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INVESTMENT COMPANIES

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY

UNITED STATES, SENATE

SEVENTY-SIXTH CONGRESS

THIRD SESSION

ON

S. 3580

A BILL TO PROVIDE FOR THE REGISTRATION AND
REGULATION OF INVESTMENT COMPANIES AND
INVESTMENT ADVISERS, AND FOR

OTHER PURPOSES

PART 1

APRIL 2, 3, 4, 5, 8, 9, AND 10, 1940

Printed for the use of the Committee on Banking and Currency

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COMMITTEE ON BANKING AND CURRENCY

ROBERT F. WAGNER, New York, Chairman CARTER GLASS, Virginia

JOHN G. TOWNSEND, JR., Delaware ALBEN W. BARKLEY, Kentucky

LYNN J. FRAZIER, North Dakota JAMES F. BYRNES, South Carolina

CHARLES W. TOBEY, New Hampshire JOHN H. BANKHEAD, Alabama

JOHN A. DANAHER, Connecticut
ALVA B. ADAM8, Colorado

ROBERT A. TAFT, Ohio
FRANCIS T. MALONEY, Connecticut
GEORGE L. RADCLIFFE, Maryland
PRENTISS M. BROWN, Michigan
JAMES H. HUGHES, Delaware
CLYDE L, HERRING, Iowa
WILLIAM H. SMATHERS, New Jersey
JOHN E. MILLER, Arkansas
D. WORTH CLARK, Idaho
SHERIDAN DOWNEY, California

PHILIP LEVY, Clerk

SUBCOMMITTEE ON SECURITIES and ExchaNGE

ROBERT F. WAGNER, New York, Chairman CARTER GLASS, Virginia

JOHN G. TOWNSEND, JR., Delaware JAMES F. BYRNES, South Carolina

LYNN J. FRAZIER, North Dakota
FRANCIS T. MALONEY, Connecticut

ROBERT A. TAFT, Ohio
JAMES H. HUGHES, Delaware
CLYDE L. HERRING, Iowa
JOHN E. MILLER, Arkansas
SHERIDAN DOWNEY, California

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INVESTMENT TRUSTS AND INVESTMENT COMPANIES

TUESDAY, APRIL 2, 1940

UNITED STATES SENATE,
SUBCOMMITTEE ON SECURITIES AND EXCHANGE
OF THE BANKING AND CURRENCY COMMITTEE,

Washington, D. C. The subcommittee met, pursuant to call, at 10:30 a. m., in room 301, Senate Office Building, Senator Robert F. Wagner presiding.

Present: Senators Wagner (chairman of the subcommittee), Maloney, Hughes, Miller, Downey, Townsend, and Taft.

Senator WAGNER. The subcommittee will come to order. Senators Miller and Hughes have authorized the chairman to vote them for a quorum, and they will be here presently.

This subcommittee is called to begin hearings on S. 3580, introduced by the chairman, to provide for the registration and regulation of investment companies and investment advisers, and for other purposes. The full text of the bill will be made a part of the record at this point.

(S. 3580 is printed in full, as follows:)

[8. 3580, 76th Cong., 3d sess.) A BILL To provide for the registration and regulation of investment companies and investment advisers,

and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-INVESTMENT COMPANIES

FINDINGS

Section 1. Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Commission made pursuant to section 30 of the Public Utility Holding Company Act of 1935, and facts otherwise disclosed and ascertained, it is hereby found that investment companies are affected with a national public interest in that, among other things

(1) the securities issued by such companies, which constitute a substantial part of all securities publicly offered, are distributed, exchanged, transferred, redeemed, and repurchased by use of the mails and means and instrumentalities of interstate commerce, and in the case of the numerous companies which issue redeemable securities this process of distribution and redemption is continuous and constant;

(2) the principal activities of such companies investing, reinvesting, and trading in securities issued by other companies--are conducted by use of the mails and means and instrumentalities of interstate commerce, including the facilities of national securities exchanges, and constitute a substantial part of all transactions effected in the securities markets of the Nation;

(3) such companies customarily invest and trade in securities issued by, and may dominate and control or otherwise affect the policies and management of, companies engaged in business in interstate commerce;

(4) such companies are media for the investment in the national economy of a substantial part of the national savings and may have a vital effect upon the flow of such savings into the capital markets; and

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