Salary data with respect to former Securities and Exchange Commission employees now employed by Associated Gas & Electric Co. 1 On staff of trustees of Associated Gas & Electric Corporation. 2 On staff of trustees, Associated Gas & Electric Co. 3 Represents interim compensation. Pursuant to the terms of the court order additional compensation may be requested. Holding companies in the Associated System. 5 A mutual service company in the Associated System. 6 Plus $5 per day while in New York City and not to exceed $10 per week travelling expenses from New York City to Alexandria, Va. R. STATUS OF OPEN-END INVESTMENT COMPANY SECURITIES UNDER PROPOSED AMENDMENTS TO SECTIONS 4 AND 5 OF SECURITIES ACT OF 1933 TUESDAY, JANUARY 27, 1942 STATEMENT OF COMMISSIONER GANSON PURCELL, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION Commissioner PURCELL. Mr. Chairman, there are one or two other things, if I may. You will remember in discussing problems under section 5 of the Securities Act reference was made both by the representatives of the securities industry group and ourselves to the problem of the open-end investment companies and their offering of securities, and it was stated at that time that we were working with representatives of that group in order to come to some agreement, if possible, as to the treatment of offerings of that character. We would like to insert in the record a statement of the open-end investment companies as to the treatment which they would like to have accorded under any amended Securities Act provision in section 5 and related sections, if we may do that. The CHAIRMAN. You may do that. (The statement referred to is as follows:) STATUS OF OPEN-END INVESTMENT COMPANIES' SECURITIES UNDER PROPOSED AMENDMENTS TO SECTIONS 4 AND 5 OF SECURITIES ACT OF 1933 In the discussion of the securities industry's proposal relating to sections 4 and 5 of the Securities Act of 1933, together with the amendments to those sections which would be acceptable to the Commission, the committee's attention was called to the fact (at p. 320 of the printed transcript) that special problems are involved in the sale of securities by open-end investment companies. I am submitting for inclusion in the record a statement of the National Association of Investment Companies which submits for the consideration of the committee changes in the proposals as to section 5 and related sections which are designed to meet those problems if the committee adopts either the securities industry's proposals on section 5 or those which are acceptable to the Commission. Those changes are concurred in by the Securities and Exchange Commission and the representatives of the Investment Bankers Association of America, the National Association of Securities Dealers, Inc., the New York Curb Exchange, and the New York Stock Exchange. I am submitting also for inclusion in the record a statement by Asiel & Co. on this subject. This statement represents the position taken by Asiel & Co., and I am simply submitting it at their request STATEMENT BY NATIONAL ASSOCIATION OF INVESTMENT COMPANIES WITH RESPECT TO SECTIONS 4 AND 5 OF THE SECURITIES ACT OF 1933 Commissioner Purcell and Robert McLean Stewart, in discussing the securities industry's proposals relating to section 5 of the Securities Act of 1933 and the amendments relating to that section which would be acceptable to the Commission, called the committee's attention to the fact that special problems are faced by open-end investment companies in the sale of their securities. Those problems require special treatment, and we are submitting for the consideration of the committee the following changes in the proposals relating to section 5 which are designed to meet those problems if the committee adopts either the securities industry's proposals relating to section 5 or those which are acceptable to the Commission. These changes have been discussed both with the Securities and Exchange Commission and with representatives of the Investment Bankers Association and the National Association of Securities Dealers, Inc., and are concurred in by them. Part I below sets out the changes in section 5 and related sections which are designed to meet the special problems of open-end investment companies if those sections are amended in the manner acceptable to the Commission. Part II sets out the changes in section 5 and related sections which are de signed to meet the problems of open-end investment companies if those sections are amended in the manner proposed by the securities industry. Part III sets out certain changes in new sections 4 (a) (3) and 12 (a) which are designed to meet the problems of open-end investment companies if section 5 and related sections are amended either in the manner acceptable to the Commission or in the manner proposed by the securities industry. I If sections 5 and related sections are amended in the manner acceptable to Commission (committee print, pp. 26-27), renumber section 5 (c) as section 5 (f) and add the following new sections 5 (c), 5 (d), and 5 (e) : "(c) The provisions of sections 5 (a) (2) and 5 (b) (2) shall not apply to any offer or sale, or any act incident to any offer or sale, of a redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940. "(d) It shall be unlawful for any person, by use of the mails or in interstate commerce or otherwise, to sell any redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940, to deliver any such security for the purpose of sale or after sale, or to collect or to receive payment of any part of the purchase price of any such security, unless a general prospectus current at the time of the sale has been sent or given to the purchaser so that it would normally be received by him not later than the business day before the sale, or, in the case of a sale made by acceptance by the seller of an order or offer to buy, not later than the business day before the making of such order or offer. "(e) It shall be unlawful for any person, by use of the mails or in interstate commerce or otherwise, to offer to sell any redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940 to any person, by any means other than an identifying statement meeting the requirements of section 2 (10) (d), unless the offer is incorporated in, is accompanied by, or has been preceded by, a limited or general prospectus current at the time of the offer." If the proposal as to section 5 which is acceptable to the Commission is changed in the above manner, new sections 4 (c), 4 (d), 7 (c), 12 (b), and 12 (c) should be changed to add references in each case to sections 5 (d) and 5 (e). In addition, in new section 7 (c) the word "and" in line 9 of page 39 of the committee print should be changed to "or." II If section 5 and related sections are amended in the manner proposed by the securities industry (committee print, pp. 27-30), renumber section 5 (c) as section 5 (f) and add the following new sections 5 (c), 5 (d), and 5 (e): "(c) The provisions of sections 5 (a) (2), 5 (a) (3), and 5 (b) (3) shall not apply to any offer or sale, or any act incident to any offer or sale, of a redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940. "(d) It shall be unlawful for any person, by use of the mails or in interstate commerce or otherwise, to sell any redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940, to deliver any such security for the purpose of sale or after sale, or to collect or to receive payment of any part of the purchase price of any such security, unless a general prospectus current at the time of the sale has been sent or given to the purchaser so that it would normally be received by him not later than the business day before the sale, or, in the case of a sale made by acceptance by the seller of an order or offer to buy, not later than the business day before the making of such order or offer. "(e) It shall be unlawful for any person, by use of the mails or in interstate commerce or otherwise, to offer to sell any redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940 to any person, if a registration statement is in effect as to such security, by any written means other than an identifying statement meeting the requirements of section 2 (10) (d), unless the offer is incorporated in, is accomplished by, or has been preceded by, a limited or general prospectus current at the time of the offer." If the securities industry's proposal as to section 5 is changed in the above manner, new sections 4 (c), 4 (d), 7 (c), 12 (b), and 12 (c) should be changed to add references in each case to sections 5 (d) and 5 (e). In addition, in new section 7 (c) the word "and" in line 9 of page 39 of the committee print should be changed to "or." III If section 5 and related sections are amended either in the manner acceptable to the Commission or in the manner proposed by the securities industry, change new section 4 (a) (3) (committee print, pp. 16-17) by shifting the word "or" from the end of clause (A) (p. 17, line 8) to the end of clause (B) (p. 17, line 20), and by adding the following clause (C) : "(C) Any offer or sale, or any act incident to any offer or sale, of a redeemable security issued by an open-end investment company registered under the Investment Company Act of 1940, if any other securities of the same class are currently being offered or sold by the issuer or by or through an underwriter in a distribution which is not exempted under sections 3 or 4, except to such extent and subject to such terms and conditions as the Commission, having due regard for the public interest and the protection of investors, may prescribe by rules or regulations with respect to any class of persons, securities, or transactions;" If new section 4 (a) (3) is changed in the above manner, new section 12 (a) (committee print, p. 55, lines 1-2) should be changed to read as follows: * * but no person other than the issuer, an associate, or a dealer offering or selling a security under such circumstances that the provisions of section 4 (a) (3) (C) are applicable, shall be so liable if he sustains the burden of proof STATEMENT BY ASIEL & Co. IN CONNECTION WITH SECTIONS 4 AND 5 OF THE SECURITIES ACT OF 1933 AND SECTION 22 (d) OF THE INVESTMENT COMPANY Act of 1940 We understand that in the proposed amendments to the Securities Act of 1933 provision is made for the special treatment of transactions in the overthe-counter market in open-end investment company securities. As a result of this special treatment the "dealer" exemption from section 5 (sec. 4 (1)) will no longer apply to these transactions whereas it will continue to apply and probably be liberalized in the case of all other transactions covered by it. We submit that such special treatment favors the interest of the underwriters and contract distributors of open-end securities against the interest of the over-thecounter dealers with whom they are in competition. It is to be noted that similar special treatment was given the underwriters of open-end investment company securities in the Investment Company Act of 1940. Section 22 (d) of that act prohibits a dealer in the over-the-counter market from selling such securities to anybody except another dealer, the issuer or the principal underwriter below the current public offering price maintained by said principal underwriter. Thus, an investor is denied the opportunity of buying in the over-the-counter market at a lower price the presently outstanding shares but may only buy the identical security newly issued at the fixed price set by the underwriter. It is our belief that this process is in conflict with the spirit of the various Federal security acts. We therefore submit for the consideration of the committee that 1. Under sections 4 and 5 of the Securities Act of 1933 as they will be amended, transactions in the over-the-counter market in open-end investment company shares be given the same treatment as transactions in other securities. 2. That subsection (d) of section 22 of the Investment Company Act be repealed. |