clients, which contracts fail to provide for notification of change in partnership. The form of contracts executed between investment advisers and their clients will thus have to be carefully scrutinized to insure compliance with such statutory provisions.

3. The conduct of investigations to determine whether statutory prohibitions against certain types of transactions have been violated.-Registered investment advisers are prohibited from engaging in unlawful transactions and practices which defraud or operate as a fraud or deceit upon clients or prospective clients. Additional statutory provisions prohibit registered investment advisers from purchasing securities from, or from selling securities to, any client, either as principal or as broker for another person, without first advising the client of the transaction and obtaining his consent thereto. The staff of the Commission must perform the necessary investigations to ascertain whether such provisions are being complied with, and to institute the requisite proceedings if violations are found to exist.

PROJECT NO. 6. EXECUTIVE AND ADMINISTRATIVE ACTIVITIES APPLICABLE TO ALL OF THE LEGISLATION UNDER THE JURISDICTION OF THE COMMISSION

This project covers the salaries of the Commissioners, their staff, and technical assistants; the trial examiners; the Secretary of the Commission and his immediate office force; and the employees assigned to the administrative and personnel divisions. The personnel grouped under this heading perform duties in connection with all of the legislation administered by the Commission and, therefore, their salaries cannot conveniently be charged to particular acts.

The employees carried under the project perform the executive, business management, and service functions of the Commission. These functions include (1) action on, signing and service of all Commission orders, opinions, and certifications; (2) preparation, maintenance and indexing of the official Minutes of the Commission, and the drafting of memoranda to the division heads and regional offices, indicating the action taken on matters presented to the Commission; (3) handling of all personnel matters for the Commission; (4) preparation and defense of the budget estimates before the Bureau of the Budget and the Appropriations Committees of Congress; (5) preparation of the Commission's Annual Report to Congress; (6) coordination of the many activities of the Commission; (7) all service activities, such as the establishment of field offices, the preparation of leases, the preparation of contracts for miscellaneous services, all duplicating activities, the purchase, storage, and issuance of supplies and equipment, the maintenance and distribution of forms, rules, regulations, instructions, opinions, etc., the compilation of statistical information by means of card punching, sorting and tabulating machines; (8) editorial and printing work; (9) the preparation and maintenance of the dockets and records on all registration statements, applications, declarations, etc., filed with the Commission; (10) the maintenance of the central files of the Commission; (11) the maintenance of the public reference room and the dissemination of information with respect to all public documents filed with the Commission; (12) the maintenance of the library, the central mail room and the stenographic pool for servicing all divisions of the Commission; (13) the maintenance of the Commission's appropriation accounting records and the audit of pay rolls and all types of vouchers and claims; and (14) the conduct of general correspondence not relating to technical subjects or matters.

This concludes the justifications for the amount requested for personal services. As has been indicated previously, the Commission is requesting the sum of $3,430,000 for personal services, departmental, and $1,200,000 for personal services, field, or a total of $4,630,000 for all personal services.

The justifications for "other obligations" follow.

0132 Mileage and witness fees, $7,000.-The acts administered by the Commission (except ch. X of the Bankruptcy Act) authorize the Commission to subpena witnesses. Those witnesses subpenaed by the Commission to testify for the Government are entitled to the mileage and fees prescribed by law for Government witnesses. The funds requested under this classification are to pay mileage and fees to Government witnesses subpenaed by the Commission. The sum of $7,042 was expended for this purpose in the fiscal year 1941. Based upon these expenditures it is estimated that the sum of $7,000 will be required in the fiscal year 1943.

02 Supplies and materials, $140,000.-The items of expense included under this classification, together with the estimated requirements for 1943, the estimated obligations for 1942, and the actual cost for 1941, are shown in the following table:

05 Communication services, $81,800.-The amount requested for communication service is to provide for the payment of (a) telegraph service; (b) telephone service (rental of equipment and local calls); (c) telephone, toll charges; (d) teletypewriter service; (e) stock and bond ticker service, and (f) postage. There is presented below a statement showing by item the actual expenditure during the fiscal year 1941, the estimated obligations for the fiscal year 1942 and the amount requested for 1943:

Teletypewriter service was maintained in Washington, D. C., and in New York, N. Y., during the entire fiscal year 1941. Service in Cleveland, Ohio, and San Francisco, Calif., was installed in February 1941.

06 Travel expenses, $300,000.-The sum of $300,000 is requested to provide funds to reimburse employees of the Commission for expenses incurred by them while traveling on the official business of the Commission. The travel expenses incurred during the fiscal year 1941, the estimated obligations for the fiscal year 1942 and the amount requested for 1943 are as follows:

07

Transportation of things, $9,500.-These funds are requested to defray the est of shipping charges incurred in transporting goods and materials when the ofcial necessity so requires.

The sum of $4,295 was expended for this purpose in the fiscal year 1941. For the fiscal year 1942 an allotment of $4,500 has been made and it is estimated that $9,500 will be required in 1943. The increase of $5,000 for 1943 is to provide for the moving of the household goods and effects of employees transferred from one official station to another.

08 Reporting hearings, $25,000.-All of the legislation administered by the Commission (except ch. X of the Bankruptcy Act) specifically provides that opportunity for hearing shall be granted in connection with many phases of the work, that such hearings may be public and that proper record thereof shall be kept. The testimony given in these hearings is stenographically recorded. As the hearings are held at various points throughout the country it is necessary that competent stenographic reporting services be available to the Commission at all points in the United States. This is accomplished through a contract with a commercial reporting agency.

An

In the fiscal year 1941 the sum of $24,918 was expended for this purpose. allotment of $25,000 has been made for 1942 and it is estimated that a like amount will be required in 1943.

10 Light and power, $7,500.-The leases covering the rental of commercial office space for the New York, Boston, Cleveland, and Chicago offices of the Commission do not provide for the furnishing of light and power. The cost of this service for the fiscal year 1941 amounted to $7,102 and the sum of $7,500 is requested for 1943. The estimated increased cost in the fiscal years 1942 and 1943 is due to the fact that the Commission now occupies more space in Chicago than was occupied during the fiscal year 1941. Consequently, the light bill should be higher.

11 Rents, $131,400.—The items of expense grouped under this classification and the amounts requested for each item are indicated below:

12 Repairs and alterations, $4,500.-The funds requested for this item are to defray the cost of repairs to mechanical office devices, furniture, and other equipment; the cost of minor alterations in field offices for which the leases do not provide; and similar costs.

In the fiscal year 1941 the sum of $4,362 was expended for this purpose. It is estimated that $4,500 will be required in the fiscal year 1943.

13 Miscellaneous current expenses, $2,500.-This is to cover minor items of expense that cannot readily be classified elsewhere. Some of the expenses chargeable under this classification are: Certified copies of records of State governments and other agencies; expenses incurred by United States marshals in serving subpenas issued by the Commission; lettering on doors or other objects; and similar costs.

In the fiscal year 1941 the sum of $2,585 was expended for minor items of expense, for which $2,500 is requested for the fiscal year 1943.

30 Equipment, $39,000.-The funds requested under this classification are for the replacement of worn and damaged equipment, and to provide for the normal demands for additional equipment. The sum of $56,013 was expended for this purpose in 1941; an allotment of $44,000 has been made for 1942 and it is estimated that $39,000 will be required in 1943.

GENERAL STATEMENT

Mr. WOODRUM. Mr. Eicher, will you give us a general statement on this estimate for the Securities and Exchange Commission?

Mr. EICHER. Mr. Chairman, the budget estimates of the Securities and Exchange Commission provide for appropriations of $5,380,000 for salaries and expenses, and $60,000 for printing and binding. These amounts are the same as our current year's appropriations.

We have submitted written justifications to the committee, in which we explain the nature of the Commission's work and give some figures regarding the volume of this work for the last 3 fiscal years. I have presented a copy of these justifications for the record.

As you already know, the Commission administers seven statutes: The Securities Act of 1933; the Securities Exchange Act of 1934; the Public Utility Holding Company Act of 1935; the Trust Indenture Act of 1939; the Investment Company Act of 1940; the Investment Advisers Act of 1940; and certain provisions of chapter X of the Bankruptcy Act, as amended.

Before discussing our many functions under these acts, I want to point out one thing that characterizes our work under each of these statutes. It is the fact that the Commission has little or no control over the amount of work that must be handled in a given period. A great portion of the matters coming before the Commission under each of these statutes arise either by virtue of applications from persons and business concerns subject to the statutes, or in other manners wholly beyond the control of the Commission itself.

We cannot control the number of filings and therefore we have no control over the number of examinations, the number of investigations, the number of informal conferences, the number of formal hearings or the amount of correspondence which we must conduct. We have statutory time limits on many of our actions and cases and in other cases we are under the gun of unpredictable market movements. These matters, which relate to the financial welfare and well-being of business enterprises, have such repercussions on the general business activity of the Nation that they must be disposed of in the shortest possible period of time.

Most security issues nowadays are tied up one way or another with the national-defense program and therefore time is always of the essence. The operation of the laws administered by the S. E. C. has a direct impact upon the affairs of corporations representing over half the total assets of American industry. Whenever any of these corporations seek to do public financing, list their securities on a stock exchange, solicit proxies from their security holders or undertake numerous other vital corporate activities, they must conform to requirements of the S. E. C. laws. The volume and complexity of such corporate transactions resulting from the defense effort has naturally increased very substantially. But, above all, the importance of getting the job done quickly has become paramount.

ADMINISTRATION AND ENFORCEMENT OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE TRUST INDENTURE ACT OF 1939

The first project described in our justifications covers the administration and enforcement of the Securities Act of 1933, as amended, and the Trust Indenture Act of 1939.

I suppose it will not be necessary to explain all our functions under these acts because they seem to be pretty clearly stated in our justifications. This starts on page 9. However, it seems to me that we have an excellent example here to support the statements I made a few moments ago regarding the control of the volume of our work. There is no way under the sun that we can predict what the volume of filings

under these acts will be from year to year, or even from month to month or week to week. Yet when corporate financing is necessary we must do our part with the maximum amount of speed consistent with the requirements and objectives of the statute. Corporations and investment bankers naturally try to arrange their financing so that it will take place during the most favorable market conditions. When they reach a period in which they feel that securities issues may be sold successfully, they are always eager to make the offering with the maximum amount of speed so that the favorable market conditions will not slip away from them. I have seen many instances in which the failure of the Commission to be able to finish its job of examination in accordance with the time schedule of the underwriters would actually have meant the difference between the success and failure of substantial issues of securities, often for important capital expansion. The market a day or two after the scheduled offering date dropped off to the extent that either failure to sell the issue or a substantial loss would have been inevitable.

We have had to speed up our examinations under the Securities Act by reason of a recent amendment to that act permitting registration statements to become effective at any time that the requirements of the public interest are met. This means that whereas prior to the amendment, we always had 20 days in which to complete examination, now, on some issues we sometimes have as little as 3 days in which to clear a registration statement. It is absolutely essential, therefore, that we have available at all times a staff of trained employees capable of handling any reasonable work load that may be dumped upon us. We obviously have no time to go out and hire employees after statements are filed, and if we could it would do us no good because they would not be trained for the job.

We have constantly found it necessary to examine and reexamine our procedures under the statutes to the end that we shall put no unnecessary obstacles in the way of those seeking to raise capital and in order to be able to prepare ourselves better to handle unexpected peak loads within our budgetary limitations. One example, I believe not referred to in the justifications now before you, relates to small issues of securities. During the past fiscal year, that work has been substantially reorganized and the requirements of applicants have been substantially modified. The company secking to issue $100,000 or less of securities may now make its application directly in our regional office and the regional office is charged with the responsibility of investigating and clearing the application. This has substantially increased our investigatory work load but it has produced such excellent results in speeding up the financing of small business that it is more than justified. The number of filings in the first 6 months of operation under the new requirements is actually more than three times as great as it was during the last 6 months under the old requirements. It seems extremely likely that, as the provisions of the new regulations for small issues become better known, the volume of work in this connection will continue to increase substantially. I think you understand the importance, at a time like this, of facilitating the raising of capital by small business, but it must be borne in mind that the effort to accomplish this objective within our budgetary limitations requires no small amount of ingenuity.