published in domestic and foreign professional journals. In 1962, he received an honorary LL.D. degree from Brooklyn Law School. He took office as a member of the Commission on October 11, 1961, for the term expiring June 5, 1963, and was reappointed for the term expiring June 5, 1968.

Jack M. Whitney II

Commissioner Whitney was born in Huntington Beach, Calif., on May 16, 1922. He attended Millsaps College in Jackson, Miss., for 2 years, and Northwestern University School of Commerce, from which he received a B.S. degree in 1943. From 1943 to 1946, he was on active duty in the U.S. Naval Reserve, achieving the rank of Lieutenant (junior grade) in the Supply Corps. He was graduated from Northwestern University School of Law in 1949 with the degree of J.D. In law school he was an editor of the law review, and he is a member of Beta Gamma Sigma and Order of the Coif. Following graduation he became associated with the Chicago law firm of Bell, Boyd, Marshall & Lloyd, of which he was a member at the time of his appointment to the Commission. His practice was primarily in the field of corporate finance. He took office as a member of the Commission on November 9, 1961, for the term ending June 5, 1964.

PART I

IMPORTANT DEVELOPMENTS DURING THE YEAR

Special Study of Securities Markets

Fiscal year 1963 was a particularly notable one for the Commission by virtue of the substantial completion of the Special Study of Securities Markets, which was first undertaken, at the direction of Congress, in September 1961. The Study's Report was transmitted to Congress in three segments, on April 3, July 17, and August 8, 1963. As stated by the Commission in transmitting the final segment, the Report "is clearly the most thorough examination of the securities markets since the early 1930s. Size alone is but a poor measure of its importance and achievement. The Report would have high usefulness if only for its orderly presentation of basic facts about the markets. More importantly it offers a foundation for regulatory and industry actions for a long period to come."

In its 13 chapters totaling some 3,000 pages,1 the Report provides a detailed catalog of practices involved in the operation of the securities industry and markets, as well as developments and problems in their regulation and self-regulation. A brief summary of the content of the Report will indicate the breadth of the subject matter reviewed by the Special Study.

Chapter I of the Report, after describing briefly the purposes and methods of study and the general nature of recommendations arrived at, sets forth general data highlighting the growth of the securities industry in the postwar period, which was an important reason for the Study and provides the background for many of the subjects explored. Chapters II and III are concerned with the broad range of persons and business entities engaged in the securities businessbroker-dealers, salesmen, salesmen's supervisors, and persons engaged in giving investment advice. The first of this pair of chapters examines the standards and controls relating to their entry into and removal from the business; and the second, their activities and respon

1 The Report is available from the Superintendent of Documents, Government Printing Office, Washington, D.C., as House Document No. 95 of the 88th Congress, 1st session. Part I: $2.25, Part II: $3.50, Part III: 50 cents, Part IV: $3.75. The letters of transmittal and the Study's conclusions and specific recommendations are set forth in a summary volume, Part V: 55 cents.

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sibilities in the course of that business and the related controls. Chapter IV deals with primary and secondary distributions of securities to the public, with particular emphasis on new issues and briefer review of other specific areas such as the disclosure requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934, unregistered distributions, intrastate offerings, and real estate securities.

Chapters V, VI, VII, and VIII extensively explore the functions, structures, and problems of markets in which securities are traded after their distribution. Chapter V is a general introduction to this group of chapters. Chapter VI covers the exchange markets, with special attention to the most important of these, the New York Stock Exchange. The chapter reviews the functions and activities of various specialized categories of members, particularly specialists, oddlot brokers and dealers, and floor traders, and also deals with the subjects of short selling and commission rate structures. Chapter VII discusses the over-the-counter markets, their vast and heterogeneous character, their wholesale and retail components, the quotations systems, and present controls over all of them. Chapter VIII then examines various interrelationships among trading markets, including patterns of distribution of securities among exchange and overthe-counter markets, institutional participation in various markets, over-the-counter trading in listed securities, and the regional exchanges as "dual" and primary markets.

Chapter IX reviews the legal requirements and standards in respect of reporting, proxy solicitation and "insider" trading which are applicable to issuers of securities in public hands, contrasting those relating to securities listed on exchanges with those relating to overthe-counter securities and emphasizing the need for legislation in the latter area. It also considers problems in the dissemination of corporate publicity by issuers of both kinds of securities. Chapter X deals with the purposes, effects, and enforcement of securities credit and margin regulations and some inconsistencies and anomalies of the present regulatory pattern. Chapter XI is concerned with certain aspects of open-end investment companies ("mutual funds") which are for the most part covered neither by the recent industry study conducted by the Wharton School of Finance and Commerce nor by continuing inquiries of the Commission's Division of Corporate Regulation. It contains the results of an investor survey and also specifically treats with selling practices, contractual plans, and certain problems in connection with fund portfolio transactions. Chapter XII deals with the self-regulatory pattern which is largely unique to the securities industry. It evaluates the regulatory functioning

of the New York Stock Exchange, the American Stock Exchange, the principal regional exchanges, the National Association of Securities Dealers, Inc. ("NASD”), and certain quasi-regulatory agencies, notes the absence of self-regulatory organizations in certain areas, and assesses the role of the Commission in relation to all of them.

The market break of May 1962 was thought to merit separate examination as a major market phenomenon, and also afforded an opportunity to study certain aspects of the securities markets, already studied under more normal conditions, in the circumstances of a precipitous decline. The results of this study are set forth in Chapter XIII, the final chapter of the Report.

The Commission's judgment on the state of the securities markets and their regulation was summarized in its transmittal letter accompanying the first segment of the Report: "At the outset we emphasize that, although many specific recommendations for improvements in rules and practices are made in the Report of the Special Study, the report demonstrates that neither the fundamental structure of the securities markets nor of the regulatory pattern of the securities acts requires dramatic reconstruction. . . . At the same time the Report makes very clear that important problems do exist, grave abuses do occur, and additional controls and improvements are much needed."

The Report points up many shortcomings in investor protection, of various kinds and degrees, and makes 175 specific recommendations for their correction. In transmitting the Report to Congress, the Commission stated that "we do not embrace every recommendation as our own, but we do accept them as a sound point of departure for proposals to the Congress, for rule-making by the Commission and by the self-regulatory agencies, and for discussions with the industry." The Commission's letters of April 19, and July 23, 1963, to Chairman Oren Harris of the House Interstate and Foreign Commerce Committee and Chairman A. Willis Robertson of the Senate Banking and Currency Committee, and its transmittal letter to Congress of August 8, 1963, stated the Commission's response to each of the Study's recommendations.

As stated, the Study Report is a basic informational document. Among other things, it describes for the first time, in an organized and complete fashion, the operation of the current over-the-counter market, and the impact of the New York Stock Exchange minimum commission rate schedule on the securities markets. In addition, the Report provides an over-all review of the operation of self-regulation.

Secondly, the Study and its Report have been and will be a springboard for both industry and regulatory action. The Study's impact