REGISTRATION STATEMENTS FILED

During the 1966 fiscal year, 1,697 registration statements were filed for offerings of securities aggregating $31.1 billion, as compared with 1,376 registration statements filed during the 1965 fiscal year for offerings amounting to $19.1 billion. This represents an increase of 23.2 percent in the number of statements filed and 62.5 percent in the dollar amount involved.

Of the 1,697 registration statements filed in the 1966 fiscal year, 422, or 25 percent, were filed by companies that had not previously filed registration statements under the Securities Act of 1933. Comparable figures for the 1965 and 1964 fiscal years were 458, or 33 percent, and 322, or 27 percent, respectively.

From the effective date of the Securities Act through June 30, 1966, a cumulative total of 27, 119 registration statements has been filed by 12,065 different issuers covering proposed offerings of securities aggregating over $308 billion.

The disposition of all registration statements filed under the Act to June 30, 1966 is summarized in the following table:

Number and disposition of registration statements filed

• Includes 247 registration statements covering proposed offerings totalling $11,303,681,419 filed by investment companies under Section 24(e) of the Investment Company Act of 1940 which permits registration by amendment to a previously effective registration statement.

Includes one registration statement which had been removed from the effective category in 1964 when a stop order was issued and which became effective again in fiscal 1966 when the stop order was lifted. • Excludes 17 registration statements that became effective during the year but were subsequently withdrawn. These statements are counted in the 148 statements withdrawn during the year.

Excludes 25 registration statements effective prior to July 1, 1965, which were withdrawn during the year. These statements are reflected under withdrawn.

Excludes 1 registration statement that became effective during the year by lifting of stop order and 1 flective registration statement on which a stop order was placed in 1964 and lifted during the fiscal year.

The reasons given by registrants for requesting withdrawal of the 148 registration statements that were withdrawn during the 1966 fiscal year are shown in the following table:

Reason for withdrawal request

1. Withdrawal requested after receipt of staff's letter of comment.

2. Registrant was advised that institution of stop order proceedings would be recommended if statement not withdrawn.

3. Change in financing plans...

4. Other change in plans or in registrant's circumstances..

5. Change in market conditions..

6. Registrant unable to negotiate agreement with underwriter.

Total....

STOP ORDER PROCEEDINGS

Section 8(d) of the Act provides that, if it appears to the Commission at any time that a registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may institute proceedings to determine whether a stop order suspending the effectiveness of the registration statement should be issued. Where such an order is issued, the offering cannot lawfully be made, or continued if it has already begun, until the registration statement has been amended to cure the deficiencies and the Commission has lifted the stop order.

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At the beginning of the 1966 fiscal year, one stop order proceeding was pending. Four additional proceedings were instituted during the year, two were terminated (one through issuance of a stop order," and one through withdrawal of the registration statement pursuant to an offer of settlement *), and three were pending at the end of the year. The Wolf Corporation -The registration statement of a cash flow real estate company was found materially false and misleading because it substantially overstated registrant's cash flow, net income and assets, and failed to disclose adequately registrant's relationship with affiliated persons. The Commission's opinion pointed out that the registrant's ability to maintain cash disbursements at the existing level was of paramount importance to prospective purchasers of its securities, and therefore a clear, uncomplicated statement of the basic facts re

'Great Southwest Drilling Programs, Inc., Securities Act Release No. 4834 (June 20, 1966). This stop order to which the registrant consented was issued by the Director of the Office of Opinions and Review pursuant to delegated authority.

'The Wolf Corporation, Securities Act Release No. 4830 (May 4, 1966). "Securities Act Release No. 4830 (May 4, 1966).

lating to this issue was essential. Instead, registrant's presentation of its cash distribution policy and practices was highly deceptive. Registrant not only included in the term "cash available for distribution" amounts which represented anticipated income rather than cash, but included in such anticipated income substantial amounts of rent arrearages without disclosing any of the facts indicating that such arrearages were uncollectible. In view of registrant's affirmative representation that it believed such amounts would be paid in the future, the Commission found that a sophisticated investor-and certainly an unsophisticated one could reasonably believe that the qualifying statement that "there is no assurance" that the rent arrearages would be paid was attributable to an excess of caution in the interest of full disclosure, and conclude that the uncollected (and uncollectible) rents were for all practical purposes equivalent to cash in hand. In fact, registrant had distributed to stockholders a sum which was more than twice as much as the cash actually derived from operations; the remainder apparently had come from funds borrowed for the purpose of making cash distributions to stockholders and thus maintaining a false appearance of a high level of cash available from operations.

Although the deficiencies were considered serious and extensive, the Commission did not issue a stop order but permitted the withdrawal of the registration statement pursuant to an offer of settlement. Registrant's offer provided that a stipulation correcting the principal deficiencies of the registration statement be included in the public record of the proceeding and that a written communication advising of the stop order proceeding be distributed to its stockholders and other persons to whom copies of the preliminary prospectus had been sent. In the Commission's view, this communication, which was to be reviewed by the Commission's staff prior to release, was sufficient to give adequate public notice of the dismal record of the abortive financial program and the deceptive disclosures in the prospectus. The factors that led to this conclusion were: (1) the registration statement had never become effective; (2) none of the securities had been sold; (3) the proposed financing had been abandoned; and (4) the stipulation correcting the deficiencies was to become part of the public record.

EXAMINATIONS AND INVESTIGATIONS

The Commission is authorized by Section 8(e) of the Act to make an examination in order to determine whether a stop order proceeding should be instituted under Section 8(d), and in connection therewith is empowered to examine witnesses and require the production of pertinent documents. The Commission is also authorized by Section 20 (a) of the Act to make an investigation to determine whether any provi

sion of the Act or any rule or regulation prescribed thereunder has been or is about to be violated. In appropriate cases, investigations are instituted under this Section as an expeditious means of determining whether a registration statement is false or misleading or omits to state any material fact. The following tabulation indicates the number of such examinations and investigations with which the Commission was concerned during the year:

EXEMPTION FROM REGISTRATION OF SMALL ISSUES The Commission is authorized under Section 3 (b) of the Securities Act 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 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 because of the small amount involved or the limited character of the public offering. Only offerings not exceeding $300,000 may thus be exempted.

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 transactions. 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 adopted Regulation E which exempts, subject to terms and conditions substantially similar to those contained in Regulation A, securities offerings not exceeding $300,000 by any small business investment company which is registered under the Investment Company Act of 1940.

Exemption from registration under Section 3 (b) or 3 (c) of the Act does not carry with it any exemption from the provisions of the Act prohibiting fraudulent conduct in the offer or sale of securities and imposing civil liability or criminal responsibility for such conduct. Exempt Offerings Under Regulation A

Regulation A 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, provided specified conditions are met. These include the filing of a notification supplying basic information about the company with the Regional Office of the Commission in the region in which the company has its principal place of business, and the filing and use in the offering of an offering circular. However, an offering circular need not be filed or used in connection with an offering not in excess of $50,000 by a company with earnings in one of the last 2 years.

During the 1966 fiscal year, 410 notifications were filed under Regulation A, covering proposed offerings of $75,218,434, compared with 397 notifications covering proposed offerings of $77,367,235 in the 1965 fiscal year. Included in the 1966 total were 9 notifications covering stock offerings of $2,242,800 by companies engaged in the exploratory oil and gas business, 12 notifications with respect to offerings of $2,190,224 by mining companies and 23 notifications covering offerings of $5,823,237 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:

The Commission requires, within 30 days after the end of each 6month period following the date of the original offering circular re

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