21st Annual Report of the Securities and Exchange Commission Fiscal Year Ended June 30, 1955 UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON I 1956 For we by the Superintendent of DocUDlent8, U. S. Governnaent Printing OfJice W""hington 25, D. C. - Price 50 centll (Paper cover) SECURITIES AND EXCHANGE COMMISSION Headquarters Office 425 Second Street NW. Washington 25, D. C. COMMISSIONERS March 30, 1956 J. SINCLAIR ARMSTRONG, Chairman CLARENCE H. ADAMS ANDREW DOWNEY ORRICK HAROLD C. PATTERSON EARL F. HASTINGS ORVAL L. Dulsors, Secretary II LEITER OF TRANSMITTAL SECURITIESANDEXCHANGECOMMISSION, Washington, D. C., March 30, 1956. SIR: I have the honor to transmit to you the Twenty-first Annual Report of the Securities and Exchange Commission, covering the fiscal year July 1, 1954 to June 30, 1955, 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 Com- pany 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, J. SINCLAIRARMSTRONG, Chairman. THE PRESIDENTOF THE SENATE, THE SPEAKEROF THE HOUSE OF REPRESENTATIVES, Washington, D. C. In TABLE OF CONTENTS Page ForewordL________________________________________________________ XI Commissioners and staff offieers., _____ ____ ___ __ _________ XII Regional and branch offices__ ________ __ _ _ _________ XIU Biographies of commissioners , _ _ ____ __________________ _______ XIV PART I REVISIONS OF RULES AND FORMS Rule 154_____________________________________________________ 1 Changes in rules to conform to Public Law 577, 83d Congress_______ 2 Rule N-24E-l .__ 2 Rule 461_______________________________________________ 3 Rule 133_____________________________________________________ 3 Rules 134 and 135_____________________________________________ 4 Rules 423, 428 and 404___ _________ __ __ ______ __________ _ 4 RegulationA_________________________________________________ 4 Form 9-K and related rules_____________________________________ 4 Form lo-]{___________________________________________________ 5 Regulation BVV___________________________________________ 5 Revisions under consideration__ _ __ ___ _____ ___ 5 PARTH ADMINISTRATION OF THE SECURITIES ACT OF 1933 Description of the registration process____________________________ 7 Registration statement and prospectus , ___ ________ __ _____ 7 Examination proeedure.L, , __ _ _ _ 7 Time required to complete registration_______________________ 8 Volume of securities registered__________________________________ 8. Registration statements filed;., _ __ __ _ __ ______ 10 Exemption from registration under the act________________________ 11 Regulations A and D_ _ ___ 11 Regulation B_ _ _ ___ ____________ ____ ____ __ ____ _____ 14 Formal action under Section 8_ _ __ _ 14 Results obtained by the registration process_______________________ 17 Litigation under the Securities Act______ __ ___ __________ 19 Injunctive actions - ____ __ _____ _ ______ 19 Enforcement of Commission subpenas________________________ 22 Participation as amicus curiae__ ____ _____ ____ _________ 23 Disclosure of Commission's confidential files., _ _ __ 23 PART III ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 1934 Regulation of exchanges and exchange trading ___ _________________ 26 Registration and exemption of exchanges_____________________ 26 Disciplinary action by exchanges., ____ ____ __ ______ _ _ 26 Registration of securities on exchanges___________________________ 27 Statistics of securities registered on exchanges_________________ 27 Disclosure obtained by the registration process________________ 27 Market value of securities traded on exchanges____________________ 28 Comparison with market value of securities traded over the counter_________________________________________________ 29 v VI TABLE OF CONTENTS Page ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 1934-Continued Unlisted trading privileges on exchanges__________________________ 30 Volume of unlisted trading in stocks on exchanges _____________ 30 Application for unlisted trading privileges____________________ 3Q Delisting of securities from exchanges , _________ __ _________ 31 Block distributions reported by exchanges________________________ 31 Manipulation and stabilization , __ ______ _ __ ____ _ 32 Manipulation; _______________________________ __ 32 Stabilization , ______ _ _ ______________ _ _ 33 Insiders security transactions and holdings________________________ 34 Recovery of insiders' profits by company _____________________ 35 Regulation of proxies , _ _ ____ ____ _______ ____________ ____ 35 Scope of proxy regulation___________________________________ 35 Statistics relating to proxy statements________________________ 36 Regulation of brokers and dealers in over-the-counter markets; __ ___ 37 Registration_ _________ _ ____ _ __________ __ 37 Administrative prooeedings., _____ _ _______________________ 37 Broker-dealer inspections , , ___ _ _ _ 41 Financial statements., ___________ _ 42 Net capital rule , ______ __________ __ __ _ ____ ___ 43 Supervision of activities of National Association of Securities Dealers, Inc________________________________________________________ 43 Disciplinary actions_____ __________________________ __ ___ 44 Commission review of NASD disciplinary aotions______________ 44 Commission review of action on membership__________________ 47 Litigation under the Securities Exchange Aot of 1934______________ 47 Participation as amicus curiae______________________________ 50 PART IV ADMINISTRATION OF THE PUBLIC UTILITY HOLDING COM- PANY ACT OF 1935 Composition of registered holding company systems-Summary of changes_____________________________________________________ 51 Significant developments in and litigation involving holding company systems____________________________________________________ 53 Revision of rules, ________ ______ __ _ _ 75 Financing of registered public utility holding company systems______ 77 Financing of electric generating companies supplying facilities of the Atomic Energy Commission___________________________________ 84 Cooperation with State and local regulatory authorttles., ___ _ 85 PART V PARTICIPATION OF THE COMMISSION IN CORPORATE RE- ORGANIZATIONS UNDER CHAPTER X OF THE BANKRUPTCY ACT, AS AMENDED__________________________________________ 89 Summary of aetivitiea.; , _ _ _ _ ___________ _____ 90 Problems in the administration of the debtor's estate___________ 90 Examinations and reports on plans of reorganisation, __________ 90 Fairness of treatment of security holders_____________________ 91 Consummation of plan_____________________________________ 93 Commission's activities under Chapter XL___________________ 93 TABLE OF CONTENTS PART VI Page ADMINISTRATION OF THE TRUST INDENTURE ACT OF 1939__ 95 PART VII ADMINISTRATION OF THE INVESTMENT COMPANY ACT OF 1940___________________________________________________________ 96 Companies registered under the Act______________________________ 96 Types of new investment companies registered____________________ 97 Current information , _ 97 Applications and proceedings_____ ______ ___ 97 Status of The Alleghany Corporation under the Act________________ 101 PART VIII ADMINISTRATION OF THE INVESTMENT ADVISERS ACT OF 1940 Simplification of forms and rules_________________________________ 103 Registration of foreign investment advisers_______________________ 104 Litigation under the Investment Advisers Act of 1940______________ 105 PART IX RELATED ACTIVITIES OF THE COMMISSION Legislative matters_________________ ___ _ 107 Courtproceedings_____________________________________________ 107 Civilproceedings__________________________________________ 107 Criminal proceedings.L L; , __ __ _ 108 Extradition proceedings; _ ___ 113 Complaints and investigations___________________________________ 114 Restitution, _ _________ 115 Section of securities violations___________________________________ 116 Activities of the Commission in accounting and auditing____________ 116 Opinions of the Commission , __ 118 Confidential treatment of applications, reports, and documents______ 118 Statistics and special studies____________________________________ 119 Personnel and fiseal; , _ __ ______ __ 121 Publications__________________________________________________ 122 Information available for public inspection________________________ 123 PART X APPENDIX-STATISTICAL TABLES Table 1. A 21-year record of registration fully effective under the Securities Act of 1933____________________________________________ 126 Table 2. Registrations fully effective under the Securities Act of 1933_ 127 Part 1. Distribution by months_________________________________ 127 Part 2. Purpose of registration and type of security________________ 127 Part 3. Industry of registrants__________________________________ 128 Part 4. Use of proceeds________________________________________ 129 Table 3. New securities offered for cash sale in the United States_______ 130 Part 1. Type of offering, __________ __________________ 130 Part 2. Type of security________________________________________ 131 Part 3. Type of issuer______ ___ ________________ __________ 132 Part 4. Private placement of corporate securitles, _________________ 133 VIII TABLE OF CONTENTS Page Table 4. Proposed uses of net proceeds from the sale of