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General Aeromation, Inc.-General Aeromation filed a notification and offering circular under Regulation A in March 1960, relating to a proposed public offering of 84,450 shares of common stock at $3 per share. The company proposed to develop and market a selfpowered vehicle, invented by Henry J. Wiebe, the issuer's president, and named "Romatt," which was designed to transport aircraft to and from various airport locations such as hangars and runways. One version of the vehicle was designed for commercial use and another for military use. The offering circular included a letter from the issuer's patent attorney to the effect that the Air Force and commercial airlines were "desperately" in need of ground handling equipment, and the circular stated that the device had been checked by competent industry sources, that no satisfactory ground equipment of comparable nature was available, and that no direct known competition existed employing the Romatt method of moving heavy aircraft on the ground. The offering circular projected a military market of up to 1,000 Romatt-type vehicles and stated that the issuer expected to market or lease a considerable number of units to commercial airlines "as they are manufactured and . . . tested."

In its order suspending the exemption for this offering, the Commission held that these representations were false or misleading. It found that, at the time of filing, both commercial and military aircraft were being handled by specially designed ground equipment which was considered to be reasonably adequate. During 1958, the Air Force had issued a request for proposals for the development of ground equipment which would meet certain performance specifications, but several proposals submitted by Wiebe and the issuer had been rejected. There was no tangible evidence of prospects of acceptance of the vehicle for commercial use, and at the time of the filing, no commercial model had been completed, tested or demonstrated in actual operation.

The Commission stated that, regardless of whether the issuer in good faith believed in the merits and potential success of its product, it must make an adequate, accurate and fair presentation of all material factors so that public investors may be able to decide for themselves whether to invest. It further stated that the presentation of an optimistic picture of the issuer's prospects, though qualified by certain general concessions, but without disclosure of significant adverse information, created a materially misleading picture even though individual representations in another context might not be objectionable.

• Securities Act Release No. 4536 (September 19, 1962).

The Commission rejected certain evidence proffered by the issuer after the recommended decision of the hearing examiner and exceptions thereto had been filed, which assertedly reflected certain favorable developments. It pointed out that its findings were based on the deficiencies of the offering circular at the time it was filed and that subsequent developments could not remedy prior misstatements and failures to state adverse material facts.

In addition to the misstatements discussed above, the Commission found that there were a number of other misstatements in the offering circular, that the aggregate offering price exceeded $300,000, and that offering circulars were mailed out earlier than permitted.

Exempt Offerings Under Regulation B

During the fiscal year ended June 30, 1963, 231 offering sheets and 248 amendments thereto were filed pursuant to Regulation B and were examined by the Oil and Gas Section of the Commission's Division of Corporation Finance. During the 1962 and 1961 fiscal years, 229 and 261 offering sheets, respectively, were filed. The following table indicates the nature and number of Commission orders issued in connection with such filings during the fiscal years 1961-63. The balance of the offering sheets filed became effective without order.

Action taken on offering sheets filed under Regulation B

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Temporary suspension orders (under Rule 340(a))....
Orders terminating proceeding after amendment.
Orders consenting to withdrawal of offering sheet and terminating pro-
ceeding.

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Orders permanently suspending the effectiveness of filing of offering

sheet.

1

Notice of opportunity for hearing (under Rule 340(b)).

6

Notice and order for hearing (pursuant to Rule 340(b)).

1

Orders fixing effective date of amendment (no proceeding pending).
Orders consenting to withdrawal of offering sheet (no proceeding pending)..

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Total number of orders..

215

197

188

Exempt Offerings Under Regulation E

Regulation E provides a conditional exemption from registration under the Securities Act of 1933 for securities of small business investment companies which are licensed under the Small Business Investment Act of 1958, or which have received the preliminary approval of the Small Business Administration and have been notified by the Administration that they may submit an application for such a license.

The Regulation, which is similar in many respects to the general exemption provided by Regulation A, requires the filing of a notifica

tion with the Commission and, except in the case of offerings not in excess of $50,000, the filing and use of an offering circular containing certain specified information.

Regulation E provides for the suspension of the exemption in particular cases if the Commission finds that any of the terms and conditions of the regulation have not been met or complied with.

During the 1963 fiscal year, one notification was filed under Regu lation E, covering a proposed offering of $264,000, and became effective.

Exempt Offerings Under Regulation F

Regulation F provides an exemption from registration under the Securities Act for assessments levied upon assessable stock and for delinquent assessment sales in amounts not exceeding $300,000 in any one year. It requires the filing of a simple notification giving brief information with respect to the issuer, its management, principal security holders, recent and proposed assessments and other security issues. The Regulation requires a company to send to its stockholders, or otherwise publish, a statement of the purposes for which the proceeds from the assessment are proposed to be used. If the issuer should employ any other sales literature in connection with the assessment, copies of such literature must be filed with the Commission.

During the 1963 fiscal year, 35 notifications were filed under Regu lation F, covering assessments of $937,425. Regulation F notifications were filed in three of the nine regional offices of the Commission: Denver, San Francisco and Seattle. Underwriters were not employed in any of the Regulation F assessments.

Regulation F provides for the suspension of an exemption thereunder, as in Regulation A, where the Regulation provides no exemption or where the offering is not made in accordance with the terms and conditions of the Regulation or in accordance with prescribed disclosure standards.

One Regulation F filing was temporarily suspended in the fiscal year 1963. No hearing was requested and none was ordered by the Commission, with the result that the suspension order became permanent on the 30th day after its entry.

PART V

ADMINISTRATION OF THE SECURITIES EXCHANGE ACT OF 1934

The Securities Exchange Act of 1934 provides for the registration and regulation of securities exchanges and the registration of securities listed on such exchanges and it establishes, for issuers of securities so registered, financial and other reporting requirements, regulation of proxy solicitations and requirements with respect to trading by directors, officers and principal security holders. The Act also provides for the registration and regulation of national securities associations and of brokers and dealers doing business in the over-the-counter market, contains provisions designed to prevent fraudulent, deceptive and manipulative acts and practices on the exchanges and in the over-the-counter markets and authorizes the Federal Reserve Board to regulate the use of credit in securities transactions. The purpose of these statutory requirements is to ensure the maintenance of fair and honest markets in securities transactions on the organized exchanges and in the over-the-counter markets.

REGULATION OF EXCHANGES AND EXCHANGE TRADING

Registration and Exemption of Exchanges

As of June 30, 1963, 14 stock exchanges were registered under the Exchange Act as national securities exchanges:

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Four exchanges were exempted from registration by the Commis

sion pursuant to Section 5 of the Act:

Colorado Springs Stock Exchange

Honolulu Stock Exchange

Richmond Stock Exchange

Wheeling Stock Exchange

Disciplinary Action

Each national securities exchange reports to the Commission disciplinary actions taken against any member, member firm, or person connected therewith, for violation of any rule of the exchange, of the Securities Exchange Act, or of any rule or regulation thereunder. During the year 9 exchanges reported 75 cases of such disciplinary actions, including imposition of fines ranging from $50 to $5,000 in 34 cases, with total fines aggregating $58,350; the suspension from membership of 4 member firms and 15 individuals, 2 of whom also had their specialist registration revoked; the expulsion of 3 individual members and 1 allied member; the revocation of the registration of 1 member as an odd-lot and round-lot dealer; and the censure of a number of individuals and firms. Various other sanctions were imposed against registered representatives and other employees of member firms.

REGISTRATION OF SECURITIES ON EXCHANGES

Unless a security is registered under the Exchange Act or is exempt from such registration it is unlawful for a member of a national securities exchange or a broker or dealer to effect any transaction in the security on an exchange. In general, the Act exempts from regis tration obligations issued or guaranteed by a state or the Federal Government or by certain subdivisions or agencies thereof and authorizes the Commission to adopt rules and regulations exempting such other securities as the Commission may find necessary or appropriate to exempt in the public interest or for the protection of investors. Under this authority the Commission has exempted securities of certain banks, certain securities secured by property or leasehold interests, certain warrants and, on a temporary basis, certain securities issued in substitution for or in addition to listed securities.

Pursuant to Section 12 of the Exchange Act, an issuer may register a class of securities on an exchange by filing with the Commission and the exchange an application which discloses pertinent information concerning the issuer and its affairs. Information must be furnished regarding the issuer's business and capital structure, the terms of its securities, the persons who manage or control its affairs, the remuneration paid to its officers and directors, and the allotment of options, bonuses and profit-sharing plans, and financial statements certified by independent accountants must be filed as part of the application. Form 10 is the form used for registration by most commercial and industrial companies. There are specialized forms for certain types of securities, such as voting trust certificates, certificates of deposit and securities of foreign governments.

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