PART IV

ADMINISTRATION OF THE SECURITIES ACT OF 1933

The Securities Act of 1933 is designed to provide disclosure to investors of material facts concerning securities publicly offered for sale by use of the mails or instrumentalities of interstate commerce, and to prevent misrepresentation, deceit, or other fraudulent practices in the sale of securities. Disclosure is obtained by requiring the issuer of such securities to file with the Commission a registration statement and related prospectus containing significant information about the issuer and the offering. These documents are available for public inspection as soon as they are filed. The registration statement must become "effective," however, before the securities may be sold to the public. In addition the prospectus must be furnished to the purchaser at or before the sale or delivery of the security. The registrant and the underwriter are responsible for the contents of the registration statement. The Commission has no authority to control the nature or quality of a security to be offered for public sale or to pass upon its merits or the terms of its distribution. Its action in permitting a registration statement to become effective does not constitute approval of the securities, and any representation to a prospective purchaser of securities to the contrary is made unlawful by section 23 of the act.

DESCRIPTION OF THE REGISTRATION PROCESS

Registration Statement and Prospectus

Registration of any security proposed to be publicly offered may be effected by filing with the Commission a registration statement on the applicable form containing the prescribed disclosure. When a registration statement relates, generally speaking, to a security issued by a corporation or other private issuer, it must contain the information, and be accompanied by the documents, specified in schedule A of the act; when it relates to a security issued by a foreign government, the material specified in schedule B must be supplied. Both schedules specify in considerable detail the disclosure which should be made available to an investor in order that he may make an informed decision whether to buy the security. In addition, the act provides flexibility in its administration by empowering the Commission to classify issues, issuers and prospectuses, to prescribe appropriate forms, and to increase, or in certain instances vary or diminish, the information required to be disclosed in the registration statement,

as the Commission deems appropriate in the public interest or for the protection of investors.

In general the registration statement of an issuer other than a foreign government must set forth such matters as the names of persons who participate in the direction, management, or control of the issuer's business; their security holdings and remuneration and the options or bonus and profit-sharing privileges allotted to them; the character and size of the business enterprise, its capital structure, past history and earnings and financial statements certified by independent accountants; underwriters' commissions; payments to promoters made within 2 years or intended to be made; acquisitions of property not in the ordinary course of business, and the interest of directors, officers and principal stockholdlers therein; pending or threatened legal proceedings; and the purpose to which the proceeds of the offering are to be applied. The registration statement of a foreign government must contain comparable information in regard to the underwriting and distribution of the securities being registered, the natural and industrial resources of the country, its revenues, obligations and expenses, a description of the securities being registered, and similar matters. The prospectus constitutes a part of the registration statement and presents the more important of the required disclosures. Examination Procedure

The staff of the Division of Corporation Finance examines each registration statement for compliance with the standards of accurate and adequate disclosure and usually notifies the registrant by an informal letter of comment of any material respects in which the statement appears to fail to conform to those requirements. The regisrant is thus afforded an opportunity to file a curative amendment. In addition, the Commission has power, after notice and opportunity for hearing, to issue a "stop order" suspending the effectiveness of a registration statement. In certain cases, such as where a registration statement is so deficient as to indicate a willful or irresponsible failure to make adequate disclosure, no letter of comment is sent and the Commission either institutes an investigation to determine whether stop-order proceedings should be instituted or immediately institutes stop-order proceedings. Information about the use of this stop-order power during 1959 appears below under "Stop Order Proceedings." Time Required to Complete Registration

Because prompt examination of a registration statement is important to industry, the Commission completes its analysis as promptly as possible. Congress provided for 20 days in the ordinary case between the filing date of a registration statement or of an amendment thereto and the time it may become effective. This waiting period is designed to provide investors with an opportunity to become familiar with the proposed offering. Information disclosed in

the registration statement is disseminated during the waiting period by means of the preliminary form of prospectus. The Commission is empowered to accelerate the effective date so as to shorten the 20-day waiting period where the facts justify such action. In exercising this power, the Commission is required to take into account the adequacy of the information respecting the issuer theretofore available to the public, the facility with which investors can understand the nature of and the rights conferred by the securities to be registered, and their relationship to the capital structure of the issuer, and the public interest and the protection of investors. The note to rule 460 under the act indicates, for the information of interested persons, some of the more common situations in which the Commission believes that the statute generally requires it to deny acceleration of the effective date of a registration statement.

The number of calendar days which elapsed from the date of filing to the effective date of the median registration statement with respect to the 9251 registration statements that became effective during the fiscal year ended June 30, 1959, was 28. The number of such calendar days in the 1958 and 1957 fiscal years was 24 and 23, respectively.

These 28 calendar days for the median registration statement in the 1959 fiscal year were divided among the three principal stages of the registration process as follows:

(a) from the date of filing the registration statement to the date of the staff's letter of comment, 17 days;

(b) from the date of the staff's letter of comment to the date of filing the first material amendment after such letter, 6 days; and

(c) from the date of filing the first material amendment after the staff's letter of comment to the effective date of registration, 5 days. Holidays as well as Saturdays and Sundays are included in these numbers of days.

The increase in elapsed time is a reflection of the substantial increase in the number of registration statements filed, as indicated below, and of the fact that a large number of these statements related to new or unseasoned ventures which required relatively more time and effort in making an appropriate review.

VOLUME OF SECURITIES REGISTERED

Securities effectively registered under the Securities Act of 1933 during fiscal 1959 totalled $15.7 billion, 5 percent less than the record

1 Does not include 149 regitsration statements of investment companies filed and effective as amendments to previously effective registration statements pursuant to section 24 (e) of the Investment Company Act of 1940. The number of calendar days elapsed from the date of filing to the effective date of registration of the median (average) of these 149 registration statements was 22.

$16.5 billion registered the previous year. The number of registration statements filed was 1,226, 34% greater than in 1958. During the 25-year history of the Commission, approximately $160 billion of registrations have become effective, $71 billion in the last 5 fiscal years. The lowest annual volume of registrations was $659 million in the wartime year 1943. The chart below shows the dollar amount of effective registrations by fiscal years from 1935 to 1959.

These figures cover all securities effectively registered, including new issues sold for cash by the issuer, secondary distributions, and securities registered for other than cash sale, such as exchange transactions, issues reserved for conversion and issues reserved for longterm options. Of the dollar amount of securities registered in 1959, 77.3 percent was for the account of issuers for cash sale, 17.5 percent for account of issuers for other than cash sale and 5.2 percent was for the account of others, as shown below.

Iccount for which securities were registered under the Securities Act of 1933 during the fiscal year 1959 compared with the fiscal years 1958 and 1957

Securities to be sold for cash for account of the issuer amounted to $12.1 billion in 1959, a decrease of $1.2 billion over the previous year. This reflects a 23 percent decrease, about $1.6 billion, in the volume of debt securities, partially offset by a small increase in the volume of common stock. Debt securities made up $5.3 billion of the 1959 volume, preferred stock $400 million and common stock $6.4 billion. Investment company securities showed a sharp increase in 1959 and accounted for 60 percent of the total for common stock compared with less than one-half in fiscal 1958.

The number of statements, total amounts registered, and a classification by type of security for issues to be sold for cash for account of the issuing company is shown for each of the fiscal years 1935 through 1959 in appendix table 1. More detailed information for 1959 is given in appendix table 2, while 5-year summaries of such information for the 25-year period appear in part II of appendix table 1. The amount of securities registered by investment companies increased almost 50 percent in 1959 over the previous year while that registered by communication companies decreased 80 percent. Among the smaller groups, the trade group aggregate showed an outstanding increase. Securities classified by industry, registered for cash sale for account of issuers in each of the last 3 fiscal years are shown below:

Of the net proceeds of the corporate securities registered for cash sale for the account of issuers in fiscal 1959, 53 percent was desig