Third Annual Report of the .~s.Securities and Exchange 1/ Commission _Fiscal Year Ended June 30, 1937 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: IlI-3T For sale by the Snperintendent or Documents. Wash1nllton. D. C. • - • - • - - • PrIce 25 cents SECURITIES AND EXCHANGE COMMISSION Office: 1778 Pennsylvada Avenue NW. WashUIgton, D. C. COMMISSIONERS WILLIAM O. DOUGLAS, Chairman GEORGE C. MATHEWS ROBERT E. HEALY J. D. Ross FRANCIS P. BRASSOR, Secretary Address All Communications SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. n tI (f ~.!) 8 fc ,USA3 /~'3q CxJfl3 . LETTER OF TRANSMITTAL SECURITIES AND EXCHANGE COMMISSroNI' ~ashi~on,January3,19S~ Sm: I have the honor to transmit to you the Third .Annual Re- port of the Securities and Exc~e Commission, in compliance with the provisions of Section 23 (b) of the Securities Exchange .Act of 1934, approved June 6, 1934, and Section 23 of the Public Utility Holding Company .Act of 1935, approved .August 26, 1935. Respectfully, WILLIAM O. DOUGLAS, Chairman. The PRESIDENT OF THE SENATE, The SPEAKER OF THE HOUSE OF REPRESENTATIVES, Washi~on,D. O. m ~"" I t CONTENTS Page Functions of the Commission _ 1 Commissioners and Staff Officers _ 1 Registration of Securities Under the Securities Act of 1933 _ 2 Examination of Securities Act Registration Statements _ 2 Securities Act Forms, Rules and Regulations - _ 7 Statistics of Securities Registered under the Securities Act. _ 9 Statistics of Private Placings . _ 13- Exemption From Registration Requirements of Securities Act _ 14 Exemptions of Fractional Undivided Interests in Oil or Gas Rights; 14 Exemptions Other Than Those Relating to Oil and Gas Interests __ 14 Registration of National Securities Exchanges _ 15 Exchanges Registered _ 15 Exchanges Exempted from Registration _ 15 Registration of Securities on Exchanges _ 16 Applications for the Registration of Securities on Exchanges _ 16 Applications for the Withdrawal 01' Striking from Listing and Registration of Securities on Exchanges _ 17 Applications ,for the Granting, Extension and Termination of Un- listed Trading Privileges on Exchanges _ 1'1 Forms for the Registration of Securities on Exchanges _ 19 Statistics of Securities Registered or Exempt from Registration on Exc~nges---------------_-------------------------------_ 2() Registration of Brokers and Dealers Transacting Business in Over-The- Counter ]darkets _ 26_ Registration of Public Utility Holding Companies _ 27, Exemptions From Registration Under the Public Utility Holding Company . Act of 1935 _ 31 Rules, Regulations, and Forms Under the Public Utility Holding Company Act of 1935____ ___ ________ _ _ 31 Uniform System of Accounts for Public Utility Holding Companies -__ 33 Issuance of Securities by Registered Holding Companies _ 34 Acquisition of Securities, Utility Assets and Other Interests by Registered- Holding Companies or Their Subsidiaries _ 35 Statements Required Pursuant to Section 12 (i) of the Public Utility Hold- ing Company Act of 1935 _ 36 Control of Service Companies _ 30 Voluntary Compliance With the Purposes of Section 11 of the Public Utility Holding Company Act of 1935 by Registered Holding Com- panies and Subsidiaries _ 37 Transformation of Holding Companies Into Operating Companies by Acquisition of the Utility Assets of Subsidiaries _ 37 Exchange of Control of Properties for the Purpose of Creating Inte- grated Public Utility Systems _ 39 Simplification of Corporate Structure of Holding Company Systems -by Merger of Subsidiaries Operating in the Same Area _ 40 Commission -Reports' on -Reorganization PIans __• _ 41 V VI CONTENTS Pap General Policies With Respect to Administration of Public Utility Holding CODlpanyAct___________________________________________________ 42 Complaints, Informal and Formal Investigations______________________ 43 PubliclIearings___________________________________________________ 44 Litigation Under the Securities Act of 1933 and the Securities Exchange Act of 1934________________ 45 Injunctions Against Violation of the Securities Act and the Securities Exchange Act____________________________________________ _ 46 Suits to Enforce Subpenas____________________________________ 48 Petitions for Review of Oommlsalon's DeterDlination on Applications for Confidential TTeatDlent ._____________ 48 References to The Attorney General for CriDlinal Prosecution.L;., 48 Litigation Under the Public Utility Holding Company Act of 1935______ 49 Suits by Holding Companies to Enj.pin EnforceDlent_____________ 49 Petitions by Trustees of Holding Oompsnles in Bankruptcy_______ 51 Stockholders' Suits___ _ __ 51 Validity1935 of Section 30 of Public Utility Holding Company Act of• 52 Securities Violations Files_ 52 FOrD1a1 Opinions__________________________________________________ 52 Securities Act of 1933, As Amended • 52 Securities Exchange Act of 1934_______________________________ 54 Public Utility Holding Company Act of 1935___________________ 55 Advisory and Interpretative Assistance '-___________ 59 Reports of Officers, Directors, and Principal StockhoIders .:___________ 60 Solicitation of Proxies, Consents, and Authorizations___________________ 61 Confidential TTeatDlent of Applications, Reports or DOcuDlentB_________ 62 AdDlissions to Practice as Attorney or Agent Before the CoDlDlission____ 63 Report on the Study and Investigation of Protective and Reorganization CoDlDlittees_____________________________________________________ 64 Study of Investment Trusts and Investment CODlpanies________________ 65 )larginRegulations________________________________________________ 69 Detection of Manipulative and Deceptive Practices____________________ 69 .special Studies and Researches______________________________________ 72 Study of Exchange Rules Governing Miscellaneous Exchange Practices ~___________ 72 Study of Over-the-Counter Practices and ProbleDlS______________ 73 Formulation of Rules to Define Manipulative, Djlfeptive and Other Fraudulent Devices in the Over-the-Counter MarketB__ 74 Study of "When Issued" Trading Rules________________________ 7~ Further Study of the Segregation of the Functions of Broker and Dealer ~_______ 74 Summary of All Rules Affecting Exchange Trading Promulgated by the Commission or Adopted by Exchanges at Request of CoDlDlission 74 A. Rules Regulating Trading Practices upon Exchanges Promul- gated by the CoDlDlission_______________________________ 75 B. Trading Rules Adopted by Exchanges at the Request of the CoDlDlission_____ __ _ ____ __ ___ __ _____ 75 (1) The Sixteen Trading Rules_______________________ 75 (2) Interpretation of the Tenth of the Sixteen Rules____ 78 (3) "When Issued" Margin Rules____________________ 78 (4) "Daylight Trading" Margin Rules; 78 ltegion~ Offices___________________________________________________ 79 Public Reference RooDlS_________________________________________ __ 8o. CONTENTS VII Publications _ Pac. 81 Registration Record, Securities Act of 1933 _ Releases _ 8r--- AccountingOpinions _ 81 82 Other Publications _ Personnel _ 82 FlscalAJfairs _ 83 83 APPENDIXES ApPENDIX I. Rules of Practice____________________________________ 87 APPENDIXII. Guide to FOrIDS_____________________________________ 97 ApPENDIX.III. Securities Act Registration Statements as to which stop orders, consent refusal orders, and withdrawal orders were issued July 1, 1936 to June 30, 1937__________ 119 ApPENDIXIV. List of Publications available as of November 1,1937____ 124 ApPENDIX V. Statistical tables: Table 1. Statistics, by months, of new securities, included in regis- tration statements fully effective September 1, 1934-June 30, 1937_____________________________________________________126 Table 2. Type classification, by months, of new securities, in- cluded in registration statements fully effective July 1, 1936- June 30, 1937____________________________________________ 127 Table 3. Group classification, by months, of issuers of new secu- rities fully effective July 1, 1936-June 30, 1937_______________ 129 Table 4. Reduction of estimated gross proceeds to net proceeds, by months, of new securities registered for account of issuers and fully effective July 1, 1936-June 30, 1937___________________ 132 Table 5. Proposed uses of net proceeds, by months, of new secu- rities registered for account of issuers and ful1y effective July 1, 1936-June30, 1937________________________________________ 133 Table 6. Statistics, by industries, of new securities fully effective under the Securities Act of 1933 from July 1, 1936 to June 30, 1937_____________________________________________________136 Table 7. Channels of distribution of new securities registered for account of issuers and fully effective July 1, 1936-June 30, 1937__ 144 Table 8. Type classification, by months, of securities included in registration statements for reorganization and exchange issues fully effective July 1, 1936-June 30, 1937___________________ 148 Table 9. Industry group classification, by months, of securities included in registration statements for reorganization and ex- change issues fully effective July 1,.l936-June 30,1937________ 149 Table 10. Private placings of securities July 1, 1934-June 30, 1937__ 150 Table 11: Transactions in all stocks for account of members, New York Stock Exchange, by weeks, March 2, 1936-June 26,1937___ 152 Transactions in all stocks for account of members, New York Curb Exchange, by weeks, March 16, 1936-June 26, 1937__ 154 Table 12. Value and volume of sales on registered exchanges, by months, July I, 1936-June 30, 1937: Part 1. Total market value