Commission Consideration of Temporary Approval, Pursuant to Section 11A(a) (3) (B), of Consolidated Quotation Association Joint Plan to Implement Rule 11 Ac1-1

This item, previously scheduled for Commission consideration at today's open meeting, has been postponed to the emergency open meeting scheduled for 10:00 a.m. tomorrow, Thursday, July 27. The postponement was necessitated in order to afford the staff sufficient time to review the joint plan which was only recently filed by the participating self-regulatory organizations. In addition, the Commission will also consider at tomorrow's meeting whether to grant requests for exemption from certain provisions of Rule 11Ac1-1 submitted by Intermountain, Spokane, Cincinnati, and Philadelphia Stock Exchanges.

The Commission regrets any inconvenience caused by this scheduling change. Item No. 1: Re-entry Application of Carrol P. Teig

By Order of the Commission dated September 17, 1976, Mr. Teig was barred from association with any broker or dealer with the provisio that, after four months, he could apply to the Commission to become again so associated in a non-proprietary, non-supervisory capacity.

The Commission will consider an application for re-entry filed concerning Mr. Teig, for permission to become associated with a broker-dealer.

For further information, contact Michael F. Perlis at (202) 755-1650.

Item No. 2: Lost and Stolen Securities Program

The Commission will consider whether to issue a release soliciting comments on various aspects of its pilot Lost and Stolen Securities Program. Section 17(f) (1) of the Securities Exchange Act, as amended, directed the Commission to adopt procedures for reporting securities thefts and losses and verifying securities which come into the possession of broker-dealers, banks, transfer agents, and clearing agencies. Rule 17f-1 (17 CFR 240.17f-1), promulgated thereunder, was published in its final, amended version on August 12, 1977 (42 FR 41022).

In order to facilitate the implementation of the rule and the Lost and Stolen Securities Program, the Commission determined to initiate the program on a pilot basis, through December 31, 1978. The Commission also determined to designate another person, as provided for by the Act, to receive and process reports and inquiries concerning missing, lost, stolen, or counterfeit securities on behalf of the Commission. The Securities Information Center, Inc. ("SIC") was designated for purposes of the pilot program after analysis of plans submitted by interested persons. The pilot year of the program and SIC's term of designation will expire on December 31, 1978. The Commission will consider whether to solicit public comment at this time on the various provisions of Rule 17f-1 and the operation of the Lost and Stolen Securities Program.

Issues that might arise during the Commission discussion include whether to request comment on: the operation of the program to date; the appropriateness of the Commission's redesignation of SIC; the classes of financial institutions subject to Rule 17f-1 and the type of securities covered by the rule; the role of the Federal Reserve Banks and SIC in receiving amounts and inquiries on U.S. Government and Agency securities; the fee structure and schedule of fees for operation of the program; the design and continued operation of the processing system by SIC or another designee; and the date by which comments must be received.

For further information, contact Gregory C. Yadley at (202) 376-8129. Item No. 3: Uniform Net Capital Rule; Municipal Securities

The Commission will consider whether to authorize concurrent issuance of two releases dealing with the uniform net capital rule (17 CFR 240.15c3-1). The first release would propose, and request comments on, certain changes to presently-effective temporary amendments to the uniform net capital rule with respect to specific receivables and undue concentration deductions relating to transac tions in municipal securities. The second release would extend the applicability of the temporary amendments, which are due to expire on August 1, 1978, until January 1, 1979.

Rule 15c3-1 generally requires that good faith deposits arising in connection with an underwriting, and outstanding longer than eleven business days, be deducted from net worth. In addition, profits derived from participation in an underwriting syndicate are treated as unsecured receivables which, pursuant to

Rule 15c3-1, are also deducated from net worth. Under the temporary amendments to Rule 15c3-1, broker-dealers are permitted to include in net worth, for ninety (90) days after settlement of an underwriting with the issues, good faith deposits and receivables arising from participation in municipal securities underwritings. The Commission will consider whether to propose reducing the ninety (90) days after settlement of an underwriting with the issuer, good faith good faith deposits in net worth. The reduced time period would be consistent with the requirements of the Municipal Securities Rulemaking Board.

Under the temporary amendments to Rule 15c3-1, municipal securities are exempt from the undue concentration provisions of Rule 15c3-1 which generally require that a broker-dealer take a deduction from net worth equal to half the applicable "haircut" (required deduction of a specified percentage of market value) against long or short positions in the securities of an issuer of a single class or series, the market value of which positions exceed ten percent of tentative net capital.

For further information, contact Nelson S. Kibler at (202) 376-8131 or Jim Moody at (202) 376-8126.

Item No. 4: Proposed SIPC Bylaw Changes

The Commission will consider revisions to the bylaws of the Securities Investor Protection Corporation (“SIPC"), which SIPC adopted and submitted to the Commission pursuant to Sections 3(b)(3) and 3(e) (1) of the recently amended Securities Investor Protection Act of 1970 ("SIPC Act"). The proposed bylaw changes will take effect July 31, 1978, unless the Commission disapproves them.

Among those bylaws which were changed, SIPC has deleted assessment requirements based on gross revenues. In addition, SIPC has proposed an assessment of $25 per year upon each member, starting in 1979. Further, SIPC has shortened the official explanatory statement which members may use in their advertisements.

SIPC has also proposed two new bylaws. One delegates to the Chairman of SIPC authority to initiate, or discontinue, a direct payment procedure pursuant to Section 10 of the amended SIPC Act. The other provides for indemnification of SIPC's directors, officers and employees in accordance with the standard set forth in Section 3 (b) (3) (B) of the SIPC Act.

Issues which might arise during the Commission discussion include: possible revisions of the propoed indemnification provision, and the possibility of inviting SIPC to comment on a change to the indemnification provision which would require the question of indemnification to be referred to independent counsel in any case when a quorum of disinterested directors is not available to consider the question.

For further information, contact Linda Kurjan at (202) 376–7470.

Item No. 5: Management Remuneration ̧

The Commission will consider whether to propose amendments to the disclosure requirements relating to management remuneration. The proposed amendments would revise Item 4 of Regulation S-K which governs the disclosures required in certain registration statements, periodic reports and proxy and information statements filed under the 1933 and 1934 Acts.1

The Commission's action in considering proposed amendments is based on several factors: First, management remuneration packages have become more diverse and complex over recent years, and the disclosure practices in many Commission filings results in certain forms of remuneration being excluded from the table and disclosed, instead, in footnotes or text following the table. Since the same forms of remuneration may be disclosed differently, there is concern that revised disclosure requirements are necessary to promote investor understanding and consistency of disclosure. Also, at the recent Corporate Governance Hearings, certain witnesses urged that shareholders be afforded more complete information concerning their company's management, including its remuneration. Another basis for the Commission's consideration of this subject relates to two recent releases on the subject of management perquisites. The first, Release No. 33-5856 (August 18, 1977), stated the Commission's view that the existing

At the July 26th meeting, the Commission is also considering the adoption of Item 4 of Regulation S-K, which would integrate into Regulation S-K (the Commission's uniform disclosure regulation) the existing disclosure requirements concerning management remuneration as they appear in the present proxy rules.

disclosure provisions require registrants to include perquisites in aggregate remuneration; the second, Release No. 33-5904 (February 6, 1978), set forth staff views in question-and-answer form concerning the disclosure of perquisites. The application of these releases during the 1978 proxy season indicated that certain fundamental issues relating to the disclosure of perquisites could be the subject of a rule; these include: (i) the basis for valuing a perquisite; (ii) whether separate disclosure of perquisites should be required; and (iii) how to deal with expenses when it is unclear whether they are personal rather than business related.

The proposed amendments require that the remuneration table reflect all remuneration received by individual members of management during a fiscal year. Accordingly, the proposed amendments would require inclusion in the table of all amounts actually received as remuneration during the fiscal year by specified persons, as well as all amounts expended or otherwise accrued for financial reporting purposes by the registrant or its subsidiaries, during the fiscal year, for the account of such persons. This approach generally would require inclusion in the remuneration table of all amounts relating to salaries, bonuses, commissions, pensions, or retirement plans, stock options, including stock appreciation rights, insurance, perquisites and performance plans.

Among the other issues which may arise during the course of the Commission's discussion are the following:

1. Whether to propose revisions to change the present requirement that remuneration data be furnished, on an individual, named basis, as to each director of the issuer and each of the three highest paid officers of the issuer whose aggregate direct remuneration exceeded $40,000;

2. Whether personal benefits in the nature of perquisites may be excluded from the table under specified conditions;

3. Whether personal benefits should be valued based on the registrant's incremental costs;

4. Whether to raise the issue of requiring additional disclosures of (i) the total cost of maintaining any corporate facility or equipment used by management for personal purposes; and (ii) the total cost of maintaining the office of the chief executive, without proposing rules for comment at this time.

Since the Commission hopes to be in a position to adopt any amendments on this subject in time to apply them to the 1979 proxy season, the release, if approved will request that comments be received by September 29, 1978. For further information, contact Rowland Cook at (202) 755-1750. Item No. 6: Uniform and Integrated Reporting Requirements, Management Background, Remuneration, Legal Proceedings, and Security Ownership of Certain Beneficial Owners and Management

The Commission will consider whether to adopt four new items of Regulation S-K, the uniform disclosure regulation.

Regulation S-K is intended to improve, simplify, and integrate the disclosure process by standardizing the disclosure which is required by various reports, registration forms, and schedules pertaining to the same category of information into one uniform regulation, thereby eliminating immaterial differences among disclosure documents. The four items which will be considered set forth uniform instructions for disclosure of information regarding Directors and Executive Officers, Management Remuneration and Transactions, Legal Proceedings, and Security Ownership of Certain Beneficial Owners and Management. Registration Forms S-1, S-11, and 10, Annual Report Form 10-K, and Proxy Statement Instructions in Schedule 14A would be amended so as to reference the uniform Regulation S-K items.

The substance of these amendments was originally proposed in Securities Act Release No. 5758 (November 2, 1976), and generally the amendments do not impose new disclosure requirements except in the following respects:

1. The time period for which certain material events in the background of executive officers and directors (e.g., bankruptcy petitions or criminal proceedings) must be described is reduced from ten to five years.

2. Injunctions prohibiting any director or executive officer from engaging in any type of business practice, injunctions and consent decrees prohibiting future violations of federal or state securities laws, and private civil actions in which any such person was found to have violated any federal or state securities laws are specified as litigation which must be disclosed unless the registrant establishes that such information is not material to an evaluation of such person's ability and integrity.

Another issue which may arise during the course of the Commission discussion is whether the Commission should require disclosure of all directorships held by each nominee or incumbent director in any public company, as previously proposed in Securities Act Release No. 5758.

Further further information contact Steve Paggioli at (202) 376-8090. Item Number 7: Revised Form 10-K

The Committee will consider whether to issue a concept release soliciting comment on issues related to Form 10-K disclosure. The Report of the Advisory Committee on Corporate Disclosure, published November 3, 1977, recommended in Chapter XV the adoption of a revised Form 10-K which would differ from the existing Form 10-K in format, approach, and content. (The Form 10-K is the annual report form required to be filed by most publicly owned companies).

In Section 9, "Reporting Requirements under the Exchange Act," of Securities Act Release No. 5906 (February 15, 1978), “Preliminary Response of the Commission to the Recommendations of the Advisory Committee on Corporate Disclosure," the Commission indicated that the Division of Corporate Finance would act upon this recommendation by preparing a release requesting_comments upon both the existing Form 10-K and the Advisory Committee's Form 10-K. The Division is not at this time recommending that any specific revisions of Form 10-K be proposed for comment, but rather intends to develop specific proposals upon review of comments received in response to the release. The most significant new features of the Advisory Committee's Form 10-K are: (1) a five-part format designed to group data in order that the user can turn directly to the information which interests him; (2) an approach which gives management more discretion to determine what risks and particular characteristics of the business should be discussed; (3) the encouragement of disclosure of forward-looking information; and (4) a revised version of "Management's Discussion and Analysis of the Summary of Operations."

The release which the Commission will consider is a detailed version of a "concept release." In Section 2, "The Commission's Rulemaking and Monitoring Practices", of the above-mentioned Release, No. 5906, the Commission indicated that it hopes to improve the operation of the concept release approach by posing specific questions. . . . It also would attempt to help commentators focus on specific issues by describing the particular changes recommended by the Advisory Committee and by asking a series of questions requesting comments on these features.

For further information, contact William Carter at (202) 376-8090. Attachment: The Advisory Committee's Form 10-K.

FORM 10-K RECOMMENDED BY THE ADVISORY COMMITTEE ON CORPORATE

DISCLOSURE

Note: Instructions only appear where necessary to explain modifications proposed and are not inclusive of all instructions in the revised form. A number of existing instructions would be carried over into the new form.

PART I: FACT SHEET

Item 1. Capsule Financial Data

(a) Present in comparative columnar form the following financial data for the registrant and its subsidiaries (if any) consolidated for each of the last five fiscal years of the registrant (or for the life of the registrant and its predecessors if less): Net sales; income from continuing operations; net income; working capitol; cash flow; total assets; total indebtedness; and shareholders' equity.

(b) Present in tabular form for at least the two most recent fiscal years any operating statistics called for by appropriate Industry Guide(s).

Item 2. Products and Services

Present a list of all business segments identifying principal classes of products and services within each segment. For each reportable industry and geographic segment state for the registrant's last five fiscal years the approximate amount of percentage of (i) total sales and revenues, (ii) income (or loss) before income taxes and extraordinary items, and (iii) identifiable assets attributable to each industry segment.

Instruction: Definitions of "reportable business segments," "principal classes of products and services," "identifiable assets" etc. would be included. The definitions set forth in Appendix A "Definitions and Guidelines for Compliance with Industry and Homogeneous Geographic Segment Reporting Requirements" to the Commission's Release on Segment Reporting (Securities Act Release No. 5826) would provide an appropriate reference.1

Item 3. Market for the Registrant's Securities

(a) State the approximate number of holders of record as of the end of the period for which the report is filed and the number of shares outstanding of each class of equity securities of the registrant and the average weekly trading volume during the previous fiscal year.

(b) Furnish the following information, as of the most recent practicable date, with respect to any person (including any "group" as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who is known to the registrant to be the beneficial owner of more than five percent of any class of the registrant's voting securities: (i) the title of class of securities owned, (ii) name of owner, (iii) the total number of shares beneficially owned, and (iv) the percent of class so owned. Of the number of shares owned, indicate by footnote or otherwise, the amount known to be shares with respect to which such listed beneficial owner has the right to acquire beneficial ownership, as specified in Rule 13d-3(d) (1) under the Exchange Act.

Item 4. Properties

If applicable, identify by appropriate unit or class of units manufactured the registrant's productive capacity by segment and the extent of utilization thereof.

Instruction: The location and general character of the principal plants, mines, and other materially important physical properties of the registrant or its subsidiaries shall be filed as an exhibit to this report. A list of all subsidiaries should also be filed.

Item 5. Pending Legal Proceedings

Briefly decribe any material pending legal proceedings, other than ordinary routine litigation incidental to the buiness, to which the registrant or any of its subsidiaries is a party or of which any of their property is the subject. Include the name of the court or agency in which the proceedings are pending, the date instituted, the principal parties thereto, a description of the factual basis alleged to underlie the proceeding and the relief sought. Include similar information as to any such proceedings known to be contemplated by governmental authorities.

Instruction: Registrants are encouraged to incorporate by reference any discussion of legal proceedings appearing in the footnotes to the financial statements; however, that discussion should be supplemented by any information required by the item but not appearing in the information incorporated by ref

erence.

Item 6. Executive Officers and Directors of the Registrant

(a) List the names and ages of all executive officers and directors of the regis trant who did not hold their current office with the registrant prior to the beginning of the period reported.

(b) Give a brief account of the business experience during the past five years of each executive officer named in (a) including his principal occupations and employment during the most recent five year period and the name and principal business of any corporation or other organization in which such occupations and employment were carried on.

(c) List the names and positions held of all officers and directors who terminated their employment with the registrant during the previous year.

1 The proposals contained in Release No. 33-5826 were adopted in a modified form in Securities Act Release No. 5893 (December 23, 1977) 42 FR 65154. Under Release No. 38-5848, the revenue, profit and asset information relating to each of the registrant's industry segments for which such information is presented in the financial statements is also required to be furnished in response to the Description of Business item of Form 10-K. Accordingly. the definitions set forth in Appendix A of Release No. 33-5826 were not expressly incorporated into the disclosure requirements of Form 10-K and appropriate conforming modifications would be necessary to the above instruction.