with the Commission by either American and/or Bond and Share. Pursuant to a letter filed in the record subsequent to the hearing, American has committed itself to cause Kansas, not later than ninety days from the date of the proposed sale, to amend its charter to provide that its common stock shall have preemptive rights only in the event a sale is not made pursuant to a public offering, cumulative voting in connection with the election of directors, and that all of the proceeds from the sale of common stock be entered in the Company's capital stock account.❜ American has requested that our order herein recite that the sale and transfer of the Kansas common stock and the proposed assignment to American by Kansas of claims against Bond and Share and its present or former subsidiaries are necessary or appropriate to the integration or simplification of the holding company system of which American is a member, and necessary to effectuate the provisions of Section 11 (b) of the Act, all in accordance with the meaning and requirements of the Internal Revenue Code, amended, including Section 1808 (f) and Supplement R thereof. American further requests that any supplemental order issued upon the determination of the amount of cash proceeds from the proposed sale and prior to the receipt thereof by American specify and itemize the money and/or other considerations to be received by American. The disposition by American of a part of the common stock of Kansas is a step in compliance with our order of August 22, 1942, issued under Section 11 (b) (2) of the Act. Accordingly, our order herein will contain the requested recitals and if a supplemental order is issued, upon a finding that the price proposed to be accepted meets the requirements of Section 12 (d) of the Act, such order will contain the itemizations and specifications requested. We conclude that the application-declaration may be granted and permitted to become effective subject to the terms and conditions of Rule U-24 and subject to the following additional conditions: 1. That the sale of 150,000 shares of common stock of Kansas by American shall not be consummated until a further order shall have been entered by the Commission in light of the record as completed with respect to the maintenance of competitive conditions, the results of negotiation including the price to be paid American and the underwriters' commissions. 2. That jurisdiction be reserved with respect to all fees and expenses incurred or to be incurred in connection with the proposed transactions. An appropriate order will issue. By the Commission (Commissioners McConnaughey, Hanrahan, and McDonald), Commissioner McEntire being absent and not participating. • The record indicates that American does not propose that Kansas apply at this time for the listing of its common stock on any national securities exchange. This question will be determined by us in connection with the disposition of the balance of American's holdings of Kansas' common stock pursuant to the plan or otherwise. Condensed Balance Sheet as of December 31, 1947 Adjusted to Give Effect to the Issuance and Sale in March, 1948 Of $5,000,000 Principal Amount of First Mortgage Bonds, Due 1978 KANSAS GAS AND ELECTRIC COMPANY Condensed Statement of Income for the Year Ended December 31, 1947, Adjusted to Give Effect to the Retirement of the 6% Debentures Series A, Retired September 1, 1947, and the Issuance and Sale in March, 1948, of $ 5,000,000 Principal Amount of First Mortgage Bonds, Financing costs including call premiums relating to the First Mortgage Sinking Fund 6% Gold Bonds retired in 1930 and to the First Mortgage Gold Bonds 44% Series, due 1980, Commission. A reserve for Electric Plant Acquisition Adjustments, in the amount of $849,711, is being provided by charges to income in equal annual amounts of $85,686. Subsequent credits of $7,148 have reduced the asset account from its original amount of $856,859. The TRANSIT INVESTMENT CORPORATION and File No. 812-510. Promulgated May 5, 1948 Investment Company Act of 1940--Section 6 (c) and 17 (e) (1) TRANSACTIONS BETWEEN AFFILIATED PERSONS Affiliated Real Estate Brokers In the absence of an order of exemption pursuant to Section 6 (c), Section 17 (e) (1) prohibits an affiliated real estate broker of a registered investment company from receiving a sales commission for the sale of the company's real estate, the exception in Section 17 (e) (1) with respect to a person acting in the regular course of his business as a broker being limited to a securities broker and not including a real estate broker. EXEMPTIONS Exemptive Powers Under Section 6 (c) The general exemptive power conferred upon the Commission by Section 6 (c) is not limited to transactions which are covered by some other specific exemption provision and gives the Commission jurisdiction to exempt from Section 17 (e) (1) the acceptance of compensation by an affiliated real estate agent of a registered investment company, notwithstanding the absence of a specific exemption provision in Section 17 (e) (1) covering such situation. Acceptance of Compensation by Affiliated Person Acting as Agent Where brokerage commission for sale of real estate of registered investment company by real estate broker who is affiliated person of affiliated person of such company represents compensation for services actually rendered in connection with a bona fide sale and is fair and reasonable in amount, and satisfies generally standards of Section 17 (b) which control exception of transactions involving affiliates acting as principals, exemption from Section 17 (e) (1) granted, pursuant to Section 6 (c), to permit acceptance of such commission by real estate broker. APPEARANCES: Stanley Folz, of Sundheim, Folz, Kamsler & Goodis, and Maxwell P. Bralow, for Albert M. Greenfield & Co. George H. Huft, and Antony H. Whitaker and Thomas B. K. Ringe, of Morgan, Lewis & Bockius, for Transit Investment Corporation. Morris L. Forer and Samuel L. Sperling, of Wolf, Block, Schorr and Solis-Cohen, for Frank G. Binswanger, Inc. Joseph S. Lord, III, for certain intervening shareholders of Transit Investment Corporation. James P. Goode and John E. Downs, for Division of Corporation Finance of the Commission. FINDINGS AND OPINION OF THE COMMISSION Transit Investment Corporation (TIC"), a registered investment company, and Albert M. Greenfield & Co. (''Greenfield Co."), a real estate broker, have filed a joint application pursuant to Section 6 (c) of the Investment Company Act of 1940 (''the Act") for an order exempting from the provisions of Section 17 (e) (1) of the Act the acceptance by Greenfield Co. of a real estate sales commission for negotiating the sale by TIC of certain real estate known as the Mitten Building. 28 S. E. C.--40----1171 10 After appropriate notice a hearing was held. Requests for findings, briefs and a reply brief were submitted to the hearing examiner, and the hearing examiner has filed a recommended decision recommending that the application be granted. Exceptions to this recommended decision and a brief in support of such exceptions have been filed by the Division of Corporation Finance, and reply briefs have been filed by applicants and by Frank G. Binswanger, Inc. ("Binswanger, Inc."), a Philadelphia real estate broker in cooperation with whom Greenfield Co. negotiated the real estate sale. We heard oral argument. Upon the basis of the entire record, the briefs and oral argument, we make the findings and reach the conclusions set forth below. PARTIES AND TRANSACTIONS INVOLVED TIC is a closed-end non-diversified management investment company registered under the Act since January 1, 1944. TIC is in the process of liquidation and dissolution pursuant to an order of the Court of Common Pleas in Philadelphia issued in December 1946.1 Greenfield Co. is a real estate brokerage and management business in Philadelphia and is also active in other parts of the country, with office s in New York City, Pittsburgh, Pennsylvania, and Newark and Atlantic City, New Jersey. Albert M. Greenfield is president of Greenfield Co. and one of three trustees who hold a majority of the voting stock of Greenfield Co. under a voting trust agreement. Greenfield is also a director of TIC' Under Section 2 (a) (3) of the Act, Greenfield Co. is an affiliated person of Greenfield, and Greenfield in turn is an affiliated person of TIC. In the fall of 1946, TIC authorized Greenfield Co. to arrange for a public auction of the Mitten Building, located at Broad and Locust Streets in Philadelphia, which was TIC's principal remaining asset. A public auction was held in November 1946 but no satisfactory bid was received and the building was withdrawn from public sale. After the failure of the auction, Greenfield Co. was requested by TIC to attempt to secure a purchaser for the Mitten Building at private sale as agent for TIC, and carried on negotiations with various prospective buyers and other brokers. In August 1947, an agreement was negotiated by Greenfield Co. in cooperation with Binswanger, Inc. for the sale of the Mitten Building to the Broad-Locust Realty Co. at a price of $1,875,000. Neither the purchaser nor Binswanger, Inc. is affiliated with 1 In re Cooperative Wage Fund, Court of Common Pleas No. 4, Philadelphia County, Pa., June Term 1942, No. 3252. ? Greenfield has been a director of TIC since 1943. For several years ending early in 1943, TIC was in receivership under the jurisdiction of the United States District Court for the Eastern District of Pennsylvania. Upon termination of the receivership in 1943, stockholders elected a new board of directors among whom, at the suggestion of the District Court, were Edward Hopkinson, Jr., a partner of Drexel and Co., and Greenfield, who became chairman and vice-chairman of the board of directors respectively. Greenfield is also a member of the executive and finance committees. |