List of registered public utility holding companies, including sub- holding registered companies, as of June 30, 1939___. List of pending applications for exemption as public utility holding companies as of June 30, 1939_. APPENDIX VIII. New York Stock Exchange Program.... APPENDIX IX. Statistical Analysis of Reorganization Proceedings instituted under Chapter X of the Bankruptcy Act, as At the close of the fifth fiscal year since its creation, the Securities and Exchange Commission was administering three statutes, the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, and had certain duties under Chapter X of the amended Bankruptcy Act.1 The full administration of the Public Utility Holding Company Act was delayed in many respects by the failure of a substantial portion of the industry to register until after the decision of the Supreme Court, on March 28, 1938, upholding the constitutionality of the registration provisions. Thus, the Commission at the close of the fiscal year had had only a year and three months of full administration of the Act. The amended Bankruptcy Act was adopted by Congress on June 22, 1938, so that the Commission had exercised its duties with respect to corporate reorganizations under Chapter X of the Act for only slightly more than one year. Proposed new issues of securities registered under the Securities Act of 1933, thus making full data available to prospective investors, had reached a 5-year total of over $14,500,000,000 by the end of the fiscal year. Twenty securities exchanges were subject to the jurisdiction of the Commission and data was available to investors on more than 4,000 securities listed on these exchanges. Nearly 7,000 brokers and dealers doing a business in the over-the-counter security markets were registered with the Commission. Fifty-one public utility holding company systems, comprising 142 registered holding companies and including 1,542 separate holding, sub-holding, and operating companies, were subject to the Commission's regulation. A fifth statute, the Trust Indenture Act of 1939, was enacted just after the close of the fiscal year. This act adds a new title (Title III) to the Act of May 27, 1933, as amended, Title I of which is the Securities Act of 1933. Briefly, the Trust Indenture Act of 1939 requires that bonds, notes, debentures, and similar securities publicly offered for sale, sold, or delivered after sale through the mails or in interstate commerce, except as specifically exempted by the Act, be issued under an indenture which meets the requirements of the Act and has been duly qualified with the Commission. The provisions of these two Acts are so inte grated that registration pursuant to the Securities Act of such securities to be issued under a trust indenture shall not be permitted to become effective unless the indenture conforms to the specific statutory requirements expressed in the Trust Indenture Act. The indenture is automatically "qualified" when registration becomes effective as to the securities themselves. During the year the Commission filed notices of appearance in reorganization proceedings under Chapter X of the Bankruptcy Act in cases involving 87 principal debtors and 18 subsidiary debtors. In the enforcement of its laws during the past five years the Commission has stopped the issuance of 119 proposed security issues and 14 security issues have been delisted from stock exchanges as a result of inability or unwillingness to make the required disclosure. Six persons have been suspended from membership in national securities exchanges for violations of the Securities Exchange Act of 1934, and two members have been ordered' expelled. The registration of 60 brokers and dealers in over-the-counter security markets has been suspended or revoked. The Commission has intensified its prosecution of fraudulent promoters, stock swindlers, bucket shop operators, and others who abuse the confidence of the investing public and, during the past five fiscal years, has brought 312 suits in the United States courts to prevent violation of its laws. Of these, 288 had been concluded at the end of the fiscal year and as a result 657 firms and individuals had been permanently enjoined from further violation of the law. In addition, the Commission has referred 158 cases to the Department of Justice. As a result, 403 defendants had been convicted at the end of the year. The Commission's activities in the regulation of securities exchanges during the past year have been directed principally towards securing protection against avoidable financial risks for the customer of stock exchange brokerage firms. The Commission's report on its investigation of the failure of Richard Whitney & Company revealed lax standards and recommended a broad program of measures designed to protect customers' funds and securities. Continuing its policy of encouraging self-policing by securities exchanges as an alternative to direct and detailed regulation by the Government-the Commission sought to have the exchanges effectuate, under their own rules, a program for customer protection. Although various plans and proposals had been discussed, at the end of the fiscal year adequate measures for customer protection had not yet been put into effect by the exchanges. During the year the Commission continued its work with invest-. ment bankers, dealers, and brokers to effectuate the system of cooperative regulation of the over-the-counter security markets envisioned by the Maloney Amendment to the Securities Exchange Act (adopted June 25, 1938). At the close of the fiscal year plans for the organization and registration under the Act of a national association of securities dealers were nearing maturity.2 Shortly after the close of the fiscal year the National Association of Securities Dealers, Inc., registered with the Commission under the Act. Perhaps the most important single effect of the Public Utility Holding Company Act has been on the security issues of the utility companies. From December 1, 1935, when the Act became effective, until the close of the fiscal year, utility companies had issued over $2,500,000,000 of securities, all of them sufficiently in harmony with the aims and spirit of the law to permit their issuance. Of this amount, $1,449,810,000 were issued during the past fiscal year. In addition the Commission has passed on nearly every variety of financial transaction covered by the statute. With respect to the integration and simplification provisions of the Act, six companies have had plans of simplification approved by the Commission and eight companies had plans pending before the Commission at June 30, 1939. On August 3, 1938, William O. Douglas, former Chairman of the Commission, addressed a letter to the chief executives of all registered holding companies requesting them to inform the Commission of their tentative ideas as to how Section 11 (b) could be complied with. The purpose of this request was to focus the attention of the industry upon the steps needed to comply with the statutes, and to assist the Commission in determining the best means of securing such compliance, as well as to obtain both data and ideas that might prove helpful to the Commission. With few exceptions the registered holding companies submitted more or less elaborate statements in response to this request. These have been carefully studied and analyzed and have aided considerably in the formulation of working plans for securing compliance with the statute. The next step is the specific and separate determination of each company's problem, a matter which in each case must be based on the evidence produced, both by the Commission and the company, at a public hearing. During the past fiscal year the Commission adopted 27 new rules under its statutes and repealed 14 rules. The courts have almost invariably sustained the orders of the Commission in cases where review has been sought. During the past five years the Circuit Courts of Appeal have been asked to review orders of the Commission in 49 cases. Thirty-nine of these petitions were dismissed or withdrawn, in two cases the order of the Commission was affirmed and in only one case was the Commission's order vacated. Seven cases were pending at the end of the year. During the year a new chairman was elected when, on May 18, 1939, Commissioner Jerome N. Frank succeeded Chairman William O. Douglas, who resigned April 16, 1939 as Chairman and Commissioner to accept an appointment as Justice of the United States Supreme Court. On June 30, 1939, Commissioner Frank was reelected Chairman of the Commission, for the period ending June 30, 1940. Edward C. Eicher of Iowa was appointed Commissioner on December 1, 1939, for the term ending June 5, 1940, vice John W. Hanes, who resigned to accept an appointment as Assistant Secretary of the Treasury. Leon Henderson was appointed Commissioner on May 17, 1939, for the term ended June 5, 1939, vice William O. Douglas. Commissioner Henderson was reappointed Commissioner on May 29, 1939, for the term ending June 5, 1944. During the past fiscal year, the Commission established a new division, known as the Reorganization Division. On June 9, 1939, the Commission abolished the Forms and Regulations Division and transferred its functions and personnel to a new Forms and Regulations Unit, created in the Registration Division. On November 21, 1938, the Commission announced the establishment of a new regional office in Cleveland, Ohio. The Commissioners, staff officers, and regional administrators, as of the close of the past fiscal year, were as follows: Commissioners: Frank, Jerome N., Chairman. Healy, Robert E. Eicher, Edward C. Henderson, Leon. Staff Officers: Allen, James, Supervisor of Information Research. Bane, Baldwin B., Director of the Registration Division. Brassor, Francis P., Secretary of the Commission and Director Clark, Samuel O., Jr., Director of the Reorganization Division. Neff, Harold H., Foreign Expert. Purcell, Ganson, Director of the Trading and Exchange Schenker, David, Chief of the Investment Trust Study. Mr. Blaisdell resigned June 29, 1939. • Mr. Clark resigned July 27, 1939 and Edmund Burke was appointed Director of the Reorganization Division on September 6, 1939. • Mr. Smith resigned September 5, 1939 and Joseph L. Weiner was appointed Director of the Public Utilities Division on September 6, 1939. |