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Annual Report 1989

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Annual Report 1989 For sale by the Supermtendent of Documents. US Government Prmtmg Office Washington, 0 C 20402 Table of Contents Chairman's Letter of Transmittal vii Enforcement Program 1 Introduction . 1 Key 1989 Results 1 International Affairs 3 Program Areas . 4 Penny Stock Cases . 4 Insider Trading . 6 Financial Disclosure . 8 Corporate Control . 10 Securities Offerings 11 Regulated Entities. 12 Sources for Further Inquiry. 15 Full Disclosure System 16 Introduction . 16 Key 1989 Results ,........................ 16 Review of Filings ........• '. " , ' .. '-'" . 17 Rulemaking, Interpretive, and Legislative Matters ". 19 Scope of Registration Requirements .>, . 19 Multijurisdictional Disclosure System ~ .. ,:-. '. .. 20 Resales to Institutional Investors . 20 Change in Holding Period for Restricted Securities. .. 21 Ownership Reports and Trading by Officers, Directors, and Principal Security Holders 21 Management's Discussion and Analysis 21 Form S-8 .. .. 22 Change in Fiscal Year/Quarterly Reporting. .. 22 Beneficial Ownership Reporting. .. 22 Disclosure of Significant Equity Participants '. 23 Commodity Pool Disclosure .. .. 23 Regulation D Exemptions from Registration Requirements . .. 23 Conferences . .. 24 SEC Government-Business Forum on Small Business Capital Formation . .. 24 SEC/NASAA Conference Under Section 19(c) of the Securities Act 24 Accounting and Auditing Matters 25 Introduction . .. 25 Key 1989 Results 25 Accounting-Related Rules and Interpretations. .. 26 National Commission on Fraudulent Financial Reporting . .. 27 Changes in Registrants' Independent Accountants 27 Management Reports " 27 Timely Reviews by Auditors of Interim Information 27 Audit Committees . .. 28 Enforcement Remedies . .. 28 Oversight of Private Sector Standard-Setting . .. 28 FASB . .. 28 Postemployment Benefits Other Than Pensions . .. 28 Income Taxes 29 Financial Instruments . .. 29 Other Activities . .. 29 Timely Financial Reporting Guidance 29 AICPA 29 ASB 30 AcSEC . .. 30 SECPS . .. 30 International Accounting and Auditing Standards . .. 31 Independence 31 The EDGAR Project . .. 32 Introduction . .. 32 Key 1989 Results 32 Pilot System 32 Operational System. .. 33 Rulemaking . .. 34 Conclusion 34 Regulation of the Securities Markets . .. 35 Introduction . .. 35 Key 1989 Results 35 Securities Markets, Facilities, and Trading . 36 Market Reform Initiatives. .. 36 The National Market System .. .. 37 National System for Clearance and Settlement .. .. 39 Internationalization 40 Options and Other Derivative Products 42 Regulation of Brokers, Dealers, Municipal Securities Dealers, and Transfer Agents . 45 Penny Stock Task Force 45 Broker-Dealer Examination Program . 46 Municipal Securities Disclosures 47 Commission Dollar Practices . 47 Exemption of Certain Securities by the Resolution Funding Corporation . 47 Financial Responsibility Rules . 48 ii Lost and Stolen Securities . .. 49 Oversight of Self-Regulatory Organizations . .. 49 National Securities Exchanges . .. 49 National Association of Securities Dealers, Inc. .. 50 Clearing Agencies . .. 51 Municipal Securities Rulemaking Board. 51 SRO Sponsored Arbitration . .. 52 Inspections of SRO Surveillance and Regulatory Compliance . .. 52 Applications for Re-entry . .. 55 SRO Final Disciplinary Actions 56 Securities Investor Protection Corporation " 56 Investment Companies and Advisers 58 Introduction . .. 58 Key 1989 Results 59 Significant Legislative Developments . .. 59 Disclosure Requirements 59 EDGAR Filings. .. 60 Regulatory Policy . .. 60 Significant Investment Company Act Developments . .. 60 Significant Public Utility Holding Company Developments .. 61 Significant Institutional Disclosure Program Developments . 62 Significant Applications and Interpretations . .. 62 Investment Company Matters . .. 62 Insurance Products Matters . 64 Investment Advisers Act Matters . .. 64 Holding Company Act Matters . 64 Other Litigation and Legal Activities . .. 67 Introduction . .. 67 Key 1989 Results 67 Litigation 68 Illegal Trading and Disgorgement . .. 68 Self-Regulatory Organizations 69 Definition of Security . 70 Broker-Dealers and Market Professionals 71 Liability in Private Actions. .. 72 International Application of the Securities Laws 73 Actions Under the Public Utility Holding Company Act of 1935 (Holding Company Act) 73 Motions to Vacate Injunctions 74 Actions Involving Other Agencies. 74 Discovery Actions in Commission Enforcement Actions .... 75 Litigation Involving Requests for Access to Commission Records. 75 Actions Against the Commission 76 iii Actions Against Professionals Under Commission Rule 2(e) . 76 Actions Under the Right to Financial Privacy Act . 77 Significant Administrative Decisions 77 Broker-Dealers and Market Professionals . 77 Significant Legislative Developments . 78 Enforcement Remedies . 78 International Enforcement . 78 Internationalization 79 Market Reform Legislation , 79 Leveraged Buyouts . 81 Investment Adviser Self-Regulation . 81 Shareholder Communications 81 Debt Financing . .. 82 RICO Reform. 82 Corporate Reorganizations . .. 82 Committees 83 Estate Administration , 83 Disclosure Statements/Plans of Reorganization . .. 85 Compliance with the Registration Requirements of the Securities Act 86 Economic Research and Analysis 87 Introduction . .. 87 Key 1989 Results 87 Management and Program Support 89 Introduction . .. 89 Key 1989 Results 89 Policy Management . .. 89 Consumer Affairs and Information Services . .. 90 Public Reference. .. 91 Equal Employment Opportunity 91 Public Affairs . .. 92 Administrative Support 93 Financial Management 93 Facilities Management . 93 Information Systems Management . .. 94 Personnel Management . 94 Commission Operations " 95 Commission and Principal Staff Officers . " 96 Biographies of Commissioners 98 Richard C. Breeden 98 David S. Ruder . .. 99 Charles C. Cox 100 iv Joseph A. Grundfest 100 Edward H. Fleischman 101 Mary Schapiro. .. 102 Philip R. Lochner, Jr. 102 Regional and Branch Offices and Administrators 104 Footnotes 107 Appendix . .. 120 Appendix Tables 1 Unconsolidated Financial Information for Broker-Dealers 121 2 Unconsolidated Annual Revenues and Expenses for Broker-Dealers Doing a Public Business 122 3 Unconsolidated Balance Sheet for Broker-Dealers Doing a Public Business 123 4 Securities Industry Dollar in 1988 125 5 Unconsolidated Revenues and Expenses for Carrying/ Clearing Broker-Dealers . .. 126 6 Unconsolidated Balance Sheet for Carrying/Clearing Broker-Dealers . .. 127 7 Consolidated Financial Information of Self-Regulatory Organizations " 130 8 Self-Regulatory Organizations-Clearing Agencies, 1988 Revenues and Expenses . .. 131 9 Companies Registered Under the Investment Company Act of 1940 . .. 133 10 Market Value of Equity/Options Sales of U.S. Securities Exchanges . .. 134 11 Volume of Equity/Options Sales on U.S. Securities Exchanges. .. 135 12 Share Volume by Exchanges. .. 137 13 Dollar Volume by Exchanges 138 14 Securities Listed On Exchanges " 139 15 Value of Stocks Listed on Exchanges . .. 140 16 Certificate Immobilization Trends. .. 141 17 Types of Proceedings. .. 142 18 Fiscal 1989 Enforcement Cases Listed by Program Area '" 146 19 Enforcment Cases Initiated by the Commission During Fiscal 1989 in Various Program Areas 152 20 Investigations of Possible Violations of the Acts Administered by the Commission . .. 153 21 Administrative Proceedings Instituted During Fiscal Year Ending September 30, 1989 . .. 153 22 Injunctive Actions . ..
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