Imágenes de páginas
PDF
EPUB

nation program for persons associated with broker-dealers that are not members of the NASD, the Commission grants reciprocity to securities examinations meeting established standards. Since the initiation of the Commission examination program in January 1966, a majority of the 31 states which require salesmen to pass a general securities examination, and the NASD, have granted reciprocity to the Commission's own examination. Conflicts of Interest of Investment Advisers

The Special Study Report discussed various situations where the nature of the advice given by investment advisers could be affected by consideration of their own interests. It particularly questioned the purchase of securities by an investment adviser for his own account shortly before recommending such securities, followed by a sale after the market price reflects the impact of the recommendation. This practice is known as "scalping."

With a view to identifying and possibly regulating conflicts-ofinterest situations involving investment advisers, the Commission amended Rule 204-2(a) of the Investment Advisers Act of 1940 to require investment advisers to maintain records concerning transactions in which they or their “advisory representatives” (as that term is defined in the rule) have a beneficial interest.

In announcing the amendment, the Commission pointed out that an investment adviser is a fiduciary, and as such owes his clients undivided loyalty, should not engage in any activity in conflict with the interest of clients, and should take the steps reasonably necessary to fulfill his fiduciary obligations. It referred to the holding by the United States Supreme Court in SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963), that “scalping” by an investment adviser violates the anti-fraud provisions of Sections 206(1) and (2) of the Advisers Act unless appropriately disclosed. The Commission has considered whether it should adopt a rule designed to prevent "scalping" by prohibiting specified transactions by investment advisers and their associates in securities recommended by them. It is expected that the new record-keeping requirement will assist the Commission in determining whether such a rule is necessary and if so, what its nature and scope should be. In addition, the reports furnished to investment advisers by their "advisory representatives” should provide the investment advisers with valuable information on the basis of which

5 See pp. 16–17, infra.

The amendment was proposed during the fiscal year. Its adoption was announced in Investment Advisers Act Release No. 203 (August 11, 1966). To allow investment advisers adequate time to establish the internal procedures necessary for compliance with its provision, the Commission made the amendment effective on October 1, 1966.

they may establish appropriate internal controls over representatives trading. New Building

The Commission completed its move into new quarters in June 1966 The building is conveniently located at 500 North Capitol Street, facing Union Station Plaza.

For the first time in its 32-year history, the Commission's Headquarters Office is housed in a single modern office building with suitable facilities and accommodations. This consolidation of the Washington staff (including the Washington Regional Office) into one building will contribute to a more orderly and efficient conduct of the Commission's business. Coincident with the move, the Commission undertook to improve its service to the public. For example, better facilities are now available for the public's examination of corporate and other reports on file with the Commission. In addition, new and improved telephone facilities have been installed which will permit direct transfers of incoming telephone calls without rerouting through the master switchboard. The Commission will continue to press forward in every possible way to make improvements in its service to the public.

In a message sent to the dedication ceremonies, President Johnson said:

“It gives me great pleasure to congratulate you on the attainment
of a much-needed goal—the efficient and attractive quarters being
dedicated today.
For many years the Securities and Exchange Commission has
labored under the handicap of a series of so-called “temporary”
buildings. I am glad that we could finally obtain this new and
more pleasant working environment for your dedicated public
servants.
The modern facilities now at your disposal will undoubtedly re-
sult in even better service to the public and the securities industry.
A valuable by-product of the new SEC building deserves mention.
The important Washington gateway at Union Station, adjacent
to the Capitol, should add to an impressive first view for our
visitors arriving by rail. The SEC building significantly im-
proves the vista on this spacious plaza. It makes a notable con-
tribution to our efforts to create a more beautiful Washington.
I share the pride of the Commission and its staff in your new

home and you have my best wishes for the future.” Installation and Use of Electronic Data-Processing Equipment

In May 1966, following extensive studies and preparatory work, a computer was delivered to the Commission in its new building. The

equipment is being used for a variety of regulatory, enforcement, statistical and house-keeping uses.

In one important application of EDP, the Commission has begun operation of an integrated regulatory and enforcement information system which combines information as to names, numbers and descriptions previously contained only in a number of separate indexes. The new system will permit a speedier, more accurate and more comprehensive verification of information in incoming documents against information already on file. It will also be used to provide supervisory personnel with meaningful information about the large number of documents which are under examination at any given time. A second important application of automation is in the area of surveillance of the over-the-counter securities markets on a comprehensive basis which was not feasible under the former manual methods. The computer is programmed to identify unusual price movements or dealer interest, securities which are quoted in the inter-dealer market after lengthy absence, and those in which there are "special arrangements” among broker-dealers. If a security is identified for any of these reasons, the system will print out the security and the dealers involved, permitting the rapid detection of potentially troublesome areas.

The computer is also being used to analyze various data relating to the securities industry. These analyses will materially assist the Commission in carrying out its regulatory functions. EDP applications planned for the future include the development and programming of a system for legal and accounting research and the expansion of the integrated regulatory and enforcement system to provide for EDP surveillance of security holdings and transactions required to be reported by corporate insiders.

PART II

OPERATION OF THE SECURITIES ACTS AMENDMENTS OF 1964

Extension of Disclosure Requirements to Over-the-Counter Securities

Section 12(g) of the 1964 amendments extended to many securities traded in the over-the-counter markets the registration, periodic reporting, proxy solicitation and insider reporting and trading provisions of the Exchange Act previously applicable to securities listed on a national securities exchange. This Section requires a company with total assets exceeding 1 million dollars and a class of non-exempt equity securities not previously registered under Section 12 which is held of record by 500 or more persons 1 to register those securities by filing a registration statement.

During the fiscal year, 676 registration statements were filed under Section 12(g). From the enactment of the 1964 amendments through June 30, 1966, 2,184 registration statements were filed under this Section. Six of these statements were withdrawn before they had become effective upon the determination that they were not required to be filed under the Act. Sixteen registrations were terminated pursuant to Section 12(g) (4) because the number of shareholders fell under 300.

Of the 2,184 registration statements filed under Section 12(g), 1,310 were filed by issuers already subject to the reporting requirements of Sections 13 or 15(d) of the Act. Of this latter figure 106 registration statements (78 in fiscal 1965 and 28 in fiscal 1966) were filed by issuers with another security registered on a national securities exchange under Section 12 of the Act, and 1,204 were filed by issuers subject to the reporting requirements of Section 15(d) (851 during fiscal 1965 and 353 during fiscal 1966). These latter companies had not been subject to the proxy solicitation and insider reporting and trading provisions of Sections 14 and 16 of the Exchange Act. The remaining 868 issuers which filed registration statements had not been subject to any of the disclosure or insider trading provisions and became subject to them through registration.

During the fiscal year, the Commission granted 250 extensions of time for filing, including more than one request by some issuers. A majority of these requests was based on the difficulties encountered by independent accountants in preparing certified financial statements

[blocks in formation]

within the prescribed time when prior financial statements had not been certified.

During the fiscal year, 1,304 definitive proxy statements were filed pursuant to Regulation 14A by issuers with securities registered under Section 12(g). In addition, 19 out of 37 proxy contests occurring during the year which were subject to Regulation 14A involved securities registered under Section 12(g).

As a further consequence of Section 12(g), there was a great increase in the number of ownership reports filed this year pursuant to Section 16(a).

Section 14(c) of the Exchange Act, added by the 1964 amendments, requires issuers of securities registered under Section 12 to file with the Commission and transmit to security holders from whom proxies are not solicited for a meeting of stockholders an information statement containing information comparable to that which would be furnished in proxy material if proxies were solicited. During the fiscal year, the Commission adopted Regulation 14C, setting forth the requirements for this information statement. In the case of an annual meeting the issuer is also required to transmit to security holders an annual report including financial statements certified by independent public or certified public accountants, similar to the annual report required of issuers which solicit proxies.?

Rule 14c-7 of the new regulation provides that if the issuer knows that securities of any class entitled to vote at a meeting are held of record by a broker, dealer, bank or voting trustee, or their nominees, the issuer must inquire whether other persons are beneficial owners of such securities and must furnish the record holder with enough copies of the information statement and annual report to enable the record holder to send copies to the beneficial owners. The issuer must pay the reasonable expenses of the record holders in transmitting this material. This latter provision is similar to Rule 14a-2(b) of the

proxy rules.

Regulation 14C applied to any meeting of security holders held on or after March 15, 1966. During the fiscal year, 53 information statements in definitive form were filed with the Commission pursuant to the regulation.

Section 12(i) provides, in effect, that for securities issued by banks, the responsibility for administering and enforcing Sections 12, 13, 14(a), 14(c) and 16 of the Exchange Act is vested in the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, depending on which agency has primary supervisory jurisdiction over a particular

Securities Exchange Act Release No. 7774 (December 30, 1965).

« AnteriorContinuar »