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table indicates the number of such examinations and investigations with which the Commission was concerned during the fiscal year.

Cases pending at the beginning of the fiscal year.
Cases initiated during the fiscal year----

17 18

35

Cases in which stop order procedings were authorized during the

fiscal year.---Other cases closed during the fiscal year--

1 7

8

Cases pending at the end of the fiscal year..

27

EXEMPTION FROM REGISTRATION OF SMALL ISSUES

Under Section 3(b) of the Securities Act, the Commission is empowered to exempt, by its rules and regulations and subject to such terms and conditions as it may prescribe therein, any class of securities from registration under the Act, if it finds that the enforcement of the registration provisions of the Act with respect to such securities is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering. The statute imposes a maximum limitation of $300,000 upon the size of the issues which may be exempted by the Commission in the exercise of this power.

Acting under this authority the Commission has adopted the following exemptive rules and regulations:

Rule 234 : Exemption of first lien notes.
Rule 235: Exemption of securities of cooperative housing corporations.
Rule 236: Exemption of shares offered in connection with certain trans-
actions.
Regulation A: General exemption for United States and Canadian issues
up to $300,000.

Regulation B: Exemption for fractional undivided interests in oil or gas rights up to $100,000.

Regulation F: Exemption for assessments on assessable stock and for

assessable stock offered or sold to realize the amount of assessment thereon. Under Section 3(c) of the Securities Act, which was added by Section 307(a) of the Small Business Investment Act of 1958, the Commission is authorized to adopt rules and regulations exempting securities issued by a company which is operating or proposes to

operate as a small business investment company under the Small Business Investment Act. Acting pursuant to this authority, the Commission has adopted a Regulation E which exempts upon certain terms and conditions limited amounts of securities issued by any small business investment company which is registered under the Investment Company Act of 1940. This regulation is substantially similar to the one provided by Regulation A adopted under Section 3(b) of the Act.

Exemption from registration under Section 3(b) or 3(c) of the Act does not carry any exemption from the civil liabilities for false and misleading statements imposed upon any person by Section 12(2) or from the criminal liabilities for fraud imposed upon any person by Section 17 of the Act.

Exempt Offerings Under Regulation A

The Commission's Regulation A implements Section 3(b) of the Securities Act of 1933 and permits a company to obtain needed capital not in excess of $300,000 (including underwriting commissions) in any one year from a public offering of its securities without registration, if the company complies with the regulation. Regulation A requires that the issuer file a notification supplying basic information about the company, certain exhibits, and an offering circular which must be used in offering the securities. However, in the case of a company with an earnings history which is making an offering not in excess of $50,000 an offering circular need not be used. A notification is filed with the Regional Office of the Commission in the region in which the company has its principal place of business.

During the 1962 fiscal year, 1,065 notifications were filed under Regulation A, covering proposed offerings of $237,238,600 compared with 1,057 notifications covering proposed offerings of $239,920,549 in the 1961 fiscal year. Included in the 1962 total were 17 notifications covering stock offerings of $4,406,907 with respect to companies engaged in the exploratory oil and gas business, 28 notifications covering offerings of $5,891,302 by mining companies and 23 notifications covering offerings of $5,226,927 by companies featuring new inventions, products or processes.

The following table sets forth various features of the Regulation A offerings during the past 3 fiscal years:

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Most of the offerings which were underwritten were made by commercial underwriters, who participated in 528 offerings in 1962, 511 offerings in 1961, and 398 offerings in 1960. The remaining offerings in which commissions were paid were handled by officers, directors, or other persons not regularly engaged in the securities business. Suspension of Exemption

Regulation A provides for the suspension of an exemption thereunder where, in general, no exemption is available for the securities purported to be offered thereunder, or where the offering is not made in accordance with the terms and conditions of the regulation or with prescribed disclosure standards. Following the issuance of a temporary suspension order by the Commission, the respondents may request a hearing to determine whether the temporary suspension should be vacated or made permanent. If no hearing is requested within 30 days after the entry of the temporary suspension order and none is ordered by the Commission on its own motion, the temporary suspension order becomes permanent.

During the 1962 fiscal year, temporary suspension orders were issued in 51 cases. These cases together with 28 cases pending at the beginning of the fiscal year resulted in a total of 79 cases for disposition. Of these 79 cases, the temporary suspension order became permanent in 48: in 27 by lapse of time, in 9 by withdrawal of the request for hearing, and in 12 after hearing. Thus, there were 31 cases pending at the end of the fiscal year.

Two of the above cases are summarized below to illustrate the type of misrepresentations and other noncompliance with the regulation which led to the issuance of suspension orders.

Chrislin Photo Industries Corp.—The Commission, in ordering the exemption permanently suspended, found that the issuer's offering circular was misleading in not disclosing all the material circumstances under which the offering was made, including the following facts: that no shares were to be sold at the $6 per share offering price until after a market was established at a level well above that price; that immediately prior to any sales at $6 per share there were transactions in the over-the-counter market at prices ranging from $17 to $22.50 per share; that a substantial number of shares were reserved for sale at $6 per share to persons related to or associated with the issuer and the underwriter; that a number of persons who acquired shares at $6 per share almost immediately resold them at substantially higher prices; and that there were persons who acted as underwriters although not named as such in the offering circular.

In addition, statements in the offering circular that a camera developed by the company was ready for marketing, that it would be in production within a reasonable time after the completion of the offering, and that the company was of the opinion that the camera with accessories could profitably be retailed for $20 were found to be false and misleading because in fact the camera was not expected to be ready for marketing until March 1962, at which time additional funds would be required.

The Commission further found that the terms and conditions of Regulation A were not complied with in that the issuer sold securities without furnishing an offering circular as required by Rule 256(a) and the aggregate offering price exceeded the $300,000 limitation prescribed by Rule 254.8

Mainco Electronics and Marine Development Corporation.--According to the Commission's temporary suspension order in this case, the issuer's offering circular failed to disclose, among other things, that it was not producing the fiberglass products referred to; that it had no inventory of the electronic products described therein, was not currently producing those items and had little or no facilities to produce them; that it had cancelled a lease agreement pertaining to expansion of production facilities; and that the proceeds would not be used in the stated order of priority. The order also alleged that the offering circular named various persons as directors when in fact such persons had not consented to serve, that the description of the educational background of the general manager and projects engineer

• Securities Act Release No. 4484 (May 8, 1962).

was false and misleading, and that the amended offering circular contained untrue statements regarding the reasons for the resignations of certain directors. No hearing was requested and the suspension became permanent. Exempt Offerings Under Regulation B

During the fiscal year ended June 30, 1962, 229 offering sheets 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 1961 fiscal year, 261 offering sheets were filed and during the 1960 fiscal year, 328 were filed. The following table indicates the nature and number of Commission orders issued in connection with such filings during the fiscal years 1960–62. The balance of the offering sheets filed became effective without order.

Action taken on offering sheets filed under Regulation B

Fiscal years

1962

1961

1960

Temporary suspension orders...
Orders terminating proceeding after amendment..
Orders fixing effective date of amendment (no proceeding pending).
Orders consenting to withdrawal of offering sheet (no proceeding pending).
Orders consenting to withdrawal of offering sheet and terminating pro-
ceeding...

Total number of orders.

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Reports of sales.—The Commission requires persons who make offerings under Regulation B to file reports of the actual sales made pursuant to that regulation. The purpose of these reports is to aid the Commission in determining whether violations of laws have occurred in the marketing of such securities. The following table shows the number of sales reports filed under Regulation B during the past 3 fiscal years and the aggregate dollar amount of sales during each of such fiscal years.

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