Fourth Annual Report of the Securities and Exchange Commission Fiscal Year Ended June 30, 1938 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1938 For lIII1eby the Superintendent of Documents. Washington. D. C. - - - - - - - - Price III ceJlts SECURITms AND EXCHANGE COMMISSION omoe: 1778 P8lUlSYlvllllla A.venue NW. Washlngton, D. O. COMMISSIONERS WILLIAM O. DOUGLAS, Chairman GEORGE C. MATHEWS ROBERT E. HEALY JEROME N. FRANK JOHN W. HANES 1 FRANCIS P. BRASSOR, Secretary Address All Communications SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. I Resigned June 30, 1938. LETTER OF TRANSMITTAL SECURITIES AND EXCHANGE COMMISSION, Washington, January 3, 1939. SIR: I have the honor to transmit to you the Fourth Annual Report of the Securities and Exchange 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, Ohairman. The PRESIDENT OF THE SENATE, The SPEAKER OF THE HOUSE OF REPRESENTATIVES, Washington, D. O. m CONTENTS Introduction _ P... 1 Registration of Public Utility Holding Companies .. _ 6 Orders Granting Exemptions from Registration under the Public Utility Holding Company Act of 1935 _ 8 Reorganization, Simplification, and Integration of Registered Public Util- ity Holding Companies and Subsidiaries _ 9 Rules, Regulations, and Forms under the Public Utility Holding Company Act of 1935 _ 13 Issuance of Securities by Registered Holding Companies and Their Sub- sidiaries _ 16 Acquisition of Securities or Utility Assets and Other Interests by Regis- tered Holding Companies or Their Subsidiaries _ 17 Uniform System of Accounts for Public Utility Holding Companies _ 17 Service Companies _ 18 Statements Required Pursuant to Section 12 (i) of the Public Utility Hold- ing Company Act of 1935 _ 19 National Securities Exchanges _ 20 Exchange Reorganization _ 20 Round 'fable Conferences _ 21 Exchanges Registered., ______ _ _ 22 Exchanges Exempted from Registration _ 24 Registration of Securities on Exchanges _ 24 Applications for Registration of Securities on Exchanges _ 24 Statistics of Securities Registered or Exempt from Registration on Exchanges _ 26 Applications for the Withdrawal or Striking from Listing and Regis- tration of Securities on Exchanges _ 30 Applications for the Granting, Extension, and Termination of Un- listed Trading Privileges on Exchanges _ 30 Regulation of the Over-the-Counter Markets _ 32 The Maloney Amendment and Rules Thereunder _ 32 Registration of Brokers and Dealers " _ 34 Registration of Securities Under the Securities Act of 1933 _ 35 Examination of Securities Act Registration Statements _ 35 Statistics of Securities Registered under the Securities Act- _ 40 Exemption from Registration Requirements of Securities Act of 1933 _ 43 Securities Act and Securities Exchange Act Forms, Rules, and Regulations , 45 Litigation under the Public Utility Holding Company Act of 1935 _ 46 Litigation under the Securities Act of 1933 and the Securities Exchange Act of 1934 _ 50 Complaints, Informal and Formal Investigations _ 59- Public Hearings _ 60 Formal Opinions _ 60 Securities Act of 1933, as Amended _ 60 Securities Exchange Act of 1934, as Amended _ 61 Public Utility Holding Company Act of 1935 _ 63 Miscellaneous _ 66 .,. VI CONTENTS Page Reports of Officers, Directors, and Principal Stockholdera.i., ____________ 66 General Scope of Reporting Requirements______________________ 66 Volume of Reports______ _____ ____ ___ _____________________ 67 Decline in Reports Needing AmendmenL______________________ 67 Decline in Late Filing of Reporta______________________________ 67 Extent of Compliance with Reporting Requirements_____________ 68 Publication of Security Ownership Reports_____________________ 68 Solicitation of Proxies, Consents, and Authorizations under the Securities Exchange Act of 1934 and the Public Utility Holding Company Act of 1935___________________________________________________________ 69 Confidential Treatment of Applications, Reports, or Documents., ________ 73 Report on the Study and Investigation of Protective and Reorganization Committees_____________________________________________________ 74 Study of Investment Trusts and Investment Companiea, _______________ 76 Margin Regulatlons..c , , ________________________ ____________ _ 80 Detection of Manipulative and Deceptive Practices____________________ 80 Market Surveillance , _ _ ____________________ __________________ 80 Trading Investigations , ___ ___________________________________ 81 Disposition of Trading Cases______ __ _ 82 Miscellaneous_______________________________________________ 86 Special Studies and the Preparation of Rules__________________________ 87 Short Selling________________________________________________ 87 Trading by Officers, Directors, and Principal Stockholdere.,., ______ 88 Segregation ._______ 88 Financial Safeguards-Richard Whitney & Company __ _ _________ 89 Margins____________________________________________________ 90 Miscellaneous Exchange Studies and Rules_____________________ 91 Over-the-Counter Studies..c., , ___________ _ 91 Admission to Practice as Attorney or Agent Before the Commission______ 92 Public Reference Rooma.c.,., __________________ ______________________ 93 Publications______________________________________________________ 94 Information Releases_________________________________________ 94 Registration Record, Securities Act of 1933_____________________ 95 OtherPublications___________________________________________ 95 Personnel_________________________________________________________ 96 Flscal Affairs______________________________________________________ 96 APPENDIXES ApPENDIX I. Rules of Practice; _ _ 99 ApPENDIX II. Guides to Forms 113 ApPENDIX III. Securities Act Registration Statements as to which stop orders, consent refusal orders, and withdrawal orders were issued July 1, 1937, to June 30, 1938_____________ 136 ApPENDIX IV. List of Publications as of December 9, 1938_____________ 141 ApPENDIX V. Statistical tables: Table 1. Effective registrations of new seeu'ritiea-e-totals, from September 1934 to June 1938, by months_____________________ 143 Table 2. Effective registrations of new securities, by types of securi- ties, from July 1937 to June 1938, by months_________________ 144 Table 3. Effective registrations of new securities, by major indus- trial groups, from July 1937 to June 1938, by months__________ 145 Table 4. Effective registrations of new eecuritles-e-reductdon of gross amount of all effective securities to estimated net cash pro- ceeds accruing to issuers, from July 1937 to June 1938, by months; 147 CONTENTS vn APPENDIX V. Statistical tables-Continued. Page Table 5, part 1. Effective registrations of new securltiee-e-proposad uses of estimated net cash proceeds of new securities registered for account of issuers, from July 1937 to June 1938, by months..; 148 Table 5, part 2. Effective registrations of new securities--proposed uses of estimated net cash proceeds of new securities reaistered for account of issuers, from July 1937 to June 1938, by months., , 149 Table 6. Effective registrations of new securities-detailed statistics by industries-fiscal year ended June 30, 1938_ _______________ 150 Table 7. Effective registrations of new securities-channels of dis- tribution of new securities intended for cash offering for account of issuers--fiscal year ended June 30,1938______________________ 158 Table 8. Effective registrations of reorganization and exchange securities, by types of securities, from July 1937 to June 1938, by months___________________________________________________ 160 'Table 9. Effective registrations of reorganization and exchange securities, by major industrial groups, from July 1937 to June 1938, by months___________________________________________ 161 Table 10, part 1. Transactions in all stocks for account of members, New York Stock Exchange, by weeks, June 28, 1937-June 25, 1938_____________________________________________________ 162 Table 10, part 2. Transactions in all stocks for account of members, New York Curb Exchange, by weeks, June 28, 1937-June 25, 1938_____________________________________________________ 164 Table 11, part 1. Value and volume of sales on registered exchanges. Grand totals for the year ended June 30, 1938________________ 166 Table 11, part 2. Total market value of all sales, monthly, from July 1937 to June 1938, inclusive________________________________ 167 Table 11, part 3. Market value of stock sales, monthly, from July 1937 to June 1938, inclusive_________________________________ 168 Table 11, part 4. Market value of bond sales, monthly, from July 1937 to June 1938, inclusive J _ _ __ _ _ __ 169 Table 11, part 5. Volume of stock sales, monthly, from July 1937 to June 1938, inclusive .___ __ 170 Table 11, part 6. Principal amount of bond sales, monthly, from July 1937 to June 1938, inclusive____________________________ 171 APPENDIX VI. Litigation Involving Statutes Administered by the Com- mission , _ _ _________________ __ 172 Table I. Injunctive proceedings brought by Commission under Securities Act of 1933 and Securities Exchange Act of 1934 which were pending during the fiscal year ended June 30,1938________ 172 Table II. Indictments returned for violation of the Securities Act of 1933 and the Securities Exchange Act of 1934 which were pending during the fiscal year ended June 30,1938____________________ 178