The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-12-30
BAD PRACTICES
ARE REVEALED
IN SEC REPORT
Faulty Financial Records
of Corporations Are
Criticised.

]
WASHINGTON Dec. 30.-A large
public utility system has been re-
quired by the Securities and Ex-
change Commission to recompute It's
financial statement in a manner
that wrote down its assets by S153,-
000,000 the commission revealed
today in its annual report.
The SECS action was cited as a
typical" example of its efforts to
simplify corporation financial state
ments for the convenience of in
vestors.
The identity of the utility was not
revealed. The registration state
nent was filed under the Securities
Act Of 1888 and was not connected
with the SECS regulation of public
utility holding companies, which
)egan Dec. l.
Price Manipulation Probed
The SEC report, covering the
fiscal year ended June 80, said the
utility company was required to set
down besides it's balance sheet an
adjusted balance sheet which 'in-
dicated that if proper accounting
and financial practices had been
followed, the company's assets would
have been $153000,000 less than
those shown in the original balance
sheet, and that in place of the capt.
tai surplus of $11,0GO,000, and the
earned surplus of S12,OOO,000, the
company would have a corporate
deficit of $3O,O0O,OO0."
The report claimed important
| progress in combating fraudulent
security practices, including 81 in
veStigations into price manipula-
ton, 10 into activities of insiders"
establishment of a ''rogues' gallery"
of 1881 persons against whom pre-
viouS action may have been taken
and voluminous files on corporations
and industries.
Improper Practices Revealed
The SEC listed several examples
of what it called improper practices
revealed by registration statements.
A mining company stopped trying
to sell securities, it said, after it was
forced to tell that a large part of
the stock sale proceeds were used
for salaries.
An investment trust has sold no
m
reveal the heavy overhead" for
services and expenses and a COM
pany selling endowment bonds"
principally to school teachers was
the subject of a stop order" of the
commission which it said will pre-
vent the further victimizing of the
public"
In the case of the public utility
company, the report said:
"A large public utility system filed
a registration statement containing
a balance sheet which showed the
company had capital surplus of
approximately Sill, 100000 and an
earned surplus of approximately
$12,000,00O.
Impossible to Understand
Appended to this balance sheet
were a great many pages of foot
notes relating to the balance sheet,
which disclosed that many improper
accounting and financial practices
had been followed.
The footnoteS were so long and
complicated however, and contained
so many technical terms, that it
would be virtually impossible for
an average investor to understand
them. Furthermore, even a trained
investment analyst would have great
difficulty in adjusting the balance
sheet in accordance with the foot
notes in order to obtain true pic
ture OF the company's financial con-
dition.
The company was required to
compute the effect in dollars and
cents, as far as possible, of the i'm
proper accounting and financial
practices and to set up a balance
sheet in a form permitting COM
parison with the balance sheet as
originally filed"