« AnteriorContinuar »
the United States and Puerto Rico. The examination was first given in United States consulates abroad in August 1966.
An associated person may also satisfy the examination requirement by passing an examination which the Commission deems a satisfactory alternative to its own. Such examinations include, thus far, those given by the NASD, certain of the national securities exchanges, many States, and the NAIC (in connection with variable annuities).
The Commission reviewed and processed more than 22,000 personnel forms received from approximately 450 non-member broker-dealers during the year. The Commission will use the information in these forms to formulate further qualification standards for non-member broker-dealers and associated persons. The data is also being coded and tabulated for a statistical study of non-member broker-dealers.
In June 1966, the Commission adopted Rule 15b8–2, which among other things established assessments for fiscal 1966.12 The assessments apply to broker-dealers who had been registered with the Commission for at least 45 days as of June 30, 1966, and who were not members of a registered securities association on that date, as well as to broker-dealers who, although members of a registered securities association on August 1, 1966 (the effective date of the rule), were for at least 45 days during fiscal 1966 both registered with the Commission and not members of such association. The rule requires the filing of an assessment form and payment of a base fee for each such broker-dealer, and imposes an additional levy for each associated person and each office of the broker-dealer.
The rule also requires broker-dealers registering with the Commission after the effective date of the rule, who do not become members of a registered securities association within 45 days after their registration with the Commission, to pay a fee of $150. In addition, there is a $25 fee for each personnel form filed after August 1, 1966, except those forms filed for persons for whom such a form had previously been filed by the firm and for persons who conduct all their securities activities outside the United States and do not deal with any United States residents or nationals.
The rule exempts broker-dealers who are members of a national securities exchange if they do not carry customers' accounts and if their annual gross income derived from over-the-counter business is no more than $1,000. This exemption applies mainly to exchange specialists and other floor members who occasionally introduce accounts to other members.
A program for the inspection of non-member broker-dealers has been formulated, and the first inspections were conducted in August 1966. In addition, the Commission's staff has drafted rules under
1 Securities Exchange Act Release No. 7906.
Section 15(b) (10) concerning the business conduct and selling practices of broker-dealers, and additional rules concerning advertising and sales literature are being prepared. Summary Suspension of Over-the-Counter Trading
Section 15(c)(5) of the 1964 amendments authorizes the Commission to suspend over-the-counter trading in any security (except an exempted security) summarily for 10 days if the Commission believes the public interest and protection of investors so require. Brokerdealers are prohibited from trading in any such security during the period of suspension. This provision is a counterpart to Section 19(a)(4) which provides for summary suspension of trading in securities listed on a national securities exchange.
During the 1966 fiscal year, the Commission temporarily banned trading in five over-the-counter securities. In three of these cases, the Commission suspended trading when it learned of information not generally known to the securities community and investors which indicated that there were substantial questions concerning the financial condition or business operations of the companies involved. The suspensions were ordered pending clarification and adequate public dissemination of information concerning these matters.13
The Commission suspended trading in the securities of two other issuers concurrently with the institution of court action to enjoin violations of the Federal securities laws in the offer and sale of such securities. These suspensions were imposed to permit public disclosure of the information developed and the steps taken by the Commission in the course of its investigations of the violations.14
The Commission also acted under Section 15(c)(5) in several instances where it ordered suspensions at the same time under Section 19(a) (4) for securities traded on national securities exchanges. In these cases, the Commission found it necessary to suspend over-thecounter trading to prevent circumvention of the exchange suspension. Changes in NASD Regulations
Pursuant to additional powers granted the NASD under the 1964 amendments, the Association amended its By-Laws and Rules of Fair Practice in September 1965 to establish further qualification requirements and standards for members and persons associated with members, as well as to expand the Association's bars to eligibility for membership. These new regulations also permit the Association in disciplinary actions to proceed directly against associated persons without necessarily joining the member firm.
1Securities Exchange Act Release Nos. 7812 (February 2, 1966), 7822 (February 11, 1966), and 7881 (April 29, 1966).
Securities Exchange Act Release Nos. 7735 (November 1, 1965) and 7866 (April 18, 1966). See Release No. 7913 (July 1, 1966).
On October 22, 1965 the President signed Public Law 89-289, amending the Securities Act of 1933. This legislation, proposed by the Commission, increased the fees payable for the registration of securities under the Securities Act from 14100 of 1 percent of the maximum aggregate offering price of the securities to be offered, or 10 cents per $1000, with a minimum fee of $25, to 150 of 1 percent, or 20 cents per $1000, with a minimum of $100. As a result, the Commission will be able to recover more of the costs of administration of the Federal securities laws.
Chairman Cohen testified on behalf of the legislation on September 14, 1965, before the Committee on Interstate and Foreign Commerce, House of Representatives, and on September 22, 1965, before the Subcommittee on Securities of the Committee on Banking and Currency, United States Senate.
On March 11, 1966, Chairman Cohen appeared before the Subcommittee on Financial Institutions of the Committee on Banking and Currency, United States Senate, and submitted a written statement in opposition to S. 2704, a bill to provide for the regulation of collective investment funds maintained by banks. Under the bill, interests in such funds would be excluded from the definition of “security” in the Securities Act and the Securities Exchange Act, and the funds would be excluded from the definition of “investment company” in the Investment Company Act. The Chairman stated that the Commission objected to the bill principally because it was special legislation which would permit banks to offer to the public collective investment management similar to that offered by mutual funds but without the proven safeguards which the Securities Act and the Investment Company Act afford to investors.
Chairman Cohen also testified on June 22, 1966, before the Subcommittee on Securities of the Committee on Banking and Currency, United States Senate, concerning S. 2672, a bill to regulate the interstate sale of undeveloped subdivision lots. Among other things, the bill, which follows the pattern of the Securities Act, would require a real estate developer to file with the Commission a registration statement making specified disclosures if he subdivided land into 25 or more units or interests for the purpose of sale or lease as part of a common
promotional plan, and to furnish a prospectus to a prospective purchaser or lessee at least 48 hours before a contract was entered into. The bill also contains provisions designed to prevent and punish fraud. The Chairman pointed out that administration of the bill by the Commission would to some extent divert its attention from its primary function, the regulation of the securities markets. He stated, however, that if the bill were enacted into law, the Commission would do its best to carry out the legislative purpose effectively and economically. The Chairman also submitted for the record an analysis of the bill and certain suggestions for amendment.
The Commission's General Counsel, Philip A. Loomis, Jr., testified on April 4, 1966, before the Subcommittee on Domestic Marketing and Consumer Relations of the Committee on Agriculture, House of Representatives, with respect to H.R. 11788, a bill to amend the Commodity Exchange Act.
During the fiscal year the Commission and its staff analyzed or commented on 43 bills and other legislative matters referred by various committees of the Senate and House of Representatives, individual members of Congress, the Bureau of the Budget and other Federal agencies.
ADMINISTRATION OF THE SECURITIES ACT OF 1933
The Securities Act of 1933 is designed to provide disclosure to investors of material facts concerning securities publicly offered for sale by the use of the mails or instrumentalities of interstate commerce, either by an issuing company or by any person in a control relationship to such company, and to prevent misrepresentation, deceit, or other fraudulent practices in the sale of securities generally. Disclosure is obtained by requiring the issuer of such securities to file a registration statement with the Commission which includes a prospectus containing significant financial and other information about the issuer and the offering. The registration statement is available for public inspection as soon as it is filed. Although the securities may be offered for sale as soon as the registration statement has been filed, actual sales may not be made until the registration statement has become effective. A copy of the prospectus must be furnished to each purchaser at or before the sale or delivery of securities in order to provide him with an opportunity to evaluate such securities and make an informed investment decision. The issuer and the underwriter are responsible for the contents of the registration statement. The Commission has no authority to control the nature or quality of a security to be offered for public sale or to pass upon its merits or the terms of its distribution. Its action in permitting a registration statement to become effective does not constitute approval of the securities, and any representation to the contrary to a prospective purchaser violates Section 23 of the Act.
DESCRIPTION OF THE REGISTRATION PROCESS
Registration Statement and Prospectus
Registration of any security proposed to be publicly offered may be effected by filing with the Commission a registration statement on the applicable form containing the prescribed disclosure. Generally speaking, a registration statement relating to securities issued by a corporation or other private issuer must contain the information specified in Schedule A of the Act, while a statement relating to securities issued by a foreign government must include the information specified in Schedule B. Securities issued by the United States, by a state, or by any political subdivision of a state are exempt from