Investment Trusts and Investment Companies
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INVESTMENT TRUSTS AND INVESTMENT COMPANIES HEARINGS BEFORE .t SUBCOMMITTEE OP THE COMMITTEE ON BANKIBG AND CURRENCY UNITED STATES SENATE SEVENTY-SIXTH CONGRESS THIRD SESSION S. 3580 A BILL TO PROVIDE FOR THE REGISTRATION AND REGULATION OF ISVESTMENT COMPANIES AND INVESTMEST ADVISERS, AND FOR OTHER PUKPOSES PART 2 APRIL 12, 15, 16, 17, 18, 19, 22, 23, 24, 25 and 26, 1940 Printed for the use of the Committee on Banking and Currency UNITED STATES GOVERNMENT PRINTING OFFICE 721347 WASHTNGTON : 1940 COMMITTEE ON BANKING AND CURRESCY ROBERT F. WAGNER, New York, Chairman CARTER GLASS, Virginia JOHN G. TOWNSEND, Jp.., Delaware ALBEN W. BARKLEY, Kentucky LYNN J. FRAZIER. North Dakota JAMES F. BYRNES, South Carolina CEARLES W. TOBEY, New Hampshire JOHN H. BANKHEAD, Alabama JOHN A. DANAHER, Connecticut ALVA B. ADAMS, Colorado ROBERT A. TAFT, Ohio FRANCIS T. MALONEY, Connecticut GEORGE L. RADCLIFFE, Maryland PRENTISS M. BROWN, Michigan JAMES H. HUGHES, Delaware CLYDE L. HERRING, Iowa WILLIAM R. SMATIIERS, Now Jersey 30HN E. MILLER, Arkansas D. WORTH CLARK, Idaho SHERIDAN DOWNEY, California PHILIP LEVY, Clerk ROBERT F. WAGNER, New YOrk, Chairman CARTER GLASS, Virginia JOHN G. TOWNSEND, JR., Delaware JAMES F. BYRNES, South Carolina LYNN J. FRAZIER, North Dakota FRANCIS T. MALONEY, Connecticut ROBERT A. TAFT, Ohio JAMES H. HUGHES, Delaware CLYDE L. HERRING, Iowa JOHN E. MILLER,Arkansas BHERIDAN DOWNEY, California 11 CONTENTS Statement of- Page Adams, Hon. Charles F., Boston, Mass ........................... 557 Adler, Robert S., president and director, Selected American Shares, Inc., Chicago, I11 ____.-____-______-----------------------_534,537 Amory, Roger, Boston, Mass ---_-_-_-.---.-----..---------------580 Anderson, 0. Kelley, president, Consolidated Investment Trust, Boston Mass- _ __ _ _ ____ ~.__ ---.------- ----.------ -- - -- --- -- - - ~ndrews,'~.Coleman, member of committee of the American Institute of Accountants, Richmond, Va. ............................... Bane, Baldwin B., director of the Registration Division, Securities and Exchange Commission- ...................................... Bellamy, F. Wilder, president, National Bond & Share Corporation, New Pork City .............................................. Berle, Rudolf, general counsel, Investment Counsel Association of America, New York City ...................................... Bolton-Smith, Carlile, attorney, Securities and Exchange Commis- slon........................................................ Bullock, Hugh, vice president, Calvin Bullock Co., New York City__ Bundy, Harvey H., chairman of the trustees, Boston Persona.1 Prop- erty Trust, Boston, Mass- .................................... Bunker, Artlnir H., esecutive vice president, The Lehnlan Corpora- tion, New york City ................................... 325, 399,1052 Cabot,, Paul C., prcrsident, State St'reet Investment Corporation, Boston, Moss ................................................ 463 Curtis, Charles P., trustee, Centl~ryShares Trust, Boston, Mass---- _ 589 Curtis, Louis, parher of Brown Bros. Harrinlarl & Co., Boston, Mass- 546 Dewey, Bradley, president, Dewey & Almy Chemical Co., Cambridge, Mass........................................................ 621 Dodd, Prof. I?. Merrick, Harvard Law School, Cambridge, Mass- _ _ - 765 Eaton, Charles F., dr., president., Eaton & Howard, Inc., Boston, Mass..................................................... 595 Eberstadt, Ferdinand,. -president of F. Eberstadt & Co., New York City_______............................................... 567 Gardiner, William Tudor, chairman, Incorporated Investors, Boston, mass___-__..__^^.__.^.--..^.---.--.---..------.. 543 Goldsmith, Raymond W., assistant director, Trading and Exchange Division, Securities and Exchange Commission. - --- .- - - - - - --- _.- 812 Greene, Francis, assistant dirrctor, Trading and Exchange Division, Securities and Exchange Commission --._--- .--------.- .-. ---- - - 863 Grismold, Merrill, chairman, Massachusetts Investors Trust of Boston, hlass ................................................ 847 Healy, Robert E., Commissioner, Securities and Exchange Com- mission ......................................... 930, 1047, 1050 Hollands, John H., attorney, Securities and Exchange Commission-- 1049 Joh!lston, Douglas T., president, Johnston & Lagerquist, Inc. and vlce president, Investment Counsel Association of America, New York City. ............................................. 71 1 Long, Hugh W.,' president, New York Stocks, Inc., and Manhattan Bond Fund, Inc., Piew York City -.---.--.---------.---.----..-584 IAoomis,Robert H., president, Loomis, Sayles &. Co., Inc., Boston, Mass.____-. ............................................. 706,760 Lord, Andrew J., president, Lord, Abbett & Co., Inc., and president, Affiliated Fund, Inc., New York City- --- 617 McGrath, Raymond D., executive vice president, General American Investors Co., Inc., New york City-_-. .- --.- -. .---- - - --- --.--- 425 Motley, Warren, counsel, Massachusetts Investors Trust, Boston, &lass................................................... 651 111 IV CONTENTS Statement of-Continued. Page Myers, John Sherman, vice president of I,ord, Abhett & Co., II~c., president of American Business Shares, Inc., and vice president of Affiliated Fulld, h-- - - - .- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 605 O'Hearn, Charles M., vice president and director of Clarke, Sinsa- baugh & Co., Ken York City ------.--_.-._...--._ . -_ 713 Orr, .la~nesN., president, Railway & Light Securities Co., Boston, Mass--.- .--..---.------....--..---.-----------.--.--631 Parker, William A., president, Incorporated Investors, Boston, Mass- 545 , Quinn, Cyril J. C., vice president, Tricontincntal Corporation and partner of J. & W. Seligrrian & Co., New York City _..____._--_ 370, 441 Rose, Dwight C., partner of Brundage, Story & Rose, Kew York City, and president, Investment Counsel Associat'ion of America_- 722 Sanders, David T., resident manager and wholesale representat,ive in Chicago of Massachusetts Distributors, Inc_--_. - - ._. ____ ____ -- 328 Schenker, David, Chief Counsel, Investment Trust Study, Securities and Exchange Comlnission ------------..-----------.----802, 866, 971 Smitli, L. M. C., associate counsel, Investment Trust Study, Securities and Exchange Commission ----.--------- --.--.-.--- - -. 783 Spmgue, Oliver M. W., Boston, Mass .--...--.---.--._._...-~560 Standish, Alexander, president, Standish, Racey, & McKay, Inc., Boston, Mass__--.-_.---.--.--.--.-------.---.-.--..-.--.-.. 718 Taliaferro, Richard N., president, Fidelity Fund, Inc., Roston, Mass__ 547 Traylor, Mahlon, president, Massachusetts Distributors, Inc., of Boston, Mass .____~.-.-._-.--__.._._...._-._.___.451, 514 Vass, Laurence C., statistician, Securities and Exchange Com~nissiori-_ 821 Wagner, Richard, president, The Chicago Corporation, Chicago, Ill. _ 682 Werntz,. Williani W., chief accountant, Securities and Exchange Coin- nllsslon _._--.--.--....--.----------------.---.-.-...906 Whit,e, James N., Scudder, Stevens & Clark, investment counsel, Boston, Mass __--..._-.-----.----_.._-------.--.-.-.-700,755 Exhibits: Memoranda submitted by Arthur H. Bunker_--...... -_._._.350,399,406 Letters to stockholders of n'ational Bond & Share Corporati011 sub- mitted by F. Wilder Bellamy- .. ____ -___.__.__.___.___- Memorandum submitted by Mahlon E. Travlor," . entitled "Investment Trust Classification"_. _ I I I IIII I II -. I -.II -.-.- - - - - - -.- -.- Memorandum submitted by Paul C. Cabot entitled, "Sixteenth Annual Report, State Street Investment Corporation, Boston, -.-------.-------.-- Pamphlet submitted by Paul C. Cabot, entitled, "The Investment Trost" List of trustees and members of the advisory board of Maccachusetts Investors Trust, submitted by Merrill Griswold- _ _ . _ _ - ...- Memorandum submitted by Richard N. Taliaferro, entitled, "Q-3 Application for Qualification of Investment Trust Sharesv_. -.- - _. Letters submitted by Richard N. Taliaferro _____ _._.- _._._ _ _._ _ _ Memorandum submitted by Senator Dowuey in behalf of Henry S. RlcKee, president, Pacific Southern Investors, Tnc., and American Capital C~rporat~ionor Lus Angeles -.-_..____-_-.---.-____ Comparative statement of capital surplus and dividends, of the Boston Personal Property Trust, submitted by Harvey H. Bundy - - - - - - _ - Chart submitted by James H. Orr, entitled "Railway & Light Securi- ties Co., Percent Asset Coverage per Outstal~dingBond at Par for Determining Dividend paymer~ts Under Invcstment Company Act of 1940"_____._..--.__-----..---..-----.-------------.-- Code of Fair Competit,ion for Investment Bankers, submitted by James H. Orr. ____._..______.___. .___.-.__.--- .__ Statement of S. L. Sholley, president, Keystone Custodian Fmlds, Inc., Boston mass____..___._______-.___.._-_^_^_._.---.__ Memoranbnm submitted by Francis I. Amory, vice president, and E. Roy Iiittredgc, treasurer, General Capital Corporation- _ - _- - -. Memorandum snbmit'ted by Malcolm W. Greenough, president', Roston Metal Investors, Inc- _ _._ ._ - - - -._...- _ -.--.-- --- - -.- -. Letter addressed to Hon. Robert F. by Donald B. Litchard, president,, Bay State Fund, Inc___-_.. ._...-_ Memorarldum submitted by Donald Holhrook, Rodon, mas,^. ._..- _ CONTENTS V Exhibits- Continued. Page Menlorandurn submitted by .John H. Sherbl~rne.clmirman. board of trustees, General Investors Trust,___- _.-.- -___-_. - - .__------. 677 Chart subniittcd by Robert H. Loomis entitled "Loomis-Sayles Mut,ualFilnd"._.___..._-___-.__._.__._..___.._._.~709