subsidiaries. The response failed to describe adequately the properties and operations of Federal Steel Products and to indicate the relative importance of Federal Steel Products in the total enterprise. Item 12. Securities sold within the year.-The answer to this item is materially deficient with respect to the information furnished concerning the obligation of Red Bank to issue common stock to the Bennett interests and to the former shareholders of Federal Steel Products Corporation. Information concerning the date of these sales, the nature and aggregate amount of consideration received, and the facts necessary to establish whether registration under the Securities Act was required, has not been furnished as required by subsections (c), (d), and (f) of this item.

The response with respect to the 710,083 shares issued in the recapitalization of the company is likewise deficient in failing to state facts necessary to establish whether registration under the Securities Act was required.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1944

Item 1 (b). Parent of registrant.-Mrs. Anna Belle A. Bennett and her affiliate, Bennett & Co., Inc., are stated to be the parents of the registrant. Red Bank at this time was completely dominated by Frank W. Bennett, who exercised effective and undisputed control over the company. The response to the item should indicate the percentage of control exercised by Bennett through all affiliates and the basis of affiliation.

Item 4. Securities, other than equity securities, owned by officers and directors.-The response to this item, to the effect that none of the registrant's securities other than equity securities were owned (of record or beneficially) by a director or officer of the registrant is incorrect. According to the revised balance sheet of Red Bank as of December 31, 1944, and Schedule X thereto, there were outstanding long-term notes payable to the Bennett interests in the amount of $213,904. This indebtedness of the company to its president should have been set forth in response to Item 4.

Item 12. Securities sold within the year.-The answer to this item is deficient for its failure to disclose the required information with respect to the additional shares of common stock which Red Bank, within the year, became obligated to issue to the Bennett interests in connection with the acquisition by Red Bank of Seatex stock.

CONCLUSIONS

As indicated above, we make no determination at this time with respect to the issues raised under Section 8 (d) of the Securities Act

as to the adequacy and accuracy of the information supplied in the registration statement under the Securities Act. Findings with respect to these issues will be entered at an early date.

The question now before us is whether, in view of the deficiencies which we have found to exist in the financial statements originally filed in the annual reports under the Securities Exchange Act, and in the responses to certain items in the body of the reports, it is necessary or appropriate for the protection of investors further to suspend or to withdraw the registration of the Red Bank common stock on the New York Curb Exchange.

The revised financial statements which have been filed correct the deficiencies which we have found in the statements originally filed, and in general supply the information omitted in the responses in the body of the reports. While the reports do not adequately describe the nature of the business of Federal Steel Products, the materiality of this omission is lessened by the fact that Red Bank disposed of its interest in this subsidiary in August 1946. While deficiencies occurring at one point in a report cannot be considered cured by statements made elsewhere in the report, we do not think the deficiencies which remain in the reports, as now amended, are of such materiality as to require the suspension of trading until the deficiencies are corrected.

We have serious question, however, whether it is appropriate for the protection of investors to permit trading in the Red Bank common stock to resume on the New York Curb Exchange until sufficient time has elapsed for notice of the numerous material deficiencies which have existed in the financial statements filed in the reports to reach the investing public, and until investors have had sufficient time to assimilate the information which is now supplied for the first time in the revised financial statements. We are advised by the New York Curb Exchange that the Exchange, on the basis of similar considerations, has determined on its own motion to continue the suspension of trading in the outstanding common stock of Red Bank which has been in effect since October 16, 1945, under orders issued by us as indicated above. The Exchange states that it has been informed that the company intends to file by the latter part of January a listing application covering an additional issue of Red Bank stock and that the question of reinstatement of the outstanding stock will be considered by the Exchange Committee on Listing at that time. We, therefore, need take no further action at this time to prevent trading in the stock on the Exchange.

Jurisdiction is reserved under Section 19 (a) (2) of the Securities Exchange Act to take such action as shall be appropriate to secure the filing of amendments necessary to render the annual reports for

the years 1942-1944 complete and accurate in all respects. Jurisdiction is also reserved as to the issues which have been raised under Section 8 (d) of the Securities Act in these consolidated proceedings.

By the Commission (Chairman Caffrey and Commissioners McConnaughey, McEntire and Hanrahan).

25 S. E. C.

IN THE MATTER OF

AMPAL-AMERICAN PALESTINE TRADING CORPORATION

File No. 812-400. Promulgated January 6, 1947

(Investment Company Act of 1940-Section 6 (c))

EXEMPTION

Where the purpose of a company is to aid in the economic development of Palestine and its funds are employed primarily for that purpose and its securities offered only to those interested therein, held that the company does not come within the purview of the Investment Company Act of 1940 and is entitled to an exemption under Section 6 (c) from all its provisions.

APPEARANCES:

Maurice M. Boukstein for the Applicant.

Simon U. Spiro for the Corporation Finance Division.

FINDINGS AND OPINION

Ampal-American Palestine Trading Corporation has filed an application for an order of the Commission under Section 3 (b) (2) of the Investment Company Act of 1940 declaring it to be engaged in a business other than that of investing, reinvesting, owning, holding or trading in securities; or, in the alternative, for an order under Section 6 (c)1 exempting it from all provisions of the Act.

A public hearing having been held after appropriate notice, the Commission having considered the record, finds as follows:

Applicant was incorporated on February 6, 1942, under the laws of the State of New York. It has outstanding 16 shares of common stock of an authorized issue of 200 shares, each having a par value of $50 per share, and 196,430 shares of 4% Cumulative Non-Voting Preferred Stock of an authorized issue of 600,000 shares each having a par value of $5. The preferred stock was sold at $5.50 per share. One share of common stock is held by each of applicant's eight di

1 Under this section the Commission is authorized to exempt any person, security, or transaction from any provision or provisions of the Act, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes of the Act.

25 S. E. C.-I. C. 40—1003

rectors and the remaining eight shares are held for the account of the Workers' Bank Ltd. of Tel-Aviv, Palestine.2

The primary purposes of the applicant appear to be to develop trading between the United States and Palestine and generally to assist in the economic development of the latter country. This it may do either directly or by the making of loans to and investments in enterprises appropriate to its purpose. Until now, the applicant has followed, principally, the second course by advancing funds to other organizations seeking to achieve the same ends.

As of July 31, 1945 applicant had total assets amounting to $1,195,928 of which $611,700 was invested in 4% ten-year serial notes of the. Jewish National Fund; $492,694 in 5% five and ten-year serial notes and in 6% five-year serial notes of the National Labor Committee for the Jewish Workers in Palestine, Inc., and $8,500, in 6% five-year serial notes of Mizrachi Palestine Fund, Inc. All three borrowers are charitable organizations organized under the laws of a state of the United States, and aiding in the economic development of Palestine. Funds borrowed from the applicant are in turn made available by the borrowers to their respective agencies in Palestine." Applicant is also engaged in the business of purchasing machinery, material, and supplies for the account of Palestinian firms. The applicant's activities in that respect have been limited because of war restrictions and the amount of capital employed in that business

4

These shares have not been issued to or accepted by the bank because of present Palestinian Exchange Control Regulations which prohibit acceptance of these shares without a license from the Palestine Controller of Foreign Exchange. The bank has not applied for the necessary license.

Applicant intended to invest a good portion of its funds in long-term deposits with the Workers' Bank, Ltd. of Tel-Aviv, Palestine. However, in order to avoid complications arising out of exchange transactions and of wartime control by the Government of Palestine of foreign investments, applicant has invested its funds in notes of the charitable organizations mentioned above. As for the investment of funds in such long-term deposits in the future, applicant's prospectus filed with the Commission in connection with the proposed offer to the public of additional 4% preferred stock, states:

"The investments . . . will be made only if assurances are received from the Controller of Foreign Exchange of the Government of Palestine that licenses will be granted for the payment of installments of principal and interest, or if satisfactory guarantees of repayment in dollars can otherwise be obtained."

The gross income of applicant since its organization from activities as purchasing agent and from interest on investments, respectively, has been as follows:

• The income from "Commissions" represents earnings by the applicant for services rendered in connection with import and export activities between the United States and Palestine, and other

services.