TABLE 1.-Registration of brokers and dealers under Section 15 (b) of the Securities Exchange Act of 1934, for the year ending June 30, 1941. TABLE 2.-Statistics on proceedings during the year ending June 30, 1941, on question of revocation, suspension, and denial of registration as brokers and dealers pursuant to Section 15 (b) of the Securities Exchange Act of 1934. Revocation proceedings pending as of July 1, 1940- 10 2087 Total Revocation proceedings dismissed upon withdrawal of registration_ Registrations suspended - Revocation proceedings pending June 30, 1941- Total.. Study of Over-the-Counter Markets in Exchange Stocks. 45 3122 1 1 20 1 11 3 45 A broad study of the nature and magnitude of transactions in the over-the-counter markets in stocks listed or having unlisted trading privileges on national securities exchanges was commenced during the past fiscal year. As a basis of this study the Commission has obtained a record of virtually all transactions in such stocks in the over-thecounter markets for a period of 6 months ending February 28, 1941. This study has been undertaken pursuant to the Commission's policy of obtaining an adequate factual background for appraising the necessity and desirability of various proposed changes in exchange policies and procedure which have lately been under discussion. In conducting this study the Commission has received the cooperation of the various national securities exchanges and of the National Association of Securities Dealers, Inc. Part VI ADMINISTRATION OF THE SECURITIES ACT OF 1933 1 The Securities Act of 1933 is designed to compel full and fair disclosure to investors of material facts regarding securities offered or sold in interstate commerce and through the mails, and to prevent fraud in such sales. Issuers of securities subject to the registration requirements of the Act must file registration statements with the Commission. These registration statements are required to contain specified information about the issuer and the proposed offering and are available for public inspection. Issuers are also required to furnish to prospective investors a prospectus showing the more essential information contained in the registration statement. STATUTORY AMENDMENT 1 Prior to August 22, 1940, Section 8 (a) of the Securities Act of 1933 provided that except in certain specified cases the effective date of the registration statement should be the twentieth day after its filing with the Commission. However, Section 8 (a) was amended on that date. to give the Commission discretionary authority to accelerate the effective date of the registration statement under certain circumstances. Specifically, the amended section now provides that the effective date of the registration statement shall be the twentieth day after the filing thereof or such earlier date as the Commission may determine, but requires the Commission to give due regard to the adequacy of information concerning the issuer which has previously been made available to the general public, the ease with which the nature of the securities to be registered, their relationship to the capital structure of the issuer, and the rights of the holders thereof can be understood, and to the public interest and the protection of investors. Coincident with this significant amendment of the statute, the Commission announced that, pursuant to such discretionary authority, it will be its general policy to accelerate the effective date of registration statements filed under the Securities Act of 1933 in accordance with the following procedure: In determining the date on which a registration statement shall become effective, the Commission will consider, having due regard to the public interest and the protection of investors, 1 For information regarding the general scope of the Act, registration and examination procedures, see Sixth Annual Report of the Commission, pp. 117-119, inclusive, as well as previous annual reports. The filing of an amendment to a registration statement prior to the effective date has the effect of estab lishing a new filing date and starting a new 20-day period running. However, the Commission is given the power under the Act to relate the filing of such an amendment back to the original filing date when such action is not detrimental to the public interest. An amendment filed after the effective date of the registra tion statement becomes effective on such date as the Commission may determine, with due regard to the public interest and the protection of the investor. (a) The adequacy of the disclosure and compliance with the requirements of the Act, and compliance with the applicable form and instruction book and rules pertaining thereto at the time the registration statement is initially filed; (b) The advisability of permitting the acceleration of material amendments filed after the initial filing date; and (c) The character and date of information previously or concurrently filed under any Act administered by the Commission or by any other Federal agency or which is generally available to the public. In connection with the above-mentioned amendment, the Commission also announced that its examination of registration statements and amendments which have been prepared with due regard to the matters set forth in (a) above, will ordinarily be completed within a few days after the filing date. Accordingly, as soon as an appropriate amendment correcting the deficiencies, if any, and an amendment setting forth the price (if the price and terms of offering were not originally included in the registration statement) are filed, the Commission will, subject to its statement of general policy and the requirements of the Act, consent to the filing of the amendments and declare the statement effective as soon as practicable. At the same time, the Commission pointed out that the require ments of the Trust Indenture Act of 1939 have materially increased the examination work of its Registration Division with respect to registration statements for securities to be issued under indentures which must be qualified under that Act. Accordingly it was suggested that it will further the effectuation of the Commission's announced general policy if drafts of such indentures are submitted in reasonably final form for consideration and discussion with the staff as far as possible in advance of the actual filing of the registration statement. The Commission stated further that it will be its policy to cooperate with registrants in order that the effectiveness of registration statements filed under the Securities Act of 1933 may be expedited as much as possible consistent with the public interest and the protection of investors. EXPERIMENTAL DECENTRALIZATION OF REGISTRATION FACILITIES As stated in its Sixth Annual Report the Commission, on June 12 1940, announced the establishment of an experimental unit in the San Francisco Regional Office for the purpose of assisting and advising prospective issuers of securities and their representatives on any problems arising in connection with their registration statements filed under the Securities Act of 1933. This experiment convinced the + 183. Commission that much time can be saved and a good deal of difficulty avoided in this way. It was found that smaller issuers in particular availed themselves of this assistance. Because of the success of the experiment, the Commission extended this experimental registration service to its other regional offices and assigned experts trained in registration technique to those offices. The extension of this service became effective on February 1, 1941. The Commission also undertook another experiment which, if proved successful, will constitute one of the most far reaching administrative changes ever undertaken by the Commission. Since February 1, 1941, it has been conducting an experiment in order to determine the feasibility and advisability of decentralization, to the extent practicable under the statute, of the administration of the registration provisions of the Securities Act of 1933. Registration units have been established in the regional offices at San Francisco and Cleveland and the rules and regulations have been amended to permit the filing of certain registration statements in those offices.* These experiments will continue until later in the year, when the Commission will consider whether they should be continued, expanded, or abandoned. Of the registration statements filed with the Commission during the period from February 1 to June 30, 1941, 26 registrants were eligible to file their statements in the San Francisco Regional Office, 13 by virtue of the location of their own principal executive offices and 13 because of that of a principal underwriter. Of these 26, 13 took advantage of the rules to file in that office. Only 1 of these was eligible solely on the basis of the location of the underwriter's offices. During the same period, 26 registrants were eligible to file in the Cleveland Regional Office, 20 qualifying because of the location of their own offices and 6 because of that of one of their principal underwriters. Ten of these elected to file in Cleveland, all of them being eligible because of the location of their own offices. Two of the 10 withdrew their registration statements before they became effective. NEW RULES, REGULATIONS, AND FORMS FOR REGISTRATION UNDER THE SECURITIES ACT Rules implementing decentralized registration facilities.--During the past fiscal year the Commission made necessary amendments of its rules relating to registration procedure under the Securities Act of 1933 to provide complete facilities for the registration of securities under that Act in the San Francisco and Cleveland Regional Offices. Under the new procedure, which is more fully discussed elsewhere in this report, if the principal executive offices of the registrant or of a principal underwriter of the securities being registered are located in Securities Act Release No. 2457. |