sion of Trading and Exchanges exercises general supervision over and coordination of the investigative activities of the regional offices. It examines and analyzes periodically the results of investigations and recommends appropriate action to the Commission, giving serious consideration to the recommendations of the regional offices in each instance. There are several sources of information which eventually lead to investigations. A primary source of information comes from complaints of members of the public concerning the activities of persons involved in the offer and sale of securities. The Division of Trading and Exchanges and the regional offices of the Commission give careful attention to this information and if it appears that violations of the federal securities laws may have occurred, an investigation is commenced. If the complaint is received by the Division of Trading and Exchanges, the information contained in the complaint is forwarded to the appropriate regional office for such investigative activity as may be deemed advisable. Other sources of information which are of great help to the Commission in carrying out its enforcement responsibilities are national securities exchanges, brokerage companies, state and Canadian securities authorities, Better Business Bureaus and the National Association of Securities Dealers, Inc. Many times information from these sources is helpful, for it comes from persons who are often familiar with the operation of the federal securities laws and are interested in seeing full protection of these laws afforded to the investing public. If, after careful consideration of information received from these and other sources, it appears that violations may have occurred, a preliminary investigation may be made. Many times this investigation discloses a violation due to a misunderstanding or ignorance of the law. In these cases, where no harm to the public has occurred, it is the policy of the Commission to inform the offender of the violation and to make sure that necessary steps are taken for future compliance. Should the offender fail to conform with the requirements of the law, then the Commission takes appropriate action. When the preliminary investigation indicates a serious violation, or appears to require more extensive investigation, including exami nation of books and records or interviews with more than a few persons, a case is docketed and a full investigation is made. At times it is necessary for the Commission to issue a formal order of investigation which appoints members of the staff as officers to issue subpoenas and take testimony under oath. As is often the case, this step is taken when the principals and others involved in the investigation are uncooperative, and it is necessary to use the subpoena power in order to determine the exact nature of the activities involved. During the past year, 94 formal orders were issued in connection with the investigations handled through the Division of Trading and Exchanges, an increase of nearly 25 percent over the previous year. In addition investigations are initiated and conducted by the staff of the Division of Corporation where necessary to assist in ascertaining facts with respect to disclosures required to be made or omissions of material information in connection with its examination of registration statements filed under the Securities Act and preliminary proxy soliciting material and reports required to be filed under the Securities Exchange Act. Where necessary, such investigations are conducted with the assistance of the staff of other divisions and regional offices. Upon completion and review of an investigation by the regional office, concerned and the Division of Trading and Exchanges, or the Division of Corporation Finance, the Commission takes under consideration the recommendations of its staff concerning the investigation. The Commission, where action is necessary, has the choice of several avenues. When required in the public interest, the Commission may refer the case, including evidence and exhibits, to the Department of Justice for criminal prosecution. Should this occur, members of the staff familiar with the case assist the Department of Justice and the United States Attorney handling the case in presenting it to the grand jury. When an indictment is returned, members of the staff aid in the trial of the case. The Commission may, when appropriate, authorize institution of civil proceedings for injunctive relief. In such event, the complaint is filed in the appropriate United States District Court and the case presented by a member of the Commission's staff. The Commission may also institute administrative proceedings when the investigation indicates that a registration statement or report filed with it is false or misleading or omits required information or that a broker-dealer or investment adviser registered with the Commission is violating the federal securities laws. The following table reflects in summarized form the investigative activities of the Commission during fiscal 1959. Investigations of possible violations of the acts administered by the Commission ENFORCEMENT PROBLEMS WITH RESPECT TO CANADIAN Enforcement problems relative to the unlawful offer and sale of securities by Canadian issuers and broker-dealers continue to be serious. In such enforcement activities the Commission is severely handicapped in that ordinarily both the violator and essential evidence are in Canada, where persons, books and records are beyond our investigative and subpoena powers. It is therefore difficult, and in most instances, impossible to obtain admissible evidence with respect to such violations. Even when evidence is obtainable, sanctions, such as civil or criminal prosecution or administrative proceedings, cannot be utilized unless personal jurisdiction over defendants can be secured. Despite these difficulties, the Commission, acting within its jurisdictional limitations, has made aggressive efforts to deal with the situation. Hundreds of investigations have been made, injunctions have been secured whenever jurisdiction over violators could be obtained, and a substantial number of criminal indictments have been entered. However, in a test case under the Supplementary Extradition Convention consummated in July 1952, the details of which were furnished in our 22d Annual Report, the Canadian courts denied extradition of a person who engaged in the fraudulent sale of securities by mail and telephone to United States residents. Through appropriate diplomatic channels negotiations are still continuing in an effort to correct this situation. In the meantime the Commission is almost wholly dependent upon voluntary cooperation of the Canadian provincial enforcement authorities. Canada does not have federal securities legislation nor a federal regulatory body. Such matters are regulated on a provincial basis somewhat similar to the blue sky laws administered by State commissions. In general excellent cooperation has been obtained during the fiscal year from the provinces in the enforcement work of the Commission. One of the most encouraging developments in this area has been the outstanding cooperation afforded by the Saskatchewan Securities Commission. On May 1, 1959, this Commission concluded an arrangement with the Saskatchewan Securities Commission under which the latter will require broker-dealers in that Province to refrain from distributing issues of securities into the United States unless the brokerdealer is registered in compliance with the Securities Exchange Act of 1934 and the security is registered in compliance with the Securities Act of 1933. This is the only such arrangement which the Commission has with any province in Canada and reflects the desire of the Saskatchewan Securities Commission that only legitimate issues be distributed from that Province into the United States. During the past fiscal year the Commission has brought 10 civil actions and instituted three criminal actions in which the illegal sale of Canadian securities in the United States was involved. Details concerning these actions: S.E.C. v. Ralph L. Loomis and F. Payson Tood, S.E.C. v. Canadian Javelin Limited et al, U.S. v. Robert M. Sherwood, S.E.C. v. Scott Taylor and Co., Inc., S.E.C. v. Sidney B. Josephson et al, S.E.C. v. A. G. Bellin Securities Corp. et al, S.E.C. v. Albert and Company, Inc. et al, S.E.C. v. I. B. Morton and Company, Inc. et al, S.E.C. v. Gotham Securities Corp. et al, S.E.C. v. Philip Newman Associates et al, U.S. v. Charles M. Berman et al, S.E.C. v. Lincoln Securities Corp. et al, and U.S. v. William J. Conrad are described above in the section on Litigation under the Securities Act of 1933 and the section on Criminal Proceedings. To cope further with the Canadian problem the Commission continues to maintain its Canadian Restricted List, which is a list of Canadian issuers whose securities the Commission has reason to believe currently are being, or recently have been, distributed in the United States in violation of the registration requirements of the Securities Act of 1933. The list and supplements thereto are issued to and published by the press, copies are mailed to all registered broker-dealers and are available to the public. They serve as a warning to the public and alert broker-dealers to the fact that transactions in the securities named therein may be unlawful. As a practical matter most United States broker-dealers refuse to execute transactions in such securities. During the fiscal year 1959, 27 supplements (compared to 14 in fiscal year 1958) were issued in which 85 names (compared to 50 names in fiscal year 1958) were added to the list. On May 20, 1959, the list was revised and consolidated, resulting in the deletion of 29 issuers concerning whose securities the Commission had no evidence of a public offering or sale in the United States during the past 3 years. In many instances the companies were no longer in existence due to mergers, charter surrenders, etc. The number of names on the list as of June 30, 1959, was 210. The current list, reflecting additions and deletions to November 25, 1959, follows: CANADIAN RESTRICTED LIST Aero Mining Corporation Aldor Exploration and Development Algro Uranium Mines Limited Americanadian Mining & Exploration Amican Petroleum and Natural Gas Anthony Gas and Oil Explorations Apollo Mineral Developers Inc. Barite Gold Mines Limited Basic Lead and Zinc Mines Limited Cavalier Mining Corporation Limited Cessland Gas and Oil Corporation Colville Lake Explorers Limited Kimberly Copper Mines Limited Consolidated Exploration and Mining Kipwater Mines Limited Korich Mining Company Limited Consolidated Quebec Yellowknife Mines Kordol Explorations Limited Consolidated Woodgreen Mines Limited Derogan Asbestos Corporation Limited Kukatush Mining Corporation Lambton Copper Mines Limited Langis Silver and Cobalt Mining Com- Larutan Petroleum Corporation Ltd. Desmont Mining Corporation Limited | Lee Gordon Mines Limited DeVille Copper Mines Limited Dolmac Mines Limited Dolsan Mines Limited DuBar Exploration Limited Export Nickel Corporation of Canada File Lake Explorations, Limited Font Petroleums Limited Golden Algoma Mines Limited Hallmark Explorations Limited Lindsay Explorations Limited Lithium Corporation of Canada Limited Mack Lake Mining Corporation Limited Mexicana Explorations Limited Nationwide Minerals Limited New Campbell Island Mines Limited |