present stated value over the indicated market value, and because of the risks which the directors felt confronted them in that some stockholder might conclude that there was an impairment in the preference stock capital and allege that there had been a dividend payment in violation of Delaware law, the directors have adopted a policy of nonaction with respect to dividend declarations. Accordingly, the management believes that the proposed reduction in the stated value of the preference stock from $50 per share, as presently stated, to $5 per share will facilitate the payment of dividends accrued and to accrue on the preference stock.

5

PROPOSED ACCOUNTING ENTRIES

It is proposed that the amount of the reduction in the stated value of the preference stock which, at $15 per share, agatur $111,992,047.50, will be placed in a separate account to be mated as "Capital Surplus-Arising From Reduction of Stater Tase of Preference Stock." It is further proposed that this accouir... be restricted, as provided in footnote 2, in the pro forma ba at December 31, 1941, which follows.

The record contains the opinion of Delaware counsel to the estated value and not the liquidating value would be the basis for deter tion of the provisions of Section 34 of the Delaware corporation dividend declarations.

It appears from the record that, for the first 3 months of 1942, 6will approximate $1,216,000 as compared with the quarterly preds requirement of approximately $1,850,000.

Not available for dividends on common stock, nor for any charge for any deficit in earned surplus nor for any other purpose which will reduce this surplus below an amount equal to $45 per share of preference stock outstanding, nor shall it be available for the purpose of permitting purchase of common stock.

NOTE. Additional notes appended to the corporation's balance sheet are omitted for brevity. Such notes refer to balance sheet items which are not changed or altered by the proposed transaction.

STOCKHOLDERS' APPROVAL

It is proposed further that the restatement of the preference stock, if it receives our approval, will be submitted to declarant's stockholders and will not be consummated unless approved by a majority of the preference stockholders voting as a class, as well as by a majority of all stockholders entitled to vote.

In addition, the restrictions against impairment or diversion of the capital surplus proposed to be created will be embodied in the form of an amendment to declarant's certificate of incorporation to be incapable of alteration or repeal without the affirmative vote of at least 80 percent in interest of the preference stockholders.

CONCLUSIONS

The proposed restatement of the preference stock capital by the declarant, a registered holding company, is subject to Section 6 (a)

On December 31, 1941, declarant had outstanding 14,529,4911⁄2 shares of common stock carrying one vote per share, as well as the 2,488,712% shares of preference stock carrying one vote per share. It is thus apparent that the approval of a majority in interest of the holders of the common as well as the preference stock will be necessary in order to consummate the proposed restatement.

(2) of the Act, which requires a declaration effective under Section 7 in order "to exercise any privilege or right to alter the priorities, preferences, voting power, or other rights of the holders of an outstanding security of such company." Thus, the standards of Section 7 (e) are applicable."

It appears from the record that the restatement, restricted as proposed, will not result in the alteration of any of the rights of the preference stockholders with respect to their priorities, preferenc or voting power. The liquidating value of $10 per share, the redemp tion price of $55 per share and dividend rights are not afesed However, insofar as the holders of the outstanding preferenc EVİ are entitled to have their stock stated upon the books of the declarant at $50 per share, the proposed reduction in the capital asana nestitutes an alteration of rights. The avoidance of the statory restriction of dividends may fall into the same categy.

We conclude, under all the circumstances herein, parlat sze it will facilitate the flow of available earnings to dead's senior security holders, that it would not be detrimental to the patie interest or the interest of investors or consumers to permit the land a become effective. However, in order to assure or

the proposed restatement will in no way result in any impairment se alteration of the protective, preferential, or other substaų meta of the holders of the preference stock, our order weeran 1 500tion requiring that any charge whatsoever to the asto be sig nated as capital surplus arising from the reductive of prabanca stock capital shall be subject to our prior approval.

As already noted, the declaration before us involve in the distribution of voting power among declarant's se coders We make no findings with respect to the fairness or equaleness :f that distribution, which is an issue in a proceeding penting wi respect to the declarant under Section 11 (b) (2)

find merely that the distribution of voting power remana mafeteri by the proposed restatement.

'We find that no state commission has jurisdiction over the y proposed transaction. Section 7 (g) is, therefore, inapplicable.

Sectis

If the requirements of subsection (g) are satisfied, the Cor a declaration to become effective regarding the exercise of a

alter the priorities, preferences, voting power, or other right a
outstanding security unless the Commission finds that such e

or right will result in an unfair or inequitable distribution
holders of the securities of the declarant or is otherwise de
interest or the interest of investors or consumers.

It may be noted that both the existing capital surplus and the pritai are subject to our Rule U-46 relating to their use.

See The United Corporation, Holding Company Act Release K instituting the proceeding under Section 11 (b) (2) of the Act a bearing with declarant's voluntary plan, under Section 11 (e), for the of its subsidiaries.

In concluding as we have, it should be clearly understood that we express no opinion whatsoever with respect to the value of the assets of The United Corporation. That matter is also involved in the pending proceeding under Section 11 (b) (2) with respect to the declarant. Further issues therein, as to which we likewise express no opinion, involve the justification for more than one class of stock in declarant's security structure and the necessity for the continued existence of the declarant. Any doubt we may have entertained with respect to the timeliness of the proposed restatement, in view of the fact that the proceeding under Section 11 (b) (2) is well under way, has been overcome by the desirability of facilitating the distribution of declarant's available earnings to its senior security holders.

Our order will further provide that the solicitation of declarant's stockholders with respect to the approval of the proposed restatement and the amendment to the certificate of incorporation embodying the restrictions upon the capital surplus to be created shall be submitted for our approval under Section 12 (e) of the Act and Rule U-62 thereunder, jurisdiction being reserved for this purpose. An appropriate order will issue.

By the Commission: (Chairman Purcell, Commissioners Healy, Pike, Burke, and O'Brien).

11 S. E. C.

[No. 1523]

IN THE MATTER OF

WILLIAM E. HOUSEL

11 East 44th Street

New York, New York

File No. 8-1. Promulgated March 26, 1942

(Securities Exchange Act of 1934-Section 15 (b))

BROKER-DEALER REGISTRATION.

Grounds for Revocation, Suspension and Denial.

Violations of the Securities Act and the Securities Exchange Act.

Where a broker or dealer sold securities by means of false represeTLE", in willful violation of Section 17 (a) of the Securities Act of 1933 au 15(e) (1) of the Securities Exchange Act of 1934, held that reveZZ.10 registration is in the public interest.

FINDINGS AND ORDER OF THE COMMISSION

(Revoking Registration as Broker and Dealer)

William E. Housel is registered with this Commission a the-counter broker-dealer pursuant to Section 15 of the you ses Exchange Act of 1934. We instituted this proceeding un 15 (b) to determine whether his registration as such suspended or revoked.

The order instituting this proceeding stated that the staff had reported to the Commission information o result of an investigation which tended to show that:

(a) During the period from May 10, 1937, to about Jun spondent sold to various persons Syndicate membership. Investors Petroleum Syndicate No. 1, an unincorporatest.com organized by respondent. In making and inducing sug spondent falsely represented to purchasers

(1) That the Syndicate operated entirely for theater water qu members, when in fact the Syndicate was controller by respondent for his own benefit;

(2) That the management of the Syndicate was chairman of a managing committee assisted by

committee and a trustee who held the property

in trust, when in fact respondent personally and extrem the affairs and controlled the property of the Synz 2