The $11.9 billion of securities to be offered for cash sale for account of issuer represented a decrease of $4.4 billion, or 27 percent, from the previous year. This was due chiefly to a decrease of almost $4.3 billion in common stock, debt securities declining by only $140 million. Debt securities made up $4.4 billion of the 1963 volume, preferred stock $270 million and common stock $7.2 billion. Of issues for cash sale, most of the common stock, 88 percent, was to be offered over an extended period, including investment company issues, stock to be issued under employee purchase plans and stock called for by warrants and options. Appendix Table 1 shows the number of statements which became effective and total amounts registered for each of the fiscal years 1935 through 1963, and contains a classification, by type of security, of issues to be offered for cash sale on behalf of the issuer during those years. More detailed information for 1963 is given in Appendix Table 2. Corporate issues scheduled for immediate offering following effective registration amounted to $5.1 billion, a decrease of $1.2 billion from the previous year. Of the total, electric, gas and water companies registered $2.3 billion of securities, about the same amount as in the preceding 2 years. The total for communication companies was $1.1 billion, exceeding the volume registered in fiscal year 1962 by 35 percent. All other groups, except for the extractive industry, registered lower amounts for immediate offering. The decline was greatest for manufacturing companies with $850 million of issues in 1963 compared with $1.8 billion in 1962. Issues registered for offering over an extended period amounted to $6.5 billion, as against $9.7 billion in fiscal year 1962. The amounts of issues to be offered over an extended period are Of the $5.1 billion expected from the immediate cash sale of corporate securities for the account of issuer in 1963, 73 percent was designated for new money purposes, including plant, equipment and working capital, 17 percent for retirement of securities and 10 percent for all other purposes including purchases of securities. REGISTRATION STATEMENTS FILED During the 1963 fiscal year, 1,159 registration statements were filed for offerings of securities aggregating $14.7 billion, as compared with 2,307 registration statements filed during the 1962 fiscal year for offerings amounting to $21.6 billion. This represents a decrease of 49.8 percent in the number of statements filed and 32 percent in the dollar amount involved. Of the 1,159 registration statements filed in the 1963 fiscal year, 357, or 31 percent, were filed by companies that had not previously filed registration statements under the Securities Act of 1933. Comparable figures for the 1962 and 1961 fiscal years were 1,377, or 60 percent, and 958, or 52 percent, respectively. From the effective date of the Securities Act of 1933 to June 30, 1963, a cumulative total of 22,854 registration statements has been filed under the Act by 10,863 different issuers, covering proposed offerings of securities aggregating over $240 billion. Particulars regarding the disposition of all registration statements filed under the Act to June 30, 1963, are summarized in the following table: Number and disposition of registration statements filed • Includes 174 registration statements covering proposed offerings totaling $4,250,676,997 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 37 registration statements that became effective during the year but were subsequently withdrawn; these 37 statements are counted in the 491 statements withdrawn during the year. Excludes 34 registration statements effective prior to July 1, 1962, that were withdrawn during the 1963 fiscal year; these statements are counted under withdrawn. Excludes 1 registration statement that became effective during the year by lifting of stop order; and also excludes 1 registration statement that was withdrawn after the stop order was lifted. These statements are counted under effective and withdrawn, respectively. The reasons given by registrants for requesting withdrawal of the 491 registration statements that were withdrawn during the 1963 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.. 8. Registration not required.. Total... 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 shows the number of proceedings under Section 8(d) of the Act pending at the beginning of the 1963 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. Proceedings terminated during fiscal year by issuance of stop orders. Proceedings pending at the end of the 1963 fiscal year. 5 8 Two of the proceedings which were terminated during the fiscal year through the issuance of stop orders are described below: The Richmond Corporation.—The registrant, a District of Columbia corporation organized in 1959, engages in various phases of the real estate business, including the ownership of undeveloped acreage, income-producing properties, and promissory notes secured by mortgages and deeds of trust. It filed a registration statement covering a proposed offering of 142,858 shares of 10 cent par value common stock at $7 per share, 36,500 common stock purchase warrants to be sold to the underwriter at 1 cent per warrant, and 36,500 shares of common stock reserved for issuance upon exercise of the warrants. The Commission instituted proceedings under Section 8(d), and the registrant stipulated certain facts and consented to the entry of a stop order. Following are some of the more important deficiencies in the registration statement: The Commission found the registration statement to be materially deficient in failing to disclose that various officers and directors of the registrant were engaged, through companies similar to the registrant which they control, or in person, in competitive real estate activities which involved potential conflicts of interest with the business purposes of the registrant. The Commission accordingly concluded that the statement in the prospectus that "There are no business relations between the Board members or officers or promoters which are competitive with, or in conflict with the business purposes of the company," was materially false and misleading. The managing underwriter named in the registration statement, a sole proprietorship, was organized February 14, 1961. Its owner's only prior experience in the securities business was as a securities salesman between May and December 1960. The firm's only experience as 2 Securities Act Release No. 4584 (February 27, 1963). an underwriter was in connection with two proposed offerings neither of which involved securities of real estate investment companies. One of these offerings was deregistered shortly after the registration statement became effective. In the other offering, made pursuant to a claimed exemption from registration under Regulation A under the Act, the firm acted together with co-underwriters and sold 30,000 shares at $2 per share. The Commission held that the limited experience of the underwriter was a material factor bearing on the success of the offering and that the failure to disclose it was a material omission. The Commission's opinion stated that the underwriter's investigation of registrant's business was so limited in nature that he did not exercise the degree of care necessary for and required of an underwriter to satisfy himself as to the accuracy and adequacy of the prospectus. His investigation consisted of (1) visits to two of the regis trant's three tracts of land, (2) an examination of a list of registrant's stockholders and (3) the obtaining of a credit report on the registrant's president. As to all other matters in connection with the registration statement, the underwriter apparently relied only on representations of the registrant's management. The Commission referred to a report, which preceded the passage of the Act, in which the Congress recognized that the high standards of honesty, care and competence required of fiduciaries were responsibilities assumed by reputable investment bankers. The Commission also cited various provisions in the Securities Act and the Securities Exchange Act which imposed upon underwriters a responsibility to conform to those standards upon pain of severe civil liability or revocation of broker-dealer registration. Doman Helicopters, Inc.-The registrant was organized in 1945 for the purpose of developing certain inventions in the field of helicopter rotor construction. It had never engaged in any substantial manufacturing activity and had never earned a profit. Its financial history had been marked by continual difficulties and by the repeated conversion of creditors' rights into common stock positions. Its future plans were predicated on a proposed helicopter to be called the D10B, which was intended to be a variant of an earlier model, two prototypes of which had been sold to and tested by the Defense Department. After testing these earlier prototypes and after making an extensive study of the registrant's rotor system, the Department of Defense had found "no significant advantages in the Doman rotor system over other types." On April 19, 1962, registrant filed a registration statement with respect to 681,971 shares of its common stock to be offered to the public H. Rept. No. 85, 73d Cong., 1st Sess. (1933) at p. 5. |