practicable, invited the comments or suggestions of other Federal and State agencies interested in accounting, of committees of professional societies, and of other interested persons. Reciprocally, the Commission has been invited to offer suggestions or comments on proposed actions or bulletins of these organizations. The past year has produced much gratifying evidence as to the effectiveness of these activities. Professional Conduct While the Commission has cooperated with the accounting profession to secure a common objective of high professional standards, yet it has, as it must, reserved to itself the right to invoke sanctions against accountants who wilfully or carelessly violate its rules. During the past year the Commission for the first time found it necessary to invoke against an accountant the sanctions found in Rule II (e) of its Rules of Practice. In In the Matter of Abraham H. Puder, et al. 15/, the Commission, on the basis of stipulated facts, issued an order suspending Puder and the firm of Puder and Puder from practice before the Commission for three months. In In the Matter of Kenneth N. Logan 16/, the accountant was denied the right to practice before the Commission for sixty days. Accounting and Auditing Several opinions involving accounting or auditing matters were issued by the Commission during the year. Of these, the case of outstanding significance was In the Matter of Associated Gas and Electric Company 17/, a delisting proceeding under Section 19 (a) (2) of the Securities Exchange Act of 1934. The findings and opinion in this case contain an extensive criticism of various accounting practices followed in the financial statements of the registrant and of certain aspects of the certificates furnished by Haskins & Sells. Other opinions under the Securities Act of 1933 and the Securities Exchange Act of 1934 dealt with the independence of the certifying accountant 18/; the adequacy of the representations made in an accountant's certificate 19/; and the failure of financial statements to conform to sound accounting principles. 20/ In addition, many of the findings and opinions under other Acts administered by the Commission, particularly the Public Utility Holding Company Act of 1935, included discussion and decision of varied accounting issues. Informal Consideration of Accounting Problems Raised in the Case of Individual Registrants As in the past, the greatest part of the Commission's accounting and auditing activities stems from the examination of financial statements filed by particular registrants. Deficiency memoranda, issued against more than half of the financial 15/ Securities Exchange Act of 1934, Release No. 3073 (1941). 16/ Accounting Series Release No. 28 (1942). 17/ Securities Exchange Act of 1934, Release No. 3285A (1942). 18 In the Matter of Southeastern Industrial Loan Company, 19/ In the Matter of Automatic Telephone Dialer, Inc., Securities Act of 1933, Release No. 2736 (1941). 20 In the Matter of Condor Gold Mining Company, Securities Exchange Act of 1934, statements currently filed, have continued to play an important role in securing satisfactory financial statements for investors. Also, accounting and auditing problems have been the subject of innumerable informal conferences between the Commission's staff and representatives of particular registrants. These conferences have proved to be an expeditious means of resolving difficult or unusual questions with respect to which no specific rules have been issued or the application of existing rules is uncertain. SOLICITATION OF PROXIES, CONSENTS AND AUTHORIZATIONS The Congress, three times, has in effect directed the Commission to adopt rules governing the solicitation of proxies. 21/ The Commission's proxy rules, which are contained in Regulation X-14, require certain information to be made available o security holders whose proxies, consents or authorization are solicited. During the fiscal year the Commission examined both the preliminary and final proxy material with respect to 1,655 solicitations and in each case commented on the material to the persons making the solicitation. In many cases it examined revised drafts of preliminary material. Aside from the initial material, 333 pieces of supplemental or "follow-up" soliciting material were received and examined. In addi– tion to the regular examination which is made of all proxy material filed, the Commission continued its policy of furnishing every assistance to persons who desired to ob tain informal opinions or suggestions in advance of the filing date. REPORTS OF OFFICERS, DIRECTORS, PRINCIPAL SECURITY HOLDERS and CERTAIN OTHER AFFILIATED PERSONS The general purpose and scope of the ownership reporting requirements, prescribed by Section 16 (a) of the Securities Exchange Act of 1934, 17 (a) of the Public Utility Holding Company Act of 1935 and 30 (f) of the Investment Company Act of 1940 and the Commission's rules and regulations promulgated thereunder, as well as the Commission's procedures for obtaining the filing of required reports, examining them for compliance with the statutes and the rules, obtaining amended reports where necessary and the publication of information contained in the reports, have been described in the Sixth Annual Report of the Commission, pp. 180, 182 and previous annual reports. Number of ownership reports of officers, directors, principal security Description of Report Original reports-Securities Exchange Act (4) 13,196, (5) 222, (6) 1,650 Amended reports-Securities Exchange Act (4) 1,256, (5) 26, (6) 62 Original reports--Holding Company Act (U-17-1) 155, (U-17-2) 517 Amended reports-Holding Company Act (U-17-1) 10, (U-17-2) 60 Original reports-Investment Company Act (N-30F-1) 315, (N-30F-2) 1,019 Amended reports-Investment Company Act (N-30F-1) 39, (N-30F-2) 73 Fiscal Year 1942 15,068 1,344 672 70 1,334 112 Figures in parentheses are Form numbers, thus (4) is Form 4. 21 Section 14 (a) Securities Exchange Act of 1934. Section 12 (e) Public Utility Holding Company Act of 1935. Form 4 is used for reporting changes in ownership of equity securities; Form 5 for reporting ownership of equity securities at the time an issuer for the first time secures registration of any equity security on a national securities exchange; Form 6 for reporting ownership of equity securities by additional persons who become officers, directors or principal stockholders; Form U-17-1 for reporting ownership of securities at the time a holding company becomes registered or an additional person becomes an officer or director; Form U-17-2 for reporting changes in ownership of utility securities; Form N-30F-1 for reporting ownership of securities at the time a closed-end investment company becomes registered or an additional person assumes any of specified relationships; and Form N-30F-2 for reporting changes in ownership of securities of closed-end investment companies. PUBLICATIONS Public Announcements Under the various Acts it is the Commission's duty to publish its decisions and generally to inform Congress and the public of its activities. Its releases are classified into various categories so that a person may receive the material relating only to those phases of the Commission's work in which he is interested. The Commission has made an exhaustive check of its mailing lists to eliminate those no longer desiring specified material. The announcements issued during the past fiscal year included 250 releases under the Securities Act of 1933; 320 under the Securities Exchange Act of 1934; 780 under the PubHic Utility Holding Company Act of 1935; 153 under the Investment Company Act of 1940; and 13 under the Investment Advisers Act of 1940. In addition, two releases concerned the Commission's activities in corporate reorganizations and six were issued under the Trust Indenture Act of 1939. The following is a partial classification of the announcements by subject matter: Report to Congress on the Study of Investment Trusts and Investment Companies: Part Four, Chapter II: Economic Significance of Investment Companies Part Five: Conclusions and Recommendations (The decisions of the Commission and the reports to Congress on the Twenty-four semimonthly issues of the Official Summary of Stock An Alphabetical List of Over-the-Counter Brokers and Dealers Reg- List of Securities Traded on Exchanges under the Securities Exchange Report or Secondary Distributions of Exchange Stocks (A complete list of the Commission's publications, the Rules of INSPECTION OF REGISTERED INFORMATION BY THE PUBLIC Copies of all public information on file with the Commission, appearing in registration statements, applications, reports, declarations, and other public documents, are available for inspection in the Public Reference Room of the Commission at Philadelphia, During the past fiscal year more than 8,667 members of the public visited this Public Reference Room seeking such information, and thousands of letters and telephone calls were received requesting registered information. The Commission, through the facilities provided for the sale of public registered information, filled more than 2,127 orders for photocopies of material, involving 137,084 pages. Insofar as practicable, the Commission has sought to make some of the public registered information filed with it available in its regional offices. In the New York Regional Office at 120 Broadway, facilities are provided for the inspection of certain public information on file with the Commission. This includes copies of (1) such applications for permanent registration of securities on all national securities exchanges, except the New York Stock Exchange and the New York Curb Exchange, as have received final examination in the Commission, together with copies of supplemental reports and amendments thereto, (2) annual reports filed pursuant to the provisions of Section 15 (d) of the Securities Exchange Act of 1934, as amended, by issuers that have securities registered under the Securities Act of 1933, as amended. During the past fiscal year 10,241 members of the public visited the New York Office Public Reference Room, and more than 3,900 made telephone calls to this office, seeking registered public information, forms, releases, and other material. In the Chicago Regional Office, which is located at 105 West Adams Street, there are available for public inspection copies of applications for permanent registration of securities on the Chicago exchanges, the New York Stock Exchange and the New York Curb Exchange, which have received final examination in the Commission, together with copies of all supplemental reports and amendments thereto. During the fiscal year ended June 30, 1941, more than 3,230 members of the public requested registered information, forms, releases, and other material. In each of the Commission's regional offices there are available for inspection copies of prospectuses used in public offerings of securities effectively registered under the Securities Act of 1933, as amended. Duplicate copies of applications for registration of brokers or dealers transacting business on over-the-counter markets, together with supplemental statements thereto, filed under the Securities Exchange Act of 1934, are also available for public inspection in the regional office having jurisdiction over the zone in which the principal office of the broker or dealer is located. Also, inasmuch as letters of notification under Regulation A exempting small issues of securities from the registration requirements of the Securities Act of 1933, as amended, may be filed with the regional office of the Commission for the region in which the issuer's principal place of business is located, copies of such material are available for inspection at the particular regional office where it is filed. During the past fiscal year duplicate copies of applications for registration of Investment Advisers, together with supplemental statements thereto filed under the Investment Advisers Act of 1940, have been made available for public inspection in the regional offices having jurisdiction over the zone in which the principal office of the investment adviser is located. There are available for inspection in the Commission's San Francisco and Cleveland Regional Offices, in which are provided complete facilities for such registration and qualification, copies of registration statements and applications for qualification of indentures filed at those regional offices. Copies of all applications for permanent registration of securities on national securities exchanges are available for public inspection at the respective exchange upon which the securities are registered. PUBLIC HEARINGS The following statistics indicate the number of public hearings held by the Commission from July 1, 1935 to June 30, 1942: Commissioner Ganson Purcell was elected Chairman of the Commission on January 20, 1942 for the term expiring June 30, 1942, vice Chairman Edward C. Eicher who resigned. On June 6, 1942 he was reappointed as Commissioner for the term expiring on June 5, 1947. Commissioner Purcell was reelected Chairman of the Commission on June 5, 1942 for the period ending June 30, 1943. Edmund Burke, Jr., of New York, was appointed Commissioner July 31, 1941 for the term expiring June 5, 1944 vice Leon Henderson. Robert H. O'Brien, of Montana, was appointed Commissioner on February 3, 1942 for the term expiring June 5, 1945 vice Edward C. Eicher. The Commissioners, as of the close of the past fiscal year, were as follows: Purcell, Ganson, Chairman Pike, Summer T. As of the close of the past fiscal year the personnel of the Commission comprised five Commissioners and 1437 employees, of which 377 were assigned to the regional offices. These figures do not include 170 employees who had entered the military service and were carried on the payrolls in a furlough status. (As of May 21, 1943, the number of employees in the military service increased to 341.) |