap.DJ' 16.034.996-. Betraprint I liLa-:'ne lIaahl .. 10, Drirl~ s, A- Lor; Drl.T1n,; l!a1::e htcMU ~r Calpm.Y. Ltd. 188.355 fiJlb.rland.. Camda JIopt.ac Daa d: bprov_nt !:0IIl!*DJ' !I. I.. Lo.DTi~ Wrlpd. Il&'"" ~. the 758.479 S.ll~ ....". - t!ldon WaUl" Po-er ~. The 7tP,5591'* W..ter Stem,;_ Yo"" ~co~ Reu",olr ~1lI1,. 1.021.164 Water Storal;_ lla1De- York JlaDl:Olct:urlnr:: Caapaa;y 5.361.~ Cotton Fabric_ 1<&1". .Public Serri.oe C~ ot HewHutpsh1re 4S.91B.907.- EleO'tr1o- Qu. fn.nep. H.R._Vt Cazl&4a

.... kea& IDiw.tri Inc. I. A- Real Eatate I ... a-pahlre JlNTbaek Panl" 155.657 UDd6velopm Wator ponr Sit S... Ra!psh1re Pea&oook Rlectria lAt;ht Cccpan;y 66./DO UMeTelcpedW.ter Power Sit.s

I ..... HMpsh1re Proftl. PaUa P.-r CcmrpaJV' 36.922 UDde....loped Water ponr 81t .. H_ Haap.b1re PI'operto1 .. , IDe. 43.275 Real Estate 1_ Bupshir. .1_~

B. A- Red £atato 1i_ HMpab1'" SUDa.pee DlIa Coli' on:t1DD I. A- Water Stara~e W_~.hin

hl1& "-""1 199.951 Electric Gwiarat10n 1ft Ramp_hin Weare blproTc...n:rt.« Re.OJ"TOir.&a_oelation I. A- Water Stonp 1'_ u.pah1 ... 8a.bon Fa.11a 'a'ter ~aDir 91.086 Water .... Hasp_hire Twin State au & E160trie- Gas Vt...!I.T.-I.R. i:leotrlo ec.ap.n,., The l4.153.067

Real Eatate V&D&£8meat I. A- )(l.auqao:l 87Dd1cate I. AWonh -.rt.oa. Gu lID:l EbcUi.c 265.5Jeo 2.578.785 1Io1diD. "-""7 - lp;ll. 2- 3-43 Col-..l I ... c..po,.. 2.487.1Q9 I_ Cool loM:b. Caro11Ja Loeb A 1Doorpclr&tool 91.316 S.nioe ~D1 - IIort:h 1IelI1: Vt1l1ti .. (Jftddl...... t

Corparati. ... 1170-) 1.516.873. 101.7ll4.25l! 1IoldiD< "-""7 - l652 9-10-43 r.Ioo SapoTi<>r Dia.rlot Pvwr c..p.." 15.519.391 Eleotr10" Gu _u.ooM1ob..

.ortbwMt:enl Publlo S.moe l4.2470373 Bl.ot:rio-- Qu .. IlMt 8.D.-.ebruka

WbOODaiIl'p_r aDd Llr;bt 70.782.381 Klees.- Ga ... ft.- BtlS"-H_t: Wi.aou:1D-I--.

Beloit: Water Power 81.061 Im.otl ....

80vth B.lolt: Water. ou aDd. El.atrio Co. 1.074.01,6 Elacrtr1o- Gu .. Water n.ooDd.:zrI1l1Do1a

fotat .I.a.et:a o~ SlIbaldiary Ccapan1. .. t2.659.1l69.190

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