The amount of issues to be offered over an extended period are Of the $6.1 billion expected from the immediate cash sale of corporate securities for the account of issuers in fiscal 1962, 89 percent was designated for new money purposes, including plant, equipment and working capital, 4 percent for retirement of securities and 7 percent for all other purposes including purchases of securities. REGISTRATION STATEMENTS FILED During the 1962 fiscal year, 2,307 registration statements were filed for offerings of securities aggregating $21.6 billion, as compared with 1,830 registration statements filed during the 1961 fiscal year for offerings amounting to $20.7 billion. This represents an increase of 26 percent in the number of statements filed and 4.4 percent in the dollar amount involved. Of the 2,307 registration statements filed in the 1962 fiscal year, 1,377, or 60 percent, were filed by companies that had not previously filed registration statements under the Securities Act of 1933. Comparable figures for the 1961 and 1960 fiscal years were 958, or 52 percent, and 774, or 47 percent, respectively. A cumulative total of 21,695 registration statements has been filed under the Act by 10,506 different issuers covering proposed offerings of securities aggregating over $225 billion from the effective date of the Securities Act of 1933 to June 30, 1962. Particulars regarding the disposition of all registration statements filed under the Act to June 30, 1962, are summarized in the following table: Number and disposition of registration statements filed • Includes 201 registration statements covering proposed offerings totaling $5,235,031,546 filed by investment companies under Section 24(e) of the Investment Company Act of 1940 which permits registration by amendment to a previously effective registration statement. Excludes 11 registration statements that became effective during the year but were subsequently withdrawn; these 11 statements are counted in the 264 statements withdrawn during the year. Excludes 1 registration statement that became effective prior to July 1, 1961, which was placed under stop order during the 1962 fiscal year, and also excludes 11 registration statements effective prior to July 1, 1961, that were withdrawn during the 1962 fiscal year; these statements are counted under stop orders and withdrawn, respectively. The reasons given by registrants for requesting withdrawal of the 264 registration statements that were withdrawn during the 1962 fiscal year are shown in the following table: Reason for registrant's withdrawal request 1. Withdrawal requested after receipt of the staff's letter of comment.. 2. Registrant was advised that statement should be withdrawn or stop order proceedings would be necessary. 3. Change in financing plans. 5. Financing obtained elsewhere. 6. Regulation A could be used. 7. Registrant was unable to negotiate acceptable agreement with underwriter. Total.. Number of Percent statements of total withdrawn withdrawn 61 24 95 56 15 10 264 STOP ORDER PROCEEDINGS Section 8(d) provides that, if it appears to the Commission at any time that a registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may institute proceedings looking to the issuance of a stop order suspending the effectiveness of the registration statement. Where such an order is issued, the offering cannot lawfully be made, or continued if it has already begun, until the registration statement has been amended to cure the deficiencies and the Commission has lifted the stop order. The following table indicates the number of proceedings under Section 8(d) of the Act pending at the beginning of the 1962 fiscal year, the number initiated during the year, the number terminated and the number pending at the end of the year. Proceedings pending at beginning of fiscal year.. 6 7 13 Proceedings terminated during fiscal year by issuance of stop orders___ 7 Proceedings terminated otherwise_ 1 8 Proceedings pending at the end of the 1962 fiscal year--- Several of the proceedings which were terminated during the fiscal year are described below. 5 American Finance Company, Inc.-The registrant, a Delaware corporation organized in 1955, engages in the automobile sales finance business primarily with overseas members of United States Armed Forces. It filed a registration statement covering a proposed offering of 2,500 units, each consisting of 1 $200 debenture, 30 shares of common stock, and 10 warrants, with the price of $500 per unit, for which Myron A. Lomasney (Lomasney) was named as the managing underwriter. The registration statement also covered 60,000 shares of common stock held by Lomasney and 17 persons associated with it, proposed to be offered from time to time at such prices as may prevail on the market following the completion of the offering of the Units. In the course of the proceeding the registrant stipulated to certain facts and consented to the entry of a stop order. Some of the more important deficiencies found in the registration statement are described below.3 The Commission held than an accountant's relationship as attorney for the registrant during the same period covered by his accounting firm's certification disqualified him and the accounting firm of which he was a partner from certifying registrant's financial statements as independent accountants. The Commission stated that "though owing a public responsibility, an attorney, in acting as the client's advisor, defender, advocate, and confidant enters into a personal relationship in which his principal concern is with the interest and rights of his client. The requirement of the Act of certification by an independent accountant, on the other hand, is intended to secure for the benefit of public investors the detached objectivity of a disinterested person. The certifying accountant must be one who is in no way * Securities Act Release No. 4465 (March 19, 1962). connected with the business or its management, and who does not have any relationship that might affect the independence which at times may require him to voice public criticisms of his client's accounting practices." Prior to the filing of the registration statement, Lomasney had purchased the 60,000 shares of registrant's common stock for its own account at an advantageous price, and passed some of these shares on to certain favored customers so that they too might benefit from the planned public offering of shares at a higher price. In offering these 60,000 shares to the public, Lomasney and his favored customers, a group of 17 persons, would be statutory underwriters participating in the distribution of a large block of the registrant's stock. The Commission found that in view of the large number of shares proposed to be offered in relation to the limited floating supply of shares, the apparent lack of cohesiveness in the selling group, and the absence of a prior market, the registration statement should have identified the sellers and their relationship to each other, the registrant, and Lomasney; and it should have disclosed that such distribution would not be coordinated or controlled by a managing underwriter and that the selling group had not provided the contractual safeguards for the protection of buyers and sellers usually provided in a conventional distribution. Accordingly, the Commission required undertakings similar to those required in Hazel Bishop, Inc.* Standard Savings and Loan Association, a wholly-owned subsidiary of the registrant, was described in the registration statement as an operating savings and loan association. The Commission found that Standard was organized and operated merely as a collection agency for the registrant, in that it received allotment payments from military persons in connection with registrant's automobile sales financing business and forwarded such allotments to registrant for application on the unpaid balances of the automobile loans. The Commission held that the opening of shareholders' savings accounts, evidenced by pass books, involved the sale of unregistered securities in violation of Section 5 of the Act; that based on the facts there was not available for such securities the exemption provided by Section 3(a) (5) of the Act for securities issued by a savings and loan association "substantially all the business of which is confined to the making of loans to members." Faradyne Electronics Corp.-Faradyne Electronics Corp., a New Jersey corporation formed in 1959, offered and sold to public investors in December 1959, while in a promotional stage, 200,000 shares of its common stock at $5 per share pursuant to a registration state Securities Act Release No. 4371 (June 7, 1961); See 27th Annual Report, p. 31. ment filed under the Securities Act of 1933. The four promoters together received 300,000 Class A common shares for a cash investment of $20,000. A second registration statement filed in January 1961, as amended, covered a $2 million offering of convertible debentures. The prospectus included in the 1959 registration statement was found by the Commission to be materially false and misleading in several respects. One was in conveying the false impression that Faradyne intended to proceed promptly with plans to develop and produce capacitors whereas its officials in fact contemplated that they might develop an entirely different type of business through the acquisition of the assets or stock of other companies and might use a substantial part of the proceeds from the public offering for that purpose. Faradyne in fact used a substantial portion of the proceeds to acquire the assets or stock of six other companies within a period of several months after the effective date of the registration statement, including the assets and business of Mansol Ceramics Company, of which two of Faradyne's promoters were the principal partners. The prospectus filed as part of the 1961 registration statement was also found materially misleading. It stated that Faradyne, through a subsidiary, Mansol Corporation, had paid $150,000 cash in March 1960, for the assets and business of Mansol Ceramics Company and that it had agreed to make further fixed payments of $1,200,000 and $200,000 plus an additional maximum contingent payment of $2,500,000, payable in annual installments comprised of 50% of Mansol Corporation's annual net profit after taxes beginning with the fiscal year ending January 31, 1961. The prospectus further stated that the obligation to make contingent payments "will terminate on February 1, 1980," and that if such payments are not completed by that date "any balance contingently due will be forgiven." These statements were found misleading in failing to disclose material provisions of the sale agreement. First, under the sale agreement Mansol Corporation could have at any time after January 31, 1962, anticipated all or any part of the obligation to pay the $2,500,000, in which event the two promoters from whom the ceramics company was acquired might receive more than would have been payable on the basis of annual payments of 50% of Mansol Corporation's net profits. Second, the agreement also provided that in the event Mansol Corporation should incur losses for any fiscal year ended January 31, 1966, or thereafter, the period ending in 1980 would be extended 1 year for each such loss year. Moreover, the prospectus set forth a summary of consolidated earnings of Faradyne and its subsidiaries for the fiscal year ended January 31, 1961, which showed net income, after provision for |