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company, Section 16 (b) of the Securities Exchange Act, Section 17 (b) of the Public Utility Holding Company Act, and Section 30 (f) of the Investment Company Act provide for the recovery by or on behalf of the issuer of any profit realized by insiders from certain purchases and sales, or sales and purchases, of securities of the company within any period of less than 6 months. The Commission has certain exemptive powers with respect to transactions not comprehended within the purpose of these provisions, but is not charged with the enforcement of the civil remedies created thereby.

REGULATION OF PROXIES

Scope of Proxy Regulation

Under Sections 14(a) of the Securities Exchange Act, 12(e) of the Public Utility Holding Company Act of 1935, and 20(a) of the Investment Company Act of 1940, the Commission has adopted Regulation 14 requiring the disclosure in a proxy statement of pertinent information in connection with the solicitation of proxies, consents and authorizations in respect of securities of companies subject to those statutes, in order that holders of such securities will be able to act intelligently on such matters. The regulation provides, among other things, that when the management is soliciting proxies, any security holder desiring to communicate with other security holders for a proper purpose may require the management to furnish him with a list of all security holders or to mail his communication to security holders for him. A security holder may also, subject to reasonable prescribed limitations, require the management to include in its proxy material any appropriate proposal which such security holder desires to submit to a vote of security holders. Any security holder or group of security holders may at any time make an independent proxy solicitation upon compliance with the proxy rules, whether or not the management is making a solicitation. Certain additional provisions of the regulation are applicable where a contest for control of the management of an issuer is involved.

Copies of proposed proxy material must be filed with the Commission in preliminary form prior to the date of the proposed solicitation. Where preliminary material fails to meet the prescribed disclosure standards, the management or other group responsible for its preparation is notified informally and given an opportunity to avoid such defects in the preparation of the proxy material in the definitive form in which it is furnished to stockholders.

Statistics Relating to Proxy Statements

During the 1963 fiscal year, 2,396 proxy statements in definitive form were filed under the Commission's Regulation 14 for the solicitation of

proxies of security holders; 2,375 of these were filed by management and 21 by nonmanagement groups or individual stockholders. These 2,396 solicitations related to 2,231 companies, some 165 of which had more than one solicitation during the year, generally for a special meeting not involving the election of directors.

There were 2,205 solicitations of proxies for the election of directors, 174 for special meetings not involving the election of directors, and 17 for assents and authorizations for action not involving a meeting of security holders or the election of directors.

In addition to the election of directors, the decisions of security holders were sought through the solicitation in the 1963 fiscal year of their proxies, consents and authorizations with respect to the following types of matters:

Mergers, consolidations, acquisitions of businesses, purchases and sales of property, and dissolutions of companies___

Authorizations of new or additional securities, modifications of existing securities, and recapitalization plans (other than mergers, consolidations, etc.).

116

225

Employee pension and retirement plans (including amendments to existing plans)__

44

Bonus, profit-sharing plans and deferred compensation arrangements
(including amendments to existing plans and arrangements)..
Stock option plans (including amendments to existing plans) - - - --
Stockholder approval of the selection by management of independent
auditors..

49

183

908

Miscellaneous amendments to charter and by-laws, and miscellaneous other matters (excluding those involved in the preceding matters) __. Stockholders' Proposals

590

During the 1963 fiscal year, 56 stockholders submitted a total of 229 proposals which were included in the 134 proxy statements of 134 companies under Rule 14a-8 of Regulation 14.

Typical of such stockholder proposals submitted to a vote of security holders were resolutions relating to amendments to charters or bylaws to provide for cumulative voting for the election of directors, limitations on granting stock options and their exercise by key employees and management groups, sending a post-meeting report to all stockholders, changing the place of the annual meeting of stockholders, and the approval by stockholders of management's selection of independent auditors.

The managements of 26 companies omitted from their proxy statements under the Commission's Rule 14a-8 a total of 61 additional proposals submitted by 45 individual stockholders. The principal reasons for such omissions and the numbers of times each such reason was involved (counting only one reason for omission for each pro

posal even though it may have been omitted under more than one provision of Rule 14a-8) were as follows:

(a) 36 proposals were withdrawn by the stockholders;

(b) 8 proposals related to the ordinary conduct of the company's business;

(c) 7 proposals were not a proper subject matter under state

law;

(d) 5 proposals were not timely submitted;

(e) 3 proposals concerned a personal grievance against the

company;

(f) 1 proposal involved substantially the same matter as one previously submitted to security holders;

(g) 1 proposal and reason therefor was deemed misleading. Ratio of Soliciting to Non-soliciting Companies

Of the 2,417 issuers that had securities listed and registered on national securities exchanges as of June 30, 1963, 2,254 had voting securities so listed and registered. Of these 2,254 issuers, 3 listed and registered voting securities for the first time after their annual stockholders' meeting in fiscal 1963; of the remaining 2,251 issuers with voting securities, 1,875 or 83 per cent solicited proxies for the election of directors under the Commission's proxy rules during the 1963 fiscal year.

Proxy Contests

During the 1963 fiscal year, 27 companies were involved in proxy contests for the election of directors. A total of 376 persons, both management and nonmanagement, filed detailed statements as participants under the requirements of Rule 14a-11. Proxy statements in 18 cases involved contests for control of the board of directors and those in 9 cases involved contests for representation on the board.

Management retained control of the board of directors in 10 of the 18 contests for control, 1 was settled by negotiation, nonmanagement persons won 4, and 3 were pending as of June 30, 1963. Of the 9 cases where representation on the board of directors was involved, management retained all places on the board in 6 cases.

INVESTIGATIONS

Section 21(a) of the Act authorizes the Commission to make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of the Act or any rule or regulation thereunder. The Commission is authorized, for this purpose, to administer oaths, subpoena witnesses, compel their attendance, take evidence and require the production of records. In addition

to the investigations undertaken in enforcing the anti-fraud, brokerdealer registration, and other regulatory provisions of the Act, which are discussed in Part XI of this report under "Complaints and Investigations," the following investigations were undertaken in enforcing the reporting provisions of Sections 12, 13, 14 and 15(d) of the Act and the rules thereunder, particularly those provisions relating to the filing of annual and other periodic reports and proxy material:

Investigations pending at beginning of the fiscal year...
Investigations initiated during the fiscal year....

21

Investigations closed during the fiscal year...

19

40

13

27

Investigations pending at close of the fiscal year.....

REGULATION OF BROKER-DEALERS AND OVER-THE-COUNTER

Registration

MARKETS

Section 15(a) of the Securities Exchange Act of 1934 requires the registration of all brokers and dealers who use the mails or instrumentalities of interstate commerce to effect or induce transactions in securities in the over-the-counter market. Brokers and dealers conducting an exclusively intrastate business or dealing only in exempted securities, commercial paper, commercial bills or bankers' acceptances are exempt from registration.

The table below sets forth statistics on broker-dealer registrations and applications for fiscal 1963.

Effective registrations at close of preceding fiscal year.......
Applications pending at close of preceding fiscal year.
Applications filed during fiscal year.

Total...

Applications denied...

Applications withdrawn..

Applications cancelled...

Registrations withdrawn..

Registrations cancelled.

Registrations revoked...

Registrations suspended..

Registrations effective at end of year.

Applications pending at end of year..

Total.

Less: Suspended registrations, 9 revoked and 1 cancelled during year....

Total....

5, 868

81

679

6, 628

12

18

0

908

90

74

4

5, 482

50

6, 638

10

6, 628

• 23 registrations were in suspension at close of the fiscal year.

ADMINISTRATIVE PROCEEDINGS

Under Section 15 (b) of the Exchange Act, the Commission has the power to deny or revoke the registration of a broker-dealer. An order of denial or revocation will be issued, after notice and opportunity for hearing, if the Commission finds that such sanction is in the public interest and that the applicant or registrant, or any partner, officer, director, or other person directly or indirectly controlling or controlled by the applicant or registrant, is subject to a statutory disqualification. The statutory disqualifications are:

(1) willfully false or misleading statements in the application for registration or documents supplemental thereto;

(2) conviction within the previous 10 years of a felony or misdemeanor involving the purchase or sale of securities or arising out of the conduct of business as a broker-dealer;

(3) injunction by a court of competent jurisdiction against engaging in any practices in connection with the purchase or sale of securities; and

(4) willful violation of the Securities Act of 1933 or the Exchange Act or any of the Commission's rules or regulations thereunder.

The Commission has no authority to deny or revoke registration without finding a disqualification of the types set forth. Therefore, bad reputation or character, or inexperience in the securities business, or even conviction of a felony unrelated to transactions in securities is not a basis for ordering denial or revocation of registration.

Section 15A of the Exchange Act empowers the Commission to suspend or expel a broker-dealer from membership in a registered securities association upon a finding of violation of the Federal securities laws or regulations thereunder. The National Association of Securities Dealers, Inc. ("NASD") is the only such association. Section 19(a)(3) of the Act gives the Commission power to take similar action against members of national securities exchanges.

Pursuant to the provisions of Section 15A (b) (4) of the Securities Exchange Act, in the absence of Commission approval or direction, no broker or dealer may be admitted to or continued in membership in the NASD if the broker or dealer or any partner, officer, director, or controlling or controlled person of such broker or dealer was a cause of any order of denial or revocation of registration or suspension or expulsion from membership which is in effect. An individual named as a cause often is subject to one or more statutory disqualifications under Section 15 (b) and his employment by any other broker-dealer thus could also become a basis for broker-dealer revocation or denial proceedings against such employer.

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