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Provisions of Federal Law Relating to the Securities Act of 1933
In addition to sections 3 and 4 of the Securities Act of 1933; the following should be considered:
A. Section 264 of the Bankruptcy Act (11 U.S.C. 664): "SEC. 264. a. The provisions of section 5 of the Securities Act of 1933 shall not apply to
"(1) any security issued by the receiver, trustee, or debtor in possession pursuant to paragraph (2) of section 1162 of this Act; or
'(2) any transaction in any security issued pursuant to a plan in exchange for securities of or claims against the debtor or partly in such exchange and partly for cash and/or property, or issued upon exercise of any right to subscribe or conversion privilege so issued, except (a) transactions by an issuer or an underwriter in connection with a distribution otherwise than pursuant to the plan, and (b) transactions by a dealer as to securities constituting the whole or a part of an unsold allotment to or subscription by such dealer as a participant in a distribution of such securities by the issuer or by or through an underwriter otherwise than pursuant to the plan.
"b. As used in this section, the terms 'security,' 'issuer,' 'underwriter,' and 'dealer' shall have the meanings provided in Section 2 of the
1 Sec. 7 of the amendatory Act provides that the Act shall "take effect and be in force on and after three months from the date of its approval." Sec. 276. c. provides as follows with respect to pending proceedings under secs. 77A and 77B of the Bankruptcy Act:
"c. the provisions of sections 77A and 77B of chapter VIII, as amended, of the Act entitled 'An Act to establish a uniform system of bankruptcy throughout the United Stat approved July 1, 1898, shall continue in full force and effect with respect to proceedings pending under those sections upon the effective date of this amendatory Act, except that
"(1) if the petition in such proceedings was approved within three months prior to the effective date of this amendatory Act, the provisions of this chapter shall apply in their entirety to such proceedings; and
"(2) if the petition in such proceedings was approved more than three months before the effective date of this amendatory Act, the provisions of this chapter shall apply to such proceedings to the extent that the judge shall deem their application practicable and ***" 2 PAR. (2) of sec. 116 of the Bankruptcy Act, as amended June 22, 1938, c. 575, § 1, 52 Stat. 885:
"SEC. 116. Upon the approval of a petition, the judge may, in addition to the jurisdiction, powers, and duties herein above and elsewhere in this chapter conferred and imposed upon him and the court
"(2) authorize a receiver, trustee, or debtor in possession, upon such notice as the judge may prescribe and upon cause shown, to issue certificates of indebtedness for cash, property, or other consideration approved by the judge, upon such terms and conditions and with such security and priority in payment over existing obligations, secured or unsecured, as in the particular case may be equitable;"
Securities Act of 1933, and the term 'Securities Act of 1933' shall be deemed to refer to such Act as heretofore or hereafter amended.".
[NOTE: Section 264, which is contained in chapter X of the amendatory Act entitled "Corporate Reorganization," is to replace the following excerpt from subdivision (h) of section 77B of the Bankruptcy Act as contained in c. 424, 48 Stat. 920, approved June 7, 1934:
**All securities issued pursuant to any plan of reorganization confirmed by the court in accordance with the provisions of this section, including, without limiting the generality of the foregoing, any securities issued pursuant to such plan for the purpose of raising money for working capital and other purposes of such plan and securities issued by the debtor or by the trustee or trustees pursuant to subdivision (c), clause (3), of this section, and all certificates of deposit representing securities of or claims against the debtor which it is proposed to deal with under any such plan, shall be exempt from all the provisions of the Securities Act of 1933, approved May 27, 1933, except the provisions of subdivision (2) of section 12, and section 17 thereof, and except the provisions of section 24 thereof as applied to any willful violation of said section 17.".
Subdivision (c), clause (3), referred to in the above excerpt from section 77B, reads as follows:
(c) Upon approving the petition or answer or at any time thereafter, the judge, in addition to the jurisdiction and powers elsewhere in this section conferred upon him, *** (3) may, for cause shown, authorize the debtor or the trustee or trustees, if appointed, to issue certificates for cash, property, or other consideration approved by the judge for such lawful purposes, and upon such terms and conditions and with such security and such priority in payments over existing obligations, secured or unsecured, as may be lawful in the particular case;
The effect of section 264 and its relation to section 77B (h) is discussed in the following excerpts from S. Rept. No. 1916, 75th Cong. (3d sess.), at p. 38:
"Section 264 is derived in part from section 77B (h). Under this provision no registration in compliance with the Securities Act of 1933 is required for the issuance of securities to the security holders or creditors of the debtor in whole or part exchange for their old securities or claims. However, new issues sold by the reorganized company for cash are required to be registered under the Securities Act just as any other new issues of securities, in order that prospective investors may have all material information before buying. Furthermore, the exemption for the issuance of securities to security holders and creditors under the plan does not extend to any subsequent redistribution of such securities by the issuer or an underwriter; for any such redistribution is subject to the same need for public disclosure of relevant data as in the case of a new issue. This need for registration upon redistribution has been recognized by the Securities and Exchange Commission in its