TRANSFER OF ADMINISTRATION OF SECURITIES ACT

The Securities Act of 1933 was administered by the Federal Trade Commission from May 27, 1933, the date of enactment, until September 1, 1934. On this latter date, under the provisions of section 210 of the Securities Exchange Act of 1934, the administration and enforcement of the Securities Act was transferred to the Securities and Exchange Commission.

AMENDMENT OF SECURITIES ACT OF 1933, AS AMENDED

The Motor Carrier Act of 1935 (approved Aug. 9, 1935), section 214, amended section 3 (a) (6) of the Securities Act of 1933 to read as follows:

(6) Any security issued by a common or contract carrier, the issuance of which is subject to the provisions of section 20a of the Interstate Commerce Act, as amended; [the new law added is in italics].

ACKNOWLEDGMENT

The Commission desires to express its appreciation to the Federal Trade Commission for the cooperation and assistance rendered to it during the first months of its existence.

PART II

ADVISORY ASSISTANCE

Legislation of the character of the Securities Act of 1933 and the Securities Exchange Act of 1934 comprehends within its scope such. a variety of complex situations that innumerable questions necessarily arise during the early period of its administration as to the applicability of the text of the law to situations which are not the subject of specific provision but to which it is clear its mandates were intended to apply. The Commission found it necessary to arrive at determinations as to the applicability of the legislation to concrete problems presented and as to the manner of compliance therewith. The many problems presented in connection with the rendering of such assistance covered every aspect of the acts.

Since the scope of the Securities Act of 1933 extends to various unique types of security interests, situations frequently arose, under the act, where the nature of the interest which was offered for sale was such as to make it difficult to determine whether a security was involved within the meaning of the act and, if so, who, under the act, was the issuer of such security. In this connection, problems most frequently arose in the case of interests in oil, gas, and other mineral rights, certificates issued under deposit or trust agreements, and securities issued in reorganizations.

The Securities Act exempts from its registration requirements not only various types of securities because of their generic character, but also other securities which are issued in certain specific types of transactions. The exemptive provisions of the latter type have presented questions of particular difficulty, the solutions of which have required a thorough-going understanding of the history of the particular provisions in question, and of the practical results of the application of such provisions. The act also exempts from registration, securities offered in limited amounts where such offerings meet requirements to be imposed by the Commission. Pursuant to the authority conferred by this provision of the act, various requirements were formulated to be satisfied as conditions to the availability of such exemption to offerings of such securities.

Numerous problems also arose under those provisions of the act exempting certain types of transactions; such as private offerings and dealers' and brokers' transactions, from the requirement of prior registration. Other questions on which advice was frequently

sought related to the requirements of the act and of the Commission's regulations in regard to prospectuses and the filing and amendment of registration statements.

The administration of the Securities Exchange Act also brought to the Commission many questions of a novel and difficult character. Advice was given to the public on the subjects of national securities exchanges, temporary registration, and subsequent permanent registration of securities on national securities exchanges. The provisions of section 16 of the Securities Exchange Act of 1934, relating to the reporting of transactions by directors, officers, and principal stockholders of issuers of listed securities, were such as to give rise to numerous inquiries relating to the nature of beneficial ownership within the meaning of this section. After careful study of the problems involved in this question, opinions were published which, it is believed, have been of substantial assistance to the public.

In view of the volume and diversity of inquiries received, it was essential to provide for the coordination of this part of the work so as to effect uniformity in the opinions which were rendered. The letters and memoranda of conferences which contained opinions rendered were classified and indexed. In addition, a summary of interpretations of the Securities Act rendered by the Federal Trade Commission and by the Securities and Exchange Commission was prepared for the use of the Commission, in such form as to make practicable its periodic revision. The preparation of a similar summary was commenced of interpretations rendered of the Securities Exchange Act of 1934 and regulations promulgated thereunder.

As a result of the method described above, consistency was obtained in the interpretation of the acts and rules and regulations. While for the most part advisory opinions rendered, in answer to inquiries received, were not published, a number of these opinions were publicly released in cases where the questions involved had been the subject of wide-spread interest and numerous inquiries.

The advisory assistance rendered by the Commission was of manifest importance to the public because of the newness of the acts and regulations and the resulting lack of precedence by which persons seeking to comply with the law in particular situations might be guided. Moreover, it is believed that the spirit of cooperation engendered between the public and the Commission through this interpretative service was of definite value. In addition, the Commission benefited greatly from the information obtained through the correspondence and conferences incidental to the rendering of such service. From these sources much valuable information was obtained on the basis of which existing regulations were improved and new regulations promulgated.

REGISTRATION OF EXCHANGES AS NATIONAL SECURITIES
EXCHANGES

Pursuant to section 6 of the Securities Exchange Act of 1934, 4 exchanges submitted applications for registration as national securities exchanges.

In considering these applications, the constitution, bylaws, and rules and regulations of each exchange were examined and analyzed. Each exchange was required to execute an agreement to comply with the provisions of the act and any rules and regulations thereunder, and to enforce compliance with such provisions by its members, so far as is within its power. Each exchange was also required to include in its rules provision for the expulsion, suspension, or disciplining of members for conduct or proceeding inconsistent with ast and equitable principles of trade, and to declare that willful vilation of any provision of such act or any rule or regulation thereunder shall be considered conduct or proceeding inconsistent with just and equitable principles of trade.

Upon investigation into the affairs of the New York Mining Exchange and the New York Produce Exchange, both of which applied for registration, the New York Mining Exchange discontinued operations entirely, and the New York Produce Exchange ceased to afford facilities for trading in securities.

A merger of the Los Angeles Curb Exchange with the Los Angeles. Stock Exchange necessitated an examination into the terms and conditions of such merger, and the determination whether the merged change was so organized as to be able to comply with the act and the rules and regulations thereunder, and whether its rules were just and adequate to insure fair dealing, and to protect investors. Upon the completion of this examination, such determination was made and the merged exchange was permitted to continue in operation. as a national securities exchange.

The cessation of trading in securities by the 2 New York exchanges above named and the merger of the Los Angeles exchanges, reduced to 21 the number of securities exchanges registered with the Commission.

From time to time during the year, such registered exchanges fied amendments to their registration statements. These amendents covered changes in membership, in exchange trading rules, in securities admitted to listed or unlisted trading privileges, and In the rules for the government of exchanges. Such amendments. were subjected to thorough analysis to ascertain whether the exchanges were being maintained in compliance with the provisions of the Securities Exchange Act of 1934, and the rules and regulations

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thereunder. The following named constitute the national securities exchanges as of June 30, 1935:

Pursuant to section 5 of the Securities Exchange Act of 1934, 19 exchanges filed applications for exemption from registration as national securities exchanges. The applicants were granted temporary exemption from registration pending investigations with respect to their constitution, bylaws, trading rules and practices, members, volume of security transactions, and the financial standing of companies having securities traded on these exchanges. Investigators were sent to the far West to examine 7 exchanges, to the Middle West to examine 4 exchanges, to the South to examine 3 exchanges, and to New England to examine 2 exchanges.

The reports filed by the trial examiners before whom hearings were held on the applications for exemption, were analyzed preliminary to determining which applications should, in the public interest, be granted.

After investigation of the California Stock Exchange, the Boston Curb Exchange, and the Hartford Stock Exchange, operations on those exchanges were altogether discontinued.

The Philippine Stock Exchange of Manila discontinued operations as of March 1, 1935, and thereupon its temporary exemption was canceled by the Commission.

The cancelation of this application, together with the dissolution of the three exchanges above mentioned, reduced the number of exchanges granted temporary exemption as of June 30, 1935, to 15.

The Standard Stock Exchange of Spokane, which had previously been granted temporary exemption from registration, submitted an application for registration as a national securities exchange.

The Chicago Curb Exchange, which also had been granted temporary exemption from registration, asked leave to withdraw its application for exemption and to substitute there for an application for registration as a national securities exchange.