Annual Report 1957
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23rd Annual Report of the Securities and Exchange Commission Fiscal Year Ended June 30, 1957 UNITED STATES GOVERNMENT PRINTING OFFICE. WASHINGTON: 1958 For aaI" b,. th" Superintendent of Doeument8. U. S. Government Printing Offir" W"WDKton 25. D. C. - Pri"" 75 ""Dt. (psI"'r cover) SECURITIES AND EXCHANGE COMMISSION Headquarters Office 425 Second Street NW. Washington 25, D. C. COMMISSIONERS January 7, 1958 EDWARD N. GADSBY, Chairman ANDREW DOWNEY ORRICK HAROLD C. PATTERSON EARL F. HASTINGS JAMES C. SARGENT ORVALL. DuBoIS, Secretary D LE'ITER OF TRANSMITrAL SECURITIES AND EXCHANGE COHHISBION, Washington, D. 0., January 7,1958. Sm: On behalf of the Securities and Exchange Commission, I have the honor to transmit to you the Twenty-Third Annual Report of the Commission covering the fiscal year July 1, 1956,to June 30,1957, in accordance with the provisions of section 23 (b) of the Securities Exchange Act of 1934, approved June 6, 1934; section 23 of the Public Utility Holding Company Act of 1935, approved August 26, 1935;section 46 (a) of the Investment Company Act of 1940,approved August 22, 1940; section 216 of the Investment Advisers Act of 1940, approved August 22, 1940; and section 3 of the act of June 29, 1949, amending the Bretton Woods Agreements Act. Respectfully, EDWARD N. GADSBY, Ohairman. THE PREsIDENT OF THE SENATE, THE SPEAKER OF THE HOUSE OF REPREsENTATIVES, Washington,D.l7. m TABLE OF CONTENTS Page Forevvord_________________________________________________________ XI Commissioners and staff officers , ____ ______ ________ ________ _______ XII Regional and branch offlcea.i, , ___ ___ _ _______ XIII Biographies of eommissioners , __ _________ __ ______________ __ XIV PART I ENFORCEMENT PROGRAM____________________________________ 1 The problem of "boiler rooms"__________________________________ 2 Sales of unregistered securities based on claimed exemptions________ 3 Evasion of registration requirements through the "no sale" theory __ 3 Certain problems of promotional stock___________________________ 4 Stop order and suspension proceedings for new issues_______________ 5 Broker-dealer Inspections, __ ____ _________________ 6 Statistical summary of enforcement activities_____________________ 7 PART II LEGISLATIVE ACTIVITIES_ _ _ 10 Statutory amendments proposed by the Commission_______________ 10 Proposal to increase registration fees_____________________________ 12 Registration of unlisted securities of certain companies having large investorinterest_____________________________________________ 13 Proposals to amend the exemption from registration for small issues , 15 Reporting requirement of beneficial owners of registered securities., __ 15 Disclosure of beneficial ownership of registered securities in election contests____________________________________________________ 16 Other bills introduced in Congress to amend the Federal securities la~s_______________________________________________________ 16 Other legislative propoaala.c ; ___________________________________ 17 Congressionalhearings_________________________________________ 17 PART III REVISION OF RULES AND FORMS_____________________________ 20 Proposed revision of rule 133 under the Securities Act of 1933______ 20 Adoption of rule 434A and amendment of Forms 8-1 and S-9 under the Securities Act of 1933_____ _____ ________ __________ _____ 21 Adoption of note to rule 460 under the Securities Act of 1933_______ 22 Rescission of rules 132, 151, and 414 under the Securities Act of 1933_ 22 Amendment of rules 100, 170, and 426 under the Securities Act of 1933- 23 Revision of Regulation A under the Securities Act of 1933 and with- drawal of proposed amendments thereto________________________ 24 Withdrawal of proposal to amend Form 8-1-_ _ 25 Proposed revision of Forms S-2 and 8-3__________________________ 25 Amendment of Forms S-4, 8-5, and 8-6__________________________ 25 Proposed amendments to statement of policy relating to investment company sales Iiterature-., , ________ ______ _____ 26 Amendment of rule 12b-35 and Form IO-K under the Securities Ex- change Act of 1934_ _ ___ ___ _ 26 V VI CONTENTS REVISION OF RULES AND FORMS-Continued Page Amendment of Forms 4, U-17-2 and N-30F-2____________________ 27 Amendment of Forms N-8B-l and N-30A-L____________________ 27 Amendment of rule 17d-l under the Investment Company Act of 1940_ 28 Proposed revision and consolidation of Forms N-8B-2 and N-8B-3__ 28 Adoption of rule 17a-7 under the Securities Exchange Act of 1934___ 28 Amendment of rule 15c2-3 under the Securities Exchange Act of 1934_ 29 Amendment of rule 12f-2 under the Securities Exchange Act of 1934_ 30 Proposal to amend rules 15b-8 and 1780-5 under the Securities Ex- change Act of 1934__________________________________________ 30 PART IV ADMINISTRATION OF THE SECURITIES ACT OF 1933__________ 33 Description of the registration process____ ________________________ 33 Registration statement and prospectus, ______________________ 33 Examination procedure.,., __________________________________ 34 Time required to complete registration_______________________ 34 Volume of securities registered__________________________________ 35 Registration statements filed__ __________________________________ 37 Results obtained by the registration process_______________________ 38 Stop order proceedings; ________________________________________ 40 Examinations and investigations_____ __ _____ ______ ____________ 47 Exemption from registration of small issues_______________________ 47 Exempt offerings under Regulation A________________________ 48 Exempt offerings under Regulation D________________________ 49 Denial or suspension of exemption___________________________ 49 Exempt offerings under Regulation B_ ___ __ 52 Litigatlon under the Securities Act of 1933______________ 52 PABT V ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 1934___________________________________________________________ 59 Regulation of exchanges and exchange trading____________________ 59 Registration and exemption of exchanges_____________________ 59 Disciplinary actions_____ __ ____ _____________ __ _ 60 Registration of securities on exchanges___________________________ 60 Market value of securities traded on exchanges____________________ 62 Assets of companies with listed common stocks________________ 63 Foreignstock_____________________________________________ 63 Comparative over-the-counter statistics .__ 63 Delisting of securities from exchanges____________________________ 65 Delisting proceedings under section 19 (a)____________________ 66 Unlisted trading privileges on exchanges__________________________ 68 Unlisted trading categories______ ______________ _______ __ __ 68 Volume of unlisted trading in stocks on exohanges; ____________ 69 Applications for unlisted trading privileges..c., , ________________ 69 Block distributions reported by exchanges, _______________________ 70 Manipulation and etablllaatlon, _________________________________ 71 Manipulation. __________________________________ __________ 71 Stabilization______________________________________________ 73 CONTENTS m ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 1934-Continued P&&,e Insiders' security transactions and holdings., ______________________ 78 Recovery of short swing trading profits by or on behalf of issuer. 75 Regulation of proxies; _ _ ______ ____________________ _______ 75 Scope of proxy regulation___________________________________ 75 Statistics relating to proxy statements________________________ 75 Stockholders' proposals.L, , _________________________________ 76 Ratio of soliciting to non-soliciting cornpanies, ________________ 77 Proxy eontests, ______ ____________ _____ _________ 77 Regulation of broker-dealers and over-the-counter markets__________ 77 Registration., __________________ ___ __ ____ __ 77 Administrative proeeedinga, 78 Net capital rule , __ ___ ____ ____ ______________ _______ __ 85 Financial statementa.c ; , __ ________________ _______ 86 Broker-dealerinspections .____ 86 Supervision of activities of National Association of Securities Dealers, Inc________________________________________________________ 88 Disciplinary actions______ _____________ ____ _________ __ 89 Commission review of N ASD disciplinary acttona., ____________ 89 Commission review of action on membership__________________ 92 Commission action on NASD rules__________________________ 93 Litigation under the Securities Exchange Act of 1934_______________ 93 Anti-fraud litigation_____ ____ _ 93 Cases involving the net capital rule__________________________ 94 Delisting cases____________________________________________ 96 Proxylitigation___________________________________________ 97 Litigation involving registration and reporting requirements_____ 97 Other litigation_______ _____________________________________ 99 Participation as amicus curiae_______________________________ 100 PART VI ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COM- PANY ACT OF 1935___________________________________________ 101 Composition of registered holding company systems--summary of changes____________________________________________________ 101 Developments in individual registered systems________________ 104 Acquisitions by persons other than registered holding eompanles; 126 Electric generating companies developing atomic power or sup- plying electric energy to installations of the Atomic Energy CoDlntission_____________________________________________ 126 Financing of registered public utility holding company systems- trends in electric and