Imágenes de páginas
PDF
EPUB

In the paragraphs and chapters which follow we refer in somewhat greater detail to these and other matters which received the attention of the Commission and its staff in fiscal 1962.

Special Study of Securities Markets

The Study was authorized by Public Law 87-196, enacted early in September 1961, which directed the Commission to make a study and investigation of the adequacy, for the protection of investors, of the rules of stock exchanges and national securities associations and to report to the Congress, on or before January 3, 1963, the results of its study together with its recommendations. Following organization of the Study unit and preliminary analysis of the topics to be investigated, it became apparent that the thorough examination and reassessment of the securities markets which were contemplated by the Congress could be completed only if the reporting date were extended. Public Law 87-561 extended the Study to April 3, 1963.

The Study, as the Congress intended, is extremely broad in scope. The effectiveness of industry self-regulation through the stock exchanges and the National Association of Securities Dealers, Inc. is undergoing thorough examination. Intensive inquiries are being conducted into the rules and practices of the stock exchanges, including those relating to the role of specialists, floor traders and odd-lot dealers.

The structure of the over-the-counter market and the adequacy of its regulation, such as controls over quotations systems, are the subject of a detailed review. Information is also being gathered regarding the character of issuers whose securities are traded in that market. Under existing law, a large number of these issuers in whose securities there is a substantial public interest are not subject to any of the reporting or other regulatory requirements imposed on companies whose securities are listed on an exchange. On the basis of the information gathered, the Commission expects to determine the appropriateness of existing distinctions in the regulation of these two categories of issuers.

The Study is also conducting an investigation into the process by which corporations distribute their securities to the public, and into the over-the-counter trading in these securities after distribution, including the problem of so-called "hot issues." Other major subjects of scrutiny include the adequacy of the existing pattern of securities credit regulation and any gaps and inconsistencies with respect to the types of lenders and securities covered; the techniques and uses of financial publicity; standards of entrance into the securities business: and sales practices, including those relating to mutual funds. Substantial progress has been made in gathering information in all these

areas, through questionnaires, interviews and public hearings, and in analyzing such information.

It is anticipated that upon completion of the Study, the present regular staff of the Commission, and additional personnel from the Study, will be assigned the task of implementing the findings and recommendations made.

The Commission believes that the Study has already had a beneficial effect by stimulating significant developments in the form of rule changes, the establishment of internal control procedures and new or improved testing and training programs by broker-dealers, and vigorous disciplinary actions by the self-regulatory agencies of the industry. These steps reflect an increased awareness by the financial community of its responsibilities and have assisted in establishing a more salutary climate in the securities markets. The most dramatic illustration of this new climate is the reorganization of the American Stock Exchange. An investigation of that Exchange, which had commenced prior to the authorization of the Study, was completed with the participation of personnel from the Study, and a report was issued on January 6, 1962. The report concluded, on the basis of detailed findings, that in the case of that Exchange the statutory scheme of self-regulation had not worked in the manner envisioned by Congress. Since that time, substantial changes have occurred in the staff, organization and constitutional structure of the Exchange. This reorganization was effected by the Exchange itself, consistent with the Commission's belief that self-regulation could be revitalized on a realistic basis. The Commission maintained close coordination with the Exchange throughout the process of reorganization.

The Wharton School Study of Investment Companies

As reported previously, the Commission engaged the Wharton School of the University of Pennsylvania to conduct a fact-finding study of the problems created by the growth in size of investment companies. Shortly after the close of fiscal year 1962, the study was completed and was transmitted to the Commission which in turn submitted it to the Committee on Interstate and Foreign Commerce, House of Representatives. The study constitutes the most comprehensive analysis of the mutual fund industry since the Commission's study made more than 20 years ago, prior to the adoption of the Investment Company Act of 1940. It analyzes the growth, organization and control, investment policy, and performance of open-end investment companies or mutual funds, their impact on securities markets, the extent of control of portfolio companies, and the financial and other relationships of mutual funds with their investment advisers and principal underwriters.

The staff of the Commission is now engaged in an evaluation of the conclusions and comments contained in the Wharton School Study, in a study of the structure of the investment company industry generally, and in a reassessment of the provisions of the Investment Company Act and the Commission's rules and regulations thereunder. This detailed analysis, together with related Commission studies now in progress, will aid the Commission in determining whether specific legislative recommendations should be made to the Congress with respect to the Act and what action, if any, should be taken to strengthen the rules and regulations under the Act.

Registration of New Security Offerings

Although the number of registration statements filed under the Securities Act of 1933 with respect to securities issues proposed to be publicly offered dropped off as a result of the market decline toward the end of the fiscal year, the total number of statements filed during the year, 2,307, far exceeded that for any previous year in the Commission's history. This figure represents an increase of 26 per cent over the record number of statements filed in the preceding year. The dollar amount represented by these statements aggregated $21.6 billion, or 4.4 per cent more than the corresponding figure for the previous year. During fiscal year 1962, 1,815 statements relating to offerings of $19.5 billion of securities became effective, also a record both in number and dollar amount, as graphically shown in the chart on page 5.

The unprecedented number of registration statements filed placed a heavy burden upon the Commission's staff. Aside from the sheer volume of statements, a record number of 1,377 statements representing 60 percent of all those filed, related to companies that had not previously been subject to the registration process. The examination of such statements tends of necessity to be more time-consuming than that of filings by issuers which have previously gone through the registration process.

In an effort to reduce the record backlog of registration statements on file, the staff of the Commission was forced to work frequently on an over-time basis and the Commission effected a number of changes in processing procedures during the fiscal year. Among other things. it was decided to reduce the amount and layers of review, particularly with respect to statements relating to high grade debt securities and those filed by public utility companies, by established companies which have filed financial information with the Commission within recent periods, and by other established companies where the registration statement is meticulously prepared and the financial statements are unexceptionable. The Commission also took steps to dispose of a

[merged small][merged small][merged small][graphic][subsumed][subsumed][subsumed][subsumed][subsumed][merged small][merged small][merged small][subsumed][subsumed][graphic][subsumed][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]

large group of statements which had been unsatisfactorily prepared, and had been on the docket for a long time without any corrective amendments having been filed.

Enforcement Activity

During the fiscal year, fraudulent sales of securities and other illegal practices in connection with securities transactions presented, as in past years, a major problem for the Commission and occupied the time of a large portion of its staff. As described in more detail in subsequent portions of this report, the Commission continued to pursue a vigorous enforcement program. Thus, it referred 64 cases to the Department of Justice for criminal prosecution during the year, constituting the largest number of referrals in a single year in the Commission's history, and brought 89 injunction actions. In addition, a total of 503 investigations of securities transactions involving pos

sible violations of the antifraud or other provisions of the securities acts were instituted, and 51 orders suspending the exemption from registration provided for small security issues were issued.

Delegation of Functions

The enactment in August 1962 of Public Law 87-592, authorizing the Commission to delegate to staff members certain of its functions, should have the effect of strengthening the Commission's administration of the various acts administered by it. When implemented, the proposed delegation will relieve the Commissioners from certain routine matters with which they now deal and free them to devote more attention to major matters of policy and planning.

In December 1962, following extensive work by the Commission and at the staff level with a view to implementation of the law, the Commission published notice that it had under consideration the adop tion of rules which would accomplish delegation of various routine functions to certain of its staff officials, including Division and Office heads and regional administrators, to be performed by them or under their direction by such persons as might be designated from time to time by the Chairman.

« AnteriorContinuar »