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Securities and Exchange Commission on March 23, 1964, for the term expiring June 5, 1965, and was reappointed for the term expiring June 5, 1970.

Hamer H. Budge Commissioner Budge was born in Pocatello, Idaho, on November 21, 1910. He attended the College of Idaho, Caldwell, Idaho, received an A.B. degree from Stanford University, Palo Alto, California, majoring in political science, and an LL.B. degree from the University of Idaho in Moscow, Idaho. He is admitted to practice before the Supreme Court of Idaho and the Supreme Court of the United States and practiced law in the city of Boise, Idaho, from 1936 to 1951, except for 312 years in the United States Navy (1942–1945), with final discharge as Lieutenant Commander. Elected to the Idaho State Legislature, he served three sessions, two as assistant Republican floor leader and one as majority floor leader. First elected to Congress in November 1950, he represented Idaho's Second Congressional District in the United States House of Representatives during the 82d, 83d, 84th, 85th, and 86th Congresses. In the House he was a member of the Rules Committee, Appropriations Committee, and Interior Committee. During the period from 1961 until his appointment to the Commission he was District Judge in Boise. He took office as a member of the Securities and Exchange Commission on July 8, 1964, for the term of office expiring June 5, 1969.

Francis M. Wheat

Commissioner Wheat was born in Los Angeles, California, on February 4, 1921. He received an A.B. degree in 1942 from Pomona College, in Claremont, California, and an LL.B. degree in 1948 from the Harvard Law School. At the time of his appointment to the Commission, Commissioner Wheat was a member of the Los Angeles law firm of Gibson, Dunn & Crutcher, with which he became associated upon his graduation from law school. His practice was primarily in the field of corporation and business law, including the registration of securities for public offering under the Securities Act of 1933. He has been active in bar association work, including service as Chairman of the Committee on Corporations of the Los Angeles County Bar Association and Chairman of the Subcommittee on Investment Companies and Investment Advisers, Committee on Federal Regulation of Securities, American Bar Association (Banking and Business Law Section). He also has written or co-authored articles on various aspects of the securities business and its regulation, both under Federal and State law. He took office as a member of the Commission on October 2, 1964, for the term expiring June 5, 1966, and was reappointed for the term expiring June 5, 1971.

Changing Conditions in the Securities Industry

Changes are taking place in the nation's securities markets and the securities industry. The dramatic growth of institutional investment in equity securities and the advent of automation are but two examples of the changes which raise basic questions about the structure of the securities industry and its ways of doing business. The Commission must continually study and assess the implications of these changes and take appropriate action if it is to fulfill its statutory obligations nd help to maintain public confidence in the securities markets.

The Commission has recently completed and submitted to the Congress a Report on the Public Policy Implications of Investment Company Growth. The Report was submitted pursuant to Section 14(b) of the Investment Company Act of 1940, which authorizes the Commission, "if it deems that any substantial further increase in the size of investment companies creates any problem involving the protection of investors or the public interest, to make a study and investigation” and “to report the results of its studies and investigations and its recommendations to the Congress.'

Both the securities industry and the Commission have taken important first steps in the use of electronic data-processing equipment, but much remains to be done in that area. The Commission's computer is already serving an important role in the surveillance of the securities markets and in developing a better understanding of the operation of the securities markets. The Commission is also working with the self-regulatory organizations, namely, the national securities exchanges and the National Association of Securities Dealers, to develop automated procedures which will make possible more efficient and effective procedures for the execution of securities transactions, the publication of more timely and informative price and other information, and the establishment of improved surveillance programs.

The Commission staff has drafted improved financial reporting forms for broker-dealers and investment advisers, and is discussing these forms with industry groups. The information derived from these forms, coupled with the use of computer simulation techniques, should facilitate the evaluation of trends and problems within the industry and of the effects of alternative regulatory actions.

Changes in the securities markets and in the companies whose securities are traded require a reassessment of the Commission's disclosure requirements. At the present time the Commission is working with the accounting profession and corporate executives to improve financial reporting by "conglomerate” companies and to enhance the comparability of financial statements of similar companies. In addition the Commission is reviewing its disclosure requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934 to determine if the requirements can be coordinated and simplified so as to provide more meaningful information to investors.


In sum, changes in the structure of the securities markets, in the composition of the investor population, and in technology all require knowledge and understanding on the Commission's part and imaginative regulation to deal with the problems raised. The Commission's budget and staff have been strained in an effort to keep pace with these problems. The Commission is attempting, through improved coordination and cooperation with the states and the self-regulatory bodies and other measures, to achieve the best utilization of its available resources.


As indicated in the Introduction to this Report, the Commission and its staff devoted considerable attention during the 1966 fiscal year to the study of changes taking place in the securities field and consideration of the appropriate regulatory response. Some of the problem areas had been touched on in the Report of the Special Study of Securities Markets and various of the actions taken during the year were to implement recommendations of that Study. Another important step forward was the acquisition of a computer, coincident with the Commission's move into a new building. The computer will contribute substantially to the Commission's efforts to discharge its responsibilities more effectively. The sections that follow describe in brief the principal matters under consideration during the year (aside from developments with respect to the Securities Acts Amendments of 1964 which are discussed in Part II of this Report), the longawaited move to satisfactory quarters, and the Commission's entry into the computer age. Proposed Broker-Dealer Financial Reports

The Commission has submitted to industry leaders an informal proposal to require broker-dealers to furnish increased financial information on a periodic basis.

In making this proposal, the Commission considered several factors. It noted that this is a period of rapid change in the securities markets and the security industry. The resulting situation calls for actions and decisions which require an informed analysis of the operations of the markets and of persons and organizations in the markets. It is necessary to evaluate the effects which various changes and proposals by the Commission and others may have on the functioning of the industry, its profitability and its ability to attract capital and people with the imagination and energy so necessary to the continued growth and development of our national economy. The Commission believes that a full regulatory response to these conditions should be based on informed analysis of the economic factors at work in the industry. The Commission, the stock exchanges and the National Association of Securities Dealers, Inc. now receive assorted financial information at various times but often in a form which does not permit meaningful

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